UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022


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

Commission file number: 000-50976

HURON CONSULTING GROUP INC.

(Exact name of registrant as specified in its charter)


Delaware						01-0666114
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification Number)

550 West Van Buren Street

Chicago, Illinois

60607

(Address of principal executive offices)

(Zip Code)

(312) 583-8700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HURN	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

☐

Non-accelerated Filer

☐

Smaller Reporting
Company

☐

Emerging Growth Company

☐

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. ☐

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

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, 2021, 21,917,598~~July 21, 2022, 20,784,210 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

Table of Contents


Huron Consulting Group Inc.

HURON CONSULTING GROUP INC.

INDEX

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, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	11,189	$	67,177	Cash and cash equivalents	$	11,958	$	20,781
Receivables from clients, net of allowances of $8,236 and $7,680, respectively		111,548		87,687
Unbilled services, net of allowances of $2,738 and $2,603, respectively		94,862		53,959
Receivables from clients, net of allowances of $8,115 and $8,827, respectively						Receivables from clients, net of allowances of $8,115 and $8,827, respectively	150,973		122,316
Unbilled services, net of allowances of $3,493 and $2,637, respectively						Unbilled services, net of allowances of $3,493 and $2,637, respectively	118,825		91,285
Income tax receivable	Income tax receivable	2,120		5,121		Income tax receivable	677		8,071
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,624		16,569		Prepaid expenses and other current assets	21,279		15,229
Total current assets	Total current assets	233,343		230,513		Total current assets	303,712		257,682
Property and equipment, net	Property and equipment, net	30,654		29,093		Property and equipment, net	27,214		31,004
Deferred income taxes, net	Deferred income taxes, net	1,726		4,191		Deferred income taxes, net	1,775		1,804
Long-term investments	Long-term investments	68,216		71,030		Long-term investments	96,982		72,584
Operating lease right-of-use assets	Operating lease right-of-use assets	37,367		39,360		Operating lease right-of-use assets	32,018		35,311
Other non-current assets	Other non-current assets	64,463		62,068		Other non-current assets	64,096		68,191
Intangible assets, net	Intangible assets, net	16,663		20,483		Intangible assets, net	28,271		31,894
Goodwill	Goodwill	597,552		594,237		Goodwill	623,841		620,879
Total assets	Total assets	$	1,049,984	$	1,050,975	Total assets	$	1,177,909	$	1,119,349
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	5,918	$	648	Accounts payable	$	10,983	$	13,621
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	18,520		14,874		Accrued expenses and other current liabilities	25,549		22,519
Accrued payroll and related benefits	Accrued payroll and related benefits	103,526		133,830		Accrued payroll and related benefits	92,738		139,131

Current maturities of long-term debt	Current maturities of long-term debt	555		499		Current maturities of long-term debt	—		559
Current maturities of operating lease liabilities	Current maturities of operating lease liabilities	10,066		8,771		Current maturities of operating lease liabilities	10,241		10,142
Deferred revenues	Deferred revenues	17,820		28,247		Deferred revenues	18,969		19,212
Total current liabilities	Total current liabilities	156,405		186,869		Total current liabilities	158,480		205,184
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Deferred compensation and other liabilities	Deferred compensation and other liabilities	40,582		47,131		Deferred compensation and other liabilities	32,370		43,458

Long-term debt, net of current portion	Long-term debt, net of current portion	262,362		202,780		Long-term debt, net of current portion	342,000		232,221
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	56,873		61,825		Operating lease liabilities, net of current portion	49,093		54,313
Deferred income taxes, net	Deferred income taxes, net	394		428		Deferred income taxes, net	20,607		12,273
Total non-current liabilities	Total non-current liabilities	360,211		312,164		Total non-current liabilities	444,070		342,265
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 24,377,457 and 25,346,916 shares issued, respectively		238		246
Treasury stock, at cost, 2,457,456 and 2,584,119 shares, respectively		(135,903)		(129,886)
Common stock; $0.01 par value; 500,000,000 shares authorized; 23,492,632 and 24,364,814 shares issued, respectively						Common stock; $0.01 par value; 500,000,000 shares authorized; 23,492,632 and 24,364,814 shares issued, respectively	232		239
Treasury stock, at cost, 2,681,730 and 2,495,172 shares, respectively						Treasury stock, at cost, 2,681,730 and 2,495,172 shares, respectively	(136,425)		(135,969)
Additional paid-in capital	Additional paid-in capital	409,910		454,512		Additional paid-in capital	374,280		413,794
Retained earnings	Retained earnings	245,938		214,009		Retained earnings	317,723		276,996
Accumulated other comprehensive income	Accumulated other comprehensive income	13,185		13,061		Accumulated other comprehensive income	19,549		16,840
Total stockholders’ equity	Total stockholders’ equity	533,368		551,942		Total stockholders’ equity	575,359		571,900
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,049,984	$	1,050,975	Total liabilities and stockholders’ equity	$	1,177,909	$	1,119,349

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,
2021 2020 2021 2020
Revenues and reimbursable expenses:
Revenues $ 224,007 $ 205,304 $ 657,346 $ 645,780
Reimbursable expenses 3,690 2,860 8,876 25,133
Total revenues and reimbursable expenses 227,697 208,164 666,222 670,913
Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
Direct costs 153,902 145,459 463,543 451,221
Amortization of intangible assets and software development costs 910 1,370 2,745 4,005
Reimbursable expenses 3,914 2,840 9,233 25,095
Total direct costs and reimbursable expenses 158,726 149,669 475,521 480,321
Operating expenses and other losses (gains), net
Selling, general and administrative expenses 43,520 38,561 128,476 126,864
Restructuring charges 1,677 59 3,166 1,777
Litigation and other losses (gains) 56 — 98 (150)
Depreciation and amortization 5,412 6,176 16,286 18,483
Goodwill impairment charges — — — 59,816
Total operating expenses and other losses (gains), net 50,665 44,796 148,026 206,790
Operating income (loss) 18,306 13,699 42,675 (16,198)
Other income (expense), net:
Interest expense, net of interest income (2,217) (2,259) (5,965) (7,516)
Other income (expense), net (394) 2,035 2,177 687
Total other expense, net (2,611) (224) (3,788) (6,829)
Income (loss) from continuing operations before taxes 15,695 13,475 38,887 (23,027)
Income tax expense (benefit) 1,968 2,388 6,958 (5,413)
Net income (loss) from continuing operations 13,727 11,087 31,929 (17,614)
Loss from discontinued operations, net of tax — (29) — (89)
Net income (loss) $ 13,727 $ 11,058 $ 31,929 $ (17,703)
Net earnings (loss) per basic share:
Net income (loss) from continuing operations $ 0.65 $ 0.50 $ 1.48 $ (0.81)
Loss from discontinued operations, net of tax — — — —
Net income (loss) $ 0.65 $ 0.50 $ 1.48 $ (0.81)
Net earnings (loss) per diluted share:
Net income (loss) from continuing operations $ 0.64 $ 0.50 $ 1.46 $ (0.81)
Loss from discontinued operations, net of tax — — — —
Net income (loss) $ 0.64 $ 0.50 $ 1.46 $ (0.81)
Weighted average shares used in calculating earnings (loss) per share:
Basic 21,242 21,905 21,574 21,868
Diluted 21,531 22,175 21,904 21,868
Comprehensive income (loss):
Net income (loss) $ 13,727 $ 11,058 $ 31,929 $ (17,703)
Foreign currency translation adjustments, net of tax (246) 381 236 (294)
Unrealized gain (loss) on investment, net of tax 1,158 4,885 (2,068) (1,051)
Unrealized gain (loss) on cash flow hedging instruments, net of tax 309 (243) 1,956 (3,633)
Other comprehensive income (loss) 1,221 5,023 124 (4,978)
Comprehensive income (loss) $ 14,948 $ 16,081 $ 32,053 $ (22,681)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues and reimbursable expenses:
Revenues	$	273,325	$	230,126	$	533,374	$	433,339
Reimbursable expenses	7,492		3,252		12,218		5,186
Total revenues and reimbursable expenses	280,817		233,378		545,592		438,525
Operating expenses:
Direct costs (exclusive of depreciation and amortization included below)	189,233		161,526		376,480		309,641
Reimbursable expenses	7,576		3,316		12,332		5,319
Selling, general and administrative expenses	46,033		45,190		94,428		84,998
Restructuring charges	2,069		861		3,624		1,489
Depreciation and amortization	6,902		6,356		13,766		12,709

Total operating expenses	251,813		217,249		500,630		414,156
Operating income	29,004		16,129		44,962		24,369
Other income (expense), net:
Interest expense, net of interest income	(2,446)		(2,029)		(4,642)		(3,748)
Other income (expense), net	(4,881)		2,151		19,484		2,571
Total other income (expense), net	(7,327)		122		14,842		(1,177)
Income before taxes	21,677		16,251		59,804		23,192
Income tax expense	7,802		3,454		19,077		4,990


Net income	$	13,875	$	12,797	$	40,727	$	18,202



Earnings per share:
Net income per basic share	$	0.67	$	0.59	$	1.97	$	0.84



Net income per diluted share	$	0.66	$	0.59	$	1.94	$	0.82
Weighted average shares used in calculating earnings per share:
Basic	20,582		21,555		20,715		21,743
Diluted	20,967		21,871		21,047		22,105
Comprehensive income (loss):
Net income	$	13,875	$	12,797	$	40,727	$	18,202
Foreign currency translation adjustments, net of tax	(656)		82		(699)		482
Unrealized gain (loss) on investment, net of tax	773		1,422		(1,888)		(3,226)
Unrealized gain on cash flow hedging instruments, net of tax	971		218		5,296		1,647
Other comprehensive income (loss)	1,088		1,722		2,709		(1,097)
Comprehensive income	$	14,963	$	14,519	$	43,436	$	17,105

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

Table of Contents

HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


	Three Months Ended June 30,
	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2022	23,639,953	$	237	(2,918,100)	$	(135,367)	$	395,103	$	303,848	$	18,461	$	582,282
Comprehensive income									13,875		1,088		14,963
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	27,309	—		(15,115)	(931)		931						—
Exercise of stock options	13,731	—					538						538
Share-based compensation							6,049						6,049
Shares redeemed for employee tax withholdings				(2,584)	(127)								(127)

Share repurchases	(497,547)	(5)					(28,341)						(28,346)
Balance at June 30, 2022	23,183,446	$	232	(2,935,799)	$	(136,425)	$	374,280	$	317,723	$	19,549	$	575,359

Balance at March 31, 2021	24,698,499	$	247	(2,887,999)	$	(134,611)	$	445,711	$	219,414	$	10,242	541,003
Comprehensive income									12,797		1,722		14,519
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	21,820	—		(9,091)	(605)		605						—
Exercise of stock options	6,772	—					248						248
Share-based compensation							4,575						4,575
Shares redeemed for employee tax withholdings				(2,843)	(148)								(148)
Share repurchases	(405,363)	(4)					(22,055)						(22,059)
Balance at June 30, 2021	24,321,728	$	243	(2,899,933)	$	(135,364)	$	429,084	$	232,211	$	11,964	$	538,138

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, 2021 24,321,728 $ 243 (2,899,933) $ (135,364) $ 429,084 $ 232,211 $ 11,964 $ 538,138
Comprehensive income 13,727 1,221 14,948
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations 45,190 — 1,371 77 (77) —
Exercise of stock options 5,000 — 191 191
Share-based compensation 5,693 5,693
Shares redeemed for employee tax withholdings (12,489) (616) (616)
Share repurchases (518,045) (5) (24,981) (24,986)
Balance at September 30, 2021 23,853,873 $ 238 (2,911,051) $ (135,903) $ 409,910 $ 245,938 $ 13,185 $ 533,368
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 —
Exercise of stock options 6,800 — 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


		Nine Months Ended September 30,																					Six Months Ended June 30,
		Common Stock			Treasury Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income				Stockholders’ Equity				Common Stock						Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Stockholders’ Equity
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
Balance at December 31, 2020		24,560,855	$	246	(2,812,896)	$	(129,886)			$	454,512						$	214,009			$	13,061		$	551,942
Balance at December 31, 2021																						Balance at December 31, 2021	23,868,918			$	239		(2,908,849)	$	(135,969)		$	413,794		$	276,996		$	16,840		$	571,900
Comprehensive income	Comprehensive income											31,929			124				32,053			Comprehensive income													40,727			2,709			43,436
Issuance of common stock in connection with:	Issuance of common stock in connection with:																					Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	Restricted stock awards, net of cancellations	443,741	4		82,380	3,250		(3,254)											—			Restricted stock awards, net of cancellations	304,938			3			115,125	6,555		(6,558)									—
Exercise of stock options	Exercise of stock options	18,403	—					613											613			Exercise of stock options	30,536			—						1,185									1,185
Share-based compensation	Share-based compensation							18,256											18,256			Share-based compensation										18,100									18,100
Shares redeemed for employee tax withholdings	Shares redeemed for employee tax withholdings				(180,535)	(9,267)													(9,267)			Shares redeemed for employee tax withholdings							(142,075)	(7,011)											(7,011)
Share repurchases	Share repurchases	(1,169,126)	(12)					(60,217)											(60,229)			Share repurchases	(1,020,946)			(10)						(52,241)									(52,251)
Balance at September 30, 2021		23,853,873	$	238	(2,911,051)	$	(135,903)	$	409,910			$	245,938		$	13,185			$	533,368
Balance at June 30, 2022																						Balance at June 30, 2022	23,183,446			$	232		(2,935,799)	$	(136,425)	$	374,280		$	317,723		$	19,549		$	575,359

Balance at December 31, 2019		24,603,308	$	247	(2,763,302)	$	(128,348)	$	460,781			$	237,849		$	14,936			$	585,465
Balance at December 31, 2020																						Balance at December 31, 2020	24,560,855			$	246		(2,812,896)	$	(129,886)	$	454,512		$	214,009		$	13,061		$	551,942
Comprehensive loss	Comprehensive loss											(17,703)			(4,978)				(22,681)			Comprehensive loss													18,202			(1,097)			17,105
Issuance of common stock in connection with:	Issuance of common stock in connection with:																					Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	Restricted stock awards, net of cancellations	321,986	3		94,180	6,707		(6,710)											—			Restricted stock awards, net of cancellations	398,551			4			81,009	3,173		(3,177)									—
Exercise of stock options	Exercise of stock options	33,600	—					825											825			Exercise of stock options	13,403			—						422									422
Share-based compensation	Share-based compensation							20,135											20,135			Share-based compensation										12,563									12,563
Shares redeemed for employee tax withholdings	Shares redeemed for employee tax withholdings				(134,274)	(7,797)													(7,797)			Shares redeemed for employee tax withholdings							(168,046)	(8,651)											(8,651)
Share repurchases	Share repurchases	(313,998)	(3)					(20,878)											(20,881)			Share repurchases	(651,081)			(7)						(35,236)									(35,243)
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, 2021																						Balance at June 30, 2021	24,321,728			$	243		(2,899,933)	$	(135,364)	$	429,084		$	232,211		$	11,964		$	538,138

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,					Six Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	31,929	$	(17,703)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Net income						Net income	$	40,727	$	18,202
Adjustments to reconcile net income to cash flows from operating activities:						Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	Depreciation and amortization	19,245		22,511		Depreciation and amortization	13,766		12,923
Non-cash lease expense	Non-cash lease expense	4,912		5,844		Non-cash lease expense	3,174		3,301

Share-based compensation	Share-based compensation	17,979		18,559		Share-based compensation	15,166		11,566
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	595		595		Amortization of debt discount and issuance costs	397		397
Goodwill impairment charges		—		59,816

Allowances for doubtful accounts	Allowances for doubtful accounts	—		539		Allowances for doubtful accounts	47		—
Deferred income taxes	Deferred income taxes	2,434		(16,125)		Deferred income taxes	7,089		(48)
Loss on sale of business		—		102
Gain on sale of property and equipment, excluding transaction costs						Gain on sale of property and equipment, excluding transaction costs	(1,117)		(158)

Change in fair value of contingent consideration liabilities	Change in fair value of contingent consideration liabilities	98		—		Change in fair value of contingent consideration liabilities	33		42
Change in fair value of preferred stock investment						Change in fair value of preferred stock investment	(26,964)		—
Other, net	Other, net	(325)		—		Other, net	—		(78)
Changes in operating assets and liabilities, net of acquisition and divestiture:
Changes in operating assets and liabilities, net of acquisitions and divestiture:						Changes in operating assets and liabilities, net of acquisitions and divestiture:
(Increase) decrease in receivables from clients, net	(Increase) decrease in receivables from clients, net	(23,294)		23,493		(Increase) decrease in receivables from clients, net	(28,825)		(27,749)
(Increase) decrease in unbilled services, net	(Increase) decrease in unbilled services, net	(40,883)		1,597		(Increase) decrease in unbilled services, net	(28,329)		(36,088)
(Increase) decrease in current income tax receivable / payable, net	(Increase) decrease in current income tax receivable / payable, net	3,159		9,455		(Increase) decrease in current income tax receivable / payable, net	9,394		3,366
(Increase) decrease in other assets	(Increase) decrease in other assets	98		(3,426)		(Increase) decrease in other assets	3,984		(1,117)
Increase (decrease) in accounts payable and other liabilities	Increase (decrease) in accounts payable and other liabilities	2,229		(5,272)		Increase (decrease) in accounts payable and other liabilities	(13,524)		5,038
Increase (decrease) in accrued payroll and related benefits	Increase (decrease) in accrued payroll and related benefits	(35,958)		(25,290)		Increase (decrease) in accrued payroll and related benefits	(43,420)		(42,487)
Increase (decrease) in deferred revenues	Increase (decrease) in deferred revenues	(10,424)		3,290		Increase (decrease) in deferred revenues	(1,834)		(9,080)
Net cash provided by (used in) operating activities		(28,206)		77,985
Net cash used in operating activities						Net cash used in operating activities	(50,236)		(61,970)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment, net		(8,918)		(5,731)
Purchase of investment securities		—		(13,000)
Purchases of property and equipment						Purchases of property and equipment	(6,800)		(5,439)

Investment in life insurance policies	Investment in life insurance policies	(574)		(2,026)		Investment in life insurance policies	—		(77)

Purchase of business		(5,886)		(801)
Purchases of business, net of cash acquired						Purchases of business, net of cash acquired	(1,948)		(5,886)
Capitalization of internally developed software costs	Capitalization of internally developed software costs	(3,603)		(6,830)		Capitalization of internally developed software costs	(3,974)		(2,508)

Proceeds from note receivable						Proceeds from note receivable	157		—
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	255		—		Proceeds from sale of property and equipment	4,750		158

Divestiture of business						Divestiture of business	207		—
Net cash used in investing activities	Net cash used in investing activities	(18,726)		(28,388)		Net cash used in investing activities	(7,608)		(13,752)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from exercises of stock options	Proceeds from exercises of stock options	613		825		Proceeds from exercises of stock options	1,185		422
Shares redeemed for employee tax withholdings	Shares redeemed for employee tax withholdings	(9,267)		(7,797)		Shares redeemed for employee tax withholdings	(7,011)		(8,651)
Share repurchases	Share repurchases	(60,229)		(22,115)		Share repurchases	(52,443)		(35,243)
Proceeds from bank borrowings	Proceeds from bank borrowings	189,000		283,000		Proceeds from bank borrowings	224,000		139,000
Repayments of bank borrowings	Repayments of bank borrowings	(129,362)		(240,396)		Repayments of bank borrowings	(114,780)		(74,270)

Net cash provided by (used in) financing activities		(9,245)		13,517
Deferred payments on business acquisitions						Deferred payments on business acquisitions	(1,875)		—
Net cash provided by financing activities						Net cash provided by financing activities	49,076		21,258
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	189		27		Effect of exchange rate changes on cash	(55)		269
Net increase (decrease) in cash and cash equivalents		(55,988)		63,141
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(8,823)		(54,195)
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	67,177		11,604		Cash and cash equivalents at beginning of the period	20,781		67,177
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	11,189	$	74,745	Cash and cash equivalents at end of the period	$	11,958	$	12,982
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
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	$	2,140	$	2,049	Property and equipment expenditures and capitalized software included in accounts payable, accrued expenses and accrued payroll and related benefits	$	3,134	$	3,315
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	$	2,960	$	1,456	Operating lease right-of-use asset obtained in exchange for operating lease liability	$	102	$	—
Contingent consideration related to purchase of business						Contingent consideration related to purchase of business	$	869	$	—

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

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

1. Description of Business

Huron is a global ~~consultancy~~professional services firm that ~~collaborates with~~creates innovative strategies, optimizes operations and accelerates digital transformation using an enterprise portfolio of technology, data and analytics solutions to empower clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need to own their future. By collaborating with clients, embracing diverse perspectives, encouraging new ideas and challenging the status quo, ~~Huron creates~~we create sustainable results for the organizations ~~it serves.~~we serve.

We provide our services and manage our business under 3 operating segments: Healthcare, Education and Commercial. See Note 14 “Segment Information” for a discussion of our 3 segments.

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following 3 industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving visibility into the core drivers of our business.

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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("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") 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, 2020~~ included in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly ~~Reports~~Report on Form 10-Q for the ~~periods~~period ended March 31, ~~2021 and June 30, 2021.~~2022. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.

~~During~~In order to better align with industry standards, in the first quarter of ~~2021,~~2022, we ~~identified an error on our previously reported consolidated balance sheet as~~revised the presentation of ~~December 31, 2020~~

~~related to the classification between receivables from clients, unbilled services, and deferred revenues. Our consolidated balance sheet as~~

~~of December 31, 2020 presented herein has been revised to reflect the correction of this error. The results of this correction on our~~

~~consolidated balance sheet were a decrease in unbilled services of $7.2 million, an increase in receivables from clients of $0.7 million, and a~~

~~decrease in deferred revenues of $6.5 million. This error had no impact on~~ our consolidated statement of operations and other

comprehensive income (loss) to present depreciation and amortization expense inclusive of amortization of intangible assets and software development costs previously presented within total direct costs and reimbursable expenses. We also aggregated immaterial line items within selling, general and administrative expenses. The change in presentation has no effect on our consolidated results, and our historical consolidated statements of ~~cash flows~~operations and other comprehensive income (loss) were revised for any current or prior period. We evaluated the materiality of this error from both quantitative and qualitative perspectives and concluded that the impact of the error was not material to the financial statements for the year ended December 31, 2020.consistent presentation.

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.

3. New Accounting Pronouncements

~~Recently Adopted~~

~~In October 2020, the FASB issued Accounting Standards Update ("ASU") 2020-10,~~ ~~Codification Improvements.~~ ASU 2020-10 situates all disclosure guidance within the appropriate disclosure section of the Codification and makes other improvements and technical corrections to the Codification. We adopted ASU 2020-10 effective January 1, 2021, which did not have any impact on our consolidated financial statements.

Not Yet Adopted

In March 2020, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform (Topic 848): Scope. Together, these ASUs provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting under GAAP. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. We have certain debt instruments and related interest rate swaps that are indexed to LIBOR; as such, we are currently evaluating the potential impact this guidance will have on our consolidated financial statements.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

reference rate reform on financial reporting under GAAP. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. Our senior secured credit facility and related interest rate swaps are indexed to LIBOR; as such, we are currently evaluating the potential impact this guidance will have on our consolidated financial statements.

4. Goodwill and Intangible Assets

The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Healthcare
Business
Advisory Education Total
Balance as of December 31, 2020:
Goodwill $ 636,810 $ 308,935 $ 104,384 $ 1,050,129
Accumulated impairment losses (208,081) (247,811) — (455,892)
Goodwill, net as of December 31, 2020 428,729 61,124 104,384 594,237
Goodwill recorded in connection with a business acquisition (1)
— 3,315 — 3,315
Goodwill, net as of September 30, 2021 $ 428,729 $ 64,439 $ 104,384 $ 597,552


	Healthcare		Education		Commercial(1)		Total
Balance as of December 31, 2021:
Goodwill	$	642,951	$	121,570	$	312,250	$	1,076,771
Accumulated impairment losses	(208,081)		—		(247,811)		(455,892)
Goodwill, net as of December 31, 2021	434,870		121,570		64,439		620,879
Goodwill reallocation(1)	18,057		(1,417)		(16,640)		—
Goodwill recorded in connection with business acquisitions (2)(3)	162		2,082		718		2,962

Goodwill, net as of June 30, 2022	$	453,089	$	122,235	$	48,517	$	623,841

(1)The goodwill balance as of December 31, 2021 shown within the Commercial segment related to our Business Advisory segment prior to the modification of our operating model. Effective January 1, 2022, we reallocated a portion of the goodwill within our Business Advisory segment to our Healthcare and Education segments. The remaining goodwill was allocated to our new Commercial segment.

