Huron Consulting Group Announces Second Quarter 2014 Financial Results

Huron Consulting Group Inc. (NASDAQ: HURN), a leading provider of business consulting services, today announced financial results for the second quarter ended June 30, 2014.

"Strong second quarter results capped off a solid first half of the year for the Company. Both the Huron Healthcare and Huron Legal segments, which comprise approximately 75% of the Company’s revenue, generated strong growth," said James H. Roth, chief executive officer and president, Huron Consulting Group. "Our business continues to be driven by the complex and rapidly-changing business environment facing clients across our primary markets. We expect that these pressures on our clients will remain or increase during the coming years, and we are encouraged by our ability in all of our operating segments to continue to provide value to our clients as they address a difficult array of challenges.”

Second Quarter 2014 Results

Revenues for the second quarter of 2014 were $209.4 million, an increase of 22.9% compared to $170.4 million for the second quarter of 2013. The Company's second quarter 2014 operating income was $34.0 million, compared to $30.5 million in the second quarter of 2013. Net income from continuing operations was $19.9 million, or $0.86 per diluted share, for the second quarter of 2014, compared to $15.8 million, or $0.69 per diluted share, for the same period last year.

Second quarter 2014 earnings before interest, taxes, depreciation and amortization ("EBITDA") (6) was $41.6 million, or 19.9% of revenues, compared to $36.1 million, or 21.2% of revenues, in the comparable quarter last year.

In addition to using EBITDA to evaluate the Company’s financial performance, management uses certain other non-GAAP financial measures, which exclude the effect of the following items (in thousands):
  Three Months EndedJune 30,
2014   2013
Amortization of intangible assets $ 2,912 $ 1,451
Restructuring charges $ 1,034 $ 596
Other gain $ (440 ) $
Tax effect $ (1,402 ) $ (819 )

Adjusted EBITDA (6) was $42.2 million, or 20.1% of revenues, in the second quarter of 2014, compared to $36.7 million, or 21.5% of revenues, in the comparable quarter last year. Adjusted net income from continuing operations (6) was $22.0 million, or $0.95 per diluted share, for the second quarter of 2014 compared to $17.0 million, or $0.75 per diluted share, for the comparable period in 2013.

The average number of full-time billable consultants (1) was 1,784 in the second quarter of 2014 compared to 1,532 in the same quarter last year. Full-time billable consultant utilization rate (2) was 77.8% during the second quarter of 2014 compared with 76.9% during the same period last year. Average billing rate per hour for full-time billable consultants (3) was $232 for the second quarter of 2014 compared to $213 for the second quarter of 2013. The average number of full-time equivalent professionals (4) totaled 1,157 in the second quarter of 2014 compared to 1,087 for the comparable period in 2013.

Year-to-Date Results

Revenues for the first six months of 2014 were $420.1 million, an increase of 25.6% compared to $334.4 million for the first half of 2013. The Company's operating income for the first six months of 2014 was $75.8 million compared to $51.9 million in the first six months of 2013. Net income from continuing operations was $54.0 million, or $2.34 per diluted share, for the first six months of 2014 compared to $27.2 million, or $1.20 per diluted share, for the same period last year.

EBITDA (6) was $90.6 million, or 21.6% of revenues, for the first half of 2014 compared to $62.9 million, or 18.8% of revenues, for the same period in 2013.

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

 
 

Six Months EndedJune 30,
2014   2013
Amortization of intangible assets $ 5,430 $ 2,907
Restructuring charges $ 1,163 $ 596
Litigation and other gains $ (440 ) $ (1,150 )
Tax effect $ (2,461 ) $ (941 )
Net tax benefit related to “check-the-box” election

$
(10,244 )

$

Adjusted EBITDA (6) was $91.3 million, or 21.7% of revenues, in the first half of 2014, compared to $62.3 million, or 18.6% of revenues, in the comparable quarter last year. Adjusted net income from continuing operations (6) was $47.5 million, or $2.06 per diluted share, for the first six months of 2014 compared to $28.6 million, or $1.26 per diluted share, for the comparable period in 2013.

The average number of full-time billable consultants (1) increased 15.4% to 1,751 in the first half of 2014 compared to 1,517 in the same quarter last year. Full-time billable consultant utilization rate (2) was 76.0% during the first half of 2014 compared with 77.4% during the same period last year. Average billing rate per hour for full-time billable consultants (3) was $240 for the first six months of 2014 compared to $213 for the first six months of 2013. The average number of full-time equivalent professionals (4) increased 17.4% to 1,333 in the first half of 2014 compared to 1,135 for the comparable period in 2013.

