UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 – K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 16, 2005
Date of Report (Date of earliest event reported)
HURON CONSULTING GROUP INC.
(Exact name of registrant as specified in its charter)
| Delaware | 000-50976 | 01-0666114 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On February 16, 2005, Huron Consulting Group Inc. issued a press release announcing its financial results for the quarter and full year ended December 31, 2004. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated in this report as if fully set forth herein.
- 1 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Huron Consulting Group Inc. | ||
| (Registrant) | ||
| Date: February 16, 2005 | /s/ Gary L. Burge | |
| Gary L. Burge | ||
| Vice President, | ||
| Chief Financial Officer and Treasurer | ||
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EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press Release, dated February 16, 2005 |
EXHIBIT 99.1
 |
 |
FOR IMMEDIATE RELEASE
February 16, 2005
Huron Consulting Group Reports Fourth Quarter
and Full Year Financial Results 2004
| • | Revenues of $40.8 million for Q4 2004 increased 40.7% from $29.0 million in Q4 2003. |
| • | Earnings for the quarter were 15 cents per diluted share, compared to a loss of nine cents per diluted share in the same period last year. |
| • | Utilization rate increased to 77.8% during Q4 2004 from 62.7% during the same period last year. Full year 2004 utilization rate increased to 72.2% from 66.1% in 2003. |
| • | Full Year 2004 revenues increased $58.1 million, or 57.2%, to $159.6 million from $101.5 million in 2003. |
CHICAGO – February 16, 2005 – Huron Consulting Group Inc. (NASDAQ: HURN) today announced its financial results for the fourth quarter and full year ended December 31, 2004.
Fourth Quarter Results
Revenues (before reimbursable expenses) of $40.8 million for the fourth quarter of 2004 increased 40.7% from $29.0 million for the fourth quarter of 2003. The Company’s fourth quarter 2004 operating income was $4.6 million compared to an operating loss of $0.7 million in the fourth quarter of 2003. Net income attributable to common stockholders was $2.4 million, or $0.15 per diluted share, for the fourth quarter of 2004 compared to a net loss of $1.0 million, or a loss of $0.09 per diluted share, for the comparable quarter last year.
“Our results for the quarter were fueled by strong demand in the marketplace for Huron’s services. The record 40 percent increase in revenue for the fourth quarter was a very solid performance, boosted by significant increases in our utilization rates,” said Gary E. Holdren, chairman and chief executive officer, Huron Consulting Group.
Fourth quarter 2004 earnings before interest, taxes, depreciation and amortization (“EBITDA”) (4) were $5.2 million, or 12.9% of revenues, compared to $0.4 million, or 1.5% of revenues, in the comparable quarter last year. Adjusted EBITDA (4), which excludes stock-based compensation expense, totaled $6.2 million, or 15.2% of revenues.
Both of the Company’s segments – Financial Consulting and Operational Consulting – continued to record significant improvements in revenue growth. In the fourth quarter, Financial Consulting represented 58.0% of Huron’s revenues, and Operational Consulting represented 42.0%.
Selling, General and Administrative (SG&A) expenses for Q4 2004 were higher than in Q3 2004 (as adjusted to exclude Q3 stock based compensation, restructuring and severance charges) primarily due to additional marketing, recruiting and public company expenses. Marketing costs
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included special initiatives targeted to key customer segments in an effort to build the awareness of Huron’s brand and capabilities. In response to strong client demand for services, investments were also made in Q4 to retain recruiters for senior level consultant searches in our disputes and investigations, forensic accounting and discovery management practices. Public company expenses for Sarbanes-Oxley compliance, insurance, capital stock taxes and other requirements also increased in Q4 upon completion of the Company’s IPO.
Billable consultant headcount totaled 483 at December 31, 2004, an increase of six from 477 at December 31, 2003 while utilization rate increased to 77.8% during the fourth quarter of 2004 from 62.7% during the same period last year. Average billing rate per hour increased $33, or 15.7%, to $243 for the fourth quarter of 2004 from $210 for the fourth quarter of 2003.
Full Year 2004 Results
Revenues (before reimbursable expenses) increased $58.1 million, or 57.2%, to $159.6 million for the year ended December 31, 2004 from $101.5 million for the same period last year.
“2004 was a milestone year for Huron, marked by our IPO and a 57 percent growth in revenue from the previous year. As an independent provider of financial and operational consulting, we have seen the marketplace respond to our brand with significant client wins this past year,” said Holdren. “We believe that we are positioned well for 2005 and beyond.”
For the year ended December 31, 2004, the Company’s operating income was $19.7 million compared to $0.2 million of operating loss in the comparable period last year. Net income attributable to common stockholders was $9.9 million, or $0.72 per diluted share, for the year ended December 31, 2004 as compared to a net loss of $2.1 million, or $0.18 per diluted share, for the comparable period last year. Year-to-date December 31, 2004 EBITDA (4) was $22.0 million, or 13.8% of revenues, compared to $5.1 million, or 5.0% of revenues, for the same period last year.
