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Huron Announces Third Quarter 2020 Financial Results and Updates 2020 Guidance

·22 min read

THIRD QUARTER 2020 HIGHLIGHTS

  • Revenues were $205.3 million in Q3 2020 compared to $219.3 million in Q3 2019.

  • Net income from continuing operations was $11.1 million in Q3 2020 compared to $13.7 million in Q3 2019.

  • Adjusted EBITDA(7), a non-GAAP measure, was $23.6 million in Q3 2020 compared to $28.8 million in Q3 2019.

  • Diluted earnings per share from continuing operations was $0.50 in Q3 2020 compared to $0.61 in Q3 2019.

  • Adjusted diluted earnings per share from continuing operations(7), a non-GAAP measure, was $0.59 in Q3 2020 compared to $0.79 in Q3 2019.

  • Huron repaid $80.0 million of outstanding borrowings on the company's revolving credit facility during Q3 2020, reflecting strong cash flows during the quarter.

YEAR-TO-DATE 2020 HIGHLIGHTS AND 2020 GUIDANCE

  • Revenues increased $1.3 million, or 0.2%, to $645.8 million for the first nine months of 2020 from $644.5 million for the same prior year period.

  • Net loss from continuing operations, which includes non-cash pretax goodwill impairment charges of $59.8 million related to the company's Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment incurred in Q1 2020, was $17.6 million for the first nine months of 2020 compared to net income from continuing operations of $27.6 million for the same prior year period.

  • Adjusted EBITDA(7), a non-GAAP measure, was $70.1 million for the first nine months of 2020 compared to $76.0 million for the same prior year period.

  • Diluted loss per share from continuing operations was $0.81 for the first nine months of 2020 compared to diluted earnings per share from continuing operations of $1.23 for the first nine months of 2019.

  • Adjusted diluted earnings per share from continuing operations(7), a non-GAAP measure, was $1.70 for the first nine months of 2020 compared to $1.95 for the first nine months of 2019.

  • Cash flows from operating activities were $78.0 million for the first nine months of 2020.

  • The company announced a restructuring plan that includes a reduction in workforce and leased office space, which is expected to result in annualized savings in a range of $23.0 million to $27.0 million. Additional cost avoidance measures, including limited annual salary increases, are expected to result in additional annualized savings. The company does not anticipate a material revenue impact related to the restructuring actions.

  • Huron updates its previous earnings guidance range for full year 2020, including revenue expectations in a range of $835 million to $855 million.

Global professional services firm Huron (NASDAQ: HURN) today announced financial results from continuing operations for the third quarter ended September 30, 2020.

"Our third-quarter performance was in line with our expectations. Growth in the Business Advisory segment reflected solid demand for our restructuring services and the acceleration of clients’ investments in technology to improve their operations, while the ongoing pandemic has continued to create disruption for our clients in the healthcare and education industries," said James H. Roth, chief executive officer of Huron. "The current crisis presents a classic set of challenges for our clients, including how to balance addressing immediate operational issues with strategically managing for the long-term. Huron is well positioned to help our clients in this environment as we work with them to solve an increasingly complex array of issues and position their organizations for a successful future."

COVID-19 IMPACT

The worldwide spread of the coronavirus (COVID-19) has created significant volatility, uncertainty and disruption to the global economy. The company continues to closely monitor the impact of the pandemic on all aspects of its business, including how it will impact its clients, employees and business partners. In the first nine months of 2020, some clients reprioritized and delayed projects as a result of the pandemic. This negatively impacted demand for certain services, primarily in the company's Healthcare and Education segments. Conversely, the pandemic strengthened demand for cloud-based technology and analytics solutions and certain services provided to organizations in transition within the company's Business Advisory segment.

During the third quarter of 2020, the pandemic continued to negatively impact sales and elongate the sales cycle for new opportunities for certain services, particularly within the company's Healthcare and Education segments. Therefore, the company expects the COVID-19 pandemic to continue to have an unfavorable impact on its financial results in the fourth quarter of 2020 compared to the same prior year period, which is contemplated in the updated full year 2020 guidance provided.

