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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-50976 
HURON CONSULTING GROUP INC.
(Exact name of registrant as specified in its charter)
 
Delaware 01-0666114
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification Number)
550 West Van Buren Street
Chicago, Illinois
60607
(Address of principal executive offices)
(Zip Code)
(312) 583-8700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareHURNNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting 
Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 20, 2023, 19,024,193 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


Table of Contents



Huron Consulting Group Inc.
HURON CONSULTING GROUP INC.
INDEX
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



Table of Contents



PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) 
June 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$16,583 $11,834 
Receivables from clients, net of allowances of $16,808 and $10,600, respectively
152,300 147,852 
Unbilled services, net of allowances of $3,283 and $3,850, respectively
174,409 141,781 
Income tax receivable6,475 960 
Prepaid expenses and other current assets29,734 26,057 
Total current assets379,501 328,484 
Property and equipment, net23,440 26,107 
Deferred income taxes, net1,397 1,554 
Long-term investments97,227 91,194 
Operating lease right-of-use assets27,829 30,304 
Other non-current assets83,777 73,039 
Intangible assets, net19,188 23,392 
Goodwill624,966 624,966 
Total assets$1,257,325 $1,199,040 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$9,720 $14,254 
Accrued expenses and other current liabilities27,472 27,268 
Accrued payroll and related benefits126,430 171,723 
Current maturities of operating lease liabilities11,208 10,530 
Deferred revenues24,703 21,909 
Total current liabilities199,533 245,684 
Non-current liabilities:
Deferred compensation and other liabilities34,363 33,614 
Long-term debt395,000 290,000 
Operating lease liabilities, net of current portion41,407 45,556 
Deferred income taxes, net35,404 32,146 
Total non-current liabilities506,174 401,316 
Commitments and contingencies
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 21,863,932 and 22,507,159 shares issued, respectively
218 223 
Treasury stock, at cost, 2,840,319 and 2,711,712 shares, respectively
(141,407)(137,556)
Additional paid-in capital279,070 318,706 
Retained earnings390,679 352,548 
Accumulated other comprehensive income23,058 18,119 
Total stockholders’ equity551,618 552,040 
Total liabilities and stockholders’ equity$1,257,325 $1,199,040 
The accompanying notes are an integral part of the consolidated financial statements.
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HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited) 
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Revenues and reimbursable expenses:
Revenues$346,759 $273,325 $664,654 $533,374 
Reimbursable expenses8,140 7,492 16,630 12,218 
Total revenues and reimbursable expenses354,899 280,817 681,284 545,592 
Operating expenses:
Direct costs (exclusive of depreciation and amortization included below) 235,198 189,233 463,581 376,480 
Reimbursable expenses8,121 7,576 16,745 12,332 
Selling, general and administrative expenses64,019 46,033 126,308 94,428 
Restructuring charges1,699 2,069 3,983 3,624 
Depreciation and amortization6,143 6,902 12,517 13,766 
Total operating expenses315,180 251,813 623,134 500,630 
Operating income 39,719 29,004 58,150 44,962 
Other income (expense), net:
Interest expense, net of interest income(5,796)(2,446)(10,099)(4,642)
Other income (expense), net1,062 (4,881)2,781 19,484 
Total other income (expense), net(4,734)(7,327)(7,318)14,842 
Income before taxes34,985 21,677 50,832 59,804 
Income tax expense 10,273 7,802 12,701 19,077 
Net income $24,712 $13,875 $38,131 $40,727 
Earnings per share:
Net income per basic share$1.30 $0.67 $2.00 $1.97 
Net income per diluted share$1.27 $0.66 $1.95 $1.94 
Weighted average shares used in calculating earnings per share:
Basic18,939 20,582 19,029 20,715 
Diluted19,486 20,967 19,598 21,047 
Comprehensive income (loss):
Net income $24,712 $13,875 $38,131 $40,727 
Foreign currency translation adjustments, net of tax327 (656)379 (699)
Unrealized gain (loss) on investment, net of tax553 773 4,426 (1,888)
Unrealized gain on cash flow hedging instruments, net of tax2,463 971 134 5,296 
Other comprehensive income3,343 1,088 4,939 2,709 
Comprehensive income $28,055 $14,963 $43,070 $43,436 
The accompanying notes are an integral part of the consolidated financial statements.
