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~~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~~
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. Yes ý☒ 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). Yes ý☒ 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

☒

ýAccelerated Filer

☐

~~Accelerated filer~~Non-accelerated Filer

☐

Smaller Reporting
Company

☐

Emerging Growth Company

~~Non-accelerated filer~~

o ~~(Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

~~Emerging 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~~2020, 22,871,243 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

Table of Contents

~~Table of Contents~~

Huron Consulting Group Inc.

HURON CONSULTING GROUP INC.

INDEX


				Page
Part I – Financial Information

			~~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		2824

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		5146

Item 4.		Controls and Procedures		5247

Part II – Other Information

Item 1.		Legal Proceedings		5247

Item 1A.		Risk Factors		5247

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		5448

Item 3.		Defaults Upon Senior Securities		5449

Item 4.		Mine Safety Disclosures		5449

Item 5.		Other Information		5449

Item 6.		Exhibits		5550

Signature				5651

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				September 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	8,660		$	17,027		Cash and cash equivalents	$	74,745	$	11,604
Receivables from clients, net	94,025			94,246
Unbilled services, net	65,432			51,290
Receivables from clients, net of allowances of $8,520 and $8,907, respectively							Receivables from clients, net of allowances of $8,520 and $8,907, respectively	94,644		116,571
Unbilled services, net of allowances of $2,734 and $2,994, respectively							Unbilled services, net of allowances of $2,734 and $2,994, respectively	78,346		79,937
Income tax receivable	4,018			4,211			Income tax receivable	244		2,376
Prepaid expenses and other current assets	15,106			13,308			Prepaid expenses and other current assets	11,853		14,248
Total current assets	187,241			180,082			Total current assets	259,832		224,736
Property and equipment, net	47,075			32,434			Property and equipment, net	34,879		38,413
Deferred income taxes, net	15,159			—			Deferred income taxes, net	11,425		1,145
Long-term investment	31,937			34,675
Long-term investments							Long-term investments	66,122		54,541
Operating lease right-of-use assets							Operating lease right-of-use assets	50,499		54,954
Other non-current assets	26,149			24,814			Other non-current assets	58,944		52,177
Intangible assets, net	80,861			81,348			Intangible assets, net	22,250		31,625
Goodwill	689,375			799,862			Goodwill	586,730		646,680
Total assets	$	1,077,797		$	1,153,215		Total assets	$	1,090,681	$	1,104,271
Liabilities and stockholders’ equity							Liabilities and stockholders’ equity
Current liabilities:							Current liabilities:
Accounts payable	$	10,259		$	7,273		Accounts payable	$	4,838	$	7,944
Accrued expenses and other current liabilities	22,846			19,788			Accrued expenses and other current liabilities	23,646		18,554
Accrued payroll and related benefits	62,451			82,669			Accrued payroll and related benefits	105,276		141,605
Accrued contingent consideration for business acquisitions	7,743			1,985
Current maturities of long-term debt							Current maturities of long-term debt	540		529
Current maturities of operating lease liabilities							Current maturities of operating lease liabilities	9,058		7,469
Deferred revenues	25,495			24,053			Deferred revenues	31,768		28,443
Total current liabilities	128,794			135,768			Total current liabilities	175,126		204,544
Non-current liabilities:							Non-current liabilities:
Deferred compensation and other liabilities	20,336			24,171			Deferred compensation and other liabilities	44,699		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			Long-term debt, net of current portion	250,917		208,324
Deferred lease incentives	15,236			10,703
Operating lease liabilities, net of current portion							Operating lease liabilities, net of current portion	64,318		69,233
Deferred income taxes, net	—			35,633			Deferred income taxes, net	555		8,070
Total non-current liabilities	424,626			369,414			Total non-current liabilities	360,489		314,262
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity							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; 25,444,128 and 25,144,764 shares issued at September 30, 2020 and December 31, 2019, respectively							Common stock; $0.01 par value; 500,000,000 shares authorized; 25,444,128 and 25,144,764 shares issued at September 30, 2020 and December 31, 2019, respectively	247		247
Treasury stock, at cost, 2,571,266 and 2,425,430 shares at September 30, 2020 and December 31, 2019, respectively							Treasury stock, at cost, 2,571,266 and 2,425,430 shares at September 30, 2020 and December 31, 2019, respectively	(129,438)		(128,348)
Additional paid-in capital	431,211			405,895			Additional paid-in capital	454,153		460,781
Retained earnings	210,543			351,483			Retained earnings	220,146		237,849
Accumulated other comprehensive income	3,777			3,615			Accumulated other comprehensive income	9,958		14,936
Total stockholders’ equity	524,377			648,033			Total stockholders’ equity	555,066		585,465
Total liabilities and stockholders’ equity	$	1,077,797		$	1,153,215		Total liabilities and stockholders’ equity	$	1,090,681	$	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 September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2020		2019		2020		2019
Revenues and reimbursable expenses:													Revenues and reimbursable expenses:
Revenues	$	176,376		$	183,400		$	546,643		$	548,148		Revenues	$	205,304	$	219,289	$	645,780	$	644,488
Reimbursable expenses	17,982			19,093			55,862			54,636			Reimbursable expenses	2,860		23,636		25,133		65,787
Total revenues and reimbursable expenses	194,358			202,493			602,505			602,784			Total revenues and reimbursable expenses	208,164		242,925		670,913		710,275
Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):													Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
Direct costs	113,775			108,354			343,185			323,310			Direct costs	145,459		143,034		451,221		422,442
Amortization of intangible assets and software development costs	2,657			4,052			8,388			11,278			Amortization of intangible assets and software development costs	1,370		1,162		4,005		3,450
Reimbursable expenses	18,079			18,956			55,901			54,747			Reimbursable expenses	2,840		23,571		25,095		65,897
Total direct costs and reimbursable expenses	134,511			131,362			407,474			389,335			Total direct costs and reimbursable expenses	149,669		167,767		480,321		491,789
Operating expenses and other losses (gains), net:
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			Selling, general and administrative expenses	38,561		48,123		126,864		151,409
Restructuring charges	1,347			1,049			5,295			4,129			Restructuring charges	59		127		1,777		2,156
Other losses (gains), net	880			494			(222		)	494
Litigation and other gains													Litigation and other gains	0		(630)		(150)		(1,571)
Depreciation and amortization	9,946			8,092			28,549			23,064			Depreciation and amortization	6,176		6,962		18,483		21,285
Goodwill impairment charge	—			—			209,600			—
Goodwill impairment charges													Goodwill impairment charges	0		0		59,816		0
Total operating expenses and other losses (gains), net	53,749			47,891			375,359			147,624			Total operating expenses and other losses (gains), net	44,796		54,582		206,790		173,279
Operating income (loss)	6,098			23,240			(180,328		)	65,825			Operating income (loss)	13,699		20,576		(16,198)		45,207
Other income (expense), net:													Other income (expense), net:
Interest expense, net of interest income	(4,880		)	(4,176		)	(13,811		)	(12,270		)	Interest expense, net of interest income	(2,259)		(4,374)		(7,516)		(13,156)
Other income, net	930			489			3,204			1,236
Total 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
Other income (expense), net													Other income (expense), net	2,035		(82)		687		2,830
Total other income (expense), net													Total other income (expense), net	(224)		(4,456)		(6,829)		(10,326)
Income (loss) from continuing operations before taxes													Income (loss) from continuing operations before taxes	13,475		16,120		(23,027)		34,881
Income tax expense (benefit)	(1,984		)	7,265			(49,740		)	19,498			Income tax expense (benefit)	2,388		2,414		(5,413)		7,256
Net income (loss) from continuing operations	4,132			12,288			(141,195		)	35,293			Net income (loss) from continuing operations	11,087		13,706		(17,614)		27,625
Income (loss) from discontinued operations, net of tax	238			4			690			(1,830		)
Loss from discontinued operations, net of tax													Loss from discontinued operations, net of tax	(29)		(52)		(89)		(195)
Net income (loss)	$	4,370		$	12,292		$	(140,505	)	$	33,463		Net income (loss)	$	11,058	$	13,654	$	(17,703)	$	27,430
Net earnings (loss) per basic share:													Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	0.19		$	0.58		$	(6.59	)	$	1.67		Net income (loss) from continuing operations	$	0.50	$	0.62	$	(0.81)	$	1.26
Income (loss) from discontinued operations, net of tax	0.01			—			0.03			(0.08		)
Loss from discontinued operations, net of tax													Loss from discontinued operations, net of tax	0		0		0		(0.01)
Net income (loss)	$	0.20		$	0.58		$	(6.56	)	$	1.59		Net income (loss)	$	0.50	$	0.62	$	(0.81)	$	1.25
Net earnings (loss) per diluted share:													Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	0.19		$	0.57		$	(6.59	)	$	1.65		Net income (loss) from continuing operations	$	0.50	$	0.61	$	(0.81)	$	1.23
Income (loss) from discontinued operations, net of tax	0.01			—			0.03			(0.09		)
Loss from discontinued operations, net of tax													Loss from discontinued operations, net of tax	0		0		0		(0.01)
Net income (loss)	$	0.20		$	0.57		$	(6.56	)	$	1.56		Net income (loss)	$	0.50	$	0.61	$	(0.81)	$	1.22
Weighted average shares used in calculating earnings per share:
Weighted average shares used in calculating earnings (loss) per share:													Weighted average shares used in calculating earnings (loss) per share:
Basic	21,505			21,076			21,413			21,084			Basic	21,905		22,052		21,868		21,973
Diluted	21,622			21,445			21,413			21,427			Diluted	22,175		22,561		21,868		22,425
Comprehensive income (loss):
Comprehensive income:													Comprehensive income:
Net income (loss)	$	4,370		$	12,292		$	(140,505	)	$	33,463		Net income (loss)	$	11,058	$	13,654	$	(17,703)	$	27,430
Foreign currency translation adjustments, net of tax	609			50			1,835			52			Foreign currency translation adjustments, net of tax	381		(630)		(294)		(673)
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													Unrealized gain (loss) on investment, net of tax	4,885		1,168		(1,051)		7,740
Unrealized loss on cash flow hedging instruments, net of tax													Unrealized loss on cash flow hedging instruments, net of tax	(243)		(149)		(3,633)		(998)
Other comprehensive income (loss)	(1,568		)	(1,867		)	162			(1,138		)	Other comprehensive income (loss)	5,023		389		(4,978)		6,069
Comprehensive income (loss)	$	2,802		$	10,425		$	(140,343	)	$	32,325		Comprehensive income (loss)	$	16,081	$	14,043	$	(22,681)	$	33,499

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 September 30,
	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2020	24,586,236	$	246	(2,786,798)	$	(128,646)	$	450,391	$	209,088	$	4,935	$	536,014
Comprehensive income									11,058		5,023		16,081
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	51,860	1		(4,130)	(212)		211						0
Exercise of stock options	6,800	0					179						179
Share-based compensation							3,372						3,372
Shares redeemed for employee tax withholdings				(12,468)	(580)								(580)

Balance at September 30, 2020	24,644,896	$	247	(2,803,396)	$	(129,438)	$	454,153	$	220,146	$	9,958	$	555,066

Balance at June 30, 2019	24,711,193	$	247	(2,742,826)	$	(127,133)	$	463,190	$	209,882	$	22,175	$	568,361
Comprehensive income									13,654		389		14,043
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	58,164	1		(3,741)	(169)		168						0
Exercise of stock options	10,000	0					235						235
Share-based compensation							5,664						5,664
Shares redeemed for employee tax withholdings				(12,657)	(746)								(746)
Balance at September 30, 2019	24,779,357	$	248	(2,759,224)	$	(128,048)	$	469,257	$	223,536	$	22,564	$	587,557

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


	Nine Months Ended September 30,
	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2019	24,603,308	$	247	(2,763,302)	$	(128,348)	$	460,781	$	237,849	$	14,936	$	585,465
Comprehensive income									(17,703)		(4,978)		(22,681)
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	321,986	3		94,180	6,707		(6,710)						0
Exercise of stock options	33,600	0					825						825
Share-based compensation							20,135						20,135
Shares redeemed for employee tax withholdings				(134,274)	(7,797)								(7,797)
Share repurchases	(313,998)	(3)					(20,878)						(20,881)
Balance at September 30, 2020	24,644,896	$	247	(2,803,396)	$	(129,438)	$	454,153	$	220,146	$	9,958	$	555,066

Balance at December 31, 2018	24,418,252	$	244	(2,671,962)	$	(124,794)	$	452,573	$	196,106	$	16,495	$	540,624
Comprehensive income									27,430		6,069		33,499
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	331,105	4		21,433	1,952		(1,956)						0
Exercise of stock options	30,000	0					703						703
Share-based compensation							17,937						17,937
Shares redeemed for employee tax withholdings				(108,695)	(5,206)								(5,206)

Balance at September 30, 2019	24,779,357	$	248	(2,759,224)	$	(128,048)	$	469,257	$	223,536	$	22,564	$	587,557

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,							Nine Months Ended September 30,
	2017			2016				2020		2019
Cash flows from operating activities:							Cash flows from operating activities:
Net income (loss)	$	(140,505	)	$	33,463		Net income (loss)	$	(17,703)	$	27,430
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:							Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization	37,881			34,344			Depreciation and amortization	22,511		25,410
Non-cash lease expense							Non-cash lease expense	5,844		6,413
Lease impairment charge							Lease impairment charge	0		805
Share-based compensation	11,711			13,145			Share-based compensation	18,559		18,094
Amortization of debt discount and issuance costs	7,604			7,171			Amortization of debt discount and issuance costs	595		8,066
Goodwill impairment charge	209,600			—
Allowances for doubtful accounts and unbilled services	3,812			7,107
Goodwill impairment charges							Goodwill impairment charges	59,816		0
Allowances for doubtful accounts							Allowances for doubtful accounts	539		191
Deferred income taxes	(51,062		)	4,980			Deferred income taxes	(16,125)		(262)
Gain on sale of business	(931		)	—
Loss on sale of business							Loss on sale of business	102		0
Change in fair value of contingent consideration liabilities	(222		)	494			Change in fair value of contingent consideration liabilities	0		(1,506)
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:							Changes in operating assets and liabilities, net of divestiture:
(Increase) decrease in receivables from clients, net							(Increase) decrease in receivables from clients, net	23,493		(6,817)
(Increase) decrease in unbilled services, net							(Increase) decrease in unbilled services, net	1,597		(30,163)
(Increase) decrease in current income tax receivable / payable, net	(32		)	(3,039		)	(Increase) decrease in current income tax receivable / payable, net	9,455		10,561
(Increase) decrease in other assets	(1,802		)	12,669			(Increase) decrease in other assets	(3,426)		(4,160)
Increase (decrease) in accounts payable and accrued liabilities	1,850			(2,860		)
Increase (decrease) in accounts payable and other liabilities							Increase (decrease) in accounts payable and other liabilities	(5,272)		(3,565)
Increase (decrease) in accrued payroll and related benefits	(21,928		)	(17,707		)	Increase (decrease) in accrued payroll and related benefits	(25,290)		(1,850)
Increase (decrease) in deferred revenues	(318		)	2,028			Increase (decrease) in deferred revenues	3,290		3,098
Net cash provided by operating activities	52,432			79,745			Net cash provided by operating activities	77,985		51,745
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment, net	(20,139		)	(9,372		)	Purchases of property and equipment, net	(5,731)		(10,024)
Purchases of investment securities							Purchases of investment securities	(13,000)		0
Investment in life insurance policies	(1,826		)	(1,890		)	Investment in life insurance policies	(2,026)		(4,434)
Distributions from life insurance policies	2,889			—
Purchases of businesses, net of cash acquired	(106,915		)	(69,133		)

Purchases of businesses							Purchases of businesses	(801)		(2,500)
Capitalization of internally developed software costs	(938		)	(838		)	Capitalization of internally developed software costs	(6,830)		(7,462)
Proceeds from note receivable	177			—
Proceeds from sale of business	1,499			—

Net cash used in investing activities	(125,253		)	(81,233		)	Net cash used in investing activities	(28,388)		(24,420)
Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from exercise of stock options	—			123
Proceeds from exercises of stock options							Proceeds from exercises of stock options	825		703
Shares redeemed for employee tax withholdings	(4,450		)	(4,837		)	Shares redeemed for employee tax withholdings	(7,797)		(5,206)
Share repurchases	—			(55,265		)	Share repurchases	(22,115)		0
Proceeds from borrowings under credit facility	241,000			168,000
Repayments of debt	(170,082		)	(156,000		)
Proceeds from bank borrowings							Proceeds from bank borrowings	283,000		105,500
Repayments of bank borrowings							Repayments of bank borrowings	(240,396)		(105,885)
Payments for debt issuance costs	(395		)	—			Payments for debt issuance costs	0		(1,498)
Payments of contingent consideration liabilities	(1,811		)	—			Payments of contingent consideration liabilities	0		(4,674)
Net cash provided by (used in) financing activities	64,262			(47,979		)	Net cash provided by (used in) financing activities	13,517		(11,060)
Effect of exchange rate changes on cash	192			133			Effect of exchange rate changes on cash	27		38
Net decrease in cash and cash equivalents	(8,367		)	(49,334		)
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents	63,141		16,303
Cash and cash equivalents at beginning of the period	17,027			58,437			Cash and cash equivalents at beginning of the period	11,604		33,107
Cash and cash equivalents at end of the period	$	8,660		$	9,103		Cash and cash equivalents at end of the period	$	74,745	$	49,410
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:							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, accrued expenses and accrued payroll and related benefits							Property and equipment expenditures and capitalized software included in accounts payable, accrued expenses and accrued payroll and related benefits	$	2,049	$	3,085
Operating lease right-of-use asset obtained in exchange for operating lease liability							Operating lease right-of-use asset obtained in exchange for operating lease liability	$	1,456	$	3,628

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, Huron helps 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, Huron creates 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, we provide guidance to support~~ organizations ~~as they contend with the changes transforming their industries and businesses.~~it serves.