FOURTH QUARTER 2020 RESTRUCTURING PLAN

On October 29, 2020, the company announced a restructuring plan to reduce operating costs to address the impact of the COVID-19 pandemic on its business. The restructuring plan provides for a reduction in workforce and leased office space that is expected to result in annualized savings of approximately $23.0 million to $27.0 million. The company does not anticipate a material revenue impact related to the restructuring actions.

The reduction in workforce impacts approximately 145 employees across all segments and corporate operations. The company expects the reduction in workforce to be substantially complete by the end of the fourth quarter of 2020 and expects to incur an estimated restructuring charge in a range of approximately $3.5 million to $4.5 million related to cash payments for employee severance and benefits.

The reduction in leased office space is expected to result in estimated non-cash restructuring charges in a range of approximately $12.0 million to $15.0 million. The non-cash restructuring charges related to the reduction in leased office space are expected to be recorded primarily in the fourth quarter of 2020. Future cash expenditures related to the leased office space are expected to continue through 2029. The exact amount and timing of the office space reductions, and the associated payments and expenses, depend on a number of factors, including the company’s ability to terminate or modify existing lease contracts and/or enter into sublease agreements for the exited spaces to lower future cash expenditures.

Additional cost avoidance measures, including limiting annual salary increases, are expected to result in additional annualized savings.

In addition, the company announced its intent to divest its life sciences drug safety practice, a UK-based business that is part of the Life Sciences reporting unit within the Business Advisory segment. For the nine months ended September 30, 2020, this practice generated $1.9 million of revenue and is not significant to the company's consolidated financial statements. The company expects the divestiture to be completed in the fourth quarter of 2020.

The company believes these measures will better align delivery capacity with anticipated demand and strengthen the company’s financial position amidst the ongoing disruption, creating a foundation from which it can grow.

THIRD QUARTER 2020 RESULTS FROM CONTINUING OPERATIONS

Revenues were $205.3 million for the third quarter of 2020, compared to $219.3 million for the third quarter of 2019.

Net income from continuing operations was $11.1 million for the third quarter of 2020 compared to $13.7 million for the same quarter last year. Diluted earnings per share from continuing operations was $0.50 for the third quarter of 2020 compared to $0.61 for the third quarter of 2019.

Third quarter 2020 earnings before interest, taxes, depreciation and amortization ("EBITDA")(7) was $23.3 million compared to $28.6 million in the same prior year period.

In addition to using EBITDA to evaluate the company’s financial performance, management uses other non-GAAP financial measures, which exclude the effect of the following items (in thousands):

Three Months Ended
September 30,

2020

2019

Amortization of intangible assets

$

3,155

$

4,205

Restructuring and other charges

$

59

$

127

Litigation and other gains

$

$

(630

)

Non-cash interest on convertible notes

$

$

2,171

Transaction-related expenses

$

437

$

563

Tax effect of adjustments

$

(1,692

)

$

(1,673

)

Tax benefit related to "check-the-box" election

$

$

(736

)

Foreign currency transaction losses (gains), net

$

(194

)

$

114

Adjusted EBITDA(7) was $23.6 million, or 11.5% of revenues, in the third quarter of 2020, compared to $28.8 million, or 13.1% of revenues, in the same prior year period. Adjusted net income from continuing operations(7) was $13.0 million, or $0.59 per diluted share, for the third quarter of 2020, compared to $17.7 million, or $0.79 per diluted share, for the same prior year period.

The average number of full-time billable consultants(1) increased 4.7% to 2,592 in the third quarter of 2020 from 2,476 in the same quarter last year, primarily related to hiring that occurred prior to the COVID-19 pandemic. Full-time billable consultant utilization rate(2) was 70.4% during the third quarter of 2020, compared to 76.3% during the same period last year. Average billing rate per hour for full-time billable consultants(3) was $206 for both the third quarter of 2020 and 2019. The average number of full-time equivalent professionals(5) was 360 in the third quarter of 2020, compared to 288 for the same period in 2019.

