Huron Consulting Group Inc 10-Q for FY2020 Q1

Huron Consulting Group Inc. (HURN)

10-Q 2020-04-30 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Huron Consulting Group Inc filed this 10-Q on April 30, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $241.92M; up 8.5% from $223.06M a year earlier
Net loss: $42.31M; compared with net income of $3.3M a year earlier
Diluted EPS: -$1.94; compared with $0.15 a year earlier

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Delaware		01-0666114
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HURN	NASDAQ Global Select Market



Large Accelerated Filer	☒	Accelerated Filer	☐	Non-accelerated Filer	☐	Smaller Reporting Company	☐	Emerging Growth Company	☐



		Page
Part I – Financial Information

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations and Other Comprehensive Income	2
	Consolidated Statements of Stockholders’ Equity	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	36

Part II – Other Information

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

Signature		40



	March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	151,009		$	11,604
Receivables from clients, net of allowances of $9,187 and $8,907, respectively	105,379			116,571
Unbilled services, net of allowances of $3,356 and $2,994, respectively	88,960			79,937
Income tax receivable	748			2,376
Prepaid expenses and other current assets	13,309			14,248
Total current assets	359,405			224,736
Property and equipment, net	38,326			38,413
Deferred income taxes, net	8,334			1,145
Long-term investment	67,194			54,541
Operating lease right-of-use assets	52,849			54,954
Other non-current assets	49,578			52,177
Intangible assets, net	28,127			31,625
Goodwill	586,235			646,680
Total assets	$	1,190,048		$	1,104,271
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,799		$	7,944
Accrued expenses and other current liabilities	21,580			18,554
Accrued payroll and related benefits	53,380			141,605
Current maturities of long-term debt	533			529
Current maturities of operating lease liabilities	8,206			7,469
Deferred revenues	30,010			28,443
Total current liabilities	119,508			204,544
Non-current liabilities:
Deferred compensation and other liabilities	26,854			28,635
Long-term debt, net of current portion	451,189			208,324
Operating lease liabilities, net of current portion	67,317			69,233
Deferred income taxes, net	571			8,070
Total non-current liabilities	545,931			314,262
Commitments and contingencies
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 25,391,801 and 25,144,764 shares issued at March 31, 2020 and December 31, 2019, respectively	246			247
Treasury stock, at cost, 2,546,566 and 2,425,430 shares at March 31, 2020 and December 31, 2019, respectively	(128,366		)	(128,348		)
Additional paid-in capital	444,974			460,781
Retained earnings	195,541			237,849
Accumulated other comprehensive income	12,214			14,936
Total stockholders’ equity	524,609			585,465
Total liabilities and stockholders’ equity	$	1,190,048		$	1,104,271



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended March 31,
	2020			2019
Revenues and reimbursable expenses:
Revenues	$	222,619		$	204,445
Reimbursable expenses	19,303			18,617
Total revenues and reimbursable expenses	241,922			223,062
Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
Direct costs	156,248			137,780
Amortization of intangible assets and software development costs	1,301			1,117
Reimbursable expenses	19,389			18,669
Total direct costs and reimbursable expenses	176,938			157,566
Operating expenses and other losses (gains), net
Selling, general and administrative expenses	43,446			50,749
Restructuring charges	1,609			1,275
Litigation and other gains	(150		)	(456		)
Depreciation and amortization	6,114			7,172
Goodwill impairment charges	59,816			—
Total operating expenses and other losses (gains), net	110,835			58,740
Operating income (loss)	(45,851		)	6,756
Other income (expense), net:
Interest expense, net of interest income	(2,341		)	(4,258		)
Other income (expense), net	(5,296		)	2,217
Total other expense, net	(7,637		)	(2,041		)
Income (loss) from continuing operations before taxes	(53,488		)	4,715
Income tax expense (benefit)	(11,215		)	1,365
Net income (loss) from continuing operations	(42,273		)	3,350
Loss from discontinued operations, net of tax	(35		)	(46		)
Net income (loss)	$	(42,308	)	$	3,304
Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	(1.94	)	$	0.15
Loss from discontinued operations, net of tax	—			—
Net income (loss)	$	(1.94	)	$	0.15
Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	(1.94	)	$	0.15
Loss from discontinued operations, net of tax	—			—
Net income (loss)	$	(1.94	)	$	0.15
Weighted average shares used in calculating earnings (loss) per share:
Basic	21,827			21,868
Diluted	21,827			22,311
Comprehensive income:
Net income (loss)	$	(42,308	)	$	3,304
Foreign currency translation adjustments, net of tax	(779		)	316
Unrealized gain (loss) on investment, net of tax	(258		)	2,657
Unrealized loss on cash flow hedging instruments, net of tax	(1,685		)	(237		)
Other comprehensive income (loss)	(2,722		)	2,736
Comprehensive income (loss)	$	(45,030	)	$	6,040