Operating Segments

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

The Company’s year-to-date revenues by operating segment as a percentage of total Company revenues are as follows: Huron Healthcare (50%); Huron Legal (26%); Huron Education and Life Sciences (17%); and Huron Business Advisory (7%). Financial results by segment are included in the attached schedules and in Huron's forthcoming Form 10-Q filing for the quarter ended June 30, 2014.

Acquisition

On May 5, 2014, Huron completed its acquisition of Vonlay, LLC, a healthcare technology consulting firm specializing in clinical, administrative and financial system implementation and optimization.

Share Repurchase Program

The Company's Board of Directors authorized a share repurchase program pursuant to which the Company may, from time to time, repurchase up to $50 million of its common stock through February 28, 2015. In the second quarter of 2014 the Company repurchased 157,850 shares at an average price of $60.40, totaling $9.5 million. The amount and timing of the repurchases are determined by management and depend on a variety of factors, including the trading price of the Company's common stock, general market and business conditions, and applicable legal requirements.

Outlook for 2014 (7)

Based on currently available information, the Company raises guidance, which was previously provided on April 29, 2014, for full year 2014 revenues before reimbursable expenses in a range of $805.0 million to $825.0 million. The Company also raises EBITDA in a range of $151.7 million to $157.7 million, Adjusted EBITDA in a range of $152.5 million to $158.5 million, GAAP diluted earnings per share in a range of $3.40 to $3.55, and non-GAAP adjusted diluted earnings per share in a range of $3.25 to $3.40.

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

Second Quarter 2014 Webcast

The Company will host a webcast to discuss its financial results today, July 29, 2014, at 5:00 p.m. Eastern Time (4:00 p.m. Central Time). The conference call is being webcast by NASDAQ OMX and can be accessed at Huron Consulting Group’s website at http://ir.huronconsultinggroup.com. A replay will be available approximately two hours after the conclusion of the webcast and for 90 days thereafter.

Use of Non-GAAP Financial Measures (6)

In evaluating the Company’s financial performance and outlook, management uses EBITDA, Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted net income from continuing operations and Adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Management believes that such measures, as supplements to operating income, net income from continuing operations and diluted earnings per share from continuing operations and other GAAP measures, are useful indicators for investors. These useful indicators can help readers gain a meaningful understanding of our core operating results and future prospects. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

About Huron Consulting Group

Huron Consulting Group helps clients in diverse industries improve performance, transform the enterprise, reduce costs, leverage technology, process and review large amounts of complex data, address regulatory changes, recover from distress and stimulate growth. Our professionals employ their expertise in finance, operations, strategy and technology to provide our clients with specialized analyses and customized advice and solutions that are tailored to address each client's particular challenges and opportunities to deliver sustainable and measurable results. The Company provides consulting services to a wide variety of both financially sound and distressed organizations, including healthcare organizations, leading academic institutions, Fortune 500 companies, governmental entities and law firms. Huron has worked with more than 425 health systems, hospitals, and academic medical centers; more than 400 corporate general counsel; and more than 350 universities and research institutions. Learn more at www.huronconsultinggroup.com.

Statements in this press release that are not historical in nature, including those concerning the Company’s current expectations about its future requirements and needs, 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” or “continues.” These forward-looking statements reflect our current expectations about our future requirements and needs, results, levels of activity, performance, or achievements, including, without limitation, current expectations with respect to, among other factors, utilization rates, billing rates, and the number of revenue-generating professionals; that we are able to expand our service offerings; that we successfully integrate the businesses we acquire; and that existing market conditions continue to trend upward. These 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, 2013, 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.
HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended

June 30,
  Six Months Ended

June 30,
2014   2013 2014   2013
Revenues and reimbursable expenses:
Revenues $ 209,405 $ 170,407 $ 420,136 $ 334,443
Reimbursable expenses   21,141     18,123     40,244     33,459  
Total revenues and reimbursable expenses 230,546 188,530 460,380 367,902
Direct costs and reimbursable expenses (exclusive of depreciation
and amortization shown in operating expenses):
Direct costs 124,289 102,869 247,899 208,997
Amortization of intangible assets and software development costs 1,290 674 2,391 1,332
Reimbursable expenses   20,899     18,118     40,330     33,469  
Total direct costs and reimbursable expenses   146,478     121,661     290,620     243,798  
Operating expenses and other operating gains:
Selling, general and administrative expenses 43,184 30,847 80,872 63,110
Restructuring charges 1,034 596 1,163 596
Litigation and other gains (440 ) - (440 ) (1,150 )
Depreciation and amortization   6,267     4,877     12,323     9,656  
Total operating expenses and other operating gains   50,045     36,320     93,918     72,212  
Operating income 34,023 30,549 75,842 51,892
Other income (expense), net:
Interest expense, net of interest income (1,594 ) (1,706 ) (2,965 ) (3,569 )
Other income (expense), net   169     (152 )   345     (139 )
Total other expense, net   (1,425 )   (1,858 )   (2,620 )   (3,708 )
Income from continuing operations before income tax expense 32,598 28,691 73,222 48,184
Income tax expense   12,685     12,877     19,183     21,001  
Net income from continuing operations 19,913 15,814 54,039 27,183
Loss from discontinued operations, net of tax   -     (9 )   -     (41 )
Net income $ 19,913   $ 15,805   $ 54,039   $ 27,142  
 