YEAR-TO-DATE 2020 RESULTS FROM CONTINUING OPERATIONS

Revenues slightly increased $1.3 million, or 0.2%, to $645.8 million for the first nine months of 2020, compared to $644.5 million for the same prior year period.

Net loss from continuing operations was $17.6 million for the first nine months of 2020, compared to net income from continuing operations of $27.6 million for the same prior year period. Diluted loss per share from continuing operations was $0.81 for the first nine months of 2020, compared to diluted earnings per share from continuing operations of $1.23 for the first nine months of 2019. Results for the first nine months of 2020 reflect non-cash pretax charges totaling $59.8 million to reduce the carrying value of goodwill in the company's Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment. The impairment charges are non-cash in nature and do not affect the company's liquidity or debt covenants.

EBITDA(7) was $7.0 million for the first nine months of 2020, compared to EBITDA of $72.8 million for the first nine months of 2019.

In addition to using EBITDA to evaluate the company’s financial performance, management uses other non-GAAP financial measures, which exclude the effect of the following items (in thousands):

Nine Months Ended
September 30,

2020

2019

Amortization of intangible assets

$

9,558

$

13,036

Restructuring and other charges

$

2,626

$

2,156

Litigation and other gains

$

(150

)

$

(1,571

)

Goodwill impairment charges

$

59,816

$

Non-cash interest on convertible notes

$

$

6,436

Loss on sale of business

$

102

$

Transaction-related expenses

$

437

$

2,613

Tax effect of adjustments

$

(17,041

)

$

(5,909

)

Tax benefit related to "check-the-box" election

$

$

(736

)

Foreign currency transaction losses, net

$

245

$

36

Adjusted EBITDA(7) was $70.1 million, or 10.8% of revenues, for the first nine months of 2020, compared to $76.0 million, or 11.8% of revenues, for the first nine months of 2019. Adjusted net income from continuing operations(7) was $37.7 million, or $1.70 per diluted share, for the first nine months of 2020, compared to $43.7 million, or $1.95 per diluted share, for the same prior year period.

The average number of full-time billable consultants(1) increased 9.1% to 2,592 in the first nine months of 2020 from 2,376 in the first nine months of 2019, primarily related to hiring that occurred prior to the COVID-19 pandemic. Full-time billable consultant utilization rate(2) was 71.5% during the first nine months of 2020, compared to 76.5% during the same prior year period. Average billing rate per hour for full-time billable consultants(3) was $206 for the first nine months of 2020, compared to $207 for the first nine months of 2019. The average number of full-time equivalent professionals(5) was 362 in the first nine months of 2020, compared to 295 in the same prior year period.

OPERATING SEGMENTS

Huron’s results reflect a portfolio of service offerings focused on helping clients address complex business challenges.

The company’s year-to-date 2020 revenues by operating segment as a percentage of total company revenues are as follows: Healthcare (42%); Business Advisory (31%); and Education (27%). Financial results by segment are included in the attached schedules and in Huron's Quarterly Report on Form 10-Q filing for the quarter ended September 30, 2020.

OUTLOOK FOR 2020

Based on currently available information, the company is updating guidance for full year 2020 revenues before reimbursable expenses in a range of $835 million to $855 million. The company anticipates adjusted EBITDA as a percentage of revenues in a range of 10.0% to 10.5% and non-GAAP adjusted diluted earnings per share in a range of $1.95 to $2.15.

Management will provide a more detailed discussion of its outlook during the company's earnings conference call webcast.

THIRD QUARTER 2020 WEBCAST

The company will host a webcast to discuss its financial results today, November 2, 2020, at 5:00 p.m. Eastern Time (4:00 p.m. Central Time). The conference call is being webcast by NASDAQ and can be accessed from Huron's website at http://ir.huronconsultinggroup.com. A replay will be available approximately two hours after the conclusion of the webcast and for 90 days thereafter.

