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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 September 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 October 26, 2023, 18,747,865 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) 
September 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$9,398 $11,834 
Receivables from clients, net of allowances of $16,011 and $10,600, respectively
166,330 147,852 
Unbilled services, net of allowances of $4,779 and $3,850, respectively
192,853 141,781 
Income tax receivable4,500 960 
Prepaid expenses and other current assets32,450 26,057 
Total current assets405,531 328,484 
Property and equipment, net22,919 26,107 
Deferred income taxes, net1,735 1,554 
Long-term investments95,387 91,194 
Operating lease right-of-use assets23,441 30,304 
Other non-current assets87,486 73,039 
Intangible assets, net20,090 23,392 
Goodwill625,711 624,966 
Total assets$1,282,300 $1,199,040 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$11,987 $14,254 
Accrued expenses and other current liabilities31,591 27,268 
Accrued payroll and related benefits183,872 171,723 
Current maturities of operating lease liabilities11,116 10,530 
Deferred revenues26,217 21,909 
Total current liabilities264,783 245,684 
Non-current liabilities:
Deferred compensation and other liabilities32,700 33,614 
Long-term debt358,000 290,000 
Operating lease liabilities, net of current portion39,207 45,556 
Deferred income taxes, net34,256 32,146 
Total non-current liabilities464,163 401,316 
Commitments and contingencies
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 21,597,274 and 22,507,159 shares issued, respectively
215 223 
Treasury stock, at cost, 2,848,126 and 2,711,712 shares, respectively
(141,729)(137,556)
Additional paid-in capital261,995 318,706 
Retained earnings412,195 352,548 
Accumulated other comprehensive income20,678 18,119 
Total stockholders’ equity553,354 552,040 
Total liabilities and stockholders’ equity$1,282,300 $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
September 30,
Nine Months Ended
September 30,
2023202220232022
Revenues and reimbursable expenses:
Revenues$358,178 $285,370 $1,022,832 $818,744 
Reimbursable expenses9,288 6,816 25,918 19,034 
Total revenues and reimbursable expenses367,466 292,186 1,048,750 837,778 
Operating expenses:
Direct costs (exclusive of depreciation and amortization included below) 244,774 193,368 708,355 569,848 
Reimbursable expenses9,497 6,917 26,242 19,249 
Selling, general and administrative expenses64,347 54,458 190,655 148,886 
Restructuring charges5,402 1,332 9,385 4,956 
Depreciation and amortization6,104 6,812 18,621 20,578 
Total operating expenses330,124 262,887 953,258 763,517 
Operating income 37,342 29,299 95,492 74,261 
Other income (expense), net:
Interest expense, net of interest income(5,047)(3,111)(15,146)(7,753)
Other income (expense), net(1,000)(785)1,781 18,699 
Total other income (expense), net(6,047)(3,896)(13,365)10,946 
Income before taxes31,295 25,403 82,127 85,207 
Income tax expense 9,779 7,662 22,480 26,739 
Net income $21,516 $17,741 $59,647 $58,468 
Earnings per share:
Net income per basic share$1.15 $0.88 $3.15 $2.85 
Net income per diluted share$1.10 $0.86 $3.05 $2.80 
Weighted average shares used in calculating earnings per share:
Basic18,770 20,109 18,941 20,511 
Diluted19,475 20,615 19,578 20,899 
Comprehensive income (loss):
Net income $21,516 $17,741 $59,647 $58,468 
Foreign currency translation adjustments, net of tax(662)(1,034)(283)(1,733)
Unrealized gain (loss) on investment, net of tax(1,350)(830)3,076 (2,718)
Unrealized gain (loss) on cash flow hedging instruments, net of tax(368)3,762 (234)9,058 
Other comprehensive income (loss)(2,380)1,898 2,559 4,607 
Comprehensive income $19,136 $19,639 $62,206 $63,075 
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 September 30,
Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income
Stockholders’
Equity
SharesAmountSharesAmount
Balance at June 30, 202321,732,924 $218 (2,969,196)$(141,407)$279,070 $390,679 $23,058 $551,618 
Comprehensive income (loss)21,516 (2,380)19,136 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations16,511  385    