(2)On ~~February 1, 2021,~~January 18, 2022, we completed the acquisition of ~~Unico Solution, a data strategy~~AIMDATA, LLC ("AIMDATA"), an advisory and ~~technology~~implementation consulting services firm focused on ~~helping clients use their data to speed~~strategy, technology and business ~~transformation and accelerate cloud adoption.~~transformation. The results of operations of ~~Unico Solution~~AIMDATA are included within our consolidated financial statements as of the acquisition date and allocated among our 3 operating industries, which are our reportable segments, based on the engagements delivered by the business. The acquisition of AIMDATA is not significant to our consolidated financial statements.

(3)In the first quarter of 2022, we finalized the measurement of assets acquired, including goodwill, and liabilities assumed in the acquisition of Whiteboard Communications Ltd. ("Whiteboard"), a student enrollment advisory firm that helps colleges and universities with recruitment initiatives and financial aid strategies that we acquired in December 2021. The results of operations of Whiteboard are included in our consolidated financial statements and results of operations of our ~~Business Advisory~~Education segment from the date of acquisition. ~~This acquisition is not significant to our consolidated financial statements.~~

First Quarter ~~2020~~2022 Goodwill ~~Impairment Charges~~Reallocation

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following 3 industries, which are our reportable segments: Healthcare, Education and Commercial. The ~~worldwide spread~~Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the ~~COVID-19 pandemic~~new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the ~~first quarter of 2020 created significant volatility, uncertainty~~respective segments' industries. The new Healthcare and ~~disruption to~~

~~the global economy. From the onset of the COVID-19 pandemic, we closely monitored the impact it could have on all aspects of our~~

~~business, including how we expect it to negatively impact our clients, employees~~Education segments include some revenue and ~~business partners. While the COVID-19 pandemic did~~

~~not have a significant impact on our consolidated revenues~~costs historically reported 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 units within our~~ Business Advisory 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 projects~~

~~within these practices are typically short-term. Therefore, at the onset of the COVID-19 pandemic~~Healthcare segment includes some revenue and costs historically reported in the ~~U.S. and due to the uncertainty~~

~~caused by the pandemic, we were cautious about near-term results for these two reporting units. Based on our internal projections and the~~

~~preparation of our financial statements for the quarter ended March 31, 2020, and considering the expected decrease in demand due to the~~

~~COVID-19 pandemic, during the first quarter of 2020 we believed it was more likely than not 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 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, 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 Strategy and Innovation and Life Sciences reporting~~

units with its respective carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair value. To estimate the fair value of 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 each reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with each~~

~~reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted~~

~~revenue growth rates, forecasted EBITDA margins, and discount rates that reflect the risk inherent in the future cash flows. In estimating~~

~~future cash flows, we relied on internally generated seven-year forecasts. Our forecasts are based on historical experience, current backlog,~~

~~expected market demand, and other industry information.~~

~~In the market approach, we utilized the guideline company method, which involved calculating 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 pay for a company. These multiples were evaluated and adjusted based on specific~~

~~characteristics of the 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.~~Education segment.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The 3 reportable segments of Healthcare, Education and Commercial are also our reporting units for goodwill impairment testing purposes. As a result of the reorganization, we reallocated the goodwill balances of our historical reporting units to our new reporting units based on the relative estimated fair values of each component of the historical reporting units to be allocated to the new reporting units. Additionally, we performed a goodwill impairment test on the goodwill balances of each of our reporting units as of January 1, 2022 by comparing the fair value of the reporting unit to its carrying value, including the reallocated goodwill. Based on the results of the goodwill impairment test, we determined the fair values of the Healthcare, Education, and Commercial reporting units exceeded their carrying values by 37%, 199%, and 105%, respectively. As such, we concluded that there was no indication of goodwill impairment for all 3 reporting units as of January 1, 2022.

We relied on the income approach to estimate the fair value of the reporting units for both the goodwill reallocation and the goodwill impairment test. The income approach utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each business and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted EBITDA margins, and discount rates that reflect the risk inherent in the future cash flows. In estimating future cash flows, we relied on internally generated ten-year forecasts. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

Intangible Assets

Intangible assets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:


			As of September 30, 2021				As of December 31, 2020						As of June 30, 2022				As of December 31, 2021
		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	Customer relationships	3 to 13	$	71,273	$	56,496	$	73,629	$	56,232	Customer relationships	3 to 13	$	77,763	$	57,261	$	75,908	$	53,421
Trade names	Trade names	6	6,000		4,901		6,130		4,287		Trade names	6	6,000		5,527		6,000		5,148
Technology and software	Technology and software	5	5,800		5,543		5,800		5,380		Technology and software	2 to 5	13,330		6,791		13,330		5,607
Non-competition agreements	Non-competition agreements	5	1,720		1,258		2,090		1,541		Non-competition agreements	2 to 5	920		216		2,020		1,347
Customer contracts	Customer contracts	2	800		732		800		526		Customer contracts	1	260		207		260		101
Total	Total		$	85,593	$	68,930	$	88,449	$	67,966	Total		$	98,273	$	70,002	$	97,518	$	65,624

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.

Intangible asset amortization expense was ~~$2.2~~$2.8 million and ~~$3.2~~$2.3 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively; and ~~$6.9~~$5.7 million and ~~$9.6~~$4.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021. The table below sets forth the estimated annual amortization expense for the intangible assets recorded as of ~~September~~June 30, ~~2021.~~2022.

Year Ending December 31,
Estimated Amortization Expense(1)
2021 $ 9,059
2022 $ 6,878
2023 $ 4,231
2024 $ 1,384
2025 $ 566

~~(1)~~On November 1, 2021, we completed the divestiture of the Life Sciences business, including the sale of customer relationships previously acquired which had a net book value of $2.0 million as of September 30, 2021. The amortization of these customer relationships is included in the table above through 2024.


Year Ending December 31,	Estimated Amortization Expense
2022	$	11,198
2023	$	7,904
2024	$	4,514
2025	$	3,386
2026	$	2,435

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

~~5. Revenues~~

For the three months ended September 30, 2021 and 2020, we recognized revenues of $224.0 million and $205.3 million, respectively. Of the $224.0 million recognized in the third quarter of 2021, we recognized revenues of $4.3 million from obligations satisfied, or partially satisfied, in prior periods, of which $2.2 million was primarily due to the release of allowances on unbilled services and $2.1 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements. 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 and $1.7 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements.

For the nine months ended September 30, 2021 and 2020, we recognized revenues of $657.3 million and $645.8 million, respectively. Of the $657.3 million recognized in the first nine months of 2021, we recognized revenues of $22.1 million from obligations satisfied, or partially satisfied, in prior periods, of which $14.6 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $7.5 million was primarily due to the release of allowances on unbilled services. 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.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

5. Revenues

For the three months ended June 30, 2022 and 2021, we recognized revenues of $273.3 million and $230.1 million, respectively. Of the $273.3 million recognized in the second quarter of 2022, we recognized revenues of $5.1 million from obligations satisfied, or partially satisfied, in prior periods, of which $3.7 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $1.4 million was primarily due to the release of allowances on receivables from clients and unbilled services. Of the $230.1 million recognized in the second quarter of 2021, we recognized revenues of $15.7 million from obligations satisfied, or partially satisfied, in prior periods, of which $13.5 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $2.2 million was primarily due to the release of allowances on receivables from clients and unbilled services.

For the six months ended June 30, 2022 and 2021, we recognized revenues of $533.4 million and $433.3 million, respectively. Of the $533.4 million recognized in the first six months of 2022, we recognized revenues of $3.4 million from obligations satisfied, or partially satisfied, in prior periods, of which $2.1 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $1.3 million was primarily due to the release of allowances on receivables from clients and unbilled services. Of the $433.3 million recognized in the first six months of 2021, we recognized revenues of $20.8 million from obligations satisfied, or partially satisfied, in prior periods, of which $13.9 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements, and $6.9 million was primarily due to the release of allowances on receivables from clients and unbilled services.

As of ~~September~~June 30, ~~2021,~~2022, we had ~~$72.8~~$124.5 million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude ~~obligations under contracts with an original expected duration of one year or less,~~ variable consideration which has been excluded from the total transaction price due to the constraint and performance obligations under time-and-expense engagements which are recognized in the amount invoiced. Of the ~~$72.8~~$124.5 million of performance obligations, we expect to recognize approximately ~~$15.8~~$39.7 million as revenue in ~~2021, $30.2~~2022, $45.1 million in ~~2022,~~2023, and the remaining ~~$26.8~~$39.7 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.

Contract Assets and Liabilities

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

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~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$20.8~~$26.8 million and ~~$17.3~~$23.7 million, respectively. The ~~$3.5~~$3.1 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.

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~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, was ~~$17.8~~$19.0 million and ~~$28.2~~$19.2 million, respectively. The ~~$10.4~~$0.2 million decrease 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~~six months ended ~~September~~June 30, ~~2021, $1.3~~2022, $3.4 million and ~~$27.3~~$16.5 million of revenues recognized were included in the deferred ~~revenue~~revenues balance as of December 31, ~~2020.~~2021.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net income (loss) from continuing operations $ 13,727 $ 11,087 $ 31,929 $ (17,614)
Loss from discontinued operations, net of tax — (29) — (89)
Net income (loss) $ 13,727 $ 11,058 $ 31,929 $ (17,703)
Weighted average common shares outstanding – basic 21,242 21,905 21,574 21,868
Weighted average common stock equivalents 289 270 330 —
Weighted average common shares outstanding – diluted 21,531 22,175 21,904 21,868
Net earnings (loss) per basic share:
Net income (loss) from continuing operations $ 0.65 $ 0.50 $ 1.48 $ (0.81)
Loss from discontinued operations, net of tax — — — —
Net income (loss) $ 0.65 $ 0.50 $ 1.48 $ (0.81)
Net earnings (loss) per diluted share:
Net income (loss) from continuing operations $ 0.64 $ 0.50 $ 1.46 $ (0.81)
Loss from discontinued operations, net of tax — — — —
Net income (loss) $ 0.64 $ 0.50 $ 1.46 $ (0.81)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	13,875	$	12,797	$	40,727	$	18,202

Weighted average common shares outstanding – basic	20,582		21,555		20,715		21,743
Weighted average common stock equivalents	385		316		332		362
Weighted average common shares outstanding – diluted	20,967		21,871		21,047		22,105

Net income per basic share	$	0.67	$	0.59	$	1.97	$	0.84
Net income per diluted share	$	0.66	$	0.59	$	1.94	$	0.82

The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above for the three and six months ended June 30, 2022 and 2021 were less than 0.1 million shares, ~~at both September 30, 2021 and 2020,~~ and related to unvested restricted ~~stock.~~stock and outstanding common stock options.

In November 2020, our board of directors authorized a share repurchase program ~~(the “2020 Share Repurchase Program”)~~ permitting us to

repurchase up to $50 million of our common stock through December 31, 2021. ~~The 2020 Share Repurchase Program was authorized~~

~~subsequent to the expiration of our prior share repurchase program (the “2015 Share Repurchase Program”) on October 31, 2020. The 2015~~

~~Share Repurchase Program permitted us to repurchase up to $125 million of our common stock through October 31, 2020.~~ During the third quarter of 2021, our board of directors authorized an extension of the ~~2020 Share Repurchase Program~~share repurchase program through December 31, 2022 and increased the authorized amount ~~from $50 million~~ to $100 ~~million.The~~million. During the first quarter of 2022, our board of directors authorized a further extension through December 31, 2023 and increased the authorized amount to $200 million. The amount and timing of repurchases under ~~both~~the share repurchase ~~programs~~program were and will continue to be determined by management and 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. All shares repurchased and retired are reflected as a reduction to our basic weighted average shares outstanding based on the trade date of the share repurchase.

In the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we repurchased and retired ~~518,045~~497,547 and ~~1,169,126~~1,020,946 shares for ~~$25.0~~$28.3 million and ~~$60.2~~$52.2 million, ~~respectively, under the 2020 Share Repurchase Program. In the first quarter of 2020, we repurchased 313,998 shares for $20.9 million under the 2015 Share Repurchase Program.~~respectively. Additionally, in the first quarter of ~~2020,~~2022, we settled the repurchase of ~~18,000~~3,820 shares for ~~$1.2~~$0.2 million that were accrued as of December 31, ~~2019. No~~2021. In the three and six months ended June 30, 2021, we repurchased and retired 405,363 and 651,081 shares ~~were repurchased in the second or third quarters of 2020.~~for $22.1 million and $35.2 million, respectively. As of ~~September~~June 30, ~~2021, $34.7~~2022, $77.9 million remained available for share repurchases under our ~~2020 Share Repurchase Program.~~share repurchase program.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

7. Financing Arrangements

A summary of the carrying amounts of our debt follows:
September 30,
2021 December 31,
2020
Senior secured credit facility $ 260,000 $ 200,000
Promissory note due 2024 2,917 3,279
Total long-term debt $ 262,917 $ 203,279
Current maturities of long-term debt (555) (499)
Long-term debt, net of current portion $ 262,362 $ 202,780

~~Below is a summary of the scheduled remaining principal payments of our debt as of September 30, 2021.~~
Principal Payments of Long-Term Debt
2021 $ 137
2022 $ 559
2023 $ 575
2024 $ 261,646


	June 30, 2022		December 31, 2021
Senior secured credit facility	$	342,000	$	230,000
Promissory note due 2024	—		2,780
Total long-term debt	342,000		232,780
Current maturities of long-term debt	—		(559)
Long-term debt, net of current portion	$	342,000	$	232,221

Senior Secured Credit Facility

The Company has a $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 Agreement"), that becomes due and payable in full upon maturity on 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 $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 $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.

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 1.125% per annum and 1.875% per annum, in the case of LIBOR borrowings, or between 0.125% per annum and 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 upon an Event 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 “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) of 3.75 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 upon the 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 non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, pro forma historical EBITDA for businesses

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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~~June 30, ~~2021,~~2022, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of ~~2.73~~2.20 to 1.00 and a Consolidated Interest Coverage Ratio of ~~13.99~~19.03 to 1.00.

Borrowings outstanding under the Amended Credit Agreement at ~~September~~June 30, ~~2021~~2022 totaled ~~$260.0~~$342.0 million. These borrowings carried a weighted average interest rate of ~~2.7%~~2.6%, including the effect of the interest rate swaps described in Note 9 “Derivative Instruments and Hedging Activity.” Borrowings outstanding under the Amended Credit Agreement at December 31, ~~2020~~2021 were ~~$200.0~~$230.0 million and carried a weighted average interest rate of ~~2.5%~~2.7%, including the effect of the interest rate swaps. 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~~June 30, ~~2021,~~2022, we had

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

outstanding letters of credit totaling $0.7 million, which are used as security deposits for our office facilities. As of ~~September~~June 30, ~~2021,~~2022, the unused borrowing capacity under the revolving credit facility was ~~$339.3~~$257.3 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~~In the first quarter of 2022, we completed the sale of the aircraft to a third-party and used a portion of the sale proceeds to pay the remaining principal and unpaid interest on the promissory note. Prior to the repayment of the promissory note, the principal balance of the promissory note iswas 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.~~2024. Under the terms of the promissory note, we ~~pay~~paid 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,~~December 31, 2021, the outstanding principal amount of the promissory note was ~~$2.9~~$2.8 million, and the aircraft had a carrying amount of ~~$3.9~~$3.7 million. ~~At December 31, 2020, the outstanding principal amount~~As a result of the ~~promissory note was $3.3~~sale, we recognized a gain of $1.0 million in the first quarter of 2022 and ~~the aircraft had a carrying amount of $4.4 million.~~we no longer own any aircraft.

8. Restructuring Charges

Restructuring charges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were ~~$1.7~~$2.1 million and ~~$3.2 million, respectively.~~$3.6 million. The ~~$1.7~~$2.1 million of restructuring charges recognized in the ~~third~~second quarter of ~~2021 consisted of $0.7~~2022 included $1.1 million of ~~third-party transaction~~employee-related expenses, ~~related to the evaluation of the divestiture of our Life Sciences business within our Business Advisory segment, $0.5~~$0.4 million of rent and related expenses, net of sublease income, for previously vacated office spaces, ~~and~~ $0.5 million for third-party transaction expenses related to the modification of ~~employee-related expenses. Of~~our operating model, and $0.1 million related to the ~~$3.2~~divestiture of our Life Sciences business in the fourth quarter of 2021. The $3.6 million of restructuring ~~charge~~charges incurred in the first ~~nine~~six months of 2022 included $1.6 million of employee-related expenses, $1.0 million of rent and related expenses, net of sublease income, for previously vacated office spaces, $0.6 million for third-party transaction expenses related to the modification of our operating model, $0.3 million of accelerated amortization of capitalized software implementation costs for a cloud-computing arrangement that is no longer in use, and $0.1 million related to the divestiture of our Life Sciences business in the fourth quarter of 2021.

Restructuring charges for the three and six months ended June 30, 2021 ~~$1.8~~were $0.9 million and $1.5 million, respectively, and primarily related to rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for vacated office spaces; $0.9 million related to third-party transaction expenses related to the evaluation of the divestiture of our Life Sciences business within our Business Advisory segment; and $0.5 million related to the employee-related expenses recognized in the third quarter of 2021.

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.

In the fourth quarter of 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, which was substantially complete in the fourth quarter of 2020, provided for a reduction in certain leased office spaces and a reduction in workforce.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.


		Employee Costs		Office Space Reductions		Other		Total			Employee Costs		Other		Total
Balance as of December 31, 2020		$	2,447	$	84	$	893	$	3,424
Balance as of December 31, 2021										Balance as of December 31, 2021	$	573	$	567	$	1,140
Additions	Additions	504		—		927		1,431		Additions	1,617		550		2,167
Payments	Payments	(2,438)		(84)		(707)		(3,229)		Payments	(1,016)		(810)		(1,826)
Adjustments	Adjustments	(13)		—		—		(13)		Adjustments	—		40		40
Balance as of September 30, 2021		$	500	$	—	$	1,113	$	1,613
Balance as of June 30, 2022										Balance as of June 30, 2022	$	1,174	$	347	$	1,521

~~The~~All of the $1.2 million restructuring charge liability related to employee costs at ~~September~~June 30, ~~2021~~2022 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related ~~benefits. The employee related payments made~~benefits in our consolidated balance sheet. All of the ~~first nine months of 2021 primarily related to the fourth quarter 2020 restructuring plan. Of the $1.1~~$0.3 million other restructuring charge liability at ~~September~~June 30, ~~2021,$0.6 million is related to the divestiture of our Life Sciences business within our Business Advisory segment and~~2022 is expected to be paid over the next 12 months and ~~the remaining $0.5 million~~ is ~~related to the termination of a third-party advisor agreement expected to be paid over the next 16 months. The other restructuring charge liabilities are~~ included as a component of accrued expenses and other current liabilities ~~and deferred compensation and other liabilities.~~in our consolidated balance sheet.

9. Derivative Instruments and Hedging Activity

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 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%.

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%.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

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 onin the consolidated 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, net of interest income upon settlement. As of ~~September~~June 30, ~~2021,~~2022, it was anticipated that ~~$1.7~~$2.2 million of the ~~losses,~~gains, 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 the interest rate swaps designated as a cash flow hedging instrument as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


		Fair Value (Derivative Asset and Liability)					Fair Value (Derivative Asset and Liability)
Balance Sheet Location	Balance Sheet Location	September 30, 2021		December 31, 2020		Balance Sheet Location	June 30, 2022		December 31, 2021

Prepaid expenses and other current assets						Prepaid expenses and other current assets	$	3,080	$	—
Other non-current assets						Other non-current assets	$	3,578	$	1,210
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	2,051	$	2,100	Accrued expenses and other current liabilities	$	—	$	1,604
Deferred compensation and other liabilities	Deferred compensation and other liabilities	$	660	$	3,297	Deferred compensation and other liabilities	$	—	$	149

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 onin our consolidated balance sheet.

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.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The table below sets forth our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
September 30, 2021
June 30, 2022										June 30, 2022
Assets:	Assets:									Assets:
Interest rate swaps										Interest rate swaps	$	—	$	6,658	$	—	$	6,658
Convertible debt investment										Convertible debt investment	—		—		63,352		63,352
Deferred compensation assets										Deferred compensation assets	—		31,911		—		31,911
Total assets										Total assets	$	—	$	38,569	$	63,352	$	101,921
Liabilities:										Liabilities:

Contingent consideration for business acquisitions										Contingent consideration for business acquisitions	$	—	$	—	$	3,266	$	3,266
Total liabilities										Total liabilities	$	—	$	—	$	3,266	$	3,266
December 31, 2021										December 31, 2021
Assets:										Assets:
Interest rate swap										Interest rate swap	$	—	$	627	$	—	$	627
Convertible debt investment	Convertible debt investment	$	—	$	—	$	61,549	$	61,549	Convertible debt investment	—		—		65,918		65,918
Deferred compensation assets	Deferred compensation assets	—		37,195		—		37,195		Deferred compensation assets	—		39,430		—		39,430
Total assets	Total assets	$	—	$	37,195	$	61,549	$	98,744	Total assets	$	—	$	40,057	$	65,918	$	105,975
Liabilities:	Liabilities:									Liabilities:
Interest rate swaps	Interest rate swaps	$	—	$	2,711	$	—	$	2,711	Interest rate swaps	$	—	$	1,170	$	—	$	1,170
Contingent consideration for business acquisition		—		—		1,868		1,868
Contingent consideration for business acquisitions										Contingent consideration for business acquisitions	—		—		3,743		3,743
Total liabilities	Total liabilities	$	—	$	2,711	$	1,868	$	4,579	Total liabilities	$	—	$	1,170	$	3,743	$	4,913
December 31, 2020
Assets:

Convertible debt investment		$	—	$	—	$	64,364	$	64,364
Deferred compensation assets		—		34,056		—		34,056
Total assets		$	—	$	34,056	$	64,364	$	98,420
Liabilities:
Interest rate swaps		$	—	$	5,397	$	—	$	5,397
Contingent consideration for business acquisition		—		—		1,770		1,770
Total liabilities		$	—	$	5,397	$	1,770	$	7,167

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. Refer to Note 9 “Derivative Instruments and Hedging Activity” for additional information on our interest rate swaps.

Convertible debt investment: InSince 2014, ~~and 2015,~~ we have invested ~~$27.9~~$40.9 million in the form of ~~zero coupon~~1.69% 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~~The convertible notes ~~(the “additional convertible note”) and amended our initial convertible notes to~~

~~extend the maturity date to~~will mature on January 17, 2024, ~~which coincides with the maturity date of the additional convertible note.~~unless converted earlier.

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

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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 ~~22.5%~~23.0% and ~~24.0%~~22.5% as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively; and the concluded equity volatility of 37.5% and 45.0% as of ~~both September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, 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 investments onin our consolidated balance sheets.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The table below sets forth the changes in the balance of the convertible debt investment for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.


	Convertible Debt Investment
Balance as of December 31, ~~2020~~2021	$	~~64,364~~65,918

Change in fair value ~~of convertible debt investment~~	~~(2,815)~~(2,566)
Balance as of ~~September~~June 30, ~~2021~~2022	$	~~61,549~~63,352

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

Contingent consideration for business ~~acquisition:~~acquisitions: We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted assessment of the specific financial performance targets being measured 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 of our contingent consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and a discount rate which ~~typically reflects a risk-free rate, and~~ was ~~2.39% and 2.41%~~3.5% as of ~~September~~June 30, ~~2021 and~~2022. As of December 31, ~~2020, respectively.~~2021, the discount rate used in the fair value measurements of our contingent consideration was in a range of 2.4% to 5.1% with a weighted average of 3.7%. The weighted average discount rate was calculated using the relative fair values of the contingent consideration liabilities as of December 31, 2021. 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.

~~The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the nine months ended September 30, 2021.~~


	~~Contingent Consideration for Business Acquisitions~~
~~Balance as of December 31, 2020~~	$	~~1,770~~
~~Change in fair value of contingent consideration for business acquisition~~	98
~~Balance as of September 30, 2021~~	$	~~1,868~~

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

~~Preferred Stock Investment~~

In the fourth quarter of 2019, we invested $5.0 million, in the form of preferred stock, in Medically Home Group, Inc. (“Medically Home”), a healthcare technology-enabled services company. To determine the appropriate accounting treatment for our investment, we performed a

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the six months ended June 30, 2022.