USE OF NON-GAAP FINANCIAL MEASURES(7)

In evaluating the company’s financial performance and outlook, management uses EBITDA, adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income from continuing operations, and adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Management uses these non-GAAP financial measures to gain an understanding of the company's comparative operating performance (when comparing such results with previous periods or forecasts). These non-GAAP financial measures are used by management in their financial and operating decision making because management believes they reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing their business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. Management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Huron’s current operating performance and future prospects in the same manner as management does, if they so choose, and in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

Management has provided its outlook regarding adjusted EBITDA and non-GAAP adjusted diluted earnings per share, both of which are non-GAAP financial measures and exclude certain charges. Management has not reconciled these non-GAAP financial measures to the corresponding GAAP financial measures because guidance for the various reconciling items are not provided. Management is unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of the company's control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measures are not available without unreasonable effort.

ABOUT HURON

Huron is a global consultancy that collaborates with clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve. Learn more at www.huronconsultinggroup.com.

Statements in this press release that are not historical in nature, including those concerning the company’s current expectations about its future results, are "forward-looking" statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as "may," "should," "expects," "provides," "anticipates," "assumes," "can," "will," "meets," "could," "likely," "intends," "might," "predicts," "seeks," "would," "believes," "estimates," "plans," "continues," "guidance," or "outlook" or similar expressions. These forward-looking statements reflect the company's current expectations about future requirements and needs, results, levels of activity, performance, or achievements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: the impact of the COVID-19 pandemic on the economy, our clients and client demand for our services, and our ability to sell and provide services, including the measures taken by governmental authorities and businesses in response to the pandemic, which may cause or contribute to other risks and uncertainties that we face; failure to achieve expected utilization rates, billing rates and the number of revenue-generating professionals; inability to expand or adjust our service offerings in response to market demands; our dependence on renewal of client-based services; dependence on new business and retention of current clients and qualified personnel; failure to maintain third-party provider relationships and strategic alliances; inability to license technology to and from third parties; the impairment of goodwill; various factors related to income and other taxes; difficulties in successfully integrating the businesses we acquire and achieving expected benefits from such acquisitions; risks relating to privacy, information security, and related laws and standards; and a general downturn in market conditions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, among others, those described under "Item 1A. Risk Factors" in Huron's Annual Report on Form 10-K for the year ended December 31, 2019, and under "Item 1A. Risk Factors" in Huron's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, that may cause actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. The company disclaims any obligation to update or revise any forward-looking statements as a result of new information or future events, or for any other reason.

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues and reimbursable expenses:

Revenues

$

205,304

$

219,289

$

645,780

$

644,488

Reimbursable expenses

2,860

23,636

25,133

65,787

Total revenues and reimbursable expenses

208,164

242,925

670,913

710,275

Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):

Direct costs

145,459

143,034

451,221

422,442

Amortization of intangible assets and software development costs

1,370

1,162

4,005

3,450

Reimbursable expenses

2,840

23,571

25,095

65,897

Total direct costs and reimbursable expenses

149,669

167,767

480,321

491,789

Operating expenses and other losses (gains), net:

Selling, general and administrative expenses

38,561

48,123

126,864

151,409

Restructuring charges

59

127

1,777

2,156

Litigation and other gains

(630

)

(150

)

(1,571

)

Depreciation and amortization

6,176

6,962

18,483

21,285

Goodwill impairment charges

59,816

Total operating expenses and other losses (gains), net

44,796

54,582

206,790

173,279

Operating income (loss)

13,699

20,576

(16,198

)

45,207

Other income (expense), net:

Interest expense, net of interest income

(2,259

)

(4,374

)

(7,516

)

(13,156

)

Other income (expense), net

2,035

(82

)

687

2,830

Total other income (expense), net

(224

)

(4,456

)

(6,829

)

(10,326

)

Income (loss) from continuing operations before taxes

13,475

16,120

(23,027

)

34,881

Income tax expense (benefit)

2,388

2,414

(5,413

)

7,256

Net income (loss) from continuing operations

11,087

13,706

(17,614

)

27,625

Loss from discontinued operations, net of tax

(29

)

(52

)

(89

)

