UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10–Q~~10-Q

(Mark One)



ý☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2020



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-50976

H~~URON~~ C~~ONSULTING~~ G~~ROUP~~ I~~NC.~~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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HURN	NASDAQ 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. Yesý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yesý☒ No o☐

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 filer~~Accelerated Filer		ý	☒	Accelerated ~~filer~~Filer	☐	o

Non-accelerated ~~filer~~Filer	☐	o ~~(Do not check if a smaller reporting company)~~Smaller Reporting Company		~~Smaller reporting company~~		o

			☐	Emerging ~~growth company~~Growth Company		o☐

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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒

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, 2017, 22,129,393~~April 23, 2020, 22,849,043 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
Part I – Financial Information

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations and Other Comprehensive Income	2
	Consolidated ~~Statement~~Statements of Stockholders’ Equity	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2820

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5135

Item 4.	Controls and Procedures	5236

Part II – Other Information

Item 1.	Legal Proceedings	5236

Item 1A.	Risk Factors	5237

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5438

Item 3.	Defaults Upon Senior Securities	5438

Item 4.	Mine Safety Disclosures	5438

Item 5.	Other Information	5438

Item 6.	Exhibits	5539

Signature		5640

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, 2017			December 31, 2016			March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	8,660		$	17,027		$	151,009		$	11,604
Receivables from clients, net	94,025			94,246
Unbilled services, net	65,432			51,290
Receivables from clients, net of allowances of $9,187 and $8,907, respectively							105,379			116,571
Unbilled services, net of allowances of $3,356 and $2,994, respectively							88,960			79,937
Income tax receivable	4,018			4,211			748			2,376
Prepaid expenses and other current assets	15,106			13,308			13,309			14,248
Total current assets	187,241			180,082			359,405			224,736
Property and equipment, net	47,075			32,434			38,326			38,413
Deferred income taxes, net	15,159			—			8,334			1,145
Long-term investment	31,937			34,675			67,194			54,541
Operating lease right-of-use assets							52,849			54,954
Other non-current assets	26,149			24,814			49,578			52,177
Intangible assets, net	80,861			81,348			28,127			31,625
Goodwill	689,375			799,862			586,235			646,680
Total assets	$	1,077,797		$	1,153,215		$	1,190,048		$	1,104,271
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	10,259		$	7,273		$	5,799		$	7,944
Accrued expenses and other current liabilities	22,846			19,788			21,580			18,554
Accrued payroll and related benefits	62,451			82,669			53,380			141,605
Accrued contingent consideration for business acquisitions	7,743			1,985
Current maturities of long-term debt							533			529
Current maturities of operating lease liabilities							8,206			7,469
Deferred revenues	25,495			24,053			30,010			28,443
Total current liabilities	128,794			135,768			119,508			204,544
Non-current liabilities:
Deferred compensation and other liabilities	20,336			24,171			26,854			28,635
Accrued contingent consideration for business acquisitions, net of current portion	14,726			6,842
Long-term debt, net of current portion	374,328			292,065			451,189			208,324
Deferred lease incentives	15,236			10,703
Operating lease liabilities, net of current portion							67,317			69,233
Deferred income taxes, net	—			35,633			571			8,070
Total non-current liabilities	424,626			369,414			545,931			314,262
Commitments and contingencies
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 24,560,468 and 24,126,118 shares issued at September 30, 2017 and December 31, 2016, respectively	241			235
Treasury stock, at cost, 2,428,971 and 2,408,343 shares at September 30, 2017 and December 31, 2016, respectively	(121,395		)	(113,195		)
Common stock; $0.01 par value; 500,000,000 shares authorized; 25,391,801 and 25,144,764 shares issued at March 31, 2020 and December 31, 2019, respectively							246			247
Treasury stock, at cost, 2,546,566 and 2,425,430 shares at March 31, 2020 and December 31, 2019, respectively							(128,366		)	(128,348		)
Additional paid-in capital	431,211			405,895			444,974			460,781
Retained earnings	210,543			351,483			195,541			237,849
Accumulated other comprehensive income	3,777			3,615			12,214			14,936
Total stockholders’ equity	524,377			648,033			524,609			585,465
Total liabilities and stockholders’ equity	$	1,077,797		$	1,153,215		$	1,190,048		$	1,104,271

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

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,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenues and reimbursable expenses:
Revenues	$	176,376		$	183,400		$	546,643		$	548,148		$	222,619		$	204,445
Reimbursable expenses	17,982			19,093			55,862			54,636			19,303			18,617
Total revenues and reimbursable expenses	194,358			202,493			602,505			602,784			241,922			223,062
Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
Direct costs	113,775			108,354			343,185			323,310			156,248			137,780
Amortization of intangible assets and software development costs	2,657			4,052			8,388			11,278			1,301			1,117
Reimbursable expenses	18,079			18,956			55,901			54,747			19,389			18,669
Total direct costs and reimbursable expenses	134,511			131,362			407,474			389,335			176,938			157,566
Operating expenses and other losses (gains), net:
Operating expenses and other losses (gains), net
Selling, general and administrative expenses	41,576			38,256			132,137			119,937			43,446			50,749
Restructuring charges	1,347			1,049			5,295			4,129			1,609			1,275
Other losses (gains), net	880			494			(222		)	494
Litigation and other gains													(150		)	(456		)
Depreciation and amortization	9,946			8,092			28,549			23,064			6,114			7,172
Goodwill impairment charge	—			—			209,600			—
Goodwill impairment charges													59,816			—
Total operating expenses and other losses (gains), net	53,749			47,891			375,359			147,624			110,835			58,740
Operating income (loss)	6,098			23,240			(180,328		)	65,825			(45,851		)	6,756
Other income (expense), net:
Interest expense, net of interest income	(4,880		)	(4,176		)	(13,811		)	(12,270		)	(2,341		)	(4,258		)
Other income, net	930			489			3,204			1,236
Other income (expense), net													(5,296		)	2,217
Total other expense, net	(3,950		)	(3,687		)	(10,607		)	(11,034		)	(7,637		)	(2,041		)
Income (loss) from continuing operations before income tax expense	2,148			19,553			(190,935		)	54,791
Income (loss) from continuing operations before taxes													(53,488		)	4,715
Income tax expense (benefit)	(1,984		)	7,265			(49,740		)	19,498			(11,215		)	1,365
Net income (loss) from continuing operations	4,132			12,288			(141,195		)	35,293			(42,273		)	3,350
Income (loss) from discontinued operations, net of tax	238			4			690			(1,830		)
Loss from discontinued operations, net of tax													(35		)	(46		)
Net income (loss)	$	4,370		$	12,292		$	(140,505	)	$	33,463		$	(42,308	)	$	3,304
Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	0.19		$	0.58		$	(6.59	)	$	1.67		$	(1.94	)	$	0.15
Income (loss) from discontinued operations, net of tax	0.01			—			0.03			(0.08		)
Loss from discontinued operations, net of tax													—			—
Net income (loss)	$	0.20		$	0.58		$	(6.56	)	$	1.59		$	(1.94	)	$	0.15
Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	0.19		$	0.57		$	(6.59	)	$	1.65		$	(1.94	)	$	0.15
Income (loss) from discontinued operations, net of tax	0.01			—			0.03			(0.09		)
Loss from discontinued operations, net of tax													—			—
Net income (loss)	$	0.20		$	0.57		$	(6.56	)	$	1.56		$	(1.94	)	$	0.15
Weighted average shares used in calculating earnings per share:
Weighted average shares used in calculating earnings (loss) per share:
Basic	21,505			21,076			21,413			21,084			21,827			21,868
Diluted	21,622			21,445			21,413			21,427			21,827			22,311
Comprehensive income (loss):
Comprehensive income:
Net income (loss)	$	4,370		$	12,292		$	(140,505	)	$	33,463		$	(42,308	)	$	3,304
Foreign currency translation adjustments, net of tax	609			50			1,835			52			(779		)	316
Unrealized loss on investment, net of tax	(2,200		)	(2,038		)	(1,669		)	(1,163		)
Unrealized gain (loss) on cash flow hedging instruments, net of tax	23			121			(4		)	(27		)
Unrealized gain (loss) on investment, net of tax													(258		)	2,657
Unrealized loss on cash flow hedging instruments, net of tax													(1,685		)	(237		)
Other comprehensive income (loss)	(1,568		)	(1,867		)	162			(1,138		)	(2,722		)	2,736
Comprehensive income (loss)	$	2,802		$	10,425		$	(140,343	)	$	32,325		$	(45,030	)	$	6,040

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HURON CONSULTING GROUP INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)



	Three Months Ended March 31, 2020
	Common Stock					Treasury Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Stockholders’ Equity
	Shares		Amount			Shares		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Stockholders’ Equity
Balance at December 31, 2019	24,603,308		$	247		(2,763,302	)	$	(128,348	)	$	460,781		$	237,849		$	14,936		$	585,465
Comprehensive income														(42,308		)	(2,722		)	(45,030		)
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	250,544		2			102,467		7,115			(7,117		)							—
Exercise of stock options	20,000		—								468									468
Share-based compensation											11,720									11,720
Shares redeemed for employee tax withholdings						(120,000	)	(7,133		)										(7,133		)
Share repurchases	(313,998	)	(3		)						(20,878		)							(20,881		)
Balance at March 31, 2020	24,559,854		$	246		(2,780,835	)	$	(128,366	)	$	444,974		$	195,541		$	12,214		$	524,609



	Three Months Ended March 31, 2019
	Common Stock			Treasury Stock					Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount		Shares		Amount			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
Balance at December 31, 2018	24,418,252	$	244	(2,671,962	)	$	(124,794	)	$	452,573		$	196,106	$	16,495	$	540,624
Comprehensive income												3,304		2,736		6,040
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	254,550	3		27,612		2,196			(2,199		)					—
Exercise of stock options	10,000	—							234							234
Share-based compensation									7,140							7,140
Shares redeemed for employee tax withholdings				(94,500	)	(4,385		)								(4,385		)
Balance at March 31, 2019	24,682,802	$	247	(2,738,850	)	$	(126,983	)	$	457,748		$	199,410	$	19,231	$	549,653

Common Stock Treasury Stock
Additional
Paid-In
Capital

Retained
Earnings

Accumulated Other
Comprehensive
Income

Stockholders’
Equity
Shares Amount Shares Amount
Balance at December 31, 2016 23,478,016
$ 235
(2,420,913 ) $ (113,195 ) $ 405,895
$ 351,483
$ 3,615
$ 648,033
Comprehensive income (loss) (140,505 ) 162
(140,343 )
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations 367,278
4
(56,315 ) (3,750 ) 3,746
—
Business acquisition 221,558
2
9,558
9,560
Share-based compensation 11,577
11,577
Shares redeemed for employee tax withholdings (102,179 ) (4,450 ) (4,450 )
Cumulative-effect adjustment from adoption of ASU 2016-09 435
(435 ) —
Balance at September 30, 2017 24,066,852
$ 241
(2,579,407 ) $ (121,395 ) $ 431,211
$ 210,543
$ 3,777
$ 524,377

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income (loss)	$	(140,505	)	$	33,463		$	(42,308	)	$	3,304
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization	37,881			34,344			7,415			8,538
Non-cash lease expense							1,938			2,172
Lease impairment charge							—			740
Share-based compensation	11,711			13,145			8,504			5,366
Amortization of debt discount and issuance costs	7,604			7,171			198			2,618
Goodwill impairment charge	209,600			—
Allowances for doubtful accounts and unbilled services	3,812			7,107
Goodwill impairment charges							59,816			—
Allowances for doubtful accounts							21			59
Deferred income taxes	(51,062		)	4,980			(14,016		)	—
Gain on sale of business	(931		)	—
Loss on sale of business							102			—
Change in fair value of contingent consideration liabilities	(222		)	494			—			(391		)
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in receivables from clients	9,025			9,442
(Increase) decrease in unbilled services	(12,251		)	(21,492		)
Changes in operating assets and liabilities, net of divestiture:
(Increase) decrease in receivables from clients, net							11,698			5,129
(Increase) decrease in unbilled services, net							(9,138		)	(16,850		)
(Increase) decrease in current income tax receivable / payable, net	(32		)	(3,039		)	2,332			3,490
(Increase) decrease in other assets	(1,802		)	12,669			4,304			(2,554		)
Increase (decrease) in accounts payable and accrued liabilities	1,850			(2,860		)
Increase (decrease) in accounts payable and other liabilities							(3,708		)	2,396
Increase (decrease) in accrued payroll and related benefits	(21,928		)	(17,707		)	(84,910		)	(54,151		)
Increase (decrease) in deferred revenues	(318		)	2,028			1,606			1,845
Net cash provided by operating activities	52,432			79,745
Net cash used in operating activities							(56,146		)	(38,289		)
Cash flows from investing activities:
Purchases of property and equipment, net	(20,139		)	(9,372		)	(1,001		)	(2,349		)
Purchases of investment securities							(13,000		)	—
Investment in life insurance policies	(1,826		)	(1,890		)	(1,472		)	(3,645		)
Distributions from life insurance policies	2,889			—
Purchases of businesses, net of cash acquired	(106,915		)	(69,133		)
Capitalization of internally developed software costs	(938		)	(838		)	(2,922		)	(2,093		)
Proceeds from note receivable	177			—
Proceeds from sale of business	1,499			—
Net cash used in investing activities	(125,253		)	(81,233		)	(18,395		)	(8,087		)
Cash flows from financing activities:
Proceeds from exercise of stock options	—			123
Proceeds from exercises of stock options							468			234
Shares redeemed for employee tax withholdings	(4,450		)	(4,837		)	(7,133		)	(4,385		)
Share repurchases	—			(55,265		)	(22,115		)	—
Proceeds from borrowings under credit facility	241,000			168,000
Repayments of debt	(170,082		)	(156,000		)
Payments for debt issuance costs	(395		)	—
Payments of contingent consideration liabilities	(1,811		)	—
Net cash provided by (used in) financing activities	64,262			(47,979		)
Proceeds from bank borrowings							281,000			40,500
Repayments of bank borrowings							(38,131		)	(14,627		)
Net cash provided by financing activities							214,089			21,722
Effect of exchange rate changes on cash	192			133			(143		)	73
Net decrease in cash and cash equivalents	(8,367		)	(49,334		)
Net increase (decrease) in cash and cash equivalents							139,405			(24,581		)
Cash and cash equivalents at beginning of the period	17,027			58,437			11,604			33,107
Cash and cash equivalents at end of the period	$	8,660		$	9,103		$	151,009		$	8,526
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Property and equipment expenditures included in accounts payable and accrued expenses	$	4,049		$	2,928
Promissory note assumed for purchase of property and equipment	$	5,113		$	—
Contingent consideration related to business acquisitions	$	15,489		$	8,754
Common stock issued related to a business acquisition	$	9,560		$	—
Property and equipment expenditures and capitalized software included in accounts payable and accrued expenses							$	3,716		$	1,913

The accompanying notes are an integral part of the consolidated financial statements.

Table of Contents

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 committed~~consultancy that collaborates with clients to ~~achieving~~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 ~~in partnership with its clients. We bring a depth of expertise in strategy, technology, operations, advisory services and analytics to drive lasting and measurable results in~~for the ~~healthcare, higher education, life sciences and commercial sectors. Through focus, passion, and collaboration,~~organizations we ~~provide guidance to support organizations as they contend with the changes transforming their industries and businesses.~~serve.

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, 2017~~March 31, 2020 and ~~2016.~~2019. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ~~(“SEC”~~("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”~~("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 for the year ended December 31, ~~2016~~2019 included in our Annual Report on Form ~~10-K and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.~~10-K. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.

3. New Accounting Pronouncements

Recently Adopted

In ~~January 2017,~~June 2016, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU") 2017-04,~~ ~~Intangibles-Goodwill and Other~~ASU 2016-13, Financial Instruments - Credit Losses (Topic ~~350)~~326): ~~Simplifying the Test~~Measurement of Credit Losses on Financial Instruments which provides a new current expected credit loss model to account for ~~Goodwill Impairment. ASU 2017-04 eliminates Step 2 of the goodwill impairment test, which required us to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its~~credit losses on certain financial assets, ~~and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance~~including trade receivables. That model requires an entity to ~~perform its annual or interim goodwill impairment test by comparing~~estimate lifetime credit losses based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the ~~fair value~~collectability of the ~~reporting unit~~reported amount. The ASU also makes targeted amendments to ~~its carrying value, and recognizing~~the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a ~~non-cash impairment charge for~~direct write-down of the ~~amount by~~investment, which may be reversed in the ~~carrying value exceeds~~event that the ~~reporting unit's fair value with the loss not exceeding the total amount~~credit of ~~goodwill allocated to that reporting unit.~~an issuer improves. We adopted ~~this~~ ASU ~~in the second quarter of 2017 on~~2016-13 effective January 1, 2020, which did not have a prospective basis and applied the new guidance to our interim goodwill impairment tests performed in the second quarter of 2017. Refer to Note 6 “Goodwill and Intangible Assets” for additional informationmaterial impact on our ~~interim goodwill impairment tests performed.~~consolidated financial statements.

In ~~March 2016,~~August 2018, the FASB issued ASU ~~2016-09,~~ ~~Improvements~~2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to ~~Employee Share-Based Payment~~the Disclosure Requirements for Fair Value Measurement, which modifies certain disclosure requirements related to fair value measurements. We adopted ASU 2018-13 effective January 1, 2020, which had no impact on the amounts reported on our consolidated financial statements. We updated our disclosures within the notes to our consolidated financial statements as required by ASU 2018-13.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting. for Income Taxes. ASU ~~2016-09~~2019-12 simplifies ~~several~~the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies other aspects of the accounting for ~~share-based payment transactions, including~~franchise taxes and enacted changes in tax laws or tax rates and clarifies the accounting for ~~income taxes, classification of excess tax benefits on the statement of cash flows, and forfeitures. We adopted this guidance~~transactions that result in a step-up in the ~~first quarter~~tax basis of ~~2017, at which time~~goodwill. On January 1, 2020, we began recognizing excess tax benefits and deficiencies as income tax benefit or expense in our consolidated statements of operations on a prospective basis. We recognized $0.1 million and $1.8 million of net excess tax deficiencies as income tax expense in our consolidated statement of operations for the three and nine months ended September 30, 2017, respectively. Refer to Note 13 "Income Taxes" for additional information on our effective tax rate for the three and nine months ended September 30, 2017. Additionally, upon adoption, we began classifying excess tax benefits as an operating activity on the statement of cash flows on a retrospective basis. As a result, we reclassified $0.9 million of excess tax benefits for the first nine months of 2016 from cash flows from financing activities to cash flows from operating activities on our statement of cash flows. We elected to ~~account for share-based award forfeitures as they occur, and applied this accounting change~~early adopt ASU 2019-12 on a modified retrospective basis asfor those amendments that are not applied on a ~~cumulative-effect adjustment to retained earnings~~prospective basis. The adoption of ~~$0.4 million during the first quarter of 2017.~~

~~In March 2016, the FASB issued~~ ASU ~~2016-06,~~ ~~Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments~~. ASU 2016-06 clarifies that in assessing whether an embedded contingent put or call option is clearly and closely related to the debt host, an entity is required to perform only the four-step decision sequence in ASC 815-15-25-42 (as amended by the ASU). The entity does2019-12 did not have to separately assess whether the event that triggers its ability to exercise the contingent option is itself indexed only to interest rates or credit risk. We adopted these amendments in the first quarter of 2017a material impact on aour 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)

~~modified retrospective basis. The adoption of these amendments did not have any impact on our consolidated financial statements.~~

~~Not Yet Adopted~~

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~. The amendments to the guidance improve and simplify accounting rules for hedge accounting to better present the economic results of an entity’s risk management activities in its financial statements and improve the disclosures of hedging arrangements. Additionally, ASU 2017-12 simplifies the hedge documentation and effectiveness assessment requirements. The updated guidance is effective for us beginning January 1, 2019. We do not expect this guidance to have a material impact on our consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-02,~~ ~~Leases, which supersedes ASC Topic 840,~~ ~~Leases~~, and sets forth the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record on the balance sheet a right-of-use asset and a lease liability, equal to the present value of the remaining lease payments, for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or a straight-line basis over the term of the lease. ASU 2016-02 will be effective for us beginning January 1, 2019, with early adoption permitted. Entities are required to use a modified retrospective transition method for existing leases. We are currently evaluating the potential impact this guidance will have on our consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~. The amendments to the guidance enhance the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation, and disclosure. The updated guidance is effective for us beginning January 1, 2018. We do not expect this guidance to have a material impact on our consolidated financial statements.

~~In May 2014, the FASB issued ASU��2014-09,~~ ~~Revenue from Contracts with Customers,~~ ~~as a new Topic~~, ASC 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In accordance with the new standard, we will adopt ASU 2014-09 on January 1, 2018. Companies may apply the new guidance using either the full retrospective transition method, which requires restating each prior period presented, or the modified retrospective transition method, under which the new guidance is applied to the current period presented in the financial statements and a cumulative-effect adjustment is recorded as of the date of adoption. We expect to apply the new guidance using the modified retrospective transition method. We are currently evaluating the potential impact this guidance will have on our consolidated financial statements; most notably the impact on our revenue recognition for performance-based fee billing arrangements. Currently, we recognize revenue under performance-based fee billing arrangements once all related performance criteria are met and the amount to be recognized is fixed or determinable. However, ASC 606 will require us to estimate these amounts and recognize a significant portion of the estimated amounts over the term of the engagement. As a result, we expect to recognize revenue under performance-based fee billing arrangements earlier under ASC 606 than we do under current guidance.

4. ~~Discontinued Operations~~

On December 31, 2015, we sold our Huron Legal segment to Consilio, Inc. ("Consilio"). Huron Legal provided eDiscovery services, consulting services and contract management services related to law department management, information governance and compliance, legal discovery, litigation management, and legal analytics.

The divestiture of the Huron Legal segment represented a strategic shift that had a major effect on our operations and financial results. As such, the operations of our Huron Legal segment have been classified as discontinued operations in our consolidated statements of operations for all periods presented. As of September 30, 2017 and December 31, 2016, no assets or liabilities of the disposed business remained on our consolidated balance sheet.

For the three and nine months ended September 30, 2017, we recognized income from discontinued operations, net of tax, of $0.2 million and $0.7 million, respectively, primarily related to updated lease assumptions for vacated office space directly related to the sale of the Huron Legal segment. For the nine months ended September 30, 2016, we recognized losses from

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

discontinued operations, net of tax, of $1.8 million, primarily related to obligations for former employees, legal fees, and updated lease assumptions for vacated office space directly related to the sale of the Huron Legal segment.

In connection with the sale of Huron Legal, we entered into a transition services agreement ("TSA") with Consilio, under which we provided certain post-closing services, support, and facilities to Consilio to facilitate an orderly transfer of the Huron Legal business operations. Billings under the TSA, which we did not consider to be significant, were recorded as a reduction of the costs to provide the respective services, primarily in selling, general and administrative expenses in the consolidated statements of operations. Services under the TSA ended as of June 30, 2017. We have no continuing involvement with the Huron Legal segment.

~~5. Acquisitions~~

~~ADI Strategies, Inc.~~

~~Pope Woodhead and Associates Limited~~

On January 9, 2017, we completed our acquisition of Pope Woodhead and Associates Limited ("Pope Woodhead"), a U.K.-based consulting firm providing market access capabilities to assist clients in developing value propositions for innovative medicines and technologies. The acquisition expands our life sciences strategy expertise and strengthens our ability to lead clients through complex payer and regulatory environments. Pope Woodhead's results of operations have been included in our consolidated financial statements and the results of operations of our Business Advisory segment from the date of acquisition.

Pro forma results of operations are not presented for ADI Strategies or Pope Woodhead because these acquisitions were not material in relation to our consolidated financial position or results of operations.

~~Innosight Holdings, LLC~~

On March 1, 2017, we acquired 100% of the membership interests of Innosight Holdings, LLC ("Innosight"). Innosight is a growth strategy firm focused on helping companies navigate disruptive change and manage strategic transformation. Together with Innosight, we use our strategic, operational, and technology capabilities to help clients across multiple industries develop pioneering solutions to address disruption and achieve sustained growth.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

The acquisition was accounted for using the acquisition method of accounting. Tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The current fair values of assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. We believe that the information provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed, but certain items, such as working capital amounts, may be subject to change as additional information is received. Thus, the provisional measurements of fair value and goodwill are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

~~The acquisition date fair value of the consideration transferred for Innosight was $113.6 million, which consisted of the following:~~

Fair value of consideration transferred
Cash $ 90,725
Common stock 9,560
Contingent consideration liability 12,050
Net working capital adjustment 1,272
Total consideration transferred $ 113,607

We funded the cash component of the purchase price with cash on hand and borrowings of $89.0 million under our senior secured credit facility. We issued 221,558 shares of our common stock as part of the consideration transferred, with an acquisition date fair value of $9.6 million based on our common stock's closing price of $43.15 on the date of acquisition. The preliminary contingent consideration liability of $12.1 million represents the acquisition date fair value of the contingent consideration arrangement, pursuant to which we may be required to pay additional consideration to the sellers if specific financial performance targets are met over a four-year term. The maximum amount that may be paid is $35.0 million. See Note 11 "Fair Value of Financial Instruments" for additional information on the valuation of contingent consideration liabilities.

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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 summarizes the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of the acquisition date.~~

March 1, 2017
Assets acquired:
Accounts receivable $ 7,752
Unbilled services 1,881
Prepaid expenses and other current assets 468
Property and equipment 419
Intangible assets 18,015
Liabilities assumed:
Accounts payable 531
Accrued expenses and other current liabilities 916
Accrued payroll and related benefits 883
Deferred revenues 30
Total identifiable net assets 26,175
Goodwill 87,432
Total purchase price $ 113,607

~~The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the acquisition date.~~

Fair Value
Useful Life in
Years
Customer relationships $ 9,500
6
Trade name 6,000
6
Customer contracts 1,000
1
Non-compete agreements 1,300
5
Favorable lease contract 215
1
Total intangible assets subject to amortization $ 18,015

The weighted average amortization period for the identifiable intangible assets shown above is 5.6 years. Customer relationships and customer contracts represent the fair values of the underlying relationships and agreements with Innosight customers. The trade name represents the fair value of the brand and name recognition associated with the marketing of Innosight's service offerings. Non-compete agreements represent the value derived from preventing certain Innosight executives from entering into or starting a similar, competing business. The favorable lease contract represents the difference between the fair value and minimum lease obligations under the current outstanding lease. Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed, and largely reflects the expanded market opportunities expected from combining the service offerings of Huron and Innosight, as well as the assembled workforce of Innosight. Goodwill recognized in conjunction with the acquisition of Innosight was recorded in the Business Advisory segment. Goodwill of $87.4 million is expected to be deductible for income tax purposes.