Purchase of business16,337  1,646 1,646 
Share-based compensation10,063 10,063 
Shares redeemed for employee tax withholdings(3,820)(322)(322)
Share repurchases(290,288)(3)(28,784)(28,787)
Balance at September 30, 202321,475,484 $215 (2,972,631)$(141,729)$261,995 $412,195 $20,678 $553,354 
Balance at June 30, 202223,183,446 $232 (2,935,799)$(136,425)$374,280 $317,723 $19,549 $575,359 
Comprehensive income17,741 1,898 19,639 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations36,251  (835)(46)46  
Exercise of stock options6,000 — 236 236 
Share-based compensation7,160 7,160 
Shares redeemed for employee tax withholdings(8,020)(529)(529)
Share repurchases(685,641)(7)(45,597)(45,604)
Balance at September 30, 202222,540,056 $225 (2,944,654)$(137,000)$336,125 $335,464 $21,447 $556,261 
Nine Months Ended September 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 income59,647 2,559 62,206 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations322,775 3 122,220 5,877 (5,880) 
Exercise of stock options21,609 — 987 987 
Purchase of business16,337  1,646 1,646 
Share-based compensation34,958 34,958 
Shares redeemed for employee tax withholdings(141,704)(10,050)(10,050)
Share repurchases(1,116,830)(11)(88,422)(88,433)
Balance at September 30, 202321,475,484 $215 (2,972,631)$(141,729)$261,995 $412,195 $20,678 $553,354 
Balance at December 31, 202123,868,918 $239 (2,908,849)$(135,969)$413,794 $276,996 $16,840 $571,900 
Comprehensive income58,468 4,607 63,075 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations341,189 3 114,290 6,509 (6,512) 
Exercise of stock options36,536 — 1,421 1,421 
Share-based compensation25,260 25,260 
Shares redeemed for employee tax withholdings(150,095)(7,540)(7,540)
Share repurchases(1,706,587)(17)(97,838)(97,855)
Balance at September 30, 202222,540,056 $225 (2,944,654)$(137,000)$336,125 $335,464 $21,447 $556,261 
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)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income$59,647 $58,468 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization18,653 20,578 
Non-cash lease expense4,840 4,768 
Lease-related impairment charges5,584  
Share-based compensation35,398 23,083 
Amortization of debt discount and issuance costs577 595 
Allowances for doubtful accounts53 47 
Deferred income taxes890 7,133 
Gain on sale of property and equipment, excluding transaction costs(61)(1,117)
Change in fair value of contingent consideration liabilities(251)(34)
Change in fair value of preferred stock investment (26,964)
Other, net 6 
Changes in operating assets and liabilities, net of acquisitions and divestiture:
(Increase) decrease in receivables from clients, net(18,508)(44,759)
(Increase) decrease in unbilled services, net(51,092)(31,937)
(Increase) decrease in current income tax receivable / payable, net(4,365)14,704 
(Increase) decrease in other assets(6,243)3,468 
Increase (decrease) in accounts payable and other liabilities(5,361)(14,538)
Increase (decrease) in accrued payroll and related benefits10,805 (18,883)
Increase (decrease) in deferred revenues4,328 (397)
Net cash provided by (used in) operating activities54,894 (5,779)
Cash flows from investing activities:
Purchases of property and equipment(5,147)(9,768)
Investment in life insurance policies(2,601)(283)
Distributions from life insurance policies2,956 2,958 
Purchases of businesses(1,613)(1,948)
Capitalization of internally developed software costs(19,610)(6,855)
Proceeds from note receivable154 157 
Proceeds from sale of property and equipment62 4,753 
Divestiture of business 207 
Net cash used in investing activities(25,799)(10,779)
Cash flows from financing activities:
Proceeds from exercises of stock options987 1,421 
Shares redeemed for employee tax withholdings(10,050)(7,540)
Share repurchases(88,897)(95,474)
Proceeds from bank borrowings292,000 287,000 
Repayments of bank borrowings(224,000)(178,780)
Payments for debt issuance costs(58) 
Deferred payments on business acquisition(1,500)(1,875)
Net cash provided by (used in) financing activities(31,518)4,752 