	Three Months Ended March 31, 2020
	Common Stock					Treasury Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Stockholders’ Equity
	Shares		Amount			Shares		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Stockholders’ Equity
Balance at December 31, 2019	24,603,308		$	247		(2,763,302	)	$	(128,348	)	$	460,781		$	237,849		$	14,936		$	585,465
Comprehensive income														(42,308		)	(2,722		)	(45,030		)
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	250,544		2			102,467		7,115			(7,117		)							—
Exercise of stock options	20,000		—								468									468
Share-based compensation											11,720									11,720
Shares redeemed for employee tax withholdings						(120,000	)	(7,133		)										(7,133		)
Share repurchases	(313,998	)	(3		)						(20,878		)							(20,881		)
Balance at March 31, 2020	24,559,854		$	246		(2,780,835	)	$	(128,366	)	$	444,974		$	195,541		$	12,214		$	524,609



	Three Months Ended March 31, 2019
	Common Stock			Treasury Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount		Shares		Amount			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
Balance at December 31, 2018	24,418,252	$	244	(2,671,962	)	$	(124,794	)	$	452,573		$	196,106	$	16,495	$	540,624
Comprehensive income												3,304		2,736		6,040
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	254,550	3		27,612		2,196			(2,199		)					—
Exercise of stock options	10,000	—							234							234
Share-based compensation									7,140							7,140
Shares redeemed for employee tax withholdings				(94,500	)	(4,385		)								(4,385		)
Balance at March 31, 2019	24,682,802	$	247	(2,738,850	)	$	(126,983	)	$	457,748		$	199,410	$	19,231	$	549,653



	Healthcare			Business Advisory			Education		Total
Balance as of December 31, 2019:
Goodwill	$	636,810		$	302,057		$	103,889	$	1,042,756
Accumulated impairment losses	(208,081		)	(187,995		)	—		(396,076		)
Goodwill, net as of December 31, 2019	428,729			114,062			103,889		646,680
Goodwill impairment charges	—			(59,816		)	—		(59,816		)
Foreign currency translation	—			(629		)	—		(629		)
Goodwill, net as of March 31, 2020	$	428,729		$	53,617		$	103,889	$	586,235



		As of March 31, 2020				As of December 31, 2019
	Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	3 to 13	$	87,379	$	64,265	$	87,577	$	61,882
Trade names	5 to 6	28,930		26,192		28,930		25,894
Technology and software	5	5,440		4,456		5,694		4,321
Non-competition agreements	5	2,220		1,559		2,220		1,447
Customer contracts	2	800		170		800		52
Total		$	124,769	$	96,642	$	125,221	$	93,596



Year Ending December 31,	Estimated Amortization Expense
2020	$	12,561
2021	$	8,358
2022	$	6,111
2023	$	3,512
2024	$	741



	As of March 31,
	2020	2019
Unvested restricted stock awards	992	12
Outstanding common stock options	86	—
Convertible senior notes	—	3,129
Warrants related to the issuance of convertible senior notes	3,129	3,129
Total anti-dilutive securities	4,207	6,270



	March 31, 2020			December 31, 2019
Senior secured credit facility	$	448,000		$	205,000
Promissory note due 2024	3,722			3,853
Total long-term debt	$	451,722		$	208,853
Current maturities of long-term debt	(533		)	(529		)
Long-term debt, net of current portion	$	451,189		$	208,324