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HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
Three Months Ended June 30,
Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income
Stockholders’
Equity
SharesAmountSharesAmount
Balance at March 31, 202321,910,425 $220 (2,970,118)$(141,353)$284,420 $365,967 $19,715 $528,969 
Comprehensive income24,712 3,343 28,055 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations8,683  3,386 145 (145) 
Exercise of stock options7,464 — 360 360 
Share-based compensation9,806 9,806 
Shares redeemed for employee tax withholdings(2,464)(199)(199)
Share repurchases(193,648)(2)(15,371)(15,373)
Balance at June 30, 202321,732,924 $218 (2,969,196)$(141,407)$279,070 $390,679 $23,058 $551,618 
Balance at March 31, 202223,639,953 $237 (2,918,100)$(135,367)$395,103 $303,848 $18,461 $582,282 
Comprehensive income13,875 1,088 14,963 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations27,309  (15,115)(931)931  
Exercise of stock options13,731 — 538 538 
Share-based compensation6,049 6,049 
Shares redeemed for employee tax withholdings(2,584)(127)(127)
Share repurchases(497,547)(5)(28,341)(28,346)
Balance at June 30, 202223,183,446 $232 (2,935,799)$(136,425)$374,280 $317,723 $19,549 $575,359 
Six Months Ended June 30,
Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income
Stockholders’
Equity
SharesAmountSharesAmount
Balance at December 31, 202222,231,593 $223 (2,953,147)$(137,556)$318,706 $352,548 $18,119 $552,040 
Comprehensive income38,131 4,939 43,070 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations306,264 3 121,835 5,877 (5,880) 
Exercise of stock options21,609 — 987 987 
Share-based compensation24,895 24,895 
Shares redeemed for employee tax withholdings(137,884)(9,728)(9,728)
Share repurchases(826,542)(8)(59,638)(59,646)
Balance at June 30, 202321,732,924 $218 (2,969,196)$(141,407)$279,070 $390,679 $23,058 $551,618 
Balance at December 31, 202123,868,918 $239 (2,908,849)$(135,969)$413,794 $276,996 $16,840 $571,900 
Comprehensive income40,727 2,709 43,436 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations304,938 3 115,125 6,555 (6,558) 
Exercise of stock options30,536 — 1,185 1,185 
Share-based compensation18,100 18,100 
Shares redeemed for employee tax withholdings(142,075)(7,011)(7,011)
Share repurchases(1,020,946)(10)(52,241)(52,251)
Balance at June 30, 202223,183,446 $232 (2,935,799)$(136,425)$374,280 $317,723 $19,549 $575,359 
The accompanying notes are an integral part of the consolidated financial statements.
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HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
20232022
Cash flows from operating activities:
Net income$38,131 $40,727 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization12,549 13,766 
Non-cash lease expense3,340 3,174 
Lease-related impairment charge2,086  
Share-based compensation23,151 15,166 
Amortization of debt discount and issuance costs382 397 
Allowances for doubtful accounts53 47 
Deferred income taxes1,755 7,089 
(Gain) loss on sale of property and equipment, excluding transaction costs1 (1,117)
Change in fair value of contingent consideration liabilities(233)33 
Change in fair value of preferred stock investment (26,964)
Changes in operating assets and liabilities, net of acquisitions and divestiture:
(Increase) decrease in receivables from clients, net(4,440)(28,825)
(Increase) decrease in unbilled services, net(32,567)(28,329)
(Increase) decrease in current income tax receivable / payable, net(6,141)9,394 
(Increase) decrease in other assets(4,880)3,984 
Increase (decrease) in accounts payable and other liabilities(5,594)(13,524)
Increase (decrease) in accrued payroll and related benefits(44,277)(43,420)
Increase (decrease) in deferred revenues2,804 (1,834)
Net cash used in operating activities(13,880)(50,236)
Cash flows from investing activities:
Purchases of property and equipment(3,725)(6,800)
Investment in life insurance policies(2,188) 
Distributions from life insurance policies2,956  
Purchases of businesses38 (1,948)
Capitalization of internally developed software costs(12,998)(3,974)
Proceeds from note receivable154 157 
Proceeds from sale of property and equipment 4,750 
Divestiture of business 207 
Net cash used in investing activities(15,763)(7,608)
Cash flows from financing activities:
Proceeds from exercises of stock options987 1,185 
Shares redeemed for employee tax withholdings(9,728)(7,011)
Share repurchases(60,368)(52,443)
Proceeds from bank borrowings230,000 224,000 
Repayments of bank borrowings(125,000)(114,780)
Payments for debt issuance costs(58) 
Deferred payments on business acquisition(1,500)(1,875)
Net cash provided by financing activities34,333 49,076 
Effect of exchange rate changes on cash59 (55)
Net increase (decrease) in cash and cash equivalents4,749 (8,823)
Cash and cash equivalents at beginning of the period11,834 20,781 
Cash and cash equivalents at end of the period$16,583 $11,958 
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Property and equipment expenditures and capitalized software included in current liabilities$4,437 $3,134 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$1,839 $102 
Contingent consideration related to purchase of business$ $869 
Excise tax on net share repurchases included in current liabilities$385 $ 
    The accompanying notes are an integral part of the consolidated financial statements.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)

1. Description of Business
Huron is a global professional services firm that partners with clients to develop growth strategies, optimize operations and accelerate digital transformation using an enterprise portfolio of technology, data and analytics solutions to empower clients to own their future. By collaborating with clients, embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.
We provide our services and products and manage our business through three operating segments: Healthcare, Education and Commercial. See Note 13 “Segment Information” for more information.
2. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited consolidated financial statements reflect the financial position, results of operations, and cash flows as of and for the three and six months ended June 30, 2023 and 2022. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. These financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the period ended March 31, 2023. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.
3. Goodwill and Intangible Assets
The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2023.

Healthcare
EducationCommercialTotal
Balance as of December 31, 2022:
Goodwill$644,238 $123,652 $312,968 $1,080,858 
Accumulated impairment losses(190,024)(1,417)(264,451)(455,892)
Goodwill, net as of December 31, 2022$454,214 $122,235 $48,517 $624,966 
Goodwill, net as of June 30, 2023$454,214 $122,235 $48,517 $624,966 
Intangible Assets
Intangible assets as of June 30, 2023 and December 31, 2022 consisted of the following:
As of June 30, 2023As of December 31, 2022
Useful Life 
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Customer relationships
5 to 13
$65,083 $50,630 $74,583 $57,219 
Technology and software
2 to 5
13,330 9,051 13,330 7,975 
Trade names66,000 6,000 6,000 5,907 
Non-competition agreements
2 to 5
920 464 920 340 
Total$85,333 $66,145 $94,833 $71,441 
Identifiable intangible assets with finite lives are amortized over their estimated useful lives. Customer relationships as well as certain trade names and technology and software, are amortized on an accelerated basis to correspond to the cash flows expected to be derived from the assets. All other intangible assets with finite lives are amortized on a straight-line basis.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
Intangible asset amortization expense was $2.0 million and $2.8 million for the three months ended June 30, 2023 and 2022, respectively; and $4.2 million and $5.7 million for the six months ended June 30, 2023 and 2022, respectively. The table below sets forth the estimated annual amortization expense for the intangible assets recorded as of June 30, 2023.