(195

)

Net income (loss)

$

11,058

$

13,654

$

(17,703

)

$

27,430

Net earnings (loss) per basic share:

Net income (loss) from continuing operations

$

0.50

$

0.62

$

(0.81

)

$

1.26

Loss from discontinued operations, net of tax

(0.01

)

Net income (loss)

$

0.50

$

0.62

$

(0.81

)

$

1.25

Net earnings (loss) per diluted share:

Net income (loss) from continuing operations

$

0.50

$

0.61

$

(0.81

)

$

1.23

Loss from discontinued operations, net of tax

(0.01

)

Net income (loss)

$

0.50

$

0.61

$

(0.81

)

$

1.22

Weighted average shares used in calculating earnings (loss) per share:

Basic

21,905

22,052

21,868

21,973

Diluted

22,175

22,561

21,868

22,425

Comprehensive income:

Net income (loss)

$

11,058

$

13,654

$

(17,703

)

$

27,430

Foreign currency translation adjustments, net of tax

381

(630

)

(294

)

(673

)

Unrealized gain (loss) on investment, net of tax

4,885

1,168

(1,051

)

7,740

Unrealized loss on cash flow hedging instruments, net of tax

(243

)

(149

)

(3,633

)

(998

)

Other comprehensive income (loss)

5,023

389

(4,978

)

6,069

Comprehensive income (loss)

$

16,081

$

14,043

$

(22,681

)

$

33,499

HURON CONSULTING GROUP INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

September 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

74,745

$

11,604

Receivables from clients, net

94,644

116,571

Unbilled services, net

78,346

79,937

Income tax receivable

244

2,376

Prepaid expenses and other current assets

11,853

14,248

Total current assets

259,832

224,736

Property and equipment, net

34,879

38,413

Deferred income taxes, net

11,425

1,145

Long-term investments

66,122

54,541

Operating lease right-of-use assets

50,499

54,954

Other non-current assets

58,944

52,177

Intangible assets, net

22,250

31,625

Goodwill

586,730

646,680

Total assets

$

1,090,681

$

1,104,271

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

4,838

$

7,944

Accrued expenses and other current liabilities

23,646

18,554

Accrued payroll and related benefits

105,276

141,605

Current maturities of long-term debt

540

529

Current maturities of operating lease liabilities

9,058

7,469

Deferred revenues

31,768

28,443

Total current liabilities

175,126

204,544

Non-current liabilities:

Deferred compensation and other liabilities

44,699

28,635

Long-term debt, net of current portion

250,917

208,324

Operating lease liabilities, net of current portion

64,318

69,233

Deferred income taxes, net

555

8,070

Total non-current liabilities

360,489

314,262

Commitments and contingencies

Stockholders’ equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 25,444,128 and 25,144,764 shares issued at September 30, 2020 and December 31, 2019, respectively

247

247

Treasury stock, at cost, 2,571,266 and 2,425,430 shares at September 30, 2020 and December 31, 2019, respectively

(129,438

)

(128,348

)

Additional paid-in capital

454,153

460,781

Retained earnings

220,146

237,849

Accumulated other comprehensive income

9,958

14,936

Total stockholders’ equity

555,066

585,465

Total liabilities and stockholders’ equity

$

1,090,681

$

1,104,271

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended
September 30,

2020

2019

Cash flows from operating activities:

Net income (loss)

$

(17,703

)

$

27,430

Adjustments to reconcile net income (loss) to cash flows from operating activities:

Depreciation and amortization

22,511

25,410

Non-cash lease expense

5,844

6,413

Lease impairment charge

805

Share-based compensation

18,559

18,094

Amortization of debt discount and issuance costs

595

8,066

Goodwill impairment charges

59,816

Allowances for doubtful accounts

539

191

Deferred income taxes

(16,125

)

(262

)

Loss on sale of business

102

Change in fair value of contingent consideration liabilities

(1,506

)

Changes in operating assets and liabilities, net of divestiture:

(Increase) decrease in receivables from clients, net

23,493

(6,817

)