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~~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~~2020 and June 30, ~~2017.~~2020. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.

Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related disclosures. The business and economic uncertainty resulting from the coronavirus (COVID-19) pandemic has made such estimates and assumptions more difficult to predict. Accordingly, actual results and outcomes could differ from those estimates.

In the third quarter of 2020, we identified an error on our previously reported consolidated balance sheet as of March 31, 2020 and June 30, 2020, which resulted in an overstatement of unbilled services by $0.6 million and $0.8 million, respectively. The error also impacted our previously reported consolidated statement of operations for the three months ended March 31, 2020 and June 30, 2020, which resulted in an overstatement of revenues by $0.6 million and $0.2 million, respectively, and an overstatement of net income by $0.4 million and $0.2 million, respectively. For the six months ended June 30, 2020, the error resulted in an overstatement of revenues and net income by $0.8 million and $0.6 million, respectively. This error related to a revenue recognition calculation error for a specific fee component of one contract within our Healthcare segment. This error was corrected in the third quarter of 2020 by decreasing revenues and unbilled services by $0.8 million, and resulted in a $0.6 million decrease to net income in the third quarter of 2020. This error, which was not material to the first, second, or third quarter 2020 results, had no impact on our consolidated balance sheet as of September 30, 2020 or our consolidated statement of operations for the nine months ended September 30, 2020.

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 aspects of the accounting for share-based payment transactions, including~~ the accounting for income taxes ~~classification of excess tax benefits on~~by eliminating certain exceptions to the ~~statement of cash flows, and forfeitures. We adopted this~~ guidance in the first quarter of 2017, at which time 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 on a modified retrospective basis as a cumulative-effect adjustment to retained earnings 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~~ASC 740, Income Taxes, 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 does 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 2017 on a

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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 franchise taxes and enacted changes in tax laws or tax rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. On January 1, 2020, we elected to early adopt ASU 2019-12 on a modified retrospective basis for those amendments that are not applied on a prospective basis. The adoption of ~~these amendments~~ASU 2019-12 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

~~Table of Contents~~

~~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.~~

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 of the Business Advisory segment from the date of acquisition.

~~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.

~~Table of Contents~~

~~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.

~~Table of Contents~~

~~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.

~~Table of Contents~~

~~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.

~~Table of Contents~~

~~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 months ended September 30, ~~2017.~~

2020.

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


	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)		0		(396,076)
Goodwill, net as of December 31, 2019	428,729		114,062		103,889		646,680
Goodwill recorded in connection with a business acquisition (1)	0		0		495		495
Goodwill impairment charge	0		(59,816)		0		(59,816)
Foreign currency translation	0		(629)		0		(629)
Goodwill, net as of September 30, 2020	$	428,729	$	53,617	$	104,384	$	586,730


~~(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~~(1)On August 1, 2020, we completed the acquisition of B3i Analytics, LLC, a software firm that provides a software as a solution ("SaaS") application to leverage internal and external data to help higher education institutions forecast research revenue. The results of operations of the acquired business is included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition. This acquisition is not significant to our consolidated financial statements.

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

~~Since~~The worldwide spread of the coronavirus (COVID-19) in the first quarter of ~~2016,~~2020 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 we expect it will continue to negatively 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 expected it to have an unfavorable impact on sales, increase uncertainty in the backlog and negatively impact full year 2020 results. 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, 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 ofidentify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the ~~expansion~~duration of ~~our existing services such as those in our Studer Group, strategy, physician and technology offerings, and workforce reductions~~the projects within these practices are typically short-term. Therefore, due to ~~better align resources with market demand. While~~ the ~~initiatives undertaken to improve~~uncertainty caused by the ~~financial performance of our Healthcare segment~~COVID-19 pandemic, we are ~~yielding some positive impacts, hospitals and health systems continue to face regulatory and funding uncertainty; therefore, we remain~~ 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, during the first quarter of 2020 we believed that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on both reporting units as of March 31, 2020.

Based on the ~~Healthcare~~estimated fair values of the Strategy and Innovation and Life Sciences reporting ~~unit.~~units, 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.

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, ~~utilizing the guideline company method,~~ with a fifty-fifty weighting. ~~Based on~~

In the ~~estimated fair value of~~income approach, we utilized a discounted cash flow analysis, which involved estimating the ~~Healthcare~~expected after-tax cash flows that will be generated by each reporting unit ~~we recorded a $209.6~~

and then discounting those cash flows to present value, reflecting the relevant risks associated with each

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

~~million non-cash pretax charge~~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 discount rates that reflects the risk inherent in the ~~second quarter~~future cash flows. In estimating future cash flows, we relied on internally generated seven-year forecasts. For periods after the seven-year forecast, we assumed a long-term annual revenue growth rate of ~~2017~~3.0% for both the Strategy and Innovation and Life Sciences reporting units and a long-term EBITDA margin of 24.8% and 6.7%, respectively. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information. Our discounted cash flow analysis assumed weighted average cost of capital discount 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 revenue 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 ~~reduce~~pay for a company. These multiples were evaluated and adjusted based on specific characteristics of the ~~carrying value~~Strategy and Innovation and Life Sciences reporting units relative to the selected guideline companies and applied to the reporting units' operating data to arrive at an indication of value. The range of revenue multiples used in the valuation of the Strategy and Innovation and Life Sciences reporting units was 1.20x to 1.70x and 0.30x to 0.40x, respectively.

Concurrently with the goodwill inimpairment tests performed over the Strategy and Innovation and Life Sciences 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 reporting ~~unit.~~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 ~~test~~tests performed on the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit,~~units as of March 31, 2020, we performed an impairment ~~test~~tests on the long-lived assets allocated to the asset groups ~~within~~of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit.~~units. Based on the impairment ~~test~~tests 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~~March 31, 2020. We did not identify any indicators that would lead us to ~~assess performance and allocate resources, by moving our Life Sciences practice from~~believe that 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 faircarrying values of the ~~Life Sciences reporting unit and the remaining Education reporting unit. The estimated fair values were determined using a combination~~long-lived assets allocated to our other asset groups may not be recoverable as of ~~the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.~~

March 31, 2020.

In ~~conjunction with~~ the ~~goodwill reallocation,~~second and third quarters of 2020, 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 determineddid not identify any indicators that would lead us to believe that the fair values of any of our ~~Education~~ reporting ~~unit and Life Sciences reporting unit exceeded~~units may not exceed their carrying ~~values. As such,~~values, nor did we ~~concluded~~identify any indicators that ~~there was no indication~~would lead us to believe that the carrying values of ~~goodwill impairment for either reporting unit.~~

~~Table of Contents~~

~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

the long-lived assets allocated to our asset groups may not be recoverable.

Intangible Assets

Intangible assets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 consisted of the following:


		As of September 30, 2017				As of December 31, 2016						As of September 30, 2020				As of December 31, 2019
	Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			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	Customer relationships	3 to 13	$	83,287	$	64,757	$	87,577	$	61,882
Trade names	2 to 6	29,016		17,065		22,930		11,652		Trade names	5 to 6	28,930		26,788		28,930		25,894
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		Technology and software	5	5,800		5,053		5,694		4,321
Non-competition agreements	1 to 5	5,295		2,482		3,685		1,697		Non-competition agreements	5	1,880		1,441		2,220		1,447
Publishing content	3	3,300		2,888		3,300		2,062
Favorable lease contract	3	720		369		720		203
In-process technology	Indefinite	—		—		370		—
Customer contracts										Customer contracts	2	800		408		800		52
Total		$	181,399	$	100,538	$	155,751	$	74,403	Total		$	120,697	$	98,447	$	125,221	$	93,596

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~~

Table 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~~Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts 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.thousands, except per share amounts)

(Unaudited)

Intangible asset amortization expense was ~~$8.8~~$3.2 million and $4.2 million for the three months ended ~~both~~ September 30, ~~2017~~2020 and ~~2016. Intangible asset amortization expense was $26.4~~2019, respectively; and $9.6 million and ~~$24.4~~$13.0 million for the nine months ended September 30, ~~2017~~2020 and ~~2016, respectively.~~2019. 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.~~2020.


Year Ending December 31,	Estimated Amortization Expense		Year Ending December 31,	Estimated Amortization Expense
2017	$	34,966
2018	$	23,936
2019	$	17,279
2020	$	12,116	2020	$	12,635
2021	$	8,070	2021	$	8,422
2022	$	6,092	2022	$	6,186
2023			2023	$	3,582
2024			2024	$	797

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 September 30, 2020 and 2019, we recognized revenues of $205.3 million and $219.3 million, respectively. Of the $205.3 million recognized in the third quarter of 2020, we recognized revenues of $7.4 million from obligations satisfied, or partially satisfied, in prior periods, of which $5.7 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments and $1.7 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements. Of the $219.3 million recognized in the third quarter of 2019, we recognized revenues of $4.8 million from obligations satisfied, or partially satisfied, in prior periods, of which $3.7 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments and $1.1 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements.

For the nine months ended September 30, 2020 and 2019, we recognized revenues of $645.8 million and $644.5 million, respectively. Of the $645.8 million recognized in the first nine months of 2020, we recognized revenues of $11.0 million from obligations satisfied, or partially satisfied, in prior periods, of which $6.5 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $4.5 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments. Of the $644.5 million recognized in the first nine months of 2019, we recognized revenues of $2.6 million from obligations satisfied, or partially satisfied, in prior periods, primarily due to the release of allowances on unbilled services due to securing contract amendments. During the first nine months of 2019, we recognized a $1.4 million decrease to revenues due to changes in the estimates of our variable consideration under performance-based billing arrangements.

As of September 30, 2020, we had $67.9 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 $67.9 million of performance obligations, we expect to recognize approximately $14.5 million as revenue in 2020, $34.2 million in 2021, and the remaining $19.2 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.

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 September 30, 2020 and December 31, 2019 was $13.4 million and $12.6 million, respectively. The $0.8 million increase primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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 September 30, 2020 and December 31, 2019, was $31.8 million and $28.4 million, respectively. The $3.4 million increase primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the three and nine months ended September 30, 2020, $3.0 million and $24.3 million, respectively, 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.

~~Table of Contents~~

~~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,
	2020		2019		2020		2019
Net income (loss) from continuing operations	$	11,087	$	13,706	$	(17,614)	$	27,625
Loss from discontinued operations, net of tax	(29)		(52)		(89)		(195)
Net income (loss)	$	11,058	$	13,654	$	(17,703)	$	27,430

Weighted average common shares outstanding – basic	21,905		22,052		21,868		21,973
Weighted average common stock equivalents	270		509		0		452
Weighted average common shares outstanding – diluted	22,175		22,561		21,868		22,425

Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	0.50	$	0.62	$	(0.81)	$	1.26
Loss from discontinued operations, net of tax	0		0		0		(0.01)
Net income (loss)	$	0.50	$	0.62	$	(0.81)	$	1.25

Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	0.50	$	0.61	$	(0.81)	$	1.23
Loss from discontinued operations, net of tax	0		0		0		(0.01)
Net income (loss)	$	0.50	$	0.61	$	(0.81)	$	1.22

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 September 30,			As of September 30,
	2017	2016		2020	2019
Unvested restricted stock awards	627	5	Unvested restricted stock awards	59	0
Outstanding common stock options	194	—

Convertible senior notes	3,129	3,129	Convertible senior notes	0	3,129
Warrants related to the issuance of convertible senior notes	3,129	3,129	Warrants related to the issuance of convertible senior notes	0	3,129
Total anti-dilutive securities	7,079	6,263	Total anti-dilutive securities	59	6,258

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,~~2020, we had 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. No shares were repurchased during the first nine months of 2017. In the first quarter of ~~2016,~~2020, we repurchased and retired ~~982,192~~313,998 shares for ~~$55.3 million. No shares were repurchased in the second or third quarter of 2016. As of September 30, 2017, $35.1 million remains available for share repurchases.~~

$20.9

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

million. The 313,998 shares repurchased and retired in the first quarter of 2020 were reflected 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 second or third quarters of 2020 nor were any shares repurchased during the first nine months of 2019. As of September 30, 2020, less than $0.1 million remained available for share repurchases. The Share Repurchase Program expired on October 31, 2020.

7. Financing Arrangements

A summary of the carrying amounts of our debt follows:


							September 30, 2020		December 31, 2019
	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		Senior secured credit facility	$	248,000	$	205,000
Promissory note due 2024	4,991			—		Promissory note due 2024	3,457		3,853
Total long-term debt	$	374,825		$	292,065	Total long-term debt	$	251,457	$	208,853
Current maturities of debt⁽¹⁾	(497		)	—
Current maturities of long-term debt						Current maturities of long-term debt	(540)		(529)
Long-term debt, net of current portion	$	374,328		$	292,065	Long-term debt, net of current portion	$	250,917	$	208,324


~~(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.~~

2020.

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


	Principal Payments of Long-Term Debt
2020	$	133
2021	$	544
2022	$	559
2023	$	575
2024	$	249,646

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 in accordance with their terms.~~

~~Upon~~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.

~~Table of Contents~~

~~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.~~

Table of Contents

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 presented.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016			Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Contractual interest coupon	$	781	$	781	$	2,344	$	2,344	Contractual interest coupon	$	781	$	2,344
Amortization of debt discount	1,974		1,883		5,853		5,582		Amortization of debt discount	2,171		6,436
Amortization of debt issuance costs	306		302		915		900		Amortization of debt issuance costs	317		947
Total interest expense	$	3,061	$	2,966	$	9,112	$	8,826	Total interest expense	$	3,269	$	9,727

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~~had 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 incrementally on 100 different dates from January 6, 2020 to May 28, 2020 and are exercisable at each such expiry date.~~expired in the second quarter of 2020. If the average market value per share of our common stock for the reporting period ~~exceeds~~exceeded the strike price of the warrants, the warrants ~~will~~would have had 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~~were separate transactions and ~~are~~were 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.

~~Table of Contents~~

~~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.

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. For purposes of the Consolidated Leverage Ratio,

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

total debt is on a gross basis and is not netted against our cash balances. At September 30, ~~2017,~~2020, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of ~~3.52~~2.09 to 1.00 and a Consolidated Interest Coverage Ratio of ~~12.60~~13.19 to 1.00.

Borrowings outstanding under the Amended Credit Agreement at September 30, ~~2017~~2020 totaled ~~$139.0~~$248.0 million. These borrowings carried a weighted average interest rate of ~~3.4%~~2.5%, 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,~~2020, we had outstanding letters of credit totaling ~~$2.7~~$1.7 million, which are primarily used as security deposits for our office facilities. As of September 30, ~~2017,~~2020, the unused borrowing capacity under the revolving credit facility was ~~$358.3~~$350.3 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~~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,~~2020, the outstanding principal amount of the promissory note was ~~$5.0 million. As of September 30, 2017,~~$3.5 million, and the aircraft had a carrying amount of ~~$6.6~~$4.6 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 three and nine months ended September 30, 2020 were $0.1 million and $1.8 million, respectively. The $0.1 million charge recognized in the third quarter of 2020 primarily related to rent and related expenses, net of sublease income, for vacated office spaces. Restructuring charges recognized in the first nine months of 2020 include 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, $0.2 million related to rent and related expenses, net of sublease income, for vacated office spaces, and $0.1 million related to workforce reductions in our corporate operations.