	Principal Payments of Long-Term Debt
2020	$	398
2021	$	544
2022	$	559
2023	$	575
2024	$	449,646



	Employee Costs			Office Space Reductions		Other			Total
Balance as of December 31, 2019	$	68		$	91	$	—		$	159
Additions	411			—		1,188			1,599
Payments	(473		)	—		(67		)	(540		)
Adjustments	8			—		—			8
Balance as of March 31, 2020	$	14		$	91	$	1,121		$	1,226



Level 1 Inputs		Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs		Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs		Unobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.


•	Healthcare



	Three Months Ended March 31, 2019
Contractual interest coupon	$	781
Amortization of debt discount	2,120
Amortization of debt issuance costs	315
Total interest expense	$	3,216



	Fair Value (Derivative Asset and Liability)
Balance Sheet Location	March 31, 2020		December 31, 2019
Accrued expenses and other current liabilities	$	1,156	$	159
Deferred compensation and other liabilities	$	1,666	$	387



	Level 1		Level 2		Level 3		Total
March 31, 2020
Assets:
Convertible debt investment	$	—	$	—	$	62,194	$	62,194
Deferred compensation assets	—		24,220		—		24,220
Total assets	$	—	$	24,220	$	62,194	$	86,414
Liabilities:
Interest rate swaps	$	—	$	2,822	$	—	$	2,822
Total liabilities	$	—	$	2,822	$	—	$	2,822
December 31, 2019
Assets:
Convertible debt investment	—		—		49,542		49,542
Deferred compensation assets	—		27,445		—		27,445
Total assets	$	—	$	27,445	$	49,542	$	76,987
Liabilities:
Interest rate swap	$	—	$	546	$	—	$	546
Total liabilities	$	—	$	546	$	—	$	546



	Three Months Ended March 31, 2020								Three Months Ended March 31, 2019
	Before Taxes			Tax (Expense) Benefit		Net of Taxes			Before Taxes			Tax (Expense) Benefit			Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(779	)	$	—	$	(779	)	$	316		$	—		$	316
Unrealized gain (loss) on investment	$	(348	)	$	90	$	(258	)	$	3,609		$	(952	)	$	2,657
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(2,272	)	$	590	$	(1,682	)	$	(247	)	$	65		$	(182	)
Reclassification adjustments into earnings	(4		)	1		(3		)	(74		)	19			(55		)
Net unrealized gain (loss)	$	(2,276	)	$	591	$	(1,685	)	$	(321	)	$	84		$	(237	)
Other comprehensive income (loss)	$	(3,403	)	$	681	$	(2,722	)	$	3,604		$	(868	)	$	2,736



	Foreign Currency Translation			Available-for-Sale Investment			Cash Flow Hedges			Total
Balance, December 31, 2019	$	(566	)	$	15,882		$	(380	)	$	14,936
Current period change	(779		)	(258		)	(1,685		)	(2,722		)
Balance, March 31, 2020	$	(1,345	)	$	15,624		$	(2,065	)	$	12,214


(1)	The 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.



	Three Months Ended March 31, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	55,785	$	25,393	$	13,175	$	94,353
Time and expense	14,733		37,589		43,711		96,033
Performance-based	18,921		646		—		19,567
Software support, maintenance and subscriptions	6,139		1,277		5,250		12,666
Total	$	95,578	$	64,905	$	62,136	$	222,619

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	65,445	$	61,957	$	53,436	$	180,838
Revenue generated by full-time equivalents	30,133		2,948		8,700		41,781
Total	$	95,578	$	64,905	$	62,136	$	222,619

Timing of Revenue Recognition
Revenue recognized over time	$	94,459	$	64,905	$	62,022	$	221,386
Revenue recognized at a point in time	1,119		—		114		1,233
Total	$	95,578	$	64,905	$	62,136	$	222,619



