Huron Announces First Quarter 2021 Financial Results

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Global professional services firm Huron (NASDAQ: HURN) today announced financial results from continuing operations for the first quarter ended March 31, 2021.

"Our first quarter financial results were in line with our expectations as we saw signs of recovery in our healthcare and education businesses and continued momentum in the business advisory segment. Increases in our sales pipeline and the pace of signings in our healthcare and education businesses, in particular, give us confidence to raise and narrow our full year guidance," said James H. Roth, chief executive officer, Huron. "We continue to invest in our business to achieve our strategic growth objectives, including managed services, technology and analytics. The disruption facing our clients and primary end markets is substantial, stemming from the impacts of the COVID-19 pandemic as well as the rapidly evolving competitive landscape, and we believe this disruption creates significant opportunities for long-term growth for Huron."

COVID-19 IMPACT

The worldwide spread of the coronavirus (COVID-19) has created significant volatility, uncertainty and disruption to the global economy. The company continues to closely monitor the impact of the pandemic on all aspects of its business, including how it will impact its clients, employees and business partners. In 2020, some clients reprioritized and delayed projects as a result of the pandemic. This negatively impacted demand for certain services, primarily in the company's Healthcare and Education segments. Conversely, the pandemic strengthened demand for cloud-based technology and analytics solutions and certain services provided to organizations in transition within the company's Business Advisory segment.

In most of 2020 and the first quarter of 2021, the pandemic continued to negatively impact sales and elongate the sales cycle for new opportunities for certain services, particularly within the company's Healthcare and Education segments. Given the uncertainties around the duration of the COVID-19 pandemic, the company continues to remain cautious about revenue growth for the first half of 2021 compared to the first half of 2020, which is contemplated in the 2021 guidance provided.

FIRST QUARTER 2021 RESULTS FROM CONTINUING OPERATIONS

Revenues were $203.2 million for the first quarter of 2021, compared to $222.6 million for the first quarter of 2020.

Net income from continuing operations was $5.4 million for the first quarter of 2021 compared to net loss from continuing operations of $42.3 million for the same quarter last year. Diluted earnings per share from continuing operations was $0.24 for the first quarter of 2021 compared to diluted loss per share from continuing operations of $1.94 for the first quarter of 2020. Results for the first three months of 2020 reflect non-cash pretax charges totaling $59.8 million to reduce the carrying value of goodwill in the company's Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment.

First quarter 2021 earnings before interest, taxes, depreciation and amortization ("EBITDA")(7) was $15.2 million compared to loss before interest, taxes, depreciation and amortization of $43.7 million in the same prior year period.

In addition to using EBITDA to evaluate the company's financial performance, management uses other non-GAAP financial measures, which exclude the effect of the following items (in thousands):

Three Months Ended
March 31,

2021

2020

Amortization of intangible assets

$

2,399

$

3,209

Restructuring and other charges

$

628

$

2,458

Litigation and other losses (gains)

$

42

$

(150

)

Goodwill impairment charges

$

--

$

59,816

Loss on sale of business

$

--

$

102

Transaction-related expenses

$

170

$

--

Tax effect of adjustments

$

(858

)

$

(13,409

)

Foreign currency transaction losses, net

$

403

$

520

Adjusted EBITDA(7) was $16.5 million, or 8.1% of revenues, in the first quarter of 2021, compared to $19.0 million, or 8.5% of revenues, in the same prior year period. Adjusted net income from continuing operations(7) was $7.8 million, or $0.35 per diluted share, for the first quarter of 2021, compared to $9.8 million, or $0.44 per diluted share, for the same prior year period.

The average number of billable consultants(2) increased 1.5% to 2,633 in the first quarter of 2021 from 2,595 in the same quarter last year. Billable consultant utilization rate(3) was 68.8% during the first quarter of 2021 compared to 72.9% during the same period last year. Average billing rate per hour for our billable consultants(4) was $205 for the first quarter of 2021 compared to $204 for the same prior year period. The average number of full-time equivalent professionals(6) was 328 in the first quarter of 2021 compared to 358 for the same period in 2020.

Healthcare Group Hiring

On April 5, 2021, Huron hired approximately 300 full-time equivalent professionals within its Healthcare operating segment. These additional professionals will expand the company's capacity to provide revenue cycle billing, collections, insurance verification and charge integrity services to its healthcare clients. These professionals will serve new and existing clients in our Healthcare managed services solution, including serving under a short-term contract with an existing client which we entered into in connection with this group hire. The hiring of these professionals is not significant to the company's consolidated financial statements.

OPERATING SEGMENTS

Huron's results reflect a portfolio of service offerings focused on helping clients address complex business challenges.

The company's first quarter 2021 revenues by operating segment as a percentage of total company revenues are as follows: Healthcare (39%); Business Advisory (36%); and Education (25%). Financial results by segment are included in the attached schedules and in Huron's forthcoming Quarterly Report on Form 10-Q filing for the quarter ended March 31, 2021.