	Contingent Consideration for Business Acquisitions
Balance as of December 31, 2021	$	3,743
Acquisition	869
Payment	(1,379)
Change in fair value	33
Balance as of June 30, 2022	$	3,266

Financial assets and liabilities not recorded at fair value on a recurring basis are as follows:

Medically Home Preferred Stock Investment

In the fourth quarter of 2019, we invested $5.0 million in Medically Home Group, Inc. (“Medically Home”), a hospital-at-home company. The investment was made in the form of preferred stock. To determine the appropriate accounting treatment for our preferred stock investment, we performed a VIE analysis and concluded that Medically Home does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the 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 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 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 observable transaction for the same or similar equity instrument occurred, and remeasure to the fair value of the preferred stock using such identified transactions, with changes in the fair value recorded in our consolidated statement of operations. ~~During the nine months ended September 30, 2021, there has been no impairment, nor any observable price change related to our investment.~~

As of ~~September 30,~~December 31, 2021, the carrying amount of our preferred stock investment was $6.7 million. During the first quarter of 2022, we recognized an unrealized gain of $27.0 million to increase the carrying amount of our preferred stock investment to $33.6 million, based on an observable price change of preferred stock issued by Medically Home with similar rights and preferences to our preferred stock investment. This observable price change is a Level 2 input. The $27.0 million unrealized gain was recorded to other income (expense), net in our consolidated statement of operations. There were no observable price changes in the second quarter of 2022. Since our initial investment, we have recognized cumulative unrealized gains of $28.6 million, and we have not identified any impairments of our investment.

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

Promissory Note due 2024

In the first quarter of 2022, we completed the sale of our aircraft to a third-party and used a portion of the sale proceeds to pay the remaining principal and unpaid interest on our promissory note due 2024. The carrying value of our promissory note due 2024 iswas stated at cost. ~~Our~~The carrying value ~~approximates~~approximated fair value, using Level 2 inputs, as the promissory note ~~bears~~bore interest at rates based on ~~current~~then-current market rates as set forth in the terms of the promissory note. Refer to Note 7 “Financing Arrangements” for additional information on our promissory note due 2024.

Cash and Cash Equivalents and 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.

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(Tabular amounts in thousands, except per share amounts)

(Unaudited)

11. Other Comprehensive Income (Loss)

The table below sets forth the components of other comprehensive income (loss), net of tax, for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021.


	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	Before Taxes		Tax (Expense) Benefit		Net of Taxes		Before Taxes		Tax (Expense) Benefit		Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(656)	$	—	$	(656)	$	82	$	—	$	82
Unrealized gain (loss) on investment	$	1,051	$	(278)	$	773	$	1,936	$	(514)	$	1,422
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	1,024	$	(271)	$	753	$	(305)	$	78	$	(227)
Reclassification adjustments into earnings	297		(79)		218		601		(156)		445
Net unrealized gain (loss)	$	1,321	$	(350)	$	971	$	296	$	(78)	$	218
Other comprehensive income (loss)	$	1,716	$	(628)	$	1,088	$	2,314	$	(592)	$	1,722


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	Before Taxes		Tax (Expense) Benefit		Net of Taxes		Before Taxes		Tax (Expense) Benefit		Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(699)	$	—	$	(699)	$	482	$	—	$	482
Unrealized gain (loss) on investment	$	(2,566)	$	678	$	(1,888)	$	(4,392)	$	1,166	$	(3,226)
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	6,692	$	(1,770)	$	4,922	$	884	$	(259)	$	625
Reclassification adjustments into earnings	509		(135)		374		1,381		(359)		1,022
Net unrealized gain (loss)	$	7,201	$	(1,905)	$	5,296	$	2,265	$	(618)	$	1,647
Other comprehensive income (loss)	$	3,936	$	(1,227)	$	2,709	$	(1,645)	$	548	$	(1,097)

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, 2021	$	(1,143)	$	18,374	$	(391)	$	16,840
Current period change	(699)		(1,888)		5,296		2,709
Balance, June 30, 2022	$	(1,842)	$	16,486	$	4,905	$	19,549

12. Income Taxes

For the three months ended June 30, 2022, our effective tax rate was 36.0% as we recognized income tax expense of $7.8 million on income of $21.7 million. The effective tax rate of 36.0% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4%, primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.

For the three months ended June 30, 2021, ~~and 2020.~~

Three Months Ended
September 30, 2021 Three Months Ended
September 30, 2020
Before
Taxes Tax
(Expense)
Benefit Net of
Taxes Before
Taxes Tax
(Expense)
Benefit Net of
Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments $ (246) $ — $ (246) $ 381 $ — $ 381
Unrealized gain (loss) on investment $ 1,577 $ (419) $ 1,158 $ 6,598 $ (1,713) $ 4,885
Unrealized gain (loss) on cash flow hedges:
Change in fair value $ (192) $ 47 $ (145) $ (903) $ 234 $ (669)
Reclassification adjustments into earnings 613 (159) 454 576 (150) 426
Net unrealized gain (loss) $ 421 $ (112) $ 309 $ (327) $ 84 $ (243)
Other comprehensive income (loss) $ 1,752 $ (531) $ 1,221 $ 6,652 $ (1,629) $ 5,023
our effective tax rate was 21.3% as we recognized income tax expense of $3.5 million on income of $16.3 million. The effective tax rate of 21.3% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6%,

1516

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

Nine Months Ended
September 30, 2021 Nine Months Ended
September 30, 2020
Before
Taxes Tax
(Expense)
Benefit Net of
Taxes Before
Taxes Tax
(Expense)
Benefit Net of
Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments $ 236 $ — $ 236 $ (294) $ — $ (294)
Unrealized gain (loss) on investment $ (2,815) $ 747 $ (2,068) $ (1,420) $ 369 $ (1,051)
Unrealized gain (loss) on cash flow hedges:
Change in fair value $ 692 $ (212) $ 480 $ (5,815) $ 1,510 $ (4,305)
Reclassification adjustments into earnings 1,994 (518) 1,476 909 (237) 672
Net unrealized gain (loss) $ 2,686 $ (730) $ 1,956 $ (4,906) $ 1,273 $ (3,633)
Other comprehensive income (loss) $ 107 $ 17 $ 124 $ (6,620) $ 1,642 $ (4,978)

~~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, 2020 $ (218) $ 17,205 $ (3,926) $ 13,061
Current period change 236 (2,068) 1,956 124
Balance, September 30, 2021 $ 18 $ 15,137 $ (1,970) $ 13,185

~~12. Income Taxes~~

For the three months ended September 30, 2021, our effective tax rate was 12.5% as we recognized income tax expense from continuing operations of $2.0 million on income from continuing operations of $15.7 million. The effective tax rate of 12.5% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6%, primarily due to a discrete tax benefit ~~for U.S. federal return to provision adjustments~~ related ~~to the 2020 corporate income tax return.~~

For the three months ended September 30, 2020, our effective tax rate was 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 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 year-to-date basis. The effective tax rate also reflected the positive impact of certain federal tax credits.

For the nine months ended September 30, 2021, our effective tax rate was 17.9% as we recognized income tax expense from continuing operations of $7.0 million on income from continuing operations of $38.9 million. The effective tax rate of 17.9% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6% primarily due to the discrete tax benefit during the third quarter of 2021 for U.S. federal return to provision adjustment related to the 2020 corporate income tax return. The effective tax rate also reflected the positive impact of certain federal tax credits and a discrete tax benefit recognized during the second quarter of 2021 related to electing the Global Intangible Low-Taxed Income ~~("GILTI"~~(“GILTI”) high-tax exclusion retroactively for the 2018 tax year. On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to GILTI that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available. ~~These~~This favorable ~~items were~~item was partially offset by certain nondeductible ~~business expenses.~~expense items.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022, our effective tax rate was ~~23.5%~~31.9% as we recognized an income tax ~~benefit from continuing operations~~expense of ~~$5.4~~$19.1 million on ~~a loss from continuing operations~~income of ~~$23.0~~$59.8 million. The effective tax rate of ~~23.5%~~31.9% was less favorable than the statutory rate, inclusive of state income taxes, of ~~26.0%,~~26.4% primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability andcertain nondeductible ~~business expenses~~expense items.

For the six months ended June 30, 2021, our effective tax rate was 21.5% as we recognized income tax expense of $5.0 million on income of $23.2 million. The effective tax rate of 21.5% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6% primarily due to the discrete tax benefit related to electing the GILTI high-tax exclusion retroactively for the 2018 tax year and ~~the nondeductible portion of the goodwill impairment charges recorded~~a discrete tax benefit for share-based compensation awards that vested during the first ~~quarter of 2020.~~quarter. These ~~unfavorable~~favorable items were partially offset by ~~a discrete~~certain nondeductible expense items.

As of June 30, 2022, we had $0.7 million of unrecognized tax ~~benefit for share-based compensation awards~~benefits which would affect the effective tax rate of continuing operations if recognized. It is reasonably possible that ~~vested primarily during the first quarter, the positive impact of certain federal~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~tax credits and the discrete tax benefit for the remeasurement of a portion of our income tax receivable as a result~~approximately $0.1 million of the ~~enactment of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)~~liability for unrecognized tax benefits could decrease in the ~~first quarter of 2020.~~

The CARES Act, which was signed into law on March 27, 2020, is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback periods and technical corrections to tax depreciation methods for qualified improvement property. In the first ninenext twelve months ~~of 2020, as a result of the CARES Act, we recognized a $0.8 million tax benefit 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 the higher tax rate in the carryback period. As a result~~expiration of ~~electing the retroactive GILTI high-tax exclusion in the second quarter~~statutes of 2021, we recognized a $1.0 million tax benefit of which $0.4 million related to carrying back our increased 2018 federal net operating loss to prior year income for a refund at the higher, prior year tax rate. During the third quarter of 2021, we recognized an additional tax benefit of $2.0 million, primarily related to the U.S. federal return to provision adjustments for carrying back our increased 2020 federal net operating loss to prior year income for a refund at the higher, prior year tax rate.limitations.

13. Commitments, Contingencies and Guarantees

Lease Commitments

We lease office space, data centers and certain equipment under non-cancelable operating lease arrangements in the normal course of business. In the second quarter of 2022, we entered into a lease agreement for office space in Washington, D.C. that will commence in July 2022 with a term through June 2028. Among other items, this agreement provides a renewal option to extend the term of the lease for an additional 5 year period.

Litigation

Oaktree

On November 9, 2018, Huron Consulting Services LLC, a wholly owned subsidiary of Huron, was engaged by Oaktree Medical Centre LLC, a management services organization (“Oaktree”), to perform interim management and financial advisory services. As part of the services, a Huron employee was appointed by Oaktree’s board of directors to serve as Chief Restructuring Officer of Oaktree (the “CRO”). The engagement letter through which Oaktree retained Huron’s services (the “Engagement Letter”) states that all disputes or claims arising thereunder are subject to binding arbitration, disclaims special, consequential, incidental and exemplary damages and losses and caps liability to the fees paid for the portion of the engagement giving rise to any liability. On September 19, 2019, Oaktree and certain of its affiliates filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of North Carolina, with the cases subsequently transferred to the District of South Carolina. As a result of the bankruptcy filing, a Chapter 7 trustee was appointed to oversee the bankruptcy estates, at which time Huron’s services for Oaktree concluded.

In April 2021, Trustee’s counsel communicated in writing to Huron its intent to pursue various claims against Huron and the CRO, among others, on behalf of the bankruptcy estates related to the services carried out by Huron and the CRO during the engagement.

On September 17, 2021, the Trustee filed a complaint in the Bankruptcy Court for the District of South Carolina against Huron and the CRO, among others (the “Complaint”), alleging breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, negligence, violations of the South Carolina Unfair Trade Practices Act, fraud, civil conspiracy, unjust enrichment, and recovery of avoided transfers under sections 547, 548 and 550 of the Bankruptcy Code. On December 7, 2021, the Trustee filed an amended version of the Complaint (the “Amended Complaint”), generally alleging the same claims asserted in the initial Complaint but (i) removing the claim for a violation of the South Carolina Unfair Trade Practices Act and (ii) adding a claim for breach of contract.

In the Amended Complaint, the Trustee ~~asserts~~asserted that Huron and the CRO, among others, did not develop and implement a Chapter 11 restructuring plan on a timely basis and that their failure to do so led to significant damages. The Trustee ~~seeks~~sought an unspecified amount of monetary damages in the Amended Complaint. We believe the Trustee’s allegations with respect to Huron and the CRO are without ~~merit and will vigorously defend ourselves against~~merit. On December 21, 2021, we filed a motion to dismiss all of the ~~allegations raised~~claims in the Amended Complaint. ~~Notwithstanding~~On April 19, 2022, the ~~foregoing, given~~bankruptcy court

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(Tabular amounts in thousands, except per share amounts)

(Unaudited)

entered an order staying all of the ~~inherent risk~~Trustee’s claims against Huron and ~~uncertainty associated with all litigation,~~the CRO after (i) finding that the state law claims were subject to arbitration and (ii) exercising its discretion to stay the non-state-law claims pending the arbitration proceeding. The Trustee did not appeal the court’s order prior to the deadline of May 3, 2022. Based on the available information to date, we ~~cannot~~ estimate that the potential ~~liability with respect to such allegations at~~comprehensive resolution of this ~~time.~~matter will not result in a material loss.

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 or subject to any claim that, in the current opinion of management, could reasonably be expected to have a material adverse effect on our financial position or results of ~~operations.~~operations, including the matter discussed above. 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 $0.7 million ~~and $1.6 million~~ were outstanding at ~~September~~both June 30, ~~2021~~2022 and December 31, ~~2020, respectively, primarily~~2021 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~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the total estimated fair value of our outstanding contingent consideration liability was ~~$1.9~~$3.3 million and ~~$1.8~~$3.7 million, respectively.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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 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.

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 3 operating segments, which are our reportable segments: Healthcare, Education and Commercial.

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and ~~Education.~~the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving visibility into the core drivers of our business. While our consolidated results have not been impacted, our historical segment information has been recast for consistent presentation.

•Healthcare

Our Healthcare segment serves acute care providers, including national and regional ~~hospitals, integrated~~ health systems, academic ~~medical centers,~~health systems, community health systems, and public, children’s and critical access hospitals, and non-acute care providers, including physician practices and medical ~~groups.~~groups, payors, and long-term care or post-acute providers. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; digital solutions, spanning technology and analytic-related services and a portfolio of software products; organizational transformation; financial advisory and ~~digital, technology~~strategy and ~~analytic solutions.~~innovation. Most healthcare organizations are focused on ~~changing the way care is delivered;~~ establishing a sustainable long-term strategy and business model centered around optimal cost structures, reimbursement models, and financial strategies; and evolving their digital, technology and analytic capabilities. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry expertise to help clients solve a diverse set of business issues, including, but not limited to, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, evolving organizational culture, and maximizing return on technology investments.

•~~Business Advisory~~

Our Business Advisory segment works with C-suite executives, boards, and business unit and functional leadership across a diverse set of organizations, including healthy, well-capitalized companies to organizations in transition, and across a broad range of industries, including financial services, healthcare, education, energy and utilities, industrials and manufacturing, and the public sector. Our Business Advisory professionals have deep industry, functional and technical expertise that they put forward when delivering our digital, technology and analytics, strategy and innovation and corporate finance and restructuring services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Organizations also recognize the need to adopt technologies, automation and analytics to improve their operations and compete in a rapidly changing environment. Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and analytics throughout their internal and customer-facing operations, developing insights into the needs of tomorrow’s customers in order to evolve their enterprise and business unit strategies, bringing new products to market, and managing through stressed and distressed situations to create a viable path forward for stakeholders.

•~~Education~~

Our Education segment serves public and private colleges and universities, academic medical centers, research institutes and other not-for-profit organizations. Our Education professionals have a depth of expertise in strategy and innovation; business operations, including the research enterprise and student lifecycle; digital, technology and analytic solutions; and organizational transformation. Our Education segment clients are increasingly faced with financial and/or demographic challenges as well as increased competition. To remain competitive, organizations must challenge traditional operating and financial models and reimagine strategic, operational and research-centered opportunities that advance their mission while strengthening their business models. We collaborate with clients to address these challenges and ensure they have a sustainable future. We combine our deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; and enhancing the student lifecycle.

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

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(Tabular amounts in thousands, except per share amounts)

(Unaudited)

financial strategies, and consumer-focused digital transformation; changing the way care is delivered, particularly in light of personnel shortages, and improving access to care; and evolving their digital capabilities to more effectively manage their business. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry, functional and technical expertise to help clients solve a diverse set of business issues, including, but not limited to, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, and maximizing return on technology investments.

•Education

Our Education segment serves public and private colleges and universities, research institutes and other education-related organizations. Our Education professionals have a depth of expertise in strategy and innovation; business operations, including the research enterprise and student and alumni lifecycle; digital solutions, spanning technology and analytic-related services and a portfolio of software products; and organizational transformation. Our Education segment clients are increasingly faced with strategic, financial and/or enrollment challenges, increased competition, and a need to modernize their businesses using technology to advance their missions. We combine our deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology and analytics; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; applying innovative enrollment strategies; and enhancing the student lifecycle.

•Commercial

Our Commercial segment is focused on serving industries and organizations facing significant disruption and regulatory change by helping them adapt to rapidly changing environments and accelerate business transformation. Our Commercial professionals work primarily with six primary buyers: the chief executive officer, the chief financial officer, the chief strategy officer, the chief human resources officer, the chief operating officer, and organizational advisors, including lenders and law firms. We have a deep focus on serving organizations in the financial services, energy and utilities, industrials and manufacturing industries and the public sector while opportunistically serving the commercial industries more broadly, including professional and business services, life sciences, consumer products, and nonprofit. Our Commercial professionals have deep industry, functional and technical expertise that they put forward when delivering our digital services and software products, and strategy and innovation and financial advisory (special situation advisory and corporate finance advisory) services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and analytics throughout their internal and customer-facing operations, developing analytics and insights into the needs of tomorrow’s customers in order to evolve their enterprise and business unit strategies, bringing new products to market, managing through stressed and distressed situations to create a viable path forward for stakeholders and executing mergers and acquisitions, finance offerings and risk mitigation strategies.

Segment operating income consists of the revenues generated by a segment, less operating expenses that are incurred directly by the segment. Unallocated costs include corporate costs ~~for~~related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. These administrative function costs include corporate office support ~~certain~~costs, office facility costs, costs ~~relating~~related to accounting and finance, human resources, legal, marketing, information technology, and company-wide business development functions, as well as costs related to overall corporate management. Our chief operating decision maker does not evaluate segments using asset information.

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(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The table below sets forth information about our operating segments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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,
2021 2020 2021 2020
Healthcare:
Revenues $ 92,845 $ 87,406 $ 273,924 $ 268,340
Operating income $ 30,255 $ 25,610 $ 78,363 $ 70,831
Segment operating income as a percentage of segment revenues 32.6 % 29.3 % 28.6 % 26.4 %
Business Advisory:
Revenues $ 69,966 $ 66,048 $ 213,741 $ 201,423
Operating income $ 9,892 $ 10,780 $ 37,284 $ 37,306
Segment operating income as a percentage of segment revenues 14.1 % 16.3 % 17.4 % 18.5 %
Education:
Revenues $ 61,196 $ 51,850 $ 169,681 $ 176,017
Operating income $ 14,788 $ 12,548 $ 37,211 $ 41,792
Segment operating income as a percentage of segment revenues 24.2 % 24.2 % 21.9 % 23.7 %
Total Company:
Revenues $ 224,007 $ 205,304 $ 657,346 $ 645,780
Reimbursable expenses 3,690 2,860 8,876 25,133
Total revenues and reimbursable expenses $ 227,697 $ 208,164 $ 666,222 $ 670,913
Segment operating income $ 54,935 $ 48,938 $ 152,858 $ 149,929
Items not allocated at the segment level:
Other operating expenses 31,374 29,042 94,536 87,826
Litigation and other losses (gains) 56 — 98 (150)
Depreciation and amortization 5,199 6,197 15,549 18,635
Goodwill impairment charges1
— — — 59,816
Other expense, net 2,611 224 3,788 6,829
Income (loss) from continuing operations before taxes $ 15,695 $ 13,475 $ 38,887 $ (23,027)

(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.


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Healthcare:
Revenues	$	128,474		$	114,750		$	250,350		$	210,725
Operating income	$	30,364		$	30,527		$	58,396		$	54,354
Segment operating income as a percentage of segment revenues	23.6		%	26.6		%	23.3		%	25.8		%
Education:
Revenues	$	88,225		$	60,475		$	168,887		$	111,817
Operating income	$	21,691		$	14,142		$	35,997		$	22,679
Segment operating income as a percentage of segment revenues	24.6		%	23.4		%	21.3		%	20.3		%
Commercial:
Revenues	$	56,626		$	54,901		$	114,137		$	110,797
Operating income	$	11,915		$	11,040		$	24,129		$	20,890
Segment operating income as a percentage of segment revenues	21.0		%	20.1		%	21.1		%	18.9		%
Total Huron:
Revenues	$	273,325		$	230,126		$	533,374		$	433,339
Reimbursable expenses	7,492			3,252			12,218			5,186
Total revenues and reimbursable expenses	$	280,817		$	233,378		$	545,592		$	438,525

Segment operating income	$	63,970		$	55,709		$	118,522		$	97,923
Items not allocated at the segment level:
Other operating expenses	29,912			34,325			63,460			63,134
Depreciation and amortization	5,054			5,255			10,100			10,420

Operating income	29,004			16,129			44,962			24,369
Other income (expense), net	(7,327)			122			14,842			(1,177)
Income before taxes	$	21,677		$	16,251		$	59,804		$	23,192

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

(Unaudited)

The following table illustrates the disaggregation of revenues by ~~billing arrangements, employee types, and timing of revenue recognition,~~capability, including a reconciliation of the disaggregated revenues to revenues from our 3 operating segments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

In conjunction with our continuous evaluation of the appropriate level of disaggregation of revenues as our business evolves and in consideration of a group hire of approximately 300 employees in our Healthcare Managed Services solution within our Healthcare segment in the second quarter of 2021, we began assessing our operating performance by the following three employee types: billable consultants, full-time equivalents, and Healthcare Managed Services employees. The disaggregation of revenues by employee type previously reported for


	Three Months Ended June 30,				Six Months Ended June 30,
Revenues by Capability	2022		2021		2022		2021
Healthcare:
Consulting and Managed Services	$	83,955	$	85,655	$	167,714	$	152,584
Digital	44,519		29,095		82,636		58,141
Total revenues	$	128,474	$	114,750	$	250,350	$	210,725
Education:
Consulting and Managed Services	$	49,279	$	33,476	$	93,460	$	61,509
Digital	38,946		26,999		75,427		50,308
Total revenues	$	88,225	$	60,475	$	168,887	$	111,817
Commercial:
Consulting and Managed Services	$	14,637	$	25,873	$	37,281	$	53,462
Digital	41,989		29,028		76,856		57,335
Total revenues	$	56,626	$	54,901	$	114,137	$	110,797
Total Huron:
Consulting and Managed Services	$	147,871	$	145,004	$	298,455	$	267,555
Digital	125,454		85,122		234,919		165,784
Total revenues	$	273,325	$	230,126	$	533,374	$	433,339

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 was revised below to reflect this change. This change has no impact on our consolidated total revenues or total revenues by segment.~~
Three Months Ended September 30, 2021
Healthcare Business Advisory Education Total
Billing Arrangements
Fixed-fee $ 56,836 $ 30,783 $ 14,985 $ 102,604
Time and expense 17,823 35,261 38,831 91,915
Performance-based 12,689 1,596 — 14,285
Software support, maintenance and subscriptions 5,497 2,326 7,380 15,203
Total $ 92,845 $ 69,966 $ 61,196 $ 224,007
Employee Type (1)
Revenue generated by billable consultants $ 59,502 $ 64,469 $ 51,237 $ 175,208
Revenue generated by full-time equivalents 19,731 5,497 9,959 35,187
Revenue generated by Healthcare Managed Services employees 13,612 — — 13,612
Total $ 92,845 $ 69,966 $ 61,196 $ 224,007
Timing of Revenue Recognition
Revenue recognized over time $ 91,800 $ 69,966 $ 60,921 $ 222,687
Revenue recognized at a point in time 1,045 — 275 1,320
Total $ 92,845 $ 69,966 $ 61,196 $ 224,007

Nine Months Ended September 30, 2021
Healthcare Business Advisory Education Total
Billing Arrangements
Fixed-fee $ 160,226 $ 92,014 $ 48,130 $ 300,370
Time and expense 47,237 108,882 100,654 256,773
Performance-based 50,419 6,522 — 56,941
Software support, maintenance and subscriptions 16,042 6,323 20,897 43,262
Total $ 273,924 $ 213,741 $ 169,681 $ 657,346
Employee Type (1)
Revenue generated by billable consultants $ 178,057 $ 200,367 $ 143,056 $ 521,480
Revenue generated by full-time equivalents 60,458 13,374 26,625 100,457
Revenue generated by Healthcare Managed Services employees 35,409 — — 35,409
Total $ 273,924 $ 213,741 $ 169,681 $ 657,346
Timing of Revenue Recognition
Revenue recognized over time $ 270,448 $ 213,741 $ 169,406 $ 653,595
Revenue recognized at a point in time 3,476 — 275 3,751
Total $ 273,924 $ 213,741 $ 169,681 $ 657,346

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

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 — 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 billable consultants $ 60,034 $ 62,340 $ 44,234 $ 166,608
Revenue generated by full-time equivalents 20,949 3,708 7,616 32,273
Revenue generated by Healthcare Managed Services employees 6,423 — — 6,423
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 — 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 billable consultants $ 177,149 $ 191,566 $ 150,857 $ 519,572
Revenue generated by full-time equivalents 69,698 9,857 25,160 104,715
Revenue generated by Healthcare Managed Services employees 21,493 — — 21,493
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 — 302 2,829
Total $ 268,340 $ 201,423 $ 176,017 $ 645,780

~~(1) Billable consultants consist~~2022 and 2021, substantially all of our consulting 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. Healthcare Managed Services employees manage and provide revenue cycle billing, collections, insurance verification and change integrity services to healthcare clients.

revenues were recognized over time. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, no single client accounted for greater than 10% of our combined balance of receivables from clients, net and unbilled services, net. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, no single client generated greater than 10% of our consolidated revenues.