Net earnings per basic share:
Net income from continuing operations $ 0.88 $ 0.71 $ 2.39 $ 1.22

Loss from discontinued operations, net of tax
 

-
   

-
   

-
   

-
 
Net income $ 0.88   $ 0.71   $ 2.39   $ 1.22  
 
Net earnings per diluted share:
Net income from continuing operations $ 0.86 $ 0.69 $ 2.34 $ 1.20
Loss from discontinued operations, net of tax   -     -     -     -  
Net income $ 0.86   $ 0.69   $ 2.34   $ 1.20  
 
Weighted average shares used in calculating earnings per share:
Basic 22,645 22,351 22,617 22,246
Diluted 23,098 22,760 23,092 22,624
HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
    June 30,

2014
  December 31,

2013
Assets    
Current assets:
Cash and cash equivalents $ 9,218 $ 58,131
Receivables from clients, net 136,149 123,750
Unbilled services, net 94,024 55,125
Income tax receivable 11,322 270
Deferred income taxes, net 11,931 15,498
Prepaid expenses and other current assets   15,261     19,740  
Total current assets 277,905 272,514
Property and equipment, net 38,707 38,742
Other non-current assets 16,158 16,485
Intangible assets, net 29,773 21,222
Goodwill   566,998     536,637  
Total assets $ 929,541   $ 885,600  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 13,422 $ 8,185
Accrued expenses 15,845 19,180
Accrued payroll and related benefits 62,955 97,677
Bank borrowings, current portion 26,250 25,000
Accrued consideration for business acquisitions 5,480 5,177
Income tax payable - 2,917

Deferred revenues
  16,588     15,248  
Total current liabilities 140,540 173,384
Non-current liabilities:
Deferred compensation and other liabilities 10,003 5,360
Bank borrowings, net of current portion 152,500 143,750
Deferred lease incentives 14,150 12,355
Deferred income taxes, net   22,867     20,487  
Total non-current liabilities 199,520 181,952
 
Commitments and Contingencies
 
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized;
25,558,342 and 25,246,565 shares issued at June 30, 2014
and December 31, 2013, respectively 247 245
Treasury stock, at cost, 2,066,921 and 1,993,769 shares at
June 30, 2014 and December 31, 2013, respectively (92,412 ) (88,091 )
Additional paid-in capital 452,429 443,144
Retained earnings 229,802 175,763
Accumulated other comprehensive loss   (585 )   (797 )
Total stockholders’ equity   589,481     530,264  
Total liabilities and stockholders’ equity $ 929,541   $ 885,600  
HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
  Six Months Ended

June 30,
2014   2013
Cash flows from operating activities:
Net income $ 54,039 $ 27,142
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,071 10,988
Share-based compensation 10,273 8,832
Allowances for doubtful accounts and unbilled services (281 ) 5,375
Deferred income taxes 5,816 5,213

Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in receivables from clients (4,679 ) 4,576
(Increase) decrease in unbilled services (37,220 ) (33,936 )
(Increase) decrease in current income tax receivable / payable, net (13,966 ) (9,795 )
(Increase) decrease in other assets 4,489 712
Increase (decrease) in accounts payable and accrued liabilities 10,517 2,583
Increase (decrease) in accrued payroll and related benefits (32,764 ) (15,849 )
Increase (decrease) in deferred revenues   904     (3,120 )

Net cash provided by operating activities
 

12,199
 

 

2,721
 
 
Cash flows from investing activities:
Purchases of property and equipment, net (11,433 ) (10,201 )
Net investment in life insurance policies (797 ) (654 )
Purchases of businesses (51,391 ) -
Capitalization of internally developed software - (1,058 )
Proceeds from note receivable   328     219  
Net cash used in investing activities   (63,293 )   (11,694 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 779 30
Shares redeemed for employee tax withholdings (3,140 ) (581 )
Tax benefit from share-based compensation 4,602 1,242
Share repurchases (9,539 ) -
Proceeds from borrowings under credit facility 74,000 66,000
Repayments on credit facility (64,000 ) (77,250 )
Payments for debt issue costs (41 ) -
Payments for capital lease obligations (42 ) -
Deferred payment for purchase of property and equipment (471 ) (471 )
Deferred acquisition payment   -     (481 )
Net cash provided by (used in) financing activities   2,148     (11,511 )
 