Restructuring charges for the three and nine months ended September 30, 2019 were $0.1 million and $2.2 million, respectively. The $0.1 million charge recognized in the third quarter of 2019 primarily related to workforce reductions as we continued to better align resources with market demand. During the nine months ended September 30, 2019, we exited a portion of our Lake Oswego, Oregon corporate office resulting in a $0.7 million lease impairment charge on the operating lease right-of-use asset and leasehold improvements and $0.2 million of accelerated depreciation on furniture and fixtures in that office. Additionally, during the nine months ended September 30, 2019, we exited the remaining portion of our Middleton, Wisconsin office and an office space in Houston, Texas, resulting in restructuring charges of $0.4 million and $0.1 million, respectively, which primarily consisted of accelerated depreciation on furniture and fixtures in those offices. The restructuring charges for the nine months ended September 30, 2019 also include $0.2 million related to workforce reductions as we continue to better align resources with market demand and $0.2 million related to workforce reductions in our corporate operations.

Table of Contents

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 months ended September 30, ~~2017.~~2020.


	Employee Costs		Office Space Reductions		Other		Total
Balance as of December 31, 2019	$	68	$	91	$	0	$	159
Additions	412		0		1,188		1,600
Payments	(477)		0		(264)		(741)
Adjustments	4		(6)		0		(2)
Balance as of September 30, 2020	$	7	$	85	$	924	$	1,016

Employee Costs Office Space Reductions Other Total
Balance as of December 31, 2016 $ 5,182
$ 5,773
$ 24
$ 10,979
Additions ⁽¹⁾
2,889
2,445
110
5,444
Payments (7,226 ) (2,047 ) 5
(9,268 )
Adjustments⁽¹⁾
(117 ) (1,087 ) (78 ) (1,282 )
Non-cash items (46 ) (119 ) (61 ) (226 )
Balance as of September 30, 2017 $ 682
$ 4,965
$ —
$ 5,647


~~(1)~~	Additions and adjustments for the nine months ended September 30, 2017 include a restructuring gain of $1.1 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~~The restructuring charge liability related to employee costs at September 30, ~~2017, our~~2020 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related benefits. The $0.1 million 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 September 30, 2020 is included as a component of accrued expenses and other current liabilities and deferred compensation and other liabilities. ~~All of the $0.7~~The $0.9 million other restructuring charge liability ~~related to employee costs~~ at September 30, ~~2017~~2020 is related to the termination of a third-party advisor agreement and is expected to be paid inover the next ~~12 months. The restructuring charge liability related to employee costs~~28 months and is included as a component of accrued ~~payroll~~expenses and ~~related benefits.~~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,~~2020, it was anticipated that ~~$0.1~~$1.7 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~~2020 and December 31, ~~2016.~~2019.

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


	Fair Value (Derivative Asset and Liability)
Balance Sheet Location	September 30, 2020		December 31, 2019


Accrued expenses and other current liabilities	$	1,977	$	159
Deferred compensation and other liabilities	$	3,475	$	387

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.~~

2013

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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.

~~11.~~

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~~2020 and December 31, ~~2016.~~2019.


	Level 1		Level 2		Level 3		Total
September 30, 2020
Assets:

Convertible debt investment	$	—	$	—	$	61,122	$	61,122
Deferred compensation assets	—		30,477		—		30,477
Total assets	$	—	$	30,477	$	61,122	$	91,599
Liabilities:

Interest rate swaps	$	—	$	5,452	$	—	$	5,452
Total liabilities	$	—	$	5,452	$	0	$	5,452
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	$	0	$	546
Total liabilities	$	—	$	546	$	0	$	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.

Table of Contents

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 24.0%, 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 nine months ended September 30, 2020.


	Convertible Debt Investment
Balance as of December 31, 2019	$	49,542
Purchases	13,000
Change in fair value of convertible debt investment	(1,420)
Balance as of September 30, 2020	$	61,122

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.

Table of Contents

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~~2020 and ~~2016.~~2019.


	Three Months Ended September 30, 2020						Three Months Ended September 30, 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	$	381	$	0	$	381	$	(630)	$	0	$	(630)
Unrealized gain (loss) on investment	$	6,598	$	(1,713)	$	4,885	$	1,586	$	(418)	$	1,168
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(903)	$	234	$	(669)	$	(158)	$	42	$	(116)
Reclassification adjustments into earnings	576		(150)		426		(46)		13		(33)
Net unrealized gain (loss)	$	(327)	$	84	$	(243)	$	(204)	$	55	$	(149)
Other comprehensive income (loss)	$	6,652	$	(1,629)	$	5,023	$	752	$	(363)	$	389

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										Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
	Before Taxes			Tax (Expense) Benefit			Net of Taxes			Before Taxes			Tax (Expense) Benefit			Net of Taxes				Before Taxes		Tax (Expense) Benefit		Net of Taxes		Before Taxes		Tax (Expense) Benefit		Net of Taxes
Other comprehensive income (loss):																			Other comprehensive income (loss):
Foreign currency translation adjustments	$	1,835		$	—		$	1,835		$	52		$	—		$	52		Foreign currency translation adjustments	$	(294)	$	0	$	(294)	$	(673)	$	0	$	(673)
Unrealized loss on investment	$	(2,738	)	$	1,069		$	(1,669	)	$	(1,899	)	$	736		$	(1,163	)
Unrealized gain (loss) on investment																			Unrealized gain (loss) on investment	$	(1,420)	$	369	$	(1,051)	$	10,514	$	(2,774)	$	7,740
Unrealized gain (loss) on cash flow hedges:																			Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(41	)	$	16		$	(25	)	$	(367	)	$	146		$	(221	)	Change in fair value	$	(5,815)	$	1,510	$	(4,305)	$	(1,164)	$	308	$	(856)
Reclassification adjustments into earnings	36			(15		)	21			323			(129		)	194			Reclassification adjustments into earnings	909		(237)		672		(192)		50		(142)
Net unrealized loss	$	(5	)	$	1		$	(4	)	$	(44	)	$	17		$	(27	)
Net unrealized gain (loss)																			Net unrealized gain (loss)	$	(4,906)	$	1,273	$	(3,633)	$	(1,356)	$	358	$	(998)
Other comprehensive income (loss)	$	(908	)	$	1,070		$	162		$	(1,891	)	$	753		$	(1,138	)	Other comprehensive income (loss)	$	(6,620)	$	1,642	$	(4,978)	$	8,485	$	(2,416)	$	6,069

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, 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

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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

~~13.~~


	Foreign Currency Translation		Available-for-Sale Investment		Cash Flow Hedges		Total
Balance, December 31, 2019	$	(566)	$	15,882	$	(380)	$	14,936
Current period change	(294)		(1,051)		(3,633)		(4,978)
Balance, September 30, 2020	$	(860)	$	14,831	$	(4,013)	$	9,958

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 a nearly $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 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.

We apply an estimated annual effective tax rate to our year-to-date operating results to determine the interim provision for income tax expense. In addition, we recognize taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior year as discrete items in the interim period in which the event occurs.

For the three months ended September 30, ~~2017,~~2020, our effective tax rate was ~~(92.4)%~~17.7% as we recognized income tax expense from continuing operations of $2.4 million on income from continuing operations of $13.5 million. The effective tax rate of 17.7% was more favorable than the statutory rate, inclusive of state income taxes, of 26.0%, primarily due to the current year-to-date pre-tax losses and the impact during the quarter of certain nondeductible expense items, including the nondeductible portion of the goodwill impairment charges, based on the attribution of those expenses to the quarter in accordance with the allocation of income tax expense on a current year-to-date basis. The effective tax rate also reflected the positive impact of certain federal tax credits.

For the three months ended September 30, 2019, our effective tax rate was 15.0% as we recognized income tax expense from continuing operations of $2.4 million on income from continuing operations of $16.1 million. The effective tax rate of 15.0% was more favorable than the statutory rate, inclusive of state income taxes, of 26.4%, primarily due to a discrete tax benefit for U.S. federal return to provision adjustments related to the 2018 corporate income tax return. In addition, we recognized a discrete tax benefit related to a previously unrecognized tax benefit due to the expiration of statute of limitations on our "check-the-box" election made in 2015 to treat certain wholly-owned foreign subsidiaries as disregarded entities for U.S. federal income tax purposes.

For the nine months ended September 30, 2020, our effective tax rate was 23.5% as we recognized an income tax benefit from continuing operations of ~~$2.0~~$5.4 million on ~~income~~a loss from continuing operations of ~~$2.1~~$23.0 million. The effective tax rate of 23.5% was less favorable than the statutory rate, inclusive of state income taxes, of 26.0%, primarily due to certain nondeductible business expenses 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 primarily during the first quarter, the positive impact of certain federal tax credits, 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 first quarter of 2020.

For the ~~third quarter of 2016,~~nine months ended September 30, 2019, our effective tax rate was ~~37.2%~~20.8% as we recognized income tax expense from continuing operations of $7.3 million on income from continuing operations of ~~$19.6~~$34.9 million. The effective tax rate ~~for the three months ended September 30, 2017~~of 20.8% was more favorable than the statutory rate, inclusive of state income taxes, of 26.4%, primarily due to ~~recognizing~~ a ~~$2.7 million~~discrete tax benefit recognized primarily in the third quarter of 2019 related to U.S. federal and foreign return to provision adjustments. In addition, we recognized a discrete tax benefit in the third quarter of 2019 related to a previously unrecognized tax benefit ~~from~~due to the expiration of statute of limitations on our "check-the-box" election made in ~~2014~~2015 to treat ~~one of our~~certain wholly-owned foreign subsidiaries as a disregarded ~~entity~~entities for ~~U.S~~U.S. federal income tax purposes. ~~This benefit was partially offset by $0.6 million~~

Table of ~~tax expense recorded~~Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts 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.thousands, except per share amounts)

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 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 million. The effective tax rate for the nine months ended September 30, 2017 was less favorable than the statutory rate, inclusive of state income taxes, 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 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. 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 share-based compensation, partially offset by non-deductible business expenses.(Unaudited)

~~As 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.~~

~~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 million and $4.8~~$1.7 million were outstanding at both September 30, ~~2017~~2020 and December 31, ~~2016, respectively,~~2019, 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~~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

~~Table of Contents~~

~~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~~

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 analytics 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~~

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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.

•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 analytics 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.

Table of Contents

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~~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 September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Healthcare:
Revenues	$	87,406		$	100,000		$	268,340		$	295,621
Operating income	$	25,610		$	32,863		$	70,831		$	94,058
Segment operating income as a percentage of segment revenues	29.3		%	32.9		%	26.4		%	31.8		%
Business Advisory:
Revenues	$	66,048		$	62,519		$	201,423		$	183,602
Operating income	$	10,780		$	11,942		$	37,306		$	32,997
Segment operating income as a percentage of segment revenues	16.3		%	19.1		%	18.5		%	18.0		%
Education:
Revenues	$	51,850		$	56,770		$	176,017		$	165,265
Operating income	$	12,548		$	14,413		$	41,792		$	43,235
Segment operating income as a percentage of segment revenues	24.2		%	25.4		%	23.7		%	26.2		%
Total Company:
Revenues	$	205,304		$	219,289		$	645,780		$	644,488
Reimbursable expenses	2,860			23,636			25,133			65,787
Total revenues and reimbursable expenses	$	208,164		$	242,925		$	670,913		$	710,275

Segment operating income	$	48,938		$	59,218		$	149,929		$	170,290
Items not allocated at the segment level:
Other operating expenses	29,042			32,310			87,826			105,369
Litigation and other gains	0			(630)			(150)			(1,571)
Depreciation and amortization	6,197			6,962			18,635			21,285
Goodwill impairment charges1	0			0			59,816			0
Other expense, net	224			4,456			6,829			10,326
Income (loss) from continuing operations before taxes	$	13,475		$	16,120		$	(23,027)		$	34,881

(1) The non-cash goodwill impairment 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.

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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
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 and nine months ended September 30, 2020 and 2019.


~~(1)~~	The goodwill impairment charge is 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.


	Three Months Ended September 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	51,491	$	20,675	$	10,958	$	83,124
Time and expense	14,627		40,511		35,214		90,352
Performance-based	15,641		3,671		0		19,312
Software support, maintenance and subscriptions	5,647		1,191		5,678		12,516
Total	$	87,406	$	66,048	$	51,850	$	205,304

Employee Type (1)
Revenue generated by full-time billable consultants	$	65,084	$	62,340	$	44,234	$	171,658
Revenue generated by full-time equivalents	22,322		3,708		7,616		33,646
Total	$	87,406	$	66,048	$	51,850	$	205,304

Timing of Revenue Recognition
Revenue recognized over time	$	86,413	$	66,048	$	51,663	$	204,124
Revenue recognized at a point in time	993		0		187		1,180
Total	$	87,406	$	66,048	$	51,850	$	205,304


	Nine Months Ended September 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	158,079	$	73,442	$	35,530	$	267,051
Time and expense	43,389		118,364		123,493		285,246
Performance-based	49,042		5,903		695		55,640
Software support, maintenance and subscriptions	17,830		3,714		16,299		37,843
Total	$	268,340	$	201,423	$	176,017	$	645,780

Employee Type (1)
Revenue generated by full-time billable consultants	$	188,750	$	191,566	$	150,857	$	531,173
Revenue generated by full-time equivalents	79,590		9,857		25,160		114,607
Total	$	268,340	$	201,423	$	176,017	$	645,780

Timing of Revenue Recognition
Revenue recognized over time	$	265,813	$	201,423	$	175,715	$	642,951
Revenue recognized at a point in time	2,527		0		302		2,829
Total	$	268,340	$	201,423	$	176,017	$	645,780

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	65,610	$	24,333	$	12,418	$	102,361
Time and expense	12,307		35,212		39,688		87,207
Performance-based	16,313		1,614		0		17,927
Software support, maintenance and subscriptions	5,770		1,360		4,664		11,794
Total	$	100,000	$	62,519	$	56,770	$	219,289

Employee Type (1)
Revenue generated by full-time billable consultants	$	72,142	$	60,131	$	48,928	$	181,201
Revenue generated by full-time equivalents	27,858		2,388		7,842		38,088
Total	$	100,000	$	62,519	$	56,770	$	219,289

Timing of Revenue Recognition
Revenue recognized over time	$	98,204	$	62,519	$	56,274	$	216,997
Revenue recognized at a point in time	1,796		0		496		2,292
Total	$	100,000	$	62,519	$	56,770	$	219,289


	Nine Months Ended September 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	188,875	$	72,693	$	37,926	$	299,494
Time and expense	39,345		104,325		114,122		257,792
Performance-based	50,144		2,810		0		52,954
Software support, maintenance and subscriptions	17,257		3,774		13,217		34,248
Total	$	295,621	$	183,602	$	165,265	$	644,488

Employee Type (1)
Revenue generated by full-time billable consultants	$	206,508	$	177,279	$	144,338	$	528,125
Revenue generated by full-time equivalents	89,113		6,323		20,927		116,363
Total	$	295,621	$	183,602	$	165,265	$	644,488

Timing of Revenue Recognition
Revenue recognized over time	$	289,452	$	183,602	$	164,164	$	637,218
Revenue recognized at a point in time	6,169		0		1,101		7,270
Total	$	295,621	$	183,602	$	165,265	$	644,488

(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 Culture and Organizational Excellence 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~~2020 one client in our Healthcare segment had a total receivable and unbilled services balance that accounted for 15.0% of our combined balance of receivables from clients, net and unbilled services, net. The outstanding balance for this client is the result of outstanding invoices due in the normal course of the contract payment terms and services performed in advance of the contract billing schedule. At 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~~2020 and ~~2016,~~2019, no single client generated greater than 10% of our consolidated revenues.

Table of Contents

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

15. Subsequent Event

Acquisition of ForceIQ, Inc.

On October 15, 2020, we entered into an agreement to acquire ForceIQ, Inc. ("ForceIQ"), a Salesforce Industries partner focused on helping clients drive digital transformation and innovation at scale powered by the cloud. The acquisition expands our cloud-based technology offerings within the Business Advisory segment. The results of operations of ForceIQ will be included within the Business Advisory segment from the effective close date, November 1, 2020. The acquisition of ForceIQ is not significant to our consolidated financial statements.

