Huron Announces Third Quarter 2020 Financial Results and Updates 2020 Guidance
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 .
“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
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
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
The reduction in leased office space is expected to result in estimated non-cash restructuring charges in a range of approximately
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
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
Net income from continuing operations was
Third quarter 2020 earnings before interest, taxes, depreciation and amortization ("EBITDA")(7) was
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 |
|||||||
|
|
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
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
YEAR-TO-DATE 2020 RESULTS FROM CONTINUING OPERATIONS
Revenues slightly increased
Net loss from continuing operations was
EBITDA(7) was
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 |
|||||||
|
|
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 |
) |
|
|
|
$ |
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
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
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
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
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,
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
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
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) (Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
|
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 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
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 |
|
|
|
CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) (Unaudited) |
||||||||
|
|
|
|
|
|||||
|
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 |
|
|
|
|
|
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; |
|
247 |
|
|
|
247 |
|
|
|
|
|
(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 |
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
||||||||
|
|
Nine Months Ended |
|||||||
|
|
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 |
|
|
|
|
|
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 |
|
|
|
SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (Unaudited) |
|||||||||||
|
|
|
Three Months Ended |
|
Percent |
|||||||
|
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 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
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 |
|
|
|
|
|
SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED) (Unaudited) |
||||||||
|
|
|
Three Months Ended |
||||||
|
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 |
|
|
SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED) (Unaudited) |
|||||||||||
|
|
|
Nine Months Ended |
|
Percent |
|||||||
|
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 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
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 |
)% |
|
|
|
|
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 |
|
|
|
|
|
SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED) (Unaudited) |
||||||||
|
|
|
Nine Months Ended |
||||||
|
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 |
||
|
|
Absent the impact of Huron Eurasia India, Huron's consolidated average billing rate per hour would have been |
||
|
(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 | |||
|
RECONCILIATION OF NET INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (7) (In thousands) (Unaudited) |
||||||||||||||||
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
|
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 |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
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 |
% |
|
|
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 |
|
Nine Months Ended |
|||||||||||||
|
|
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 |
) |
|
|
|
|
— |
|
|
|
— |
|
|
|
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 |
|
| (8) |
As the company reported a net loss for the nine months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20201102005900/en/
MEDIA CONTACT
abovis@huronconsultinggroup.com
INVESTOR CONTACT
investor@huronconsultinggroup.com
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