Effect of exchange rate changes on cash(13)(144)
Net decrease in cash and cash equivalents(2,436)(11,950)
Cash and cash equivalents at beginning of the period11,834 20,781 
Cash and cash equivalents at end of the period$9,398 $8,831 
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Property and equipment expenditures and capitalized software included in current liabilities$5,308 $3,474 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$2,320 $1,908 
Common stock issued related to purchase of business$1,646 $ 
Contingent consideration accrued related to purchases of businesses
$374 $869 
Share repurchases included in current liabilities$ $2,572 
Excise tax on net share repurchases included in current liabilities$643 $ 
    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 nine months ended September 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 Reports on Form 10-Q for the periods ended March 31, 2023 and June 30, 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
Goodwill
The table below sets forth the changes in the carrying value of goodwill by reportable segment for the nine months ended September 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 recorded in connection with business acquisition(1)
745   745 
Goodwill, net as of September 30, 2023$454,959 $122,235 $48,517 $625,711 
(1)On September 1, 2023, we completed the acquisition of Roundtable Analytics, Inc. ("Roundtable"), a healthcare analytics company. The results of operations of Roundtable are included within our consolidated financial statements and results of operations of our Healthcare segment as of the acquisition date. The acquisition of Roundtable is not significant to our 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)
Intangible Assets
Intangible assets as of September 30, 2023 and December 31, 2022 consisted of the following:
As of September 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 $52,003 $74,583 $57,219 
Technology and software
2 to 5
16,230 9,613 13,330 7,975 
Trade names66,000 6,000 6,000 5,907 
Non-competition agreements
2 to 5
920 527 920 340 
Total$88,233 $68,143 $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.
Intangible asset amortization expense was $2.0 million and $2.8 million for the three months ended September 30, 2023 and 2022, respectively; and $6.2 million and $8.5 million for the nine months ended September 30, 2023 and 2022, respectively. The table below sets forth the estimated annual amortization expense for the intangible assets recorded as of September 30, 2023.
Year Ending December 31,Estimated Amortization Expense
2023$8,219 
2024$5,554 
2025$4,344 
2026$3,112 
2027$2,127 
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 September 30, 2023 and 2022, we recognized revenues of $358.2 million and $285.4 million, respectively. Of the $358.2 million recognized in the third quarter of 2023, we recognized revenues of $9.6 million from obligations satisfied, or partially satisfied, in prior periods, of which $7.1 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $2.5 million was due to the release of allowances on receivables from clients and unbilled services. Of the $285.4 million recognized in the third quarter of 2022, we recognized revenues of $3.5 million from obligations satisfied, or partially satisfied, in prior periods, which was primarily due to the release of allowances on receivables from clients and unbilled services.
For the nine months ended September 30, 2023 and 2022, we recognized revenues of $1.02 billion and $818.7 million, respectively. Of the $1.02 billion recognized in the first nine months of 2023, we recognized revenues of $10.4 million from obligations satisfied, or partially satisfied, in prior periods, of which $9.1 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. Of the $818.7 million recognized in the first nine months of 2022, we recognized revenues of $4.7 million from obligations satisfied, or partially satisfied, in prior periods, of which $2.5 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $2.2 million was primarily due to the release of allowances on receivables from clients and unbilled services.