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~~HURON CONSULTING GROUP INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~

~~15. Subsequent Event~~

On November 1, 2021, we completed the divestiture of our Life Sciences business to Oliver Wyman. The Life Sciences business, a reporting unit within the Business Advisory segment, provides commercial and research and development strategy, pricing and market access strategy solutions to customers in the life sciences industries. For the three and nine months ended September 30, 2021, Life Sciences revenues were $5.1 million and $14.8 million, respectively. The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

~~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 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,” “goals,” “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,~~economy; our clients and client demand for our services, and our ability to sell and provide services, including the measures taken by governmental authorities and businesses in response to the pandemic, which may cause or contribute to other risks and uncertainties that we face; failure to achieve expected utilization rates, billing rates, and the number of revenue-generating professionals; inability to expand or adjust our service offerings in response to market demands; our dependence on renewal of client-based services; dependence on new business and retention of current clients and qualified personnel; failure to maintain third-party provider relationships and strategic alliances; inability to license technology to and from third parties; the impairment of goodwill; various factors related to income and other taxes; difficulties in successfully integrating the businesses we acquire and achieving expected benefits from such acquisitions; risks relating to privacy, information security, and related laws and standards; and a general downturn in market conditions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, among others, those described under Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 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 ~~consultancy~~professional services firm that ~~collaborates with~~creates innovative strategies, optimizes operations and accelerates digital transformation using an enterprise portfolio of technology, data and analytics solutions to empower clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need to own their future. By collaborating with clients, embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.

~~We provide professional services through~~Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three ~~operating~~industries, which are our reportable segments: Healthcare, ~~Business Advisory,~~Education and ~~Education.~~

•~~Healthcare~~

~~Our Healthcare~~Commercial. The Commercial segment ~~serves national~~includes all industries outside of healthcare and regional hospitals, integrated health systems, academic medical centers, community hospitals, and medical groups. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; organizational transformation; and digital, technology and analytic solutions. Most healthcare organizations are focused on changing the way care is delivered; establishing a sustainable business model centered around optimal cost structures, reimbursement models and financial strategies; and evolving their digital, technology and analytic capabilities. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry expertise to help clients solve a diverse set of business issues,education, including, but not limited to, ~~optimizing~~ financial services and ~~operational performance,~~energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving ~~care delivery~~visibility into the core drivers of our business. While our consolidated results have not been impacted, our historical segment information has been recast for consistent presentation. See below for additional information on our principal capabilities and ~~clinical outcomes, increasing physician, patient~~operating industries.

Capabilities

Within each of our reportable segments, we provide services under two principal capabilities: i) Consulting and ~~employee satisfaction, evolving organizational culture,~~Managed Services and ~~maximizing return on technology investments.~~ii) Digital.

•~~Business Advisory~~Consulting and Managed Services

Our ~~Business Advisory segment works with C-suite executives, boards,~~Consulting and ~~business unit~~Managed Services capabilities represent all of our management consulting services, managed services (excluding technology-related managed services) and ~~functional leadership~~outsourcing services delivered across ~~a diverse set of organizations, including healthy, well-capitalized companies to organizations in transition,~~industries. Our Consulting and across a broad range of industries, including financial services, healthcare, education, energy and utilities, industrials and manufacturing, and the public sector. Our Business Advisory professionals have deep industry, functional and technical expertise that they put forward when delivering our digital, technology and analytics, strategy and innovation and corporate finance and restructuring services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Organizations also recognize the need to adopt technologies, automation and analytics to improve their operations and compete in a rapidly changing environment. OurManaged Services experts help ~~organizations across industries with~~our clients address a variety of ~~business challenges, including, but not limited~~strategic, operational, financial, people and organizational-related challenges. These services are often combined with technology, analytic and data-driven solutions powered by our Digital capability to ~~embedding technology~~support long-term relationships with our clients and ~~analytics throughout their internal~~drive lasting impact. Examples include the areas of revenue cycle management and ~~customer-facing operations, developing insights into the needs of tomorrow’s customers in order to evolve their enterprise~~research administration at our healthcare and ~~business unit strategies, bringing new~~education clients, where our consulting projects are often coupled with our digital services and products ~~to market, and managing through stressed and distressed situations to create a viable path forward for stakeholders.~~offerings.

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•~~Education~~Digital

Our ~~Education segment serves public and private colleges and universities, academic medical centers, research institutes and other not-for-profit organizations. Our Education professionals have a depth~~Digital capabilities represent all of ~~expertise in strategy and innovation; business operations, including the research enterprise and student lifecycle; digital,~~our technology and ~~analytic solutions;~~analytics services, including technology-related managed services, and ~~organizational transformation.~~software products delivered across industries. Our Education segment clients are increasingly faced with financial and/or demographic challenges as well as increased competition. To remain competitive, organizations must challenge traditional operating and financial models and reimagine strategic, operational and research-centered opportunities that advance their mission while strengthening their business models. We collaborate with clients to address these challenges and ensure they have a sustainable future. We combine our deep industry, functional and technical expertise toDigital experts help clients ~~solve their most pressing~~address a variety of business challenges, including, but not limited to, ~~transforming business operations~~designing and implementing technologies to accelerate transformation, facilitate data-driven decision making and improve customer and employee experiences.

We have expanded our ecosystem to work with ~~technology; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; and enhancing the student lifecycle.~~

~~Huron is~~more than 25 technology partners. We are an Oracle partner, a Gold-level consulting partner with Salesforce.com and a Premium Partner with Salesforce.org, a Workday Services and Software Partner, an Amazon Web Services consulting partner, a Silver-level system integrator with Informatica and an SAP Concur implementation partner. We have also grown our proprietary software product portfolio to address our clients' challenges with solutions that expand our base of recurring revenue and further differentiate our consulting, digital and managed services offerings.

~~Coronavirus (COVID-19)~~Operating Industries

~~The worldwide spread of COVID-19 beginning in 2020 has created significant volatility, uncertainty~~We provide our services and ~~disruption to the global economy. This pandemic had an unfavorable impact on aspects of~~manage our business under three operating industries, which are also our operating segments: Healthcare, Education and Commercial.

•Healthcare

Our Healthcare segment serves acute care providers, including national and regional health systems, academic health systems, community health systems, and public, children’s and critical access hospitals, and non-acute care providers, including physician practices and medical groups, payors, and long-term care or post-acute providers. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; digital solutions, spanning technology and analytic-related services and a portfolio of software products; organizational transformation; financial ~~results,~~advisory and ~~caused us to significantly change~~strategy and innovation. Most healthcare organizations are focused on establishing a sustainable long-term strategy and business model centered around optimal cost structures, reimbursement models, financial strategies, and consumer-focused digital transformation; changing the way ~~we operate. Near the end~~care is delivered, particularly in light of ~~the first quarter~~personnel shortages, and improving access to care; and evolving their digital capabilities to more effectively manage their business. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry, functional and technical expertise to help clients solve a diverse set of ~~2020, we suspended almost all~~ business travel and our 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 and enhanced available technology allows our revenue-generating professionals to effectively serve clients in a remote work environment. As federal, state and local government restrictions evolve, we continue to refine 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 implement our phased transition. As of September 30, 2021, our employees continue to primarily work from their homes; however, most of our offices are open and we are providing our employees the flexibility to choose to work remotely, from our offices, or from client sites as needed and in accordance with recommended public health guidelines.

In each of our operating segments, we are working closely with our clients to support them and their ongoing business needs and provide relevant services to address their needs caused by the COVID-19 pandemic. However, since the beginning of the pandemic, some clients reprioritized and delayed projects which negatively impacted demand for certain offerings, particularly within our Healthcare and Education segments. Conversely, the COVID-19 pandemic strengthened demand for other services we provide, such as our cloud-based technology and analytics solutions within our Business Advisory segment and our restructuring and capital advisory solutions provided to organizations in transition also within our Business Advisory segment.

Beginning in the second quarter of 2021 and continuing through the third quarter of 2021, we saw strengthened demand for services in all of our segments compared to the same prior year period. As a result, total revenues in the first nine months of 2021 increased 1.8% compared to the first nine months of 2020, and total revenues in the third quarter of 2021 increased 9.1% compared to the third quarter of 2020. We expect continued revenue growth in the fourth quarter of 2021 compared to the fourth quarter of 2020.

~~In order to support our liquidity during the COVID-19 pandemic, we took proactive measures to increase available cash on hand~~issues, including, but not limited to, ~~borrowing under~~optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, and maximizing return on technology investments.

•Education

Our Education segment serves public and private colleges and universities, research institutes and other education-related organizations. Our Education professionals have a depth of expertise in strategy and innovation; business operations, including the research enterprise and student and alumni lifecycle; digital solutions, spanning technology and analytic-related services and a portfolio of software products; and organizational transformation. Our Education segment clients are increasingly faced with strategic, financial and/or enrollment challenges, increased competition, and a need to modernize their businesses using technology to advance their missions. We combine our ~~senior secured credit facility~~deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology and analytics; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; applying innovative enrollment strategies; and enhancing the student lifecycle.

•Commercial

Our Commercial segment is focused on serving industries and organizations facing significant disruption and regulatory change by helping them adapt to rapidly changing environments and accelerate business transformation. Our Commercial professionals work primarily with six primary buyers: the chief executive officer, the chief financial officer, the chief strategy officer, the chief human resources officer, the chief operating officer, and organizational advisors, including lenders and law firms. We have a deep focus on serving organizations in the ~~first quarter of 2020~~financial services, energy and ~~reducing discretionary operating~~utilities, industrials and capital spending. In the second, third and fourth quarters of 2020, we made repayments on our borrowings to reduce our total debt outstanding to pre-pandemic levels due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources. In the first nine months of 2021, we borrowed under our credit facility primarily to fund our annual performance bonus payment. To further support our liquidity during the COVID-19 pandemic, we elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through December 31, 2020, as provided for under the CARES Act. These deferred payments, which totaled $12.2 million, were paid in full in the third quarter of 2021. See the “Liquidity and Capital Resources” section below for additional information on these items.

~~Enterprise Resource Planning System Implementation~~

In the fourth quarter of 2019, we began the implementation of a new cloud-based enterprise resource planning (“ERP”) system designed to improve the efficiency of our internal finance, human resources, resource planning, and administrative operations. In January 2021, we successfully went live with the new ERP system, and we continue to progress with additional functionality and integrations as scheduled. The implementation progressed on schedule and was not significantly impacted by the COVID-19 pandemic due to the ability of our implementation team to work and collaborate remotelymanufacturing industries and the ~~enhanced~~public sector while opportunistically serving the commercial industries more broadly, including professional and business services, life sciences, consumer products, and nonprofit. Our Commercial professionals have deep industry, functional and technical expertise that they put forward when delivering our digital services and software products, and strategy and innovation and financial advisory (special situation advisory and corporate finance advisory) services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and ~~cloud-based nature~~analytics throughout their internal and customer-facing operations, developing analytics and insights into the needs of ~~our~~tomorrow’s customers in order to evolve their enterprise and business unit strategies, bringing new ERP system. We believe our investment in this new system will position our teams to drive efficiencies and provide more robust management reporting and data analytics to support future growth and the goals and vision of the company.

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~~How~~products to market, managing through stressed and distressed situations to create a viable path forward for stakeholders and executing mergers and acquisitions, finance offerings and risk mitigation strategies.

Business Strategy, Opportunities and Challenges

Our primary strategy is to be the premier transformation partner to our clients, meeting their needs by providing a balanced portfolio of service and digital product offerings so that we can adapt quickly and effectively to emerging opportunities in the marketplace. To achieve our strategic and financial objectives, we remain focused on accelerating growth in healthcare and education, growing our presence in the commercial industries, advancing our integrated, global digital platform, building a more sustainable base of revenue to drive more consistent growth, strategically deploying capital to accelerate our strategy and return capital to shareholders, and investing in and growing our talented team, including attracting and retaining our managing directors, our senior most practitioners that lead our revenue generation efforts. We ~~Generate Revenues~~

~~A large portion~~regularly evaluate the performance of our businesses to ensure our investments meet these objectives.

COMPONENTS OF OPERATING RESULTS

Revenues

Our revenues isare primarily generated by our ~~billable consultants~~employees who provide consulting and other professional 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 coaches and their support staff from our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, and our employees who provide software support and maintenanceworked, 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. Another portion of our revenue is generated by our Healthcare Managed Services employees within our Healthcare segment. Our Healthcare Managed Services employees manage and provide revenue cycle billing, collections, insurance verification and change integrity services to clients.provided, or achieved outcomes. We refer to ~~our billable consultants, full-time equivalents and Healthcare Managed Services~~these employees as our revenue-generating professionals.

Revenues ~~generated by our billable consultants~~ are primarily driven by the number of ~~consultants~~revenue-generating professionals 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~~services. We also engage independent contractors to supplement our ~~Healthcare Managed Services employees are largely dependent~~revenue-generating professionals on ~~the number of Healthcare Managed Services employees we employ and the total value, scope and terms of the related contracts.~~client engagements as needed.

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

•Fixed-fee (including software license revenue):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. 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 versus our estimates of the total services to be provided under the engagement. Contracts within our Culture and Organizational Excellence solution include fixed-fee partner contracts with multiple performance obligations (“Partner Contracts”), which primarily consist of coaching services, as well as speaking engagements, conferences, publications and software products. 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 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 45.8% and 40.5% of our revenues for the three months ended September 30, 2021 and 2020, respectively, and 45.7% and 41.3% of our revenues for the nine months ended September 30, 2021 and 2020, respectively.

~~Time-and-expense~~•Time-and-expense: Under time-and-expense billing arrangements, we 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 Culture and Organizational Excellence solution and the portion of our Healthcare Managed Services contracts that are billed under time-and-expense arrangements. We recognize revenues under time-and-expense billing arrangements as the related services or publications are provided. Time-and-expense engagements represented 41.0% and 44.0% of our revenues for the three months ended September 30, 2021 and 2020, respectively, and 39.1% and 44.2% of our revenues for the nine months ended September 30, 2021 and 2020, respectively.clients.

•Performance-based: 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 recognize revenues under performance-based billing arrangements 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 approach. Performance-based fee revenues represented 6.4% and 9.4% of our revenues for the three months ended September 30, 2021 and 2020, respectively, and 8.6% and 8.6% of our revenues for the nine months ended September 30, 2021 and 2020, respectively. The level of performance-based fees earned may vary based on our ~~clients'~~clients’ risk sharing preferences and the mix of services we provide.

•Software support, maintenance and subscriptions: 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, maintenance and subscription revenues are recognized

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ratably over the support or subscription period. These fees are generally billed in advance and included in deferred revenues until recognized. ~~Software support, maintenance~~

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 ~~subscription~~ revenues ~~represented 6.8%~~ and ~~6.1%~~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 ~~our revenues~~work performed for ~~the three months ended September 30, 2021 and 2020, respectively, and 6.6% and 5.9% of our revenues for the nine months ended September 30, 2021 and 2020, respectively.~~any particular client can vary widely from period to period.

Our quarterly results are impacted principally by the total value, scope, and terms of our ~~billable consultants’ utilization rate, the bill rates we charge our clients, and~~client contracts, the number of our revenue-generating professionals who are available to ~~work.~~work, our revenue-generating professionals' utilization rate, and the bill rates we charge our clients. 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.

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~~RESULTS OF OPERATIONS~~

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

In conjunction with our continuous evaluation of the appropriate level of disaggregation of revenues as our business evolves and in consideration of a group hire of approximately 300 employees in our Healthcare Managed Services solution within our Healthcare segment in the second quarter of 2021, we began assessing our operating performance by the following three employee types: billable consultants, full-time equivalents, and Healthcare Managed Services employees. The other operating data previously reported for the three and nine months ended September 30, 2020 was revised below to reflect this change. This change has no impact on our consolidated total revenues or total revenues by segment.

Segment and Consolidated Operating Results
(in thousands, except per share amounts): Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Healthcare:
Revenues $ 92,845 $ 87,406 $ 273,924 $ 268,340
Operating income $ 30,255 $ 25,610 $ 78,363 $ 70,831
Segment operating income as a percentage of segment revenues 32.6 % 29.3 % 28.6 % 26.4 %
Business Advisory:
Revenues $ 69,966 $ 66,048 $ 213,741 $ 201,423
Operating income $ 9,892 $ 10,780 $ 37,284 $ 37,306
Segment operating income as a percentage of segment revenues 14.1 % 16.3 % 17.4 % 18.5 %
Education:
Revenues $ 61,196 $ 51,850 $ 169,681 $ 176,017
Operating income $ 14,788 $ 12,548 $ 37,211 $ 41,792
Segment operating income as a percentage of segment revenues 24.2 % 24.2 % 21.9 % 23.7 %
Total Company:
Revenues $ 224,007 $ 205,304 $ 657,346 $ 645,780
Reimbursable expenses 3,690 2,860 8,876 25,133
Total revenues and reimbursable expenses $ 227,697 $ 208,164 $ 666,222 $ 670,913
Statements of Operations reconciliation:
Segment operating income $ 54,935 $ 48,938 $ 152,858 $ 149,929
Items not allocated at the segment level:
Other operating expenses 31,374 29,042 94,536 87,826
Litigation and other losses (gains) 56 — 98 (150)
Depreciation and amortization 5,199 6,197 15,549 18,635
Goodwill impairment charges (1)
— — — 59,816
Operating income (loss) 18,306 13,699 42,675 (16,198)
Other expense, net (2,611) (224) (3,788) (6,829)
Income (loss) from continuing operations before taxes 15,695 13,475 38,887 (23,027)
Income tax expense (benefit) 1,968 2,388 6,958 (5,413)
Net income (loss) from continuing operations $ 13,727 $ 11,087 $ 31,929 $ (17,614)
Earnings (loss) per share from continuing operations:
Basic $ 0.65 $ 0.50 $ 1.48 $ (0.81)
Diluted $ 0.64 $ 0.50 $ 1.46 $ (0.81)

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Three Months Ended
September 30, Nine Months Ended
September 30,
Other Operating Data: 2021 2020 2021 2020
Number of billable consultants (at period end) (2):
Healthcare 849 838 849 838
Business Advisory 1,179 1,001 1,179 1,001
Education 816 790 816 790
Total 2,844 2,629 2,844 2,629
Average number of billable consultants (for the period) (2):
Healthcare 802 844 807 873
Business Advisory 1,136 976 1,103 940
Education 784 772 750 779
Total 2,722 2,592 2,660 2,592
Billable consultant utilization rate (3):
Healthcare 74.9 % 71.4 % 72.7 % 70.2 %
Business Advisory 69.0 % 72.6 % 69.3 % 72.6 %
Education 74.5 % 66.5 % 73.3 % 71.7 %
Total 72.2 % 70.4 % 71.5 % 71.5 %
Billable consultant average billing rate per hour (4):
Healthcare $ 229 $ 232 $ 232 $ 218
Business Advisory (5)
$ 184 $ 186 $ 191 $ 197
Education $ 193 $ 184 $ 186 $ 189
Total (5)
$ 200 $ 200 $ 201 $ 201
Revenue per billable consultant (in thousands):
Healthcare $ 74 $ 71 $ 221 $ 203
Business Advisory $ 57 $ 64 $ 182 $ 204
Education $ 65 $ 57 $ 191 $ 194
Total $ 64 $ 64 $ 196 $ 200
Average number of full-time equivalents (for the period) (6):
Healthcare 149 191 154 188
Business Advisory 59 35 50 27
Education 49 46 41 56
Total 257 272 245 271
Revenue per full-time equivalent (in thousands):
Healthcare $ 133 $ 110 $ 392 $ 371
Business Advisory $ 93 $ 106 $ 270 $ 370
Education $ 203 $ 165 $ 643 $ 453
Total $ 137 $ 119 $ 410 $ 388
Healthcare Managed Services employees(7):
Total revenues (in thousands) $ 13,612 $ 6,423 $ 35,409 $ 21,493
Average number of Healthcare Managed Services employees (for the period) 485 88 342 91

~~(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.

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

~~(3)~~Utilization rate for our billable consultants is calculated by dividing the number of hours our billable consultants worked on client assignments during a period by the total available working hours for these 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 billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.~~

~~(5)~~The Business Advisory segment includes operations of Huron Eurasia India. Absent the impact of Huron Eurasia India, the average billing rate per hour for the Business Advisory segment would have been $200 and $201 for the three months ended September 30, 2021 and 2020, respectively; and $207 and $217 for the nine months ended September 30, 2021 and 2020, respectively.

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~~Absent~~Reimbursable Expenses

Reimbursable expenses that are billed to clients, primarily relating to travel and out-of-pocket expenses incurred in connection with client engagements, are included in total revenues and reimbursable expenses. Reimbursable expenses are recognized as expenses in the ~~impact~~period in which the expense is incurred. Subcontractors that are billed to clients at cost are also included in reimbursable expenses. When billings do not specifically identify reimbursable expenses, we allocate the portion of ~~Huron Eurasia India, Huron's consolidated average billing rate per hour would have been $207 and $206 for~~ the ~~three months ended September 30, 2021 and 2020, respectively; and $208 for both~~billings equivalent to these expenses to reimbursable expenses.

We manage our business on the ~~nine months ended September 30, 2021 and 2020.~~

~~(6)Consists~~basis of ~~coaches and their support staff within~~revenues before reimbursable expenses, which we believe is the most accurate reflection of our ~~Culture and Organizational Excellence solution, consultants who work variable schedules as needed by~~services because it eliminates the effect of reimbursable expenses that we bill to our clients at cost.

Operating Expenses

Our most significant expenses are costs classified as direct costs. Direct costs primarily consist of payroll costs which includes salaries, performance bonuses, share-based compensation, signing and ~~full-time employees who provide~~retention bonuses, payroll taxes, and benefits for our revenue-generating professionals. Direct costs also include fees paid to independent contractors that we retain to supplement our revenue-generating professionals, typically on an as-needed basis for specific client engagements, and technology costs, product and event costs, and commissions. Direct costs exclude amortization of intangible assets and software development costs and reimbursable expenses, both of which are separately presented in our consolidated statements of operations.

Selling, general and administrative expenses consist primarily of salaries, performance bonuses, payroll taxes, benefits, and share-based compensation for our support personnel. Selling, general and ~~maintenance services~~administrative expenses also include third-party professional fees, software licenses and hosting expenses, rent and other office related expenses, sales and marketing related expenses, recruiting and training expenses, and practice administration and meetings expenses.

Other operating expenses include restructuring charges, depreciation expense, and amortization expense related to internally developed software costs and intangible assets acquired in business combinations. In the first quarter of 2022, we began presenting depreciation and amortization expense inclusive of amortization of intangible assets and software development costs previously presented within total direct costs and reimbursable expenses. We have recast our ~~clients.~~historical presentation of our consolidated statement of operations for consistent presentation.

~~(7)Consists~~Segment Results

Segment operating income consists of ~~employees who manage~~the revenues generated by a segment, less operating expenses that are incurred directly by the segment. Unallocated costs include corporate 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 corporate office support costs, office facility costs, costs related to accounting and ~~provide revenue cycle billing, collections, insurance verification~~finance, human resources, legal, marketing, information technology, and ~~change integrity services~~company-wide business development functions, as well as costs related to ~~our healthcare clients.~~overall corporate management.