Fourth Quarter 2020 Restructuring Plan

On October 29, 2020, we announced a restructuring plan to reduce operating costs to address the impact of the COVID-19 pandemic on our business. The restructuring plan provides for a reduction in workforce and leased office space that is expected to result in initial restructuring charges in a range of approximately $15.5 million to $19.5 million. We do not anticipate a material revenue impact related to the restructuring actions.

The reduction in workforce impacts approximately 145 employees across all segments and corporate operations. We expect the reduction in workforce to be substantially complete by the end of the fourth quarter of 2020 and expect to incur an estimated restructuring charge in a range of approximately $3.5 million to $4.5 million related to cash payments for employee severance and benefits.

The reduction in leased office space is expected to result in estimated non-cash restructuring charges in a range of approximately $12.0 million to $15.0 million, consisting of operating lease right-of-use asset and leasehold improvement impairment charges and accelerated depreciation on other fixed assets. The non-cash restructuring charges related to the reduction in leased office space are expected to be recorded primarily in the fourth quarter of 2020. Future cash expenditures related to the leased office space are expected to continue through 2029. The exact amount and timing of the office space reductions, and the associated payments and expenses, depend on a number of factors, including our ability to terminate or modify existing lease contracts and/or enter into sublease agreements for the exited spaces to lower future cash expenditures.

In addition, in the fourth quarter of 2020, we announced our intent to divest our life sciences drug safety practice, a UK-based business that is part of the Life Sciences reporting unit within our Business Advisory segment. For the nine months ended September 30, 2020, this practice generated $1.9 million of revenue and is not significant to our consolidated financial statements. We expect the divestiture to be completed in the fourth quarter of 2020.

We believe these measures will better align delivery capacity with anticipated demand and strengthen our financial position amidst the ongoing disruption, creating a foundation from which our business can grow.

Table of Contents



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~~

~~Table of Contents~~

•Business Advisory

Table of Contents

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 analytics 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 the coronavirus (COVID-19) in 2020 has created significant volatility, uncertainty and disruption to the global economy. The pandemic has had an unfavorable impact on aspects of our business, operations, and financial results, and has caused us to significantly change the way we operate. Near the end of the first quarter of ~~2017,~~2020, we ~~reorganized~~suspended almost all business travel and our ~~internal financial reporting structure, which management uses~~employees began working from their homes. While traditionally a majority of the work performed by our revenue-generating professionals occurred at client sites, the nature of the services we provide allows for our revenue-generating professionals to ~~assess performance~~continue to serve clients in a remote work environment. As state and ~~allocate resources,~~local governments ease their restrictions, we continue to develop and implement our comprehensive plan to return to our offices and client sites with our people’s safety and the needs of our clients guiding how we manage our phased transition. As of September 30, 2020, our employees continue to primarily work from their homes.

In each of our operating segments, we are working closely with our clients to support them and provide relevant services to address their needs caused by ~~moving~~the COVID-19 pandemic. However, as some clients reprioritized and delayed projects as a result of the pandemic, demand for certain offerings has been negatively impacted, particularly within our ~~Life Sciences practice from~~Healthcare and Education segments. While 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~~COVID-19 pandemic did not have a significant impact on 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~~revenues in the first quarter of ~~the international assets of ADI Strategies, Inc. ("ADI Strategies") in Dubai and India. We acquired the U.S. assets of ADI Strategies~~2020, revenues in the second and third quarters of 2020 declined 2.1% and 5.8%, sequentially. Revenues in the third quarter of ~~2016. ADI Strategies is a leading enterprise performance management, risk management~~2020 decreased by 6.4% compared to the third quarter of 2019, and ~~business intelligence firm.~~ revenues for the first nine months of 2020 increased by just 0.2% compared to the same prior year period.

The ~~acquisition strengthens~~COVID-19 pandemic has strengthened demand for other services we provide, such as our cloud-based 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 of~~solutions within our Business Advisory segment and our restructuring and capital advisory solutions provided to organizations in transition within our Business Advisory segment.

In order to support our liquidity during the COVID-19 pandemic, we took proactive measures to increase available cash on hand including, but not limited to, borrowing under our senior secured credit facility in the first quarter of 2020 and reducing discretionary operating and capital spending. During the second and third quarters of 2020, we made repayments on our borrowings to reduce our total debt outstanding due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources. To further support our liquidity during the ~~date~~COVID-19 pandemic, we elected to defer the deposit of ~~acquisition.~~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 Coronavirus Aid, Relief, and Economic Security Act ("CARES") Act.

~~Innosight Holdings, LLC~~First Quarter 2020 Goodwill Impairment Charges

~~On March 1, 2017, we completed~~The services provided by our ~~acquisition of Innosight Holdings, LLC ("Innosight"), a growth strategy firm focused on helping companies navigate disruptive change, enable innovation,~~Strategy and ~~manage strategic transformation. Together with Innosight, we use our strategic, operational,~~Innovation 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 and results of operations ofLife Sciences reporting units within our Business Advisory segment ~~from~~focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the ~~date~~duration of ~~acquisition.~~

~~Pope Woodhead~~the projects within these practices are typically short-term. Therefore, due to the uncertainty caused by the COVID-19 pandemic, we are cautious about near-term results for these two reporting units. Based on our internal projections and ~~Associates Limited~~

~~On January 9, 2017, we completed~~the preparation of 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 for the quarter ended March 31, 2020, and ~~results~~considering the expected decrease in demand due to the COVID-19 pandemic, during the first quarter of ~~operations~~2020 we believed that the fair value of these two reporting units no longer exceeded 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. The non-cash

Table of Contents

goodwill impairment charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $37.5 million as of March 31, 2020. The non-cash goodwill impairment charge related to the Life Sciences reporting unit reduced the goodwill balance to zero as of March 31, 2020. 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.~~

~~See~~"Critical Accounting Policies" section below and Note ~~5 "Acquisitions"~~4 "Goodwill and Intangible Assets" within the notes to our consolidated financial statements for ~~further~~additional information ~~regarding our recent acquisitions.~~

~~Divestiture~~

~~Life Sciences Compliance~~on the charges and ~~Operations~~evaluations performed.

During the second and third quarters of 2020, we did not identify any indicators that would lead us to believe that the fair values of our reporting units may not exceed their carrying values. We will continue to evaluate goodwill for impairment during future periods. Any future significant decline in the performance of our Strategy and Innovation reporting unit, or any other reporting unit with a goodwill balance, compared to our internal forecasts could result in additional non-cash goodwill impairment charges.

Enterprise Resource Planning System Implementation

In the fourth quarter of ~~2017,~~2019, we ~~divested our Life Sciences Compliance and Operations practice ("Life Sciences C&O"), which was part~~committed to the implementation of a new enterprise resource planning system designed to improve the efficiency of our ~~broader Life Sciences practice within~~internal operational, financial and administrative activities. The implementation continues to progress and is on schedule and has not been significantly impacted by the ~~Business Advisory segment. The sale~~COVID-19 pandemic.

See Part II, Item 1A. "Risk Factors" of ~~Life Sciences C&O did not meet~~this Quarterly Report on Form 10-Q for additional information on the ~~criteria for reporting separately as discontinued operations.~~

~~Table of Contents~~

potential impact the COVID-19 pandemic could have on our business, operations and 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 from our Studer Group solution, which include~~ coaches and their support staff ~~specialized finance~~from our Culture and ~~operational~~Organizational Excellence solution, 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%~~40.5% and ~~44.5%~~46.7% of our revenues for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~45.9%~~41.3% and ~~48.5%~~46.5% of our revenues for the nine months ended September 30, ~~2017~~2020 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%~~44.0% and ~~42.2%~~39.7% of our

Table of Contents

revenues for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~44.4%~~44.2% and ~~37.6%~~40.0% of our revenues for the nine months ended September 30, ~~2017~~2020 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%~~9.4% and 8.2% of our revenues for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~4.4%~~8.6% and ~~9.1%~~8.2% of our revenues for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. ~~Performance-based fee engagements~~The level of performance-based fees earned may ~~cause significant variations in quarterly revenues~~vary based on our clients' risk sharing preferences and ~~operating results depending on~~ the ~~timing~~mix 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

~~Table of Contents~~

~~5.6%~~ 6.1% and ~~5.1%~~5.4% of our revenues for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~5.3%~~5.9% and ~~4.8%~~5.3% of our revenues for the nine months ended September 30, ~~2017~~2020 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.

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.

Table of Contents

RESULTS OF OPERATIONS

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


Segment and Consolidated Operating Results (in thousands, except per share amounts):	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Healthcare:
Revenues	$	87,406		$	100,000		$	268,340		$	295,621
Operating income	$	25,610		$	32,863		$	70,831		$	94,058
Segment operating income as a percentage of segment revenues	29.3		%	32.9		%	26.4		%	31.8		%
Business Advisory:
Revenues	$	66,048		$	62,519		$	201,423		$	183,602
Operating income	$	10,780		$	11,942		$	37,306		$	32,997
Segment operating income as a percentage of segment revenues	16.3		%	19.1		%	18.5		%	18.0		%
Education:
Revenues	$	51,850		$	56,770		$	176,017		$	165,265
Operating income	$	12,548		$	14,413		$	41,792		$	43,235
Segment operating income as a percentage of segment revenues	24.2		%	25.4		%	23.7		%	26.2		%
Total Company:
Revenues	$	205,304		$	219,289		$	645,780		$	644,488
Reimbursable expenses	2,860			23,636			25,133			65,787
Total revenues and reimbursable expenses	$	208,164		$	242,925		$	670,913		$	710,275
Statements of Operations reconciliation:
Segment operating income	$	48,938		$	59,218		$	149,929		$	170,290
Items not allocated at the segment level:
Other operating expenses	29,042			32,310			87,826			105,369
Litigation and other gains	—			(630)			(150)			(1,571)
Depreciation and amortization	6,197			6,962			18,635			21,285
Goodwill impairment charges (1)	—			—			59,816			—
Operating income (loss)	13,699			20,576			(16,198)			45,207
Other income (expense), net	(224)			(4,456)			(6,829)			(10,326)
Income (loss) from continuing operations before taxes	13,475			16,120			(23,027)			34,881
Income tax expense (benefit)	2,388			2,414			(5,413)			7,256
Net income (loss) from continuing operations	$	11,087		$	13,706		$	(17,614)		$	27,625
Earnings (loss) per share from continuing operations:
Basic	$	0.50		$	0.62		$	(0.81)		$	1.26
Diluted	$	0.50		$	0.61		$	(0.81)		$	1.23

Table of Contents


	Three Months Ended September 30,						Nine Months Ended September 30,
Other Operating Data:	2020			2019			2020			2019
Number of full-time billable consultants (at period end) (2):
Healthcare	838			886			838			886
Business Advisory	1,001			954			1,001			954
Education	790			727			790			727
Total	2,629			2,567			2,629			2,567
Average number of full-time billable consultants (for the period) (2):
Healthcare	844			858			873			835
Business Advisory	976			920			940			876
Education	772			698			779			665
Total	2,592			2,476			2,592			2,376
Full-time billable consultant utilization rate (3):
Healthcare	71.4		%	81.8		%	70.2		%	80.4		%
Business Advisory	72.6		%	72.0		%	72.6		%	72.7		%
Education	66.5		%	75.5		%	71.7		%	76.7		%
Total	70.4		%	76.3		%	71.5		%	76.5		%
Full-time billable consultant average billing rate per hour (4):
Healthcare	$	252		$	226		$	233		$	225
Business Advisory (5)	$	186		$	193		$	197		$	195
Education	$	184		$	197		$	189		$	200
Total (5)	$	206		$	206		$	206		$	207
Revenue per full-time billable consultant (in thousands):
Healthcare	$	77		$	84		$	216		$	247
Business Advisory	$	64		$	65		$	204		$	202
Education	$	57		$	70		$	194		$	217
Total	$	66		$	73		$	205		$	222
Average number of full-time equivalents (for the period) (6):
Healthcare	279			217			279			237
Business Advisory	35			19			27			14
Education	46			52			56			44
Total	360			288			362			295
Revenue per full-time equivalent (in thousands):
Healthcare	$	80		$	128		$	285		$	375
Business Advisory	$	106		$	126		$	370		$	465
Education	$	165		$	151		$	453		$	480
Total	$	93		$	132		$	317		$	395

(1)The ~~results~~non-cash goodwill impairment charges are not allocated at the segment level because the underlying goodwill asset is reflective of ~~operations for acquired businesses have been included~~our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our ~~results~~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 our full-time billable consultants worked on client assignments during a period by the total available working hours for 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 ~~since~~of Huron Eurasia India. Absent the ~~date~~impact of ~~their respective acquisition.~~

~~During~~Huron Eurasia India, 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~~average billing rate per hour for the Business Advisory ~~segment. The remaining Education~~segment would have been $201 and ~~Life Sciences segment is now referred to as~~$221 for the ~~Education segment. While our~~three months ended September 30, 2020 and 2019, respectively; and $217 and $220 for the nine months ended September 30, 2020 and 2019, respectively.

Absent the impact of Huron Eurasia India, Huron's consolidated ~~results~~average billing rate per hour would have ~~not~~ been ~~impacted, we have restated our historical segment information~~$212 and $216 for ~~consistent presentation.~~the three months ended September 30, 2020 and 2019, respectively; and $213 and $216 for the nine months ended September 30, 2020 and 2019, respectively.

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

Table of Contents

Three Months Ended
September 30, Nine Months Ended
September 30,
Other Operating Data: 2017 2016 2017 2016
Number of full-time billable consultants (at period end) ⁽²⁾:

Healthcare 761
1,010
761
1,010
Education 536
466
536
466
Business Advisory 830
545
830
545
Total 2,127
2,021
2,127
2,021
Average number of full-time billable consultants (for the period) ⁽²⁾:

Healthcare 741
984
805
1,005
Education 527
447
497
425
Business Advisory 779
530
710
465
Total 2,047
1,961
2,012
1,895
Full-time billable consultant utilization rate ⁽³⁾:

Healthcare 80.3 % 77.0 % 76.6 % 78.6 %
Education 70.9 % 68.0 % 73.6 % 71.2 %
Business Advisory 72.9 % 73.5 % 73.4 % 72.4 %
Total 75.0 % 73.9 % 74.7 % 75.3 %
Full-time billable consultant average billing rate per hour ⁽⁴⁾:

Healthcare $ 190
$ 203
$ 200
$ 209
Education $ 210
$ 220
$ 215
$ 217
Business Advisory $ 197
$ 203
$ 195
$ 216
Total $ 197
$ 207
$ 202
$ 212
Revenue per full-time billable consultant (in thousands):
Healthcare $ 69
$ 73
$ 211
$ 231
Education $ 69
$ 72
$ 226
$ 224
Business Advisory $ 67
$ 72
$ 212
$ 229
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
Business Advisory 26
25
21
19
Total 275
269
272
257
Revenue per full-time equivalent (in thousands):
Healthcare $ 134
$ 156
$ 427
$ 456
Education $ 138
$ 158
$ 419
$ 436
Business Advisory $ 108
$ 126
$ 342
$ 335
Total $ 132
$ 154
$ 420
$ 444


~~(1)~~	The non-cash goodwill impairment charge is 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)~~	(6)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)~~	Consists of cultural transformation consultants within our Studer Group solution, which include coaches and their support staff, consultants who work variable schedules as needed by our clients, and full-time employees who provide software support and maintenance services to our clients.

~~Table~~ of ~~Contents~~

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.