The utilization rate increased to 72.2% during 2004 from 66.1% during 2003. Average billing rate per hour increased $22, or 10.1%, to $239 for the year ended December 31, 2004 from $217 for the same period last year.
The Company previously disclosed the closing of two small, underperforming offices in Q1 2004 and the elimination of a service offering of a practice area in the Operational Consulting segment that was not meeting management’s expectations in Q3 2004. As a result, the Company recorded restructuring charges totaling $3.5 million. Additionally, the Company eliminated the positions of certain managing directors and other senior level consultants and recorded related severance charges totaling $1.8 million in Q3 2004. Adjusted EBITDA (4), which excludes these charges and stock-based compensation expense was $28.7 million, or 18.0% of revenues.
On October 13, 2004, Huron Consulting Group Inc. completed its initial public offering (IPO) and became a publicly traded company. In the IPO, the Company and a selling stockholder sold 3,333,333 and 2,416,667, respectively, shares of common stock at a price of $15.50 per share.
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Fourth Quarter Webcast
The Company will host a webcast to discuss its financial results today at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). The webcast may be accessed at www.huronconsultinggroup.com and will be available for replay for 90 days.
About Huron Consulting Group Inc.
Huron Consulting Group Inc. is the parent company of Huron Consulting Services LLC, an independent provider of financial and operational consulting services. Huron’s experienced and credentialed professionals employ their expertise in accounting, finance, economics and operations to a wide variety of both financially sound and distressed organizations, including Fortune 500 companies, medium-sized businesses, leading academic institutions, healthcare organizations and the law firms that represent these various organizations.
Statements in this press release, which are not historical in nature and concern Huron Consulting Group’s current expectations about the company’s future results are “forward-looking” statements as defined in Section 21 of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” or “continue.” These forward-looking statements reflect our current expectation about our future results, levels of activity, performance or achievements, including without limitation, that our business continues to grow at the current expectations; that we are able to expand our service offerings through our existing consultants and new hires; and that existing market conditions do not change from current expectations. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Please see “Business Risk Factors” in our Form 10-K for a complete description of the material risks we face.
Media Contact:
Jennifer Frost Hennagir
312-880-3260
jfrost-hennagir@huronconsultinggroup.com
Investor Contact:
Gary L. Burge, Chief Financial Officer
312-583-8722
garyburge@huronconsultinggroup.com
###
HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three months ended December 31, |
Year ended December 31, |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
||||||||||||
| Revenues and reimbursable expenses: |
|||||||||||||||
| Revenues |
$ | 40,837 | $ | 29,014 | $ | 159,550 | $ | 101,486 | |||||||
| Reimbursable expenses |
4,046 | 2,797 | 14,361 | 8,808 | |||||||||||
| Total revenues and reimbursable expenses |
44,883 | 31,811 | 173,911 | 110,294 | |||||||||||
| Direct costs and reimbursable expenses: |
|||||||||||||||
| Direct costs |
22,598 | 21,017 | 92,270 | 69,374 | |||||||||||
| Stock-based compensation expense |
648 | 9 | 978 | 27 | |||||||||||
| Reimbursable expenses |
4,055 | 2,874 | 14,281 | 8,929 | |||||||||||
| Total direct costs and reimbursable expenses |
27,301 | 23,900 | 107,529 | 78,330 | |||||||||||
| Gross profit |
17,582 | 7,911 | 66,382 | 31,964 | |||||||||||
| Operating expenses: |
|||||||||||||||
| Selling, general and administrative |
12,014 | 7,471 | 40,425 | 25,171 | |||||||||||
| Stock-based compensation expense |