Non-GAAP Measures

We also assess our results of operations using ~~certain~~the following non-GAAP financial ~~measures. These non-GAAP financial measures differ from GAAP because the non-GAAP financial measures we calculate to measure~~measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income, ~~from continuing operations,~~ and adjusted diluted earnings per share (“EPS”). These non-GAAP financial measures differ from ~~continuing operations~~GAAP because they 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,
2021 2020 2021 2020
Revenues $ 224,007 $ 205,304 $ 657,346 $ 645,780
Net income (loss) from continuing operations $ 13,727 $ 11,087 $ 31,929 $ (17,614)
Add back:
Income tax expense (benefit) 1,968 2,388 6,958 (5,413)
Interest expense, net of interest income 2,217 2,259 5,965 7,516
Depreciation and amortization 6,534 7,546 19,640 22,488
Earnings before interest, taxes, depreciation and amortization (EBITDA) 24,446 23,280 64,492 6,977
Add back:
Restructuring and other charges 1,677 59 3,166 2,626
Litigation and other losses (gains) 56 — 98 (150)
Goodwill impairment charges — — — 59,816
Loss on sale of business — — — 102
Transaction-related expenses 194 437 335 437
Foreign currency transaction losses (gains), net 43 (194) 398 245
Adjusted EBITDA $ 26,416 $ 23,582 $ 68,489 $ 70,053
Adjusted EBITDA as a percentage of revenues 11.8 % 11.5 % 10.4 % 10.8 %

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Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net income (loss) from continuing operations $ 13,727 $ 11,087 $ 31,929 $ (17,614)
Weighted average shares - diluted 21,531 22,175 21,904 21,868
Diluted earnings (loss) per share from continuing operations $ 0.64 $ 0.50 $ 1.46 $ (0.81)
Add back:
Amortization of intangible assets 2,235 3,155 6,923 9,558
Restructuring and other charges 1,677 59 3,166 2,626
Litigation and other losses (gains) 56 — 98 (150)
Goodwill impairment charges — — — 59,816
Loss on sale of business — — — 102
Transaction-related expenses 194 437 335 437
Tax effect of adjustments (1,103) (1,692) (2,788) (17,041)
Total adjustments, net of tax 3,059 1,959 7,734 55,348
Adjusted net income from continuing operations $ 16,786 $ 13,046 $ 39,663 $ 37,734
Adjusted weighted average shares - diluted 21,531 22,175 21,904 22,207
Adjusted diluted earnings per share from continuing operations $ 0.78 $ 0.59 $ 1.81 $ 1.70

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

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

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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 lease impairment charges and accelerated depreciation on lease-related property and equipment, and employee 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~~exclude the effect of the restructuring ~~and other~~ charges from our non-GAAP measures to permit comparability with periods that ~~were~~are not impacted by these items.

~~Litigation and other~~Other losses (gains): We ~~have excluded~~exclude the effect of ~~a loss in the first and third quarter of 2021 from an increase~~other losses (gains), which primarily relate to changes in the estimated fair value of our ~~liability~~liabilities for contingent consideration related to a business ~~acquisition and a litigation settlement gain recognized in the first quarter of 2020~~acquisitions, to permit comparability with periods that ~~were~~are not impacted by these items.

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

~~Loss on sale of business:~~ We excluded the effect of the loss on sale of a software-based solution within our Business Advisory segment in the first quarter of 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~~exclude the impact of third-party legal and accounting fees incurred ~~in the first nine months of 2021 and 2020~~ related to business acquisitions.

Unrealized gain on preferred stock investment: We exclude the effect of unrealized gains related to changes in the fair value of our preferred stock investment in Medically Home Group, Inc. (“Medically Home”), which are recognized when an observable price change occurs. These unrealized gains are included as a component of other income (expense), net. We believe that these unrealized gains are not indicative of the ongoing performance of our business and their exclusion permits comparability with prior periods.

Foreign currency transaction losses (gains), net: We ~~have excluded~~exclude 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 changes in foreign exchange rates.

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

Income tax expense, Interest expense, net of interest income, and Depreciation and amortization: We ~~have excluded~~exclude 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. ~~Included within~~Within the depreciation and amortization adjustment, iswe include the amortization of capitalized implementation costs of our ERP and other related software, which is included within selling, general and administrative expenses on our consolidated statement of operations.

Revenue-Generating Professionals

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

Utilization Rate

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

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RESULTS OF OPERATIONS

Executive Highlights

Highlights from the second quarter of 2022 include:

•~~As we reported a net loss~~Revenues increased 18.8% to $273.3 million for the second quarter of 2022 from $230.1 million for the second quarter of 2021

•Revenues within our Digital capability increased 47.4% in the second quarter of 2022, compared to the second quarter of 2021

•Operating margin increased to 10.6% for the second quarter of 2022, compared to 7.0% for the second quarter of 2021

•Diluted EPS increased 11.9% to $0.66 for the second quarter of 2022, compared to $0.59 for the second quarter of 2021

•Adjusted diluted EPS increased 20.3% to $0.83 for the second quarter of 2022, compared to $0.69 for the second quarter of 2021

•Returned $28.3 million to shareholders by repurchasing 497,547 shares of our common stock in the second quarter of 2022; for a total of $52.2 million, or 1,020,946 shares, repurchased in the first ~~nine~~six months of ~~2020, GAAP~~2022

Revenues increased $43.2 million, or 18.8%, to $273.3 million for the second quarter of 2022 from $230.1 million for the second quarter of 2021. The increase in revenues reflects continued strength in demand for our Digital capability services across all industries as companies continue to invest in cloud-based technology and analytic solutions, as well as strengthened demand for our Consulting and Managed Services offerings within our Education segment, partially the result of a favorable comparison against this segment's results in the second quarter of 2021 which was more significantly impacted by the COVID-19 pandemic this time last year. Beginning in the second quarter of 2021, we saw strengthened demand for our services in the Healthcare segment and an increase in our pipeline that continued through 2021 and into 2022. Revenues for the second quarter of 2022 increased 4.9% compared to the first quarter of 2022.

In our Consulting and Managed Services capability, revenues for the second quarter of 2022 increased 2.0% compared to the second quarter of 2021, and reflected strengthened demand in our Education segment. The utilization rate within our Consulting capability decreased to 73.2% in the second quarter of 2022, compared to 74.6% in the second quarter of 2021.

Revenues within our Digital capability increased 47.4% in the second quarter of 2022 compared to the second quarter of 2021, and reflected strengthened demand in all of our segments. The utilization rate within our Digital capability increased to 74.3% in the second quarter of 2022, compared to 73.2% in the second quarter of 2021.

The total number of revenue-generating professionals increased to 4,243 as of June 30, 2022, compared to 3,459 as of June 30, 2021, as a result of the overall increase in demand for our services within all of our segments, as well as headcount increases in connection with business acquisitions. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services as payroll costs are the most significant portion of our operating expenses.

Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 10.6% for the three months ended June 30, 2022 compared to 7.0% for the three months ended June 30, 2021, driven by strong revenue growth that outpaced increases in operating expenses.

Net income increased $1.1 million to $13.9 million for the three months ended June 30, 2022 from $12.8 million for the same period last year. As a result of the increase in net income, diluted ~~weighted average~~earnings per share for the second quarter of 2022 was $0.66 compared to $0.59 for the second quarter of 2021. Adjusted diluted earnings per share was $0.83 for the second quarter of 2022, compared to $0.69 for the second quarter of 2021.

During the second quarter of 2022, we repurchased 497,547 shares of our common stock for $28.3 million. In the first six months of 2022, we repurchased 1,020,946 shares of our common stock for $52.2 million, representing 4.7% of our common stock outstanding ~~equals~~as of December 31, 2021.

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Summary of Results

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the ~~basic weighted average shares outstanding~~company to accelerate growth.

To align with the new operating model, effective with reporting for ~~that~~periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving visibility into the core drivers of our business. While our consolidated results have not been impacted, our historical segment information has been recast for consistent presentation.

The following table sets forth, for the periods indicated, selected segment and consolidated operating results and other operating data, including non-GAAP measures.


Segment and Consolidated Operating Results (in thousands, except per share amounts):	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Healthcare:
Revenues	$	128,474		$	114,750		$	250,350		$	210,725
Operating income	$	30,364		$	30,527		$	58,396		$	54,354
Segment operating income as a percentage of segment revenues	23.6		%	26.6		%	23.3		%	25.8		%
Education:
Revenues	$	88,225		$	60,475		$	168,887		$	111,817
Operating income	$	21,691		$	14,142		$	35,997		$	22,679
Segment operating income as a percentage of segment revenues	24.6		%	23.4		%	21.3		%	20.3		%
Commercial:
Revenues	$	56,626		$	54,901		$	114,137		$	110,797
Operating income	$	11,915		$	11,040		$	24,129		$	20,890
Segment operating income as a percentage of segment revenues	21.0		%	20.1		%	21.1		%	18.9		%
Total Huron:
Revenues	$	273,325		$	230,126		$	533,374		$	433,339
Reimbursable expenses	7,492			3,252			12,218			5,186
Total revenues and reimbursable expenses	$	280,817		$	233,378		$	545,592		$	438,525

Segment operating income	$	63,970		$	55,709		$	118,522		$	97,923
Items not allocated at the segment level:
Other operating expenses	29,912			34,325			63,460			63,134
Depreciation and amortization	5,054			5,255			10,100			10,420
Operating income	29,004			16,129			44,962			24,369
Other income (expense), net	(7,327)			122			14,842			(1,177)
Income before taxes	21,677			16,251			59,804			23,192
Income tax expense	7,802			3,454			19,077			4,990
Net income	$	13,875		$	12,797		$	40,727		$	18,202
Earnings per share:
Basic	$	0.67		$	0.59		$	1.97		$	0.84
Diluted	$	0.66		$	0.59		$	1.94		$	0.82

Other Operating Data:
Number of revenue-generating professionals by segment (at period end) (5):
Healthcare	1,619			1,443			1,619			1,443
Education	1,407			885			1,407			885
Commercial (1)	1,217			1,131			1,217			1,131
Total	4,243			3,459			4,243			3,459

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Segment and Consolidated Operating Results (in thousands, except per share amounts):	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

Revenue by capability:
Consulting and Managed Services (2)	$	147,871		$	145,004		$	298,455		$	267,555
Digital	125,454			85,122			234,919			165,784
Total	$	273,325		$	230,126		$	533,374		$	433,339

Number of revenue-generating professionals by capability (at period end):
Consulting and Managed Services (3)	2,018			1,736			2,018			1,736
Digital	2,225			1,723			2,225			1,723
Total	4,243			3,459			4,243			3,459

Utilization rate by capability(4):
Consulting	73.2		%	74.6		%	72.4		%	70.5		%
Digital	74.3		%	73.2		%	73.6		%	72.3		%

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

(2)Managed Services capability revenue within our Healthcare segment was $16.1 million and $14.0 million for the three months ended June 30, 2022 and 2021, respectively; and $29.9 million and $21.6 million for the six months ended June 30, 2022 and 2021, respectively.

Managed Services capability revenue within our Education segment was $3.9 million and $2.3 million for the three months ended June 30, 2022 and 2021, respectively; and $7.3 million and $4.5 million for the six months ended June 30, 2022 and 2021, respectively.

(3)The number of Managed Services revenue-generating professionals within our Healthcare segment as of June 30, 2022 and 2021 was 504 and 448, respectively.

The number of Managed Services revenue-generating professionals within our Education segment as of June 30, 2022 and 2021 was 96 and 51, respectively.

(4)Utilization rates are presented for our revenue-generating professionals who primarily bill on an hourly basis. We do not present utilization rates for our Managed Services professionals as most of the revenues generated by these employees are not billed on an hourly basis.

(5)During the first quarter of 2022, we reclassified certain Digital revenue-generating professionals within our Healthcare and Education segments to our Commercial segment as these professionals can provide services across all of our industries. This reclassification did not impact the total headcount within our Digital capability for any period. The ~~non-GAAP adjustments described above resulted in adjusted net income from continuing operations~~prior period headcount has been revised for ~~the first nine months~~consistent presentation.

Table of ~~2020. Therefore, we included the dilutive common stock equivalents in the calculation of adjusted diluted weighted average shares outstanding for that period.~~Contents

Non-GAAP Measures


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues	$	273,325		$	230,126		$	533,374		$	433,339
Net income	$	13,875		$	12,797		$	40,727		$	18,202
Add back:
Income tax expense	7,802			3,454			19,077			4,990
Interest expense, net of interest income	2,446			2,029			4,642			3,748
Depreciation and amortization	7,097			6,555			14,219			13,106
Earnings before interest, taxes, depreciation and amortization (EBITDA)	31,220			24,835			78,665			40,046
Add back:
Restructuring charges	2,069			861			3,624			1,489
Other losses	21			—			33			42


Transaction-related expenses	—			(29)			50			141
Unrealized gain on preferred stock investment	—			—			(26,964)			—
Foreign currency transaction losses (gains), net	(100)			(48)			(81)			355
Adjusted EBITDA	$	33,210		$	25,619		$	55,327		$	42,073
Adjusted EBITDA as a percentage of revenues	12.2		%	11.1		%	10.4		%	9.7		%


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	13,875	$	12,797	$	40,727	$	18,202
Weighted average shares - diluted	20,967		21,871		21,047		22,105
Diluted earnings per share	$	0.66	$	0.59	$	1.94	$	0.82
Add back:
Amortization of intangible assets	2,818		2,289		5,678		4,688
Restructuring charges	2,069		861		3,624		1,489
Other losses	21		—		33		42


Transaction-related expenses	—		(29)		50		141
Unrealized gain on preferred stock investment	—		—		(26,964)		—
Tax effect of adjustments	(1,301)		(827)		4,658		(1,685)


Total adjustments, net of tax	3,607		2,294		(12,921)		4,675
Adjusted net income	$	17,482	$	15,091	$	27,806	$	22,877
Adjusted weighted average shares - diluted	20,967		21,871		21,047		22,105
Adjusted diluted earnings per share	$	0.83	$	0.69	$	1.32	$	1.03

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Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to Three Months Ended ~~September~~June 30, ~~2020~~2021

Revenues

Revenues by segment and capability for the three months ended June 30, 2022 and 2021 were as follows:


Revenues (in thousands)	Three Months Ended June 30,				Percent Increase (Decrease)
	2022		2021
Segment:
Healthcare	$	128,474	$	114,750	12.0	%
Education	88,225		60,475		45.9	%
Commercial	56,626		54,901		3.1	%
Total revenues	$	273,325	$	230,126	18.8	%

Capability:
Consulting and Managed Services	$	147,871	$	145,004	2.0	%
Digital	125,454		85,122		47.4	%
Total revenues	$	273,325	$	230,126	18.8	%

Revenues increased ~~$18.7~~$43.2 million, or ~~9.1%~~18.8%, to ~~$224.0~~$273.3 million for the ~~third~~second quarter of ~~2021~~2022 from ~~$205.3~~$230.1 million for the ~~third~~second quarter of ~~2020.~~2021. The overall increase in revenues reflects continued strength in demand for our Digital capability services across all industries as companies continue to invest in cloud-based technology and analytic solutions, as well as strengthened demand for ~~services in all~~our Consulting and Managed Services offerings within our Education segment, partially the result of ~~our segments, as well as the~~a favorable comparison against this segment's results ~~for~~in the ~~third~~second quarter of ~~2020 in our Healthcare and Education segments~~2021 which ~~were~~was more significantly impacted by the COVID-19 pandemic asthis time last year. During 2020 and 2021, some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the ~~pandemic.~~

Of the $18.7 million increase in revenues, $8.6 million was attributable to an increase in revenues generated by our billable consultants, $7.2 million was attributable to an increase in revenues generated bypandemic, particularly within our Healthcare ~~Managed Services employees,~~ and ~~$2.9~~Education segments. Additional information on our revenues by segment follows.

•Healthcare revenues increased $13.7 million, ~~was attributable to revenues generated~~or 12.0%, driven by ~~our full-time equivalents.~~

~~The increase in billable consultant revenues reflected~~ strengthened demand for our technology and analytics services inwithin our ~~Education~~Digital capability, as well as strengthened demand for our revenue cycle managed services solutions within our Consulting and ~~Business Advisory segments,~~Managed Services capability. These increases were partially offset by a decrease in demand for ~~certain services in~~ our Healthcare segment, as discussed below in Segment Results. The overall increase in billable consultant revenues was primarily attributable to overall increases in the average number of billable consultantsperformance improvement solution within our Consulting and ~~the consultant utilization rate for the third quarter of 2021 compared to the same prior year period.~~

~~The increase in Healthcare~~ Managed Services ~~revenues was primarily attributable to an increase~~capability. Revenues in ~~demand for these services, which led to an increase in the average number of managed services employees in the third quarter of 2021 compared to the same prior year period. At the beginning of~~ the second quarter of ~~2021, we hired approximately 300 employees to expand~~2022 included $1.2 million of incremental revenues from our ~~capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients. These employees are serving new and existing clients~~acquisition of Perception Health, Inc., which was completed in ~~our Healthcare Managed Services solution, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.~~December 2021.

The increase in full-time equivalent revenues was primarily attributable to an increase in full-time equivalent revenues in our Education and Business Advisory segments, as discussed below in Segment Results. The overall increase in full-time equivalent revenues reflected an overall increase in revenue per full-time equivalent, partially offset by an overall decrease in the average number of ~~full-time equivalents in the third quarter of 2021 compared to the same prior year period.~~

~~In most of 2020 and the first quarter of 2021, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services, particularly~~revenue-generating professionals within our Healthcare ~~and Education segments~~segment grew 12.2% to 1,619 as ~~some clients reprioritized~~of June 30, 2022, compared to 1,443 as of June 30, 2021.

•Education revenues increased $27.8 million, or ~~delayed certain projects. During the second and third quarters of 2021, we saw an increase in our sales pipeline and the pace of signings in our Healthcare and Education businesses. As the overall~~45.9%, driven by strengthened demand for our technology and analytics services ~~continued to strengthen~~within our Digital capability and strengthened demand for our research, strategy and operations, and student solutions within our Consulting and Managed Services capability. Revenues in the second quarter of 2022 included $1.9 million of incremental revenues from our acquisition of Whiteboard Communications Ltd., which was completed in December 2021.

The number of revenue-generating professionals within our Education segment grew 59.0% to 1,407 as of June 30, 2022, compared to 885 as of June 30, 2021.

•Commercial revenues increased $1.7 million, or 3.1%, driven by strengthened demand for our technology and ~~third quarters~~analytics services within our Digital capability, largely offset by a decrease in demand for our financial advisory solutions within our Consulting and Managed Services capability and the divestiture of ~~2021, we expect continued revenue growth~~our Life Sciences business in the fourth quarter of ~~2021~~2021. The Life Sciences business generated $5.0 million of revenues in the second quarter of 2021. Revenues in the second quarter of 2022 included $0.9 million of incremental revenues from our acquisition of AIMDATA, LLC, which was completed in January 2022.

The number of revenue-generating professionals within our Commercial segment grew 7.6% to 1,217 as of June 30, 2022, compared to 1,131 as of June 30, 2021. This increase includes the impact of the divestiture of our Life Sciences business completed in the fourth quarter of ~~2020.~~

~~Total Direct Costs~~

Direct costs, excluding amortization of intangible assets and software development costs, increased $8.4 million, or 5.8%, to $153.9 million for the three months ended September 30, 2021, from $145.5 million for the three months ended September 30, 2020.2021. The $8.4 million increase primarily related to a $9.8 million increase in salaries and related expenses for our revenue-generating professionals, a $1.0 million increase in signing, retention and other bonus expense for our revenue-generating professionals, a $0.9 million increase in share-based compensation expense for our revenue-generating professionals, a $0.7 million increase in contractor expense and a $0.5 million increase in product and event costs. These increases in direct costs were partially offset by a $4.5 million decrease in performance bonus expense for our revenue-generating professionals which primarily reflects a decrease in the performance bonus adjustment recorded in the third quarter of 2021 compared to the third quarter of 2020 to adjust our year-to-date performance bonus accrual to reflect the revised full year forecasts. As a percentage of revenues, direct costs decreased to 68.7% during the third quarter of 2021 compared to 70.9% during the third quarter of 2020, primarily due to the decrease in performance bonus expense for our revenue-generating professionals, partially offset by the increases in signing, retention and other bonus expense and share-based compensation expense for ourLife Sciences business employed 66 revenue-generating professionals as ~~percentages~~ of ~~revenues.~~

~~Total direct costs for the three months ended September~~June 30, 2021 included $0.9 million of amortization expense for internal software development costs and intangible assets, compared to $1.4 million of amortization expense for the same prior year period. Intangible asset amortization included within direct costs for the three months ended September 30, 2021 and 2020 primarily related to technology and software, certain customer relationships and customer contracts acquired in connection with our business acquisitions. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on our intangible assets.

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

Selling, general and administrative expenses increased by $5.0 million, or 12.9%, to $43.5 million in the third quarter of 2021 from $38.6 million in the third quarter of 2020. The overall $5.0 million increase primarily related to a $1.4 million increase in share-based compensation expense for our support personnel, a $1.2 million increase in promotion and marketing expense, a $1.1 million increase in salaries and related expenses for our support personnel, a $0.8 million increase in software and data hosting expense, a $0.6 million increase in signing, retention and other bonus2021.

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~~expense~~Operating Expenses

Operating expenses for ~~our support personnel,~~the second quarter of 2022 increased $34.6 million, or 15.9%, over the second quarter of 2021.

Operating expenses and operating expenses as a ~~$0.6~~percentage of revenues were as follows:


Operating Expenses (in thousands, except amounts as a percentage of revenues)	Three Months Ended June 30,						Increase / (Decrease)
	2022			2021
Direct costs	$	189,233	69.2%	$	161,526	70.2%	$	27,707
Reimbursable expenses	7,576		2.8%	3,316		1.4%	4,260
Selling, general and administrative expenses	46,033		16.8%	45,190		19.6%	843
Restructuring charges	2,069		0.8%	861		0.4%	1,208
Depreciation and amortization	6,902		2.5%	6,356		2.8%	546
Total operating expenses	$	251,813	92.1%	$	217,249	94.4%	$	34,564

Direct Costs

Direct costs increased $27.7 million, or 17.2%, to $189.2 million for the three months ended June 30, 2022 from $161.5 million for the three months ended June 30, 2021. The $27.7 million increase primarily related to a $19.8 million increase in ~~research expense,~~payroll costs for our revenue-generating professionals, driven by increased headcount and annual salary increases that went into effect in the first quarter of 2022, partially offset by a ~~$0.6~~decrease in performance bonus expense. Additional increases in direct costs include a $5.8 million increase in ~~legal~~contractor expense, and a $1.6 million increase in technology costs. As a percentage of revenues, direct costs decreased to 69.2% during the second quarter of 2022, compared to 70.2% during the second quarter of 2021, primarily due to revenue growth that outpaced the increase in payroll costs for our revenue-generating professionals; partially offset by the increase in contractor expense, as a percentage of revenues.

Reimbursable Expenses

Reimbursable expenses are billed to clients at cost and primarily relate to travel and out-of-pocket expenses incurred in connection with client engagements. These expenses are also included in total revenues and reimbursable expenses. We manage our business on the basis of revenues before reimbursable expenses, which we believe is the most accurate reflection of our services because it eliminates the effect of reimbursable expenses that are also included as a component of operating expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $0.8 million, or 1.9%, to $46.0 million in the second quarter of 2022 from $45.2 million in the second quarter of 2021. The $0.8 million increase primarily related to a $5.2 million increase in non-payroll costs which includes a $2.3 million increase in promotion and marketing expenses, a ~~$0.5~~$1.4 million increase in practice administration and meetings ~~expense,~~expenses, and a ~~$0.5~~$0.8 million increase in third-party consulting expense. The increase 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. These increases were partiallysoftware and data hosting expenses, largely offset by a ~~$2.2~~$4.4 million decrease in payroll costs for our support personnel. The $4.4 million decrease in payroll costs includes a $7.1 million decrease in deferred compensation expense attributable to the change in the market value of our deferred compensation liability, partially offset by a $2.5 million increase in salaries and ~~a $1.2 million decrease in performance bonus expense~~related expenses for our support personnel. ~~During the third quarter of 2021, the market value of our~~The decrease in deferred compensation ~~liability decreased by $0.4 million, compared to an increase of $1.8 million in the third quarter of 2020. This $2.2 million decrease in~~ expense is fully offset by a ~~$2.2 million~~ decrease 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. As a percentage of revenues, selling, general and administrative expenses ~~increased~~decreased to ~~19.4%~~16.8% during the ~~third~~second quarter of ~~2021~~2022, compared to ~~18.8%~~19.6% during the ~~third~~second quarter of ~~2020.~~2021. This ~~increase~~decrease was primarily attributable to the ~~increases in selling, general and administrative expenses described above, as percentages of revenues, partially offset by the decreases~~decrease in deferred compensation expense ~~and performance bonus expense for our support personnel.~~in the second quarter of 2022 compared to the second quarter of 2021.