(Increase) decrease in unbilled services, net

1,597

(30,163

)

(Increase) decrease in current income tax receivable / payable, net

9,455

10,561

(Increase) decrease in other assets

(3,426

)

(4,160

)

Increase (decrease) in accounts payable and other liabilities

(5,272

)

(3,565

)

Increase (decrease) in accrued payroll and related benefits

(25,290

)

(1,850

)

Increase (decrease) in deferred revenues

3,290

3,098

Net cash provided by operating activities

77,985

51,745

Cash flows from investing activities:

Purchases of property and equipment, net

(5,731

)

(10,024

)

Purchases of investment securities

(13,000

)

Investment in life insurance policies

(2,026

)

(4,434

)

Purchases of businesses

(801

)

(2,500

)

Capitalization of internally developed software costs

(6,830

)

(7,462

)

Net cash used in investing activities

(28,388

)

(24,420

)

Cash flows from financing activities:

Proceeds from exercise of stock options

825

703

Shares redeemed for employee tax withholdings

(7,797

)

(5,206

)

Share repurchases

(22,115

)

Proceeds from bank borrowings

283,000

105,500

Repayments of bank borrowings

(240,396

)

(105,885

)

Payment of debt issuance costs

(1,498

)

Payments for contingent consideration liabilities

(4,674

)

Net cash provided by (used in) financing activities

13,517

(11,060

)

Effect of exchange rate changes on cash

27

38

Net increase in cash and cash equivalents

63,141

16,303

Cash and cash equivalents at beginning of the period

11,604

33,107

Cash and cash equivalents at end of the period

$

74,745

$

49,410

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)

Three Months Ended
September 30,

Percent
Increase
(Decrease)

Segment and Consolidated Operating Results (in thousands):

2020

2019

Healthcare:

Revenues

$

87,406

$

100,000

(12.6

)%

Operating income

$

25,610

$

32,863

(22.1

)%

Segment operating income as a percentage of segment revenues

29.3

%

32.9

%

Business Advisory:

Revenues

$

66,048

$

62,519

5.6

%

Operating income

$

10,780

$

11,942

(9.7

)%

Segment operating income as a percentage of segment revenues

16.3

%

19.1

%

Education:

Revenues

$

51,850

$

56,770

(8.7

)%

Operating income

$

12,548

$

14,413

(12.9

)%

Segment operating income as a percentage of segment revenues

24.2

%

25.4

%

Total Company:

Revenues

$

205,304

$

219,289

(6.4

)%

Reimbursable expenses

2,860

23,636

(87.9

)%

Total revenues and reimbursable expenses

$

208,164

$

242,925

(14.3

)%

Statements of Operations reconciliation:

Segment operating income

$

48,938

$

59,218

(17.4

)%

Items not allocated at the segment level:

Other operating expenses

29,042

32,310

(10.1

)%

Litigation and other gains

(630

)

N/M

Depreciation and amortization

6,197

6,962

(11.0

)%

Total operating income (loss)

13,699

20,576

(33.4

)%

Other expense, net

(224

)

(4,456

)

(95.0

)%

Income from continuing operations before taxes

$

13,475

$

16,120

(16.4

)%

Other Operating Data:

Number of full-time billable consultants (at period end) (1):

Healthcare

838

886

(5.4

)%

Business Advisory

1,001

954

4.9

%

Education

790

727

8.7

%

Total

2,629

2,567

2.4

%

Average number of full-time billable consultants (for the period) (1):

Healthcare

844

858

Business Advisory

976

920

Education

772

698

Total

2,592

2,476

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)

Three Months Ended
September 30,

Other Operating Data (continued):

2020

2019

Full-time billable consultant utilization rate (2):

Healthcare

71.4

%

81.8

%

Business Advisory

72.6

%

72.0

%

Education

66.5

%

75.5

%

Total

70.4

%

76.3

%

Full-time billable consultant average billing rate per hour (3):

Healthcare

$

252

$

226

Business Advisory (4)

$

186

$

193

Education

$

184

$

197

Total (4)