Innosight’s results of operations have been included in our unaudited consolidated statements of operations and results of operations of our Business Advisory segment from the date of acquisition. For the three months ended September 30, 2017, revenues from Innosight were $11.0 million and operating loss was $0.6 million, which included $0.9 million of amortization expense for intangible assets acquired. For the nine months ended September 30, 2017, revenues from Innosight were $27.2 million and operating income was $0.8 million, which included $2.7 million of amortization expense for intangible assets acquired. In connection with the acquisition of Innosight, we incurred $1.7 million of transaction and acquisition-related expenses. Of the $1.7 million of expense, $1.4 million was incurred in the first quarter of 2017 and $0.3 million was incurred in the second quarter in 2017. These costs are recorded in selling, general and administrative expenses.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

~~The following unaudited supplemental pro forma information summarizes the combined results of operations of Huron and Innosight as though the companies were combined on January 1, 2016.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues $ 176,376
$ 194,968
$ 555,768
$ 578,924
Net income (loss) from continuing operations $ 4,170
$ 14,184
$ (137,922 ) $ 36,558
Net income (loss) from continuing operations per share - basic $ 0.19
$ 0.67
$ (6.43 ) $ 1.72
Net income (loss) from continuing operations per share - diluted $ 0.19
$ 0.65
$ (6.43 ) $ 1.69

The historical financial information has been adjusted to give effect to pro forma adjustments consisting of intangible asset amortization expense, acquisition-related costs, interest expense, and the related income tax effects. The unaudited pro forma information above includes adjustments to decrease expense for the three months ended September 30, 2017 by less than $0.1 million and include additional expense of $2.8 million for the three months ended September 30, 2016. We have included additional expense of $0.5 million and $8.4 million, for the nine months ended September 30, 2017 and 2016, respectively. Additionally, the historical financial information has been adjusted to give effect to the shares issued as consideration. All of these adjustments are based upon currently available information and certain assumptions. Therefore, the pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had it completed the acquisition on January 1, 2016. The historical results included in the pro forma consolidated results do not purport to project future results of operations of the combined companies nor do they reflect the expected realization of any cost savings or revenue synergies associated with the acquisition.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

6. Goodwill and Intangible Assets

The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020.



	Healthcare			Business Advisory			Education		Total
Balance as of December 31, 2019:
Goodwill	$	636,810		$	302,057		$	103,889	$	1,042,756
Accumulated impairment losses	(208,081		)	(187,995		)	—		(396,076		)
Goodwill, net as of December 31, 2019	428,729			114,062			103,889		646,680
Goodwill impairment charges	—			(59,816		)	—		(59,816		)
Foreign currency translation	—			(629		)	—		(629		)
Goodwill, net as of March 31, 2020	$	428,729		$	53,617		$	103,889	$	586,235

Healthcare
Education

Business
Advisory
Total
Balance as of December 31, 2016:
Goodwill $ 636,802
$ 102,906
$ 203,137
$ 942,845
Accumulated impairment losses —
—
(142,983 ) (142,983 )
Goodwill, net as of December 31, 2016 636,802
102,906
60,154
799,862
Goodwill recorded in connection with business acquisitions ⁽¹⁾
7
10,252
88,286
98,545
Goodwill impairment charge (209,600 ) —
—
(209,600 )
Goodwill reallocation —
(10,794 ) 10,794
—
Goodwill allocated to disposal of business ⁽²⁾
—
—
(568 ) (568 )
Foreign currency translation —
466
670
1,136
Goodwill, net as of September 30, 2017 $ 427,209
$ 102,830
$ 159,336
$ 689,375


~~(1)~~	~~Refer to Note 5 "Acquisitions" for additional information on the goodwill recorded in connection with business acquisitions.~~

~~(2)~~

On June 16, 2017, we sold our Life Sciences Compliance and Operations practice ("Life Sciences C&O") to a third-party, and allocated a portion of goodwill within the Life Sciences reporting unit to the disposed business based on the relative fair values of Life Sciences C&O and the remaining reporting unit. The allocated goodwill of $0.6 million was written off and included in the gain on sale of Life Sciences C&O. The sale of Life Sciences C&O did not meet the criteria for reporting separately as discontinued operations. In connection with the sale, we recorded a $0.9 million gain which is included in other income, net in our consolidated statements of operations.

~~Second~~First Quarter ~~2017~~2020 Goodwill Impairment ~~Charge~~Charges

~~Since~~The worldwide spread of coronavirus (COVID-19) in the first quarter of ~~2016,~~2020 has created significant volatility, uncertainty and disruption to the ~~Healthcare segment, which is also~~global economy. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our clients, employees and business partners. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expect it to have an unfavorable impact on sales and business development activities and full year 2020 results. Additionally, we expect a decrease in the demand for the services we provide that may be considered by our clients to be more discretionary in nature. The services provided by our Strategy and Innovation and Life Sciences reporting ~~unit, has experienced declining revenues, primarily driven by softness in our revenue cycle offering~~units within our ~~performance improvement solution. This softness is attributable~~Business Advisory segment focus on strategic solutions for healthy, well-capitalized companies to ~~decreased demand for our services, the winding down of some of our larger projects,~~identify new growth opportunities and a growing trend toward smaller projects, as well as fewer large integrated projects. In light of these challenges, several initiatives have been undertaken to improve the segment's financial performance, including repositioning our solutions to address the most critical needs ofmay be considered by our clients ~~the expansion of our existing services such as those~~to be more discretionary in our Studer Group, strategy, physician and technology offerings, and workforce reductions to better align resources with market demand. While the initiatives undertaken to improve the financial performance of our Healthcare segment are yielding some positive impacts, hospitals and health systems continue to face regulatory and funding uncertainty;nature; therefore, we ~~remain~~are cautious about near-term growth. As we have previously disclosed in prior quarters, if the financial performance of our Healthcare segment continued to decline and did not meet our expectations, we could be required to perform an interim impairment analysis with respect to our carrying value of goodwillresults for ~~the Healthcare~~these two reporting ~~unit prior to our usual annual test.~~units. Based on ~~forecasts prepared in the second quarter of 2017 in connection with~~ our quarterly forecasting cycle, we determined that the likely time frame to improve the financial results of this segment would take longer than originally anticipated. As such, we concluded, during the second quarter of 2017, that the fair value of the Healthcare reporting unit may no longer exceed its carrying value. In connection withinternal projections and the preparation of our financial statements for the quarter ended ~~June 30, 2017,~~March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, we believed that the fair value of these two reporting units may no longer exceed their carrying values and performed an interim impairment test on ~~the Healthcare~~both reporting ~~unit.~~units.

Our goodwill impairment test was performed by comparing the fair value of each of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit~~units with ~~its~~their respective carrying ~~value~~values and ~~in accordance with ASU 2017-04 which we adopted in the second quarter of 2017,~~ recognizing an impairment charge for the amount by which the carrying value exceeded the fair value. To estimate the fair value of ~~the Healthcare~~each reporting unit, we relied on a combination of the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting. Based on the estimated fair ~~value~~values of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting units described below, we recorded non-cash pretax goodwill impairment charges of $49.9 million and $9.9 million, respectively, in the first quarter of 2020. The $49.9 million non-cash pretax charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $37.5 million. The $9.9 million non-cash pretax charge related to the Life Sciences reporting unit reduced the goodwill balance of the reporting unit to zero.

Concurrently with the goodwill impairment tests performed over the Strategy and Innovation and Life Sciences reporting units, we ~~recorded a $209.6~~evaluated whether any indicators exist that would lead us to believe that the fair values of our Healthcare, Education, and Business Advisory reporting units may not exceed their carrying values. Based on our internal projections, consideration of the impact of the COVID-19 pandemic on these reporting units, and review of the amounts by which the fair values of these reporting units exceeded their carrying values in the most recent quantitative goodwill impairment analysis performed, we did not identify any indicators that would lead us to believe that the fair values of these reporting units may not exceed their carrying values as of March 31, 2020.

In connection with the goodwill impairment tests performed on the Strategy and Innovation and Life Sciences reporting units, we performed impairment tests on the long-lived assets allocated to the asset groups of the Strategy and Innovation and Life Sciences reporting units. Based on the impairment tests performed, we concluded that the long-lived assets allocated to the asset groups were not impaired as of March 31, 2020. We did not identify any indicators that would lead us to believe that the carrying values of the long-lived assets allocated to our other asset groups may not be recoverable as of March 31, 2020.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~million non-cash pretax charge in the second quarter of 2017 to reduce the carrying value of goodwill in our Healthcare reporting unit.~~

In connection with the goodwill impairment test performed on the Healthcare reporting unit, we performed an impairment test on the long-lived assets allocated to the asset groups within the Healthcare reporting unit. Based on the impairment test performed, we concluded that the long-lived assets allocated to the asset groups within the Healthcare reporting unit were not impaired as of June 30, 2017.

~~Second Quarter 2017 Goodwill Reallocation~~

Effective June 1, 2017, we reorganized our internal financial reporting structure, which management uses to assess performance and allocate resources, by moving our Life Sciences practice from the Education and Life Sciences segment to the Business Advisory segment. The remaining Education and Life Sciences segment is now referred to as the Education segment. The Life Sciences practice is a separate reporting unit for purposes of goodwill impairment testing. We continue to operate under three reportable segments: Healthcare, Education, and Business Advisory. These three reportable segments are comprised of the following six reporting units for goodwill impairment testing purposes: Healthcare, Education, Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences. The Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences reporting units comprise our Business Advisory segment. See Note 15 "Segment Information" for additional information on our reportable segments.

As a result of the reorganization, we reallocated $10.8 million of the goodwill balance associated with the previous Education and Life Sciences reporting unit to the new Life Sciences reporting unit based on the relative fair values of the Life Sciences reporting unit and the remaining Education reporting unit. The estimated fair values were determined using a combination of the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.

In conjunction with the goodwill reallocation, we performed a goodwill impairment test for the goodwill balances within our Education reporting unit and Life Sciences reporting unit as of June 1, 2017. Based on the results of the goodwill impairment test, we determined that the fair values of our Education reporting unit and Life Sciences reporting unit exceeded their carrying values. As such, we concluded that there was no indication of goodwill impairment for either reporting unit.

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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, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following:



		As of March 31, 2020				As of December 31, 2019
	Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	3 to 13	$	87,379	$	64,265	$	87,577	$	61,882
Trade names	5 to 6	28,930		26,192		28,930		25,894
Technology and software	5	5,440		4,456		5,694		4,321
Non-competition agreements	5	2,220		1,559		2,220		1,447
Customer contracts	2	800		170		800		52
Total		$	124,769	$	96,642	$	125,221	$	93,596

As of September 30, 2017 As of December 31, 2016

Useful
Life in
Years

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization
Customer relationships 4 to 13 $ 106,174
$ 47,325
$ 89,279
$ 34,827
Trade names 2 to 6 29,016
17,065
22,930
11,652
Customer contracts 1 to 4 27,554
25,919
26,497
21,295
Technology and software 3 to 5 9,340
4,490
8,970
2,667
Non-competition agreements 1 to 5 5,295
2,482
3,685
1,697
Publishing content 3 3,300
2,888
3,300
2,062
Favorable lease contract 3 720
369
720
203
In-process technology Indefinite —
—
370
—
Total $ 181,399
$ 100,538
$ 155,751
$ 74,403

Identifiable intangible assets with finite lives are amortized over their estimated useful lives. Customer relationships and customer contracts, 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. In connection with the acquisition of MyRounding Solutions, LLC, we acquired in-process technology which was accounted for as an indefinite-lived intangible asset until the development of the technology was complete, which occurred in the first quarter of 2017. Upon completion, we reclassified the technology to definite-lived technology and software, and began amortizing the asset over a five-year useful life on a straight-line basis.

Intangible asset amortization expense was ~~$8.8~~$3.2 million and $4.5 million for the three months ended ~~both September 30, 2017~~March 31, 2020 and ~~2016. Intangible asset amortization expense was $26.4 million and $24.4 million for the nine months ended September 30, 2017 and 2016,~~2019, respectively. The table below sets forth the estimated annual amortization expense for the ~~year ending December 31, 2017 and each of the five succeeding years for the definite-lived~~ intangible assets recorded as of ~~September 30, 2017.~~March 31, 2020.


Year Ending December 31,	Estimated Amortization Expense		Estimated Amortization Expense
2017	$	34,966
2018	$	23,936
2019	$	17,279
2020	$	12,116	$	12,561
2021	$	8,070	$	8,358
2022	$	6,092	$	6,111
2023			$	3,512
2024			$	741

Actual future amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, and other factors.

7.5. Revenues

For the three months ended March 31, 2020 and 2019, we recognized revenues of $222.6 million and $204.4 million, respectively. Of the $222.6 million recognized in the first quarter of 2020, we recognized revenues of $7.9 million from obligations satisfied, or partially satisfied, in prior periods, of which $4.8 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $3.1 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments. Of the $204.4 million recognized in the first quarter of 2019, we recognized revenues of $3.9 million from obligations satisfied, or partially satisfied, in prior periods, due to the release of allowances on unbilled services due to securing contract amendments. During the first quarter of 2019, we recognized a $1.2 million decrease to revenues due to changes in the estimates of our variable consideration under performance-based billing arrangements.

As of March 31, 2020, we had $92.5 million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude obligations under contracts with an original expected duration of one year or less, 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 $92.5 million of performance obligations, we expect to recognize approximately $49.6 million as revenue in 2020, $28.2 million in 2021, and the remaining $14.7 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.

Contract Assets and Liabilities

The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

Unbilled services include revenues recognized for services performed but not yet billed to clients. Services performed that we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval in performance-based engagements, must occur are recorded as contract assets and included within unbilled services, net. The contract asset balance as of March 31, 2020 and December 31, 2019 was $12.4 million and $12.6 million, respectively. The $0.2 million decrease primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.

Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition policy. Our deferred revenues balance as of March 31, 2020 and December 31, 2019, was $30.0 million and $28.4 million, respectively. The $1.6 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 months ended March 31, 2020, $14.4 million of revenues recognized were included in the deferred revenue balance as of December 31, 2019.

6. 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, outstanding common stock options, convertible senior notes, and outstanding warrants, to the extent dilutive. In periods for which we report a net loss from continuing operations, diluted weighted average common shares outstanding excludes all potential common stock equivalents as their impact on diluted net loss from continuing operations per share would be anti-dilutive.

Earnings (loss) per share under the basic and diluted computations are as follows:



	Three Months Ended March 31,
	2020			2019
Net income (loss) from continuing operations	$	(42,273	)	$	3,350
Income (loss) from discontinued operations, net of tax	(35		)	(46		)
Net income (loss)	$	(42,308	)	$	3,304

Weighted average common shares outstanding – basic	21,827			21,868
Weighted average common stock equivalents	—			443
Weighted average common shares outstanding – diluted	21,827			22,311

Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	(1.94	)	$	0.15
Income (loss) from discontinued operations, net of tax	—			—
Net income (loss)	$	(1.94	)	$	0.15

Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	(1.94	)	$	0.15
Income (loss) from discontinued operations, net of tax	—			—
Net income (loss)	$	(1.94	)	$	0.15

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~Earnings (loss) per share under the basic and diluted computations are as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income (loss) from continuing operations $ 4,132
$ 12,288
$ (141,195 ) $ 35,293
Income (loss) from discontinued operations, net of tax 238
4
690
(1,830 )
Net income (loss) $ 4,370
$ 12,292
$ (140,505 ) $ 33,463

Weighted average common shares outstanding – basic 21,505
21,076
21,413
21,084
Weighted average common stock equivalents 117
369
—
343
Weighted average common shares outstanding – diluted 21,622
21,445
21,413
21,427

Net earnings per basic share:

Net income (loss) from continuing operations $ 0.19
$ 0.58
$ (6.59 ) $ 1.67
Income (loss) from discontinued operations, net of tax 0.01
—
0.03
(0.08 )
Net income (loss) $ 0.20
$ 0.58
$ (6.56 ) $ 1.59

Net earnings per diluted share:
Net income (loss) from continuing operations $ 0.19
$ 0.57
$ (6.59 ) $ 1.65
Income (loss) from discontinued operations, net of tax 0.01
—
0.03
(0.09 )
Net income (loss) $ 0.20
$ 0.57
$ (6.56 ) $ 1.56

The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above were as follows:



	As of March 31,
	2020	2019
Unvested restricted stock awards	992	12
Outstanding common stock options	86	—
Convertible senior notes	—	3,129
Warrants related to the issuance of convertible senior notes	3,129	3,129
Total anti-dilutive securities	4,207	6,270

As of September 30,
2017 2016
Unvested restricted stock awards 627
5
Outstanding common stock options

194
—
Convertible senior notes 3,129
3,129
Warrants related to the issuance of convertible senior notes 3,129
3,129
Total anti-dilutive securities 7,079
6,263

See Note 87 “Financing Arrangements” for further information on the convertible senior notes and warrants related to the issuance of convertible notes.

~~As of September 30, 2017, we had~~We currently have a share repurchase program ~~authorized by our board of directors, pursuant~~permitting us to ~~which we may, from time to time,~~ repurchase up to $125 million of our common stock through October 31, ~~2017~~2020 (the “Share Repurchase Program”). ~~During the fourth quarter of 2017, our board of directors authorized an extension of the Share Repurchase Program through October 31, 2018.~~ The amount and timing of the repurchases will be determined by management and will 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. In the first quarter of 2020, we repurchased and retired 313,998 shares for $20.9 million. The 313,998 shares repurchased and retired in the first quarter of 2020 were included as a reduction to our basic weighted average shares outstanding for the quarter ended March 31, 2020 based on the trade date of the share repurchase. Additionally, in the first quarter of 2020, we settled the repurchase of 18,000 shares for $1.2 million that were accrued as of December 31, 2019. These shares were reflected as a reduction to our basic weighted average shares outstanding in the fourth quarter of 2019 based on the trade date of the share repurchase. No shares were repurchased during the first ~~nine~~three months of ~~2017. In the first quarter of 2016, we repurchased and retired 982,192 shares for $55.3 million. No shares were repurchased in the second or third quarter of 2016.~~2019. As of ~~September 30, 2017, $35.1~~March 31, 2020, less than $0.1 million remains available for share repurchases.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

8.7. Financing Arrangements

A summary of the carrying amounts of our debt follows:



	March 31, 2020			December 31, 2019
Senior secured credit facility	$	448,000		$	205,000
Promissory note due 2024	3,722			3,853
Total long-term debt	$	451,722		$	208,853
Current maturities of long-term debt	(533		)	(529		)
Long-term debt, net of current portion	$	451,189		$	208,324

September 30, 2017 December 31, 2016
1.25% convertible senior notes due 2019 $ 230,834
$ 224,065
Senior secured credit facility 139,000
68,000
Promissory note due 2024 4,991
—
Total long-term debt $ 374,825
$ 292,065
Current maturities of debt⁽¹⁾
(497 ) —
Long-term debt, net of current portion $ 374,328
$ 292,065


~~(1)~~	~~The current maturities of debt are included as a component of accrued expenses and other current liabilities on our consolidated balance sheets.~~

Below is a summary of the scheduled remaining principal payments of our debt as of ~~September 30, 2017.~~March 31, 2020.



	Principal Payments of Long-Term Debt
2020	$	398
2021	$	544
2022	$	559
2023	$	575
2024	$	449,646

Principal Payments of Long-Term Debt
2017 $ 123
2018 $ 501
2019 $ 250,515
2020 $ 139,529
2021 $ 544
Thereafter $ 2,779

Convertible Notes

In September 2014, the Company issued $250 million principal amount of 1.25% convertible senior notes due 2019 (the “Convertible Notes”) in a private offering. The Convertible Notes ~~are~~were governed by the terms of an indenture between the Company and U.S. Bank National Association, as Trustee (the “Indenture”). The Convertible Notes ~~are~~were senior unsecured obligations of the Company and ~~will pay~~paid interest semi-annually on April 1 and October 1 of each year at an annual rate of 1.25%. ~~The Convertible Notes will mature on October 1, 2019, unless earlier repurchased by the Company or converted~~

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in ~~accordance with their terms.~~thousands, except per share amounts)

~~Upon~~(Unaudited)

Prior to maturity, upon conversion, the Convertible Notes ~~will be~~would have been settled, at our election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. Our ~~current~~ intent and policy iswas to settle conversions with a combination of cash and shares of common stock with the principal amount of the Convertible Notes paid in cash, in accordance with the settlement provisions of the Indenture.

The initial conversion rate for the Convertible Notes is 12.5170 shares of our common stock per $1,000 principal amount of the Convertible Notes, which is equal to an initial conversion price of approximately $79.89 per share of our common stock. The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest, except in certain limited circumstances described in the Indenture. Upon the occurrence of a “make-whole fundamental change” (as defined in the Indenture) the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change. Additionally, if the Company undergoes a “fundamental change” (as defined in the Indenture), a holder will have the option to require the Company to repurchase all or a portion of its Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes being repurchased plus any accrued and unpaid interest. As discussed below, the convertible note hedge transactions and warrants, which were entered into in connection with the Convertible Notes, effectively raise the price at which economic dilution would occur from the initial conversion price of approximately $79.89 to approximately $97.12 per share.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Holders of the Convertible Notes may convert their Convertible Notes at their option at any time prior to July 1, 2019, only under the following circumstances:~~

during any calendar quarter (and only during such calendar quarter) commencing after December 31, 2014 if, for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including, the last trading day of the immediately preceding calendar quarter, the last reported sale price of the Company’s common stock for such trading day is equal to or greater than 130% of the applicable conversion price on such trading day;

during the five consecutive business day period immediately following any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which, for each trading day of the measurement period, the “trading price” (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for such trading day was less than 98% of the product of the last reported sale price of the Company’s common stock for such trading day and the applicable conversion rate on such trading day; or

~~upon the occurrence of specified corporate transactions described in the Indenture.~~

On or after July 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or a portion of its Convertible Notes, regardless of the foregoing circumstances.

~~We have~~issuance, we separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was determined by measuring the fair value of a similar liability that does not have an associated convertible feature, assuming our non-convertible debt borrowing rate. The carrying value of the equity component representing the conversion option, which iswas recognized as a debt discount, was determined by deducting the fair value of the liability component from the proceeds of the Convertible Notes. The debt discount iswas amortized to interest expense using an effective interest rate of 4.751% over the term of the Convertible Notes. ~~As of September 30, 2017, the remaining life of the Convertible Notes is 2.0 years.~~ The equity component ~~will~~was not be remeasured as ~~long as~~ it ~~continues~~continued to meet the conditions for equity classification.

The transaction costs related to the issuance of the Convertible Notes were separated into liability and equity components based on their relative ~~values, as determined above.~~values. Transaction costs attributable to the liability component ~~are~~were recorded as a deduction to the carrying amount of the liability and amortized to interest expense over the term of the Convertible Notes; and transaction costs attributable to the equity component ~~are~~were netted with the equity component of the Convertible Notes in stockholders’ equity. ~~Total debt issuance costs were approximately $7.3 million, of which $6.2 million was allocated to liability issuance costs and $1.1 million was allocated to equity issuance costs.~~

~~As of September 30, 2017 and December 31, 2016, the Convertible Notes consisted of the following:~~

September 30, 2017 December 31, 2016
Liability component:
Proceeds $ 250,000
$ 250,000
Less: debt discount, net of amortization (16,666 ) (22,520 )
Less: debt issuance costs, net of amortization (2,500 ) (3,415 )
Net carrying amount $ 230,834
$ 224,065
Equity component ⁽¹⁾
$ 39,287
$ 39,287


~~(1)~~	~~Included in additional paid-in capital on the 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)~~

The following table presents the amount of interest expense recognized related to the Convertible Notes for the ~~periods~~period presented.



	Three Months Ended March 31, 2019
Contractual interest coupon	$	781
Amortization of debt discount	2,120
Amortization of debt issuance costs	315
Total interest expense	$	3,216

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Contractual interest coupon $ 781
$ 781
$ 2,344
$ 2,344
Amortization of debt discount 1,974
1,883
5,853
5,582
Amortization of debt issuance costs 306
302
915
900
Total interest expense $ 3,061
$ 2,966
$ 9,112
$ 8,826

In connection with the issuance of the Convertible Notes, we entered into convertible note hedge transactions and warrant transactions. The convertible note hedge transactions ~~are~~were intended to reduce the potential future economic dilution associated with the conversion of the Convertible Notes and, combined with the warrants, effectively ~~raise~~raised the price at which economic dilution would occur from the initial conversion price of approximately $79.89 to approximately $97.12 per share. For purposes of the computation of diluted earnings per share in accordance with GAAP, dilution will occur when the average share price of our common stock for a given period exceeds the conversion price of the Convertible Notes, which initially is equal to approximately $79.89 per share. The convertible note hedge transactions ~~and warrant transactions are discussed separately below.~~

~~Convertible Note Hedge Transactions~~. In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge transactions whereby the Company has call options to purchase a total of approximately 3.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the Convertible Notes in full, at a price of approximately $79.89, which corresponds to the initial conversion price of the Convertible Notes, subject to customary anti-dilution adjustments substantially similar to thoseexpired in the ~~Convertible Notes.~~third quarter of 2019. The convertible note hedge transactions are exercisable upon conversion of the Convertible Notes and will expire in 2019 if not earlier exercised. We paid an aggregate amount of $42.1 million for the convertible note hedge transactions, which was recorded as additional paid-in capital on the consolidated balance sheets. The convertible note hedge transactions are separate transactions and are not part of the terms of the Convertible Notes.

~~Warrants.~~ ~~In connection with the issuance of the Convertible Notes, the Company sold warrants whereby the~~ holders of the warrants have the option to purchase aan initial total of approximately 3.1 million shares of the Company’s common stock at a strike price of approximately $97.12. The warrants ~~will expire~~are expiring incrementally on 100 different dates from January 6, 2020 to May 28, 2020 and are exercisable at each such expiry date. If the average market value per share of our common stock for the reporting period exceeds the strike price of the warrants, the warrants will have a dilutive effect on our earnings per share. ~~We received aggregate proceeds of $23.6 million from the sale of the warrants, which was recorded as additional paid-in capital on the consolidated balance sheets.~~ The warrants are separate transactions and are not part of the terms of the Convertible Notes or the convertible note hedge transactions.

The Company recorded an initial deferred tax liability of $15.4 million in connection with the debt discount associated with the Convertible Notes and recorded an initial deferred tax asset of $16.5 million in connection with the convertible note hedge transactions. The deferred tax liability and deferred tax asset are included in deferred income taxes, net on the consolidated balance sheets.

Senior Secured Credit Facility

The Company has a ~~$500~~$600 million ~~five-year~~ senior secured revolving credit facility, subject to the terms of a Second Amended and Restated Credit Agreement dated as of March 31, 2015, as amended to date (as amended and modified the "Amended Credit ~~Facility"~~Agreement"), that becomes due and payable in full upon maturity on ~~March 31, 2020.~~September 27, 2024. The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount of up to ~~$100~~$150 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 ~~$600~~$750 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, acquisitions of businesses, share repurchases, and general corporate purposes.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

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, two, three or six-month LIBOR or an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between ~~1.25%~~1.125% per annum and ~~2.00%~~1.875% per annum, in the case of LIBOR borrowings, or between ~~0.25%~~0.125% per annum and ~~1.00%~~0.875% per annum, in the case of base rate loans, based upon our Consolidated Leverage Ratio at such time.