320 | 5 | 433 | 14 | |||||||||||
| Depreciation and amortization |
683 | 1,178 | 2,365 | 5,328 | |||||||||||
| Restructuring charges |
— | — | 3,475 | — | |||||||||||
| Loss on lease abandonment |
— | — | — | 1,668 | |||||||||||
| Total operating expenses |
13,017 | 8,654 | 46,698 | 32,181 | |||||||||||
| Operating income (loss) |
4,565 | (743 | ) | 19,684 | (217 | ) | |||||||||
| Other (income) expense: |
|||||||||||||||
| Interest (income) expense, net |
(43 | ) | 220 | 692 | 856 | ||||||||||
| Other |
— | 1 | — | 112 | |||||||||||
| Total other (income) expense |
(43 | ) | 221 | 692 | 968 | ||||||||||
| Net income (loss) before provision (benefit) for income taxes |
4,608 | (964 | ) | 18,992 | (1,185 | ) | |||||||||
| Provision (benefit) for income taxes |
2,086 | (206 | ) | 8,128 | (122 | ) | |||||||||
| Net income (loss) |
2,522 | (758 | ) | 10,864 | (1,063 | ) | |||||||||
| Accrued dividends on 8% preferred stock |
74 | 275 | 931 | 1,066 | |||||||||||
| Net income (loss) attributable to common stockholders |
$ | 2,448 | $ | (1,033 | ) | $ | 9,933 | $ | (2,129 | ) | |||||
| Net income (loss) attributable to common stockholders per share*: |
|||||||||||||||
| Basic |
$ | 0.16 | $ | (0.09 | ) | $ | 0.77 | $ | (0.18 | ) | |||||
| Diluted |
$ | 0.15 | $ | (0.09 | ) | $ | 0.72 | $ | (0.18 | ) | |||||
| Weighted average shares used in calculating net income (loss) attributable to common stockholders per share*: |
|||||||||||||||
| Basic |
15,061 | 11,946 | 12,820 | 11,871 | |||||||||||
| Diluted |
16,101 | 11,946 | 13,765 | 11,871 | |||||||||||
| * | Adjusted to reflect a 1 for 2.3 reverse stock split effected on October 5, 2004. |
HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| December 31, 2004 |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 28,092 | $ | 4,251 | ||||
| Receivables from clients, net |
21,750 | 15,118 | ||||||
| Unbilled services, net |
10,830 | 7,946 | ||||||
| Income tax receivable |
494 | 2,286 | ||||||
| Deferred income taxes |
7,919 | 1,946 | ||||||
| Other current assets |
3,053 | 837 | ||||||
| Total current assets |
72,138 | 32,384 | ||||||
| Property and equipment, net |
8,975 | 4,498 | ||||||
| Other assets: |
||||||||
| Deferred income taxes |
1,450 | 2,333 | ||||||
| Deposits |
656 | 674 | ||||||
| Total other assets |
2,106 | 3,007 | ||||||
| Total assets |
$ | 83,219 | $ | 39,889 | ||||
| Liabilities and stockholders’ equity (deficit) |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,809 | $ | 1,396 | ||||
| Accrued expenses |
3,334 | 3,822 | ||||||
| Accrued payroll and related benefits |
20,494 | 13,914 | ||||||
| Deferred revenue |
2,603 | 2,273 | ||||||
| Interest payable to HCG Holdings LLC |
— | 820 | ||||||
| Total current liabilities |
29,240 | 22,225 | ||||||
| Non-current liabilities: |
||||||||
| Accrued expenses |
598 | — | ||||||
| Deferred lease incentives |
4,148 | — | ||||||
| Total non-current liabilities |
4,746 | — | ||||||
| Commitments and contingencies |
— | — | ||||||
| Notes payable to HCG Holdings LLC |
— | 10,076 | ||||||
| 8% preferred stock, $1,000 per share stated value plus accrued 8% annual cumulative dividends; 106,840 shares authorized; 0 and 12,500 shares issued and outstanding at December 31, 2004 and 2003, respectively |
— | 14,212 | ||||||
| Stockholders’ equity (deficit) |
||||||||
| Common stock (previously named Class A common stock)*; $0.01 par value; 500,000,000 shares authorized; 16,364,574 and 11,281,243 shares issued and outstanding at December 31, 2004 and 2003, respectively |
164 | 259 | ||||||
| Class B common stock (retired in 2004)*; $0.01 par value; 6,486,715 shares authorized; 682,348 shares issued and outstanding at December 31, 2003 |
— | 16 | ||||||
| Additional paid-in capital |
59,608 | 42 | ||||||
| Deferred stock-based compensation |
(12,281 | ) | — | |||||
| Retained earnings (deficit) |
1,742 | (6,941 | ) | |||||
| Total stockholders’ equity (deficit) |
49,233 | (6,624 | ) | |||||
| Total liabilities and stockholders equity (deficit) |
$ | 83,219 | $ | 39,889 | ||||
| * | Adjusted to reflect a 1 for 2.3 reverse stock split effected on October 5, 2004. |
HURON CONSULTING GROUP INC.
SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA
(Unaudited)
| Three months ended December 31, |
Year ended December 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Segment Operating Results (in thousands): |
||||||||||||||||
| Revenues and reimbursable expenses: |
||||||||||||||||
| Financial Consulting |
$ | 23,671 | $ | 18,389 | $ | 95,476 | $ | 69,941 | ||||||||
| Operational Consulting |
17,166 | 10,625 | 64,074 | 31,545 | ||||||||||||
| Total revenues |
40,837 | 29,014 | 159,550 | 101,486 | ||||||||||||
| Total reimbursable expenses |
4,046 | 2,797 | 14,361 | 8,808 | ||||||||||||
| Total revenues and reimbursable expenses |
$ | 44,883 | $ | 31,811 | $ | 173,911 | $ | 110,294 | ||||||||
| Operating income: |
||||||||||||||||
| Financial Consulting |
$ | 9,163 | $ | 4,060 | $ | 36,258 | $ | 22,011 | ||||||||
| Operational Consulting |
5,840 | 2,351 | 21,116 | 5,383 | ||||||||||||
| Total segment operating income |
$ | 15,003 | $ | 6,411 | $ | 57,374 | $ | 27,394 | ||||||||
| Other Operating Data: |
||||||||||||||||
| Number of consultants (at period end) (1): |
||||||||||||||||
| Financial Consulting |
274 | 290 | ||||||||||||||
| Operational Consulting |
209 | 187 | ||||||||||||||
| Total |
483 | 477 | ||||||||||||||
| Average number of consultants (for the period): |
||||||||||||||||
| Financial Consulting |
279 | 281 | 286 | 227 | ||||||||||||
| Operational Consulting |
208 | 183 | 201 | 138 | ||||||||||||
| Total |
487 | 464 | 487 | 365 | ||||||||||||
| Utilization rate (2): |
||||||||||||||||
| Financial Consulting |
77.9 | % | 60.4 | % | 72.0 | % | 66.8 | % | ||||||||
| Operational Consulting |
77.6 | % | 66.3 | % | 72.5 | % | 65.0 | % | ||||||||
| Total |
77.8 | % | 62.7 | % | 72.2 | % | 66.1 | % | ||||||||
| Average billing rate per hour (3): |
||||||||||||||||
| Financial Consulting |
$ | 263 | $ | 226 | $ | 254 | $ | 233 | ||||||||
| Operational Consulting |
$ | 221 | $ | 186 | $ | 220 | $ | 189 | ||||||||
| Total |
$ | 243 | $ | 210 | $ | 239 | $ | 217 | ||||||||
| (1) | Consultants consist of our billable professionals. |
| (2) | We calculate the utilization rate for our consultants by dividing the number of hours all our consultants worked on client assignments during a period by the total available working hours for all of our consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days. |
| (3) | Average billing rate per hour is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period. |
HURON CONSULTING GROUP INC.
RECONCILIATION OF OPERATING INCOME TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(in thousands)
| Three months ended December 31, |
Year ended December 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
$ | 40,837 | $ | 29,014 | $ | 159,550 | $ | 101,486 | ||||||||
| Operating income (loss) |
$ | 4,565 | $ | (743 | ) | $ | 19,684 | $ | (217 | ) | ||||||
| Add back: |
||||||||||||||||
| Depreciation and amortization |
683 | 1,178 | 2,365 | 5,328 | ||||||||||||
| Earnings before interest, taxes, depreciation and amortization (EBITDA) (4) |
5,248 | 435 | 22,049 | 5,111 | ||||||||||||
| Add back: |
||||||||||||||||
| Stock-based compensation expense |
968 | 14 | 1,411 | 41 | ||||||||||||
| Restructuring charges |
— | — | 3,475 | — | ||||||||||||
| Severance charges |
— | — | 1,772 | — | ||||||||||||
| Loss on lease abandonment |
— | — | — | 1,668 | ||||||||||||
| Total adjusted items |
968 | 14 | 6,658 | 1,709 | ||||||||||||
| Adjusted EBITDA (4) |
$ | 6,216 | $ | 449 | $ | 28,707 | $ | 6,820 | ||||||||
| Adjusted EBITDA as a percentage of revenues |
15.2 | % | 1.5 | % | 18.0 | % | 6.7 | % | ||||||||
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS TO ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
(in thousands)
| Three months ended December 31, |
Year ended December 31, |
|||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||
| Net income (loss) attributable to common stockholders |
$ | 2,448 | $ | (1,033 | ) | $ | 9,933 | $ | (2,129 | ) | ||||
| Add back: |
||||||||||||||
| Total adjusted items (see above) |
968 | 14 | 6,658 | 1,709 | ||||||||||
| Tax effect |
389 | 6 | 2,676 | 687 | ||||||||||
| Total adjusted items, net of tax |
579 | 8 | 3,982 | 1,022 | ||||||||||
| Adjusted net income (loss) attributable to common stockholders (4) |
$ | 3,027 | $ | (1,025 | ) | $ | 13,915 | $ | (1,107 | ) | ||||
| (4) | In evaluating the Company’s financial performance, management uses earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA and adjusted net income, which are non-GAAP measures. Management believes that the use of such measures, as supplements to operating income, net income (loss) attributable to common stockholders and other GAAP measures, are useful indicators of the Company’s financial performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures. Additionally, these measures exclude certain items to provide better comparability from period to period. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States. |