Huron Consulting Group Reports Second Quarter 2008 Financial Results
(as corrected – see
filed on August 6, 2008 for details)
(as corrected – see Form 8-K filed on August 6, 2008 for details)
CHICAGO – August 5, 2008 - Huron Consulting Group Inc. (NASDAQ: HURN), a leading provider of financial and operational consulting services, today announced financial results for the second quarter ended June 30, 2008.
“Huron’s Health and Education Consulting and Legal Consulting businesses had very strong quarters and we are optimistic about their position to generate future growth. The addition of the Stockamp team will create a real powerhouse by serving multiple segments of the healthcare industry, including major health systems, academic medical centers and community hospitals,” said Gary E. Holdren, chairman and chief executive officer, Huron Consulting Group. “We are making targeted adjustments in certain businesses to make sure that we have people with the rights skill sets in place to meet marketplace needs. At the same time, we are executing our business plan by identifying market demands, meeting the evolving needs of the marketplace, and helping clients solve complex business challenges. We are confident that our balanced portfolio of offerings will continue to deliver results.”
Second Quarter 2008 Results
Revenues of $143.4 million for the second quarter of 2008 increased 21.3% from $118.3 million for the second quarter of 2007. The Company's second quarter 2008 operating income increased 2.3% to $20.2 million compared to $19.8 million in the second quarter of 2007. Net income was $9.8 million, or $0.54 per diluted share, for the second quarter of 2008 compared to $10.1 million, or $0.56 per diluted share, for the same period last year. Financial results for the second quarter of 2007 included $2.3 million of rapid amortization of intangible assets. There was no rapid amortization in the second quarter of 2008.
Second quarter 2008 earnings before interest, taxes, depreciation and amortization ("EBITDA")(8) was $25.6 million, or 17.9% of revenues, compared to $26.2 million, or 22.2% of revenues, in the comparable quarter last year. Adjusted EBITDA(8), which excludes share-based compensation expense, was $32.8 million, or 22.9% of revenues, compared to $31.1 million, or 26.3% of revenues, in the comparable quarter last year.
The average number of full-time billable consultants(4) increased 30.8% to 1,224 in the second quarter of 2008 compared to 936 in the same quarter last year. Huron also has a number of consultants who work variable schedules as needed by clients, as well as contract reviewers and other professionals who generate revenues primarily based on number of hours worked and units produced, such as pages reviewed and data processed. The average number of these full-time equivalent professionals(7) increased 109.0% to 863 in the second quarter of 2008 compared to 413 for the comparable period in 2007. Full-time billable consultant utilization rate was 66.8% during the second quarter of 2008 compared with 77.9% during the same period last year. Average billing rate per hour for full-time billable consultants was $273 for the second quarter of 2008 compared to $281 for the second quarter of 2007.
Revenues of $282.8 million for the first six months of 2008 increased 20.7% from $234.3 million for the first half of 2007. The Company's first half 2008 operating income increased 5.6% to $40.9 million compared to $38.7 million in the first half of 2007. Net income was $20.0 million, or $1.10 per diluted share, for the first half of 2008 compared to $19.9 million, or $1.11 per diluted share, for the same period last year. Financial results for the first half of 2007 included $4.5 million of rapid amortization of intangible assets. There was no rapid amortization in the first half of 2008.
EBITDA(8) for both the first half of 2008 and 2007 was $51.4 million, or 18.2% of revenues in 2008 and 22.0% of revenues in 2007. Adjusted EBITDA(8), which excludes share-based compensation expense, rose 7.4% to $65.0 million, or 23.0% of revenues, compared to $60.5 million, or 25.8% of revenues, in the comparable period last year.
The average number of full-time billable consultants(4) increased 32.1% to 1,223 in the first half of 2008 compared to 926 in the same period last year. The average number of full-time equivalent professionals(7) increased 83.0% to 807 in the first half of 2008 compared to 441 for the comparable period in 2007. Full-time billable consultant utilization rate was 65.9% during the first half of 2008 compared with 78.0% during the same period last year. Average billing rate per hour for full-time billable consultants was $275 for the first half of 2008 compared to $276 for the first half of 2007.
Operating Segments Results
Huron continues to demonstrate the success of its broad portfolio of service offerings with solid revenue growth based upon strong market demand. The Company’s operating segments are as follows: Health and Education Consulting; Financial Consulting; Legal Consulting; and Corporate Consulting.