Effect of exchange rate changes on cash 33 (70 )
 
Net decrease in cash and cash equivalents (48,913 ) (20,554 )
Cash and cash equivalents at beginning of the period   58,131     25,162  
Cash and cash equivalents at end of the period $ 9,218   $ 4,608  

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)
   
Three Months EndedJune 30,

Percent

Increase

(Decrease)
Segment and Consolidated Operating Results (in thousands):   2014   2013  
Huron Healthcare:  
Revenues $ 100,967 $ 78,946 27.9%
Operating income $ 38,475 $ 29,507 30.4%
Segment operating income as a percentage of segment revenues 38.1% 37.4%
Huron Legal:
Revenues $ 53,296 $ 45,089 18.2%
Operating income $ 15,790 $ 10,793 46.3%
Segment operating income as a percentage of segment revenues 29.6% 23.9%

Huron Education and Life Sciences:

 

 

 
Revenues $ 37,747 $ 37,134 1.7%
Operating income $ 11,633 $ 11,547 0.7%
Segment operating income as a percentage of segment revenues 30.8% 31.1%
Huron Business Advisory:
Revenues $ 16,574 $ 9,263 78.9%
Operating income $ 5,129 $ 3,952 29.8%
Segment operating income as a percentage of segment revenues 30.9% 42.7%
All Other:
Revenues $ 821 $ (25) N/M
Operating loss $ (520) $ (244) 113.1%
Segment operating loss as a percentage of segment revenues N/M N/M
Total Company:
Revenues $ 209,405 $ 170,407 22.9%
Reimbursable expenses   21,141   18,123 16.7%
Total revenues and reimbursable expenses $ 230,546 $ 188,530 22.3%
 
Statement of Earnings reconciliation:
Segment operating income $ 70,507 $ 55,555 26.9%
Items not allocated at the segment level:
Other operating expenses and gains 30,217 20,129 50.1%
Depreciation and amortization expense   6,267   4,877 28.5%
Total operating income 34,023 30,549 11.4%
Other expense, net   1,425   1,858 (23.3)%
Income from continuing operations before income tax expense $ 32,598 $ 28,691 13.6%
 
Other Operating Data (excluding All Other):            
Number of full-time billable consultants (at period end) (1):
Huron Healthcare 1,114 916 21.6%
Huron Legal 124 145 (14.5)%
Huron Education and Life Sciences 407 434 (6.2)%
Huron Business Advisory   172   63 173.0%
Total 1,817 1,558 16.6%
Average number of full-time billable consultants (for the period) (1):
Huron Healthcare 1,071 883
Huron Legal 129 149
Huron Education and Life Sciences 415 438
Huron Business Advisory   169   62
Total 1,784 1,532

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)
  Three Months EndedJune 30,

Other Operating Data (excluding All Other):
 

2014
 

2013
Full-time billable consultant utilization rate (2):  
Huron Healthcare 81.7% 84.7%
Huron Legal 68.0% 60.0%
Huron Education and Life Sciences 71.8% 65.8%
Huron Business Advisory 75.3% 82.9%
Total 77.8% 76.9%
Full-time billable consultant average billing rate per hour (3):
Huron Healthcare $ 229 $ 199
Huron Legal (5) $ 251 $ 221
Huron Education and Life Sciences $ 225 $ 223
Huron Business Advisory $ 257 $ 348
Total (5) $ 232 $ 213
Revenue per full-time billable consultant (in thousands):
Huron Healthcare $ 88 $ 82
Huron Legal (5) $ 80 $ 60
Huron Education and Life Sciences $ 75 $ 70
Huron Business Advisory $ 94 $ 140
Total (5) $ 85 $ 79
Average number of full-time equivalents (for the period) (4):
Huron Healthcare 58 54
Huron Legal 1,048 982
Huron Education and Life Sciences 44 48
Huron Business Advisory   7   3
Total 1,157 1,087
Revenue per full-time equivalent (in thousands):
Huron Healthcare $ 115 $ 116
Huron Legal (5) $ 41 $ 37
Huron Education and Life Sciences $ 146 $ 132
Huron Business Advisory $ 104 $ 173
Total (5) $ 49 $ 45

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)
 