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,
	2020			2019			2020			2019
Revenues	$	205,304		$	219,289		$	645,780		$	644,488
Net income (loss) from continuing operations	$	11,087		$	13,706		$	(17,614)		$	27,625
Add back:
Income tax expense (benefit)	2,388			2,414			(5,413)			7,256
Interest expense, net of interest income	2,259			4,374			7,516			13,156
Depreciation and amortization	7,546			8,124			22,488			24,735
Earnings before interest, taxes, depreciation and amortization (EBITDA)	23,280			28,618			6,977			72,772
Add back:
Restructuring and other charges	59			127			2,626			2,156
Litigation and other gains	—			(630)			(150)			(1,571)
Goodwill impairment charges	—			—			59,816			—
Loss on sale of business	—			—			102			—
Transaction-related expenses	437			563			437			2,613
Foreign currency transaction losses (gains), net	(194)			114			245			36
Adjusted EBITDA	$	23,582		$	28,792		$	70,053		$	76,006
Adjusted EBITDA as a percentage of revenues	11.5		%	13.1		%	10.8		%	11.8		%

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues $ 176,376
$ 183,400
$ 546,643
$ 548,148
Net income (loss) from continuing operations $ 4,132
$ 12,288
$ (141,195 ) $ 35,293
Add back:
Income tax expense (benefit) (1,984 ) 7,265
(49,740 ) 19,498
Interest expense, net of interest income 4,880
4,176
13,811
12,270
Depreciation and amortization 12,603
12,144
36,937
34,342
Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) 19,631
35,873

(140,187 ) 101,403
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 ) —
Foreign currency transaction losses (gains), net (385 ) 84
(449 ) (270 )
Adjusted EBITDA $ 21,473
$ 37,500

$ 73,106
$ 105,756
Adjusted EBITDA as a percentage of revenues 12.2 % 20.4 %
13.4 % 19.3 %

Table of Contents


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2020		2019		2020		2019
Net income (loss) from continuing operations	$	4,132		$	12,288		$	(141,195	)	$	35,293		Net income (loss) from continuing operations	$	11,087	$	13,706	$	(17,614)	$	27,625
Weighted average shares - diluted	21,622			21,445			21,413			21,427			Weighted average shares - diluted	22,175		22,561		21,868		22,425
Diluted earnings (loss) per share from continuing operations	$	0.19		$	0.57		$	(6.59	)	$	1.65		Diluted earnings (loss) per share from continuing operations	$	0.50	$	0.61	$	(0.81)	$	1.23
Add back:													Add back:
Amortization of intangible assets	8,834			8,771			26,432			24,369			Amortization of intangible assets	3,155		4,205		9,558		13,036
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													Restructuring and other charges	59		127		2,626		2,156
Litigation and other gains													Litigation and other gains	—		(630)		(150)		(1,571)
Goodwill impairment charges													Goodwill impairment charges	—		—		59,816		—
Non-cash interest on convertible notes	1,974			1,883			5,853			5,582			Non-cash interest on convertible notes	—		2,171		—		6,436
Gain on sale of business	—			—			(931		)	—
Tax effect	(5,100		)	(4,794		)	(70,362		)	(13,588		)
Loss on sale of business													Loss on sale of business	—		—		102		—
Transaction-related expenses													Transaction-related expenses	437		563		437		2,613
Tax effect of adjustments													Tax effect of adjustments	(1,692)		(1,673)		(17,041)		(5,909)

Tax benefit related to "check-the-box" election	(2,748		)	—			(2,748		)	—			Tax benefit related to "check-the-box" election	—		(736)		—		(736)
Total adjustments, net of tax	5,187			7,403			172,917			20,986			Total adjustments, net of tax	1,959		4,027		55,348		16,025
Adjusted net income from continuing operations	$	9,319		$	19,691		$	31,722		$	56,279		Adjusted net income from continuing operations	$	13,046	$	17,733	$	37,734	$	43,650
Adjusted weighted average shares - diluted	21,622			21,445			21,585			21,427			Adjusted weighted average shares - diluted	22,175		22,561		22,207		22,425
Adjusted diluted earnings per share from continuing operations	$	0.43		$	0.92		$	1.47		$	2.63		Adjusted diluted earnings per share from continuing operations	$	0.59	$	0.79	$	1.70	$	1.95

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, we have excluded the effect of a $0.8 million one-time charge incurred during the first quarter of 2020, 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 gains recognized in the first nine months 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.

Transaction-related expenses: To permit comparability with prior periods, we excluded the impact of third-party legal and accounting fees incurred in the third quarter of 2020 related to the acquisition of ForceIQ, Inc., which closed effective November 1, 2020. See Note 15 "Subsequent Events" for additional information. We have also excluded the impact of third-party legal and accounting fees incurred in the first nine months of 2019 related to the evaluation of a potential acquisition that ultimately did not consummate to permit comparability with periods that were not impacted by this item.

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.

Table of Contents

Tax benefit related to "check-the-box" election:We have excluded the ~~effect~~positive impact of a tax benefit, recorded in the third quarter of ~~2017,~~2019, from

recognizing a previously unrecognized tax benefit ~~from~~due to the expiration of statute of limitations on our "check-the-box" election made in ~~2014~~2015 to treat ~~one of our~~

certain wholly-owned foreign subsidiaries as a disregarded ~~entity~~entities 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~~See Note ~~13 “Income Taxes”~~12 "Income Taxes" within the notes to the consolidated financial

statements for additional information.

~~Table of Contents~~

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 first nine 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 net income from continuing ~~operations.~~operations for the first nine months 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~~2020 Compared to Three Months Ended September 30, ~~2016~~2019

Revenues

Revenues decreased ~~$7.0~~$14.0 million, or ~~3.8%~~6.4%, to ~~$176.4~~$205.3 million for the third quarter of ~~2017~~2020 from ~~$183.4~~$219.3 million for the third quarter of ~~2016. Third quarter 2017 revenues included $13.4 million from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent to~~2019. In the third quarter of ~~2016,~~2020, as ~~well~~some clients reprioritized and delayed projects as ~~revenues from our acquisition~~a result of the ~~international assets~~COVID-19 pandemic, demand for certain offerings have been negatively impacted, particularly within our Healthcare and Education segments. The negative impact of ~~ADI Strategies, which was also completed subsequent to~~ the ~~third quarter of 2016 and~~COVID-19 pandemic has ~~since~~ been ~~fully integrated into the~~partially offset by strengthened demand within our 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.segment for cloud-based technology and analytics solutions and restructuring and capital advisory solutions provided to organizations in transition.

Of the ~~overall $7.0~~$14.0 million decrease in revenues, ~~$5.3~~$9.5 million was ~~attributable to our full-time equivalents and $1.7 million was attributable to our full-time billable consultants.~~

~~The decrease in full-time equivalent revenues was primarily~~ attributable to a decrease in ~~revenue~~revenues from our ~~Studer Group solution within our Healthcare segment~~full-time billable consultants and $4.5 million was attributable to a decrease in ~~license revenue in~~revenues from our ~~Education segment as discussed below in Segment Results.~~full-time equivalents.

The decrease in full-time billable consultant revenues reflected a decrease in ~~the average billing rate~~demand for ~~the third quarter of 2017,~~services in our Healthcare and Education segments, partially offset by ~~increases~~a strengthened demand for services in our Business Advisory segment, as discussed below in Segment Results. The decrease in full-time billable consultant revenues was primarily attributable to an overall decrease in the consultant utilization rate, partially offset by an overall increase in the average number of billable consultants for the third quarter of 2020 compared to the same prior year period.

The decrease in full-time equivalent revenues was attributable to decreases in full-time equivalent revenues in our Healthcare and ~~consultant utilization rate. As~~Education segments, partially offset by an increase in full-time equivalent revenues in our Business Advisory segment, as discussed below in Segment ~~Results, this~~Results. The decrease in full-time equivalent revenues reflected a decrease in revenue ~~attributable to our~~per full-time ~~billable consultants reflected decreased demand for our services~~equivalent, partially offset by an increase in the ~~Healthcare segment, largely offset by revenues from our acquisitions~~average number of ~~Innosight and Pope Woodhead, as well as strengthened demand for our services~~full-time equivalents in the ~~Business Advisory~~third quarter of 2020 compared to the same prior year period.

In the third quarter of 2020, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services we provide, particularly within our Healthcare and Education ~~segments.~~segments, and therefore is expected to continue to have an unfavorable impact on our financial results in the fourth quarter of 2020.

Total Direct Costs

~~Our total direct~~Direct costs, ~~including~~excluding amortization of intangible assets and software development costs, increased ~~$4.0~~$2.4 million, or ~~3.6%~~1.7%, to ~~$116.4~~$145.5 million infor the three months ended September 30, ~~2017,~~2020, from ~~$112.4~~$143.0 million infor the three months ended September 30, ~~2016.~~2019. The ~~$4.0~~$2.4 million increase primarily related to a ~~$2.1~~$4.2 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by increased headcount ~~from acquisitions~~in our Education segment that primarily occurred prior to the COVID-19 pandemic and increased headcount in our ~~ongoing cloud-based enterprise resource planning (ERP) investment,~~Business Advisory segment; partially offset by a $1.0 million decrease in ~~salaries~~signing, retention 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 performanceother bonus expense for our revenue-generating professionals and a ~~$0.5 million increase in share-based compensation expense for our revenue-generating professionals. All of these increases were partially offset by a $1.4~~$0.9 million decrease in ~~amortization of intangible assets.~~product and event costs. As a percentage of revenues, ~~our total~~ direct costs increased to ~~66.0%~~70.9% during the third quarter of ~~2017~~2020 compared to ~~61.3%~~65.2% during the third quarter of ~~2016,~~2019, primarily due to the ~~items described above.~~decrease in revenues and the increase in salaries and related expenses for our revenue-generating professionals.

Total direct costs for the three months ended September 30, ~~2017~~2020 included ~~$2.7~~$1.4 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~~$1.2 million of amortization expense for the same prior year period. ~~The $1.4 million decrease in~~Intangible asset amortization ~~expense was~~included within direct costs for the three months ended September 30, 2020 and 2019 primarily ~~attributable~~related to ~~the decreasing amortization expense of~~technology and software, certain customer relationships and customer contracts acquired in connection with our ~~Studer Group acquisition, due to the accelerated basis of amortization.~~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~~on our intangible assets.

3632

Table of Contents

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

Selling, general and administrative expenses ~~increased $3.3~~decreased by $9.6 million, or ~~8.7%~~19.9%, to ~~$41.6~~$38.6 million in the third quarter of ~~2017~~2020 from ~~$38.3~~$48.1 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.~~2019. The overall ~~$3.3~~$9.6 million ~~increase~~decrease primarily related to a ~~$1.9~~$3.8 million ~~increase~~decrease in promotion and marketing expenses; a $2.1 million decrease in share-based compensation expense for our support personnel; a $1.3 million decrease in practice administration and meetings expenses; a $0.9 million decrease in training expenses; a $0.9 million decrease in third-party consulting expenses, a $0.8 million decrease in facilities expense; a $0.5 million decrease in recruiting expenses; and a $0.5 million decrease 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,~~personnel. These decreases were partially offset by a ~~$1.1~~$1.8 million ~~decrease~~increase in deferred compensation expense attributable to the change in the market value of our deferred compensation liability. During the third quarter of 2020, the market value of our deferred compensation liability increased by $1.8 million, compared to an immaterial increase in the third quarter of 2019. This $1.8 million increase in expense is offset by a $1.8 million increase in the gain recognized for the change in the market value of investments that are used to fund our deferred compensation liability and recognized in other income (expense), net. The decreases in promotion and marketing expenses, practice administration and meetings ~~expenses.~~expenses, and training expenses primarily relate to the cancellation or delay of in-person meetings and events and business travel due to the COVID-19 pandemic. The decrease in share-based compensation expense primarily related to a decrease in the expected funding of performance-based share awards for our executive officers recorded in the third quarter of 2020. As a percentage of revenues, selling, general and administrative expenses ~~increased~~decreased to ~~23.6%~~18.8% during the third quarter of ~~2017~~2020 compared to ~~20.9%~~21.9% during the third quarter of ~~2016,~~2019. This decrease was primarily ~~due~~attributable to the ~~items described above.~~decreases in selling, general and administrative expenses noted above, as percentages of revenues; partially offset by the change in the market value of our deferred compensation liability.

Restructuring charges for both the third quarter of ~~2017 totaled $1.3 million, compared to $1.0 million for the third quarter of 2016.~~2020 and 2019 were $0.1 million. The ~~$1.3~~$0.1 million charge ~~incurred~~recognized in the third quarter of ~~2017~~2020 primarily related to ~~the accrual of remaining lease obligations,~~rent and related expenses, net of ~~estimated~~ sublease income, ~~due to relocating our San Francisco~~for vacated office ~~to a smaller space and consolidating our New York offices~~spaces. The $0.1 million charge recognized 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~~2019 primarily related to ~~updated lease assumptions of our Washington, D.C. space vacated in the fourth quarter of 2014.~~workforce reductions as we continued to better align resources with market demand. See Note 98 "Restructuring Charges" ~~within the notes to our consolidated financial statements for further discussion of our restructuring expenses.~~

Other losses, net totaled $0.9 million for the three months ended September 30, 2017, and represents losses due to the increase in the fair value of the liability for future expected contingent consideration payments 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 our restructuring charges.

Litigation and other gains totaled $0.6 million for the third quarter of 2019, which consisted of a remeasurement gain to decrease the estimated fair value of our liability for contingent consideration ~~liabilities.~~payments related to a business acquisition. We did not recognize any litigation or other gains in the third quarter of 2020.

Depreciation and amortization expense ~~increased by $1.9~~decreased $0.8 million, or 11.3%, to ~~$9.9~~$6.2 million in the three months ended September 30, ~~2017 from $8.1~~2020 compared to $7.0 million in the three months ended September 30, ~~2016.~~2019. The ~~increase~~$0.8 million decrease in depreciation and amortization expense was primarily attributable to ~~an increase~~a decrease in amortization expense for ~~intangible assets~~the trade name acquired in our Studer Group acquisition that was fully amortized in the ~~Innosight and Pope Woodhead acquisitions, which were completed subsequent to the third~~fourth quarter of ~~2016, and an increase in~~2019; decreasing amortization expense for ~~a customer-related intangible asset~~customer relationships due to the accelerated basis of amortization in prior periods, including the customer relationships acquired in ~~the~~our Studer Group ~~acquisition.~~acquisition; and customer relationships acquired in other business acquisitions that were fully amortized in prior periods. Intangible asset amortization expense included within operating expenses primarily ~~relates~~related to certain customer relationships, trade names, and non-competition agreements ~~and trade names~~ 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~~on our intangible assets.

Operating Income

Operating income decreased ~~$17.1~~$6.9 million, or 33.4% to ~~$6.1~~$13.7 million in the third quarter of ~~2017~~2020 from ~~$23.2~~$20.6 million in the third quarter of ~~2016.~~2019. Operating margin, which is defined as operating income expressed as a percentage of revenues, ~~decreased to 3.5% in~~was 6.7% for the three months ended September 30, ~~2017,~~2020, compared to ~~12.7% in~~9.4% for the three months ended September 30, ~~2016.~~2019. The decrease in operating margin was primarily attributable to ~~increases~~the decrease in revenues and the increase 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 comparedprofessionals. These decreases to the ~~same prior year period.~~operating margin were partially offset by the decrease in selling, general and administrative expenses discussed above, as percentages of revenues.

Total Other ~~Expense,~~Income (Expense), Net

~~Total other~~Interest expense, net ~~increased by $0.3~~of interest income decreased $2.1 million to ~~$4.0~~$2.3 million in the third quarter of ~~2017~~2020 from ~~$3.7~~$4.4 million in the third quarter of ~~2016.~~2019. The ~~increase~~decrease in ~~total other~~interest expense ~~net~~ was primarily attributable to ~~a $0.7 million increase in interest expense, net~~the maturity of ~~interest income, which was due to~~our Convertible Notes on October 1, 2019, partially offset by higher levels of ~~borrowings and higher interest rates~~borrowing under our credit facility during the third quarter of ~~2017~~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.

Other expense, net decreased $2.1 million to a net gain of $2.0 million in the third quarter of ~~2016. This increase~~2020 from a net loss of $0.1 million in the third quarter of 2019. The decrease in other expense, net was ~~partially offset by $0.4~~primarily attributable to a $1.8 million gain recognized in the third quarter of 2020 for the market value of our investments that are used to fund our deferred compensation liability, compared to an immaterial gain in the third quarter of 2019. Additionally, other expense, net includes the recognition of $0.2 million of foreign currency transaction gains in the third quarter of ~~2017~~2020 compared to $0.1 million of ~~net~~ foreign currency transaction losses recognized in the third quarter of ~~2016.~~2019.

Table of Contents

Income Tax Expense ~~(Benefit)~~

For the three months ended September 30, ~~2017,~~2020, 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%17.7% as we recognized income tax expense from continuing operations of ~~$7.3~~$2.4 million on income from continuing operations of ~~$19.6~~$13.5 million. The effective tax rate ~~for the three months ended September 30, 2017~~of 17.7% was more favorable than the statutory rate, inclusive of state income taxes, of 26.0%, primarily due to ~~recognizing~~the current year-to-date pre-tax losses and the impact during the quarter of certain nondeductible business expense items, including the nondeductible portion of the goodwill impairment charges, based on the attribution of those expenses to the quarter in accordance with the allocation of income tax expense on a ~~$2.7~~current year-to-date basis. The effective tax rate also reflected the positive impact of certain federal tax credits.