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 a requirement to pay all amounts outstanding under the Amended Credit Agreement 90 days prior to the Convertible Indebtedness Maturity Date (as defined in the Amended Credit Agreement) unless (1) the Convertible Indebtedness Maturity Date is waived or extended to a later date, (2) the Company can demonstrate (a) Liquidity (as defined in the Amended Credit Agreement) inupon an amount at least equal to the principal amount due on the Convertible Indebtedness Maturity Date, and (b) financial covenant compliance after giving effect to such payments and any additional indebtedness incurred on a pro forma basis, or (3) this requirement is waived by the Required LendersEvent 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.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The loans and obligations under the Amended Credit Agreement are secured pursuant to a Second Amended and Restated Security Agreement and a Second Amended and Restated Pledge Agreement ~~(the~~(as amended, 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).

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) ~~ranging from 3.25~~of 3.75 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 ~~to 3.75 to 1.00, depending on~~upon the ~~measurement period,~~occurrence of certain transactions, and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.50 to 1.00. Consolidated EBITDA for purposes of the financial covenants is calculated on a continuing operations basis and includes adjustments to add back ~~share-based compensation costs,~~ non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, ~~and~~ pro forma historical EBITDA for businesses ~~acquired.~~acquired, and other specified items in accordance with the Amended Credit Agreement. At ~~September 30, 2017,~~March 31, 2020, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of ~~3.52~~3.48 to 1.00 and a Consolidated Interest Coverage Ratio of ~~12.60~~15.13 to 1.00.

Borrowings outstanding under the Amended Credit Agreement at ~~September 30, 2017~~March 31, 2020 totaled ~~$139.0~~$448.0 million. These borrowings carried a weighted average interest rate of ~~3.4%~~2.3%, including the effect of the interest rate ~~swap~~swaps described in Note 109 “Derivative Instruments and Hedging Activity." Borrowings outstanding under the Amended Credit Agreement at December 31, ~~2016~~2019 were ~~$68.0~~$205.0 million and carried a weighted average interest rate of ~~2.5%.~~3.0%, including the effect of the interest rate swap outstanding at the time and described in Note 9 “Derivative Instruments and Hedging Activity." 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, 2017,~~March 31, 2020, we had outstanding letters of credit totaling ~~$2.7~~$1.6 million, which are primarily used as security deposits for our office facilities. As of ~~September 30, 2017,~~March 31, 2020, the unused borrowing capacity under the revolving credit facility was ~~$358.3~~$150.4 million.

Promissory Note due 2024

On June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $5.1 million. The principal balance of the promissory note is subject to scheduled monthly principal payments until the maturity date of March 1, 2024, at which time a final payment of $1.5 million, plus any accrued and unpaid interest, will be due. Under the terms of the promissory note, we will pay interest on the outstanding principal amount at a rate of ~~one-month~~one month LIBOR plus 1.97% per annum. The obligations under the promissory note are secured pursuant to a Loan and Aircraft Security Agreement with Banc of America Leasing & Capital, LLC, which grants the lender a first priority security interest in the aircraft. At ~~September 30, 2017,~~March 31, 2020, the outstanding principal amount of the promissory note was ~~$5.0 million. As of September 30, 2017,~~$3.7 million, and the aircraft had a carrying amount of ~~$6.6~~$4.9 million. At December 31, 2019, the outstanding principal amount of the promissory note was $3.9 million, and the aircraft had a carrying amount of $5.1 million.

8. Restructuring Charges

Restructuring charges for the first three months of 2020 totaled $1.6 million, compared to $1.3 million for the first three months of 2019. The $1.6 million restructuring charge incurred in the first quarter of 2020 related to a $1.2 million accrual for the termination of a third-party advisor agreement, $0.3 million related to workforce reductions to better align resources with market demand, and $0.1 million related to workforce reductions in our corporate operations. During the first quarter of 2019, we exited a portion of our Lake Oswego, Oregon corporate office resulting in a $0.7 million lease impairment charge on the related operating lease right-of-use asset and leasehold improvements and $0.2 million of accelerated depreciation on furniture and fixtures in that office. Additionally, we recognized a $0.2 million restructuring charge related to workforce reductions in our corporate operations.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~9. Restructuring Charges~~

Restructuring charges for the three and nine months ended September 30, 2017 totaled $1.3 million and $5.3 million, respectively. The $1.3 million charge incurred in the third quarter of 2017 primarily related to the accrual of remaining lease obligations, net of estimated sublease income, due to relocating our San Francisco office to a smaller space and consolidating our New York offices in the third quarter of 2017, and accelerated depreciation on leasehold improvements for our San Francisco office. The $5.3 million of restructuring charges incurred in the first nine months of 2017 primarily consisted of $2.5 million related to the accrual of remaining lease obligations, net of estimated sublease income, due to relocating our San Francisco office to a smaller space and consolidating our Chicago and New York offices in the first nine months of 2017, and accelerated depreciation on leasehold improvements for our San Francisco office, $2.0 million related to workforce reductions in our Healthcare segment to better align our resources with market demand, and $0.4 million related to workforce reductions in our corporate operations primarily to adjust our infrastructure to align with the decreased workforce in the Healthcare segment.

Restructuring charges for the three and nine months ended September 30, 2016 totaled $1.0 million and $4.1 million, respectively. The $1.0 million charge incurred in the third quarter of 2016 primarily related to updated lease assumptions of our Washington, D.C. space vacated in the fourth quarter of 2014. The $4.1 million of restructuring charges incurred in the first nine months of 2016 primarily consisted of $1.5 million related to updated assumptions for lease accruals for the Washington, D.C. space vacated in the fourth quarter of 2014, $1.2 million related to workforce reductions in our Healthcare segment to better align resources with market demand, $0.9 million related to workforce reductions in our corporate operations as we adjusted our infrastructure to align with our Huron Legal divestiture, and $0.2 million related to the wind down of our foreign consulting operations based in the Middle East.

The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the ~~nine~~three months ended ~~September 30, 2017.~~

March 31, 2020.


	Employee Costs			Office Space Reductions			Other			Total			Employee Costs			Office Space Reductions		Other			Total
Balance as of December 31, 2016	$	5,182		$	5,773		$	24		$	10,979
Balance as of December 31, 2019													$	68		$	91	$	—		$	159
Additions ⁽¹⁾	2,889			2,445			110			5,444			411			—		1,188			1,599
Payments	(7,226		)	(2,047		)	5			(9,268		)	(473		)	—		(67		)	(540		)
Adjustments⁽¹⁾	(117		)	(1,087		)	(78		)	(1,282		)	8			—		—			8
Non-cash items	(46		)	(119		)	(61		)	(226		)
Balance as of September 30, 2017	$	682		$	4,965		$	—		$	5,647
Balance as of March 31, 2020													$	14		$	91	$	1,121		$	1,226


~~(1)~~	~~Additions and adjustments for the nine months ended September 30, 2017 include a restructuring gain of $1.1~~ The $0.1 million related to updated lease assumptions for vacated office spaces directly related to discontinued operations. Refer to Note 4 "Discontinued Operations" for additional information on our discontinued operations.

~~As of September 30, 2017, our~~ restructuring charge liability related to office space reductions of $5.0 million represented the present value of remaining lease payments, net of estimated sublease income, primarily for our vacated office spaces in Washington, D.C., Houston, San Francisco, and Chicago. This restructuring charge liabilityat March 31, 2020 is included as a component of accrued expenses and other current liabilities and deferred compensation and other liabilities. ~~All of the $0.7 million~~The restructuring charge liability related to employee costs at ~~September 30, 2017~~March 31, 2020 is expected to be paid in the next 12 ~~months. The restructuring charge liability related to employee costs~~months and is included as a component of accrued payroll and related benefits. The $1.1 million restructuring charge liability related to the termination of a third-party advisor agreement at March 31, 2020 is expected to be paid over the next 34 months and is included as a component of accrued expenses and other current liabilities and deferred compensation and other liabilities.

~~10.~~9. Derivative Instruments and Hedging Activity

On April 4, 2013, we entered into a forward amortizing interest rate swap agreement effective March 31, 2014 which ended August 31, 2017. We entered into this derivative instrument to hedge against the interest rate risks of our variable-rate borrowings. The swap had an initial notional amount of $60.0 million and amortized quarterly until April 2016. In April 2016, the notional amount of this interest rate swap increased to $86.0 million and continued to amortize quarterly until it expired in August 2017. Under the terms of the interest rate swap agreement, we received from the counterparty interest on the notional amount based on one-month LIBOR and we paid to the counterparty a fixed rate of 0.985%.

~~Table of Contents~~

~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

On June 22, 2017, we entered into a forward interest rate swap agreement effective August 31, 2017 and ending August 31, 2022, with a notional amount of $50.0 million. We entered into this derivative instrument ~~to continue~~ to hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on ~~one-month~~one month LIBOR and we pay to the counterparty a fixed rate of 1.900%.

On January 30, 2020, we entered into a forward interest rate swap agreement effective December 31, 2019 and ending December 31, 2024, with a notional amount of $50.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.500%.

On March 16, 2020, we entered into a forward interest rate swap agreement effective February 28, 2020 and ending February 28, 2025, with a notional amount of $100.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 0.885%.

We recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. We have designated these derivative instruments as cash flow hedges. Therefore, changes in the fair value of the derivative instruments are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified into interest expense upon settlement. The ineffective portion of the change in fair value of the derivative instruments is recognized in interest expense. Our interest rate swap agreement was effective during the three and nine months ended September 30, 2017. As of ~~September 30, 2017,~~March 31, 2020, it was anticipated that ~~$0.1~~$1.4 million of the losses, net of tax, currently recorded in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

The table below sets forth additional information relating to ~~our~~the interest rate swaps designated as a cash flow hedging instrument as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.



	Fair Value (Derivative Asset and Liability)
Balance Sheet Location	March 31, 2020		December 31, 2019
Accrued expenses and other current liabilities	$	1,156	$	159
Deferred compensation and other liabilities	$	1,666	$	387

Fair Value (Derivative Asset and Liability)
Balance Sheet Location September 30,
2017 December 31,
2016
Other non-current assets $ 141
$ —
Accrued expenses $ 200
$ 54

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 on our consolidated balance sheet.

~~We do not use derivative instruments for trading or other speculative purposes. Refer to Note 12 “Other Comprehensive Income (Loss)” for additional information on our derivative instrument.~~

2012

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~11.~~We do not use derivative instruments for trading or other speculative purposes. Refer to Note 11 “Other Comprehensive Income (Loss)” for additional information on our derivative instruments.

10. 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 Inputs		Quoted 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 Inputs		Unobservable 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, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.



	Level 1		Level 2		Level 3		Total
March 31, 2020
Assets:
Convertible debt investment	$	—	$	—	$	62,194	$	62,194
Deferred compensation assets	—		24,220		—		24,220
Total assets	$	—	$	24,220	$	62,194	$	86,414
Liabilities:
Interest rate swaps	$	—	$	2,822	$	—	$	2,822
Total liabilities	$	—	$	2,822	$	—	$	2,822
December 31, 2019
Assets:
Convertible debt investment	—		—		49,542		49,542
Deferred compensation assets	—		27,445		—		27,445
Total assets	$	—	$	27,445	$	49,542	$	76,987
Liabilities:
Interest rate swap	$	—	$	546	$	—	$	546
Total liabilities	$	—	$	546	$	—	$	546

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.

Convertible debt investment: In 2014 and 2015, we invested $27.9 million, in the form of zero coupon convertible debt (the "initial convertible

notes"), 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. In the first quarter of 2020, we invested an additional $13.0 million, in the form of 1.69% convertible debt with a senior liquidation preference to the initial convertible notes (the "additional convertible note"); and amended our initial convertible notes to include a coupon rate of 1.69% and extend the maturity date to January 17, 2024, which coincides with the maturity date of the additional convertible note.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

Level 1 Level 2 Level 3 Total
September 30, 2017
Assets:
Promissory note $ —
$ —
$ 2,311
$ 2,311
Convertible debt investment —
—
31,937
31,937
Deferred compensation assets —
17,170
—
17,170
Total assets $ —
$ 17,170
$ 34,248
$ 51,418
Liabilities:
Interest rate swap $ —
$ 59
$ —
$ 59
Contingent consideration for business acquisitions —
—
22,469
22,469
Total liabilities $ —
$ 59
$ 22,469
$ 22,528
December 31, 2016
Assets:
Promissory note $ —
$ —
$ 2,325
$ 2,325
Convertible debt investment —
—
34,675
34,675
Deferred compensation assets —
16,408
—
16,408
Total assets $ —
$ 16,408
$ 37,000
$ 53,408
Liabilities:
Interest rate swap $ —
$ 54
$ —
$ 54
Contingent consideration for business acquisitions —
—
8,827
8,827
Total liabilities $ —
$ 54
$ 8,827
$ 8,881

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.

The investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive

income. We estimate the fair value of our investment using a scenario-based approach in the form of a hybrid analysis that consists of a Monte Carlo simulation model and an expected return analysis. The conclusion of value for our investment is based on the probability weighted assessment of both scenarios. The hybrid analysis utilizes certain assumptions including the assumed holding period through the maturity date of January 17, 2024, 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 26%, and the concluded equity volatility of 42.5%, all of which are Level 3 inputs. The valuation of our investment as of December 31, 2019 takes into consideration the equity value indication as well as the dilutive impact of the convertible debt issued by Shorelight in the first quarter of 2020, the terms of which were known or knowable as of December 31, 2019. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the investment, which would result in different impacts to our consolidated balance sheet and comprehensive income. Actual results may differ from our estimates. The fair value of the convertible debt investment is recorded in long-term investments on our consolidated balance sheets.

The table below sets forth the changes in the balance of the convertible debt investment for the three months ended March 31, 2020.



	Convertible Debt Investment
Balance as of December 31, 2019	$	49,542
Purchases	13,000
Change in fair value of convertible debt investment	(348		)
Balance as of March 31, 2020	$	62,194

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 on our consolidated balance ~~sheet.~~sheets. Realized and unrealized gains (losses) from the deferred compensation assets are recorded to other income (expense), net in our consolidated statements of operations.

Financial assets and liabilities not recorded at fair value are as follows:

~~Table of Contents~~Preferred Stock Investment

~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

~~Interest rate swaps:~~ ~~The fair values of our interest rate swaps were derived using estimates to settle~~In 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 discount rates reflecting the risks involved.

~~Promissory note: As part of the consideration received for the sale of our Accounting Advisory practice on December 30, 2011, we received a $3.5 million promissory note payable over four years. During the second~~fourth quarter of 2014, we agreed to amend and restate the note such that principal payments will be paid to us annually based on the amount of excess cash flows earned each year by the maker of the note until the maturity date of December 31, 2018, at which time the remaining principal balance and any accrued interest is due. The fair value of the note is based on the net present value of the projected cash flows using a discount rate of 17%, which accounts for the risks associated with the note. This fair value measurement is based on significant inputs not observable in the market and thus represent Level 3 inputs. As of September 30, 2017, $0.2 million is recorded in prepaid expenses and other current assets and represents the present value of the payments expected to be received in the next 12 months, and the remaining $2.1 million is recorded in other non-current assets.

~~The table below sets forth the changes in the balance of the promissory note for the nine months ended September 30, 2017.~~

Promissory Note
Balance as of December 31, 2016 $ 2,325
Interest payments received (140 )
Principal payment received (177 )
Change in fair value of promissory note 303
Balance as of September 30, 2017 $ 2,311

~~Convertible debt investment:~~ ~~In 2014 and 2015,~~2019, we invested ~~$27.9~~$5.0 million, in the form of ~~zero coupon convertible debt,~~preferred stock, in ~~Shorelight Holdings, LLC (“Shorelight”~~Medically Home Group, Inc. ("Medically Home"), ~~the parent company of Shorelight Education,~~ 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 notes will mature on July 1, 2020, unless converted earlier.

healthcare technology-enabled services company. To determine the appropriate accounting treatment for our investment, we performed a ~~variable interest entity (“VIE”)~~VIE analysis and concluded that ~~Shorelight~~Medically Home does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the ~~convertible notes are~~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 ~~available-for-sale debt security.~~

~~The~~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 ~~fair value with unrealized holding gains~~cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in Medically Home. On a quarterly basis, we review the information available to determine whether an orderly and ~~losses excluded from earnings~~observable transaction for the same or similar equity instrument occurred, and ~~reported in other comprehensive income. We estimated~~remeasure the fair value of ~~our investment~~the preferred stock using a Monte Carlo simulation model, cash flow projections discounted at a risk-adjusted rate, and certain assumptions related to equity volatility, default probability, and recovery rate, all of which are Level 3 inputs. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the investment, which would result in different impacts to our consolidated balance sheet and comprehensive income. Actual results may differ from our estimates. The fair value of the convertible debt investment is recorded in long-term investment.

~~The table below sets forth the~~such identified transactions, with changes ~~in the balance of the convertible debt investment for the nine months ended September 30, 2017.~~

Convertible Debt Investment
Balance as of December 31, 2016 $ 34,675
Change in fair value of convertible debt investment (2,738 )
Balance as of September 30, 2017 $ 31,937

~~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 achieved 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~~recorded in consolidated statement of operations. Following our ~~contingent~~purchase, there has been no impairment, nor any observable price changes to our investment.

2214

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and discount rates, which typically reflect a risk-free rate. 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. Refer to Note 5 “Acquisitions” for information on the acquisitions completed in 2017. The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the nine months ended September 30, 2017.

Contingent Consideration for Business Acquisitions
Balance as of December 31, 2016 $ 8,827
Acquisitions 15,489
Payments (1,938 )
Remeasurement of contingent consideration for business acquisitions (222 )
Unrealized loss due to foreign currency translation 313
Balance as of September 30, 2017 $ 22,469

~~Financial assets and liabilities not recorded at fair value are as follows:~~

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 87 “Financing Arrangements” for additional information on our senior secured credit facility.

Promissory Note due 2024

The carrying value of our promissory note due 2024 is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the promissory note bears interest at rates based on current market rates as set forth in the terms of the promissory note. Refer to Note 87 “Financing Arrangements” for additional information on our promissory note due 2024.

~~Convertible Notes~~

~~The carrying amount~~Cash and ~~estimated fair value of the Convertible Notes are as follows:~~

September 30, 2017 December 31, 2016

Carrying
Amount

Estimated
Fair Value
Carrying
Amount Estimated
Fair Value
1.25% convertible senior notes due 2019 $ 230,834
$ 233,595
$ 224,065
$ 245,018

~~The differences between the $250 million principal amount of the Convertible Notes~~Cash Equivalents and the carrying amounts shown above represent the unamortized debt discount and issuance costs. As of September 30, 2017 and December 31, 2016, the carrying value of the equity component of $39.3 million was unchanged from the date of issuance. Refer to Note 8 “Financing Arrangements” for additional information on our Convertible Notes. The estimated fair value of the Convertible Notes was determined based on the quoted bid price of the Convertible Notes in an over-the-counter market, which is a Level 2 input, on the last day of trading for the quarters ended September 30, 2017 and December 31, 2016.

~~Based on the closing price of our common stock of $34.30 on September 30, 2017, the if-converted value of the Convertible Notes was less than the principal amount.~~

~~Table of Contents~~

~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

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.

~~12.~~11. Other Comprehensive Income (Loss)

The ~~tables~~table below ~~set~~sets forth the components of other comprehensive income (loss), net of tax, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.



	Three Months Ended March 31, 2020								Three Months Ended March 31, 2019
	Before Taxes			Tax (Expense) Benefit		Net of Taxes			Before Taxes			Tax (Expense) Benefit			Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(779	)	$	—	$	(779	)	$	316		$	—		$	316
Unrealized gain (loss) on investment	$	(348	)	$	90	$	(258	)	$	3,609		$	(952	)	$	2,657
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(2,272	)	$	590	$	(1,682	)	$	(247	)	$	65		$	(182	)
Reclassification adjustments into earnings	(4		)	1		(3		)	(74		)	19			(55		)
Net unrealized gain (loss)	$	(2,276	)	$	591	$	(1,685	)	$	(321	)	$	84		$	(237	)
Other comprehensive income (loss)	$	(3,403	)	$	681	$	(2,722	)	$	3,604		$	(868	)	$	2,736

Three Months Ended
September 30, 2017 Three Months Ended
September 30, 2016
Before
Taxes Tax
(Expense)
Benefit Net of
Taxes Before
Taxes Tax
(Expense)
Benefit Net of
Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments $ 609
$ —
$ 609
$ 50
$ —
$ 50
Unrealized loss on investment $ (3,609 ) $ 1,409
$ (2,200 ) $ (3,329 ) $ 1,291
$ (2,038 )
Unrealized gain (loss) on cash flow hedges:
Change in fair value $ 41
$ (16 ) $ 25
$ 96
$ (35 ) $ 61
Reclassification adjustments into earnings (3 ) 1
(2 ) 101
(41 ) 60
Net unrealized gain $ 38
$ (15 ) $ 23
$ 197
$ (76 ) $ 121
Other comprehensive income (loss) $ (2,962 ) $ 1,394
$ (1,568 ) $ (3,082 ) $ 1,215
$ (1,867 )

Nine Months Ended
September 30, 2017 Nine Months Ended
September 30, 2016

Before
Taxes

Tax
(Expense)
Benefit

Net of
Taxes

Before
Taxes

Tax
(Expense)
Benefit

Net of
Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments $ 1,835
$ —
$ 1,835
$ 52
$ —
$ 52
Unrealized loss on investment $ (2,738 ) $ 1,069
$ (1,669 ) $ (1,899 ) $ 736
$ (1,163 )
Unrealized gain (loss) on cash flow hedges:
Change in fair value $ (41 ) $ 16
$ (25 ) $ (367 ) $ 146
$ (221 )
Reclassification adjustments into earnings 36
(15 ) 21
323
(129 ) 194
Net unrealized loss $ (5 ) $ 1
$ (4 ) $ (44 ) $ 17
$ (27 )
Other comprehensive income (loss) $ (908 ) $ 1,070
$ 162
$ (1,891 ) $ 753
$ (1,138 )

The before tax amounts reclassified from accumulated other comprehensive income related to our cash flow hedges are recorded to interest expense, net of interest income.

Accumulated other comprehensive income, net of tax, includes the following components:



	Foreign Currency Translation			Available-for-Sale Investment			Cash Flow Hedges			Total
Balance, December 31, 2019	$	(566	)	$	15,882		$	(380	)	$	14,936
Current period change	(779		)	(258		)	(1,685		)	(2,722		)
Balance, March 31, 2020	$	(1,345	)	$	15,624		$	(2,065	)	$	12,214

Foreign Currency
Translation
Available-for-Sale Investment Cash Flow Hedges Total
Balance, December 31, 2016 $ (453 ) $ 4,088
$ (20 ) $ 3,615
Current period change 1,835
(1,669 ) (4 ) 162
Balance, September 30, 2017 $ 1,382
$ 2,419
$ (24 ) $ 3,777

12. Income Taxes

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback periods and technical corrections to tax depreciation methods for qualified improvement property. As a result of the enactment of this legislation during the first quarter of 2020, we recorded a tax

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~13. Income Taxes~~benefit of $0.8 million related to the remeasurement of a portion of our income tax receivable due to the ability to apply the federal net operating loss incurred in 2018 to prior year income for a refund at a higher tax rate in the carryback period.

For the three months ended ~~September 30, 2017,~~March 31, 2020, our effective tax rate was ~~(92.4)%~~21.0% as we recognized an income tax benefit from continuing operations of $2.0 million on income from continuing operations of $2.1 million. For the third quarter of 2016, our effective tax rate was 37.2% as we recognized income tax expense from continuing operations of $7.3 million on income from continuing operations of $19.6 million. The effective tax rate for the three months ended September 30, 2017 was more favorable than the statutory rate, inclusive of state income taxes, primarily due to recognizing a $2.7 million tax benefit related to a previously unrecognized tax benefit from our "check-the-box" election made in 2014 to treat one of our wholly-owned foreign subsidiaries as a disregarded entity for U.S federal income tax purposes. This benefit was partially offset by $0.6 million of tax expense recorded in the third quarter of 2017 to correct an error that occurred in the second quarter of 2017. During the third quarter of 2017, we also recorded a $3.1 million adjustment to decrease deferred income taxes, net and increase income tax receivable on our consolidated balance sheet to correct an error that occurred in the second quarter of 2017. These errors have no impact on full year 2017 results, and we concluded that the impact of both errors was not material to the second and third quarter financial statements. The effective tax rate for the three months ended September 30, 2016 was lower than the statutory rate, inclusive of state income taxes, primarily due to non-taxable income, valuation allowance reductions, and certain credits and deductions, partially offset by non-deductible business expenses.

~~For the nine months ended September 30, 2017, our effective tax rate was 26.1% as we recognized income tax benefit from continuing operations of $49.7~~$11.2 million on a loss from continuing operations of ~~$190.9 million. For the nine months ended September 30, 2016, our effective tax rate was 35.6% as we recognized income tax expense of $19.5 million on income from continuing operations of $54.8~~$53.5 million. The effective tax rate ~~for the nine months ended September 30, 2017~~of 21.0% was less favorable than the statutory rate, inclusive of state income taxes, of 26.0% primarily due to certain nondeductible expense items, non-deductible losses on our investments used to fund our deferred compensation liability, and the ~~$61.2 million non-deductible~~nondeductible portion of the goodwill impairment ~~charge~~charges recorded induring the ~~second~~first quarter of ~~2017, as well as $1.8 million of discrete tax expense for share-based compensation related to the adoption of ASU 2016-09~~ ~~Improvements to Employee Share-Based Payment Accounting. Refer to Note 3 "New Accounting Pronouncements" for additional information on the adoption of ASU 2016-09.~~2020. These unfavorable ~~discrete~~ items were partially offset by a ~~$2.7 million~~discrete tax benefit ~~recorded~~for share-based compensation awards that vested during the quarter and the discrete tax benefit for the remeasurement of a portion of our income tax receivable as a result of the enactment of the CARES Act in the ~~third~~first quarter of ~~2017 related to a previously unrecognized~~2020.

For the three months ended March 31, 2019, our effective tax ~~benefit~~rate was 29.0% as we recognized income tax expense from ~~our 2014 "check-the-box" election.~~continuing operations of $1.4 million on income from continuing operations of $4.7 million. The effective tax rate ~~for the nine months ended September 30, 2016~~of 29.0% was ~~lower~~less favorable than the statutory rate, inclusive of state income taxes, of 26.4% primarily due to ~~the year-to-date impact of a discrete favorable adjustment to our state~~foreign losses with no tax ~~rate in the second quarter of 2016, non-taxable income, valuation allowance reductions, certain credits~~benefit and ~~deductions, and~~disallowed executive compensation deductions. These unfavorable items were partially offset by a discrete tax benefit ~~related to~~for share-based compensation ~~partially offset by non-deductible business expenses.~~

Asawards that vested during the first quarter of ~~September 30, 2017, we had $0.8 million of unrecognized tax benefits which would affect the effective tax rate of continuing operations if recognized.~~2019.

~~14.~~13. 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 that, in the current opinion of management, could 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 ~~$2.7~~$1.6 million and ~~$4.8~~$1.7 million were outstanding at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively, primarily 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, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the total estimated fair value of our contingent consideration ~~liabilities~~liability was ~~$22.5 million and $8.8 million, respectively.~~zero.

