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Huron Announces First Quarter 2023 Financial Results and Affirms 2023 Guidance

FIRST QUARTER 2023 FINANCIAL HIGHLIGHTS

  • Total revenues increased $57.8 million, or 22.2%, to $317.9 million in Q1 2023 from $260.0 million in Q1 2022.

  • Revenues within the Digital capability increased 28.5% to $140.7 million in Q1 2023, compared to $109.5 million in Q1 2022.

  • Net income was $13.4 million in Q1 2023, compared to $26.9 million in Q1 2022. Results for Q1 2022 included a non-recurring, unrealized gain of $19.8 million, net of tax, related to the company's investment in a hospital-at-home company.

  • Adjusted EBITDA(6), a non-GAAP measure, increased $7.4 million, or 33.4%, to $29.5 million in Q1 2023 from $22.1 million in Q1 2022.

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  • Diluted earnings per share was $0.68 in Q1 2023, compared to $1.27 in Q1 2022 which included the non-recurring, unrealized gain related to the company's investment in a hospital-at-home company.

  • Adjusted diluted earnings per share(6), a non-GAAP measure, increased $0.38, or 77.6%, to $0.87 in Q1 2023 from $0.49 in Q1 2022.

  • Huron returned $44.3 million to shareholders by repurchasing 0.6 million shares of the company's common stock in Q1 2023.

  • Huron affirms its previous earnings guidance range for full year 2023, including revenue expectations in a range of $1.22 billion to $1.28 billion.

OTHER HIGHLIGHTS

  • Huron amended its credit facility to include ESG-related measures that align the company's financing and people-focused goals.

  • Huron introduced its 2023 Investor Presentation, which provides insight into the company and its commitment to achieving its strategic and financial objectives.

CHICAGO, May 02, 2023--(BUSINESS WIRE)--Global professional services firm Huron (NASDAQ: HURN) today announced financial results for the first quarter ended March 31, 2023.

"Our first quarter results reflect our steady progress toward achieving the medium-term financial objectives we set forth in 2022 for double-digit revenue growth, expanded adjusted EBITDA margins, and accelerated adjusted EPS growth," said Mark Hussey, chief executive officer and president of Huron. "Driven by strong growth across all three operating segments and in our Digital capability, revenues grew 22% over the prior year quarter, reflecting continued demand across our portfolio of end markets. Consistent with our goal to expand our profitability, adjusted EBITDA margins increased 80 basis points over the prior year quarter."

"Our clients face significant strategic, financial and operational challenges in their markets, exacerbated by an increasingly uncertain macro environment. We believe these challenges will continue to drive solid demand for our business as we further innovate and build upon our deep, collaborative relationships with our clients," added Hussey.

FIRST QUARTER 2023 RESULTS

Revenues increased $57.8 million, or 22.2%, to $317.9 million for the first quarter of 2023, compared to $260.0 million for the first quarter of 2022. This revenue growth was highlighted by 28.5% growth from the Digital capability in the aggregate across all segments and growth in the Healthcare and Education segments' Consulting and Managed Services capability of 21.5% and 20.5%, respectively, during the first quarter of 2023, compared to the same prior year period, which reflects the company's focus on accelerating growth in the healthcare and education industries.

Net income was $13.4 million for the first quarter of 2023, compared to $26.9 million for the same quarter last year. Diluted earnings per share was $0.68 for the first quarter of 2023, compared to $1.27 for the first quarter of 2022. Results for the first quarter of 2022 included a non-recurring, unrealized gain of $19.8 million, net of tax, related to the increase in fair value of the company's investment in a hospital-at-home company.

First quarter 2023 earnings before interest, taxes, depreciation and amortization ("EBITDA")(6) was $26.7 million, compared to $47.4 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,

2023

2022

Amortization of intangible assets

$

2,231

$

2,860

Restructuring charges

$

2,284

$

1,555

Other losses

$

435

$

12

Transaction-related expenses

$

$

50

Unrealized gain on preferred stock investment

$

$

(26,964

)

Tax effect of adjustments

$

(1,312

)

$

5,959

Foreign currency transaction losses, net

$

80

$

19

Adjusted EBITDA(6) increased $7.4 million, or 33.4%, to $29.5 million, or 9.3% of revenues, in the first quarter of 2023, compared to $22.1 million, or 8.5% of revenues, in the same quarter last year. Adjusted net income(6) increased $6.7 million, or 65.2%, to $17.1 million, or $0.87 per diluted share, for the first quarter of 2023, compared to $10.3 million, or $0.49 per diluted share, for the same quarter in 2022.