Restructuring Charges

Restructuring charges for the ~~third~~second quarter of ~~2021~~2022 were ~~$1.7~~$2.1 million, compared to ~~$0.1~~$0.9 million for the ~~third~~second quarter of ~~2020.~~2021. The ~~$1.7~~$2.1 million of restructuring charges ~~recognized~~incurred in the ~~third~~second quarter of ~~2021 consisted of $0.7~~2022 included $1.1 million of ~~third-party transaction~~employee-related expenses, ~~related to the evaluation of the divestiture of our Life Sciences business within our Business Advisory segment, $0.5~~$0.4 million offor rent and related expenses, net of sublease income, for previously vacated office spaces, ~~and~~ $0.5 million for third-party transaction expenses related to the modification of ~~employee-related expenses.~~our operating model, and $0.1 million related to the divestiture of our Life Sciences business in the fourth quarter of 2021. The ~~$0.1~~$0.9 million of restructuring charges ~~recognized~~incurred in the ~~third~~second quarter of ~~2020~~2021 primarily related to rent and related expenses, net of sublease income, for vacated office spaces. ~~See Note 8 “Restructuring Charges” within the notes to our consolidated financial statements for additional information on our restructuring charges.~~

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Depreciation and Amortization

Depreciation and amortization expense, ~~decreased $0.8~~which includes amortization of intangible assets and software development costs previously presented separately, increased $0.5 million, or ~~12.4%~~8.6%, to ~~$5.4~~$6.9 million for the three months ended ~~September~~June 30, ~~2021~~2022, compared to ~~$6.2~~$6.4 million for the three months ended ~~September~~June 30, ~~2020.~~2021. The ~~$0.8~~$0.5 million ~~decrease~~increase in depreciation and amortization expense was primarily attributable to ~~decreasing~~an increase in amortization ~~expense for customer relationships~~of intangible assets acquired in business acquisitions ~~due~~completed subsequent to the ~~accelerated basis~~second quarter 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; as well as a decrease in depreciation expense for leasehold improvements and furniture and fixtures related to vacated office spaces. Intangible asset amortization expense included within operating expenses primarily related to certain customer relationships, trade names, and non-competition agreements acquired in connection with our business acquisitions. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on our intangible assets.2021.

Operating Income and Operating Margin

Operating income increased ~~$4.6~~$12.9 million to ~~$18.3~~$29.0 million in the ~~third~~second quarter of ~~2021~~2022 from ~~$13.7~~$16.1 million in the ~~third~~second quarter of ~~2020.~~2021. Operating margin, which is defined as operating income expressed as a percentage of revenues, ~~was 8.2%~~increased to 10.6% for the three months ended ~~September~~June 30, ~~2021~~2022, compared to ~~6.7%~~7.0% for the three months ended ~~September~~June 30, ~~2020.~~2021.

Operating income and operating margin for each of our segments is as follows. See the Segment and Consolidated Operating Results table above for a reconciliation of our total segment operating income to consolidated Huron operating income.


Segment Operating Income (in thousands, except operating margin percentages)	Three Months Ended June 30,						Increase / (Decrease)
	2022			2021
Healthcare	$	30,364	23.6%	$	30,527	26.6%	$	(163)
Education	21,691		24.6%	14,142		23.4%	7,549
Commercial	11,915		21.0%	11,040		20.1%	875
Total segment operating income	$	63,970		$	55,709		$	8,261

•Healthcare operating income decreased primarily due to increases in payroll costs for our revenue-generating professionals and contractor expenses, largely offset by the increase in revenues. The increase in payroll costs was driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2022, partially offset by a decrease in performance bonus expense. Healthcare operating margin ~~was~~decreased primarily ~~attributable~~due to the increases in contractor expenses and payroll costs for our revenue-generating professionals, as percentages of revenues.

•Education operating income increased primarily due to the increase in revenues, ~~and the decreases~~partially offset by an increase in ~~performance bonus expense~~payroll costs for our revenue-generating professionals ~~deferred compensation~~and increases in contractor expense, technology expenses, and promotion and marketing expenses. The increase in payroll costs was driven by an increase in headcount, annual salary increases that went into effect in the first quarter of 2022, and an increase in performance bonus ~~expense for our support personnel, and depreciation and amortization expense,~~expense. Education operating margin increased due to revenue growth that outpaced the increase in payroll costs; partially offset by the increases in ~~share-based compensation expense~~non-payroll costs, as percentages of revenues.

•Commercial operating income increased primarily due to a decrease in payroll costs for our revenue-generating professionals and the increase in revenues, partially offset by increases in restructuring charges, payroll costs for our support personnel, and ~~restructuring charges,~~promotion and marketing expenses. The decrease in payroll costs for our revenue-generating professionals was primarily driven by the divestiture of our Life Sciences business in the fourth quarter of 2021, partially offset by an increase in performance bonus expense. Commercial operating margin increased due to the decrease in payroll costs for our revenue-generating professionals, partially offset by the increases in non-payroll costs and the increase in payroll costs for our support personnel, as percentages of revenues.

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

Interest expense, net of interest income ~~decreased less than $0.1~~increased $0.4 million to ~~$2.2~~$2.4 million in the ~~third~~second quarter of 2022 from $2.0 million in the second quarter of 2021 ~~from $2.3 million in~~primarily attributable to higher levels of borrowing under our credit facility during the ~~third~~second quarter of ~~2020.~~2022 compared to the second quarter of 2021. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information about our senior secured credit facility.

Other income (expense), net decreased ~~$2.4~~$7.0 million to ~~other~~ expense ~~net~~ of ~~$0.4~~$4.9 million in the ~~third~~second quarter of ~~2021~~2022 from ~~other~~ income ~~net~~ of ~~$2.0~~$2.2 million in the ~~third~~second quarter of ~~2020.~~2021. The decrease in other income, net was primarily attributable to the ~~$2.2~~$7.1 million decrease in the gain recognized for the market value of our investments that are used to fund our deferred compensation liability. During the ~~third~~second quarter of ~~2021,~~2022, we recognized a ~~$0.4~~$5.0 million loss for the market value of our deferred compensation investments compared to a ~~$1.8~~$2.1 million gain recognized in the ~~third~~second quarter of ~~2020.~~2021.

Income Tax Expense

For the three months ended ~~September~~June 30, 2022, our effective tax rate was 36.0% as we recognized income tax expense of $7.8 million on income of $21.7 million. The effective tax rate of 36.0% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4%, primarily due to

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tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.

For the three months ended June 30, 2021, our effective tax rate was ~~12.5%~~21.3% as we recognized income tax expense ~~from continuing operations~~ of ~~$2.0~~$3.5 million on income ~~from continuing operations~~ of ~~$15.7~~$16.3 million. The effective tax rate of ~~12.5%~~21.3% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6%, primarily due to a discrete tax benefit ~~for U.S. federal return to provision adjustments related to the 2020 corporate income tax return.~~

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accordance with the allocation of income tax expense on a year-to-date basis. The effective tax rate also reflected the positive impact of certain federal tax credits. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the goodwill impairment charges recognized in the first quarter of 2020.

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

~~Net Income from Continuing Operations and Earnings per Share~~

Net income from continuing operations increased $2.6 million to $13.7 million for the three months ended September 30, 2021 from $11.1 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 2021 was $0.64 compared to $0.50 for the third quarter of 2020.

~~EBITDA and Adjusted EBITDA~~

EBITDA increased $1.2 million to $24.4 million for the three months ended September 30, 2021 from $23.3 million for the three months ended September 30, 2020. Adjusted EBITDA increased $2.8 million to $26.4 million in the third quarter of 2021 from $23.6 million in the third quarter of 2020. The increase in EBITDA was primarily attributable to an overall increase in segment operating income, partially offset by an increase in corporate expenses. The increase in adjusted EBITDA was primarily attributable to an increase in segment operating income, partially offset by an increase in corporate expenses, excluding the change in the market value of our deferred compensation liability for the third quarter of 2021 compared to the third quarter of 2020 and restructuring charges not allocated at the segment level. See Segment Results below for additional information on segment operating income.

~~Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share~~

Adjusted net income from continuing operations increased $3.7 million to $16.8 million in the third quarter of 2021 compared to $13.0 million in the third quarter of 2020. As a result of the increase in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was $0.78 for the third quarter of 2021, compared to $0.59 for the third quarter of 2020.

~~Segment Results~~

~~Healthcare~~

~~Revenues~~

Healthcare segment revenues increased $5.4 million, or 6.2%, to $92.8 million for the third quarter of 2021 from $87.4 million for the third quarter of 2020 due to strengthened demand for services in this segment in the third quarter of 2021, as well as the favorable comparison against results for the third quarter of 2020 which was significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

During the three months ended September 30, 2021, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 61.2%, 19.2%, 13.7%, and 5.9% of this segment’s revenues, respectively, compared to 58.9%, 16.7%, 17.9%, and 6.5% of this segment’s revenues, respectively, for the same prior year period. Performance-based fee revenue was $12.7 million for the third quarter of 2021 compared to $15.6 million for the third quarter of 2020. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide.

Of the overall $5.4 million increase in revenues, $7.2 million was attributable to an increase in revenues from our Healthcare Managed Services employees, partially offset by a $1.2 million decrease in revenues from our full-time equivalents and a $0.6 million decrease in revenues from our billable consultants.

The increase in Healthcare Managed Services revenues was primarily attributable to an increase in demand for these services, which led to an increase in the average number of managed services employees in the third quarter of 2021 compared to the same prior year period. At the beginning of the second quarter of 2021, we hired approximately 300 employees to expand our capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients. These employees are serving new and existing clients in our Healthcare Managed Services solution, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.

The decrease in revenues from our full-time equivalents was primarily driven by a decrease in demand for certain services and a decreased use of contractors and project consultants; and 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 2021 compared to the same prior year period.

The decrease in revenues attributable to our billable consultants reflected decreases in the average number of billable consultants and the average billing rate, partially offset by an increase in the consultant utilization rate in the third quarter of 2021 compared to the same prior year period.

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~~Operating Income~~

Healthcare segment operating income increased $4.6 million, or 18.1%, to $30.3 million for the three months ended September 30, 2021 from $25.6 million for the three months ended September 30, 2020. The Healthcare segment operating margin, defined as segment operating income expressed as a percentage of segment revenues, increased to 32.6% for the third quarter of 2021 from 29.3% in the same period last year. The increase in this segment’s operating margin was primarily attributable to a decrease in performance bonus expense for our revenue-generating professionals as well as a decrease in salaries and related expenses for our support personnel. These increases to the operating margin were partially offset by increases in signing, retention and other bonus expense for our revenue-generating professionals and product and event costs, as percentages of revenues.

~~Business Advisory~~

~~Revenues~~

Business Advisory segment revenues increased $3.9 million, or 5.9%, to $70.0 million for the third quarter of 2021 from $66.0 million for the third quarter of 2020, primarily related to strengthened demand for our strategy and innovation solutions and our cloud-based technology and analytics solutions. Revenues for the third quarter of 2021 included $4.5 million from our acquisitions of ForceIQ and Unico Solutions, which were completed in November 2020 and February 2021, respectively.

During the three months ended September 30, 2021, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 44.0%, 50.4%, 2.3%, and 3.3% of this segment’s revenues, respectively, compared to 31.3%, 61.3%, 5.6%, and 1.8% of this segment's revenues, respectively, for the same prior year period. Performance-based fee revenue was $1.6 million for the third quarter of 2021 compared to $3.7 million for the third quarter of 2020. The level of performance-based fees earned may vary based on our clients’ preferences, the mix of services we provide, and the timing of transactions or milestones.

Of the overall $3.9 million increase in revenues, $2.1 million was attributable to an increase in revenues from our billable consultants and $1.8 million was attributable to an increase in revenues from our full-time equivalents. The increase in revenues from our billable consultants reflected an increase in the average number of billable consultants, partially offset by decreases in the consultant utilization rate and the average billing rate in the third quarter of 2021 compared to the same prior year period. The increase in revenues generated by our full-time equivalents was primarily driven by an increased use of contractors and project consultants; 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 2021 compared to the same prior year period.

On November 1, 2021, we completed the divestiture of the Life Sciences business to Oliver Wyman. The Life Sciences business, a reporting unit within the Business Advisory segment, provides commercial and research and development strategy, pricing and market access strategy solutions to customers in the life sciences industries. For the three months ended September 30, 2021, Life Sciences revenues were $5.1 million. The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

~~Operating Income~~

Business Advisory segment operating income decreased by $0.9 million, or 8.2%, to $9.9 million for the three months ended September 30, 2021 from $10.8 million for the three months ended September 30, 2020. The Business Advisory segment operating margin decreased to 14.1% for the third quarter of 2021 from 16.3% 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 contractor expense, as percentages of revenues, as well as increases in restructuring charges, promotion and marketing expense and practice administration and meetings expense, as percentages of revenues. These decreases to the segment's operating margin were partially offset by a decrease in performance bonus expense for our revenue-generating professionals.

~~Education~~

~~Revenues~~

Education segment revenues increased $9.3 million, or 18.0%, to $61.2 million for the third quarter of 2021 from $51.9 million for the third quarter of 2020 due to strengthened demand for services in this segment in the third quarter of 2021, as well as the favorable comparison against results for the third quarter of 2020 which was significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

During the three months ended September 30, 2021, revenues from fixed-fee engagements; time-and-expense engagements; and software support, maintenance and subscription arrangements represented 24.5%, 63.4%, and 12.1% of this segment’s revenues, respectively, compared to 21.1%, 67.9%, and 11.0% of this segment’s revenues, respectively, for the same prior year period.

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Of the overall $9.3 million increase in revenues, $7.0 million was attributable to an increase in revenues from our billable consultants and $2.3 million was attributable to an increase in revenues from our full-time equivalents. The increase in revenues attributable to our billable consultants reflected increases in the consultant utilization rate, the average billing rate, and the average number of billable consultants in the third quarter of 2021 compared to the same prior year period. The increase in revenues from our full-time equivalents was primarily driven by an increase in software subscriptions and data hosting revenues, and reflected increases in revenue per full-time equivalent and the average number of full-time equivalents in the third quarter of 2021 compared to the same prior year period.

~~Operating Income~~

Education segment operating income increased $2.2 million, or 17.9% to $14.8 million for the three months ended September 30, 2021 from $12.5 million for the three months ended September 30, 2020. The Education segment operating margin was 24.2% for both the third quarter of 2021 and 2020. This segment's revenue growth outpaced the increase in salaries and related expenses for our revenue-generating professionals. This increase to the segment's operating margin was largely offset by increases in performance bonus expense and share-based compensation expense for our revenue-generating professionals, as percentages of revenues.

~~Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

~~Revenues~~

Revenues increased $11.6 million, or 1.8%, to $657.3 million for the first nine months of 2021 from $645.8 million for the first nine months of 2020. The increase in revenues reflects strengthened demand for services in our Business Advisory and Healthcare segments, partially offset by a decrease in demand for services in our Education segment, as discussed below in Segment Results.

Of the overall $11.6 million increase in revenues, $13.9 million was attributable to an increase in revenues from our Healthcare Managed Services employees and $2.0 million was attributable to an increase in revenues from our billable consultants, partially offset by a $4.3 million decrease in revenues from our full-time equivalents.

The increase in Healthcare Managed Services revenues was primarily attributable to an increase in demand for these services, which led to an increase in the average number of Healthcare Managed Services employees in the first nine months of 2021 compared to the same prior year period. At the beginning of the second quarter of 2021, we hired approximately 300 employees to expand our capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients. These employees are serving new and existing clients in our Healthcare Managed Services solution, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.

The increase in billable consultant revenues was attributable to an increase in demand for services in our Business Advisory segment, largely offset by a decrease in demand for services in our Education segment, as discussed below in Segment Results. The overall increase in billable consultant revenues reflected an overall increase in the average number of billable consultants during the first nine months of 2021 compared to the same prior year period.

The decrease in full-time equivalent revenues was primarily attributable to a decrease in full-time equivalent revenues in our Healthcare segment, partially offset by increases in full-time equivalent revenues in our Business Advisory and Education segments, as discussed below in Segment Results; and reflected an overall decrease in the average number of full-time equivalents, partially offset by an overall increase in revenue per full-time equivalent during the first nine months of 2021 compared to the first nine months of 2020.

In most of 2020 and the first quarter of 2021, 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 as some clients reprioritized or delayed certain projects. During the second and third quarters of 2021, we saw an increase in our sales pipeline and the pace of signings in our Healthcare and Education businesses. While overall demand for our services in the first quarter of 2021 was negatively impacted by the COVID-19 pandemic, the overall demand for our services strengthened in the second and third quarters of 2021 and we expect continued revenue growth in the fourth quarter of 2021 compared to the fourth quarter of 2020.

The COVID-19 pandemic has caused the need for many companies to accelerate their digital transformation to drive operational efficiencies, better engage with their customers, and make better data-driven decisions. This has resulted in strong demand for our digital, technology and analytic offerings, particularly within our Business Advisory segment. Indicative of our expectations for future growth in this segment, we continue to make investments in these offerings, both organically and through strategic acquisitions, such as our acquisitions of ForceIQ in November 2020 and Unico Solutions in February 2021, and through the addition of new offerings and capabilities within this segment where we see strategic opportunities.

~~Total Direct Costs~~

Direct costs, excluding amortization of intangible assets and software development costs, increased $12.3 million, or 2.7%, to $463.5 million for the nine months ended September 30, 2021, from $451.2 million for the nine months ended September 30, 2020. The overall $12.3 million increase primarily related to a $16.1 million increase in salaries and related expenses for our revenue-generating professionals and a $2.4 million increase in

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signing, retention and other bonus expense for our revenue-generating professionals, partially offset by a $4.2 million decrease in performance bonus expense for our revenue-generating professionals and a $1.8 million decrease in contractor expense. As a percentage of revenues, our direct costs increased to 70.5% during the first nine months of 2021 compared to 69.9% during the first nine months of 2020 primarily due to the increase in salaries and related expenses for our revenue-generating professionals, as a percentage of revenues, partially offset by the decrease in performance bonus expense for our revenue-generating professionals.

Total direct costs for the nine months ended September 30, 2021 included $2.7 million of amortization expense for internal software development costs and intangible assets, compared to $4.0 million of amortization expense for the same prior year period. Intangible asset amortization included within direct costs for the nine months ended September 30, 2021 and 2020 related to technology and software, certain customer relationships and customer contracts acquired in connection with our business acquisitions. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information about our intangible assets.

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

Selling, general and administrative expenses increased $1.6 million, or 1.3%, to $128.5 million in the nine months ended September 30, 2021 from $126.9 million in the nine months ended September 30, 2020. The $1.6 million increase primarily related to a $1.7 million increase in software and data hosting expense, a $1.6 million increase in deferred compensation expense, a $1.4 million increase in legal expense, and a $1.1 million increase in signing, retention and other bonus expense for our support personnel. The $1.6 million increase in deferred compensation expense was attributable to the change in the market value of our deferred compensation liability. During the first nine months of 2021, the market value of our deferred compensation liability increased by $2.6 million, compared to $1.0 million in the first nine months of 2020. This $1.6 million increase in expense is offset by a $1.6 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. These increases to selling, general and administrative expenses were largely offset by a $3.7 million decrease in practice administration and meetings expense and a $1.0 million decrease in promotion and marketing expense. As a percentage of revenues, selling, general and administrative expenses decreased to 19.5% for the first nine months of 2021 compared to 19.6% during the first nine months of 2020, primarily attributable to the decrease in practice administration and meetings expense, largely offset by the increases in the other selling, general and administrative expenses described above.

Restructuring charges for the first nine months of 2021 totaled $3.2 million, compared to $1.8 million for the first nine months of 2020. The $3.2 million restructuring charge incurred in the first nine months of 2021 consisted of $1.8 million of rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for vacated office spaces, $0.9 million of third-party transaction expenses related to the evaluation of the divestiture of our Life Sciences business within our Business Advisory segment, and $0.5 million of employee-related expenses. The $1.8 million restructuring charge incurred in the first nine months of 2020 primarily related to a $1.2 million accrual for the termination of a third-party advisor agreement; $0.3 million related to workforce reductions to better align resources with market demand; $0.2 million related to rent and related expenses, net of sublease income, for office spaces previously vacated, and $0.1 million related to workforce reductions in our corporate operations. See Note 8 “Restructuring Charges” within the notes to our consolidated financial statements for additional information on our restructuring charges.

Litigation and other losses (gains), net totaled a net loss of $0.1 million for the nine months ended September 30, 2021, which consisted of remeasurement losses to increase the fair value of our liability for contingent consideration related to a business combination. Litigation and other losses (gains), net totaled a net gain of $0.2 million for the nine months ended September 30, 2020, which consisted of a litigation settlement gain for the resolution of a claim that was settled in the first quarter of 2020.

Depreciation and amortization expense decreased by $2.2 million, or 11.9%, to $16.3 million for the nine months ended September 30, 2021, from $18.5 million for the nine months ended September 30, 2020. The $2.2 million decrease was primarily attributable to decreasing amortization expense for customer relationships acquired in business acquisitions 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; as well as a decrease in depreciation expense for leasehold improvements and furniture and fixtures related to vacated office spaces. Intangible asset amortization expense included within operating expenses primarily related to certain customer relationships, trade names, and non-competition agreements acquired in connection with our business acquisitions. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on our intangible assets.

During the first quarter of 2020, we recorded $59.8 million of non-cash pretax goodwill impairment charges related to our Strategy and Innovation and Life Sciences reporting 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 were non-cash in nature and did not affect our liquidity or debt covenants. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the charges.

~~Operating Income (Loss)~~

Operating income increased $58.9 million to income of $42.7 million in the first nine months of 2021 from a loss of $16.2 million in the first nine months of 2020. This increase is primarily attributable to the $59.8 million of non-cash pretax goodwill impairment charges recognized in the first

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quarter of 2020 related to our Business Advisory segment. Operating margin, which is defined as operating income (loss) expressed as a percentage of revenues, was 6.5% for the nine months ended September 30, 2021, compared to (2.5)% for the nine months ended September 30, 2020. The increase in operating margin was primarily attributable to the goodwill impairment charges recognized in the first quarter of 2020, as well as the increase in revenues and decreases in performance bonus expense for our revenue-generating professionals and practice administration and meetings expenses. These increases to the operating margin were partially offset by the increase in salaries and related expenses for our revenue-generating professionals, as a percentage of revenues.

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

Interest expense, net of interest income decreased $1.6 million to $6.0 million in the first nine months of 2021 from $7.5 million in the first nine months of 2020, primarily attributable to lower levels of borrowing under our credit facility during the first nine months of 2021 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 senior secured credit facility.

Other income (expense), net increased by $1.5 million to a net gain of $2.2 million in the first nine months of 2021 from a net gain of $0.7 million in the first nine months of 2020. The increase in total other income, net was primarily attributable to the $2.6 million gain recognized during the first nine months of 2021 for the market value of our investments that are used to fund our deferred compensation liability, compared to the $1.0 million gain recognized during the first nine months of 2020.

~~Income Tax Expense (Benefit)~~

For the nine months ended September 30, 2021, our effective tax rate was 17.9% as we recognized income tax expense from continuing operations of $7.0 million on income from continuing operations of $38.9 million. The effective tax rate of 17.9% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6% primarily due to a discrete tax benefit recognized in the third quarter of 2021 related to U.S. federal return to provision adjustments related to the 2020 corporate income tax return. The effective tax rate also reflected the positive impact of certain federal tax credits and a discrete tax benefit recognized during the second quarter of 2021 related to electing the Global Intangible Low-Taxed Income ~~(“GILTI”~~("GILTI") high-tax exclusion retroactively for the 2018 tax year. On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to GILTI that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available. ~~These~~This favorable ~~items were~~item was partially offset by certain nondeductible expense items.

Net Income from Continuing Operations and Earnings per Share

EBITDA and Adjusted EBITDA

EBITDA increased $6.4 million to $31.2 million for the three months ended June 30, 2022 from $24.8 million for the three months ended June 30, 2021. The increase in EBITDA was primarily attributable to the increase in segment operating income; partially offset by an increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability on corporate expenses.