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

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

action or proceedings, as it relates to their services to us if such person acted in good faith. Although there is no limit on the amount of indemnification, we may have recourse against our insurance carrier for certain payments made.

~~15.~~14. 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~~3 operating segments, which are our reportable segments: Healthcare, ~~Education, and Business Advisory.~~

During the second quarter of 2017, we reorganized our internal financial reporting structure, which management uses to assess performance and allocate resources, by moving our Life Sciences practice from the Education and Life Sciences segment to the Business Advisory, ~~segment. The remaining Education~~ and Life Sciences segment is now referred to as the Education segment. While our consolidated results have not been impacted, we have restated our historical segment information for consistent presentation.Education.

Healthcare

Our Healthcare segment ~~provides advisory services - from strategy setting through implementation -~~has a depth of expertise in ~~the areas of organizational and resource alignment, clinical transformation,~~ financial and operational ~~performance, patient~~improvement, care transformation, culture and ~~caregiver engagement,~~organizational excellence, strategy, and technology ~~implementation~~ and ~~optimization.~~analytics. We serve national and regional hospitals, ~~and~~ integrated health systems, academic medical centers, community hospitals, and medical groups. Our solutions help clients evolve and adapt to the rapidly changing healthcare environment and achieve growth, optimize performance, enhance profitability, improve quality and clinical outcomes, align leaders, improve organizational culture, and drive physician, patient, and employee engagement across the ~~enterprise.~~enterprise to deliver better consumer outcomes.

~~Education~~

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

We help organizations transform and innovate their delivery model to focus on patient wellness by improving quality outcomes, minimizing care variation and fundamentally improving patient and population health. Our ~~Education segment provides management consulting and technology solutions to higher education institutions and academic medical centers. We~~consultants partner with clients to ~~address challenges relating~~help build and sustain today’s business to ~~business~~invest in the future by reducing complexity, improving operational efficiency and growing market share. We enable the healthcare of the future by identifying, integrating and optimizing technology ~~strategy, financial management, operational~~investments to collect data that transforms care delivery and improves patient outcomes. We also develop future leaders capable of driving meaningful cultural and organizational ~~effectiveness, research administration,~~change and regulatory compliance. Our institutional strategy, market research, budgeting and financial management, business operations and student lifecycle management solutions align missions with business priorities, improve quality and reduce costs institution-wide. Our technology strategy, enterprise applications, and analytic solutionswho transform ~~and optimize operations, deliver time and cost savings, and enhance~~ the ~~student~~consumer experience. Our research enterprise solutions assist clients in identifying and implementing institutional research strategy, optimizing clinical research operations, improving financial management and cost reimbursement, improving service to faculty, and mitigating risk compliance.

Business Advisory

Our Business Advisory segment provides services to large and middle market ~~and large organizations, not-for-profit~~ organizations, lending institutions, law firms, investment banks, ~~and~~ private equity ~~firms.~~firms, and not-for-profit organizations, including higher education and healthcare institutions. We assist clients in a broad range of industries and across the spectrum from healthy, well-capitalized companies to organizations in transition, as well as creditors, equity owners, and other key constituents. Our Enterprise Solutions and Analytics experts advise, deliver, and optimize technology and analytic solutions that enable organizations to manage and optimize their financial performance, operational efficiency, and client or stakeholder experience. Our Business Advisory ~~professionals~~experts resolve complex business issues and enhance client enterprise value through a suite of services including capital advisory, transaction advisory, operational improvement, restructuring and turnaround, valuation, and dispute advisory. Our Enterprise Solutions and Analytics professionals deliver technology and analytic solutions that enable organizations to manage and optimize their financial performance, operational efficiency, and client or stakeholder experience. Our expertise in full-service enterprise performance management (EPM), enterprise resource planning (ERP), business intelligence and analytics, customer relationship management (CRM), and data management services helps clients identify and execute on business and technology strategies to drive results and gain a competitive advantage. Our Strategy and Innovation professionals collaborate with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Our Life Sciences professionals providestrategic

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Tabular amounts in thousands, except per share amounts)~~

~~(Unaudited)~~

solutions to help pharmaceutical, medical device, and biotechnology companies deliver more value to patients, payers, and providers, and comply with regulations.

Education

Our Education segment provides consulting and technology solutions to higher education institutions and academic medical centers. We collaborate with clients to address challenges relating to business and technology strategy, financial and operational excellence, student success, research administration, and regulatory compliance. Our research enterprise solutions assist clients in identifying and implementing institutional research strategy, optimizing clinical research operations, improving financial management and cost reimbursement, improving service to faculty, and mitigating risk compliance. Our technology strategy, enterprise applications, and analytic solutions transform and optimize operations, deliver time and cost savings, and enhance the student experience. Our institutional strategy, budgeting and financial management, and business operations align missions with business priorities, improve quality, and reduce costs institution-wide. Our student solutions improve attraction, retention and graduation rates, increase student satisfaction and help generate quality outcomes.

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Unallocated corporate costs include 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 costs for corporate office support, certain office facility costs, costs relating to accounting and finance, human resources, legal, marketing, information technology, and ~~Company-wide~~company-wide business development functions, as well as costs related to overall corporate management.

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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, 2017~~March 31, 2020 and ~~2016,~~2019, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.



	Three Months Ended March 31,
	2020			2019
Healthcare:
Revenues	$	95,578		$	93,682
Operating income	$	24,050		$	27,851
Segment operating income as a percentage of segment revenues	25.2		%	29.7		%
Business Advisory:
Revenues	$	64,905		$	58,806
Operating income	$	9,842		$	9,581
Segment operating income as a percentage of segment revenues	15.2		%	16.3		%
Education:
Revenues	$	62,136		$	51,957
Operating income	$	13,116		$	12,618
Segment operating income as a percentage of segment revenues	21.1		%	24.3		%
Total Company:
Revenues	$	222,619		$	204,445
Reimbursable expenses	19,303			18,617
Total revenues and reimbursable expenses	$	241,922		$	223,062

Segment operating income	$	47,008		$	50,050
Items not allocated at the segment level:
Other operating expenses	27,146			36,578
Litigation and other gains	(150		)	(456		)
Depreciation and amortization	6,047			7,172
Goodwill impairment charges¹	59,816			—
Other expense, net	7,637			2,041
Income (loss) from continuing operations before taxes	$	(53,488	)	$	4,715

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Healthcare:
Revenues $ 79,582
$ 103,425
$ 261,261
$ 323,531
Operating income $ 25,778
$ 38,824
$ 83,580
$ 119,229
Segment operating income as a percentage of segment revenues 32.4 % 37.5 % 32.0 % 36.9 %
Education:
Revenues $ 41,422
$ 38,621
$ 127,629
$ 111,816
Operating income $ 7,762
$ 10,896
$ 31,772
$ 31,474
Segment operating income as a percentage of segment revenues 18.7 % 28.2 % 24.9 % 28.1 %
Business Advisory:
Revenues $ 55,372
$ 41,354
$ 157,753
$ 112,801
Operating income $ 12,832
$ 8,608
$ 34,890
$ 23,275
Segment operating income as a percentage of segment revenues 23.2 % 20.8 % 22.1 % 20.6 %
Total Company:
Revenues $ 176,376
$ 183,400
$ 546,643
$ 548,148
Reimbursable expenses 17,982
19,093
55,862
54,636
Total revenues and reimbursable expenses $ 194,358
$ 202,493
$ 602,505
$ 602,784

Segment operating income $ 46,372
$ 58,328
$ 150,242
$ 173,978
Items not allocated at the segment level:
Other operating expenses 29,448
26,502
92,643
84,595
Other losses (gains), net 880
494
(222 ) 494
Depreciation and amortization 9,946
8,092
28,549
23,064
Goodwill impairment charge ⁽¹⁾
—
—
209,600
—
Other expense, net 3,950
3,687
10,607
11,034
Income (loss) from continuing operations before income tax expense $ 2,148
$ 19,553
$ (190,935 ) $ 54,791


(1)	The goodwill impairment ~~charge is~~charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

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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 billing arrangements, employee types, and timing of revenue recognition, including a reconciliation of the disaggregated revenues to revenues from our three operating segments for the three months ended March 31, 2020 and 2019.



	Three Months Ended March 31, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	55,785	$	25,393	$	13,175	$	94,353
Time and expense	14,733		37,589		43,711		96,033
Performance-based	18,921		646		—		19,567
Software support, maintenance and subscriptions	6,139		1,277		5,250		12,666
Total	$	95,578	$	64,905	$	62,136	$	222,619

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	65,445	$	61,957	$	53,436	$	180,838
Revenue generated by full-time equivalents	30,133		2,948		8,700		41,781
Total	$	95,578	$	64,905	$	62,136	$	222,619

Timing of Revenue Recognition
Revenue recognized over time	$	94,459	$	64,905	$	62,022	$	221,386
Revenue recognized at a point in time	1,119		—		114		1,233
Total	$	95,578	$	64,905	$	62,136	$	222,619



	Three Months Ended March 31, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	63,584	$	21,672	$	12,383	$	97,639
Time and expense	12,763		35,309		35,358		83,430
Performance-based	11,810		664		—		12,474
Software support, maintenance and subscriptions	5,525		1,161		4,216		10,902
Total	$	93,682	$	58,806	$	51,957	$	204,445

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	64,818	$	57,094	$	46,007	$	167,919
Revenue generated by full-time equivalents	28,864		1,712		5,950		36,526
Total	$	93,682	$	58,806	$	51,957	$	204,445

Timing of Revenue Recognition
Revenue recognized over time	$	91,642	$	58,806	$	51,711	$	202,159
Revenue recognized at a point in time	2,040		—		246		2,286
Total	$	93,682	$	58,806	$	51,957	$	204,445

(1)

Full-time billable consultants consist of our full-time professionals who provide consulting services to our clients and are billable to our clients based on the number of hours worked. Full-time equivalent professionals consist of leadership coaches and their support staff within our Healthcare Leadership solution, consultants who work variable schedules as needed by our clients, and full-time employees who provide software support and maintenance services to our clients.

At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, no single client accounted for greater than 10% of our combined balance of receivables from clients, net and unbilled services, ~~balances.~~net. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, no single client generated greater than 10% of our consolidated revenues.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Huron,” “Company,” “we,” “us” and “our” refer to Huron Consulting Group Inc. and its subsidiaries.

Statements in this Quarterly Report on Form 10-Q that are not historical in nature, including those concerning the Company’s current expectations about its future ~~requirements and needs,~~results, are “forward-looking” statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) 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 our current expectations about our 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~~“Risk Factors,"” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 and under Part II, Item 1A. "Risk Factors" in this Quarterly Report on Form 10-Q, 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. We disclaim any obligation to update or revise any forward-looking statements as a result of new information or future events, or for any other reason.

OVERVIEW

Our Business

Huron is a global ~~professional services firm committed~~consultancy that collaborates with clients to ~~achieving~~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 ~~in partnership with clients. We bring a depth of expertise in strategy, technology, operations, advisory services, and analytics to drive lasting and measurable results in~~for the ~~healthcare, higher education, life sciences and commercial sectors. Through focus, passion and collaboration,~~organizations we ~~provide guidance and solutions to support organizations as they contend with the changes transforming their industries and businesses.~~serve.

We provide professional services through three operating segments: Healthcare, ~~Education,~~Business Advisory, and ~~Business Advisory.~~Education.

•Healthcare

~~Education~~

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Business Advisory

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through a suite of services including capital advisory, transaction advisory, operational improvement, restructuring and ~~analytics, customer relationship management (CRM),~~turnaround, valuation, and ~~data management services helps clients identify and execute on business and technology strategies to drive results and gain a competitive advantage.~~dispute advisory. Our Strategy and Innovation professionals collaborate with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Our Life Sciences professionals providestrategic solutions to help pharmaceutical, medical device, and biotechnology companies deliver more value to patients, payers, and providers, and comply with regulations.

~~Segment Reorganization~~Education

~~During~~Our Education segment provides consulting and technology solutions to higher education institutions and academic medical centers. We collaborate with clients to address challenges relating to business and technology strategy, financial and operational excellence, student success, research administration, and regulatory compliance. Our research enterprise solutions assist clients in identifying and implementing institutional research strategy, optimizing clinical research operations, improving financial management and cost reimbursement, improving service to faculty, and mitigating risk compliance. Our technology strategy, enterprise applications, and analytic solutions transform and optimize operations, deliver time and cost savings, and enhance the ~~second~~student experience. Our institutional strategy, budgeting and financial management, and business operations align missions with business priorities, improve quality, and reduce costs institution-wide. Our student solutions improve attraction, retention and graduation rates, increase student satisfaction and help generate quality outcomes.

Huron is a Platinum level member of the Oracle PartnerNetwork, an Oracle Cloud Premier Partner within North America, a Gold level consulting partner with Salesforce.com and a Workday Services Partner.

Coronavirus (COVID-19)

The worldwide spread of coronavirus (COVID-19) in the first quarter of ~~2017,~~2020 has created significant volatility, uncertainty and disruption to the global economy. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our clients, employees and business partners. In response to the pandemic, many state and local governments have issued shelter-in-place mandates; and companies, including Huron, have implemented work from home policies and travel restrictions. While traditionally a majority of the work performed by our revenue-generating professionals occurs at client sites, the nature of the services we ~~reorganized~~provide allows for our ~~internal~~revenue-generating professionals to continue to serve clients in a remote work environment. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expect it to have an unfavorable impact on sales and business development activities and full year 2020 results. However, given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our consolidated operations and overall financial ~~reporting structure,~~performance is uncertain at this time.

In each of our segments, we are working closely with our clients to support them and to provide relevant services to address their needs caused by the COVID-19 pandemic. However, some of the services we provide may be considered by our clients to be more discretionary in nature and the COVID-19 pandemic is expected to have a negative impact on the demand for those services. In addition, conditions in the financial markets could limit our access to further capital resources, if needed, and could increase borrowing costs. In order to support our liquidity during the COVID-19 pandemic, we are proactively taking measures to increase available cash on hand including, but not limited to, borrowing under our senior secured credit facility and reducing discretionary operating and capital spending. To further support our liquidity, we have elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through the end of the year, which ~~management uses~~we expect to ~~assess performance~~pay in equal installments in the fourth quarters of 2021 and ~~allocate resources,~~2022, as provided for under the CARES Act.

The services provided by ~~moving~~ our ~~Life Sciences practice from the Education~~Strategy and Innovation and Life Sciences segment to the Business Advisory segment. The remaining Education and Life Sciences segment is now referred to as the Education segment. While our consolidated results have not been impacted, we have restated our historical segment information for consistent presentation.

~~Acquisitions~~

~~ADI Strategies, Inc. (International)~~

On April 1, 2017, we completed our acquisition of the international assets of ADI Strategies, Inc. ("ADI Strategies") in Dubai and India. We acquired the U.S. assets of ADI Strategies in the second quarter of 2016. ADI Strategies is a leading enterprise performance management, risk management and business intelligence firm. The acquisition strengthens our technology and analytics competencies and expands our global reach. The international results of operations of ADI Strategies have been included in our consolidated financial statements and results of operations ofreporting units within our Business Advisory segment ~~from~~focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities and may be considered by our clients to be more discretionary in nature. As discussed above, the ~~date~~COVID-19 pandemic is expected to have an unfavorable impact on the demand for those services. Based on our internal projections and the preparation of ~~acquisition.~~

~~Innosight Holdings, LLC~~

~~On March 1, 2017, we completed~~ our acquisition of Innosight Holdings, LLC ("Innosight"), a growth strategy firm focused on helping companies navigate disruptive change, enable innovation, and manage strategic transformation. Together with Innosight, we use our strategic, operational, and technology capabilities to help clients across multiple industries develop pioneering solutions to address disruption and achieve sustained growth. Innosight's results of operations have been included in our consolidated financial statements for the quarter ended March 31, 2020, and ~~results~~considering the expected decrease in demand due to the COVID-19 pandemic, we believed that the fair value of ~~operations~~these two reporting units may no longer exceed their carrying values and performed an interim goodwill impairment test on both reporting units. Based on the estimated fair values of the Strategy and Innovation and Life Sciences reporting units, we recorded non-cash pretax goodwill impairment charges of $49.9 million and $9.9 million, respectively. We did not identify any indicators that would lead us to believe that the fair values of our Healthcare, Education, and Business Advisory ~~segment from~~reporting units may not exceed their carrying values. See the ~~date of acquisition.~~

~~Pope Woodhead~~"Critical Accounting Policies" section below and ~~Associates Limited~~

~~On January 9, 2017, we completed our acquisition of Pope Woodhead~~Note 4 "Goodwill and ~~Associates Limited ("Pope Woodhead"), a U.K.-based consulting firm providing market access capabilities~~Intangible Assets" within the notes to assist clients in developing value propositions for innovative medicines and technologies. The acquisition expands our life sciences strategy expertise and strengthens our ability to lead clients through complex payer and regulatory environments. Pope Woodhead's results of operations have been included in our consolidated financial statements and results of operations of our Business Advisory segment from the date of acquisition.

~~See Note 5 "Acquisitions" within~~ our consolidated financial statements for ~~further~~additional information ~~regarding~~on the charges and evaluations performed.

See Part II, Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q for additional information on the potential impact the COVID-19 pandemic could have on our ~~recent acquisitions.~~

~~Divestiture~~

~~Life Sciences Compliance~~business, operations and ~~Operations~~

During the second quarter of 2017, we divested our Life Sciences Compliance and Operations practice ("Life Sciences C&O"), which was part of our broader Life Sciences practice within the Business Advisory segment. The sale of Life Sciences C&O did not meet the criteria for reporting separately as discontinued operations.

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financial results.

How We Generate Revenues

A large portion of our revenues is generated by our full-time consultants who provide consulting services to our clients and are billable to our clients based on the number of hours worked. A smaller portion of our revenues is generated by our other professionals, also referred to as full-time equivalents, some of whom work variable schedules as needed by our clients. Full-time equivalent professionals consist of our ~~cultural transformation consultants~~coaches and their

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support staff from our ~~Studer Group~~Culture and Organizational Excellence solution, ~~which include coaches and their support staff, specialized finance and operational~~ consultants who work variable schedules as needed by our clients, employees who provide managed services in our Healthcare segment, and our employees who provide software support and maintenance services to our clients. We translate the hours that these other professionals work on client engagements into a full-time equivalent measure that we use to manage our business. We refer to our full-time consultants and other professionals collectively as revenue-generating professionals.

Revenues generated by our full-time consultants are primarily driven by the number of consultants we employ and their utilization rates, as well as the billing rates we charge our clients. Revenues generated by our other professionals, or full-time equivalents, are largely dependent on the number of consultants we employ, their hours worked, and billing rates charged. Revenues generated by our coaches are largely dependent on the number of coaches we employ and the total value, scope, and terms of the consulting contracts under which they provide services, which are primarily fixed-fee contracts. Revenues generated by our Managed Services solution are dependent on the total value, scope and terms of the related contracts.

We generate our revenues from providing professional services under four types of billing arrangements: fixed-fee (including software license revenue)~~, time-and-expense, performance-based,~~; time-and-expense; performance-based; and software support, ~~and~~ maintenance and subscriptions.

In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. ~~In these engagements, it~~It is the client’s expectation in these engagements that the pre-established fee will not be exceeded except in mutually agreed upon circumstances. We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed ~~to date~~to-date versus our estimates of the total services to be provided under the engagement. Contracts within our ~~Studer Group~~Culture and Organizational Excellence solution ~~are~~include fixed-fee partner contracts with multiple ~~deliverables,~~performance obligations, which primarily consist of coaching services, as well as speaking engagements, conferences, ~~materials~~publications and software products (“Partner Contracts”). Revenues for coaching services and software products are generally recognized on a straight-line basis over the length of the contract. All other revenues under Partner Contracts, including speaking engagements, conferences and publications, are recognized at the time the ~~service is~~goods or services are provided.

Fixed-fee arrangements also include software licenses for our revenue cycle management software and research administration and compliance software. Licenses for our revenue cycle management software are sold only as a component of our consulting projects, and the services we provide are essential to the functionality of the software. Therefore, revenues from these software licenses are recognized over the term of the related consulting services contract. License revenue from our research administration and compliance software is generally recognized in the month in which the software is delivered.

Fixed-fee engagements represented ~~46.5%~~42.4% and ~~44.5%~~47.8% of our revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and 45.9% and 48.5% of our revenues for the nine months ended September 30, 2017 and 2016,~~2019, respectively.

Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-generating professionals at agreed upon rates. Time-and-expense arrangements also include certain speaking engagements, conferences and publications purchased by our clients outside of Partner Contracts within our ~~Studer Group~~Culture and Organizational Excellence solution. We recognize revenues under time-and-expense billing arrangements as the related services or publications are provided. Time-and-expense engagements represented ~~43.9%~~43.1% and ~~42.2%~~40.8% of our revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and 44.4% and 37.6% of our revenues for the nine months ended September 30, 2017 and 2016,~~2019, respectively.

In performance-based fee billing arrangements, fees are tied to the attainment of contractually defined objectives. We enter into performance-based engagements in essentially two forms. First, we generally earn fees that are directly related to the savings formally acknowledged by the client as a result of adopting our recommendations for improving operational and cost effectiveness in the areas we review. Second, we have performance-based engagements in which we earn a success fee when and if certain predefined outcomes occur. Often, performance-based fees supplement our time-and-expense or fixed-fee engagements. We ~~do not~~ recognize revenues under performance-based billing arrangements ~~until all related~~by estimating the amount of variable consideration that is probable of being earned and recognizing that estimate over the length of the contract using a proportionate performance ~~criteria are met.~~approach. Performance-based fee revenues represented ~~4.0%~~8.8% and ~~8.2%~~6.1% of our revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, respectively. The level of performance-based fees earned may vary based on our clients' risk sharing preferences and ~~4.4% and 9.1%~~the mix of our revenues for the nine months ended September 30, 2017 and 2016, respectively. Performance-based fee engagements may cause significant variations in quarterly revenues and operating results depending on the timing of achieving the performance-based criteria.services we provide.

Clients that have purchased one of our software licenses can pay an annual fee for software support and maintenance. We also generate subscription revenue from our cloud-based analytic tools and solutions. Software support, ~~and~~ maintenance and subscription revenues are recognized ratably over the support or subscription ~~period, which ranges from one to three years.~~period. These fees are generally billed in advance and included in deferred revenues until recognized. Software support, ~~and~~ maintenance and subscription revenues represented

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~~5.6%~~ 5.7% and ~~5.1%~~5.3% of our revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and 5.3% and 4.8% of our revenues for the nine months ended September 30, 2017 and 2016,~~2019, respectively.

Our quarterly results are impacted principally by our full-time consultants’ utilization rate, the bill rates we charge our clients, and the number of our revenue-generating professionals who are available to ~~work, and the amount of performance-based fees recognized, which often vary significantly between quarters.~~work. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that results in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. For example, during the third and fourth quarters of the year, vacations taken by our clients can result in the deferral of activity on existing and new engagements, which would negatively affect our utilization rate. The number of business work days is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business work days available in the fourth quarter of the year, which can impact revenues during that period.

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Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. Moreover, our clients typically retain us on an engagement-by-engagement basis, rather than under long-term recurring contracts. The volume of work performed for any particular client can vary widely from period to period.

Business Strategy, Opportunities and Challenges

Our primary strategy is to meet the needs of our clients by providing a balanced portfolio of service offerings and capabilities so that we can adapt quickly and effectively to emerging opportunities in the marketplace. To achieve this, we continue to hire highly qualified professionals and have entered into select acquisitions of complementary businesses.

To expand our business, we will remain focused on growing our existing relationships and developing new relationships, executing our managing director compensation plan to attract and retain senior practitioners, continuing to promote and provide an integrated approach to service delivery, broadening the scope of our existing services, and acquiring complementary businesses. We will regularly evaluate the performance of our practices to ensure our investments meet these objectives. Furthermore, we intend to enhance our visibility in the marketplace by refining our overarching messaging and value propositions for the organization as well as each practice. We will continue to focus on reaching our client base through clear, concise, and endorsed messages.

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RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected segment and consolidated operating results and other operating data. ~~The results~~



Segment and Consolidated Operating Results (in thousands, except per share amounts):	Three Months Ended March 31,
	2020			2019
Healthcare:
Revenues	$	95,578		$	93,682
Operating income	$	24,050		$	27,851
Segment operating income as a percentage of segment revenues	25.2		%	29.7		%
Business Advisory:
Revenues	$	64,905		$	58,806
Operating income	$	9,842		$	9,581
Segment operating income as a percentage of segment revenues	15.2		%	16.3		%
Education:
Revenues	$	62,136		$	51,957
Operating income	$	13,116		$	12,618
Segment operating income as a percentage of segment revenues	21.1		%	24.3		%
Total Company:
Revenues	$	222,619		$	204,445
Reimbursable expenses	19,303			18,617
Total revenues and reimbursable expenses	$	241,922		$	223,062
Statements of Operations reconciliation:
Segment operating income	$	47,008		$	50,050
Items not allocated at the segment level:
Other operating expenses	27,146			36,578
Litigation and other gains	(150		)	(456		)
Depreciation and amortization	6,047			7,172
Goodwill impairment charges ⁽¹⁾	59,816			—
Operating income (loss)	(45,851		)	6,756
Other expense, net	(7,637		)	(2,041		)
Income (loss) from continuing operations before taxes	(53,488		)	4,715
Income tax expense (benefit)	(11,215		)	1,365
Net income (loss) from continuing operations	$	(42,273	)	$	3,350
Earnings (loss) per share from continuing operations:
Basic	$	(1.94	)	$	0.15
Diluted	$	(1.94	)	$	0.15

Table of ~~operations for acquired businesses have been included in our results of operations since the date of their respective acquisition.~~Contents

During the second quarter of 2017, we reorganized our internal financial reporting structure by moving our Life Sciences practice from the Education and Life Sciences segment to the Business Advisory segment. The remaining Education and Life Sciences segment is now referred to as the Education segment. While our consolidated results have not been impacted, we have restated our historical segment information for consistent presentation.