Segment results are included in the attached schedules and in Huron's Form 10-Q filing for the quarter ended June 30, 2008.
Stockamp & Associates Acquisition
On July 8, 2008, Huron announced the acquisition of the assets of Stockamp & Associates, Inc., a nationally recognized management consulting firm specializing in helping high-performing hospitals and health systems optimize their financial and operational performance.
The initial purchase price was made for approximately $219 million, consisting of $169 million in cash and $50 million in stock, subject to adjustment. Additional purchase consideration will be payable if specific performance targets are met.
In the 12 months ended March 31, 2008, Stockamp had cash basis revenues of approximately $94 million.
During July 2008, the Company initiated reductions in workforce to balance its employee base with current revenue expectations, market demand, and areas of focus. These initiatives will include the elimination of the operational consulting group within the Corporate Consulting segment and a reduction in the number of consultants in the Financial Consulting segment. The Company estimates restructuring and severance charges relating to the workforce reductions of approximately $2 million.
Outlook for the Remainder of 2008
The table below presents the components of the Company’s outlook based on currently available information, for both the low and high end of the ranges, for the third quarter and the full year 2008 (in millions except earnings per share):
Third Quarter 2008
Full Year 2008
1) The Legacy Huron column represents revenues and earnings estimates without giving consideration to the acquisition of Stockamp, the impact of the elimination of the operational consulting group within the Corporate Consulting segment, and the severance charges relating to the workforce reductions as described above.
(2) While the Stockamp acquisition will be dilutive to 2008 earnings, it should be accretive to 2009 earnings, as we estimate Stockamp will have revenues in excess of $100 million for 2009 and should have comparable operating metrics to our Health and Education Consulting segment. Based on a preliminary valuation that is subject to refinement, estimated results for the third quarter and full year 2008 also include estimates for intangible assets amortization totaling $3.5 million and $8.5 million, respectively, of which $2.0 million and $5.2 million, respectively, represents rapid amortization. This column also includes the estimated interest cost associated with the acquisition as well as dilution resulting from shares issued in connection with the acquisition.
(3) The Restructuring and Severance Impact column represents estimated revenues and earnings foregone due to the elimination of the operational consulting group and includes $2 million in severance charges relating to the workforce reductions.
Share-based compensation expense of approximately $7.5 million and $28.0 million is included in the Q3 and full year 2008 estimates, respectively. Weighted average diluted share counts for 2008 are estimated to be 19.9 million for Q3 2008 and 19.1 million for full year 2008.
Second Quarter 2008 Webcast
The Company will host a webcast to discuss its financial results today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). The conference call is being webcast by Thomson and can be accessed at Huron Consulting Group’s website at www.huronconsultinggroup.com/webcasts.aspx. A replay will be available approximately two hours after the end of the webcast and for 90 days thereafter.
About Huron Consulting Group
Huron Consulting Group helps clients effectively address complex challenges that arise in litigation, disputes, investigations, regulatory compliance, procurement, financial distress, and other sources of significant conflict or change. The Company also helps clients deliver superior customer and capital market performance through integrated strategic, operational, and organizational change. Huron provides services to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations, and the law firms that represent these various organizations. Learn more at www.huronconsultinggroup.com.
Statements in this press release that are not historical in nature, including those concerning Huron Consulting Group's current expectations about the Company's future results are "forward-looking" statements as defined in Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” or “continues.” These forward-looking statements reflect our current expectation about our future results, levels of activity, performance or achievements, including without limitation, that our business continues to grow at the current expectations with respect to, among other factors, utilization rates, billing rates, and number of revenue-generating professionals; that we are able to expand our service offerings; that we successfully integrate the businesses we acquire; and that existing market conditions, including those in the credit markets, do not change from current expectations. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Therefore, you should not place undue reliance on these forward-looking statements. Please see “Risk Factors” in our 2007 Annual Report on Form 10-K and in other documents we file with the Securities and Exchange Commission for a complete description of the material risks we face.
Jennifer Frost Hennagir, Director
P (312) 880-3260
F (312) 583-8701
Gary L. Burge, Vice President, Chief Financial Officer and Treasurer
P (312) 583-8722
F (312) 583-8701