Year Ending December 31,Estimated Amortization Expense
2023$8,122 
2024$4,674 
2025$3,503 
2026$2,519 
2027$1,773 
Actual future amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, and other factors.
4. Revenues
For the three months ended June 30, 2023 and 2022, we recognized revenues of $346.8 million and $273.3 million, respectively. Of the $346.8 million recognized in the second quarter of 2023, we recognized revenues of $14.8 million from obligations satisfied, or partially satisfied, in prior periods, of which $12.6 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $2.2 million was due to the release of allowances on receivables from clients and unbilled services. Of the $273.3 million recognized in the second quarter of 2022, we recognized revenues of $5.1 million from obligations satisfied, or partially satisfied, in prior periods, of which $3.7 million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $1.4 million was primarily due to the release of allowances on receivables from clients and unbilled services.
For the six months ended June 30, 2023 and 2022, we recognized revenues of $664.7 million and $533.4 million, respectively. Of the $664.7 million recognized in the first six months of 2023, we recognized revenues of $6.3 million from obligations satisfied, or partially satisfied, in prior periods, of which $5.0 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $1.3 million was primarily due to the release of allowances on receivables from clients and unbilled services. Of the $533.4 million recognized in the first six months of 2022, we recognized revenues of $3.4 million from obligations satisfied, or partially satisfied, in prior periods, of which $2.1 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $1.3 million was primarily due to the release of allowances on receivables from clients and unbilled services.
As of June 30, 2023, we had $240.0 million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude variable consideration which has been excluded from the total transaction price due to the constraint and performance obligations under time-and-expense engagements which are recognized in the amount invoiced. Of the $240.0 million of performance obligations, we expect to recognize $54.1 million as revenue in 2023, $66.3 million in 2024, and the remaining $119.6 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.
Contract Assets and Liabilities
The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets.
Unbilled services include revenues recognized for services performed but not yet billed to clients. Services performed that we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval in performance-based engagements, must occur are recorded as contract assets and included within unbilled services, net. The contract asset balance as of June 30, 2023 and December 31, 2022 was $43.7 million and $50.2 million, respectively. The $6.5 million decrease primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.
Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition accounting policy. Our deferred revenues balance as of June 30, 2023 and
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
December 31, 2022, was $24.7 million and $21.9 million, respectively. The $2.8 million increase primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the three and six months ended June 30, 2023, $3.9 million and $20.3 million of revenues recognized were included in the deferred revenue balance as of December 31, 2022, respectively.
5. Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, excluding unvested restricted common stock. Diluted earnings per share reflects the potential reduction in earnings per share that could occur if securities or other contracts to issue common stock were exercised or converted into common stock under the treasury stock method. Such securities or other contracts include unvested restricted stock awards, unvested restricted stock units, and outstanding common stock options, to the extent dilutive. In periods for which we report a net loss, diluted weighted average common shares outstanding excludes all potential common stock equivalents as their impact on diluted net loss per share would be anti-dilutive.
Earnings per share under the basic and diluted computations are as follows: 
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2023202220232022
Net income$24,712 $13,875 $38,131 $40,727 
Weighted average common shares outstanding – basic18,939 20,582 19,029 20,715 
Weighted average common stock equivalents547 385 569 332 
Weighted average common shares outstanding – diluted19,486 20,967 19,598 21,047 
Net income per basic share$1.30 $0.67 $2.00 $1.97 
Net income per diluted share$1.27 $0.66 $1.95 $1.94 
The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above for the three and six months ended June 30, 2023 and 2022 were both less than 0.1 million shares, and related to unvested restricted stock and outstanding common stock options.
In November 2020, our board of directors authorized a share repurchase program permitting us to repurchase up to $50 million of our common stock through December 31, 2021. Subsequent to the initial authorization, our board of directors authorized extensions of the share repurchase program through December 31, 2023 and increased the authorized amount to $300 million. The amount and timing of repurchases under the share repurchase program were and will continue to be determined by management and depend on a variety of factors, including the trading price of our common stock, capacity under our credit facility, general market and business conditions, and applicable legal requirements. All shares repurchased and retired are reflected as a reduction to our basic weighted average shares outstanding based on the trade date of the share repurchase.
In the three and six months ended June 30, 2023, we repurchased and retired 193,648 and 826,542 shares for $15.4 million and $59.6 million, respectively. Additionally, in the first quarter of 2023, we settled the repurchase of 15,200 shares for $1.1 million which were accrued as of December 31, 2022. In the three and six months ended June 30, 2022, we repurchased and retired 497,547 and 1,020,946 shares for $28.3 million and $52.2 million, respectively. Additionally in the first quarter of 2022, we settled the repurchase of 3,820 shares for $0.2 million that were accrued as of December 31, 2021. As of June 30, 2023, $49.6 million remained available for share repurchases under our share repurchase program.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
6. Financing Arrangements
The Company has a $600 million five-year senior secured revolving credit facility, subject to the terms of a Third Amended and Restated Credit Agreement dated as of November 15, 2022 (as amended, the "Amended Credit Agreement") that becomes due and payable in full upon maturity on November 15, 2027. The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount up to $250 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Amended Credit Agreement of $850 million. The initial borrowings under the Amended Credit Agreement were used to refinance borrowings outstanding under a prior credit agreement, and future borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, share repurchases, permitted acquisitions, and other general corporate purposes.