Segment and Consolidated Operating Results
(in thousands, except per share amounts):
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Healthcare:
Revenues $ 79,582
$ 103,425
$ 261,261
$ 323,531
Operating income $ 25,778
$ 38,824
$ 83,580
$ 119,229
Segment operating income as a percentage of segment revenues 32.4 % 37.5 % 32.0 % 36.9 %
Education:
Revenues $ 41,422
$ 38,621
$ 127,629
$ 111,816
Operating income $ 7,762
$ 10,896
$ 31,772
$ 31,474
Segment operating income as a percentage of segment revenues 18.7 % 28.2 % 24.9 % 28.1 %
Business Advisory:
Revenues $ 55,372
$ 41,354
$ 157,753
$ 112,801
Operating income $ 12,832
$ 8,608
$ 34,890
$ 23,275
Segment operating income as a percentage of segment revenues 23.2 % 20.8 % 22.1 % 20.6 %
Total Company:
Revenues $ 176,376
$ 183,400
$ 546,643
$ 548,148
Reimbursable expenses 17,982
19,093
55,862
54,636
Total revenues and reimbursable expenses $ 194,358
$ 202,493
$ 602,505
$ 602,784

Segment operating income $ 46,372
$ 58,328
$ 150,242
$ 173,978
Items not allocated at the segment level:
Other operating expenses 29,448
26,502
92,643
84,595
Other losses (gains), net 880
494
(222 ) 494
Depreciation and amortization 9,946
8,092
28,549
23,064
Goodwill impairment charge ⁽¹⁾
—
—
209,600
—
Total operating income (loss) 6,098
23,240
(180,328 ) 65,825
Other expense, net (3,950 ) (3,687 ) (10,607 ) (11,034 )
Income (loss) from continuing operations before income tax expense 2,148
19,553
(190,935 ) 54,791
Income tax expense (benefit) (1,984 ) 7,265
(49,740 ) 19,498
Net income (loss) from continuing operations $ 4,132
$ 12,288
$ (141,195 ) $ 35,293
Earnings (loss) per share from continuing operations:
Basic $ 0.19
$ 0.58
$ (6.59 ) $ 1.67
Diluted $ 0.19
$ 0.57
$ (6.59 ) $ 1.65

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	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
Other Operating Data:	2017			2016			2017			2016			2020			2019
Number of full-time billable consultants (at period end) ⁽²⁾:
Healthcare	761			1,010			761			1,010			892			836
Business Advisory													916			864
Education	536			466			536			466			791			649
Business Advisory	830			545			830			545
Total	2,127			2,021			2,127			2,021			2,599			2,349
Average number of full-time billable consultants (for the period) ⁽²⁾:
Healthcare	741			984			805			1,005			897			819
Business Advisory													920			839
Education	527			447			497			425			778			631
Business Advisory	779			530			710			465
Total	2,047			1,961			2,012			1,895			2,595			2,289
Full-time billable consultant utilization rate ⁽³⁾:
Healthcare	80.3		%	77.0		%	76.6		%	78.6		%	71.6		%	78.6		%
Business Advisory													71.5		%	73.1		%
Education	70.9		%	68.0		%	73.6		%	71.2		%	76.2		%	76.4		%
Business Advisory	72.9		%	73.5		%	73.4		%	72.4		%
Total	75.0		%	73.9		%	74.7		%	75.3		%	72.9		%	75.9		%
Full-time billable consultant average billing rate per hour ⁽⁴⁾:
Healthcare	$	190		$	203		$	200		$	209		$	228		$	224
Business Advisory ⁽⁵⁾													$	198		$	200
Education	$	210		$	220		$	215		$	217		$	188		$	204
Business Advisory	$	197		$	203		$	195		$	216
Total	$	197		$	207		$	202		$	212
Total ⁽⁵⁾													$	204		$	210
Revenue per full-time billable consultant (in thousands):
Healthcare	$	69		$	73		$	211		$	231		$	73		$	79
Business Advisory													$	67		$	68
Education	$	69		$	72		$	226		$	224		$	69		$	73
Total													$	70		$	73
Average number of full-time equivalents (for the period) ⁽⁶⁾:
Healthcare													278			223
Business Advisory	$	67		$	72		$	212		$	229		20			8
Total	$	68		$	72		$	215		$	229
Average number of full-time equivalents (for the period) ⁽⁵⁾:
Healthcare	214			204			215			201
Education	35			40			36			37			60			36
Business Advisory	26			25			21			19
Total	275			269			272			257			358			267
Revenue per full-time equivalent (in thousands):
Healthcare	$	134		$	156		$	427		$	456		$	108		$	129
Business Advisory													$	149		$	206
Education	$	138		$	158		$	419		$	436		$	144		$	166
Business Advisory	$	108		$	126		$	342		$	335
Total	$	132		$	154		$	420		$	444		$	117		$	137


(1)	The non-cash goodwill impairment ~~charge is~~charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.


(2)	Consists of our full-time professionals who provide consulting services and generate revenues based on the number of hours worked.


(3)	Utilization rate for our full-time billable consultants is calculated by dividing the number of hours ~~all of~~ our full-time billable consultants worked on client assignments during a period by the total available working hours for ~~all of~~ these consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days.


(4)	Average billing rate per hour for our full-time billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.


(5)	The Business Advisory segment includes operations of Huron Eurasia India. Absent the impact of Huron Eurasia India, the average billing rate per hour for the Business Advisory segment would have been $224 and $223 for the three months ended March 31, 2020 and 2019, respectively.

Absent the impact of Huron Eurasia India, Huron's consolidated average billing rate per hour would have been $213 and $218 for the three months ended March 31, 2020 and 2019, respectively.

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(6)

Consists of ~~cultural transformation consultants within our Studer Group solution, which include~~ coaches and their support staff within our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, employees who provide managed services in our Healthcare segment, and full-time employees who provide software support and maintenance services to our clients.

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Non-GAAP Measures

We also assess our results of operations using certain non-GAAP financial measures. These non-GAAP financial measures differ from GAAP because the non-GAAP financial measures we calculate to measure earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income ~~(loss)~~ from continuing operations, and adjusted diluted earnings ~~(loss)~~ per share from continuing operations exclude a number of items required by GAAP, each discussed below. These non-GAAP financial 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 GAAP. Our non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how we define our non-GAAP financial measures.

Our management uses the non-GAAP financial measures to gain an understanding of our comparative operating performance, for example 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 our ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing our business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. We believe 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 and in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results.

The reconciliations of these financial measures from GAAP to non-GAAP are as follows (in thousands, except per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenues	$	176,376		$	183,400		$	546,643		$	548,148		$	222,619		$	204,445
Net income (loss) from continuing operations	$	4,132		$	12,288		$	(141,195	)	$	35,293		$	(42,273	)	$	3,350
Add back:
Income tax expense (benefit)	(1,984		)	7,265			(49,740		)	19,498			(11,215		)	1,365
Interest expense, net of interest income	4,880			4,176			13,811			12,270			2,341			4,258
Depreciation and amortization	12,603			12,144			36,937			34,342			7,415			8,289
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA)	19,631			35,873			(140,187		)	101,403			(43,732		)	17,262
Add back:
Restructuring charges	1,347			1,049			5,295			4,129
Other losses (gains), net	880			494			(222		)	494
Goodwill impairment charge	—			—			209,600			—
Gain on sale of business	—			—			(931		)	—
Restructuring and other charges													2,458			1,275
Litigation and other gains													(150		)	(456		)
Goodwill impairment charges													59,816			—
Loss on sale of business													102			—
Foreign currency transaction losses (gains), net	(385		)	84			(449		)	(270		)	520			(82		)
Adjusted EBITDA	$	21,473		$	37,500		$	73,106		$	105,756		$	19,014		$	17,999
Adjusted EBITDA as a percentage of revenues	12.2		%	20.4		%	13.4		%	19.3		%	8.5		%	8.8		%

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	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Net income (loss) from continuing operations	$	4,132		$	12,288		$	(141,195	)	$	35,293		$	(42,273	)	$	3,350
Weighted average shares - diluted	21,622			21,445			21,413			21,427			21,827			22,311
Diluted earnings (loss) per share from continuing operations	$	0.19		$	0.57		$	(6.59	)	$	1.65		$	(1.94	)	$	0.15
Add back:
Amortization of intangible assets	8,834			8,771			26,432			24,369			3,209			4,517
Restructuring charges	1,347			1,049			5,295			4,129
Other losses (gains), net	880			494			(222		)	494
Goodwill impairment charge	—			—			209,600			—
Restructuring and other charges													2,458			1,275
Litigation and other gains													(150		)	(456		)
Goodwill impairment charges													59,816			—
Non-cash interest on convertible notes	1,974			1,883			5,853			5,582			—			2,120
Gain on sale of business	—			—			(931		)	—
Tax effect	(5,100		)	(4,794		)	(70,362		)	(13,588		)
Tax benefit related to "check-the-box" election	(2,748		)	—			(2,748		)	—
Loss on sale of business													102			—
Tax effect of adjustments													(13,409		)	(1,953		)
Total adjustments, net of tax	5,187			7,403			172,917			20,986			52,026			5,503
Adjusted net income from continuing operations	$	9,319		$	19,691		$	31,722		$	56,279		$	9,753		$	8,853
Adjusted weighted average shares - diluted	21,622			21,445			21,585			21,427
Weighted average shares - diluted													22,329			22,311
Adjusted diluted earnings per share from continuing operations	$	0.43		$	0.92		$	1.47		$	2.63		$	0.44		$	0.40

These non-GAAP financial measures include adjustments for the following items:

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from the calculation of adjusted net income from continuing operations presented above. Amortization of ~~intangibles~~intangible assets is inconsistent in its amount and frequency and is significantly affected by the timing and size of our acquisitions.

Restructuring and other charges: We have incurred charges due to the restructuring of various parts of our business. These restructuring charges have primarily consisted of costs associated with office space consolidations, including ~~the~~lease impairment charges and accelerated depreciation ~~of certain leasehold improvements,~~on lease-related property and equipment, and severance charges. Additionally, during the first quarter of 2020, we have excluded the effect of a $0.8 million one-time charge related to redundant administrative costs in our corporate operations which is recorded within selling, general and administrative expenses on our consolidated statement of operations. We have excluded the effect of the restructuring and other charges from our non-GAAP measures ~~because the amount of each restructuring charge is significantly affected by the timing and size of the restructured business or component of a business.~~

~~Other losses (gains), net:~~ ~~We have excluded the effects of remeasurement losses and gains related to contingent acquisition liabilities~~ to permit comparability with periods that were not impacted by these items.

Litigation and other gains: We have excluded the effects of the litigation settlement gain recognized in the first quarter of 2020 and the remeasurement gain recognized in the first quarter of 2019 to decrease the estimated fair value of our liabilities for contingent consideration payments related to business acquisitions to permit comparability with periods that were not impacted by these items.

Goodwill impairment ~~charge:~~charges: We have excluded the effect of the goodwill impairment ~~charge that occurred~~charges recognized in the ~~second~~first quarter of ~~2017~~2020 as ~~this is an~~these are infrequent ~~event~~events and ~~its~~their exclusion permits comparability with periods that were not impacted by such ~~charge.~~charges.

Non-cash interest on convertible notes: We ~~incur~~incurred non-cash interest expense relating to the implied value of the equity conversion component of our Convertible Notes. The value of the equity conversion component iswas treated as a debt discount and amortized to interest expense over the life of the Convertible Notes using the effective interest rate method. We exclude this non-cash interest expense that does not represent cash interest payments from the calculation of adjusted net income from continuing operations as management believes that this non-cash expense is not indicative of the ongoing performance of our business.

~~Gain~~Loss on sale of business:We ~~have~~ excluded the effect of the ~~gain~~loss on ~~the~~ sale of ~~Life Sciences C&O, as management believes that this one-time gain related to~~a software-based solution within our Business Advisory segment in the ~~divestiture~~first quarter of ~~a business is~~2020. Divestitures of businesses are infrequent and are not indicative of the ongoing performance of our business.

Foreign currency transaction losses (gains), net: We have excluded the effect of foreign currency transaction losses and gains from the calculation of adjusted EBITDA because the amount of each loss or gain is significantly affected by ~~timing and~~ changes in foreign exchange rates.

Tax ~~effect:~~effect of adjustments: The non-GAAP income tax adjustment reflects the incremental tax impact applicable to the non-GAAP adjustments.

~~Tax benefit related to "check-the-box" election:~~ We have excluded the effect of a tax benefit, recorded in the third quarter of 2017, from recognizing a previously unrecognized tax benefit from our "check-the-box" election made in 2014 to treat one of our wholly-owned foreign subsidiaries as a disregarded entity for U.S. federal income tax purposes. The exclusion of this discrete tax benefit permits comparability with periods that were not impacted by this item. Refer to Note 13 “Income Taxes” within the notes to the consolidated financial statements for additional information.

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Income tax expense, Interest expense, net of interest income, Depreciation and amortization: We have excluded the effects of income tax expense, interest expense, net of interest income, and depreciation and amortization in the calculation of EBITDA as these are customary exclusions as defined by the calculation of EBITDA to arrive at meaningful earnings from core operations excluding the effect of such items.

Adjusted weighted average shares - diluted:As we reported a net loss for the ~~nine~~first three months ~~ended September 30, 2017,~~of 2020, GAAP diluted weighted average shares outstanding equals the basic weighted average shares outstanding for that period. ~~For the nine months ended September 30, 2017, the~~The non-GAAP adjustments described above resulted in an adjusted

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net income from continuing ~~operations.~~operations for the first quarter of 2020. Therefore, we included the dilutive common stock equivalents in the calculation of adjusted diluted weighted average shares outstanding for that period.

Three Months Ended ~~September 30, 2017~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2019

Revenues

Revenues ~~decreased $7.0~~increased $18.2 million, or ~~3.8%~~8.9%, to ~~$176.4~~$222.6 million for the ~~third quarter~~first three months of ~~2017~~2020 from ~~$183.4~~$204.4 million for the ~~third quarter~~first three months of ~~2016. Third quarter 2017~~2019. Of the overall $18.2 million increase in revenues, ~~included $13.4~~$12.9 million ~~from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent~~was attributable to ~~the third quarter of 2016, as well as~~an increase in revenues from our ~~acquisition of the international assets of ADI Strategies, which was also completed subsequent to the third quarter of 2016~~full-time billable consultants and has since been fully integrated into the Business Advisory segment. Third quarter 2017 revenues also included an incremental $1.7 million of revenue from our acquisition of Healthcare Services Management, Inc. ("HSM Consulting"), which was completed mid-third quarter 2016.

~~Of the overall $7.0 million decrease in revenues,~~ $5.3 million was attributable to our full-time ~~equivalents and $1.7 million~~equivalents.

The increase in full-time billable consultant revenues was attributable to strengthened demand for services in all of our segments, as discussed below in Segment Results; and reflected an overall increase in the average number of full-time billable ~~consultants.~~consultants, partially offset by overall decreases in the consultant utilization rate and the average billing rate during the first three months of 2020 compared to the same prior year period.

The ~~decrease~~increase in full-time equivalent revenues was ~~primarily~~ attributable to ~~a decrease~~increases in ~~revenue from~~full-time equivalent revenues in all of our ~~Studer Group solution within our Healthcare segment and a decrease in license revenue in our Education segment~~segments, as discussed below in Segment ~~Results.~~

~~The decrease in full-time billable consultant revenues~~Results; and reflected ~~a decrease in the average billing rate for the third quarter of 2017, partially offset by increases~~an overall increase in the average number of ~~billable consultants and consultant utilization rate. As discussed below in Segment Results, this~~full-time equivalents, partially offset by an overall decrease in revenue ~~attributable~~per full-time equivalent.

While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expect it to ~~our full-time billable consultants reflected decreased~~have an unfavorable impact on sales and business development activities and full year 2020 results. Additionally, we expect a decrease in the demand for the services we provide that may be considered by our ~~services~~clients to be more discretionary in nature. However, given the ~~Healthcare segment, largely offset by~~dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our consolidated revenues ~~from our acquisitions of Innosight and Pope Woodhead, as well as strengthened demand for our services in the Business Advisory and Education segments.~~is uncertain at this time.

Total Direct Costs

Our total direct costs, including amortization of intangible assets and software development costs, increased ~~$4.0~~$18.7 million, or ~~3.6%~~13.4%, to ~~$116.4~~$157.5 million infor the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$112.4~~$138.9 million infor the three months ended ~~September 30, 2016.~~March 31, 2019. The ~~$4.0~~overall $18.7 million increase primarily related to a ~~$2.1~~$15.3 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by increased headcount ~~from acquisitions and~~in all our ~~ongoing cloud-based enterprise resource planning (ERP) investment, partially offset by~~segments; a decrease in salaries and related expenses in our Healthcare segment as a result of headcount reductions. Additional increases included a $1.1 million increase in contractor expense, a $0.9 million increase in signing and retention bonuses for our revenue-generating professionals, a $0.6 million increase in performance bonus expense for our revenue-generating professionals, and a $0.5$2.3 million increase in share-based compensation expense for our revenue-generating ~~professionals. All of these increases were partially offset by~~professionals; a ~~$1.4~~$1.2 million ~~decrease~~increase in ~~amortization of intangible assets.~~contractor expenses; and a $0.7 million increase in technology expenses. As a percentage of revenues, our total direct costs increased to ~~66.0%~~70.8% during the ~~third quarter~~first three months of ~~2017~~2020 compared to ~~61.3%~~67.9% during the ~~third quarter~~first three months of ~~2016,~~2019 primarily due to the ~~items described above.~~increases in salaries and related expenses and share-based compensation for our revenue-generating professionals, both as percentages of revenues, partially offset by a decrease in performance bonus expense for our revenue-generating professionals.

Total direct costs for the three months ended ~~September 30, 2017~~March 31, 2020 included ~~$2.7~~$1.3 million of amortization expense for ~~intangible assets, primarily representing customer contracts and software acquired in business combinations, and~~ internal software development costs and intangible assets, compared to ~~$4.1~~$1.1 million of amortization expense for the same prior year period. ~~The $1.4 million decrease in~~Intangible asset amortization expense was primarily attributable to the decreasing amortization expense of customer contracts acquired in our Studer Group acquisition, due to the accelerated basis of amortization. See Note 5 "Acquisitions" and Note 6 "Goodwill and Intangible Assets"included within ~~the notes to our consolidated financial statements for additional information about our intangible assets.~~

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~~Operating Expenses and Other Gains, Net~~

Selling, general and administrative expenses increased $3.3 million, or 8.7%, to $41.6 million in the third quarter of 2017 from $38.3 million in the third quarter of 2016. Selling, general and administrative expenses for the third quarter of 2017 included $3.9 million from Innosight and Pope Woodhead. The overall $3.3 million increase primarily related to a $1.9 million increase in salaries and related expenses for our support personnel, a $0.9 million increase in facilities and other office-related expenses, a $0.7 million increase in third-party consulting expenses, and a $0.5 million increase in travel related expenses, partially offset by a $1.1 million decrease in practice administration and meetings expenses. As a percentage of revenues, selling, general and administrative expenses increased to 23.6% during the third quarter of 2017 compared to 20.9% during the third quarter of 2016, primarily due to the items described above.

Restructuring charges for the third quarter of 2017 totaled $1.3 million, compared to $1.0 million for the third quarter of 2016. The $1.3 million charge incurred in the third quarter of 2017 primarily related to the accrual of remaining lease obligations, net of estimated sublease income, due to relocating our San Francisco office to a smaller space and consolidating our New York offices in the third quarter of 2017, and accelerated depreciation on leasehold improvements for our San Francisco office. The $1.0 million charge incurred in the third quarter of 2016 primarily related to updated lease assumptions of our Washington, D.C. space vacated in the fourth quarter of 2014. See Note 9 "Restructuring Charges" within the notes to our consolidated financial statements for further discussion of our restructuring expenses.

~~Other losses, net totaled $0.9 million~~direct costs for the three months ended ~~September 30, 2017,~~March 31, 2020 and ~~represents losses due to the increase in the fair value of the liability for future expected contingent consideration payments~~2019 related to acquisitions. In the third quarter of 2016, we recognized $0.5 million of remeasurement losses for the increase in the fair value of the contingent consideration liability. 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. See Note 11 "Fair Value of Financial Instruments" within the notes to our consolidated financial statements for additional information on the fair value of contingent consideration liabilities.

~~Depreciation~~technology and amortization expense increased by $1.9 million to $9.9 million in the three months ended September 30, 2017 from $8.1 million in the three months ended September 30, 2016. The increase was primarily attributable to an increase in amortization expense for intangible assets acquired in the Innosight and Pope Woodhead acquisitions, which were completed subsequent to the third quarter of 2016, and an increase in amortization expense for a customer-related intangible asset acquired in the Studer Group acquisition. Intangible asset amortization included within operating expenses primarily relates tosoftware, certain customer relationships, ~~non-competition agreements,~~ and ~~trade names~~customer contracts acquired in connection with our business acquisitions. See Note ~~5 "Acquisitions" and Note 6~~4 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for additional information about our intangible assets.

Operating ~~Income~~Expenses and Other Losses (Gains), Net

~~Operating income~~Selling, general and administrative expenses decreased ~~$17.1~~$7.3 million, or 14.4%, to ~~$6.1~~$43.4 million ~~in the third quarter of 2017 from $23.2 million in the third quarter of 2016. Operating margin, which is defined as operating income expressed as a percentage of revenues, decreased to 3.5%~~ in the three months ended ~~September 30, 2017, compared to 12.7%~~March 31, 2020, from $50.7 million in the three months ended September 30, 2016. The decrease in operating margin was primarily attributable to increases in salaries and related expenses for both our revenue-generating professionals and support personnel, contractor expense, facilities and other office-related expenses, signing and retention bonuses for our revenue-generating professionals, and performance bonus expense for our revenue-generating professionals for the third quarter of 2017 compared to the same prior year period.

~~Other Expense, Net~~

Total other expense, net increased by $0.3 million to $4.0 million in the third quarter of 2017 from $3.7 million in the third quarter of 2016. The increase in total other expense, net was primarily attributable to a $0.7 million increase in interest expense, net of interest income, which was due to higher levels of borrowings and higher interest rates under our credit facility during the third quarter of 2017 compared to the third quarter of 2016. This increase was partially offset by $0.4 million of net foreign currency transaction gains in the third quarter of 2017 compared to $0.1 million of net foreign currency transaction losses in the third quarter of 2016.

~~Income Tax Expense (Benefit)~~

For the three months ended September 30, 2017, our effective tax rate was (92.4)% as we recognized income tax benefit from continuing operations of $2.0 million on income from continuing operations of $2.1 million. For the third quarter of 2016, our effective tax rate was 37.2% as we recognized income tax expense from continuing operations of $7.3 million on income from continuing operations of $19.6 million. The effective tax rate for the three months ended September 30, 2017 was more favorable than the statutory rate, inclusive of state income taxes, primarily due to recognizing a $2.7 million tax benefit related to a previously unrecognized tax benefit from our "check-the-box" election made in 2014 to treat one of our wholly-owned foreign subsidiaries as a

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disregarded entity for U.S federal income tax purposes. This benefit was partially offset by $0.6 million of tax expense recorded in the third quarter of 2017 to correct an error that occurred in the second quarter of 2017. During the third quarter of 2017, we also recorded a $3.1 million adjustment to decrease deferred income taxes, net and increase income tax receivable on our consolidated balance sheet to correct an error that occurred in the second quarter of 2017. These errors have no impact on full year 2017 results, and we concluded that the impact of both errors was not material to the second and third quarter financial statements. The effective tax rate for the three months ended September 30, 2016 was lower than the statutory rate, inclusive of state income taxes, primarily due to non-taxable income, valuation allowance reductions, and certain credits and deductions, partially offset by non-deductible business expenses.

~~Net Income from Continuing Operations~~

Net income from continuing operations decreased by $8.2 million to $4.1 million for the three months ended September 30, 2017, from $12.3 million for the same period last year. As a result of the decrease in net income from continuing operations, diluted earnings per share from continuing operations for the third quarter of 2017 was $0.19 compared to $0.57 for the third quarter of 2016.

~~Discontinued Operations~~

Net income from discontinued operations was $0.2 million for the three months ended September 30, 2017 and related to updated lease assumptions for vacated office space directly related to the sale of the Huron Legal segment. See Note 4 "Discontinued Operations" within the notes to our consolidated financial statements for additional information about our discontinued operations.

~~EBITDA and Adjusted EBITDA~~

EBITDA decreased $16.2 million to $19.6 million for the three months ended September 30, 2017 from $35.9 million for the three months ended September 30, 2016. Adjusted EBITDA decreased $16.0 million to $21.5 million in the third quarter of 2017 from $37.5 million in the third quarter of 2016. The decrease in EBITDA and adjusted EBITDA was primarily due to the decrease in segment operating income, as discussed below in Segment Results, as well as an increase in corporate expenses primarily due to our acquisitions of Innosight and Pope Woodhead.

~~Adjusted Net Income from Continuing Operations~~

Adjusted net income from continuing operations decreased $10.4 million to $9.3 million in the third quarter of 2017 compared to $19.7 million in the third quarter of 2016. As a result of the decrease in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was $0.43 for the third quarter of 2017, compared to $0.92 for the third quarter of 2016.

~~Segment Results~~

~~Healthcare~~

~~Revenues~~

Healthcare segment revenues decreased $23.8 million, or 23.1%, to $79.6 million for the third quarter of 2017 from $103.4 million for the third quarter of 2016. Revenues for the third quarter of 2017 included an incremental $1.7 million from our acquisition of HSM Consulting, which was completed mid-third quarter 2016.

March 31, 2019. Of the overall ~~$23.8~~$7.3 million decrease, ~~in revenues, $20.4~~$6.9 million was attributable to the change in the market value of our deferred compensation liability, resulting from a $4.7 million decrease in ~~revenue from our full-time billable consultants and $3.4 million was attributable~~the market value during the first quarter of 2020, compared to a ~~decrease in revenue generated by our full-time equivalents.~~

The decrease in revenue attributable to our full-time billable consultants reflected decreases in the average number of full-time billable consultants and the average billing rate, partially offset by an$2.2 million increase in the ~~consultant utilization rate. This decrease in revenue was primarily driven by a decreased demand for our performance improvement solution. Performance-based fee revenue was $5.3 million~~market value during the ~~third~~first quarter of 2017 compared to $13.8 million during the third quarter of 2016. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide. Performance-based fee arrangements may also cause significant variations in revenues, operating results, and average billing rates due to our level of execution and the timing of achievement of the performance-based criteria.

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~~The decrease in revenue attributable to our full-time equivalents was primarily driven by~~2019. Additional decreases include a ~~decreased demand for our Studer Group solution and reflected a decrease in revenue per full-time equivalent, partially offset by an increase in the average number of full-time equivalents.~~

~~Operating Income~~

Healthcare segment operating income decreased $13.0 million, or 33.6%, to $25.8 million for the three months ended September 30, 2017 from $38.8 million for the three months ended September 30, 2016. The Healthcare segment operating margin, defined as segment operating income expressed as a percentage of segment revenues, decreased to 32.4% for the third quarter of 2017 from 37.5% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to an increase in salaries and related expenses for our revenue-generating and support professionals as a percentage of revenues, as well as increases in contractor expenses, product and event costs, and signing and retention bonus expense for our revenue-generating professionals. These decreases to the operating margin are partially offset by decreases in performance bonus expense for our revenue-generating professionals, practice administration and meetings expenses, and intangible asset amortization expense, all as a percentage of revenues.

~~Education~~

~~Revenues~~

~~Education segment revenues increased $2.8 million, or 7.3%, to $41.4 million for the third quarter of 2017 from $38.6 million for the third quarter of 2016.~~

During the three months ended September 30, 2017, revenues from fixed-fee engagements, time-and-expense engagements, and software support and maintenance and subscription arrangements represented 16.2%, 78.1%, and 5.7% of this segment’s revenues, respectively. During the three months ended September 30, 2016, revenues from fixed-fee engagements, time-and-expense engagements, performance-based arrangements, and software support and maintenance and subscription arrangements represented 12.2%, 80.4%, 1.6%, and 5.8% of this segment’s revenues, respectively.