Adjusted EBITDA increased $7.6 million to $33.2 million in the second quarter of 2022 from $25.6 million in the second quarter of 2021. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income; partially offset by an increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and restructuring charges on these items.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income increased $2.4 million to $17.5 million in the second quarter of 2022 compared to $15.1 million in the second quarter of 2021. As a result of the increase in adjusted net income, adjusted diluted earnings per share was $0.83 for the second quarter of 2022, compared to $0.69 for the second quarter of 2021.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Revenues

Revenues by segment and capability for the six months ended June 30, 2022 and 2021 were as follows:


Revenues (in thousands)	Six Months Ended June 30,				Percent Increase (Decrease)
	2022		2021
Segment:
Healthcare	$	250,350	$	210,725	18.8	%
Education	168,887		111,817		51.0	%
Commercial	114,137		110,797		3.0	%
Total revenues	$	533,374	$	433,339	23.1	%

Capability:
Consulting and Managed Services	$	298,455	$	267,555	11.5	%
Digital	234,919		165,784		41.7	%
Total revenues	$	533,374	$	433,339	23.1	%

Revenues increased $100.0 million, or 23.1%, to $533.4 million for the first six months of 2022 from $433.3 million for the first six months of 2021. The overall increase in revenues reflects continued strength in demand for our Digital capability services across all industries as companies continue to invest in cloud-based technology and analytic solutions, as well as strengthened demand for our Consulting and Managed Services offerings within our Education and Healthcare segments partially the result of a favorable comparison against these segments' results in the first six months of 2021 which were more significantly impacted by the COVID-19 pandemic. During 2020 and 2021, some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic, particularly within our Healthcare and Education segments. Additional information on our revenues by segment follows.

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•Healthcare revenues increased $39.6 million, or 18.8%, driven by strengthened demand for our technology and analytics services within our Digital capability, as well as strengthened demand for our revenue cycle managed services and performance improvement solutions within our Consulting and Managed Services capability. These increases in revenues were partially offset by a decrease in demand for our strategy and innovation solution within this segment's Consulting and Managed Services capability. Revenues in the first six months of 2022 included $1.8 million of incremental revenues from our acquisition of Perception Health, Inc., which was completed in December 2021.

The number of revenue-generating professionals within our Healthcare segment grew 12.2% to 1,619 as of June 30, 2022, compared to 1,443 as of June 30, 2021.

•Education revenues increased $57.1 million, or 51.0%, driven by strengthened demand for our technology and analytics services and software products within our Digital capability, as well as strengthened demand for our research, strategy and operations, and student solutions within our Consulting and Managed Services capability. Revenues in the first six months of 2022 included $4.2 million of incremental revenues from our acquisition of Whiteboard Communications Ltd., which was completed in December 2021.

The number of revenue-generating professionals within our Education segment grew 59.0% to 1,407 as of June 30, 2022, compared to 885 as of June 30, 2021.

•Commercial revenues increased $3.3 million, or 3.0%, driven by strengthened demand for our technology and analytics services within our Digital capability, largely offset by a decrease in revenues due to the divestiture of our Life Sciences business in the fourth quarter of 2021 and a decrease in demand for our financial advisory solutions within the Consulting and Managed Services capability. The Life Sciences business generated $9.7 million of revenues in the first six months of 2021. Revenues in the first six months of 2022 included $1.9 million of incremental revenues from our acquisitions of Unico Solution, Inc. and AIMDATA, LLC, which were completed in February 2021 and January 2022, respectively.

Operating Expenses

Operating expenses for the first six months of 2022 increased $86.5 million, or 20.9%, over the first six months of 2021.

Operating expenses and operating expenses as a percentage of revenues were as follows:


Operating Expenses (in thousands, except amounts as a percentage of revenues)	Six Months Ended June 30,						Increase / (Decrease)
	2022			2021
Direct costs	$	376,480	70.6%	$	309,641	71.5%	$	66,839
Reimbursable expenses	12,332		2.3%	5,319		1.2%	7,013
Selling, general and administrative expenses	94,428		17.7%	84,998		19.6%	9,430
Restructuring charges	3,624		0.7%	1,489		0.3%	2,135
Depreciation and amortization	13,766		2.6%	12,709		2.9%	1,057
Total operating expenses	$	500,630	93.9%	$	414,156	95.5%	$	86,474

Direct Costs

Direct costs increased $66.8 million, or 21.6%, to $376.5 million for the first six months of 2022 from $309.6 million for the first six months of 2021. The $66.8 million increase primarily related to a $52.7 million increase in payroll costs for our revenue-generating professionals, driven by increased headcount, annual salary increases that went into effect in the first quarter of 2022, and an increase in performance bonus expense; as well as a $10.4 million increase in contractor expense, a $3.0 million increase in technology costs, and a $1.2 million increase in product and event costs. As a percentage of revenues, direct costs decreased to 70.6% during the first six months of 2022, compared to 71.5% during the first six months of 2021, primarily due to revenue growth that outpaced the increase in payroll costs for our revenue-generating professionals, partially offset by the increase in contractor expense, as a percentage of revenues.

Reimbursable Expenses

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $9.4 million, or 11.1%, to $94.4 million in the first six months of 2022 from $85.0 million in the first six months of 2021. The $9.4 million increase primarily related to an $8.7 million increase in non-payroll costs including a $3.1 million increase in promotion and marketing expenses, a $2.0 million increase in practice administration and meetings expense, a $1.7 million increase in software and data hosting expenses, and a $1.0 million increase in third-party professional fees. Additionally, selling, general and administrative expenses increased by $0.6 million related to payroll costs for our support personnel, which includes a $6.6 million increase in salaries and related expenses, a $2.1 million increase in performance bonus expense and a $1.8 million increase in share-based compensation expense; largely offset by a $10.5 million decrease in deferred compensation expense attributable to the change in the market value of our deferred compensation liability. The decrease in deferred compensation expense is fully offset by a decrease 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. As a percentage of revenues, selling, general and administrative expenses decreased to 17.7% during the first six months of 2022, compared to 19.6% during the first six months of 2021. This decrease was primarily attributable to the decrease in deferred compensation expense in the first six months of 2022 compared to the first six months of 2021.

Restructuring Charges

Restructuring charges for the first six months of 2022 were $3.6 million, compared to $1.5 million for the first six months of 2021. The $3.6 million of restructuring charges incurred in the first six months of 2022 included $1.6 million of employee-related expenses, $1.0 million for rent and related expenses, net of sublease income, for previously vacated office spaces, $0.6 million for third-party transaction expenses related to the modification of our operating model, $0.3 million of accelerated amortization of capitalized software implementation costs for a cloud-computing arrangement that is no longer in use, and $0.1 million related to the divestiture of our Life Sciences business in the fourth quarter of 2021. The $1.5 million of restructuring charges incurred in the first six months of 2021 primarily related to rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for vacated office spaces.

Depreciation and Amortization

Depreciation and amortization expense, which includes amortization of intangible assets and software development costs previously presented separately, increased $1.1 million, or 8.3%, to $13.8 million for the first six months of 2022, compared to $12.7 million for first six months of 2021. The $1.1 million increase in depreciation and amortization expense was primarily attributable to an increase in amortization of intangible assets acquired in business acquisitions completed subsequent to the second quarter of 2021.

Operating Income and Operating Margin

Operating income increased $20.6 million to $45.0 million in the first six months of 2022 from $24.4 million in the first six months of 2021. Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 8.4% for the first six months of 2022, compared to 5.6% for the first six months of 2021.


Segment Operating Income (in thousands, except operating margin percentages)	Six Months Ended June 30,						Increase / (Decrease)
	2022			2021
Healthcare	$	58,396	23.3%	$	54,354	25.8%	$	4,042
Education	35,997		21.3%	22,679		20.3%	13,318
Commercial	24,129		21.1%	20,890		18.9%	3,239
Total segment operating income	$	118,522		$	97,923		$	20,599

•Healthcare operating income increased primarily due to the increase in revenues, partially offset by increases in payroll costs for our revenue-generating professionals, contractor expense, amortization of intangible assets and technology expenses. The increase in payroll costs was driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2022, partially offset by a decrease in performance bonus expense. Healthcare operating margin decreased primarily due to the increases in contractor expense and payroll costs for our revenue-generating professionals, as percentages of revenues.

•Education operating income increased primarily due to the increase in revenues, partially offset by increases in payroll costs for our revenue-generating professionals, contractor expense, technology expenses, promotion and marketing expenses, and product and event costs. The increase in payroll costs was driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2022, as well as increases in performance bonus expense, share-based compensation expense, and signing, retention and

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other bonus expense. Education operating margin increased due to revenue growth that outpaced the increase in payroll costs; partially offset by the increases in non-payroll costs, as percentages of revenues.

•Commercial operating income increased primarily due to a decrease in payroll costs for our revenue-generating professionals and the increase in revenues, partially offset by an increase in payroll costs for our support personnel, restructuring charges, and promotion and marketing expenses. The decrease in payroll costs for our revenue-generating professionals was primarily driven by the divestiture of our Life Sciences business in the fourth quarter of 2021, partially offset by an increase in performance bonus expense. Commercial operating margin increased due to the decrease in payroll costs for our revenue-generating professionals; partially offset by the increases in payroll costs for our support personnel and non-payroll costs, as percentages of revenues.

Other Income (Expense), Net

Interest expense, net of interest income increased $0.9 million to $4.6 million in the first six months of 2022 from $3.7 million in the first six months of 2021 primarily attributable to higher levels of borrowing under our credit facility during the first quarter of 2022 compared to the first quarter of 2021. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information about our senior secured credit facility.

Other income, net increased $16.9 million to $19.5 million in the first six months of 2022 from $2.6 million in the first six months of 2021. The increase in other income, net was primarily attributable to a $27.0 million unrealized gain related to the increase in the fair value of our preferred stock investment in Medically Home. See Note 10 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment in Medically Home. This increase was partially offset by the $10.5 million decrease in the gain recognized for the market value of our investments that are used to fund our deferred compensation liability. During the first six months of 2022, we recognized a $7.6 million loss for the market value of our deferred compensation investments compared to a $2.9 million gain recognized in the first six months of 2021.

Income Tax Expense

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022, our effective tax rate was ~~23.5%~~31.9% as we recognized an income tax ~~benefit from continuing operations~~expense of ~~$5.4~~$19.1 million on ~~a loss from continuing operations~~income of ~~$23.0~~$59.8 million. The effective tax rate of ~~23.5%~~31.9% was less favorable than the statutory rate, inclusive of state income taxes, of ~~26.0%~~26.4%, primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible ~~business expenses~~expense items.

For the six months ended June 30, 2021, our effective tax rate was 21.5% as we recognized income tax expense of $5.0 million on income of $23.2 million. The effective tax rate of 21.5% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6%, primarily due to a discrete tax benefit related to electing the Global Intangible Low-Taxed Income ("GILTI") high-tax exclusion retroactively for the 2018 tax year and ~~the nondeductible portion of the goodwill impairment charges recorded during the first quarter of 2020. These unfavorable items were partially offset by~~ a discrete tax benefit for share-based compensation awards that vested during the first ~~quarter,~~quarter. On July 20, 2020, the ~~positive impact of certain federal tax credits,~~U.S. Treasury issued and ~~a discrete tax benefit for the remeasurement portion of our income tax receivable as a result of the enactment of the CARES Act in the first quarter of 2020.~~

The CARES Act, which was signed into law on March 27, 2020, is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback periods and technical corrections to tax depreciation methods for qualified improvement property. In the first nine months of 2020, as a result of the CARES Act, we recognized a $0.8 million tax benefitenacted final regulations related to ~~the remeasurement of~~GILTI that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to 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 the higher~~high effective tax rate ~~in the carryback period. As a result of electing the retroactive~~from their GILTI inclusions. The GILTI high-tax exclusion in the second quarter of 2021, we recognized a $1.0 million tax benefit of which $0.4 million related to carrying back our increased 2018 federal net operating loss to prior year income for a refund at the higher, prior year tax rate. During the third quarter of 2021, we recognizedis an additional tax benefit of $2.0 million primarily related to the U.S. federal return to provision adjustments for carrying back our increased 2020 federal net operating loss to prior year income for a refund at the higher, prior year tax rate.

~~See Note 12 “Income Taxes” within the notes to our consolidated financial statements for additional information on our income tax expense.~~annual election and is retroactively available. These favorable items were partially offset by certain nondeductible expense items.

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

Net income ~~from continuing operations~~ increased ~~by $49.5~~$22.5 million to ~~net income from continuing operations of $31.9~~$40.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022 from ~~a net loss from continuing operations of $17.6~~$18.2 million for the same ~~prior year period. This~~period last year. The increase isin net income was primarily attributable to a $19.8 million unrealized gain, net of tax, related to the ~~$59.8 million of non-cash pretax goodwill impairment charges recognized~~increase in the ~~first quarter~~fair value of ~~2020 related to~~ our ~~Business Advisory segment.~~preferred stock investment in Medically Home. As a result of the increase in net income, ~~from continuing operations,~~ diluted earnings per share ~~from continuing operations~~ for the six months ended June 30, 2022 was $1.94 compared to $0.82 for the six months ended June 30, 2021.

EBITDA and Adjusted EBITDA

EBITDA increased $38.6 million to $78.7 million for the six months ended June 30, 2022 from $40.0 million for the six months ended June 30, 2021. The increase in EBITDA was primarily attributable to the $27.0 million unrealized gain related to the increase in the fair value of our preferred stock investment as well as the increase in segment operating income; partially offset by an increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability on corporate expenses.

Adjusted EBITDA increased $13.3 million to $55.3 million in the first ~~nine~~six months of ~~2021 was $1.46 compared to a loss per share~~2022 from ~~continuing operations of $0.81 for~~$42.1 million in the first ~~nine~~six months of ~~2020.~~2021. The ~~non-cash goodwill impairment~~increase in adjusted EBITDA was primarily attributable to the increase in segment operating income; partially offset by an increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and restructuring charges ~~had a $2.11 unfavorable impact~~ on ~~diluted earnings per share from continuing operations for the first nine months of 2020.~~these items.

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~~EBITDA and Adjusted EBITDA~~

EBITDA increased $57.5 million to $64.5 million for the nine months ended September 30, 2021, from $7.0 million for the nine months ended September 30, 2020. The increase in EBITDA was primarily attributable to the non-cash goodwill impairment charges of $59.8 million recognized in the first quarter of 2020. Adjusted EBITDA decreased $1.6 million to $68.5 million in the first nine months of 2021 from $70.1 million in the first nine months of 2020. The decrease in adjusted EBITDA was primarily attributable to an increase in corporate expenses, excluding the change in the market value of our deferred compensation liability for the first nine months of 2021 compared to the first nine months of 2020 and restructuring charges not allocated at the segment level, partially offset by the overall increase in segment operating income, excluding depreciation and amortization and restructuring charges allocated at the segment level. See Segment Results below for additional information on segment operating income.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income ~~from continuing operations~~ increased ~~$1.9~~$4.9 million to ~~$39.7~~$27.8 million in the first ~~nine~~six months of ~~2021~~2022 compared to ~~$37.7~~$22.9 million in the first ~~nine~~six months of ~~2020.~~2021. As a result of the increase in adjusted net income, ~~from continuing operations,~~ adjusted diluted earnings per share ~~from continuing operations~~was $1.32 for the ~~first nine~~six months ~~of 2021 was $1.81~~ended June 30, 2022, compared to ~~$1.70~~$1.03 for the ~~first nine months of 2020.~~

~~Segment Results~~

~~Healthcare~~

~~Revenues~~

Healthcare segment revenues increased $5.6 million, or 2.1%, to $273.9 million for the first nine months of 2021 from $268.3 million for the first nine months of 2020. The overall increase was primarily due to strengthened demand for this segment's services in the second and third quarters of 2021 and the favorable comparison against the first nine months of 2020, which was more significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

~~During the nine~~six months ended ~~September~~June 30, 2021, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 58.5%, 17.2%, 18.4%, and 5.9% of this segment’s revenues, respectively, compared to 58.9%, 16.2%, 18.3%, and 6.6% of this segment’s revenues, respectively, for the same prior year period. Performance-based fee revenue was $50.4 million during the first nine months of 2021, compared to $49.0 million during the first nine months of 2020. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide.

Of the overall $5.6 million increase in revenues, $13.9 million was attributable to an increase in revenues from our Healthcare Managed Services employees and $0.9 million was attributable to an increase in revenues from our billable consultants, partially offset by a $9.2 million decrease in revenues from our full-time equivalents.

The increase in revenues attributable to our Healthcare Managed Services employees was primarily attributable to an increase in demand for these services, which led to an increase in the average number of managed services employees in the first nine months of 2021 compared to the same prior year period. At the beginning of the second quarter of 2021, we hired approximately 300 employees to expand our capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients. These employees are serving new and existing clients in our Healthcare Managed Services solution, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.

The increase in revenues attributable to our billable consultants reflected increases in the average billing rate and the consultant utilization rate, largely offset by a decrease in the average number of billable consultants during the first nine months of 2021 compared to the same prior year period.

The decrease in full-time equivalent revenues was primarily driven by a decrease in demand for certain services and a decreased use of contractors and project consultants; and reflected a decrease in the average number of full-time equivalents, partially offset by an increase in revenue per full-time equivalent in the first nine months of 2021 compared to the same prior year period.

~~Operating Income~~

Healthcare segment operating income increased $7.5 million, or 10.6%, to $78.4 million for the nine months ended September 30, 2021, from $70.8 million for the nine months ended September 30, 2020. The Healthcare segment operating margin increased to 28.6% for the first nine months of 2021 from 26.4% in the same period last year. The increase in this segment’s operating margin was primarily attributable to decreases in practice administration and meetings expense, contractor expense, and salaries and related expenses for our support personnel. These increases to the segment operating margin were partially offset by an increase in signing, retention and other bonus expense for our revenue-generating professionals, as a percentage of revenues.

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~~Business Advisory~~

~~Revenues~~

Business Advisory segment revenues increased $12.3 million, or 6.1%, to $213.7 million for the first nine months of 2021 from $201.4 million for the first nine months of 2020, primarily related to strengthened demand for our cloud-based technology and analytics solutions and our strategy and innovation solutions. Revenues for the first nine months of 2021 included $11.9 million from our acquisitions of ForceIQ and Unico Solutions, which were completed in November 2020 and February 2021, respectively.

During the first nine months of 2021, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 43.0%, 50.9%, 3.1%, and 3.0% of this segment’s revenues, respectively, compared to 36.5%, 58.8%, 2.9%, and 1.8% of this segment’s revenues, respectively, during the same prior year period. Performance-based fee revenue was $6.5 million for the first nine months of 2021, compared to $5.9 million for the first nine months of 2020. The level of performance-based fees earned may vary based on our clients’ preferences and the mix of services we provide.

Of the overall $12.3 million increase in revenues, $8.8 million was attributable to revenues generated by our billable consultants and $3.5 million was attributable to our full-time equivalents. The increase in revenues from our billable consultants was primarily driven by an increase in the average number of billable consultants, partially offset by decreases in the consultant utilization rate and the average billing rate in the first nine months of 2021 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 project consultants; 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 2021 compared to the same prior year period.

On November 1, 2021, we completed the divestiture of the Life Sciences business to Oliver Wyman. The Life Sciences business, a reporting unit within the Business Advisory segment, provides commercial and research and development strategy, pricing and market access strategy solutions to customers in the life sciences industries. For the nine months ended September 30, 2021, Life Sciences revenues were $14.8 million. The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

~~Operating Income~~

Business Advisory segment operating income was $37.3 million for both the nine months ended September 30, 2021 and 2020. The Business Advisory segment operating margin decreased to 17.4% for the first nine months of 2021 from 18.5% 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, contractor expense, and salaries and related expenses for our support personnel, as percentages of revenues; partially offset by decreases in performance bonus expense for our revenue-generating professionals and restructuring charges.

The first quarter 2020 non-cash goodwill impairment charges related to the Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment, which are discussed above within consolidated results, are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segment. We do not include the impact of goodwill impairment charges in our evaluation of segment performance. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the goodwill impairment charges recorded in the first quarter of 2020 and our goodwill balances.

~~Education~~

~~Revenues~~

Education segment revenues decreased $6.3 million, or 3.6%, to $169.7 million for the first nine months of 2021 from $176.0 million for the first nine months of 2020. The decrease in revenues was primarily related to the negative impact of the COVID-19 pandemic on demand for this segment's services beginning in the third quarter of 2020 and continuing through the second quarter of 2021 as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic. The decrease in revenues is also reflective of the difficult prior year comparison driven by the strong growth of this segment's revenues in the first half of 2020 prior to the impact of the pandemic on this segment.

For the nine months ended September 30, 2021, revenues from fixed-fee engagements; time-and-expense engagements; and software support, maintenance and subscription arrangements represented 28.4%, 59.3%, and 12.3% of this segment's revenues, respectively. During the same prior year period, revenues from fixed-fee engagements; time-and-expense engagements; performance-based arrangements; and software support, maintenance and subscription arrangements represented 20.2%, 70.1%, 0.4% and 9.3% of this segment’s revenues, respectively.

Of the overall $6.3 million decrease in revenues, $7.8 million was attributable to a decrease in revenues generated by our billable consultants, partially offset by a $1.5 million increase in revenues generated by our full-time equivalents. The decrease in revenues from our full-time billable consultants reflected decreases in the average number of billable consultants and the average billing rate, partially offset by an increase in the consultant utilization rate in the first nine months of 2021 compared to the same prior year period. The increase in revenues from our full-time equivalents was primarily driven by an increase in software subscriptions, software support and maintenance, and data hosting revenues, partially

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offset by a decreased use of contractors and project consultants. The overall increase in full-time equivalent revenues reflected an increase in revenue per full-time equivalent, partially offset by a decrease in the average number of full-time equivalents in the first nine months of 2021 compared to the same prior year period.

~~Operating Income~~

Education segment operating income decreased $4.6 million, or 11.0%, to $37.2 million for the nine months ended September 30, 2021, from $41.8 million for the nine months ended September 30, 2020. The Education segment operating margin decreased to 21.9% for the first nine months of 2021 from 23.7% in the same period last year. The decrease in this segment’s operating margin was primarily attributable to an increase in performance bonus expense for our revenue-generating professionals and an increase in salaries and related expenses for our revenue-generating professionals as a percentage of revenues. These increases to the segment's operating margin were partially offset by a decrease in contractor expense, as a percentage of revenues.2021.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents ~~decreased $56.0~~were $12.0 million ~~to $11.2~~and $20.8 million at ~~September~~June 30, ~~2021 from $67.2 million at~~2022 and December 31, ~~2020.~~2021. As of ~~September~~June 30, ~~2021,~~2022, 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,					Six Months Ended June 30,
Cash Flows (in thousands):	Cash Flows (in thousands):	2021		2020		Cash Flows (in thousands):	2022		2021
Net cash provided by (used in) operating activities		$	(28,206)	$	77,985
Net cash used in operating activities						Net cash used in operating activities	$	(50,236)	$	(61,970)
Net cash used in investing activities	Net cash used in investing activities	(18,726)		(28,388)		Net cash used in investing activities	(7,608)		(13,752)
Net cash provided by (used in) financing activities		(9,245)		13,517
Net cash provided by financing activities						Net cash provided by financing activities	49,076		21,258
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	189		27		Effect of exchange rate changes on cash	(55)		269
Net increase (decrease) in cash and cash equivalents		$	(55,988)	$	63,141
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	$	(8,823)	$	(54,195)

Operating Activities

Net cash used in operating activities totaled $28.2 million for the nine months ended September 30, 2021, compared to net cash provided by operating activities of $78.0 million for the nine months ended September 30, 2020. Our operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable and accrued expenses, accrued payroll and related benefits, operating lease obligations 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. Our purchase obligations primarily consist of payments for software and other information technology products to support our business and corporate infrastructure.

Net cash used in operating activities decreased $11.8 million to $50.2 million for the six months ended June 30, 2022 from $62.0 million for the six months ended June 30, 2021. The decrease in net cash used in operating activities was primarily related to an increase in cash ~~flows for~~collections in the first ~~nine~~six months of ~~2021~~2022 compared to the same prior year period was primarily attributable to a decrease in cash collections in the first nine months of 2021 compared to the same prior year period and the $12.2 million payment in the third quarter of 2021 of the employer's portion of social security taxes deferred under the CARES Act. These decreases to net operating cash flows wereperiod; partially offset by ~~a decrease~~an increase in salaries and related expenses for our revenue-generating professionals; an increase in the amount paid for annual performance bonuses in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021; and increases in contractor expenses and selling, general and administrative expenses for the first six months of 2022 compared to the same prior year period.

Investing Activities

~~Net cash used in~~Our investing activities ~~was $18.7 million~~primarily consist of purchases of complementary businesses; purchases of property and ~~$28.4 million~~equipment, primarily related to computers and related equipment for ~~the nine months ended September 30, 2021~~our employees and ~~2020, respectively.~~leasehold improvements and furniture for office spaces; payments related to internally developed cloud-based software sold to our clients; and investments. Our investments include a convertible note investment in Shorelight Holdings, LLC, a preferred stock investment in Medically Home, and investments in life insurance policies that are used to fund our deferred compensation liability.