The number of revenue-generating professionals(1) increased 24.6% to 5,013 as of March 31, 2023 from 4,023 as of March 31, 2022. The utilization rate(5) of the company's Consulting capability increased to 76.3% during the first quarter 2023, compared to 71.4% during the same period last year. The utilization rate(5) for the company's Digital capability decreased to 71.0% during the first quarter 2023, compared to 72.4% during the same period last year.

Additionally, in the first quarter of 2023, Huron repurchased 632,894 shares of the company's common stock for $44.3 million.

OPERATING INDUSTRIES

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

The company’s first quarter 2023 revenues by operating segment as a percentage of total company revenues are as follows: Healthcare (47%); Education (33%); and Commercial (20%). Financial results by operating industry are included in the attached schedules and in Huron's forthcoming Quarterly Report on Form 10-Q filing for the quarter ended March 31, 2023.

OUTLOOK FOR 2023

Based on currently available information, the company is affirming guidance for full year 2023 revenues before reimbursable expenses in a range of $1.22 billion to $1.28 billion. The company also anticipates adjusted EBITDA as a percentage of revenues in a range of 12.0% to 12.5% and non-GAAP adjusted diluted earnings per share in a range of $3.75 to $4.25.

FIRST QUARTER 2023 WEBCAST

The company will host a webcast to discuss its financial results today, May 2, 2023, at 5:00 p.m. Eastern Time, 4:00 p.m. Central Time. The conference call is being webcast by Notified 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(6)

In evaluating the company’s financial performance and outlook, management uses EBITDA, adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income, and adjusted diluted earnings per share, 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 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 is not provided. Management is unable to provide guidance for these reconciling items because they 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 professional services firm that collaborates with clients to put possible into practice by creating sound strategies, optimizing operations, accelerating digital transformation, and empowering businesses and their people 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," "goals," "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: failure to achieve expected utilization rates, billing rates, and the necessary 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, 2022 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,

2023

2022

Revenues and reimbursable expenses:

Revenues

$

317,895

$

260,049

Reimbursable expenses

8,490

4,726

Total revenues and reimbursable expenses

326,385

264,775

Operating expenses:

Direct costs (exclusive of depreciation and amortization included below)

228,383

187,247

Reimbursable expenses

8,624

4,756

Selling, general and administrative expenses

62,289

48,395

Restructuring charges

2,284

1,555

Depreciation and amortization

6,374

6,864

Total operating expenses

307,954

248,817

Operating income

18,431

15,958

Other income (expense), net:

Interest expense, net of interest income

(4,303

)

(2,196

)

Other income, net

1,719

24,365

Total other income (expense), net

(2,584

)

22,169

Income before taxes

15,847

38,127

Income tax expense

2,428

11,275

Net income

$

13,419

$

26,852

Earnings per share:

Net income per basic share

$

0.70

$

1.29

Net income per diluted share

$

0.68

$

1.27

Weighted average shares used in calculating earnings per share:

Basic

19,119

20,850

Diluted

19,699

21,167

Comprehensive income (loss):

Net income

$

13,419

$

26,852

Foreign currency translation adjustments, net of tax

52

(43

)

Unrealized gain (loss) on investment, net of tax

3,873

(2,661

)

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

(2,329

)

4,325

Other comprehensive income

1,596

1,621

Comprehensive income

$

15,015

$

28,473

HURON CONSULTING GROUP INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

March 31,
2023

December 31,
2022

Assets

Current assets:

Cash and cash equivalents

$

12,026

$

11,834

Receivables from clients, net

147,037

147,852

Unbilled services, net

173,454

141,781

Income tax receivable

275

960

Prepaid expenses and other current assets

28,718

26,057

Total current assets

361,510

328,484

Property and equipment, net

24,179

26,107

Deferred income taxes, net

1,410

1,554

Long-term investments

96,473

91,194

Operating lease right-of-use assets

28,692

30,304

Other non-current assets

80,154

73,039

Intangible assets, net

21,161

23,392

Goodwill

624,966

624,966

Total assets

$

1,238,545

$

1,199,040

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

9,556

$

14,254

Accrued expenses and other current liabilities

28,938

27,268

Accrued payroll and related benefits

78,354

171,723

Current maturities of operating lease liabilities

10,825

10,530

Deferred revenues

20,542

21,909

Total current liabilities

148,215

245,684

Non-current liabilities:

Deferred compensation and other liabilities

38,404

33,614

Long-term debt

447,000

290,000

Operating lease liabilities, net of current portion

43,393

45,556

Deferred income taxes, net

32,564

32,146

Total non-current liabilities

561,361

401,316

Commitments and contingencies

Stockholders’ equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 22,047,299 and 22,507,159 shares issued, respectively

220

223

Treasury stock, at cost, 2,842,144 and 2,711,712 shares, respectively

(141,353

)

(137,556

)

Additional paid-in capital

284,420

318,706

Retained earnings

365,967

352,548

Accumulated other comprehensive income

19,715

18,119

Total stockholders’ equity

528,969

552,040

Total liabilities and stockholders’ equity

$

1,238,545

$

1,199,040

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2023

2022

Cash flows from operating activities:

Net income

$

13,419

$

26,852

Adjustments to reconcile net income to cash flows from operating activities:

Depreciation and amortization

6,407

6,864

Non-cash lease expense

1,644

1,640

Lease-related impairment charge

1,870

Share-based compensation

11,562

7,935

Amortization of debt discount and issuance costs

191

198

Allowances for doubtful accounts

3

28

Deferred income taxes

7,129

(Gain) loss on sale of property and equipment, excluding transaction costs

1

(1,067

)

Change in fair value of contingent consideration liabilities

435

12

Change in fair value of preferred stock investment

(26,964

)

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

(Increase) decrease in receivables from clients, net

827

5,791

(Increase) decrease in unbilled services, net

(31,669

)

(35,239

)

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

1,487

3,266

(Increase) decrease in other assets

(5,205

)

1,361

Increase (decrease) in accounts payable and other liabilities

(1,881

)

(7,044

)

Increase (decrease) in accrued payroll and related benefits

(89,843

)

(70,689

)

Increase (decrease) in deferred revenues

(1,349

)

828

Net cash used in operating activities

(92,101

)

(79,099

)

Cash flows from investing activities:

Purchases of property and equipment

(1,956

)

(3,924

)

Investment in life insurance policies

(1,833

)

Purchases of businesses

38

(2,289

)

Capitalization of internally developed software costs

(6,575

)

(2,060

)

Proceeds from note receivable

154

Proceeds from sale of property and equipment

4,750

Divestiture of business

207

Net cash used in investing activities

(10,172

)

(3,316

)

Cash flows from financing activities:

Proceeds from exercise of stock options

627

648

Shares redeemed for employee tax withholdings

(9,529

)

(6,884

)

Share repurchases

(45,133

)

(24,097

)

Proceeds from bank borrowings

201,000

150,000

Repayments of bank borrowings

(44,000

)

(47,780

)

Payments for debt issuance costs

(16

)

Deferred payments on business acquisition

(500

)

(500

)

Net cash provided by financing activities

102,449

71,387

Effect of exchange rate changes on cash

16

(5

)

Net increase (decrease) in cash and cash equivalents

192

(11,033

)

Cash and cash equivalents at beginning of the period

11,834

20,781

Cash and cash equivalents at end of the period

$

12,026

$

9,748

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):

2023

2022

Healthcare:

Revenues

$

149,049

$

121,876

22.3

%

Operating income

$

32,255

$

28,032

15.1

%

Segment operating margin

21.6

%

23.0

%

Education:

Revenues

$

104,147

$

80,662

29.1

%

Operating income

$

23,165

$

14,306

61.9

%

Segment operating margin

22.2

%

17.7

%

Commercial:

Revenues

$

64,699

$

57,511

12.5

%

Operating income

$

14,067

$

12,214

15.2

%

Segment operating margin

21.7

%

21.2

%

Total Huron:

Revenues

$

317,895

$

260,049

22.2

%

Reimbursable expenses

8,490

4,726

79.6

%

Total revenues and reimbursable expenses

$

326,385

$

264,775

23.3

%

Segment operating income

$

69,487

$

54,552

27.4

%

Items not allocated at the segment level:

Other operating expenses

46,340

33,548

38.1

%

Depreciation and amortization

4,716

5,046

(6.5

) %

Total operating income

18,431

15,958

15.5

%

Other income (expense), net

(2,584

)

22,169

(111.7

) %

Income before taxes

$

15,847

$

38,127

(58.4

) %

Other Operating Data:

Number of revenue-generating professionals by segment (at period end) (1):

Healthcare

1,985

1,647

20.5

%

Education

1,633

1,231

32.7

%

Commercial (2)

1,395

1,145

21.8

%

Total

5,013

4,023

24.6

%

Revenue by capability:

Consulting and Managed Services (3)

$

177,194

$

150,584

17.7

%

Digital

140,701

109,465

28.5

%

Total

$

317,895

$

260,049

22.2

%

Number of revenue-generating professionals by capability (at period end)(1):

Consulting and Managed Services (4)

2,360

2,003

17.8

%

Digital

2,653

2,020

31.3

%

Total

5,013

4,023

24.6

%

Utilization rate by capability (5):

Consulting

76.3

%

71.4

%

Digital

71.0

%

72.4

%

(1)

Consists of our full-time consultants who generate revenues based on the number of hours worked; full-time equivalents, which consists of coaches and their support staff within the Culture and Organizational excellence solution, consultants who work variable schedules as needed by clients, and full-time employees who provide software support and maintenance services to clients; and our Healthcare Managed Services employees who provide revenue cycle billing, collections insurance verification and change integrity services to clients.

(2)

The majority of our revenue-generating professionals within our Commercial segment can provide services across all of our industries, including healthcare and education.

(3)

Managed Services capability revenues within our Healthcare segment was $19.8 million and $13.8 million for the three months ended March 31, 2023 and 2022, respectively.

Managed Services capability revenues within our Education segment was $4.6 million and $3.4 million for the three months ended March 31, 2023 and 2022, respectively.

(4)

The number of Managed Services revenue-generating professionals within our Healthcare segment as of March 31, 2023 and 2022 was 726 and 543, respectively.

The number of Managed Services revenue-generating professionals within our Education segment as of March 31, 2023 and 2022 was 101 and 92, respectively.

(5)

Utilization rate is calculated by dividing the number of hours our billable consultants worked on client assignments during a period by the total available working hours for these billable consultants during the same period. Available hours are determined by the standard hours worked by each billable consultant, adjusted for part-time hours, and U.S. standard work weeks. Available working hours exclude local country holidays and vacation days. Utilization rates are presented for our revenue-generating professionals who primarily bill on an hourly basis. We have not presented utilization rates for our Managed Services professionals as most of the revenues generated by these employees are not billed on an hourly basis.

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME

TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (6)

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2023

2022

Revenues

$

317,895

$

260,049

Net income

$

13,419

$

26,852

Add back:

Income tax expense

2,428

11,275

Interest expense, net of interest income

4,303

2,196

Depreciation and amortization

6,553

7,122

Earnings before interest, taxes, depreciation and amortization (EBITDA) (6)

26,703

47,445

Add back:

Restructuring charges

2,284

1,555

Other losses

435

12

Transaction-related expenses

50

Unrealized gain on preferred stock investment

(26,964

)

Foreign currency transaction losses, net

80

19

Adjusted EBITDA (6)

$

29,502

$

22,117

Adjusted EBITDA as a percentage of revenues (6)

9.3

%

8.5

%

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME (6)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2023

2022

Net income

$

13,419

$

26,852

Weighted average shares - diluted

19,699

21,167

Diluted earnings per share

$

0.68

$

1.27

Add back:

Amortization of intangible assets

2,231

2,860

Restructuring charges

2,284

1,555

Other losses

435

12

Transaction-related expenses

50

Unrealized gain on preferred stock investment

(26,964

)

Tax effect of adjustments

(1,312

)

5,959

Total adjustments, net of tax

3,638

(16,528

)

Adjusted net income (6)

$

17,057

$

10,324

Adjusted weighted average shares - diluted

19,699

21,167

Adjusted diluted earnings per share (6)

$

0.87

$

0.49

(6)

In evaluating the company’s financial performance and outlook, management uses earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income, and adjusted diluted earnings per share, 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 the company's 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230502005454/en/

Contacts

MEDIA CONTACT
Allie Bovis
abovis@hcg.com

INVESTOR CONTACT
John D. Kelly
investor@hcg.com