$

206

$

206

Revenue per full-time billable consultant (in thousands):

Healthcare

$

77

$

84

Business Advisory

$

64

$

65

Education

$

57

$

70

Total

$

66

$

73

Average number of full-time equivalents (for the period) (5):

Healthcare

279

217

Business Advisory

35

19

Education

46

52

Total

360

288

Revenue per full-time equivalent (in thousands):

Healthcare

$

80

$

128

Business Advisory

$

106

$

126

Education

$

165

$

151

Total

$

93

$

132

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)

Nine Months Ended
September 30,

Percent
Increase
(Decrease)

Segment and Consolidated Operating Results (in thousands):

2020

2019

Healthcare:

Revenues

$

268,340

$

295,621

(9.2

)%

Operating income

$

70,831

$

94,058

(24.7

)%

Segment operating income as a percentage of segment revenues

26.4

%

31.8

%

Business Advisory:

Revenues

$

201,423

$

183,602

9.7

%

Operating income

$

37,306

$

32,997

13.1

%

Segment operating income as a percentage of segment revenues

18.5

%

18.0

%

Education:

Revenues

$

176,017

$

165,265

6.5

%

Operating income

$

41,792

$

43,235

(3.3

)%

Segment operating income as a percentage of segment revenues

23.7

%

26.2

%

Total Company:

Revenues

$

645,780

$

644,488

0.2

%

Reimbursable expenses

25,133

65,787

(61.8

)%

Total revenues and reimbursable expenses

$

670,913

$

710,275

(5.5

)%

Statements of Operations reconciliation:

Segment operating income

$

149,929

$

170,290

(12.0

)%

Items not allocated at the segment level:

Other operating expenses

87,826

105,369

(16.6

)%

Litigation and other gains

(150

)

(1,571

)

(90.5

)%

Depreciation and amortization

18,635

21,285

(12.5

)%

Goodwill impairment charges (6)

59,816

N/M

Total operating income (loss)

(16,198

)

45,207

N/M

Other expense, net

(6,829

)

(10,326

)

(33.9

)%

Income (loss) from continuing operations before taxes

$

(23,027

)

$

34,881

N/M

Other Operating Data:

Number of full-time billable consultants (at period end) (1):

Healthcare

838

886

(5.4

)%

Business Advisory

1,001

954

4.9

%

Education

790

727

8.7

%

Total

2,629

2,567

2.4

%

Average number of full-time billable consultants (for the period) (1):

Healthcare

873

835

Business Advisory

940

876

Education

779

665

Total

2,592

2,376

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)

Nine Months Ended
September 30,

Other Operating Data (continued):

2020

2019

Full-time billable consultant utilization rate (2):

Healthcare

70.2

%

80.4

%

Business Advisory

72.6

%

72.7

%

Education

71.7

%

76.7

%

Total

71.5

%

76.5

%

Full-time billable consultant average billing rate per hour (3):

Healthcare

$

233

$

225

Business Advisory (4)

$

197

$

195

Education

$

189

$

200

Total (4)

$

206

$

207

Revenue per full-time billable consultant (in thousands):

Healthcare

$

216

$

247

Business Advisory

$

204

$

202

Education

$

194

$

217

Total

$

205

$

222

Average number of full-time equivalents (for the period) (5):

Healthcare

279

237

Business Advisory

27

14

Education

56

44

Total

362

295

Revenue per full-time equivalent (in thousands):

Healthcare

$

285

$

375

Business Advisory

$

370

$

465

Education

$

453

$

480

Total

$

317

$

395

_______

(1)

Consists of full-time professionals who provide consulting services and generate revenues based on the number of hours worked.

(2)

Utilization rate for full-time billable consultants is calculated by dividing the number of hours full-time billable consultants worked on client assignments during a period by the total available working hours for these consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days.

(3)

Average billing rate per hour for full-time billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.

(4)

The Business Advisory segment includes operations of Huron Eurasia India. Absent the impact of Huron Eurasia India, the average billing rate per hour for the Business Advisory segment would have been $201 and $221 for the three months ended September 30, 2020 and 2019, respectively; and $217 and $220 for the nine months ended September 30, 2020 and 2019, respectively.