Fees and interest on borrowings vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, borrowings under the Amended Credit Agreement will bear interest at one, three or six month Term SOFR or an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.125% per annum and 1.875% per annum, in the case of Term SOFR borrowings, or between 0.125% per annum and 0.875% per annum, in the case of base rate loans, based upon our Consolidated Leverage Ratio at such time.
In April 2023, the Company and PNC Capital Markets, LLC, as Sustainability Structuring Agent, with the consent of the Required Lenders (as defined in the Amended Credit Agreement), entered into the first amendment to the Amended Credit Agreement (the "First Amendment") to incorporate specified key performance indicators with respect to certain environmental, social and governance targets of the Company. Based upon the performance of the Company against those key performance indicators in each Reference Year (as defined in the First Amendment), certain adjustments to the otherwise applicable rates for interest, commitment fees and letter of credit fees will be made. These annual adjustments will not exceed an increase or decrease of 0.01% in the aggregate for all key performance indicators in the case of the commitment fee rate or an increase or decrease of 0.05% in the aggregate for all key performance indicators in the case of the Term SOFR borrowings, base rate borrowings or letter of credit fee rate.
Amounts borrowed under the Amended Credit Agreement may be prepaid at any time without premium or penalty. We are required to prepay the amounts outstanding under the Amended Credit Agreement in certain circumstances, including upon an Event of Default (as defined in the Amended Credit Agreement). In addition, we have the right to permanently reduce or terminate the unused portion of the commitments provided under the Amended Credit Agreement at any time.
The loans and obligations under the Amended Credit Agreement are secured pursuant to a Third Amended and Restated Security Agreement and a Third Amended and Restated Pledge Agreement (the “Pledge Agreement”) with Bank of America, N.A. as collateral agent, pursuant to which the Company and the subsidiary guarantors grant Bank of America, N.A., for the ratable benefit of the lenders under the Amended Credit Agreement, a first-priority lien, subject to permitted liens, on substantially all of the personal property assets of the Company and the subsidiary guarantors, and a pledge of 100% of the stock or other equity interests in all domestic subsidiaries and 65% of the stock or other equity interests in each “material first-tier foreign subsidiary” (as defined in the Pledge Agreement) entitled to vote and 100% of the stock or other equity interests in each material first-tier foreign subsidiary not entitled to vote.
The Amended Credit Agreement contains usual and customary representations and warranties; affirmative and negative covenants, which include limitations on liens, investments, additional indebtedness, and restricted payments; and two quarterly financial covenants as follows: (i) a maximum Consolidated Leverage Ratio (defined as the ratio of debt to consolidated EBITDA) of 3.75 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to 4.25 to 1.00 upon the occurrence of a Qualified Acquisition (as defined in the Amended Credit Agreement), and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.00 to 1.00. Consolidated EBITDA for purposes of the financial covenants is calculated on a continuing operations basis and includes adjustments to add back non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, pro forma historical EBITDA for businesses acquired, and other specified items in accordance with the Amended Credit Agreement. For purposes of the Consolidated Leverage Ratio total debt is on a gross basis and is not netted against our cash balances. At June 30, 2023, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of 2.17 to 1.00 and a Consolidated Interest Coverage Ratio of 11.23 to 1.00.
Borrowings outstanding under the Amended Credit Agreement at June 30, 2023 totaled $395.0 million and are classified as long-term debt in our consolidated balance sheet. These borrowings carried a weighted average interest rate of 4.6%, including the effect of the interest rate swaps described in Note 8 “Derivative Instruments and Hedging Activity.” Borrowings outstanding under the Amended Credit Agreement at December 31, 2022 were $290.0 million and carried a weighted average interest rate of 3.8%, including the effect of the interest rate swaps in effect at that time. The borrowing capacity under the revolving credit facility is reduced by any outstanding borrowings under the revolving
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
credit facility and outstanding letters of credit. At June 30, 2023, we had outstanding letters of credit totaling $0.7 million, which are used as security deposits for our office facilities. As of June 30, 2023, the unused borrowing capacity under the revolving credit facility was $204.3 million.
7. Restructuring Charges
Restructuring charges for the three and six months ended June 30, 2023 were $1.7 million and $4.0 million, respectively. The $1.7 million of restructuring charges recognized in the second quarter of 2023 included $0.9 million of employee-related expenses; $0.3 million related to the abandonment of a capitalized software development project; $0.2 million of rent and related expenses, net of sublease income, for previously vacated office spaces; and $0.2 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces. The $4.0 million of restructuring charges incurred in the first six months of 2023 included a $1.9 million non-cash impairment charge on the fixed assets and right-of-use operating lease asset related to our office space in Hillsboro, Oregon, which we exited in the first quarter of 2023; $0.9 million of employee-related expenses; $0.6 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.3 million related to the abandonment of a capitalized software development project; and $0.2 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces.