As of September 30, 2023, we had $228.4 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 $228.4 million of performance obligations, we expect to recognize $25.8 million as revenue in 2023, $72.6 million in 2024, and the remaining $130.0 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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, net balance as of September 30, 2023 and December 31, 2022 was $58.0 million and $50.2 million, respectively. The $7.8 million increase 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 September 30, 2023 and December 31, 2022 was $26.2 million and $21.9 million, respectively. The $4.3 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 nine months ended September 30, 2023, $0.9 million and $21.2 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
September 30,
Nine Months Ended
September 30,
 2023202220232022
Net income$21,516 $17,741 $59,647 $58,468 
Weighted average common shares outstanding – basic18,770 20,109 18,941 20,511 
Weighted average common stock equivalents705 506 637 388 
Weighted average common shares outstanding – diluted19,475 20,615 19,578 20,899 
Net income per basic share$1.15 $0.88 $3.15 $2.85 
Net income per diluted share$1.10 $0.86 $3.05 $2.80 
The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above for the three and nine months ended September 30, 2023 and 2022 were 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. In the fourth quarter of 2023, our board of directors authorized a further extension of the share repurchase program through December 31, 2024 and increased the authorized amount under the share repurchase program from $300 million to $400 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
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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 nine months ended September 30, 2023, we repurchased and retired 290,288 and 1,116,830 shares for $28.8 million and $88.4 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 nine months ended September 30, 2022, we repurchased and retired 685,641 and 1,706,587 shares for $45.6 million and $97.9 million, respectively, including 38,568 shares for $2.6 million which were settled in the fourth quarter of 2022. 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 September 30, 2023, $21.1 million remained available for share repurchases under our share repurchase program.
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
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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 September 30, 2023, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of 1.82 to 1.00 and a Consolidated Interest Coverage Ratio of 10.86 to 1.00.
Borrowings outstanding under the Amended Credit Agreement at September 30, 2023 totaled $358.0 million and are classified as long-term debt in our consolidated balance sheet. These borrowings carried a weighted average interest rate of 4.4%, 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 credit facility and outstanding letters of credit. At September 30, 2023, we had outstanding letters of credit totaling $0.6 million, which are used as security deposits for our office facilities. As of September 30, 2023, the unused borrowing capacity under the revolving credit facility was $241.4 million.
7. Restructuring Charges
Restructuring charges for the three months ended September 30, 2023 were $5.4 million. In the third quarter of 2023, we exited our office space in Lexington, Massachusetts which resulted in a $3.5 million non-cash impairment charge on the related right of use operating lease asset and fixed assets of that office space. Additionally, in the third quarter of 2023, we recognized $1.2 million of employee-related expenses and $0.7 million of rent and related expenses, net of sublease income, for previously vacated office spaces.
Restructuring charges for the nine months ended September 30, 2023 were $9.4 million. In the first nine months of 2023, we exited our office spaces in Hillsboro, Oregon and Lexington, Massachusetts, resulting in non-cash impairment charges of $1.9 million and $3.5 million, respectively, related to the right-of-use operating lease assets and fixed assets. Additionally, in the first nine months of 2023, we recognized $2.2 million of employee-related expenses; $1.3 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 nine months ended September 30, 2022 were $1.3 million and $5.0 million, respectively. The $1.3 million of restructuring charges recognized in the third quarter of 2022 included $0.7 million of rent and related expenses, net of sublease income, for previously vacated office spaces; $0.5 million for the early termination of a contract; and $0.1 million of employee-related expenses. The $5.0 million of restructuring charges incurred in the first nine months of 2022 included $1.7 million of employee-related expenses; $1.7 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; $0.5 million for the early termination of a contract; $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 value of our restructuring charge liability by restructuring type for the nine months ended September 30, 2023.
Employee CostsOther Total
Balance as of December 31, 2022$3,751 $568 $4,319 
Additions2,185  2,185 
Payments(4,289)(74)(4,363)
Adjustments
 41 41 
Balance as of September 30, 2023$1,647 $535 $2,182 
All of the $1.6 million restructuring charge liability related to employee costs at September 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 September 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.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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 to the extent effective and reclassified to earnings upon settlement.
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 September 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 September 30, 2023, it was anticipated that $6.4 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 August 31, 2024. As of September 30, 2023 and December 31, 2022, the aggregate notional amounts of these contracts were INR 1,371.2 million, or $16.5 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 September 30, 2023, it was anticipated that all of the $0.1 million of losses, 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 September 30, 2023 and December 31, 2022.