For the three months ended September 30, 2019, our effective tax rate was 15.0% as we recognized income tax expense from continuing operations of $2.4 million on income from continuing operations of $16.1 million. The effective tax rate of 15.0% was more favorable than the statutory rate, inclusive of state income taxes, of 26.4% primarily due to discrete tax benefits for U.S. federal return to provision adjustments related to the 2018 corporate income tax return. In addition, we recognized a discrete tax benefit related to a previously unrecognized tax benefit ~~from~~due to the expiration of statute of limitations on our "check-the-box" election made in ~~2014~~2015 to treat ~~one of our~~certain wholly-owned foreign subsidiaries as a

~~Table of Contents~~

disregarded ~~entity~~entities for ~~U.S~~U.S. federal income tax purposes. ~~This benefit was partially offset by $0.6 million of tax expense recorded in~~

See Note 12 "Income Taxes" within the ~~third quarter of 2017~~notes 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~~our consolidated financial statements for additional information on our 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.expense.

Net Income from Continuing Operations and Earnings per Share

Net income from continuing operations decreased ~~by $8.2~~$2.6 million to ~~$4.1~~$11.1 million for the three months ended September 30, ~~2017,~~2020 from ~~$12.3~~$13.7 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~~2020 was ~~$0.19~~$0.50 compared to ~~$0.57~~$0.61 for the third quarter of ~~2016.~~2019.

~~Discontinued Operations~~EBITDA and Adjusted EBITDA

~~Net income from discontinued operations was $0.2~~EBITDA decreased $5.3 million to $23.3 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~~2020 from $28.6 million for the three months ended September 30, ~~2017 from $35.9 million for the three months ended September 30, 2016.~~2019. Adjusted EBITDA decreased ~~$16.0~~$5.2 million to ~~$21.5~~$23.6 million in the third quarter of ~~2017~~2020 from ~~$37.5~~$28.8 million in the third quarter of ~~2016.~~2019. The decrease in both EBITDA and adjusted EBITDA was primarily ~~due~~attributable to the decrease in ~~segment~~ operating income, ~~as discussed below~~excluding the change in ~~Segment Results, as well as an increase in corporate expenses primarily due~~the market value of our deferred compensation liability for the third quarter of 2020 compared to ~~our acquisitions~~the third quarter of ~~Innosight and Pope Woodhead.~~2019.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income from continuing operations decreased ~~$10.4~~$4.7 million to ~~$9.3~~$13.0 million in the third quarter of ~~2017~~2020 compared to ~~$19.7~~$17.7 million in the third quarter of ~~2016.~~2019. As a result of the decrease in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was ~~$0.43~~$0.59 for the third quarter of ~~2017,~~2020, compared to ~~$0.92~~$0.79 for the third quarter of ~~2016.~~2019.

Segment Results

Healthcare

Revenues

Healthcare segment revenues decreased ~~$23.8~~$12.6 million, or ~~23.1%~~12.6%, to ~~$79.6~~$87.4 million for the third quarter of ~~2017~~2020 from ~~$103.4~~$100.0 million for the third quarter of ~~2016. Revenues~~2019, primarily due to the negative impact of the COVID-19 pandemic on demand for our services within this segment, as some clients reprioritized and delayed certain projects as a result of the ~~third quarter of 2017 included an incremental $1.7 million from our acquisition of HSM Consulting, which was completed mid-third quarter 2016.~~uncertainties surrounding the pandemic.

During the three months ended September 30, ~~2017,~~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 ~~68.5%~~58.9%, ~~16.6%~~16.7%, ~~6.7%~~17.9%, and ~~8.2%~~6.5% of this segment’s revenues, respectively, compared to ~~67.0%~~65.6%, ~~13.4%~~12.3%, ~~13.4%~~16.3%, and ~~6.2%~~5.8% of this segment’s revenues, respectively, for the same prior year period.

Of the overall $23.8 million decrease in revenues, $20.4 million was attributable to a decrease in revenue from our full-time billable consultants and $3.4 million was attributable 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 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~~$15.6 million ~~during~~for the third quarter of ~~2017~~2020 compared to ~~$13.8~~$16.3 million ~~during~~for the third quarter 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 $12.6 million decrease in revenues, ~~operating results,~~$7.1 million was attributable to a decrease in revenues from our full-time billable consultants and ~~average billing rates due~~$5.5 million was attributable to a decrease in revenues from our ~~level of execution and the timing of achievement of the performance-based criteria.~~

~~Table of Contents~~

full-time equivalents. The decrease in ~~revenue~~revenues attributable to our full-time ~~equivalents was primarily driven~~billable consultants reflected decreases in the consultant utilization rate and the average number of full-time billable consultants, partially offset by ~~a decreased demand for our Studer Group solution and~~an increase in the average billing rate in the third quarter of 2020 compared to the same prior year period. The decrease in full-time equivalent revenues reflected a decrease in revenue per full-time equivalent, partially offset by an increase in the average number of full-time ~~equivalents.~~equivalents in the third quarter of 2020 compared to the same prior year period.

Table of Contents

Operating Income

Healthcare segment operating income decreased ~~$13.0~~$7.3 million, or ~~33.6%~~22.1%, to ~~$25.8~~$25.6 million for the three months ended September 30, ~~2017~~2020 from ~~$38.8~~$32.9 million for the three months ended September 30, ~~2016.~~2019. The Healthcare segment operating margin, defined as segment operating income expressed as a percentage of segment revenues, decreased to ~~32.4%~~29.3% for the third quarter of ~~2017~~2020 from ~~37.5%~~32.9% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to increases in salaries and related expenses for our revenue-generating professionals and technology expenses; partially offset by decreases in product and event costs, practice administration and meetings expenses, promotion and marketing expenses, contractor expenses, and signing, retention and other bonus expense for our revenue-generating professionals, as percentages of revenues.

Business Advisory

Revenues

Business Advisory segment revenues increased $3.5 million, or 5.6%, to $66.0 million for the third quarter of 2020 from $62.5 million for the third quarter of 2019, primarily related to strengthened demand for our cloud-based technology and analytics solutions and our restructuring and capital advisory solutions provided to organizations in transition.

During the three months ended September 30, 2020, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 31.3%, 61.3%, 5.6%, and 1.8% of this segment’s revenues, respectively, compared to 38.9%, 56.3%, 2.6%, and 2.2% of this segment's revenues, respectively, for the same prior year period. Performance-based fee revenue was $3.7 million for the third quarter of 2020 compared to $1.6 million for the third quarter 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 $3.5 million increase in revenues, $2.2 million was attributable to an increase in revenues from our full-time billable consultants and $1.3 million was attributable to an increase in revenues from our full-time equivalents. The increase in revenues from our full-time billable consultants reflected increases in the average number of billable consultants and the consultant utilization rate, partially offset by a decrease in the average billing rate in the third quarter of 2020 compared to the same prior year period. The increase in revenues generated by 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 third quarter of 2020 compared to the same prior year period.

Operating Income

Business Advisory segment operating income decreased by $1.2 million, or 9.7%, to $10.8 million for the three months ended September 30, 2020 from $11.9 million for the three months ended September 30, 2019. The Business Advisory segment operating margin decreased to 16.3% for the third quarter of 2020 from 19.1% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to increases in performance bonus expense for our revenue-generating professionals and contractor expenses, as percentages of revenues; partially offset by decreases in promotion and marketing expenses and signing, retention and other bonus expense for our revenue-generating professionals.

Education

Revenues

Education segment revenues decreased $4.9 million, or 8.7%, to $51.9 million for the third quarter of 2020 from $56.8 million for the third quarter of 2019, primarily due to the negative impact of the COVID-19 pandemic on demand for our services within this segment, as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

During the three months ended September 30, 2020, revenues from fixed-fee engagements; time-and-expense engagements; and software support, maintenance and subscription arrangements represented 21.1%, 67.9%, and 11.0% of this segment’s revenues, respectively, compared to 21.9%, 69.9%, and 8.2% of this segment’s revenues, respectively, for the same prior year period.

Of the overall $4.9 million decrease in revenues, $4.7 million was attributable to our full-time billable consultants and $0.2 million was attributable to our full-time equivalents. The decrease in revenues attributable to our full-time billable consultants reflected decreases in the consultant utilization rate and the average billing rate, partially offset by an increase in the average number of full-time billable consultants in the third quarter of 2020 compared to the same prior year period. The increase in the average number of full-time billable consultants primarily related to hiring that occurred prior to the COVID-19 pandemic. The decrease in revenues from our full-time equivalents was primarily driven by a decreased use of contractors and project consultants, largely offset by an increase in software subscriptions and data hosting revenues. The overall decrease in full-time equivalent revenues reflected a decrease in the average number of full-time equivalents, partially offset by an increase in revenue per full-time equivalent in the third quarter of 2020 compared to the same prior year period.

Table of Contents

Operating Income

Education segment operating income decreased $1.9 million, or 12.9% to $12.5 million for the three months ended September 30, 2020 from $14.4 million for the three months ended September 30, 2019. The Education segment operating margin decreased to 24.2% for the third quarter of 2020 from 25.4% 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 arerevenue generating professionals; partially offset by decreases in performance bonus expense for our revenue-generating professionals ~~practice administration~~ and ~~meetings~~promotion and marketing expenses, ~~and intangible asset amortization expense, all~~ as ~~a percentage~~percentages of revenues.

~~Education~~

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenues

~~Education segment revenues~~Revenues increased ~~$2.8~~$1.3 million, or ~~7.3%~~0.2%, to ~~$41.4~~$645.8 million for the ~~third quarter~~first nine months of ~~2017~~2020 from ~~$38.6~~$644.5 million for the ~~third~~first nine months of 2019. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of ~~2016.~~

~~During~~2020, the ~~three months ended September 30, 2017, revenues from fixed-fee engagements, time-and-expense engagements,~~second and ~~software support~~third quarters of 2020 were negatively impacted by the pandemic as some clients reprioritized or delayed certain projects, primarily in our Healthcare and ~~maintenance~~Education segments. Conversely, the COVID-19 pandemic has strengthened demand for other services we provide, such as our cloud-based technology and ~~subscription arrangements represented 16.2%, 78.1%,~~analytics solutions within our Business Advisory segment 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,~~our restructuring and ~~software support and maintenance and subscription arrangements represented 12.2%, 80.4%, 1.6%, and 5.8% of this segment’s revenues, respectively.~~capital advisory solutions provided to organizations in transition within our Business Advisory segment.

Of the overall ~~$2.8~~$1.3 million increase in revenues, ~~$4.3~~$3.0 million was attributable to an increase in revenues from 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~~

~~Table of Contents~~

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~~consultant revenues was ~~primarily driven~~attributable to strengthened demand for services in our Business Advisory and Education segments, partially offset by a decrease in demand for services in our ~~acquisitions of Innosight, Pope Woodhead, and the international assets of ADI Strategies, and~~Healthcare segment, as discussed below in Segment Results. The overall increase in full-time billable consultant revenues reflected an increase in the average number of full-time billable consultants, partially offset by overall decreases in the consultant utilization rate and the average billing rate ~~and consultant utilization rate.~~ during the first nine months of 2020 compared to the same prior year period.

The decrease in ~~revenue from~~full-time equivalent revenues was attributable to decreases in full-time equivalent revenues in our Healthcare segment, partially offset by an increase in full-time ~~equivalents~~equivalent revenues in our Education and Business Advisory segments, as discussed below in Segment Results; and reflected aan overall 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~~during the first nine months of ~~2017 from $548.1 million for~~2020 compared to the first nine months of ~~2016. Revenues~~2019.

In the second and third quarters of 2020, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services, particularly within our Healthcare and Education segments, and therefore is expected to continue to have an unfavorable impact on our financial results in the ~~first nine months~~fourth quarter of ~~2017 included $34.1 million from our acquisitions of Innosight and Pope Woodhead, which were completed subsequent~~2020 compared to the ~~third~~fourth 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.2019.

Total Direct Costs

~~Our total direct~~Direct costs, ~~including~~excluding amortization of intangible assets and software development costs, increased ~~$17.0~~$28.8 million, or ~~5.1%~~6.8%, to ~~$351.6~~$451.2 million for the nine months ended September 30, ~~2017,~~2020, from ~~$334.6~~$422.4 million for the nine months ended September 30, ~~2016.~~2019. The overall ~~$17.0~~$28.8 million increase primarily related to a ~~$14.3~~$27.1 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by increased headcount ~~from acquisitions~~in all three of our segments and ~~our ongoing cloud-based ERP investment, partially offset by a decrease~~primarily reflected hiring that occurred in ~~salaries and related expenses in our Healthcare segment~~the second half of 2019 prior to the COVID-19 pandemic, as well as a ~~result of headcount reductions. Additional increases included a $2.8~~$2.4 million increase in ~~contractor~~share-based compensation expense for our revenue-generating professionals, a $2.1 million increase in technology expenses, a $1.1 million increase in contractor expenses, and a $0.9 million increase in performance bonus expenses for our revenue-generating professionals. These increases were partially offset by a $2.3 million decrease in signing, retention and ~~retention~~other bonus expense for our revenue-generating professionals, a ~~$0.8~~$1.4 million ~~increase~~decrease 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~~$0.9 million decrease in ~~intangible asset amortization expense and a $0.5 million decrease in performance bonus expense for our revenue-generating professionals.~~project costs. As a percentage of revenues, our ~~total~~ direct costs increased to ~~64.3%~~69.9% during the first nine months of ~~2017~~2020 compared to ~~61.0%~~65.5% during the first nine months of ~~2016~~2019 primarily due to the ~~items described above.~~increase in salaries and related expenses for our revenue-generating professionals, as a percentage of revenues.

Total direct costs for the nine months ended September 30, ~~2017~~2020 included ~~$8.4~~$4.0 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 ~~$11.3~~$3.5 million of amortization expense for the same prior year period. ~~The $2.9 million decrease in~~Intangible asset amortization ~~expense was primarily attributable~~included within direct costs for the nine months ended September 30, 2020 and 2019 related to ~~the decreasing amortization expense of~~technology and software, certain customer relationships, and customer contracts acquired in connection with our Studer Group acquisition, due to the accelerated basis of amortization, partially offset by the amortization of intangible assets acquired in the Innosight acquisition, which we completed in the first quarter of 2017.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.

~~Table of Contents~~

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

Selling, general and administrative expenses ~~increased $12.2~~decreased $24.5 million, or ~~10.2%~~16.2%, to ~~$132.1~~$126.9 million in the nine months ended September 30, ~~2017,~~2020, from ~~$119.9~~$151.4 million in the nine months ended September 30, ~~2016. Selling, general and administrative expenses for the first nine months of 2017 included $9.8~~2019. The $24.5 million ~~from Innosight and Pope Woodhead. The overall $12.2 million increase was~~decrease primarily related to an ~~$8.5~~$8.0 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, a $1.0 million increasedecrease in promotion and ~~sponsorship~~marketing expenses, ~~and~~ a ~~$0.7~~$2.6 million ~~increase~~decrease in ~~signing and retention bonus~~facilities expense, ~~for our support personnel. These increases were partially offset by~~ a ~~$2.5~~$2.6 million decrease in performance bonus expense for our support personnel, a $2.2 million decrease in training expenses, a $2.1 million decrease in third-party consulting expenses, a $2.0 million decrease

Table of Contents

in practice administration and meetings expenses, and a ~~$0.8~~$1.8 million decrease in the change in the market value of our deferred compensation liability. During the first nine months of 2020, the market value of our deferred compensation liability increased by $1.0 million, compared to an increase of $2.8 million during the first nine months of 2019. This $1.8 million decrease in expense is offset by a $1.8 million decrease in the gain recognized for the change in the market value of our investments that are used to fund our deferred compensation liability and recognized in other income (expense), net. Additional decreases in selling, general and administrative expenses include a $1.7 million decrease in share-based compensation expense for our support personnel, a $1.3 million decrease in legal expenses, and a $1.3 million decrease in recruiting expenses. These decreases were partially offset by a $1.4 million increase in data hosting and software related expenses and a $1.2 million increase in salaries and related expenses for support personnel. The decreases in promotion and marketing expenses, training expenses, and practice administration and meetings expenses primarily relate to the cancellation or delay of in-person meetings and events and business travel due to the COVID-19 pandemic. The decrease in share-based compensation expense primarily related to a decrease in the expected funding of performance-based share awards for our executive officers recorded in the third quarter of 2020. The decrease in legal expenses was primarily due to third-party transaction-related expenses related to the evaluation of a potential acquisition in the second quarter of 2019 that ultimately did not consummate. As a percentage of revenues, selling, general and administrative expenses ~~increased~~decreased to ~~24.2%~~19.6% during the first nine months of ~~2017~~2020 compared to ~~21.9%~~23.5% during the first nine months of ~~2016~~2019. This decrease was primarily ~~due~~attributable to the ~~items described~~overall decrease in selling, general and administrative expenses noted above.