Restructuring charges for the three and six months ended June 30, 2022 were $2.1 million and $3.6 million. The $2.1 million of restructuring charges recognized in the second quarter of 2022 included $1.1 million of employee-related expenses; $0.4 million of rent and related expenses, net of sublease income, for previously vacated office spaces; $0.5 million for third-party transaction expenses related to the modification of our operating model; and $0.1 million related to the divestiture of our Life Sciences business in the fourth quarter of 2021. The $3.6 million of restructuring charges incurred in the first six months of 2022 included $1.6 million of employee-related expenses; $1.0 million of rent and related expenses, net of sublease income, for previously vacated office spaces; $0.6 million for third-party transaction expenses related to the modification of our operating model; $0.3 million of accelerated amortization of capitalized software implementation costs for a cloud-computing arrangement that is no longer in use; and $0.1 million related to the divestiture of our Life Sciences business in the fourth quarter of 2021.
The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the six months ended June 30, 2023.
Employee CostsOther Total
Balance as of December 31, 2022$3,751 $568 $4,319 
Additions943  943 
Payments(3,489)(74)(3,563)
Adjustments
 41 41 
Balance as of June 30, 2023$1,205 $535 $1,740 
All of the $1.2 million restructuring charge liability related to employee costs at June 30, 2023 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related benefits in our consolidated balance sheet. All of the $0.5 million other restructuring charge liability at June 30, 2023, which relates to the early termination of a contract in 2022, is expected to be paid in the next 12 months and is included as a component of accrued expenses and other current liabilities in our consolidated balance sheet.
8. Derivative Instruments and Hedging Activity
In the normal course of business, we use forward interest rate swaps to manage the interest rate risk associated with our variable-rate borrowings under our senior secured credit facility and we use non-deliverable foreign exchange forward contracts to manage the foreign currency exchange rate risk related to our Indian Rupee-denominated expenses of our operations in India. From time to time, we may enter into additional forward interest rate swaps or non-deliverable foreign exchange forward contracts to further hedge against our interest rate risk and foreign currency exchange rate risk. We do not use derivative instruments for trading or other speculative purposes.
We have designated all of our derivative instruments as cash flow hedges. Therefore, changes in the fair value of the interest rate swaps and foreign exchange forward contracts are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified to earnings upon settlement.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
Interest Rate Swaps
We are party to forward interest rate swap agreements with aggregate notional amounts of $250.0 million and $200.0 million as of June 30, 2023 and December 31, 2022, respectively. Under the terms of the interest rate swap agreements, we receive from the counterparty interest on the notional amount based on one month Term SOFR and we pay to the counterparty a stated, fixed rate. The forward interest rate swap agreements have staggered maturities through February 29, 2028.
As of June 30, 2023, it was anticipated that $6.2 million of the gains, net of tax, related to interest rate swaps currently recorded in accumulated other comprehensive income will be reclassified into interest expense, net of interest income in our consolidated statement of operations within the next 12 months.
Foreign Exchange Forward Contracts
We are party to non-deliverable foreign exchange forward contracts that are scheduled to mature monthly through April 30, 2024. As of June 30, 2023 and December 31, 2022, the aggregate notional amounts of these contracts were INR 625.1 million, or $7.6 million, and INR 657.9 million, or $8.0 million, respectively, based on the exchange rates in effect as of each period end.
As of June 30, 2023, it was anticipated that all of the $0.1 million of gains, net of tax, related to foreign exchange forward contracts currently recorded in accumulated other comprehensive income will be reclassified into direct costs in our consolidated statement of operations within the next 12 months.
The table below sets forth additional information relating to our derivative instruments as of June 30, 2023 and December 31, 2022.
Derivative InstrumentBalance Sheet LocationJune 30,
2023
December 31,
2022
Interest rate swapsPrepaid expenses and other current assets$8,293 $7,108 
Interest rate swapsOther non-current assets4,057 5,131 
Foreign exchange forward contractsPrepaid expenses and other current assets79  
Total Assets$12,429 $12,239 
Interest rate swapsDeferred compensation and other liabilities$126 $ 
Foreign exchange forward contractsAccrued expenses and other current liabilities1 120 
Total Liabilities$127 $120 
All of our derivative instruments are transacted under the International Swaps and Derivatives Association (ISDA) master agreements. These agreements permit the net settlement of amounts owed in the event of default and certain other termination events. Although netting is permitted, it is our policy to record all derivative assets and liabilities on a gross basis in our consolidated balance sheet. Refer to Note 10 “Other Comprehensive Income (Loss)” for additional information on our derivative instruments.
9. Fair Value of Financial Instruments
Certain of our assets and liabilities are measured at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy for inputs used in measuring fair value and requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy consists of three levels based on the objectivity of the inputs as follows:
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 InputsQuoted 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 InputsUnobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The table below sets forth our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022.
Level 1Level 2Level 3Total
June 30, 2023
Assets:
Interest rate swaps$— $12,224 $— $12,224 
Convertible debt investment— — 63,596 63,596 
Foreign exchange forward contracts— 79 — 79 
Deferred compensation assets— 32,239 — 32,239 
Total assets$— $44,542 $63,596 $108,138 
Liabilities:
Foreign exchange forward contracts$— $1 $— $1 
Contingent consideration for business acquisitions— — 1,957 1,957 
Total liabilities$— $1 $1,957 $1,958 
December 31, 2022
Assets:
Interest rate swaps$— $12,239 $— $12,239 
Convertible debt investment— — 57,563 57,563 
Deferred compensation assets— 29,875 — 29,875 
Total assets$— $42,114 $57,563 $99,677 
Liabilities:
Foreign exchange forward contracts$— $120 $— $120 
Contingent consideration for business acquisitions— — 3,190 3,190 
Total liabilities$— $120 $3,190 $3,310 
Interest rate swaps: The fair values of our interest rate swaps were derived using estimates to settle the interest rate swap agreements, which are based on the net present value of expected future cash flows on each leg of the swaps utilizing market-based inputs and a discount rate reflecting the risks involved. Refer to Note 8 “Derivative Instruments and Hedging Activity” for additional information on our interest rate swaps.