Absent the impact of Huron Eurasia India, Huron's consolidated average billing rate per hour would have been $212 and $216 for the three months ended September 30, 2020 and 2019, respectively; and $213 and $216 for the nine months ended September 30, 2020 and 2019, respectively.

(5)

Consists of coaches and their support staff within the Culture and Organizational Excellence solution, consultants who work variable schedules as needed by clients, employees who provide managed services in our Healthcare segment, and full-time employees who provide software support and maintenance services to clients.

(6)

The non-cash goodwill impairment charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

N/M - Not Meaningful

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS

TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (7)

(In thousands)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues

$

205,304

$

219,289

$

645,780

$

644,488

Net income (loss) from continuing operations

$

11,087

$

13,706

$

(17,614

)

$

27,625

Add back:

Income tax expense (benefit)

2,388

2,414

(5,413

)

7,256

Interest expense, net of interest income

2,259

4,374

7,516

13,156

Depreciation and amortization

7,546

8,124

22,488

24,735

Earnings before interest, taxes, depreciation and amortization (EBITDA) (7)

23,280

28,618

6,977

72,772

Add back:

Restructuring and other charges

59

127

2,626

2,156

Litigation and other gains

(630

)

(150

)

(1,571

)

Goodwill impairment charges

59,816

Loss on sale of business

102

Transaction-related expenses

437

563

437

2,613

Foreign currency transaction losses (gains), net

(194

)

114

245

36

Adjusted EBITDA (7)

$

23,582

$

28,792

$

70,053

$

76,006

Adjusted EBITDA as a percentage of revenues (7)

11.5

%

13.1

%

10.8

%

11.8

%

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (7)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net income (loss) from continuing operations

$

11,087

$

13,706

$

(17,614

)

$

27,625

Weighted average shares - diluted

22,175

22,561

21,868

22,425

Diluted earnings (loss) per share from continuing operations

$

0.50

$

0.61

$

(0.81

)

$

1.23

Add back:

Amortization of intangible assets

3,155

4,205

9,558

13,036

Restructuring and other charges

59

127

2,626

2,156

Litigation and other gains

(630

)

(150

)

(1,571

)

Goodwill impairment charges

59,816

Non-cash interest on convertible notes

2,171

6,436

Loss on sale of business

102

Transaction-related expenses

437

563

437

2,613

Tax effect of adjustments

(1,692

)

(1,673

)

(17,041

)

(5,909

)

Tax benefit related to "check-the-box" election

(736

)

(736

)

Total adjustments, net of tax

1,959

4,027

55,348

16,025

Adjusted net income from continuing operations (7)

$

13,046

$

17,733

$

37,734

$

43,650

Adjusted weighted average shares - diluted (8)

22,175

22,561

22,207

22,425

Adjusted diluted earnings per share from continuing operations (7)

$

0.59

$

0.79

$

1.70

$

1.95

(7)

In evaluating the company’s financial performance and outlook, management uses earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income from continuing operations, and adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Management uses these non-GAAP financial measures to gain an understanding of the company's comparative operating performance (when comparing such results with previous periods or forecasts). These non-GAAP financial measures are used by management in their financial and operating decision making because management believes they reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing the company's business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. Management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Huron’s current operating performance and future prospects in the same manner as management does, if they so choose, and in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

(8)

As the company reported a net loss for the nine months ended September 30, 2020, GAAP diluted weighted average shares outstanding equals the basic weighted average shares outstanding for that period. The non-GAAP adjustments described above resulted in adjusted net income from continuing operations for the first nine months of 2020. Therefore, dilutive common stock equivalents have been included in the calculation of adjusted diluted weighted average shares outstanding.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201102005900/en/

Contacts

MEDIA CONTACT

Allie Bovis

abovis@huronconsultinggroup.com

INVESTOR CONTACT

John D. Kelly

investor@huronconsultinggroup.com