Derivative InstrumentBalance Sheet LocationSeptember 30,
2023
December 31,
2022
Interest rate swapsPrepaid expenses and other current assets$8,218 $7,108 
Interest rate swapsOther non-current assets3,748 5,131 
Foreign exchange forward contractsPrepaid expenses and other current assets16  
Total Assets$11,982 $12,239 
Foreign exchange forward contractsAccrued expenses and other current liabilities180 120 
Total Liabilities$180 $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.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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.
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 September 30, 2023 and December 31, 2022.
Level 1Level 2Level 3Total
September 30, 2023
Assets:
Interest rate swaps$— $11,966 $— $11,966 
Convertible debt investment— — 61,756 61,756 
Foreign exchange forward contracts— 16 — 16 
Deferred compensation assets— 31,311 — 31,311 
Total assets$— $43,293 $61,756 $105,049 
Liabilities:
Foreign exchange forward contracts$— $180 $— $180 
Contingent consideration for business acquisitions— — 2,313 2,313 
Total liabilities$— $180 $2,313 $2,493 
December 31, 2022
Assets:
Interest rate swaps$— $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
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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, 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. The carrying value is recorded in long-term investments in our consolidated balance sheets. 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 24.5% and 24.0% as of September 30, 2023 and December 31, 2022, respectively; and the concluded equity volatility of 35.0% and 40.0% as of September 30, 2023 and December 31, 2022, respectively, 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 table below sets forth the changes in the balance of the convertible debt investment for the nine months ended September 30, 2023.
Convertible Debt Investment
Balance as of December 31, 2022$57,563 
Change in fair value4,193 
Balance as of September 30, 2023$61,756 
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 6.2% as of September 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.
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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 the changes in the balance of the contingent consideration for business acquisitions for the nine months ended September 30, 2023.
Contingent Consideration for Business Acquisitions
Balance as of December 31, 2022
$3,190 
Acquisition374 
Payment(1,000)
Change in fair value(251)
Balance as of September 30, 2023
$2,313 
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 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 to other income (expense), net in our consolidated statement of operations. The carrying value of the preferred stock investment is recorded in long-term investments in our consolidated balance sheets.
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 nine months 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 September 30, 2023 and December 31, 2022, the carrying value of our preferred stock investment was $33.6 million.
Senior Secured Credit Facility
The carrying value of our borrowings outstanding under our senior secured credit facility is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the senior secured credit facility bears interest at variable rates based on current market rates as set forth in the Amended Credit Agreement. Refer to Note 6 “Financing Arrangements” for additional information on our senior secured credit facility.
Cash and Cash Equivalents and Other Financial Instruments
Cash and cash equivalents are stated at cost, which approximates fair market value. The carrying values of all other financial instruments not described above reasonably approximate fair market value due to the nature of the financial instruments and the short-term maturity of these items.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
10. Other Comprehensive Income (Loss)
The table below sets forth the components of other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2023 and 2022.