OUTLOOK FOR 2021

Based on currently available information, the company is updating guidance for full year 2021 revenues before reimbursable expenses in a range of $850.0 million to $900.0 million. The company anticipates adjusted EBITDA as a percentage of revenues in a range of 10.8% to 11.8% and non-GAAP adjusted diluted earnings per share in a range of $2.35 to $2.75.

Management will provide a more detailed discussion of its outlook during the company's earnings conference call webcast.

FIRST QUARTER 2021 WEBCAST

The company will host a webcast to discuss its financial results today, May 4, 2021, at 5:00 p.m. Eastern Time (4:00 p.m. Central Time). The conference call is being webcast by NASDAQ and can be accessed from Huron's website at http://ir.huronconsultinggroup.com. A replay will be available approximately two hours after the conclusion of the webcast and for 90 days thereafter.

USE OF NON-GAAP FINANCIAL MEASURES(7)

In evaluating the company's financial performance and outlook, management uses EBITDA, adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income from continuing operations, and adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Management uses these non-GAAP financial measures to gain an understanding of the company's comparative operating performance (when comparing such results with previous periods or forecasts). These non-GAAP financial measures are used by management in their financial and operating decision making because management believes they reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing their business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. Management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Huron's current operating performance and future prospects in the same manner as management does, if they so choose, and in comparing in a consistent manner Huron's current financial results with Huron's past financial results. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

Management has provided its outlook regarding adjusted EBITDA and non-GAAP adjusted diluted earnings per share, both of which are non-GAAP financial measures and exclude certain charges. Management has not reconciled these non-GAAP financial measures to the corresponding GAAP financial measures because guidance for the various reconciling items are not provided. Management is unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of the company's control and cannot be reasonably predicted since these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measures are not available without unreasonable effort.

ABOUT HURON

Huron is a global consultancy that collaborates with clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve. Learn more at www.huronconsultinggroup.com.

Statements in this press release that are not historical in nature, including those concerning the company's current expectations about its future results, are "forward-looking" statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as "may," "should," "expects," "provides," "anticipates," "assumes," "can," "will," "meets," "could," "likely," "intends," "might," "predicts," "seeks," "would," "believes," "estimates," "plans," "continues," "guidance," or "outlook" or similar expressions. These forward-looking statements reflect the company's current expectations about future requirements and needs, results, levels of activity, performance, or achievements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: the impact of the COVID-19 pandemic on the economy, our clients and client demand for our services, and our ability to sell and provide services, including the measures taken by governmental authorities and businesses in response to the pandemic, which may cause or contribute to other risks and uncertainties that we face; failure to achieve expected utilization rates, billing rates and the number of revenue-generating professionals; inability to expand or adjust our service offerings in response to market demands; our dependence on renewal of client-based services; dependence on new business and retention of current clients and qualified personnel; failure to maintain third-party provider relationships and strategic alliances; inability to license technology to and from third parties; the impairment of goodwill; various factors related to income and other taxes; difficulties in successfully integrating the businesses we acquire and achieving expected benefits from such acquisitions; risks relating to privacy, information security, and related laws and standards; and a general downturn in market conditions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, among others, those described under "Item 1A. Risk Factors" in Huron's Annual Report on Form 10-K for the year ended December 31, 2020 that may cause actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. The company disclaims any obligation to update or revise any forward-looking statements as a result of new information or future events, or for any other reason.

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended
March 31,

2021

2020

Revenues and reimbursable expenses:

Revenues

$

203,213

$

222,619

Reimbursable expenses

1,934

19,303

Total revenues and reimbursable expenses

205,147

241,922

Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):

Direct costs

148,115

156,248

Amortization of intangible assets and software development costs

925

1,301

Reimbursable expenses

2,003

19,389

Total direct costs and reimbursable expenses

151,043

176,938

Operating expenses and other losses (gains), net:

Selling, general and administrative expenses

39,766

43,446

Restructuring charges

628

1,609

Litigation and other losses (gains)

42

(150

)

Depreciation and amortization

5,428

6,114

Goodwill impairment charges

--

59,816

Total operating expenses and other losses (gains), net

45,864

110,835

Operating income (loss)

8,240

(45,851

)

Other income (expense), net:

Interest expense, net of interest income

(1,719

)

(2,341

)

Other income (expense), net

420

(5,296

)

Total other expense, net

(1,299

)

(7,637

)

Income (loss) from continuing operations before taxes

6,941

(53,488

)

Income tax expense (benefit)

1,536

(11,215

)

Net income (loss) from continuing operations

5,405

(42,273

)

Loss from discontinued operations, net of tax

--

(35

)

Net income (loss)

$

5,405

$

(42,308

)

Net earnings (loss) per basic share:

Net income (loss) from continuing operations

$

0.25

$

(1.94

)

Loss from discontinued operations, net of tax

--

--

Net income (loss)

$

0.25

$

(1.94

)

Net earnings (loss) per diluted share:

Net income (loss) from continuing operations

$

0.24

$

(1.94

)

Loss from discontinued operations, net of tax

--

--

Net income (loss)

$

0.24

$

(1.94

)

Weighted average shares used in calculating earnings (loss) per share:

Basic

21,932

21,827

Diluted

22,341

21,827

Comprehensive income:

Net income (loss)

$

5,405

$

(42,308

)

Foreign currency translation adjustments, net of tax

400

(779

)

Unrealized loss on investment, net of tax

(4,648

)

(258

)

Unrealized gain (loss) on cash flow hedging instruments, net of tax

1,429

(1,685

)

Other comprehensive loss

(2,819

)

(2,722

)

Comprehensive income (loss)

$

2,586

$

(45,030

)

HURON CONSULTING GROUP INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

March 31,
2021

December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$

21,623

$

67,177

Receivables from clients, net

87,146

87,687

Unbilled services, net

77,080

53,959

Income tax receivable

4,403

5,121

Prepaid expenses and other current assets

14,964

16,569

Total current assets

205,216

230,513

Property and equipment, net

29,710

29,093

Deferred income taxes, net

5,303

4,191

Long-term investments

64,703

71,030

Operating lease right-of-use assets

38,207

39,360

Other non-current assets

62,819

62,068

Intangible assets, net

21,232

20,483

Goodwill

597,552

594,237

Total assets

$

1,024,742

$

1,050,975

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

8,156

$

648

Accrued expenses and other current liabilities

16,302

14,874

Accrued payroll and related benefits

56,811

133,830

Current maturities of long-term debt

548

499

Current maturities of operating lease liabilities

9,671

8,771

Deferred revenues

18,686

28,247

Total current liabilities

110,174

186,869

Non-current liabilities:

Deferred compensation and other liabilities

43,947

45,361

Accrued contingent consideration for business acquisitions

1,812

1,770

Long-term debt, net of current portion

267,642

202,780

Operating lease liabilities, net of current portion

59,730

61,825

Deferred income taxes, net

434

428

Total non-current liabilities

373,565

312,164

Commitments and contingencies

Stockholders' equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 25,294,954 and 25,346,916 shares issued at March 31, 2021 and December 31, 2020, respectively

247

246

Treasury stock, at cost, 2,422,227 and 2,584,119 shares at March 31, 2021 and December 31, 2020, respectively

(134,611

)

(129,886

)

Additional paid-in capital

445,711

454,512

Retained earnings

219,414

214,009

Accumulated other comprehensive income

10,242

13,061

Total stockholders' equity

541,003

551,942

Total liabilities and stockholders' equity

$

1,024,742

$

1,050,975

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended
March 31,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

5,405

$

(42,308

)

Adjustments to reconcile net income (loss) to cash flows from operating activities:

Depreciation and amortization

6,567

7,415

Non-cash lease expense

1,693

1,938

Share-based compensation

5,625

8,504

Amortization of debt discount and issuance costs

198

198

Goodwill impairment charges

--

59,816

Allowances for doubtful accounts

--

21

Deferred income taxes

--

(14,016

)

Loss on sale of business

--

102

Change in fair value of contingent consideration liabilities

42

--

Changes in operating assets and liabilities, net of acquisition and divestiture:

(Increase) decrease in receivables from clients, net

1,178

11,698

(Increase) decrease in unbilled services, net

(23,086

)

(9,138

)

(Increase) decrease in current income tax receivable / payable, net

573

2,332

(Increase) decrease in other assets

327

4,304

Increase (decrease) in accounts payable and other liabilities

2,566

(3,708

)

Increase (decrease) in accrued payroll and related benefits

(74,273

)

(84,910

)

Increase (decrease) in deferred revenues

(9,569

)

1,606

Net cash used in operating activities

(82,754

)

(56,146

)

Cash flows from investing activities:

Purchases of property and equipment, net

(637

)

(1,001

)

Purchases of investment securities

--

(13,000

)

Investment in life insurance policies

--

(1,472

)

Purchases of businesses

(6,000

)

--

Capitalization of internally developed software costs

(1,400

)

(2,922

)

Net cash used in investing activities

(8,037

)

(18,395

)

Cash flows from financing activities:

Proceeds from exercise of stock options

174

468

Shares redeemed for employee tax withholdings

(8,503

)

(7,133

)

Share repurchases

(11,454

)

(22,115

)

Proceeds from bank borrowings

89,000

281,000

Repayments of bank borrowings

(24,135

)

(38,131

)

Net cash provided by financing activities

45,082

214,089

Effect of exchange rate changes on cash

155

(143

)

Net increase (decrease) in cash and cash equivalents

(45,554

)

139,405

Cash and cash equivalents at beginning of the period

67,177

11,604

Cash and cash equivalents at end of the period

$

21,623

$

151,009

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)

Three Months Ended
March 31,

Percent
Increase
(Decrease)

Segment and Consolidated Operating Results (in thousands):

2021

2020

Healthcare:

Revenues

$

79,722

$

95,578

(16.6)%

Operating income

$

20,484

$

24,050

(14.8)%

Segment operating income as a percentage of segment revenues

25.7

%

25.2

%

Business Advisory:

Revenues

$

72,867

$

64,905

12.3%

Operating income

$

13,077

$

9,842

32.9%

Segment operating income as a percentage of segment revenues