Restructuring charges for the first nine months of ~~2017~~2020 totaled ~~$5.3~~$1.8 million, compared to ~~$4.1~~$2.2 million for the first nine months of ~~2016.~~2019. The ~~charges for the first nine months of 2017 primarily consisted of $2.5~~$1.8 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 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; $0.2 million related to rent and ~~$0.4~~related expenses, net of sublease income, for office spaces previously vacated, and $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~~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, in the first nine months of 2019, we exited the remaining portion of our Middleton, Wisconsin office and an office space in Houston, Texas, resulting in restructuring charges of $0.4 million and $0.1 million, respectively, which primarily ~~consisted of $1.5 million~~ related to ~~updated assumptions for lease accruals for our Washington, D.C. space vacated in~~accelerated depreciation on furniture and fixtures. Additional restructuring charges during the ~~fourth quarter~~first nine months of ~~2014, $1.2~~2019 include a total of $0.5 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.

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.demand. See Note ~~11 "Fair Value of Financial Instruments"~~8 "Restructuring Charges" within the notes to our consolidated financial statements for additional information on ~~the fair value of contingent consideration liabilities.~~our restructuring charges.

~~Depreciation~~Litigation and ~~amortization expense increased by $5.5~~other gains totaled $0.2 million ~~to $28.5 million in~~for the nine months ended September 30, ~~2017, from $23.1~~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 $1.6 million infor the nine months ended September 30, ~~2016.~~2019, which primarily consisted of $1.5 million of remeasurement gains to decrease the estimated fair value of our liabilities for contingent consideration payments related to business acquisitions.

Depreciation and amortization expense decreased by $2.8 million, or 13.2%, to $18.5 million for the nine months ended September 30, 2020, from $21.3 million for the nine months ended September 30, 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 nine months ended September 30, 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, increased uncertainty in the backlog and a decrease in the demand for the services these reporting units provide, 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~~additional information on the charges. The non-cash goodwill impairment charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of ~~this~~the reporting unit to $37.5 million as of March 31, 2020. The non-cash goodwill impairment charge related to the Life Sciences reporting unit reduced the goodwill balance to zero as of March 31, 2020. Any future significant decline in the performance of our Strategy and Innovation reporting unit compared to our internal forecasts could result in another non-cash goodwill impairment charge. During the second and third quarters of 2020, we did not identify any indicators that would lead us to believe that the fair value of any of our reporting units may not exceed their carrying values. We will continue to evaluate goodwill for impairment during future periods.

Operating Income (Loss)

Operating income decreased ~~$246.2~~$61.4 million to a loss of ~~$180.3~~$16.2 million in the first nine months of ~~2017~~2020 from operating income of ~~$65.8~~$45.2 million in the first nine 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 and the increase in direct costs, partially offset by the decrease in selling, general and administrative expenses as discussed above. See the "Critical Accounting Policies" section below and Note 64 "Goodwill and

Table of Contents

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 (loss) expressed as a percentage of revenues, decreased to ~~(33.0)~~(2.5)% for the nine months ended September 30, ~~2017,~~2020, compared to ~~12.0%~~an operating margin of 7.0% for the nine months ended September 30, ~~2016.~~2019. The decrease in operating margin was primarily attributable to the goodwill impairment ~~charge, as well as increases~~charges and the increase in salaries and related expenses for ~~both~~ our revenue-generating professionals, ~~and support personnel, contractor expenses, and signing and retention bonuses for our revenue-generating professionals during the first nine months~~as a percentage of ~~2017 compared~~revenues. These decreases to the ~~same prior year period.~~operating margin were partially offset by the decreases in selling, general and administrative expenses.

~~Table of Contents~~

Total Other ~~Expense,~~Income (Expense), Net

~~Total other~~Interest expense, net of interest income decreased ~~by $0.4~~$5.6 million to ~~$10.6~~$7.5 million in the first nine months of ~~2017~~2020 from ~~$11.0~~$13.2 million in the first nine months of ~~2016. The decrease was~~2019, primarily attributable to ~~a $0.9 million gain on sale~~the maturity of our ~~Life Sciences Compliance and Operations solution within~~Convertible Notes on October 1, 2019, partially offset by higher levels of borrowing under our ~~Business Advisory segment in~~credit facility during the ~~second quarter~~first nine months of ~~2017.~~2020 compared to the same prior year period. See Note ~~6 "Goodwill and Intangible Assets"~~7 "Financing Arrangements" within the notes to our consolidated financial statements for additional information onabout our Convertible Notes and credit facility.

Other income, net decreased by $2.1 million to a net gain of $0.7 million in the ~~sale.~~first nine months of 2020 from a net gain of $2.8 million in the first nine months of 2019. The decrease in total other ~~expense,~~income, net was ~~also~~primarily attributable to a ~~$1.8~~$1.0 million gain inrecognized during the first nine months of 2020 for the market value of our investments that are used to fund our deferred compensation liability, compared to a ~~$1.0~~$2.8 million gain recognized during the first nine months of 2019. Additionally, other income, net includes the recognition of $0.2 million of foreign currency transaction losses in the first nine months of ~~2016. These decreases were partially offset by a $1.5 million increase in interest expense, net~~2020 compared to an immaterial amount of ~~interest income~~foreign currency transaction losses recognized in the first nine months of 2017 compared to the same prior year period. The increase in interest expense was due to higher levels of borrowings and higher interest rates under our credit facility during the first nine months of 2017 compared to the first nine months of 2016.2019.

Income Tax Expense (Benefit)

On March 27, 2020, the President of the United States signed into law the CARES Act, a nearly $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 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 nine months ended September 30, ~~2017,~~2020, our effective tax rate was ~~26.1%~~23.5% as we recognized an income tax benefit from continuing operations of ~~$49.7~~$5.4 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~~$23.0 million. The effective tax rate ~~for the nine months ended September 30, 2017~~of 23.5% was less favorable than the statutory rate, inclusive of state income taxes, of 26.0%, primarily due to certain nondeductible business expenses 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 first quarter, the positive impact of certain federal tax credits, 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 tax benefit from our 2014 "check-the-box" election. The effective tax rate for~~2020.

For the nine months ended September 30, ~~2016~~2019, our effective tax rate was ~~lower~~20.8% as we recognized income tax expense from continuing operations of $7.3 million on income from continuing operations of $34.9 million. The effective tax rate of 20.8% was more 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~~ tax ~~rate~~benefits recognized primarily in the ~~second~~third quarter of ~~2016, non-taxable income, valuation allowance reductions, certain credits~~2019 related to U.S. federal and ~~deductions, and~~foreign return to provision adjustments. In addition, we recognized a discrete tax benefit in the third quarter of 2019 related to ~~share-based compensation, partially offset by non-deductible business expenses.~~a previously unrecognized tax benefit due to the expiration of statute of limitations on our "check-the-box" election made in 2015 to treat certain wholly-owned foreign subsidiaries as disregarded entities for U.S. federal income tax purposes.

See Note 12 "Income Taxes" within the notes to our consolidated financial statements for additional information on our income tax expense.

Net Income (Loss) from Continuing Operations and Earnings (Loss) Per Share

Net income from continuing operations decreased by ~~$176.5~~$45.2 million to a net loss from continuing operations of ~~$141.2~~$17.6 million for the nine months ended September 30, ~~2017,~~2020, from net income from continuing operations of ~~$35.3~~$27.6 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 segment.~~Business Advisory segment recognized in the first quarter of 2020. As a result of the decrease in net income from continuing operations, diluted loss per share from continuing operations for the first nine months of ~~2017~~2020 was ~~$6.59~~$0.81 compared to diluted earnings per share from continuing operations of ~~$1.65~~$1.23 for the first nine months of ~~2016.~~2019. The non-cash goodwill impairment ~~charge~~charges had a ~~$7.16~~$2.11 unfavorable impact on diluted earnings per share from continuing operations for the first nine months 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~~$65.8 million to ~~a loss of $140.2~~$7.0 million for the nine months ended September 30, ~~2017,~~2020, from ~~earnings of $101.4~~$72.8 million for the nine months ended September 30, ~~2016. Adjusted EBITDA decreased $32.7 million to $73.1 million in the first nine months of 2017 from $105.8 million in the first nine 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 and the increase in salaries and related expense for our revenue-generating professionals for the first nine months of 2020 compared to the first nine months of 2019; partially offset by the decrease in selling, general and administrative expenses, excluding the change in the market value of our deferred compensation liability for the first nine months of 2020 compared to the same prior year period.

Table of Contents

Adjusted EBITDA decreased $6.0 million to $70.1 million in the first nine months of 2020 from $76.0 million in the first nine months of 2019. The decrease in adjusted EBITDA was primarily ~~due~~attributable to the increase in salaries and related expenses for our revenue-generating professionals for the first nine months of 2020 compared to the first nine months of 2019; largely offset by the decrease in ~~segment operating income, as discussed below~~selling, general and administrative expenses, excluding the change in ~~Segment Results, as well as an increase in corporate~~the market value of our deferred compensation liability and transaction-related expenses ~~primarily due~~related to ~~our~~the evaluation of potential acquisitions, for the first nine months of ~~Innosight and Pope Woodhead.~~2020 compared to the same prior year period.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income from continuing operations decreased ~~$24.6~~$5.9 million to ~~$31.7~~$37.7 million in the first nine months of ~~2017~~2020 compared to ~~$56.3~~$43.7 million in the first nine months of ~~2016.~~2019. As a result of the decrease in adjusted net income from continuing operations, adjusted

~~Table of Contents~~

diluted earnings per share from continuing operations for the first nine months of ~~2017~~2020 was ~~$1.47~~$1.70 compared to ~~$2.63~~$1.95 for the first nine months of ~~2016.~~2019.

Segment Results

Healthcare

Revenues

Healthcare segment revenues decreased ~~$62.3~~$27.3 million, or ~~19.2%~~9.2%, to ~~$261.3~~$268.3 million for the first nine months of ~~2017~~2020 from ~~$323.5~~$295.6 million for the first nine months of ~~2016. Revenues for the first nine months of 2017 included $13.9 million of incremental revenues~~2019, primarily due to the ~~full period~~negative impact of the COVID-19 pandemic on demand for our ~~acquisitions~~services within this segment, as some clients reprioritized and delayed certain projects as a result of ~~HSM Consulting and MyRounding, which we completed mid-first quarter 2016 and mid-third quarter 2016, respectively.~~the uncertainties surrounding the pandemic.

During the nine months ended September 30, ~~2017,~~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%~~58.9%, ~~16.8%~~16.2%, ~~8.3%~~18.3%, and ~~7.5%~~6.6% of this segment’s revenues, respectively, compared to ~~70.4%~~63.9%, ~~10.7%~~13.3%, ~~13.1%~~17.0%, and 5.8% 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~~$49.0 million during the first nine months of ~~2017~~2020, compared to ~~$42.5~~$50.1 million during the first nine 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 $27.3 million decrease in revenues, ~~operating results,~~$17.8 million was attributable to a decrease in revenues from our full-time billable consultants and $9.5 million was attributable to our full-time equivalents. The decrease in revenues attributable to our full-time billable consultants reflected a decrease in the consultant utilization rate, partially offset by increases in the average number of full-time billable consultants and the average billing ~~rates due~~rate in the first nine months of 2020 compared to ~~our level~~the same prior year period. The decrease in full-time equivalent revenues reflected a decrease in revenue per full-time equivalent, partially offset by an increase in the average number of ~~execution and~~full-time equivalents during the ~~timing~~first nine months of ~~achievement of~~2020 compared to the ~~performance-based criteria.~~same prior year period.

Operating Income

Healthcare segment operating income decreased ~~$35.6~~$23.2 million, or ~~29.9%~~24.7%, to ~~$83.6~~$70.8 million for the nine months ended September 30, ~~2017,~~2020, from ~~$119.2~~$94.1 million for the nine months ended September 30, ~~2016.~~2019. The Healthcare segment operating margin decreased to ~~32.0%~~26.4% for the first nine months of ~~2017~~2020 from ~~36.9%~~31.8% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to ~~an increase~~increases in salaries and related expenses for our revenue-generating professionals ~~as a percentage of revenues, as well as increases in salaries~~ and ~~related expenses for our support personnel, contractor expenses, product and event costs, and restructuring charges,~~technology expenses; partially offset by decreases in performance bonus expense for our revenue-generating professionals, contractor expenses, and ~~support personnel~~product and event costs, as ~~a percentage~~percentages of revenues.

Business Advisory

Revenues

Business Advisory segment revenues increased $17.8 million, or 9.7%, to $201.4 million for the first nine months of 2020 from $183.6 million for the first nine months of 2019, primarily related to strengthened demand for our cloud-based technology and analytics solutions and our restructuring and capital advisory solutions provided to organizations in transition.

During the first nine months of 2020, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 36.5%, 58.8%, 2.9%, and 1.8% of this segment’s revenues, respectively, compared to 39.6%, 56.8%, 1.5%, and 2.1% of this segment’s revenues, respectively, during the same prior year period. Performance-based fee revenue was $5.9 million for the first nine months of 2020, compared to $2.8 million for the first nine 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 $17.8 million increase in revenues, $14.3 million was attributable to revenues generated by our full-time billable consultants and $3.5 million was attributable to our full-time equivalents. The increase in revenues from our full-time billable consultants was primarily driven by increases in the average number of full-time billable consultants and the average billing rate in the first nine 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 nine months of 2020 compared to the same prior year period.

Table of Contents

Operating Income

Business Advisory segment operating income increased by $4.3 million, or 13.1%, to $37.3 million for the nine months ended September 30, 2020, from $33.0 million for the nine months ended September 30, 2019. The Business Advisory segment operating margin increased to 18.5% for the first nine months of 2020 from 18.0% in the same period last year. The increase in this segment’s operating margin was primarily attributable to a decrease in promotion and marketing expenses, revenue growth that outpaced an increase in salaries and related expenses for our revenue-generating professionals, and decreases in signing, retention and other bonus expense for our revenue-generating professionals and practice administration and meetings expenses. These increases to the segment's operating margin were partially offset by increases in performance bonus expense for our revenue-generating professionals, contractor expenses, share-based compensation expense for our revenue-generating professionals, and restructuring charges, all as percentages of revenues. The restructuring charge recorded in the first nine months of 2020 related to the termination of a third-party advisor agreement.

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. We will continue to evaluate goodwill for impairment during future periods. Any future significant decline in~~additional information on the ~~performance of the Healthcare segment compared to our internal forecasts could result in another non-cash~~ goodwill impairment ~~charge.~~charges and our goodwill balances.

Education

Revenues

Education segment revenues increased ~~$15.8~~$10.8 million, or ~~14.1%~~6.5%, to ~~$127.6~~$176.0 million for the first nine months of ~~2017~~2020 from ~~$111.8 million for~~$165.3 million. The increase in revenues was primarily related to an increase in our cloud-based technology and analytics solutions and strategy and research consulting solutions in the first ~~nine months~~half of ~~2016.~~2020, partially offset by the negative impact of the COVID-19 pandemic on demand for our on-premise technology consulting solutions.

For the nine months ended September 30, ~~2017,~~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 ~~15.8%~~20.2%, ~~78.5%~~70.1%, ~~0.3%,~~0.4% and ~~5.4%~~9.3% of this segment’s revenues, ~~respectively, compared to 14.5%~~respectively. Revenues from fixed-fee engagements; time-and-expense engagements; and software support, maintenance and subscription arrangements represented 22.9%, ~~78.6%, 0.9%~~69.1%, and ~~6.0%~~8.0% of this segment's revenues, respectively, during the same prior year period.

Of the overall ~~$15.8~~$10.8 million increase in revenues, ~~$16.9~~$6.5 million was attributable to revenues generated by our full-time billable consultants ~~which~~and $4.3 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~~partially offset by decreases in the consultant utilization rate and average billing rate in the first nine months of 2020 compared to the same prior year period. The increase in the average number of full-time billable consultants primarily related to hiring that occurred prior to the COVID-19 pandemic. The increase in revenues from our full-time equivalents was primarily driven by an increased use of contractors and project consultants as well as an increase in software subscriptions and data hosting revenues; and reflected an increase in the average number of full-time equivalents, partially offset by a decrease in ~~the average billing rate. The decrease in revenue from our full-time equivalents was largely driven by~~

~~Table of Contents~~

~~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 first nine months of ~~2017~~2020 compared to the same prior year period.