Of the overall $2.8 million increase in revenues, $4.3 million was attributable to our full-time billable consultants, which was partially offset by a $1.5 million decrease in revenue attributable to our full-time equivalents. The increase in revenue attributable to our full-time billable consultants reflected increases in the average number of full-time billable consultants and the consultant utilization rate, partially offset by a decrease in the average billing rate. The decrease in revenue from our full-time equivalents was largely driven by a decrease in license revenues, and reflected decreases in both revenue per full-time equivalent and the average number of full-time equivalents in the third quarter of 2017 compared to the same prior year period.

~~Operating Income~~

Education segment operating income decreased $3.1 million, or 28.8%, to $7.8 million for the three months ended September 30, 2017 from $10.9 million for the three months ended September 30, 2016. Segment operating margin decreased to 18.7% for the third quarter of 2017 from 28.2% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to increases in performance bonus expense and salaries and related expenses for our revenue-generating professionals, as well as an increase in performance bonus expense for our support personnel, all as a percentage of revenues. The increase in bonus expense was primarily the result of a significant performance bonus adjustment in the third quarter of 2017 to increase our year-to-date performance bonus accrual due to a revised full year forecast. These increases were partially offset by decreases in training expenses and practice administration and meetings expenses.

~~Business Advisory~~

~~Revenues~~

Business Advisory segment revenues increased $14.0 million, or 33.9%, to $55.4 million for the third quarter of 2017 from $41.4 million for the third quarter of 2016. Revenues for the third quarter of 2017 included $13.4 million from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent to the third quarter of 2016. Third quarter 2017 revenues also included revenues from our acquisition of the international assets of ADI Strategies, which was completed in April 2017 and has since been fully integrated into the Business Advisory segment.

During the three months ended September 30, 2017, revenues from fixed-fee engagements, time-and-expense engagements, performance-based arrangements, and software support and maintenance and subscription arrangements represented 37.5%, 57.7%, 3.0%, and 1.8% of this segment’s revenues, respectively, compared to 18.5%, 78.2%, 1.7%, and 1.6% of this segment’s revenues, respectively, for the same prior year period. Performance-based fee revenue was $1.7 million for the third quarter of 2017, compared to $0.7 million for the same prior year period. The level of performance-based fees earned may vary based on our clients’ preferences

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and the mix of services we provide. Performance-based fee arrangements may also cause significant variations in revenues, operating results, and average billing rates due to our level of execution and the timing of achievement of the performance-based criteria.

Of the overall $14.0 million increase in revenues, $14.4 million was attributable to our full-time billable consultants, which was partially offset by a $0.4 million decrease in revenues attributable to our full-time equivalents. The increase in revenue from our full-time billable consultants was primarily driven by our acquisitions of Innosight, Pope Woodhead, and the international assets of ADI Strategies, and reflected an increase in the average number of full-time billable consultants, partially offset by decreases in the average billing rate and consultant utilization rate. The decrease in revenue from our full-time equivalents reflected a decrease in revenue per full-time equivalent, partially offset by an increase in the average number of full-time equivalents in the third quarter of 2017 compared to the same prior year period.

~~Operating Income~~

Business Advisory segment operating income increased by $4.2 million, or 49.1%, to $12.8 million for the three months ended September 30, 2017 from $8.6 million for the three months ended September 30, 2016. Segment operating margin increased to 23.2% for the third quarter of 2017 from 20.8% in the same period last year. The increase in this segment’s operating margin was primarily attributable to revenue growth that outpaced increases in performance bonus expense for our revenue-generating professionals, salaries and related expenses for our revenue-generating professionals and our support personnel, and contractor expenses. These increases to segment operating margin were partially offset by increases in travel related costs, signing and retention bonuses for our revenue-generating professionals, and third-party consulting expenses, all as a percentage of revenues.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Revenues~~

Revenues decreased $1.5 million, or 0.3%, to $546.6 million for the first nine months of 2017 from $548.1 million for the first nine months of 2016. Revenues for the first nine months of 2017 included $34.1 million from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent to the third quarter of 2016, and $13.9 million of incremental revenues due to the full period impact of our acquisition of MyRounding Solutions, LLC ("MyRounding") and HSM Consulting, which we completed mid-first quarter 2016 and mid-third quarter 2016, respectively. Revenues for the first nine months of 2017 also included a full period impact of our acquisition of the U.S. assets of ADI Strategies and revenues from our acquisition of the international assets of ADI Strategies. These acquisitions were completed in May 2016 and April 2017, respectively, and have since been fully integrated into the Business Advisory segment.

The overall $1.5 million decrease in revenues was primarily attributable to our full-time billable consultants. The decrease in full-time billable consultant revenues reflected decreases in the average billing rate and consultant utilization rate, mostly offset by an increase in the average number of billable consultants. As discussed below in Segment Results, this decrease in revenue was largely driven by decreased demand for services in our Healthcare segment, mostly offset by revenues from our acquisitions of Innosight and Pope Woodhead, as well as strengthened demand for services in our Business Advisory and Education segments.

~~Total Direct Costs~~

Our total direct costs, including amortization of intangible assets and software development costs, increased $17.0 million, or 5.1%, to $351.6 million for the nine months ended September 30, 2017, from $334.6 million for the nine months ended September 30, 2016. The overall $17.0 million increase primarily related to a $14.3 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by increased headcount from acquisitions and our ongoing cloud-based ERP investment, partially offset by a decrease in salaries and related expenses in our Healthcare segment as a result of headcount reductions. Additional increases included a $2.8 million increase in contractor expense, a $2.1 million increase in signing and retention bonus expense for our revenue-generating professionals, a $0.8 million increase in product and event costs, a $0.5 million increase in project costs, and a $0.5 million increase in technology expenses. These increases were partially offset by a $2.9 million decrease in intangible asset amortization expense and a $0.5$2.3 million decrease in performance bonus expense for our ~~revenue-generating professionals. As~~support personnel; a percentage of revenues, our total direct costs increased to 64.3% during the first nine months of 2017 compared to 61.0% during the first nine months of 2016 primarily due to the items described above.

Total direct costs for the nine months ended September 30, 2017 included $8.4 million of amortization expense for intangible assets, primarily representing customer contracts and software acquired in business combinations and internal software development costs, compared to $11.3 million of amortization expense for the same prior year period. The $2.9$1.0 million decrease in ~~amortization expense was primarily attributable to the decreasing amortization expense of customer contracts acquired~~facilities expense; a $0.7 million decrease in ~~our Studer Group acquisition, due to the accelerated basis of amortization,~~third-party consulting expenses; a $0.4 million decrease in training expenses; and a $0.4 million decrease in recruiting expenses. These decreases were partially offset by the amortization of intangible assets acquired in the Innosight acquisition, which we completed in the first quarter of 2017. See Note 5 "Acquisitions" and Note 6 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for additional information about our intangible assets.

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~~Operating Expenses and Other Gains, Net~~

Selling, general and administrative expenses increased $12.2 million, or 10.2%, to $132.1 million in the nine months ended September 30, 2017, from $119.9 million in the nine months ended September 30, 2016. Selling, general and administrative expenses for the first nine months of 2017 included $9.8 million from Innosight and Pope Woodhead. The overall $12.2 million increase was primarily related to an $8.5a $1.8 million increase in salaries and related expenses for our support ~~personnel, a $2.2 million increase in facilities and other office-related expenses, a $1.4 million increase in travel related costs, a $1.2 million increase in third-party consulting expenses,~~personnel; a $1.0 million increase in ~~promotion~~practice administration and sponsorship expenses, and a $0.7 million increase in signing and retention bonus expense for our support personnel. These increases were partially offset by a $2.5 million decrease in performance bonus expense for our support personnel andmeetings expenses; a $0.8 million ~~decrease~~increase in share-based compensation expense for our support ~~personnel.~~personnel; and a $0.8 million increase in data hosting and software related expenses. As a percentage of revenues, selling, general and administrative expenses ~~increased~~decreased to ~~24.2%~~19.5% during the first ~~nine months~~quarter of ~~2017~~2020 compared to ~~21.9%~~24.8% during the first ~~nine months~~quarter of ~~2016~~2019. This decrease was primarily ~~due~~attributable to the ~~items described above.~~decreases in the market value of our deferred compensation liability, performance bonus expense for our support personnel, and facilities expenses.

Restructuring charges for the first ~~nine~~three months of ~~2017~~2020 totaled ~~$5.3~~$1.6 million, compared to ~~$4.1~~$1.3 million for the first ~~nine~~three months of ~~2016.~~2019. The ~~charges for the first nine months of 2017 primarily consisted of $2.5~~$1.6 million related to the accrual of remaining lease obligations, net of estimated sublease income, due to relocating our San Francisco office to a smaller space and consolidating our Chicago and New York officesrestructuring charge incurred in the first ~~nine months~~quarter of ~~2017, and accelerated depreciation on leasehold improvements~~2020 primarily related to a $1.2 million accrual for ~~our San Francisco office, $2.0~~the termination of a third-party advisor agreement; $0.3 million related to workforce reductions ~~in our Healthcare segment~~ to better align ~~our~~ resources with market ~~demand,~~demand; and ~~$0.4~~$0.1 million related to workforce reductions in our corporate ~~operations primarily to adjust our infrastructure to align with the decreased workforce in the Healthcare segment. The charges for~~operations. During the first ~~nine months of 2016 primarily consisted of $1.5 million related to updated assumptions for lease accruals for our Washington, D.C. space vacated in the fourth~~ quarter of ~~2014, $1.2~~2019, we exited a portion of our Lake Oswego, Oregon corporate office resulting in a $0.7 million lease impairment charge on the related operating lease right-of-use asset and leasehold improvements and $0.2 million of accelerated depreciation on furniture and fixtures in that office. Additionally, we recognized a $0.2 million restructuring charge related to workforce reductions in ~~our Healthcare segment to better align resources with market demand, $0.9 million related to workforce reductions in~~

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our corporate ~~operations as we adjusted our infrastructure to align with our Huron Legal divestiture, and $0.2 million related to the wind down of our foreign consulting operations based in the Middle East.~~

Other gains, net totaled $0.2 million for the nine months ended September 30, 2017, and represents gains due to the decrease in the fair value of the liability for future expected contingent consideration payments related to acquisitions. In the first nine months of 2016, we recognized $0.5 million of remeasurement losses for the increase in the fair value of the contingent consideration liability. 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.operations. See Note ~~11 "Fair Value of Financial Instruments"~~8 "Restructuring Charges" within the notes to our consolidated financial statements for additional information on our restructuring charges.

Litigation and other gains totaled $0.2 million for the three months ended March 31, 2020, which consisted of a litigation settlement gain for the resolution of a claim that was settled in the first quarter of 2020. Other gains totaled $0.5 million for the three months ended March 31, 2019, which primarily consisted of a $0.4 million remeasurement gain to decrease the estimated fair value of our liabilities for contingent consideration ~~liabilities.~~payments related to business acquisitions.

Depreciation and amortization expense ~~increased~~decreased by ~~$5.5~~$1.1 million, or 14.8%, to ~~$28.5~~$6.1 million infor the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$23.1~~$7.2 million infor the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. The ~~increase~~decrease was primarily attributable to ~~amortization expense for intangible assets acquired in the Innosight, ADI Strategies, Pope Woodhead, and HSM Consulting acquisitions, and an increase~~a decrease in amortization expense for ~~a customer-related intangible asset~~the trade name acquired in ~~the~~our Studer Group ~~acquisition.~~acquisition that was fully amortized in the fourth quarter of 2019; decreasing amortization expense for customer relationships due to the accelerated basis of amortization in prior periods, including the customer relationships acquired in our Studer Group acquisition; and customer relationships acquired in other business acquisitions that were fully amortized in prior periods. Intangible asset amortization included within operating expenses for the three months ended March 31, 2020 and 2019 primarily ~~relates~~related to certain customer relationships, trade names and non-competition agreements acquired in connection with our business acquisitions. See Note ~~5 "Acquisitions" and Note 6~~4 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for additional information about our intangible assets.

During the first quarter ~~ended June 30, 2017,~~of 2020, we recorded ~~a $209.6~~$59.8 million of non-cash pretax goodwill impairment ~~charge~~charges related to our ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit. This charge is~~units within our Business Advisory segment; primarily related to the expected decline in sales and business development activities and a decrease in the demand for the services these reporting units provide that may be considered by our clients to be more discretionary in nature, as a result of the COVID-19 pandemic. These charges are non-cash in nature and ~~does~~do not affect our liquidity or debt covenants. See the "Critical Accounting Policies" section below and Note 64 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for ~~further discussion of this charge.~~additional information on the charges.

Operating Income ~~(Loss)~~

Operating income decreased ~~$246.2~~$52.6 million to a loss of ~~$180.3~~$45.9 million in the first ~~nine~~three months of ~~2017~~2020 from operating income of ~~$65.8~~$6.8 million in the first ~~nine~~three months of ~~2016.~~2019. This decrease is primarily attributable to the ~~$209.6~~$59.8 million of non-cash pretax goodwill impairment ~~charge recorded in the second quarter of 2017~~charges related to our ~~Healthcare segment.~~Business Advisory segment that were recognized in the first quarter of 2020. See the "Critical Accounting Policies" section below and Note 64 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for additional information on the non-cash goodwill impairment ~~charge.~~charges. Operating margin, which is defined as operating income expressed as a percentage of revenues, decreased to ~~(33.0)~~(20.6)% for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, compared to ~~12.0%~~an operating margin of 3.3% for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. The decrease in operating margin was primarily attributable to the goodwill impairment ~~charge,~~charges, as well as the increases in salaries and related expenses ~~for both our revenue-generating professionals~~ and ~~support personnel, contractor expenses, and signing and retention bonuses~~share-based compensation expense for our revenue-generating professionals, ~~during the first nine months~~as percentages of ~~2017 compared~~revenues. These decreases to the ~~same prior year period.~~

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our deferred compensation liability, performance bonus expense for both our support personnel and revenue-generating professionals, intangible asset amortization expense, and facilities expenses.

Other Expense, Net

Total other expense, net ~~decreased~~increased by ~~$0.4~~$5.6 million to ~~$10.6~~$7.6 million in the first ~~nine~~three months of ~~2017~~2020 from ~~$11.0~~$2.0 million in the first ~~nine~~three months of ~~2016.~~2019. The decrease was primarily attributable to a $0.9 million gain on sale of our Life Sciences Compliance and Operations solution within our Business Advisory segment in the second quarter of 2017. See Note 6 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for additional information on the sale. The decreaseincrease in total other expense, net was ~~also~~primarily attributable to a ~~$1.8~~$4.7 million ~~gain in~~loss recognized during the first three months of 2020 for the market value of our investments that are used to fund our deferred compensation liability, compared to a ~~$1.0~~gain of $2.1 million gain during the first three months of 2019. Additionally, total other expense, net includes the recognition of $0.5 million of foreign currency transaction losses in the first ~~nine~~three months of ~~2016. These decreases were partially offset by a $1.5~~2020 compared to $0.1 million ~~increase~~of foreign currency transaction gains recognized in ~~interest~~the first three months of 2019.

Interest expense, net of interest income decreased $1.9 million to $2.3 million in the first ~~nine~~three months of ~~2017~~2020 from $4.3 million in the first three months of 2019, primarily attributable to the maturity of our Convertible Notes on October 1, 2019, partially offset by higher levels of borrowing under our credit facility during the first three months of 2020 compared to the same prior year period. See Note 7 "Financing Arrangements" within the notes to our consolidated financial statements for additional information about our Convertible Notes and credit facility.

Income Tax Expense

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The ~~increase~~CARES Act is an approximately $2 trillion emergency economic stimulus package in ~~interest expense was due~~response to ~~higher levels~~the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback periods and technical corrections to tax depreciation methods for qualified improvement property. As a result of ~~borrowings and higher interest rates under our credit facility~~the enactment of this legislation during the first ~~nine months~~quarter of ~~2017 compared~~2020, we recorded a tax benefit of $0.8 million related to the ~~first nine months~~remeasurement of ~~2016.~~a portion of our income tax receivable due to the ability to apply the federal net operating loss incurred in 2018 to prior year income for a refund at a higher tax rate in the carryback period.

~~Income Tax Expense (Benefit)~~

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, our effective tax rate was ~~26.1%~~21.0% as we recognized an income tax benefit from continuing operations of ~~$49.7~~$11.2 million on a loss from continuing operations of ~~$190.9~~$53.5 million. The effective tax rate of 21.0% was less favorable than the statutory rate,

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inclusive of state income taxes, of 26.0% primarily due to certain nondeductible expense items, non-deductible losses on our investments used to fund our deferred compensation liability, and the nondeductible portion of the goodwill impairment charges recorded during the first quarter of 2020. These unfavorable items were partially offset by a discrete tax benefit for share-based compensation awards that vested during the quarter and the discrete tax benefit for the remeasurement of a portion of our income tax receivable as a result of the enactment of the CARES Act during the first quarter of 2020.

For the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019, our effective tax rate was ~~35.6%~~29.0% as we recognized income tax expense from continuing operations of ~~$19.5~~$1.4 million on income from continuing operations of ~~$54.8~~$4.7 million. The effective tax rate ~~for the nine months ended September 30, 2017~~of 29.0% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4% primarily due to ~~the $61.2 million non-deductible portion of the goodwill impairment charge recorded in the second quarter of 2017, as well as $1.8 million of discrete~~foreign losses with no tax ~~expense for share-based~~benefit and disallowed executive compensation ~~related to the adoption of ASU 2016-09~~ ~~Improvements to Employee Share-Based Payment Accounting. Refer to Note 3 "New Accounting Pronouncements" for additional information on the adoption of ASU 2016-09.~~deductions. These unfavorable ~~discrete~~ items were partially offset by a $2.7 million tax benefit recorded in the third quarter of 2017 related to a previously unrecognized tax benefit from our 2014 "check-the-box" election. The effective tax rate for the nine months ended September 30, 2016 was lower than the statutory rate, inclusive of state income taxes, primarily due to the year-to-date impact of a discrete favorable adjustment to our state tax rate in the second quarter of 2016, non-taxable income, valuation allowance reductions, certain credits and deductions, and a discrete tax benefit ~~related to~~for share-based compensation ~~partially offset by non-deductible business expenses.~~awards that vested during the first quarter of 2019.

Net Income ~~(Loss)~~ from Continuing Operations

Net income from continuing operations decreased by ~~$176.5~~$45.6 million to a net loss from continuing operations of ~~$141.2~~$42.3 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, from net income from continuing operations of ~~$35.3~~$3.4 million for the same prior year period. This decrease is primarily attributable to the ~~$209.6~~$59.8 million of non-cash pretax goodwill impairment ~~charge~~charges related to our ~~Healthcare~~Business Advisory segment. As a result of the decrease in net income from continuing operations, diluted loss per share from continuing operations for the first ~~nine~~three months of ~~2017~~2020 was ~~$6.59~~$1.94 compared to diluted earnings per share from continuing operations of ~~$1.65~~$0.15 for the first ~~nine~~three months of ~~2016.~~2019. The non-cash goodwill impairment ~~charge~~charges had a ~~$7.16~~$2.19 unfavorable impact on diluted earnings per share from continuing operations for the first ~~nine months~~quarter of ~~2017.~~

~~Discontinued Operations~~

Net income from discontinued operations for the nine months ended September 30, 2017 was $0.7 million and primarily related to updated lease assumptions for vacated office space directly related to the sale of the Huron Legal segment. Net loss from discontinued operations for the nine months ended September 30, 2016 was $1.8 million and primarily related to obligations for former employees, legal fees, and updated lease assumptions for vacated office space directly related to the sale of the Huron Legal segment. See Note 4 "Discontinued Operations" within the notes to our consolidated financial statements for additional information about our discontinued operations.2020.

EBITDA and Adjusted EBITDA

EBITDA decreased ~~$241.6~~$61.0 million to a loss of ~~$140.2~~$43.7 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, from earnings of ~~$101.4~~$17.3 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. Adjusted EBITDA ~~decreased $32.7~~increased $1.0 million to ~~$73.1~~$19.0 million in the first ~~nine~~three months of ~~2017~~2020 from ~~$105.8~~$18.0 million in the first ~~nine~~three months of ~~2016.~~2019. The decrease in EBITDA was primarily attributable to the non-cash goodwill impairment ~~charge~~charges of ~~$209.6~~$59.8 million ~~recorded~~recognized in the ~~second~~first quarter of ~~2017.~~2020. The ~~decrease~~increase in adjusted EBITDA was primarily ~~due~~attributable to the increase in revenues and the decrease in ~~segment operating income, as discussed below~~performance bonus expense for our support personnel; largely offset by the increases in ~~Segment Results, as well as an increase~~salaries and related expenses and share-based compensation expense for our revenue-generating professionals in ~~corporate expenses primarily due~~the first three months of 2020 compared to ~~our acquisitions of Innosight and Pope Woodhead.~~the same prior year period.

Adjusted Net Income from Continuing Operations

Adjusted net income from continuing operations ~~decreased $24.6~~increased $0.9 million to ~~$31.7~~$9.8 million in the first ~~nine~~three months of ~~2017~~2020 compared to ~~$56.3~~$8.9 million in the first ~~nine~~three months of ~~2016.~~2019. As a result of the ~~decrease~~increase in adjusted net income from continuing operations, adjusted

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diluted earnings per share from continuing operations for the first ~~nine~~three months of ~~2017~~2020 was ~~$1.47~~$0.44 compared to ~~$2.63~~$0.40 for the first ~~nine~~three months of ~~2016.~~2019.

Segment Results

Healthcare

Revenues

Healthcare segment revenues ~~decreased $62.3~~increased $1.9 million, or ~~19.2%~~2.0%, to ~~$261.3~~$95.6 million for the first ~~nine~~three months of ~~2017~~2020 from ~~$323.5~~$93.7 million for the first ~~nine~~three months of 2016. Revenues for the first nine months of 2017 included $13.9 million of incremental revenues due to the full period impact of our acquisitions of HSM Consulting and MyRounding, which we completed mid-first quarter 2016 and mid-third quarter 2016, respectively.2019.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, revenues from fixed-fee ~~engagements,~~engagements; time-and-expense ~~engagements,~~engagements; performance-based ~~arrangements,~~arrangements; and software support, ~~and~~ maintenance and subscription arrangements represented ~~67.4%~~58.4%, ~~16.8%~~15.4%, ~~8.3%~~19.8%, and ~~7.5%~~6.4% of this segment’s revenues, respectively, compared to ~~70.4%~~67.9%, ~~10.7%~~13.6%, ~~13.1%~~12.6%, and ~~5.8%~~5.9% of this segment’s revenues, respectively, for the same prior year period.

The overall $62.3 million decrease in revenues was primarily attributable to a decrease in revenue from our full-time billable consultants. The decrease in revenue attributable to our full-time billable consultants was primarily driven by a decreased demand for our performance improvement solution and reflected decreases in the average number of full-time billable consultants, average billing rate, and consultant utilization rate. Performance-based fee revenue was ~~$21.6~~$18.9 million during the first ~~nine~~three months of ~~2017~~2020, compared to ~~$42.5~~$11.8 million during the first ~~nine~~three months of ~~2016.~~2019. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide. ~~Performance-based fee arrangements may also cause significant variations~~

Of the overall $1.9 million increase in revenues, ~~operating results,~~$1.3 million was attributable to an increase in revenues from our full-time equivalents and $0.6 million was attributable to our full-time billable consultants. The increase in revenues attributable to our full-time equivalents reflected an increase in the average number of full-time equivalents, partially offset by a decrease in revenue per full-time equivalent in the first three months of 2020 compared to the same prior year period. The increase in revenues attributable to our full-time billable consultants reflected increases in the average number of full-time billable consultants and the average billing ~~rates due~~rate, partially offset by a decrease in the consultant utilization rate in the first three months of 2020 compared to ~~our level of execution and~~ the ~~timing of achievement of the performance-based criteria.~~same prior year period.

Operating Income

Healthcare segment operating income decreased ~~$35.6~~$3.8 million, or ~~29.9%~~13.6%, to ~~$83.6~~$24.1 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$119.2~~$27.9 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. The Healthcare segment operating margin decreased to ~~32.0%~~25.2% for the first ~~nine~~three months of ~~2017~~2020 from ~~36.9%~~29.7% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to increases in salaries and

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related expenses for our revenue-generating professionals and share-based compensation expense for our revenue generating professionals both as a percentage of revenues, partially offset by a decrease in performance bonus expense for our revenue-generating professionals.

Business Advisory

Revenues

Business Advisory segment revenues increased $6.1 million, or 10.4%, to $64.9 million for the first three months of 2020 from $58.8 million for the first three months of 2019.

During the first three months of 2020, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 39.1%, 57.9%, 1.0%, and 2.0% of this segment’s revenues, respectively, compared to 36.9%, 60.0%, 1.1%, and 2.0% of this segment’s revenues, respectively, during the same prior year period. Performance-based fee revenue was $0.6 million for the first three months of 2020, compared to $0.7 million for the first three months of 2019. The level of performance-based fees earned may vary based on our clients’ preferences and the mix of services we provide.

Of the overall $6.1 million increase in revenues, $4.9 million was attributable to revenues generated by our full-time billable consultants and $1.2 million was attributable to our full-time equivalents. The increase in revenues from our full-time billable consultants was primarily driven by an increase in the average number of full-time billable consultants, partially offset by decreases in the consultant utilization rate and the average billing rate in the first three months of 2020 compared to the same prior year period. The increase in revenues from our full-time equivalents was driven by an increased use of contractors; and reflected an increase in the average number of full-time equivalents, partially offset by a decrease in revenue per full-time equivalent in the first three months of 2020 compared to the same prior year period.

Operating Income

Business Advisory segment operating income increased by $0.3 million, or 2.7%, to $9.8 million for the three months ended March 31, 2020, from $9.6 million for the three months ended March 31, 2019. The Business Advisory segment operating margin decreased to 15.2% for the first three months of 2020 from 16.3% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to a restructuring charge recorded in the first quarter of 2020 for the termination of a third-party advisor agreement, as well as increases in share-based compensation expense for our revenue-generating professionals, contractor expenses, and salaries and related expenses for our revenue-generating professionals, all as ~~a percentage~~percentages of ~~revenues, as well as increases in salaries and related expenses for our support personnel, contractor expenses, product and event costs, and restructuring charges,~~revenues. These decreases to the segment's operating margin were partially offset by decreases in ~~performance~~promotion and marketing expenses and signing, retention and other bonus ~~expense~~expenses for our revenue-generating ~~professionals and support personnel as a percentage of revenues.~~professionals.

The non-cash goodwill impairment ~~charge~~charges related to the Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment, which are discussed above within ~~the~~ consolidated results, isare not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the ~~segments.~~segment. We do not include the impact of goodwill impairment charges in our evaluation of segment performance. See the "Critical Accounting Policies" section below and Note 64 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for ~~further discussion of this charge.~~additional information on the charges and our goodwill balances. We will continue to evaluate goodwill for impairment during future periods. Any future significant decline in the performance of ~~the Healthcare segment compared to~~ our ~~internal forecasts~~Strategy and Innovation reporting unit could result in another non-cash goodwill impairment charge.