Segment and Consolidated Operating Results (in thousands, except per share amounts):	Three Months Ended March 31,
	2020			2019
Healthcare:
Revenues	$	95,578		$	93,682
Operating income	$	24,050		$	27,851
Segment operating income as a percentage of segment revenues	25.2		%	29.7		%
Business Advisory:
Revenues	$	64,905		$	58,806
Operating income	$	9,842		$	9,581
Segment operating income as a percentage of segment revenues	15.2		%	16.3		%
Education:
Revenues	$	62,136		$	51,957
Operating income	$	13,116		$	12,618
Segment operating income as a percentage of segment revenues	21.1		%	24.3		%
Total Company:
Revenues	$	222,619		$	204,445
Reimbursable expenses	19,303			18,617
Total revenues and reimbursable expenses	$	241,922		$	223,062
Statements of Operations reconciliation:
Segment operating income	$	47,008		$	50,050
Items not allocated at the segment level:
Other operating expenses	27,146			36,578
Litigation and other gains	(150		)	(456		)
Depreciation and amortization	6,047			7,172
Goodwill impairment charges ⁽¹⁾	59,816			—
Operating income (loss)	(45,851		)	6,756
Other expense, net	(7,637		)	(2,041		)
Income (loss) from continuing operations before taxes	(53,488		)	4,715
Income tax expense (benefit)	(11,215		)	1,365
Net income (loss) from continuing operations	$	(42,273	)	$	3,350
Earnings (loss) per share from continuing operations:
Basic	$	(1.94	)	$	0.15
Diluted	$	(1.94	)	$	0.15



	Three Months Ended March 31,
Other Operating Data:	2020			2019
Number of full-time billable consultants (at period end) ⁽²⁾:
Healthcare	892			836
Business Advisory	916			864
Education	791			649
Total	2,599			2,349
Average number of full-time billable consultants (for the period) ⁽²⁾:
Healthcare	897			819
Business Advisory	920			839
Education	778			631
Total	2,595			2,289
Full-time billable consultant utilization rate ⁽³⁾:
Healthcare	71.6		%	78.6		%
Business Advisory	71.5		%	73.1		%
Education	76.2		%	76.4		%
Total	72.9		%	75.9		%
Full-time billable consultant average billing rate per hour ⁽⁴⁾:
Healthcare	$	228		$	224
Business Advisory ⁽⁵⁾	$	198		$	200
Education	$	188		$	204
Total ⁽⁵⁾	$	204		$	210
Revenue per full-time billable consultant (in thousands):
Healthcare	$	73		$	79
Business Advisory	$	67		$	68
Education	$	69		$	73
Total	$	70		$	73
Average number of full-time equivalents (for the period) ⁽⁶⁾:
Healthcare	278			223
Business Advisory	20			8
Education	60			36
Total	358			267
Revenue per full-time equivalent (in thousands):
Healthcare	$	108		$	129
Business Advisory	$	149		$	206
Education	$	144		$	166
Total	$	117		$	137


(1)	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.


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


(3)	Utilization rate for our full-time billable consultants is calculated by dividing the number of hours our 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.


(4)	Average billing rate per hour for our 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.


(5)	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 $224 and $223 for the three months ended March 31, 2020 and 2019, respectively.


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



	Three Months Ended March 31,
Cash Flows (in thousands):	2020			2019
Net cash used in operating activities	$	(56,146	)	$	(38,289	)
Net cash used in investing activities	(18,395		)	(8,087		)
Net cash provided by financing activities	214,089			21,722
Effect of exchange rate changes on cash	(143		)	73
Net increase (decrease) in cash and cash equivalents	$	139,405		$	(24,581	)



Reporting Unit	Carrying Value of Goodwill
Healthcare	$	428,729
Education	103,889
Business Advisory	16,094
Strategy and Innovation	37,523
Life Sciences	—
Enterprise Solutions and Analytics	—
Total	$	586,235


•	governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;


•	the effect on our clients and client demand for our services and solutions, including the effect on the healthcare industry which is an area of significant focus for our business;


•	our ability to sell and provide our services and solutions and maintain adequate utilization levels, including as a result of travel restrictions and people working from home;