Three Months Ended
September 30, 2023
Three Months Ended
September 30, 2022
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Foreign currency translation adjustments$(662)$ $(662)$(1,034)$ $(1,034)
Unrealized gain (loss) on investment$(1,840)$490 $(1,350)$(1,128)$298 $(830)
Interest rate swaps:
Change in fair value$1,849 $(492)$1,357 $5,302 $(1,402)$3,900 
Reclassification adjustments into earnings(2,107)560 (1,547)(89)24 (65)
Net unrealized gain (loss) on interest rate swaps$(258)$68 $(190)$5,213 $(1,378)$3,835 
Foreign exchange forward contracts:
Change in fair value$(223)$59 $(164)$(98)$26 $(72)
Reclassification adjustments into earnings(19)5 (14)(1) (1)
Net unrealized gain (loss) on foreign exchange forward contracts$(242)$64 $(178)$(99)$26 $(73)
Other comprehensive income (loss)$(3,002)$622 $(2,380)$2,952 $(1,054)$1,898 
Nine Months Ended
September 30, 2023
Nine Months Ended
September 30, 2022
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Foreign currency translation adjustments$(283)$ $(283)$(1,733)$ $(1,733)
Unrealized gain (loss) on investment$4,193 $(1,117)$3,076 $(3,694)$976 $(2,718)
Interest rate swaps:
Change in fair value$5,307 $(1,411)$3,896 $11,994 $(3,172)$8,822 
Reclassification adjustments into earnings(5,580)1,483 (4,097)420 (111)309 
Net unrealized gain (loss) on interest rate swaps$(273)$72 $(201)$12,414 $(3,283)$9,131 
Foreign exchange forward contracts:
Change in fair value$(23)$6 $(17)$(98)$26 $(72)
Reclassification adjustments into earnings(21)5 (16)(1) (1)
Net unrealized gain (loss) on foreign exchange forward contracts$(44)$11 $(33)$(99)$26 $(73)
Other comprehensive income (loss)$3,593 $(1,034)$2,559 $6,888 $(2,281)$4,607 
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)$18,119 
Current period change(283)3,076 (201)(33)2,559 
Balance as of September 30, 2023$(3,316)$15,304 $8,811 $(121)$20,678 
11. Income Taxes
For the three months ended September 30, 2023, our effective tax rate was 31.2% as we recognized income tax expense of $9.8 million on income of $31.3 million. The effective tax rate of 31.2% was less favorable than the statutory rate, inclusive of state income taxes, of 26.6% 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 three months ended September 30, 2022, our effective tax rate was 30.2% as we recognized income tax expense of $7.7 million on income of $25.4 million. The effective tax rate of 30.2% 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 nine months ended September 30, 2023, our effective tax rate was 27.4% as we recognized income tax expense of $22.5 million on income of $82.1 million. The effective tax rate of 27.4% 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 discrete tax benefit for share-based compensation awards that vested during the year.
For the nine months ended September 30, 2022, our effective tax rate was 31.4% as we recognized income tax expense of $26.7 million on income of $85.2 million. The effective tax rate of 31.4% 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 September 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 $0.6 million and $0.7 million were outstanding at September 30, 2023 and December 31, 2022, respectively, 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 September 30, 2023 and December 31, 2022, the total estimated fair value of our outstanding contingent consideration liability was $2.3 million and $3.2 million, respectively.
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,
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
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 nine months ended September 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
September 30,
Nine Months Ended
September 30,
2023202220232022
Healthcare:
Revenues$179,177 $131,319 $501,994 $381,669 
Operating income$46,888 $33,045 $128,294 $91,441 
Segment operating income as a percentage of segment revenues26.2 %25.2 %25.6 %24.0 %
Education:
Revenues$111,043 $94,347 $325,884 $263,234 
Operating income$26,550 $22,851 $77,112 $58,848 
Segment operating income as a percentage of segment revenues23.9 %24.2 %23.7 %22.4 %
Commercial:
Revenues$67,958 $59,704 $194,954 $173,841 
Operating income$15,432 $14,153 $39,971 $38,282 
Segment operating income as a percentage of segment revenues22.7 %23.7 %20.5 %22.0 %
Total Huron:
Revenues$358,178 $285,370 $1,022,832 $818,744 
Reimbursable expenses9,288 6,816 25,918 19,034 
Total revenues and reimbursable expenses$367,466 $292,186 $1,048,750 $837,778 
Segment operating income$88,870 $70,049 $245,377 $188,571 
Items not allocated at the segment level:
Other operating expenses43,086 34,875 129,563 96,376 
Restructuring charges
4,095 804 6,881 2,763 
Depreciation and amortization4,347 5,071 13,441 15,171 
Operating income37,342 29,299 95,492 74,261 
Total other income (expense), net(6,047)(3,896)(13,365)10,946 
Income before taxes$31,295 $25,403 $82,127 $85,207 
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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 nine months ended September 30, 2023 and 2022.