Education

Revenues

Education segment revenues increased ~~$15.8~~$10.2 million, or ~~14.1%~~19.6%, to ~~$127.6~~$62.1 million for the first ~~nine~~three months of ~~2017~~2020 from ~~$111.8~~$52.0 million for the first ~~nine~~three months of ~~2016.~~2019.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, revenues from fixed-fee ~~engagements,~~engagements; time-and-expense ~~engagements, performance-based arrangements,~~engagements; and software support, ~~and~~ maintenance and subscription arrangements represented ~~15.8%~~21.2%, ~~78.5%, 0.3%~~70.3%, and ~~5.4%~~8.5% of this segment’s revenues, respectively, compared to ~~14.5%~~23.8%, ~~78.6%, 0.9%~~68.1%, and ~~6.0%~~8.1% of this segment's revenues, respectively, during the same prior year period.

Of the overall ~~$15.8~~$10.2 million increase in revenues, ~~$16.9~~$7.4 million was attributable to revenues generated by our full-time billable consultants ~~which~~and $2.8 million was ~~partially offset by a $1.1 million decrease in revenues~~ attributable to revenues generated by our full-time equivalents. The increase in ~~revenue~~revenues from our full-time billable consultants reflected ~~increases~~an increase in the average number of full-time billable ~~consultants and consultant utilization rate,~~consultants; partially offset by a decrease in the average billing ~~rate.~~rate in the first three months of 2020 compared to the same prior year period. The ~~decrease~~increase in ~~revenue~~revenues from our full-time equivalents was ~~largely~~primarily driven by

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~~a decrease~~contractors and project consultants as well as an increase in ~~license revenues,~~software subscriptions and data hosting revenues; and reflected ~~decreases~~an increase in ~~both revenue per full-time equivalent and~~ the average number of full-time equivalents, partially offset by a decrease in revenue per full-time equivalent in the first ~~nine~~three months of ~~2017~~2020 compared to the same prior year period.

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Operating Income

Education segment operating income increased ~~$0.3~~$0.5 million, or ~~0.9%~~3.9%, to ~~$31.8~~$13.1 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$31.5~~$12.6 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. The Education segment operating margin decreased to ~~24.9%~~21.1% for the first ~~nine~~three months of ~~2017~~2020 from ~~28.1%~~24.3% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to increases in ~~performance bonus expense for both our revenue-generating professionals~~contractor expenses, practice administration and ~~support personnel, as well as an increase in~~meetings expenses, and salaries and related expenses for our revenue-generating professionals, all as ~~a percentage~~percentages of revenues ~~partially offset by decreases in training expenses and practice administration and meetings expenses.~~.

~~Business Advisory~~

~~Revenues~~

Business Advisory segment revenues increased $45.0 million, or 39.9%, to $157.8 million for the first nine months of 2017 from $112.8 million for the first nine months of 2016. Revenues for the first nine months of 2017 included $34.1 million from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent to the third quarter of 2016. Revenues for the first nine months of 2017 also included a full period impact of our acquisition of the U.S. assets of ADI Strategies and revenues from our acquisition of the international assets of ADI Strategies. These acquisitions were completed in May 2016 and April 2017, respectively, and have since been fully integrated into the Business Advisory segment.

During the first nine months of 2017, revenues from fixed-fee engagements, time-and-expense engagements, performance-based arrangements, and software support and maintenance and subscription arrangements represented 34.7%, 62.6%, 1.2%, and 1.5% of this segment’s revenues, respectively, compared to 19.5%, 74.0%, 5.4%, and 1.1% of this segment’s revenues, respectively, during the same prior year period. Performance-based fee revenue was $1.9 million for the first nine months of 2017 compared to $6.2 million for the same prior year period. The level of performance-based fees earned may vary based on our clients’ preferences and the mix of services we provide. Performance-based fee arrangements may also cause significant variations in revenues, operating results, and average billing rates due to our level of execution and the timing of achievement of the performance-based criteria.

Of the overall $45.0 million increase in revenues, $44.1 million was attributable to our full-time billable consultants and $0.9 million was attributable to our full-time equivalents. The increase in revenue from our full-time billable consultants was primarily driven by our acquisitions of Innosight, ADI Strategies, and Pope Woodhead, and reflected increases in the average number of full-time billable consultants and consultant utilization rate, partially offset by a decrease in the average billing rate. The increase in revenue from our full-time equivalents reflected increases in the average number of full-time equivalents and revenue per full-time equivalent.

~~Operating Income~~

Business Advisory segment operating income increased by $11.6 million, or 49.9%, to $34.9 million for the nine months ended September 30, 2017, from $23.3 million for the nine months ended September 30, 2016. The Business Advisory segment operating margin increased to 22.1% for the first nine months of 2017 from 20.6% in the same period last year. The increase in this segment’s operating margin was primarily attributable to a decrease in performance bonus expense for our revenue-generating professionals, as a percentage of revenues, as well as decreases in share-based compensation expense for our revenue-generating professionals and contractor expense, partially offset by increases, as a percentage of revenues, in salaries and related expenses for our revenue-generating professionals, third-party consulting expenses, signing and retention bonuses for our revenue-generating professionals, and travel related costs.

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LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents ~~decreased $8.4~~increased $139.4 million to $151.0 million at March 31, 2020 from ~~$17.0~~$11.6 million at December 31, ~~2016 to $8.7 million at September 30, 2017.~~2019. As of ~~September 30, 2017,~~March 31, 2020, our primary sources of liquidity are cash on hand, cash flows from our U.S. operations, and borrowing capacity available under our credit facility.


	Nine Months Ended September 30,						Three Months Ended March 31,
Cash Flows (in thousands):	2017			2016			2020			2019
Net cash provided by operating activities	$	52,432		$	79,745
Net cash used in operating activities							$	(56,146	)	$	(38,289	)
Net cash used in investing activities	(125,253		)	(81,233		)	(18,395		)	(8,087		)
Net cash provided by (used in) financing activities	64,262			(47,979		)
Net cash provided by financing activities							214,089			21,722
Effect of exchange rate changes on cash	192			133			(143		)	73
Net decrease in cash and cash equivalents	$	(8,367	)	$	(49,334	)
Net increase (decrease) in cash and cash equivalents							$	139,405		$	(24,581	)

Operating Activities

Net cash ~~provided by~~used in operating activities totaled ~~$52.4~~$56.1 million for the ~~nine~~three months ended ~~September 30, 2017 and $79.7~~March 31, 2020, compared to of $38.3 million for the ~~same period last year.~~three months ended March 31, 2019, respectively. Our operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable and accrued expenses, accrued payroll and related benefits, and deferred revenues. The volume of services rendered and the related billings and timing of collections on those billings, as well as payments of our accounts payable and salaries, bonuses, and related benefits to employees affect these account balances.

The ~~decrease~~increase in cash ~~provided by operations~~used in operating activities for the first ~~nine~~three months of ~~2017~~2020 compared to the same prior year period was primarily attributable to ~~lower net income,~~an increase in the ~~collection of a settlement receivable~~amount paid for annual performance bonuses during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 and an increase in payments to employees for salaries and related benefits, partially offset by an increase in cash collections in the first quarter of ~~2016 and a decrease in cash collections from clients in~~2020 compared to the first ~~nine months~~quarter of ~~2017, partially offset by decreased vendor and tax payments.~~2019.

Investing Activities

Net cash used in investing activities was ~~$125.3~~$18.4 million and $8.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~$81.2 million for the same period last year.~~2019, respectively.

The use of cash in the first ~~nine~~three months of ~~2017~~2020 primarily consisted of ~~$106.9~~$13.0 million for the ~~purchases~~purchase of ~~businesses~~an additional convertible debt investment in Shorelight Holdings, LLC; $2.9 million for payments related to internally developed software; $1.5 million for contributions to our life insurance policies which fund our deferred compensation plan; and ~~$20.1~~$1.0 million for purchases of property and equipment, primarily related to ~~leasehold improvements and~~ purchases of furniture and ~~fixtures~~leasehold improvements for new office spaces in certain locations.

The use of cash in the first ~~nine~~three months of ~~2016~~2019 primarily consisted of ~~$69.1~~$3.6 million for ~~the purchases of businesses and $9.4~~contributions to our life insurance policies which fund our deferred compensation plan; $2.3 million for purchases of property and ~~equipment.~~equipment, primarily related to purchases of computers and related equipment; and $2.1 million for payments related to internally developed software.

WeIn order to support our liquidity during the pandemic, we are proactively taking measures to increase available cash on hand, including reducing discretionary capital expenses. Therefore, as of March 31, 2020, we estimate that cash utilized for purchases of property and equipment and software development in ~~2017~~2020 will be lower than originally estimated and total approximately ~~$25.0~~$16 million to $20 million. The purchases primarily ~~consisting~~consist of software development costs, leasehold improvements ~~furniture and fixtures,~~for certain office locations, and information technology related equipment to support our corporate infrastructure.

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Financing Activities

Net cash provided by financing activities was ~~$64.3~~$214.1 million for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020. During the first ~~nine~~three months of ~~2017,~~2020, we borrowed ~~$241.0~~$281.0 million under our credit facility, ~~primarily~~including $125.0 million prior to ~~fund our acquisitions~~March 31, 2020 to maintain excess cash and support liquidity during the period of ~~Innosight and Pope Woodhead and~~uncertainty created by the COVID-19 pandemic, as well as to fund our annual performance bonus ~~payment, and~~payment. During the first quarter of 2020, we made repayments on our ~~credit facility~~borrowings of ~~$170.0~~$38.1 million.

~~Net cash used in financing activities was $48.0 million for the nine months ended September 30, 2016. During the first nine months of 2016,~~ Additionally, we repurchased and retired ~~$55.3~~$20.9 million of our common stock under our Share Repurchase Program, as defined below, and ~~had net borrowings~~settled $1.2 million of ~~$12.0~~share repurchases that were accrued as of December 31, 2019.

Net cash used in financing activities was $21.7 million for the three months ended March 31, 2019. During the first three months of 2019, we borrowed $40.5 million under our credit facility, primarily to fund ~~the acquisitions of HSM Consulting and the U.S. assets of ADI Strategies and~~ our annual performance bonus ~~payment.~~payment, and made repayments on our credit facility of $14.5 million.

Share Repurchase Program

~~As of September 30, 2017, we had~~We currently have a share repurchase program permitting us to repurchase up to $125 million of our common stock through October 31, ~~2017~~2020 (the "Share Repurchase Program"). ~~During the fourth quarter of 2017, our board of directors authorized an extension of the Share Repurchase Program through October 31, 2018.~~ The amount and timing of the repurchases will be determined by management and will 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. ~~During~~In the first ~~nine months~~quarter of ~~2016,~~2020, we

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repurchased and retired ~~982,192~~313,998 shares for ~~$55.3~~$20.9 million. ~~No shares were repurchased~~Additionally, in the first ~~nine months~~quarter of ~~2017.~~2020, we settled the repurchase of 18,000 shares for $1.2 million that were accrued as of December 31, 2019. As of ~~September 30, 2017, $35.1~~March 31, 2020, less than $0.1 million remains available for share repurchases.

Financing Arrangements

At ~~September 30, 2017,~~March 31, 2020, we had ~~$250.0 million principal amount of our 1.25% convertible senior notes outstanding, $139.0~~$448.0 million outstanding under our senior secured credit facility and ~~$5.0~~$3.7 million outstanding under a promissory note, as discussed below.

~~1.25% Convertible Senior Notes~~

In September 2014, we issued $250.0 million principal amount of the Convertible Notes in a private offering. The Convertible Notes are senior unsecured obligations of the Company and will pay interest semi-annually on April 1 and October 1 of each year at an annual rate of 1.25%. The Convertible Notes will mature on October 1, 2019, unless earlier repurchased by the Company or converted in accordance with their terms.

Upon conversion, the Convertible Notes will be settled, at our election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. Our current intent and policy is to settle conversions with a combination of cash and shares of common stock with the principal amount of the Convertible Notes paid in cash, in accordance with the settlement provisions of the Indenture.

~~For further information, see Note 8 “Financing Arrangements” within the notes to our consolidated financial statements.~~

Senior Secured Credit Facility

The Company has a ~~$500~~$600 million senior secured revolving credit facility, subject to the terms of a Second Amended and Restated Credit Agreement dated as of March 31, 2015, as amended to date (as amended and modified the "Amended Credit ~~Facility"~~Agreement"), that becomes due and payable in full upon maturity on ~~March 31, 2020.~~September 27, 2024. The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount of up to ~~$100~~$150 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 ~~$600~~$750 million. ~~The initial borrowings under the Amended Credit Agreement were used to refinance borrowings outstanding under a prior credit agreement, and future borrowings~~Borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, acquisitions of businesses, share repurchases, and general corporate purposes.

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 a requirement to pay all amounts outstanding under the Amended Credit Agreement 90 days prior to the Convertible Indebtedness Maturity Date (as defined in the Amended Credit Agreement) unless (1) the Convertible Indebtedness Maturity Date is waived or extended to a later date, (2) the Company can demonstrate (a) Liquidity (as defined in the Amended Credit Agreement) in an amount at least equal to the principal amount due on the Convertible Indebtedness Maturity Date, and (b) financial covenant compliance after giving effect to such payments and any additional indebtedness incurred on a pro forma basis, or (3) this requirement is waived by the Required Lenders (as defined in the Amended Credit Agreement).circumstances. 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.

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covenants is calculated on a continuing operations basis and includes adjustments to add back ~~share-based compensation costs,~~ non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, ~~and~~ pro forma historical EBITDA for businesses ~~acquired.~~acquired, and other specified items in accordance with the Amended Credit Agreement. At ~~September 30, 2017,~~March 31, 2020 and December 31, 2019, we were in compliance with these financial ~~covenants with a~~covenants. Our Consolidated Leverage Ratio as of ~~3.52~~March 31, 2020 was 3.48 to 1.00, ~~and a~~compared to 1.64 to 1.00 as of December 31, 2019. Our Consolidated Interest Coverage Ratio as of ~~12.60~~March 31, 2020 was 15.13 to ~~1.00.~~1.00, compared to 15.29 to 1.00 as of December 31, 2019. The increase in our Consolidated Leverage Ratio as of March 31, 2019 compared to December 31, 2019 was driven by $125.0 million of borrowings under the Amended Credit Agreement prior to March 31, 2020 to maintain excess cash and support liquidity during the period of uncertainty created by the COVID-19 pandemic. As a result of these borrowings, cash and cash equivalents increased $139.4 million to $151.0 million at March 31, 2020 from $11.6 million at December 31, 2019.

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The Amended Credit Agreement contains restricted payment provisions, including a potential limit on the amount of dividends we may pay. Pursuant to the terms of the Amended Credit Agreement, if our Consolidated Leverage Ratio is greater than ~~3.00,~~3.25, the amount of dividends and other Restricted Payments (as defined in the Amended Credit Agreement) we may pay is limited to an amount up to $50 million plus 50% of cumulative consolidated net income (as defined in the Amended Credit Agreement) from the closing date of the Amended Credit Agreement plus 50% of the net cash proceeds from equity issuances after the closing date of the Amended Credit Agreement.$25 million.

~~Borrowings~~Principal borrowings outstanding under the Amended Credit Agreement at ~~September 30, 2017~~March 31, 2020 and December 31, 2019 totaled ~~$139.0 million.~~$448.0 million and $205.0 million, respectively. These borrowings carried a weighted average interest rate of ~~3.4%,~~2.3% at March 31, 2020 and 3.0% at December 31, 2019 including the impact of the interest rate ~~swap in effect as of September 30, 2017 and~~swaps described in Note 109 “Derivative Instruments and Hedging Activity” within the notes to the consolidated financial statements. ~~Borrowings outstanding under the Amended Credit Agreement at December 31, 2016 were $68.0 million and carried a weighted average interest rate of 2.5%.~~ 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, 2017,~~March 31, 2020, we had outstanding letters of credit totaling ~~$2.7~~$1.6 million, which are primarily used as security deposits for our office facilities. ~~As of September 30, 2017, the unused borrowing capacity under the revolving credit facility was $358.3 million.~~

Promissory Note due 2024

On June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $5.1 million. The principal balance of the promissory note is subject to scheduled monthly principal payments until the maturity date of March 1, 2024, at which time a final payment of $1.5 million, plus any accrued and unpaid interest, will be due. Under the terms of the promissory note, we will pay interest on the outstanding principal amount at a rate of one-month LIBOR plus 1.97% per annum. The obligations under the promissory note are secured pursuant to a Loan and Aircraft Security Agreement with Banc of America Leasing & Capital, LLC, which grants the lender a first priority security interest in the aircraft. At ~~September 30, 2017,~~March 31, 2020, the outstanding principal amount of the promissory note was ~~$5.0 million. As of September 30, 2017,~~$3.7 million, and the aircraft had a carrying amount of ~~$6.6~~$4.9 million. At December 31, 2019, the outstanding principal amount of the promissory note was $3.9 million, and the aircraft had a carrying amount of $5.1 million.

For further information, see Note 87 “Financing Arrangements” within the notes to the consolidated financial statements.

Future Financing Needs

Our current primary financing need is to support our operations during the COVID-19 pandemic which has created significant volatility and uncertainty in the economy, could limit our access to capital resources, and could increase borrowing costs. In order to support our liquidity during the pandemic, we are proactively taking measures to increase available cash on hand, including, but not limited to, borrowing under our senior secured credit facility and reducing discretionary operating and capital expenses. To further support our liquidity, we have elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through the end of the year, which we expect to pay in equal installments in the fourth quarters of 2021 and 2022, as provided for under the CARES Act. Our long-term financing need has been to fund our growth. Our growth strategy is to expand our service offerings, which may require investments in new hires, acquisitions of complementary businesses, possible expansion into other geographic areas, and related capital expenditures. We believe our internally generated liquidity, together with our available cash, and the borrowing capacity available under our revolving credit facility ~~and access to external capital resources~~ will be adequate to ~~fund~~support our current financing needs and long-term growth ~~and capital needs arising from cash commitments and debt service obligations.~~strategy. Our ability to secure ~~short-term and long-term~~additional financing, if needed, in the future will depend on several factors, including our future profitability, the quality of our accounts receivable and unbilled services, our relative levels of debt and equity, and the overall condition of the credit markets.

CONTRACTUAL OBLIGATIONS

For a summary of our commitments to make future payments under contractual obligations, see ~~“Item~~Item 7. ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual ~~Obligations”~~Obligations" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

In connection with certain business acquisitions completed during the first nine months of 2017, we entered into contingent consideration arrangements, under which 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. The aggregate fair value of these contingent consideration liabilities on the dates of acquisition was $15.5 million. Refer to Note 5 “Acquisitions” within the notes to the consolidated financial statements for additional information on the businesses acquired during the first nine months of 2017. At September 30, 2017, the aggregate fair value of all contingent consideration liabilities outstanding was $22.5 million.

2019. As discussed above in "Liquidity and Capital Resources," on June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $5.1 million. The principal balance of the promissory note is subject to scheduled monthly principal payments until the maturity date of March ~~1, 2024,~~31, 2020, borrowings outstanding under our senior secured credit facility totaled $448.0 million compared to $205.0 million at ~~which time a final payment of $1.5 million, plus any accrued and unpaid interest will be due. Under~~December 31, 2019. See the ~~terms of the promissory note, we will pay interest on the outstanding principal amount at a rate of one-month LIBOR plus 1.97% per annum.~~

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~~Refer to~~ "Liquidity and Capital Resources" section above and Note 87 "Financing Arrangements" within the notes to ~~the~~our consolidated financial statements for additional information on our outstanding borrowings ~~including the schedule of monthly principal payments.~~

~~The following table provides the scheduled future payments of the contingent consideration arrangements and promissory note described above~~ as of ~~September 30, 2017:~~

Payments Due by Period
Total
Less than
1 Year
1-3 Years 3-5 Years
More than
5 Years
Contingent consideration $ 22,469
$ 7,743
$ 13,126
$ 1,600
$ —
Promissory note—principal and interest $ 5,682
$ 650
$ 1,293
$ 1,283
$ 2,456

March 31, 2020. There have been no other material changes to our contractual obligations since December 31, ~~2016.~~2019.

OFF-BALANCE SHEET ARRANGEMENTS

We are not a party to any material off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. We regularly review our financial reporting and disclosure practices and accounting policies to ensure that our financial reporting and disclosures provide accurate information relative to the current economic and business environment. The preparation of financial statements in conformity with GAAP requires management to make assessments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those policies that we believe present the most complex or subjective measurements and have the most potential to impact our financial position and operating results. While all decisions regarding accounting policies are important, we believe there are five accounting policies that could be considered critical: revenue recognition, allowances for doubtful accounts and unbilled services, business combinations, carrying values of goodwill and other intangible assets, and accounting for income

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taxes. For a detailed discussion of these critical accounting policies, see ~~“Item~~Item 7. ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting ~~Policies”~~Policies" in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. Below is an update to our critical accounting policy related to the carrying value of goodwill and other intangible assets. There have been no material changes to our other critical accounting policies during the first ~~nine~~three months of ~~2017.~~2020.

Carrying Values of Goodwill and Other Intangible Assets

~~Acquisition~~First Quarter 2020 Goodwill Impairment Analysis

The worldwide spread of ~~Innosight~~

~~On March 1, 2017, we completed~~coronavirus (COVID-19) in the first quarter of 2020 has created significant volatility, uncertainty and disruption to the global economy. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our ~~acquisition of Innosight,~~business, including how it will impact our clients, employees and business partners. While the COVID-19 pandemic did not have a ~~growth strategy firm focused~~significant impact on ~~helping companies navigate disruptive change, enable innovation, and manage strategic transformation. Innosight's results of operations have been included in~~ our consolidated ~~financial statements~~revenues in the first quarter of 2020, we expect it to have an unfavorable impact on sales and ~~results of operations of our Business Advisory segment from~~business development activities and full year 2020 results. Additionally, we expect a decrease in the date of acquisition. The goodwill recorded as part of the allocation of the purchase price of Innosight has been assigned to Innosight as a separate reporting unit, which is referred to as Strategy and Innovation.

~~Adoption of ASU 2017-04~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. ASU 2017-04 eliminated Step 2 of the goodwill impairment test, which required us to determine the implied fair value of goodwill by allocating the reporting unit's fair value to each of its assets and liabilities as if the reporting unit was acquired in a business acquisition. Instead, the updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit to its carrying value, and recognizing a non-cash impairment chargedemand for the ~~amount~~services we provide that may be considered by ~~which the carrying value exceeds the reporting unit's fair value with the loss not exceeding the total amount of goodwill allocated~~our clients to ~~that reporting unit. We adopted this guidance~~be more discretionary in ~~the second quarter of 2017 on a prospective basis and applied the new guidance to~~nature. The services provided by our ~~goodwill impairment tests described below.~~

~~Second Quarter 2017 Goodwill Reallocation~~

Effective June 1, 2017, we reorganized our internal financial reporting structure, which management uses to assess performance and allocate resources, by moving our Life Sciences practice from the Education and Life Sciences reporting unit and segment to its own reporting unit within the Business Advisory segment. The remaining Education and Life Sciences segment is now referred to as the Education segment. We will continue to operate under three reportable segments: Healthcare, Education, and Business Advisory.

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These three reportable segments will be comprised of the following six reporting units for goodwill impairment testing purpose: Healthcare, Education, Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences. The Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation and Life Sciences reporting units ~~comprise~~within our Business Advisory ~~segment.~~

~~As a result of the reorganization, we reallocated $10.8 million of the goodwill balance associated with the previous Education~~segment focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities and Life Sciences reporting unit to the new Life Sciences reporting unit based on the relative fair values of the Life Sciences reporting unit and the remaining Education reporting unit. The estimated fair values were determined using a combination of the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.

In conjunction with the goodwill reallocation, we performed a goodwill impairment test for the goodwill balances within our Education reporting unit and Life Sciences reporting unit as of June 1, 2017. Based on the results of the goodwill impairment test, we determined that the fair values of our Education reporting unit and Life Sciences reporting unit exceeded their carrying values. As such, we concluded there was no indication of goodwill impairment for either reporting unit.

~~Second Quarter 2017 Goodwill Impairment Analysis~~

~~Since the first quarter of 2016, the Healthcare segment, which is also a reporting unit, has experienced declining revenues, primarily driven~~may be considered by softness in our revenue cycle offering within our performance improvement solution. This softness is attributable to decreased demand for our services, the winding down of some of our larger projects and a growing trend toward smaller projects, as well as fewer large integrated projects. In light of these challenges, several initiatives have been undertaken to improve the segment's financial performance, including repositioning our solutions to address the most critical needs of our clients ~~the expansion of our existing services such as those~~to be more discretionary in our Studer Group, strategy, physician and technology offerings, and workforce reductions to better align resources with market demand. While the initiatives undertaken to improve the financial performance of our Healthcare segment are yielding some positive impacts, hospitals and health systems continue to face regulatory and funding uncertainty;nature; therefore, we ~~remain~~are cautious about near-term growth. As we have previously disclosed in prior quarters, if the financial performance of our Healthcare segment continued to decline and did not meet our expectations, we could be required to perform an interim impairment analysis with respect to our carrying value of goodwillresults for ~~the Healthcare~~these two reporting ~~unit prior to our usual annual test.~~units. Based on ~~forecasts prepared in connection with~~ our quarterly forecasting cycle during the second quarter of 2017, we determined that the likely time frame to improve the financial results of this segment will take longer than originally anticipated. As such, we concluded, during the second quarter of 2017, that the fair value of the Healthcare reporting unit may no longer exceed its carrying value. In connection withinternal projections and the preparation of our financial statements for the quarter ended ~~June 30, 2017,~~March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, we believed that the fair value of these two reporting units may no longer exceed their carrying values and performed an interim impairment test on ~~the Healthcare~~both reporting ~~unit.~~units.

Based on the estimated fair ~~value~~values of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit~~units described below, we recorded ~~a $209.6~~non-cash pretax goodwill impairment charges of $49.9 million and $9.9 million, respectively, in the first quarter of 2020. The $49.9 million non-cash pretax charge inrelated to the ~~second quarter~~Strategy and Innovation reporting unit reduced the goodwill balance of ~~2017~~the reporting unit to ~~reduce~~$37.5 million. The $9.9 million non-cash pretax charge related to the ~~carrying value~~Life Sciences reporting unit reduced the goodwill balance of ~~goodwill in our Healthcare~~the reporting ~~unit.~~unit to zero.

Our goodwill impairment test was performed by comparing the fair value of each of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit~~units with its respective carrying value and ~~in accordance with ASU 2017-04, which we adopted in the second quarter of 2017,~~ recognizing an impairment charge for the amount by which the carrying value exceeded the fair value. To estimate the fair value of ~~the Healthcare~~each reporting unit, we relied on a combination of the income approach and the market approach, with a fifty-fifty weighting.