Operating Income

Education segment operating income ~~increased $0.3~~decreased $1.4 million, or ~~0.9%~~3.3%, to ~~$31.8~~$41.8 million for the nine months ended September 30, ~~2017,~~2020, from ~~$31.5~~$43.2 million for the nine months ended September 30, ~~2016.~~2019. The Education segment operating margin decreased to ~~24.9%~~23.7% for the first nine months of ~~2017~~2020 from ~~28.1%~~26.2% 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 and support personnel, as well as an increase in~~ salaries and related expenses for our revenue-generating professionals, technology expenses, and contractor expenses, 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,revenues; 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~~promotion 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 inmarketing expenses and 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.

professionals.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents ~~decreased $8.4~~increased $63.1 million to $74.7 million at September 30, 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,~~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,							Nine Months Ended September 30,
Cash Flows (in thousands):	2017			2016			Cash Flows (in thousands):	2020		2019
Net cash provided by operating activities	$	52,432		$	79,745		Net cash provided by operating activities	$	77,985	$	51,745
Net cash used in investing activities	(125,253		)	(81,233		)	Net cash used in investing activities	(28,388)		(24,420)
Net cash provided by (used in) financing activities	64,262			(47,979		)	Net cash provided by (used in) financing activities	13,517		(11,060)
Effect of exchange rate changes on cash	192			133			Effect of exchange rate changes on cash	27		38
Net decrease in cash and cash equivalents	$	(8,367	)	$	(49,334	)
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents	$	63,141	$	16,303

Operating Activities

Net cash provided by operating activities totaled ~~$52.4~~$78.0 million for the nine months ended September 30, ~~2017 and $79.7~~2020, compared to $51.7 million for the ~~same period last year.~~nine months ended September 30, 2019. 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~~operating activities for the first nine months of ~~2017~~2020 compared to the same prior year period was primarily attributable to ~~lower net income,~~an increase in cash collections, a decrease in selling, general and administrative expenses for the ~~collection~~first nine months of ~~a settlement receivable~~2020 compared to the first nine months of 2019; and the deferral of the employer's portion of social security taxes as provided for under the CARES Act. These increases to cash provided by operating activities were partially offset by increases in payments to employees for salaries and related benefits in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 and the amount paid for annual performance bonuses 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~~$28.4 million and $24.4 million for the nine months ended September 30, ~~2017~~2020 and ~~$81.2 million for the same period last year.~~2019, respectively.

The use of cash in the first nine months of ~~2017~~2020 primarily consisted of ~~$106.9~~$13.0 million for the ~~purchases~~purchase of ~~businesses and $20.1~~an additional convertible debt investment in Shorelight Holdings, LLC; $6.8 million for payments related to internally developed software; $5.7 million for purchases of property and equipment, primarily related to purchases of leasehold improvements and ~~purchases of~~ furniture ~~and fixtures~~ for ~~new~~certain office spaces ~~in certain locations.~~and computers and related equipment; and $2.0 million for contributions to our life insurance policies which fund our deferred compensation plan.

The use of cash in the first nine months of ~~2016~~2019 primarily consisted of ~~$69.1 million for the purchases of businesses and $9.4~~$10.0 million for purchases of property and ~~equipment.~~equipment, primarily related to purchases of computers and related equipment and leasehold improvements for new office spaces in certain locations; $7.5 million for payments related to internally developed software; $4.4 million for contributions to our life insurance policies which fund our deferred compensation plan; and $2.5 million for the purchase of a business in the third quarter of 2019.

WeIn order to support our liquidity during the COVID-19 pandemic, we took proactive measures to increase available cash on hand, including reducing discretionary capital expenses. As a result, as of September 30, 2020, we estimate that cash utilized for purchases of software development and property and equipment in ~~2017~~2020 will betotal approximately ~~$25.0~~$16 million to $20 million. These purchases will primarily ~~consisting~~consist of ~~leasehold improvements, furniture and fixtures, and~~software development costs, information technology related equipment to support our corporate ~~infrastructure.~~infrastructure, and leasehold improvements for certain office locations.

Financing Activities

Net cash provided by financing activities was ~~$64.3~~$13.5 million for the nine months ended September 30, ~~2017.~~2020. During the first nine months of ~~2017,~~2020, we borrowed ~~$241.0~~$283.0 million, ~~under our credit facility, primarily~~all of which was in the first quarter of 2020, including $125.0 million in March 2020 to ~~fund our acquisitions~~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 made repayments on our credit facility of $170.0 million.~~

~~Net cash used in financing activities was $48.0 million for the nine months ended September 30, 2016.~~payment. During the first nine months of ~~2016,~~2020, we made repayments on our borrowings of $240.4 million, including $200.0 million in the second and third quarters of 2020 due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources. 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 $11.1 million for the nine months ended September 30, 2019. During the first nine months of 2019, we paid $10.0 million to the sellers of certain business acquisitions for achieving specified financial performance targets in accordance with the related

Table of Contents

purchase agreements. Of the total $10.0 million payments made, $4.7 million is classified as a cash outflow from financing activities and represents the amount paid up to the fair value of the contingent consideration liability recorded as of the acquisition date. The remaining $5.3 million is classified as a cash outflow from operating activities. During the first nine months of 2019, we borrowed $105.5 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 borrowings of $105.9 million.

Share Repurchase Program

As of September 30, ~~2017,~~2020, we had 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~~In the ~~fourth~~first 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 the first nine months of 2016,2020, we

~~Table of Contents~~

repurchased and retired ~~982,192~~313,998 shares for ~~$55.3~~$20.9 million. 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. No shares were repurchased in the ~~first nine months~~second and third quarters of ~~2017.~~2020. As of September 30, ~~2017, $35.1~~2020, less than $0.1 million ~~remains~~remained available for share repurchases. The Share Repurchase Program expired on October 31, 2020.

Financing Arrangements

At September 30, ~~2017,~~2020, we had ~~$250.0 million principal amount of our 1.25% convertible senior notes outstanding, $139.0~~$248.0 million outstanding under our senior secured credit facility and ~~$5.0~~$3.5 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.

~~Table of Contents~~

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. For purposes of the Consolidated Leverage Ratio, total debt is on a gross basis and is not netted against our cash balances. At September 30, ~~2017,~~2020 and December 31, 2019, we were in compliance with these financial ~~covenants with a~~covenants. Our Consolidated Leverage Ratio as of ~~3.52~~September 30, 2020 was 2.09 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~~September 30, 2020 was 13.19 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 September 30, 2020 compared to December 31, 2019 was driven by increased borrowings under the Amended Credit Agreement to maintain excess cash and support liquidity during the period of uncertainty created by the COVID-19 pandemic and to fund our annual performance bonus payment in the first quarter of 2020. As a result of these borrowings, cash and cash equivalents increased $63.1 million to $74.7 million at September 30, 2020 from $11.6 million at December 31, 2019.

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~~2020 and December 31, 2019 totaled ~~$139.0 million.~~$248.0 million and $205.0 million, respectively. These borrowings carried a weighted average interest rate of ~~3.4%,~~2.5% at September 30, 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

Table of Contents

revolving credit facility and outstanding letters of credit. At September 30, ~~2017,~~2020, we had outstanding letters of credit totaling ~~$2.7~~$1.7 million, which are primarily used as security deposits for our office facilities. As of September 30, ~~2017,~~2020, the unused borrowing capacity under the revolving credit facility was ~~$358.3~~$350.3 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,~~2020, the outstanding principal amount of the promissory note was ~~$5.0 million. As of September 30, 2017,~~$3.5 million, and the aircraft had a carrying amount of ~~$6.6~~$4.6 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. The pandemic has created significant volatility and uncertainty in the economy, which could limit our access to capital resources and could increase our borrowing costs. In order to support our liquidity during the pandemic, we took proactive measures to increase available cash on hand, including, but not limited to, borrowing under our senior secured credit facility in the first quarter of 2020 and reducing discretionary operating and capital expenses. To further support our liquidity, we 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~~2019. As 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,~~2020, borrowings outstanding under our senior secured credit facility totaled $248.0 million compared to $205.0 million at December 31, 2019. See the ~~aggregate fair value of all contingent consideration liabilities outstanding was $22.5 million.~~

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, 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.

~~Table of Contents~~

~~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

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 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 months of ~~2017.~~2020.

Table of Contents

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 our acquisition~~the coronavirus (COVID-19) in the first quarter of ~~Innosight, a growth strategy firm focused~~2020 created significant volatility, uncertainty and disruption to the global economy. We are closely monitoring the impact of the COVID-19 pandemic 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 and results of operationsall aspects of our Business Advisory segment from 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 charge for the amount by which the carrying value exceeds the reporting unit's fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. We adopted this guidance in the second quarter of 2017 on a prospective basis and applied the new guidance to our goodwill impairment tests described below.

~~Second Quarter 2017 Goodwill Reallocation~~

~~Effective June 1, 2017,~~including how 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. Weexpect it will continue to ~~operate under three reportable segments: Healthcare, Education,~~negatively impact our clients, employees and ~~Business Advisory.~~

~~Table~~business partners. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of ~~Contents~~

~~These three reportable segments will be comprised of~~2020, we expected it to have an unfavorable impact on sales, increase uncertainty in the ~~following six reporting units for goodwill impairment testing purpose: Healthcare, Education, Business Advisory, Enterprise Solutions~~backlog and ~~Analytics, Strategy and Innovation, and Life Sciences.~~negatively impact full year 2020 results. The ~~Business Advisory, Enterprise Solutions and Analytics,~~services provided by our Strategy and Innovation and Life Sciences reporting units ~~comprise~~within our Business Advisory ~~segment.~~

~~As a result~~segment focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the duration of the ~~reorganization, we reallocated $10.8 million of the goodwill balance associated with the previous Education and Life Sciences reporting unit~~projects within these practices are typically short-term. Therefore, due to the ~~new Life Sciences reporting unit based on~~uncertainty caused by 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,~~COVID-19 pandemic, 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 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 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; therefore, we remain~~ 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, during the first quarter of 2020 we believed that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on ~~the Healthcare~~both reporting ~~unit.~~units as of March 31, 2020.

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~~reflect 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 and a long-term EBITDA margin of 24.8% and 6.7%, respectively. 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. The range of revenue multiples used in the valuation of the Strategy and Innovation and Life Sciences reporting units was 1.20x to 1.70x and 0.30x to 0.40x, respectively.

~~Table of Contents~~

actual future earnings or cash flows of our ~~Healthcare~~ reporting ~~unit~~units will be consistent with our projections. We will continue to monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods. Any significant decline in our operations compared to our internal forecasts could result in additional non-cash goodwill impairment charges, which could be material.

Concurrently with the goodwill impairment tests performed over the Strategy and Innovation and Life Sciences 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 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. Additionally, in the second and third quarters of 2020, we did not identify any indicators that would lead us to believe that the fair values of any of our reporting units may not exceed their carrying values. We will monitor any changes to our assumptions and will evaluate goodwill as ~~part~~deemed warranted during future periods.

Table 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 another non-cash goodwill impairment charge, which could be material.Contents

As discussed above, as of September 30, 2017, we have six reporting units with goodwill balances: our Healthcare and Education segments, and our Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences practices, which together make up our Business Advisory operating segment.

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

Reporting Unit
Carrying Value
of Goodwill
Healthcare $ 427,209
Education 102,830
Business Advisory 16,094
Enterprise Solutions and Analytics 45,119
Strategy and Innovation 87,432
Life Sciences 10,691
Total $ 689,375

~~Three of our reporting units have been established primarily or entirely through recent business acquisitions:~~


Reporting Unit	Carrying Value of Goodwill
Healthcare	$	428,729
Education	104,384
Business Advisory	16,094
Strategy and Innovation	37,523
Life Sciences	—
Enterprise Solutions and Analytics	—
Total	$	586,730

Intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill. Our intangible assets, net of accumulated amortization, totaled $22.3 million at September 30, 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 intangible assets for impairment whenever events or 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~~other asset groups may not be recoverable as of March 31, 2020, June 30, 2020, 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.September 30, 2020.

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 December 31, 2016.

~~Table of Contents~~

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.

SUBSEQUENT EVENTS

Acquisition of ForceIQ, Inc.

Fourth Quarter 2020 Restructuring Plan

On October 29, 2020, we announced a restructuring plan to reduce operating costs to address the impact of the COVID-19 pandemic on our business. The restructuring plan provides for a reduction in workforce and leased office space that is expected to result in initial restructuring charges in a range of approximately $15.5 million to $19.5 million and annualized savings in a range of approximately $23.0 million to $27.0 million. We do not anticipate a material revenue impact related to the restructuring actions.

Table of Contents



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 Convertible Notes, we entered into separate convertible note hedge and warrant transactions. The convertible note hedge transactions are intended to reduce the potential future economic dilution associated with the conversion of the Convertible Notes and, combined with the warrants, 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. 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 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 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 effect on our earnings per share.

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,~~2020, we had borrowings outstanding under the credit facility totaling ~~$139.0~~$248.0 million that carried a weighted average interest rate of ~~3.4%~~2.5%, 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~~$0.5 million effect on our pretax income on an annualized basis, including the effect of the interest rate ~~swap.~~swaps outstanding at September 30, 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 had 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%.

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,~~2020, the outstanding principal amount of the promissory note was ~~$5.0~~$3.5 million and carried an interest rate of ~~3.2%~~2.1%. 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, 2019 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.

~~Table of Contents~~

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,~~2020, the fair value of the investment was ~~$31.9~~$61.1 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 September 30, 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 in Shorelight Holdings, LLC and Medically Home Group, Inc.

Table of Contents



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.~~2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, ~~2017,~~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~~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.



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 pandemic is adversely impacting and, in the future, could materially adversely impact our business, operations and financial results. 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 severity of the pandemic;

•the timing of the development and distribution of an effective vaccine or treatments for COVID-19;

•governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic, including quarantines, social distancing and other risk mitigating measures taken to prevent the spread of COVID-19;

•the effect on our clients and client demand for our services and solutions, including the effect on the healthcare and higher education industries which are areas of significant focus for our business;

•the health and welfare of our employees, including our senior management team, practice leaders and managing directors, and their ongoing ability to serve clients and manage operations if they contract COVID-19;

•the impact on our key third-party vendors;

•the effect on the businesses in which we have invested;

Table of Contents

•our ability to sell and provide our services and solutions and maintain adequate utilization levels, including as a result of travel restrictions, shelter-in-place and quarantine orders 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,~~2020, goodwill and other intangible assets totaled ~~$770.2~~$609.0 million, or ~~71%~~56%, of our total ~~assets.~~assets as of September 30, 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~~ 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, during the first quarter of 2020 we believed that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on ~~the Healthcare~~both reporting ~~unit.~~ units as of March 31, 2020.

Based on the estimated fair ~~value~~values of the ~~Healthcare~~Strategy and Innovation and Life Sciences reporting ~~unit,~~units, 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.

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~~continue to 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.

~~Table of Contents~~



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,~~2020, we reacquired ~~4,798~~12,468 shares of common stock with a weighted average fair market value of ~~$39.78~~$46.49 as a result of such tax withholdings.

~~Our board~~

Table of ~~directors authorized~~Contents

We had 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~~, with less than $0.1 million available for share repurchases as of ~~2017, our board of directors authorized an extension of the~~September 30, 2020. The Share Repurchase Program ~~through~~expired on 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.2020.

The following table provides information with respect to purchases we made of our common stock during the quarter ended September 30, ~~2017.~~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, 2020 - July 31, 2020	3,106	$	44.25	—	$	43,572
August 1, 2020 - August 31, 2020	8,705	$	47.66	—	$	43,572
September 1, 2020 - September 30, 2020	657	$	41.57	—	$	43,572
Total	12,468	$	46.49	—

(1)The number of shares repurchased each period represent shares 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.

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
—


~~(1)~~	The number of shares repurchased for each period represents shares 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.

Table of Contents



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~~31.1

Amendment No. 2 of the Credit Agreement, dated as of October 24, 2017, by and among 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.

~~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)

Table of Contents

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~~2, 2020

/S/ JOHN D. KELLY

John D. Kelly

Executive Vice President,

Chief Financial Officer and Treasurer



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



	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	)



			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



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	—