Foreign exchange forward contracts: The fair values of our foreign exchange forward contracts were derived using estimates to settle the foreign exchange forward contracts agreements, which are based on the net present value of expected future cash flows on each contract utilizing market-based inputs, including both forward and spot prices, and a discount rate reflecting the risks involved. Refer to Note 8 “Derivative Instruments and Hedging Activity” for additional information on our foreign exchange forward contracts.
Deferred compensation assets: We have a non-qualified deferred compensation plan (the “Plan”) for the members of our board of directors and a select group of our employees. The deferred compensation liability is funded by the Plan assets, which consist of life insurance policies maintained within a trust. The cash surrender value of the life insurance policies approximates fair value and is based on third-party broker statements which provide the fair value of the life insurance policies' underlying investments, which are Level 2 inputs. The cash surrender value of the life insurance policies is invested primarily in mutual funds. The Plan assets are included in other non-current assets in our consolidated balance sheets. Realized and unrealized gains (losses) from the deferred compensation assets are recorded to other income (expense), net in our consolidated statements of operations.
Convertible debt investment: Since 2014, we have invested $40.9 million in the form of 1.69% convertible debt in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight, a U.S.-based company that partners with leading nonprofit universities to increase access to and retention of international students, boost institutional growth, and enhance an institution’s global footprint. The convertible notes will mature on January 17, 2027, unless converted earlier.
To determine the appropriate accounting treatment for our investment, we performed a variable interest entity (“VIE”) analysis and concluded that Shorelight does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the convertible notes are not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
we concluded the appropriate accounting treatment to be that of an available-for-sale debt security. We continue to monitor the key factors of our VIE analysis and the terms of the convertible notes to ensure our accounting treatment is appropriate. We have not identified any changes to Shorelight or our investment that would change our classification of the investment as an available-for-sale debt security.
The investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income. We estimate the fair value of our investment using a scenario-based approach in the form of a hybrid analysis that consists of a Monte Carlo simulation model and an expected return analysis. The conclusion of value for our investment is based on the probability-weighted assessment of both scenarios. The hybrid analysis utilizes certain assumptions including the assumed holding period through the maturity date of January 17, 2027; the applicable waterfall distribution at the end of the expected holding period based on the rights and privileges of the various instruments; cash flow projections discounted at the risk-adjusted rate of 24.0% as of June 30, 2023 and December 31, 2022; and the concluded equity volatility of 40.0% as of June 30, 2023 and December 31, 2022, all of which are Level 3 inputs. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the investment, which would result in different impacts to our consolidated balance sheet and comprehensive income. Actual results may differ from our estimates. The fair value of the convertible debt investment is recorded in long-term investments in our consolidated balance sheets.
The table below sets forth the changes in the balance of the convertible debt investment for the six months ended June 30, 2023.
Convertible Debt Investment
Balance as of December 31, 2022$57,563 
Change in fair value6,033 
Balance as of June 30, 2023$63,596 
Contingent consideration for business acquisitions: We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted assessment of the specific financial performance targets being measured or a Monte Carlo simulation model, as appropriate. These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 inputs. The significant unobservable inputs used in the fair value measurements of our contingent consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and a discount rate which was 6.1% as of June 30, 2023 and 5.5% as of December 31, 2022. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest projections and input provided by practice leaders and management. Any change in the fair value estimate is recorded in our consolidated statement of operations for that period. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of our contingent consideration liability, which would result in different impacts to our consolidated balance sheets and consolidated statements of operations. Actual results may differ from our estimates.
The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the six months ended June 30, 2023.
Contingent Consideration for Business Acquisitions
Balance as of December 31, 2022
$3,190 
Payment(1,000)
Change in fair value(233)
Balance as of June 30, 2023
$1,957 
Financial assets and liabilities not recorded at fair value on a recurring basis are as follows:
Medically Home Preferred Stock Investment
In the fourth quarter of 2019, we invested $5.0 million in Medically Home Group, Inc. (“Medically Home”), a hospital-at-home company. The investment was made in the form of preferred stock. To determine the appropriate accounting treatment for our preferred stock investment, we performed a VIE analysis and concluded that Medically Home does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the preferred stock is not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment, we concluded the appropriate accounting treatment for our investment in Medically Home to be that of an equity security with no readily determinable fair value. We elected to apply the measurement alternative at the time of the purchase and will continue to do so until the investment does not qualify to be so measured. Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
for an identical or similar investment in Medically Home. On a quarterly basis, we review the information available to determine whether an orderly and observable transaction for the same or similar equity instrument occurred, and remeasure to the fair value of the preferred stock using such identified transactions, with changes in the fair value recorded in our consolidated statement of operations.
During the first quarter of 2022, we recognized a pre-tax unrealized gain of $27.0 million based on an observable price change of preferred stock issued by Medically Home with similar rights and preferences to our preferred stock investment, a Level 2 input. There were no observable price changes for the remainder of 2022 or in the first half of 2023. Since our initial investment, we have recognized cumulative pre-tax unrealized gains of $28.6 million, which were recorded to other income (expense), net in our consolidated statement of operations, and we have not identified any impairments of our investment. As of June 30, 2023 and December 31, 2022, the carrying amount of our preferred stock investment was $33.6 million.
Senior Secured Credit Facility
The carrying value of our borrowings outstanding under our senior secured credit facility is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the senior secured credit facility bears interest at variable rates based on current market rates as set forth in the Amended Credit Agreement. Refer to Note 6 “Financing Arrangements” for additional information on our senior secured credit facility.