The use of cash in the first ~~nine~~six months of 2022 primarily consisted of $6.8 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements and furniture for certain office spaces; $4.0 million for payments related to internally developed software; and $1.9 million for the purchase of a business. These uses of cash for investing activities were partially offset by $4.8 million of cash received for the sale of our aircraft in the first quarter of 2022.

The use of cash in the first six months of 2021 primarily consisted of ~~$8.9~~$5.9 million for the purchase of a business; $5.4 million for purchases of property and equipment, primarily related to purchases of leasehold improvements ~~and furniture for certain office spaces and computers and related equipment; $5.9 million for the purchase of a business; and $3.6 million for payments related to internally developed software.~~

~~The use of cash in the first nine months of 2020 primarily consisted of $13.0 million for the purchase of 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 furniture for certain office spaces and computers and related equipment; and ~~$2.0~~$2.5 million for ~~contributions~~payments related to ~~our life insurance policies which fund our deferred compensation plan.~~internally developed software.

We estimate that cash utilized for purchases of property and equipment and software development in ~~2021~~2022 will total approximately ~~$13~~$20 million to ~~$17~~$25 million; primarily consisting of software development costs, information technology related equipment to support our corporate infrastructure, and leasehold improvements and furniture and fixtures for certain office ~~locations, software development costs,~~locations.

Financing Activities

Our financing activities primarily consist of borrowings and repayments under our senior secured credit facility, share repurchases, shares redeemed for employee tax withholdings upon vesting of share-based compensation, and payments for contingent consideration liabilities related to business acquisitions. See “Financing Arrangements” below for additional information ~~technology equipment.~~on our senior secured credit facility.

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~~Financing Activities~~

Net cash ~~used in~~provided by financing activities ~~was $9.2~~increased by $27.8 million to $49.1 million for the ~~nine~~six months ended ~~September~~June 30, 2022 from $21.3 million for the six months ended June 30, 2021.

During the ~~first nine~~six months ~~of 2021,~~ended June 30, 2022, we borrowed ~~$189.0~~$224.0 million under our credit facility primarily to fund our operations, including our annual performance bonus payment in the first quarter of ~~2021,~~2022, and made repayments on our borrowings of ~~$129.4~~$114.8 million. The repayments on our borrowings included the repayment of the outstanding principal of our promissory note due 2024 of $2.7 million from the proceeds received for the sale of our aircraft. Additionally, during the first ~~nine~~six months of ~~2021,~~2022, we repurchased and retired ~~$60.2~~$52.2 million of our common stock under our ~~2020 Share Repurchase Program, as defined below.~~

Net cash provided by financing activities was $13.5 million for the nine months ended September 30, 2020. During the first nine months of 2020, we borrowed $283.0 million under our credit facility, including $125.0 million prior to March 31, 2020 to maintain excess cash and support liquidity during the period of uncertainty created by the COVID-19 pandemic, as well as to fund our annual performance bonus payment. During the first nine months of 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 $20.9 million of our common stock under our 2015 Share Repurchase Program, as definedshare repurchase program discussed below, and settled ~~$1.2~~$0.2 million of share repurchases that were accrued as of December 31, ~~2019.~~2021. In the first half of 2022, we reacquired $7.0 million of common stock as a result of tax withholdings upon vesting of share-based compensation. We also made deferred acquisition payments of $1.9 million to the sellers of certain businesses we acquired. These payments were primarily the result of achieving specified financial performance targets in accordance with the related purchase agreements.

During the six months ended June 30, 2021, we borrowed $139.0 million primarily to fund our annual performance bonus payment, and made repayments on our borrowings of $74.3 million. Additionally, during the first six months of 2021, we repurchased and retired $35.2 million of our common stock under our share repurchase program. We also reacquired $8.7 million of common stock as a result of tax withholdings upon vesting of share-based compensation.

Share Repurchase Program

In November 2020, our board of directors authorized a share repurchase program ~~(the “2020 Share Repurchase Program”)~~ permitting us to

repurchase up to $50 million of our common stock through December 31, 2021. The 2020 Share Repurchase Program was authorized subsequent to the expiration of our prior share repurchase program (the “2015 Share Repurchase Program”) on October 31, 2020. The 2015 Share Repurchase Program permitted us to repurchase up to $125 million of our common stock through October 31, 2020. During the third quarter of 2021, our board of directors authorized an extension of the ~~2020 Share Repurchase Program~~share repurchase program through December 31, 2022 and increased the authorized amount ~~from $50 million~~ to $100 million. During the first quarter of 2022, our board of directors authorized a further extension through December 31, 2023 and increased the authorized amount to $200 million. The amount and timing of repurchases under ~~both~~the share repurchase ~~programs~~program were and will continue to be determined by management and depend on a variety of factors, including the trading price of our common stock, capacity under our credit facility, general market and business conditions, and applicable legal requirements.

In the three and nine months ended September 30, 2021, we repurchased and retired 518,045 and 1,169,126 shares for $25.0 million and $60.2 million, respectively, under the 2020 Share Repurchase Program. In the first quarter of 2020, we repurchased 313,998 shares for $20.9 million under the 2015 Share Repurchase Program. 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 second or third quarters of 2020. As of ~~September~~June 30, ~~2021, $34.7~~2022, $77.9 million remained available for share repurchases under ~~the 2020 Share Repurchase Program.~~our share repurchase program.

Financing Arrangements

At ~~September~~June 30, ~~2021,~~2022, we had ~~$260.0~~$342.0 million outstanding under our senior secured credit facility, ~~and $2.9 million outstanding under a promissory note,~~ as discussed below.

~~Senior Secured Credit Facility~~

The Company has a $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 Agreement"), that becomes due and payable in full upon maturity on 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 $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 $750 million. 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. In addition, we have the right to permanently reduce or terminate the unused portion of the commitments provided under the Amended Credit Agreement at any time.

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on a continuing operations basis and includes adjustments to add back non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, pro forma historical EBITDA for businesses 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~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we were in compliance with these financial covenants. Our Consolidated Leverage Ratio as of ~~September~~June 30, ~~2021~~2022 was ~~2.73~~2.20 to 1.00, compared to ~~1.94~~1.73 to 1.00 as of December 31, ~~2020.~~2021. Our Consolidated Interest Coverage Ratio as of ~~September~~June 30, ~~2021~~2022 was ~~13.99~~19.03 to 1.00, compared to ~~12.51~~18.43 to 1.00 as of December 31, ~~2020.~~2021.

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The Amended Credit Agreement contains restricted payment provisions, including a potential limit on the amount of dividends we may pay. Pursuant to the terms of the Amended Credit Agreement, if our Consolidated Leverage Ratio is greater than 3.25, 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 $25 million.

Principal borrowings outstanding under the Amended Credit Agreement at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 totaled ~~$260.0~~$342.0 million and ~~$200.0~~$230.0 million, respectively. These borrowings carried a weighted average interest rate of ~~2.7%~~2.6% at ~~September~~June 30, ~~2021~~2022 and ~~2.5%~~2.7% at December 31, ~~2020,~~2021, including the impact of the interest rate swaps described in Note 9 “Derivative Instruments and Hedging Activity” within the notes to the consolidated financial statements. 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~~June 30, ~~2021,~~2022, we had outstanding letters of credit totaling $0.7 million, which are ~~primarily~~ used as security deposits for our office facilities. As of ~~September~~June 30, ~~2021,~~2022, the unused borrowing capacity under the revolving credit facility was ~~$339.3 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, 2021, the outstanding principal amount of the promissory note was $2.9 million, and the aircraft had a carrying amount of $3.9 million. At December 31, 2020, the outstanding principal amount of the promissory note was $3.3 million, and the aircraft had a carrying amount of $4.4$257.3 million.

For further information, see Note 7 “Financing Arrangements” within the notes to the consolidated financial statements.

Future Financing Needs

Throughout ~~2020 and into~~ 2021, our primary financing need was to support our operations and maintain our liquidity during the COVID-19 pandemic. As such, we took proactive measures to increase available cash on hand, including, but not limited to, borrowing under our senior secured credit facility, reducing discretionary operating and capital expenses, and electing to defer the deposit of our employer portion of social security taxes as provided for under the CARES Act.

Given improved visibility to our project backlog and access to capital resources, our primary financing need has ~~now~~ returned to funding our long-term 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 will be adequate to support our current financing needs and long-term growth strategy. Our ability to secure 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 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020. As of September 30, 2021, borrowings outstanding under our senior secured credit facility totaled $260.0 million compared to $200.0 million at December 31, 2020. See the “Liquidity and Capital Resources” section above and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information on our outstanding borrowings as of September 30, 2021. There have been no other material changes to our contractual obligations since December 31, 2020.

OFF-BALANCE SHEET ARRANGEMENTS

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

~~Table of Contents~~

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“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 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, ~~2020.~~2021. Below is an update to our critical accounting policy related to the carrying values of goodwill and other intangible assets. There have been no material changes to our other critical accounting policies during the first ~~nine~~six months of ~~2021.~~2022.

Carrying Values of Goodwill and Other Intangible Assets

First Quarter 2022 Goodwill Reallocation

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment.

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The three reportable segments of Healthcare, Education and Commercial are also our reporting units for goodwill impairment testing purposes. As a result of the reorganization, we reallocated the goodwill balances of our historical reporting units to our new reporting units based on the relative estimated fair values of each component of the historical reporting units to be allocated to the new reporting units. Additionally, we performed a goodwill impairment test on the goodwill balances of each of our reporting units as of January 1, 2022 by comparing the fair value of the reporting unit to its carrying value, including the reallocated goodwill. Based on the results of the goodwill impairment test, we determined the fair values of the Healthcare, Education, and Commercial reporting units exceeded their carrying values by 37%, 199%, and 105%, respectively. As such, we concluded that there was no indication of goodwill impairment for all three reporting units as of January 1, 2022.

NEW ACCOUNTING PRONOUNCEMENTS

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

~~SUBSEQUENT EVENTS~~


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

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~~June 30, ~~2021,~~2022, we had borrowings outstanding under the credit facility totaling ~~$260.0~~$342.0 million that carried a weighted average interest rate of ~~2.7%~~2.6%, including the impact of the interest rate swaps described below. A hypothetical 100 basis point change in the interest rate would have a ~~$0.6~~$1.4 million effect on our pretax income on an annualized basis, including the effect of the interest rate swaps. At December 31, ~~2020,~~2021, we had borrowings outstanding under the credit facility totaling ~~$200.0~~$230.0 million that carried a weighted average interest rate of ~~2.5%~~2.7% including the impact of the interest rate swaps. ~~As of December 31, 2020, these variable rate borrowings were fully hedged against changes in interest rates by the interest rate swaps, which have a notional amount of $200.0 million.~~ A hypothetical 100 basis point change in the interest rate would have had ~~no impact~~a $0.3 million effect on our pretax income on an annualized basis, including the effect of the interest rate swaps.

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 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~~In 2017, the Financial Conduct Authority (FCA) in the U.K. announced that it would phase out LIBOR as a benchmark rate by the end of 2021. In March 2021, the ICE Benchmark Administration Limited, the administrator of LIBOR, extended the transition dates of certain LIBOR tenors (including all U.S. Dollar LIBOR tenors other than one-week and two-month U.S. Dollar LIBOR tenors) to ~~changes in interest rates associated with the promissory note assumed on~~ June 30, ~~2017 in connection with our purchase of an aircraft,~~2023, after which ~~has variable interest~~LIBOR reference rates ~~tied~~will cease to ~~LIBOR. At September 30, 2021, the outstanding principal amount of the promissory note was $2.9 million~~be provided. Our Amended Credit Agreement and ~~carried an~~ interest rate ~~of 2.1%. A hypothetical 100 basis point change in this interest~~swap agreements provide for any transitions away from LIBOR to a successor rate ~~would not have a material effect~~to be based on ~~our~~

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pretax income. At December 31, 2020, the outstanding principal amount of the promissory note was $3.3 million and carried an interest rate of 2.1%. A hypothetical 100 basis point change in the interest rate as of December 31, 2020 would not have had a material effect on our pretax income.prevailing or equivalent standards.

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.

We have ~~an investment in the form of~~a 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

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comprehensive income. As of ~~September~~June 30, ~~2021,~~2022, the fair value of the investment was ~~$61.5~~$63.4 million, with a total cost basis of $40.9 million. At December 31, ~~2020,~~2021, the fair value of the investment was ~~$64.4~~$65.9 million, with a total cost basis of $40.9 million.

We have a preferred stock investment in Medically Home Group, Inc. ("Medically Home"), 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~~June 30, ~~2021 and~~2022, the carrying value of the investment was $33.6 million, with a total cost basis of $5.0 million. As of December 31, ~~2020,~~2021, the carrying value of the investment was $6.7 million, with a total cost basis of $5.0 million. During the first quarter of 2022, we recognized an unrealized gain of $27.0 million on our preferred stock investment resulting from an observable price change of preferred stock with similar rights and preferences to our preferred stock investment issued by Medically Home. Following our purchase, we have not identified any impairment of 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.~~


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”)) as of ~~September~~June 30, ~~2021.~~2022. Based on this evaluation, our Chief Executive Officer

and Chief Financial Officer have concluded that, as of ~~September~~June 30, ~~2021,~~2022, 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~~June 30, ~~2021~~2022 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~~item is incorporated by reference from Note 13 “Commitments, Contingencies and Guarantees” included in Part I, Item 1 of this Form 10-Q.

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.


ITEM 1A.			RISK FACTORS.

See Part 1, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, which was filed with the Securities and Exchange Commission on February ~~23, 2021,~~24, 2022, for a complete description of the material risks we face.

~~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~~June 30, ~~2021,~~2022, we reacquired ~~12,489~~2,584 shares of common stock with a weighted average fair market value of ~~$49.35~~$49.22 as a result of such tax withholdings.

In November 2020, our board of directors authorized a share repurchase program permitting us to repurchase up to $50 million of our common stock through December 31, ~~2021 (the “2020 Share Repurchase Program”).~~2021. During the third quarter of 2021, our board of directors authorized an extension of the ~~2020 Share Repurchase Program~~share repurchase program through December 31, 2022 and increased the authorized amount from $50 million to $100 million. During the first quarter of 2022, our board of directors authorized a further extension of the share repurchase program through December 31, 2023 and increased the authorized amount to $200 million. The amount and timing of repurchases under the ~~repurchases~~share repurchase program were and will continue to 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 facility, general market and business conditions, and applicable legal requirements.

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The following table provides information with respect to purchases we made of our common stock during the quarter ended ~~September~~June 30, ~~2021.~~2022.

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, 2021 - July 31, 2021 2,739 $ 49.15 — $ 59,731,354
August 1, 2021 - August 31, 2021 526,471 $ 48.22 518,045 $ 34,745,565
September 1, 2021 - September 30, 2021 1,324 $ 49.10 — $ 34,745,565
Total 530,534 $ 48.23 518,045


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)
April 1, 2022 - April 30, 2022	57,216	$	47.34	54,889	$	103,667,584
May 1, 2022 - May 31, 2022	239,650	$	56.94	239,650	$	90,015,176
June 1, 2022 - June 30, 2022	203,265	$	59.55	203,008	$	77,919,714
Total	500,131	$	56.90	497,547

(1)The number of shares repurchased included ~~2,739~~2,327 shares in ~~July 2021, 8,426~~April 2022 and 257 shares in ~~August 2021, and 1,324 shares in September 2021~~June 2022 to satisfy employee tax withholding requirements. These shares do not reduce the repurchase authority under the ~~2020 Share Repurchase Program.~~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.

4543

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ITEM 6.			EXHIBITS.

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

Incorporated by Reference

Exhibit
Number

Exhibit Description

Filed
herewith

Furnished
herewith

Form

Period
Ending

Exhibit

Filing
Date

~~10.1~~

~~Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan Restricted Stock Unit Agreement.~~

31.1

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

31.2

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

32.1

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

32.2

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

101.INS

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

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

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

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Huron Consulting Group Inc.

(Registrant)

Date:

~~November 2, 2021~~July 28, 2022

/S/ JOHN D. KELLY

John D. Kelly

Executive Vice President,
Chief Financial Officer and Treasurer

4745


		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 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	2322

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4341

Item 4.	Controls and Procedures	4442

Part II – Other Information

Item 1.	Legal Proceedings	4442

Item 1A.	Risk Factors	4442

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542

Item 3.	Defaults Upon Senior Securities	4543

Item 4.	Mine Safety Disclosures	4543

Item 5.	Other Information	4543

Item 6.	Exhibits	4644

Signature		4745


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues and reimbursable expenses:
Revenues	$	224,007	$	205,304	$	657,346	$	645,780
Reimbursable expenses	3,690		2,860		8,876		25,133
Total revenues and reimbursable expenses	227,697		208,164		666,222		670,913
Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
Direct costs	153,902		145,459		463,543		451,221
Amortization of intangible assets and software development costs	910		1,370		2,745		4,005
Reimbursable expenses	3,914		2,840		9,233		25,095
Total direct costs and reimbursable expenses	158,726		149,669		475,521		480,321
Operating expenses and other losses (gains), net
Selling, general and administrative expenses	43,520		38,561		128,476		126,864
Restructuring charges	1,677		59		3,166		1,777
Litigation and other losses (gains)	56		—		98		(150)
Depreciation and amortization	5,412		6,176		16,286		18,483
Goodwill impairment charges	—		—		—		59,816
Total operating expenses and other losses (gains), net	50,665		44,796		148,026		206,790
Operating income (loss)	18,306		13,699		42,675		(16,198)
Other income (expense), net:
Interest expense, net of interest income	(2,217)		(2,259)		(5,965)		(7,516)
Other income (expense), net	(394)		2,035		2,177		687
Total other expense, net	(2,611)		(224)		(3,788)		(6,829)
Income (loss) from continuing operations before taxes	15,695		13,475		38,887		(23,027)
Income tax expense (benefit)	1,968		2,388		6,958		(5,413)
Net income (loss) from continuing operations	13,727		11,087		31,929		(17,614)
Loss from discontinued operations, net of tax	—		(29)		—		(89)
Net income (loss)	$	13,727	$	11,058	$	31,929	$	(17,703)
Net earnings (loss) per basic share:
Net income (loss) from continuing operations	$	0.65	$	0.50	$	1.48	$	(0.81)
Loss from discontinued operations, net of tax	—		—		—		—
Net income (loss)	$	0.65	$	0.50	$	1.48	$	(0.81)
Net earnings (loss) per diluted share:
Net income (loss) from continuing operations	$	0.64	$	0.50	$	1.46	$	(0.81)
Loss from discontinued operations, net of tax	—		—		—		—
Net income (loss)	$	0.64	$	0.50	$	1.46	$	(0.81)
Weighted average shares used in calculating earnings (loss) per share:
Basic	21,242		21,905		21,574		21,868
Diluted	21,531		22,175		21,904		21,868
Comprehensive income (loss):
Net income (loss)	$	13,727	$	11,058	$	31,929	$	(17,703)
Foreign currency translation adjustments, net of tax	(246)		381		236		(294)
Unrealized gain (loss) on investment, net of tax	1,158		4,885		(2,068)		(1,051)
Unrealized gain (loss) on cash flow hedging instruments, net of tax	309		(243)		1,956		(3,633)
Other comprehensive income (loss)	1,221		5,023		124		(4,978)
Comprehensive income (loss)	$	14,948	$	16,081	$	32,053	$	(22,681)


	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, 2021	24,321,728	$	243	(2,899,933)	$	(135,364)	$	429,084	$	232,211	$	11,964	$	538,138
Comprehensive income									13,727		1,221		14,948
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations	45,190	—		1,371	77		(77)						—
Exercise of stock options	5,000	—					191						191
Share-based compensation							5,693						5,693
Shares redeemed for employee tax withholdings				(12,489)	(616)								(616)

Share repurchases	(518,045)	(5)					(24,981)						(24,986)
Balance at September 30, 2021	23,853,873	$	238	(2,911,051)	$	(135,903)	$	409,910	$	245,938	$	13,185	$	533,368

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						—
Exercise of stock options	6,800	—					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


	Healthcare		Business Advisory		Education		Total
Balance as of December 31, 2020:
Goodwill	$	636,810	$	308,935	$	104,384	$	1,050,129
Accumulated impairment losses	(208,081)		(247,811)		—		(455,892)
Goodwill, net as of December 31, 2020	428,729		61,124		104,384		594,237
Goodwill recorded in connection with a business acquisition (1)	—		3,315		—		3,315


Goodwill, net as of September 30, 2021	$	428,729	$	64,439	$	104,384	$	597,552


Year Ending December 31,	Estimated Amortization Expense(1)
2021	$	9,059
2022	$	6,878
2023	$	4,231
2024	$	1,384
2025	$	566


	Principal Payments of Long-Term Debt
2021	$	137
2022	$	559
2023	$	575
2024	$	261,646


	Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Before Taxes		Tax (Expense) Benefit		Net of Taxes		Before Taxes		Tax (Expense) Benefit		Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(246)	$	—	$	(246)	$	381	$	—	$	381
Unrealized gain (loss) on investment	$	1,577	$	(419)	$	1,158	$	6,598	$	(1,713)	$	4,885
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	(192)	$	47	$	(145)	$	(903)	$	234	$	(669)
Reclassification adjustments into earnings	613		(159)		454		576		(150)		426
Net unrealized gain (loss)	$	421	$	(112)	$	309	$	(327)	$	84	$	(243)
Other comprehensive income (loss)	$	1,752	$	(531)	$	1,221	$	6,652	$	(1,629)	$	5,023


	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Before Taxes		Tax (Expense) Benefit		Net of Taxes		Before Taxes		Tax (Expense) Benefit		Net of Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments	$	236	$	—	$	236	$	(294)	$	—	$	(294)
Unrealized gain (loss) on investment	$	(2,815)	$	747	$	(2,068)	$	(1,420)	$	369	$	(1,051)
Unrealized gain (loss) on cash flow hedges:
Change in fair value	$	692	$	(212)	$	480	$	(5,815)	$	1,510	$	(4,305)
Reclassification adjustments into earnings	1,994		(518)		1,476		909		(237)		672
Net unrealized gain (loss)	$	2,686	$	(730)	$	1,956	$	(4,906)	$	1,273	$	(3,633)
Other comprehensive income (loss)	$	107	$	17	$	124	$	(6,620)	$	1,642	$	(4,978)


	Three Months Ended September 30, 2021
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	56,836	$	30,783	$	14,985	$	102,604
Time and expense	17,823		35,261		38,831		91,915
Performance-based	12,689		1,596		—		14,285
Software support, maintenance and subscriptions	5,497		2,326		7,380		15,203
Total	$	92,845	$	69,966	$	61,196	$	224,007

Employee Type (1)
Revenue generated by billable consultants	$	59,502	$	64,469	$	51,237	$	175,208
Revenue generated by full-time equivalents	19,731		5,497		9,959		35,187
Revenue generated by Healthcare Managed Services employees	13,612		—		—		13,612
Total	$	92,845	$	69,966	$	61,196	$	224,007

Timing of Revenue Recognition
Revenue recognized over time	$	91,800	$	69,966	$	60,921	$	222,687
Revenue recognized at a point in time	1,045		—		275		1,320
Total	$	92,845	$	69,966	$	61,196	$	224,007


	Nine Months Ended September 30, 2021
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	160,226	$	92,014	$	48,130	$	300,370
Time and expense	47,237		108,882		100,654		256,773
Performance-based	50,419		6,522		—		56,941
Software support, maintenance and subscriptions	16,042		6,323		20,897		43,262
Total	$	273,924	$	213,741	$	169,681	$	657,346

Employee Type (1)
Revenue generated by billable consultants	$	178,057	$	200,367	$	143,056	$	521,480
Revenue generated by full-time equivalents	60,458		13,374		26,625		100,457
Revenue generated by Healthcare Managed Services employees	35,409		—		—		35,409
Total	$	273,924	$	213,741	$	169,681	$	657,346

Timing of Revenue Recognition
Revenue recognized over time	$	270,448	$	213,741	$	169,406	$	653,595
Revenue recognized at a point in time	3,476		—		275		3,751
Total	$	273,924	$	213,741	$	169,681	$	657,346


	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		—		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 billable consultants	$	60,034	$	62,340	$	44,234	$	166,608
Revenue generated by full-time equivalents	20,949		3,708		7,616		32,273
Revenue generated by Healthcare Managed Services employees	6,423		—		—		6,423
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		—		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 billable consultants	$	177,149	$	191,566	$	150,857	$	519,572
Revenue generated by full-time equivalents	69,698		9,857		25,160		104,715
Revenue generated by Healthcare Managed Services employees	21,493		—		—		21,493
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		—		302		2,829
Total	$	268,340	$	201,423	$	176,017	$	645,780