In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by ~~the~~each reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with ~~the~~each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including long-term projections of future cash flows, market conditions, and a discount ~~rate~~rates that reflects the risk inherent in the future cash flows. In estimating future cash flows, we relied on an internally generated ~~11-year forecast.~~seven-year forecasts. For periods after the ~~11-year~~seven-year forecast, we assumed a long-term annual revenue growth rate of ~~3.5%.~~3.0% for both the Strategy and Innovation and Life Sciences reporting units. Our ~~forecast is~~forecasts are based on historical experience, current backlog, expected market demand, and other industry information. Our discounted cash flow analysis assumed ~~a 10.0%~~ weighted average cost of capital discount ~~rate.~~rates of 16.0% and 10.5% for the Strategy and Innovation and Life Sciences reporting units, respectively.

In the market approach, we utilized the guideline company method, which involved calculating valuation multiples based on operating data from guideline publicly traded companies. Multiples derived from guideline companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples ~~are~~were evaluated and adjusted based on specific characteristics of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit~~units relative to the selected guideline companies and applied to the reporting ~~unit's~~units' operating data to arrive at an indication of value.

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actual future earnings or cash flows of our ~~Healthcare~~ reporting ~~unit~~units will be consistent with our projections. We will monitor any changes to our assumptions and will evaluate goodwill as ~~part of our annual goodwill impairment testing in the fourth quarter of 2017, or on an interim basis, if required.~~deemed warranted during future periods. Any ~~future~~ significant decline in our operations ~~compared to our internal forecast~~ could result in ~~another~~additional non-cash goodwill impairment ~~charge,~~charges, which could be material.

~~As discussed above, as of September 30, 2017, we have six reporting units~~Concurrently with the goodwill ~~balances: our Healthcare and Education segments, and our Business Advisory, Enterprise Solutions and Analytics,~~impairment tests performed over the Strategy and Innovation and Life Sciences ~~practices, which together make up~~reporting units, we evaluated whether any indicators exist that would lead us to believe that the fair values of our Healthcare, Education, and Business Advisory ~~operating segment.~~reporting units may not exceed their carrying values. Based on our internal projections, consideration of the impact of the COVID-19 pandemic on these reporting units, and review of the amounts by which the fair values of these reporting units exceeded their carrying values in the most recent quantitative goodwill impairment analysis performed, we did not identify any indicators that would lead us to believe that the fair values of these reporting units may not exceed their carrying values as of March 31, 2020. We will monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods.

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The carrying values of goodwill for each of our reporting units as of ~~September 30, 2017~~March 31, 2020 are as follows (in thousands):


Reporting Unit	Carrying Value of Goodwill		Carrying Value of Goodwill
Healthcare	$	427,209	$	428,729
Education	102,830		103,889
Business Advisory	16,094		16,094
Enterprise Solutions and Analytics	45,119
Strategy and Innovation	87,432		37,523
Life Sciences	10,691		—
Enterprise Solutions and Analytics			—
Total	$	689,375	$	586,235

~~Three~~Intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill. Our intangible assets, net of accumulated amortization, totaled $28.1 million at March 31, 2020 and primarily consist of customer relationships, trade names, technology and software, non-competition agreements, and customer contracts, all of which were acquired through business combinations. We evaluate our ~~reporting units have been established primarily~~intangible assets for impairment whenever events or ~~entirely through recent business acquisitions: Enterprise Solutions and Analytics,~~changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In connection with the goodwill impairment tests performed for the Strategy and Innovation and Life Sciences. Our Enterprise Solutions and Analytics reporting unit was established with the acquisition of Blue Stone International, LLC in October 2013. Since that time, we have completed five additional business acquisitions within the reporting unit, most recently the acquisitions of the U.S. assets and international assets of ADI Strategies in May 2016 and April 2017, respectively. Our Strategy and Innovation reporting unit was established with the acquisition of Innosight in March 2017. Our Life Sciences reporting unit is primarily comprised of two recent acquisitions: The Frankel Group Associates LLC in January 2014 and Pope Woodhead in January 2017.

We record the assets acquired and liabilities assumed in business combinations, including identifiable intangible assets, at their estimated fair values as of the acquisition date, and goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the fair value of the net assets acquired. Therefore, the initial accounting for an acquisition results in no headroom, as its fair value equals its carrying value.

Our most recent goodwill impairment test for the Enterprise Solutions and Analytics reporting unit was performed as of November 30, 2016, as part of our annual goodwill impairment test, pursuant to our policy, and based on the results of the first step of that analysis, the reporting unit’s fair value exceeded its carrying value by 11%.

Our most recent goodwill impairment test for the Life Sciences reporting unit was performed as of June 1, 2017, as part of the reorganization of our internal financial reporting structure, as discussed above under the section titled ~~Second Quarter 2017 Goodwill Reallocation. Based on the results of that analysis, the reporting unit’s fair value exceeded its carrying value by 16%.~~

We have not yet performed a goodwill impairment test for the Strategy and Innovation reporting unit, as the reporting unit was established during the current year with the acquisition of Innosight in March 2017 and there have been no triggering events requiring an interim goodwill impairment test to date.

~~Since the date of the most recent goodwill impairment tests for the Enterprise Solutions and Analytics and Life~~ Sciences reporting units ~~and since~~in the ~~inception~~first quarter of 2020, which resulted in non-cash goodwill impairment charges, we performed impairment tests on the long-lived assets allocated to the asset groups of the Strategy and Innovation and Life Sciences reporting ~~unit,~~units. Based on the ~~performance~~impairment tests performed, we concluded that the long-lived assets allocated to the asset groups were not impaired as of ~~these three reporting units has continued~~March 31, 2020. We did not identify any indicators that would lead us to ~~reasonably meet our expectations such~~believe that ~~no triggering event for an interim goodwill impairment analysis was identified. We will monitor any changes~~the carrying values of the long-lived assets allocated to our ~~assumptions and will evaluate goodwill~~other asset groups may not be recoverable as ~~part~~ of our annual goodwill impairment testing in the fourth quarter of 2017, or on an interim basis, if required. Any future significant decline in our operations compared to our internal forecast could result in a non-cash goodwill impairment charge as a result of any such test.

For further discussion of our 2016 annual goodwill impairment test, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for the year ended DecemberMarch 31, ~~2016.~~2020.

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NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 3 ~~“New~~"New Accounting ~~Pronouncements”~~Pronouncements" within the notes to the consolidated financial statements for information on new accounting pronouncements.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks primarily from changes in interest rates and changes in the market value of our investments.

Market Risk and Interest Rate Risk

The value of our Convertible Notes is exposed to interest rate risk. Generally, the fair value of our fixed interest rate Convertible Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of our Convertible Notes is affected by our stock price. The carrying value of our Convertible Notes was $230.8 million as of September 30, 2017, which represents the liability component of the $250.0 million principal balance. The estimated fair value of our Convertible Notes at September 30, 2017 was $233.6 million, and was determined based on the quoted bid price of the Convertible Notes in an over-the-counter market as of the last day of trading for the quarter ended September 30, 2017, which was $93.438 per $100 principal amount.

Concurrent with the issuance of ~~the~~our Convertible Notes, we entered into separate convertible note hedge and warrant transactions. The convertible note hedge transactions ~~are~~were intended to reduce the potential future economic dilution associated with the conversion of the Convertible Notes and, combined with the warrants, effectively ~~raise~~raised the price at which economic dilution would occur from the initial conversion price of approximately ~~$79.89 to approximately $97.12 per share. Under the convertible note hedge transactions, we have the option to purchase a total of approximately~~ 3.1 million shares of our common stock, which iswas the number of shares initially issuable upon conversion of the Convertible Notes in full, at a price of approximately $79.89 ~~which corresponds~~to $97.12 per share. The convertible note hedge transactions expired in the third quarter of 2019 and the warrants are expiring incrementally on 100 different dates from January 6, 2020 to May 28, 2020. See Note 7 “Financing Arrangements” within the notes to the ~~initial conversion price of the~~consolidated financial statements for additional information on our Convertible Notes, subject to customary anti-dilution adjustments substantially similar to those in the Convertible Notes. Under the warrant transactions, the holders of the warrants have the option to purchase a total of approximately 3.1 million shares of our common stock at a price of approximately $97.12. If the average market value per share of our common stock for the reporting period exceeds the strike price of the warrants, the warrants will have a dilutive effectwhich matured on ~~our earnings per share.~~October 1, 2019.

We have exposure to changes in interest rates associated with borrowings under our bank credit facility, which has variable interest rates tied to LIBOR or an alternate base rate, at our option. At ~~September 30, 2017,~~March 31, 2020, we had borrowings outstanding under the credit facility totaling ~~$139.0~~$448.0 million that carried a weighted average interest rate of ~~3.4%~~2.3%, including the impact of the interest rate ~~swap~~swaps described below. A hypothetical 100 basis point change in ~~this~~the interest rate would have a ~~$0.9~~$2.5 million effect on our pretax income on an annualized basis, including the effect of the interest rate ~~swap.~~swaps outstanding at March 31, 2020. At December 31, ~~2016, our~~2019, we had borrowings outstanding under the credit facility ~~totaled $68.0~~totaling $205.0 million ~~and~~that carried a weighted average interest rate of ~~2.5%,~~3.0% including the impact of the interest rate swap outstanding at December 31, 2019. A hypothetical 100 basis point change in the interest rate would have a $1.6 million effect on our pretax income on an annualized basis, including the effect of the interest rate swap described below. The outstanding borrowings at December 31, 2016 were fully hedged against changes in interest rates by our interest rate swap, which had a notional amount of $68.0 million at December 31, 2016.

On April 4, 2013, we entered into a forward amortizing interest rate swap agreement effective March 31, 2014 and ending August 31, 2017. We entered into this derivative instrument to hedge against the interest rate risks of our variable-rate borrowings. The swap had an initial notional amount of $60.0 million and amortized quarterly until April 2016. In April 2016, the notional amount of this interest rate swap increased to $86.0 million and continued to amortize quarterly until it expired in August 2017. Under the terms of the interest rate swap agreement, we received from the counterparty interest on the notional amount based on one-month LIBOR and we paid to the counterparty a fixed rate of 0.985%.swap.

On June 22, 2017, we entered into a forward interest rate swap agreement effective August 31, 2017 and ending August 31, 2022, with a notional amount of $50.0 million. We entered into this derivative instrument ~~to continue~~ to hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-month LIBOR and we pay to the counterparty a fixed rate of 1.900%.

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We also have exposure to changes in interest rates associated with the promissory note assumed on June 30, 2017 in connection with our purchase of an aircraft, which has variable interest rates tied to LIBOR. At ~~September 30, 2017,~~March 31, 2020, the outstanding principal amount of the promissory note was ~~$5.0~~$3.7 million and carried an interest rate of ~~3.2%~~3.6%. A hypothetical 100 basis point change in this interest rate would not have a ~~$0.1 million~~material effect on our pretax ~~income,~~income. At December 31, 2019, the outstanding principal amount of the promissory note was $3.9 million and carried an interest rate of 3.7%. A hypothetical 100 basis point change in the interest rate as of December 31, 2018 would not have had a material effect on ~~an annualized basis.~~our pretax income.

We do not use derivative instruments for trading or other speculative purposes. From time to time, we invest excess cash in short-term marketable securities. These investments principally consist of overnight sweep accounts. Due to the short maturity of these investments, we have concluded that we do not have material market risk exposure.

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We have ~~a non-interest bearing~~an investment in the form of 1.69% convertible debt ~~investment~~ in Shorelight Holdings, LLC, a privately-held company, which we account for as an available-for-sale debt security. As such, the investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income. As of ~~September 30, 2017,~~March 31, 2020, the fair value of the investment was ~~$31.9~~$62.2 million, with a total cost basis of $40.9 million. At December 31, 2019, the fair value of the investment was $49.5 million, with a total cost basis of $27.9 million.

We have a preferred stock investment in Medically Home Group, Inc., a privately-held company, which we account for as an equity security without a readily determinable fair value using the measurement alternative. As such, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment. Any unrealized holding gains and losses resulting from observable price changes are recorded in our consolidated statement of operations. As of March 31, 2020, the carrying value of the investment was $5.0 million. Following our purchase, there has been no impairment, nor any observable price changes to our investment. See Note 10 “Fair Value of Financial Instruments” for further information on our long-term investments.



ITEM 4.	CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”~~"Exchange Act")) as of ~~September 30, 2017.~~March 31, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September 30, 2017,~~March 31, 2020, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended ~~September 30, 2017~~March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS.

The information required by this Item is incorporated by reference from Note 1413 "Commitments, Contingencies and Guarantees" included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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ITEM 1A.	RISK FACTORS.

The following information updates, and should be read in conjunction with, the information disclosed in Part 1, Item 1A, “Risk

Factors” ofin our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019 (the “2019 Annual Report”), which was filed with the Securities and

Exchange Commission on February ~~23, 2017.~~26, 2020.

Our results of operations have been adversely affected and, in the future, could be materially adversely impacted by the coronavirus (COVID-19) pandemic.

The worldwide spread of coronavirus (COVID-19) has created significant volatility, uncertainty and disruption to the global economy. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including:

the duration and scope of the pandemic;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

the effect on our clients and client demand for our services and solutions, including the effect on the healthcare industry which is an area of significant focus for our business;

the impact on our key third-party vendors;

the effect on the businesses in which we have invested;

our ability to sell and provide our services and solutions and maintain adequate utilization levels, including as a result of travel restrictions and people working from home;

the ability of our clients to pay for our services and solutions;

any disruption to the Internet and related systems, which may impact our ability to provide our services and solutions remotely, and increased vulnerability to hackers or third parties seeking to disrupt operations; and

any closures of our clients’ offices and facilities.

Additionally, in some instances, clients have slowed down decision making, delayed planned work or are seeking to reduce the scope of current engagements or terminate existing agreements, which may continue. Any of these events could cause or contribute to the risks and uncertainties enumerated in our 2019 Annual Report and could materially adversely affect our business, financial condition, results of operations and/or stock price.

Our goodwill and other intangible assets represent a substantial amount of our total assets, and we may be required to recognize a non-cash impairment charge for these assets if the performance of one or more of our reporting units falls below our expectations.

Our total assets reflect a substantial amount of intangible assets, primarily goodwill. At December 31, ~~2016,~~2019, goodwill and other intangible assets totaled ~~$881.2~~$678.3 million, or ~~76%~~61%, of our total assets. During the ~~second~~first quarter of ~~2017,~~2020, we ~~wrote off $209.6~~incurred non-cash pretax goodwill impairment charges totaling $59.8 million ~~of goodwill~~ related to our ~~Healthcare~~Strategy and Innovation and Life Sciences reporting units within our Business Advisory segment, as discussed ~~below. At September 30, 2017,~~below, resulting in a total goodwill and other intangible ~~assets totaled $770.2~~asset balance of $614.4 million, or ~~71%~~52%, of our total ~~assets.~~assets as of March 31, 2020. The goodwill results from our acquisitions, representing the excess of the fair value of consideration transferred over the fair value of the net assets acquired. We test goodwill for impairment at the reporting unit level, annually and whenever events or circumstances make it more likely than not that an impairment may have occurred.

~~Table of Contents~~

~~remain~~ are cautious about near-term growth. As we have previously disclosed in prior quarters, if the financial performance of our Healthcare segment continued to decline and did not meet our expectations, we could be required to perform an interim impairment analysis with respect to our carrying value of goodwillresults for ~~the Healthcare~~these two reporting ~~unit prior to our usual annual test.~~units. Based on ~~forecasts prepared in connection with~~ our quarterly forecasting cycle during the second quarter of 2017, we determined that the likely time frame to improve the financial results of this segment will take longer than originally anticipated. As such, we concluded, during the second quarter of 2017, that the fair value of the Healthcare reporting unit may no longer exceed its carrying value. In connection withinternal projections and the preparation of our financial statements for the quarter ended ~~June 30, 2017,~~March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, we believed that the fair value of these two reporting units may no longer exceed their carrying values and performed an interim impairment test on ~~the Healthcare~~both reporting ~~unit.~~units. Based on the estimated fair ~~value~~values of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting units described below, we recorded non-cash pretax goodwill impairment charges of $49.9 million and $9.9 million, respectively, in the first quarter of 2020. The $49.9 million non-cash pretax

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charge related to the Strategy and Innovation reporting unit ~~we recorded a $209.6~~reduced the goodwill balance of the reporting unit to $37.5 million. The $9.9 million non-cash pretax charge inrelated to the ~~second quarter~~Life Sciences reporting unit reduced the goodwill balance of ~~2017~~the reporting unit to ~~reduce the carrying value of goodwill in our Healthcare reporting unit.~~zero.

Determining the fair value of any reporting unit requires us to make significant judgments, estimates, and assumptions. While we believe that the estimates and assumptions underlying our valuation ~~of the Healthcare reporting unit~~methodology are reasonable, these estimates and assumptions could have a significant impact on whether or not ~~another~~a non-cash impairment charge is recognized ~~in the future~~ and also the magnitude of any such charge. The results of an impairment analysis are as of a point in time. There is no assurance that the actual future earnings or cash flows of our ~~Healthcare~~ reporting ~~unit~~units will be consistent with our projections. We will monitor any changes to our assumptions and will evaluate goodwill as ~~part of our annual goodwill impairment testing in the fourth quarter of 2017, or on an interim basis, if required.~~deemed warranted during future periods. Any ~~future~~ significant decline in our operations ~~compared to our internal forecast~~ could result in ~~another~~additional non-cash goodwill impairment ~~charge,~~charges or impairment charges with respect to our other intangible assets, which could be material.

Three of our reporting units have been established primarily or entirely through recent business acquisitions: Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences. Our Enterprise Solutions and Analytics reporting unit was established with the acquisition of Blue Stone International, LLC in October 2013. Since that time, we have completed five additional business acquisitions within the reporting unit, most recently the acquisitions of the U.S. assets and international assets of ADI Strategies in May 2016 and April 2017, respectively. Our Strategy and Innovation reporting unit was established with the acquisition of Innosight in March 2017. Our Life Sciences reporting unit is primarily comprised of two recent acquisitions: The Frankel Group Associates LLC in January 2014 and Pope Woodhead in January 2017.

Our most recent goodwill impairment test for the Life Sciences reporting unit was performed as of June 1, 2017, as part of the reorganization of our internal financial reporting structure, as discussed in the "Critical Accounting Policies" section within Part I - Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Based on the results of that analysis, the reporting unit’s fair value exceeded its carrying value by 16%.

Since the date of the most recent goodwill impairment tests for the Enterprise Solutions and Analytics and Life Sciences reporting units, and since the inception of the Strategy and Innovation reporting unit, the performance of these three reporting units has continued to reasonably meet our expectations such that no triggering event for an interim goodwill impairment analysis was identified. We will monitor any changes to our assumptions and will evaluate goodwill as part of our annual goodwill impairment testing in the fourth quarter of 2017, or on an interim basis, if required. Any future significant decline in our operations compared to our internal forecast could result in a non-cash goodwill impairment charge as a result of any such test.

Refer to “Critical Accounting Policies” within Part I - Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 64 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for further discussion of ~~business combinations,~~our goodwill, intangible assets, and impairment tests performed in ~~2017.~~2020.

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ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Our Stock Ownership Participation Program, 2012 Omnibus Incentive Plan, and 2004 Omnibus Stock Plan, which was replaced by the 2012 Omnibus Incentive Plan, permit the netting of common stock upon vesting of restricted stock awards to satisfy individual tax withholding requirements. During the quarter ended ~~September 30, 2017,~~March 31, 2020, we reacquired ~~4,798~~120,000 shares of common stock with a weighted average fair market value of ~~$39.78~~$59.44 as a result of such tax withholdings.

~~Our board of directors authorized~~We currently have a share repurchase program ~~pursuant~~permitting us to ~~which we may, from time to time,~~ repurchase up to $125 million of our common stock through October 31, ~~2017~~2020 (the "Share Repurchase Program"). ~~During the fourth quarter of 2017, our board of directors authorized an extension of the Share Repurchase Program through October 31, 2018.~~ The amount and timing of the repurchases will be determined by management and will depend on a variety of factors, including the trading price of our common stock, capacity under our line of credit, general market and business conditions, and applicable legal requirements.

The following table provides information with respect to purchases we made of our common stock during the quarter ended ~~September 30, 2017.~~March 31, 2020.

Period
Total Number of Shares Purchased ⁽¹⁾

Average Price
Paid per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Dollar Value of Shares
that may yet be
Purchased under the
Plans or Programs ⁽²⁾
July 1, 2017 - July 31, 2017 3,194
$ 43.08
—
$ 35,143,546
August 1, 2017 - August 31, 2017 796
$ 35.47
—
$ 35,143,546
September 1, 2017 - September 30, 2017 808
$ 30.95
—
$ 35,143,546
Total 4,798
$ 39.78
—



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares that may yet be Purchased under the Plans or Programs ⁽²⁾
January 1, 2020 - January 31, 2020	134,346	$	67.90	125,463	$	12,408,601
February 1, 2020 - February 29, 2020	188,547	$	65.55	188,535	$	43,572
March 1, 2020 - March 31, 2020	111,105	$	58.70	—	$	43,572
Total	433,998	$	64.53	313,998


(1)	The number of shares repurchased ~~for each period represents~~includes 8,883 shares in January 2020, 12 shares in February 2020 and 111,105 shares in March 2020 to satisfy employee tax withholding requirements. These shares do not reduce the repurchase authority under the Share Repurchase Program.


(2)	As of the end of the period.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.

None.



ITEM 4.	MINE SAFETY DISCLOSURES.

Not applicable.



ITEM 5.	OTHER INFORMATION.

None.

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ITEM 6.	EXHIBITS.

(a) The following exhibits are filed as part of this Quarterly Report on Form 10-Q.

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

herewith

Furnished

herewith

Form

Period

Ending

Exhibit

Filing

Date

10.1

~~Amendment No. 2 of the Credit~~Senior Management Agreement ~~dated as of October 24, 2017,~~ by and ~~among~~between Huron Consulting Group Inc.~~, as Borrower, certain subsidiaries, as Guarantors,~~ and ~~Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders.~~Ernest W. Torain, Jr.

31.1

Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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 thereunto duly authorized.



		Huron Consulting Group Inc.
		(Registrant)

Date:	~~November 1, 2017~~April 30, 2020	/S/ JOHN D. KELLY
		John D. Kelly
		Executive Vice President, Chief Financial Officer and Treasurer

5640



Fair value of consideration transferred
Cash	$	90,725
Common stock	9,560
Contingent consideration liability	12,050
Net working capital adjustment	1,272
Total consideration transferred	$	113,607



	March 1, 2017
Assets acquired:
Accounts receivable	$	7,752
Unbilled services	1,881
Prepaid expenses and other current assets	468
Property and equipment	419
Intangible assets	18,015
Liabilities assumed:
Accounts payable	531
Accrued expenses and other current liabilities	916
Accrued payroll and related benefits	883
Deferred revenues	30
Total identifiable net assets	26,175
Goodwill	87,432
Total purchase price	$	113,607



	Fair Value		Useful Life in Years
Customer relationships	$	9,500	6
Trade name	6,000		6
Customer contracts	1,000		1
Non-compete agreements	1,300		5
Favorable lease contract	215		1
Total intangible assets subject to amortization	$	18,015



		As of September 30, 2017				As of December 31, 2016
	Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Customer relationships	4 to 13	$	106,174	$	47,325	$	89,279	$	34,827
Trade names	2 to 6	29,016		17,065		22,930		11,652
Customer contracts	1 to 4	27,554		25,919		26,497		21,295
Technology and software	3 to 5	9,340		4,490		8,970		2,667
Non-competition agreements	1 to 5	5,295		2,482		3,685		1,697
Publishing content	3	3,300		2,888		3,300		2,062
Favorable lease contract	3	720		369		720		203
In-process technology	Indefinite	—		—		370		—
Total		$	181,399	$	100,538	$	155,751	$	74,403



	As of September 30,
	2017	2016
Unvested restricted stock awards	627	5
Outstanding common stock options	194	—
Convertible senior notes	3,129	3,129
Warrants related to the issuance of convertible senior notes	3,129	3,129
Total anti-dilutive securities	7,079	6,263



	September 30, 2017			December 31, 2016
1.25% convertible senior notes due 2019	$	230,834		$	224,065
Senior secured credit facility	139,000			68,000
Promissory note due 2024	4,991			—
Total long-term debt	$	374,825		$	292,065
Current maturities of debt⁽¹⁾	(497		)	—
Long-term debt, net of current portion	$	374,328		$	292,065



	September 30, 2017			December 31, 2016
Liability component:
Proceeds	$	250,000		$	250,000
Less: debt discount, net of amortization	(16,666		)	(22,520		)
Less: debt issuance costs, net of amortization	(2,500		)	(3,415		)
Net carrying amount	$	230,834		$	224,065
Equity component ⁽¹⁾	$	39,287		$	39,287



	Promissory Note
Balance as of December 31, 2016	$	2,325
Interest payments received	(140		)
Principal payment received	(177		)
Change in fair value of promissory note	303
Balance as of September 30, 2017	$	2,311



	Contingent Consideration for Business Acquisitions
Balance as of December 31, 2016	$	8,827
Acquisitions	15,489
Payments	(1,938		)
Remeasurement of contingent consideration for business acquisitions	(222		)
Unrealized loss due to foreign currency translation	313
Balance as of September 30, 2017	$	22,469



	September 30, 2017				December 31, 2016
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
1.25% convertible senior notes due 2019	$	230,834	$	233,595	$	224,065	$	245,018



	Three Months Ended September 30, 2017									Three Months Ended September 30, 2016
	Before Taxes			Tax (Expense) Benefit			Net of Taxes			Before Taxes			Tax (Expense) Benefit			Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	609		$	—		$	609		$	50		$	—		$	50
Unrealized loss on investment	$	(3,609	)	$	1,409		$	(2,200	)	$	(3,329	)	$	1,291		$	(2,038	)
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	41		$	(16	)	$	25		$	96		$	(35	)	$	61
Reclassification adjustments into earnings	(3		)	1			(2		)	101			(41		)	60
Net unrealized gain	$	38		$	(15	)	$	23		$	197		$	(76	)	$	121
Other comprehensive income (loss)	$	(2,962	)	$	1,394		$	(1,568	)	$	(3,082	)	$	1,215		$	(1,867	)



	Nine Months Ended September 30, 2017									Nine Months Ended September 30, 2016
	Before Taxes			Tax (Expense) Benefit			Net of Taxes			Before Taxes			Tax (Expense) Benefit			Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	1,835		$	—		$	1,835		$	52		$	—		$	52
Unrealized loss on investment	$	(2,738	)	$	1,069		$	(1,669	)	$	(1,899	)	$	736		$	(1,163	)
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(41	)	$	16		$	(25	)	$	(367	)	$	146		$	(221	)
Reclassification adjustments into earnings	36			(15		)	21			323			(129		)	194
Net unrealized loss	$	(5	)	$	1		$	(4	)	$	(44	)	$	17		$	(27	)
Other comprehensive income (loss)	$	(908	)	$	1,070		$	162		$	(1,891	)	$	753		$	(1,138	)



			Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Contingent consideration	$	22,469	$	7,743	$	13,126	$	1,600	$	—
Promissory note—principal and interest	$	5,682	$	650	$	1,293	$	1,283	$	2,456