Cash and Cash Equivalents and Other Financial Instruments
Cash and cash equivalents are stated at cost, which approximates fair market value. The carrying values of all other financial instruments not described above reasonably approximate fair market value due to the nature of the financial instruments and the short-term maturity of these items.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
10. Other Comprehensive Income (Loss)
The table below sets forth the components of other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2023 and 2022.
Three Months Ended
June 30, 2023
Three Months Ended
June 30, 2022
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Foreign currency translation adjustments$327 $ $327 $(656)$ $(656)
Unrealized gain (loss) on investment$754 $(201)$553 $1,051 $(278)$773 
Interest rate swaps:
Change in fair value$5,265 $(1,400)$3,865 $1,024 $(271)$753 
Reclassification adjustments into earnings(1,941)516 (1,425)297 (79)218 
Net unrealized gain (loss) on interest rate swaps$3,324 $(884)$2,440 $1,321 $(350)$971 
Foreign exchange forward contracts:
Change in fair value$46 $(12)$34 $ $ $ 
Reclassification adjustments into earnings(14)3 (11)   
Net unrealized gain (loss) on foreign exchange forward contracts$32 $(9)$23 $ $ $ 
Other comprehensive income (loss)$4,437 $(1,094)$3,343 $1,716 $(628)$1,088 
Six Months Ended
June 30, 2023
Six Months Ended
June 30, 2022
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Foreign currency translation adjustments$379 $ $379 $(699)$ $(699)
Unrealized gain (loss) on investment$6,033 $(1,607)$4,426 $(2,566)$678 $(1,888)
Interest rate swaps:
Change in fair value$3,458 $(919)$2,539 $6,692 $(1,770)$4,922 
Reclassification adjustments into earnings(3,473)923 (2,550)509 (135)374 
Net unrealized gain (loss) on interest rate swaps$(15)$4 $(11)$7,201 $(1,905)$5,296 
Foreign exchange forward contracts:
Change in fair value$200 $(53)$147 $ $ $ 
Reclassification adjustments into earnings(2) (2)   
Net unrealized gain (loss) on foreign exchange forward contracts$198 $(53)$145 $ $ $ 
Other comprehensive income (loss)$6,595 $(1,656)$4,939 $3,936 $(1,227)$2,709 
The before tax amounts reclassified from accumulated other comprehensive income related to our interest rate swaps and foreign exchange forward contracts are recorded to interest expense, net of interest income, and direct costs, respectively. Refer to Note 8 “Derivative Instruments and Hedging Activity” for additional information on our derivative instruments.

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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
Accumulated other comprehensive income, net of tax, includes the following components: 
Cash Flow Hedges
Foreign Currency TranslationAvailable-for-Sale InvestmentInterest Rate SwapsForeign Exchange Forward ContractsTotal
Balance as of December 31, 2022$(3,033)$12,228 $9,012 $(88)$18,119 
Current period change379 4,426 (11)145 4,939 
Balance as of June 30, 2023$(2,654)$16,654 $9,001 $57 $23,058 
11. Income Taxes
For the three months ended June 30, 2023, our effective tax rate was 29.4% as we recognized income tax expense of $10.3 million on income of $35.0 million. The effective tax rate of 29.4% was less favorable than the statutory rate, inclusive of state income taxes, of 26.6% primarily due to certain nondeductible expense items. These unfavorable items were partially offset by a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability.
For the three months ended June 30, 2022, our effective tax rate was 36.0% as we recognized income tax expense of $7.8 million on income of $21.7 million. The effective tax rate of 36.0% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4% primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.
For the six months ended June 30, 2023, our effective tax rate was 25.0% as we recognized income tax expense of $12.7 million on income of $50.8 million. The effective tax rate of 25.0% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6% primarily due to a discrete tax benefit for share-based compensation awards that vested during the first quarter of 2023 and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability. These favorable items were partially offset by certain nondeductible expense items.
For the six months ended June 30, 2022, our effective tax rate was 31.9% as we recognized income tax expense of $19.1 million on income of $59.8 million. The effective tax rate of 31.9% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4% primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.
As of June 30, 2023, we had $0.6 million of unrecognized tax benefits which would affect the effective tax rate if recognized. It is reasonably possible that approximately $0.6 million of the liability for unrecognized tax benefits could decrease in the next twelve months due to the expiration of statutes of limitations.
12. Commitments, Contingencies and Guarantees
Litigation
From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. As of the date of this Quarterly Report on Form 10-Q, we are not a party to any litigation or legal proceeding or subject to any claim that, in the current opinion of management, could reasonably be expected to have a material adverse effect on our financial position or results of operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected results.
Guarantees
Guarantees in the form of letters of credit totaling $0.7 million were outstanding at both June 30, 2023 and December 31, 2022, to support certain office lease obligations.
In connection with certain business acquisitions, we may be required to pay post-closing consideration to the sellers if specific financial performance targets are met over a number of years as specified in the related purchase agreements. As of June 30, 2023 and December 31, 2022, the total estimated fair value of our outstanding contingent consideration liability was $2.0 million and $3.2 million, respectively.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
To the extent permitted by law, our bylaws and articles of incorporation require that we indemnify our officers and directors against judgments, fines and amounts paid in settlement, including attorneys’ fees, incurred in connection with civil or criminal action or proceedings, as it relates to their services to us if such person acted in good faith. Although there is no limit on the amount of indemnification, we may have recourse against our insurance carrier for certain payments made.
13. Segment Information
Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker, who is our chief executive officer, manages the business under three operating segments, which are our reportable segments: Healthcare, Education and Commercial.
Healthcare
Our Healthcare segment serves acute care providers, including national and regional health systems; academic health systems; community health systems; and public, children’s and critical access hospitals, and non-acute care providers, including physician practices and medical groups; payors; and long-term care or post-acute providers. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; digital solutions, spanning technology and analytic-related services and a portfolio of software products; organizational transformation; financial advisory and strategy and innovation. Healthcare organizations are focused on establishing a sustainable long-term strategy and business model centered around growth, optimal cost structures, reimbursement models, financial strategies, and consumer-focused digital transformation; changing the way care is delivered, particularly in light of personnel shortages, and improving access to care; and evolving their digital capabilities to more effectively manage their business. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry, functional and technical expertise to help clients solve a diverse set of business issues, including, but not limited to, identifying new opportunities for growth, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, and maximizing return on technology investments.
Education
Our Education segment serves public and private colleges and universities, research institutes and other education-related organizations. Our Education professionals have a depth of expertise in strategy and innovation; business operations, including the research enterprise and student and alumni lifecycle; digital solutions, spanning technology and analytic-related services and Huron Research Suite, the leading software suite designed to facilitate and improve research administration service delivery and compliance; and organizational transformation. Our Education segment clients are increasingly faced with strategic, financial and/or enrollment challenges, increased competition, and a need to modernize their businesses using technology to advance their missions. We combine our deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology and analytics; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; applying innovative enrollment strategies; and enhancing the student lifecycle.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
Commercial
Our Commercial segment is focused on serving industries and organizations facing significant disruption and regulatory change by helping them adapt to rapidly changing environments and accelerate business transformation. Our Commercial professionals work primarily with six primary buyers: the chief executive officer, the chief financial officer, the chief strategy officer, the chief human resources officer, the chief operating officer, and organizational advisors, including lenders and law firms. We have a deep focus on serving organizations in the financial services, energy and utilities, industrials and manufacturing industries and the public sector while opportunistically serving commercial industries more broadly, including professional and business services, life sciences, consumer products, and nonprofit. Our Commercial professionals use their deep industry, functional and technical expertise to deliver our digital services and software products, strategy and innovation, and financial advisory (special situation advisory and corporate finance advisory) services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and analytics throughout their internal and customer-facing operations; developing analytics and insights to identify the needs of tomorrow’s customers, evolving their strategies, and bringing new products to market; managing through stressed and distressed situations to create a viable path forward for stakeholders; and providing financial, risk and regulatory advisory offerings.
Segment operating income consists of the revenues generated by a segment, less operating expenses that are incurred directly by the segment. Unallocated costs include corporate costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. These administrative function costs include corporate office support costs, office facility costs, costs related to accounting and finance, human resources, legal, marketing, information technology, and company-wide business development functions, as well as costs related to overall corporate management. Our chief operating decision maker does not evaluate segments using asset information.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The table below sets forth information about our operating segments for the three and six months ended June 30, 2023 and 2022, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.
Three Months Ended
June 30,
Six Months Ended
June 30,
2023202220232022
Healthcare:
Revenues$173,768 $128,474 $322,817 $250,350 
Operating income$49,151 $30,364 $81,406 $58,396 
Segment operating income as a percentage of segment revenues28.3 %23.6 %25.2 %23.3 %
Education:
Revenues$110,694 $88,225 $214,841 $168,887 
Operating income$27,397 $21,691 $50,562 $35,997 
Segment operating income as a percentage of segment revenues24.8 %24.6 %23.5 %21.3 %
Commercial:
Revenues$62,297 $56,626 $126,996 $114,137 
Operating income$10,472 $11,915 $24,539 $24,129 
Segment operating income as a percentage of segment revenues16.8 %21.0 %19.3 %21.1 %
Total Huron:
Revenues$346,759 $273,325 $664,654 $533,374 
Reimbursable expenses8,140 7,492 16,630 12,218 
Total revenues and reimbursable expenses$354,899 $280,817 $681,284 $545,592 
Segment operating income$87,020 $63,970 $156,507 $118,522 
Items not allocated at the segment level:
Other operating expenses42,923 29,912 89,263 63,460 
Depreciation and amortization4,378 5,054 9,094 10,100 
Operating income39,719 29,004 58,150 44,962 
Total other income (expense), net(4,734)(7,327)(7,318)14,842 
Income before taxes$34,985 $21,677 $50,832 $59,804 
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The following table illustrates the disaggregation of revenues by our two principal capabilities: i) Consulting and Managed Services and ii) Digital, and includes a reconciliation of the disaggregated revenues to revenues from our three operating segments for the three and six months ended June 30, 2023 and 2022.
Three Months Ended
June 30,
Six Months Ended
June 30,
Revenues by Capability2023202220232022
Healthcare:
Consulting and Managed Services$124,944 $83,955 $226,680 $167,714 
Digital48,824 44,519 96,137 82,636 
Total revenues$173,768 $128,474 $322,817 $250,350 
Education:
Consulting and Managed Services$53,426 $49,279 $106,653 $93,460 
Digital57,268 38,946 108,188 75,427 
Total revenues$110,694 $88,225 $214,841 $168,887 
Commercial:
Consulting and Managed Services$18,885 $14,637 $41,116 $37,281 
Digital43,412 41,989 85,880 76,856 
Total revenues$62,297 $56,626 $126,996 $114,137 
Total Huron:
Consulting and Managed Services$197,255 $147,871 $374,449 $298,455 
Digital149,504 125,454 290,205 234,919 
Total revenues$