  Six Months EndedJune 30,  

Percent

Increase

(Decrease)
Segment and Consolidated Operating Results (in thousands):   2014   2013  
Huron Healthcare:  
Revenues $ 208,515 $ 157,691 32.2%
Operating income $ 89,695 $ 60,668 47.8%
Segment operating income as a percentage of segment revenues 43.0% 38.5%

Huron Legal:

Revenues
$ 108,271 $ 86,033 25.8%
Operating income $ 28,278 $ 13,731 105.9%
Segment operating income as a percentage of segment revenues 26.1% 16.0%
Huron Education and Life Sciences:
Revenues $ 71,323 $ 72,860 (2.1)%
Operating income $ 18,080 $ 20,899 (13.5)%
Segment operating income as a percentage of segment revenues 25.3% 28.7%
Huron Business Advisory:
Revenues $ 29,956 $ 17,845 67.9%
Operating income $ 7,684 $ 7,331 4.8%
Segment operating income as a percentage of segment revenues 25.7% 41.1%
All Other:
Revenues $ 2,071 $ 14 N/M
Operating loss $ (978) $ (416) 135.1%
Segment operating loss as a percentage of segment revenues N/M N/M
Total Company:
Revenues $ 420,136 $ 334,443 25.6%
Reimbursable expenses 40,244 33,459 20.3%
Total revenues and reimbursable expenses $ 460,380 $ 367,902 25.1%
 
Statement of Earnings reconciliation:
Segment operating income $ 142,759 $ 102,213 39.7%
Items not allocated at the segment level:
Other operating expenses and gains 54,594 40,665 34.3%
Depreciation and amortization expense 12,323 9,656 27.6%
Total operating income 75,842 51,892 46.2%
Other expense, net 2,620 3,708 (29.3)%
Income from continuing operations before income tax expense $ 73,222 $ 48,184 52.0%
 
 
Other Operating Data (excluding All Other):            
Number of full-time billable consultants (at period end) (1):
Huron Healthcare 1,114 916 21.6%
Huron Legal 124 145 (14.5)%
Huron Education and Life Sciences 407 434 (6.2)%
Huron Business Advisory 172 63 173.0%
Total 1,817 1,558 16.6%
Average number of full-time billable consultants (for the period) (1):
Huron Healthcare 1,028 873
Huron Legal 134 148
Huron Education and Life Sciences 424 434
Huron Business Advisory 165 62
Total 1,751 1,517

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)
  Six Months EndedJune 30,
Other Operating Data (excluding All Other):   2014   2013
Full-time billable consultant utilization rate (2):  
Huron Healthcare 80.4% 85.1%
Huron Legal 66.2% 56.0%
Huron Education and Life Sciences 70.0% 67.9%
Huron Business Advisory 72.0% 83.8%
Total 76.0% 77.4%
Full-time billable consultant average billing rate per hour (3):
Huron Healthcare $ 249 $ 202
Huron Legal (5) $ 241 $ 221
Huron Education and Life Sciences $ 213 $ 215
Huron Business Advisory $ 248 $ 339
Total (5) $ 240 $ 213
Revenue per full-time billable consultant (in thousands):
Huron Healthcare $ 190 $ 167
Huron Legal (5) $ 146 $ 113
Huron Education and Life Sciences $ 140 $ 140
Huron Business Advisory $ 173 $ 276
Total (5) $ 173 $ 158
Average number of full-time equivalents (for the period) (4):
Huron Healthcare 55 55
Huron Legal 1,229 1,035
Huron Education and Life Sciences 42 43
Huron Business Advisory   7   2
Total 1,333 1,135
Revenue per full-time equivalent (in thousands):
Huron Healthcare $ 243 $ 219
Huron Legal (5) $ 72 $ 67
Huron Education and Life Sciences $ 285 $ 282
Huron Business Advisory $ 187 $ 324
Total (5) $ 86 $ 83

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

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

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

(4) Consists of consultants who work variable schedules as needed by our clients, as well as contract reviewers and other professionals who generate revenues primarily based on number of hours worked and units produced, such as pages reviewed and data processed. Also includes full-time employees who provide software support and maintenance services to our clients.

(5) During the second quarter of 2014, we revised the methodology we use to allocate revenue between our billable consultants and our full-time equivalents in our Huron Legal segment to better reflect the nature of the work being provided. Operating data for the three and six months ended June 30, 2014, as presented above, reflects this change. Operating data for the Huron Legal segment for the three months ended March 31, 2014 has been revised as follows: full-time billable consultant average billing rate per hour decreased from $259 to $231, revenue per full-time billable consultant decreased from $75 thousand to $67 thousand, and revenue per full-time equivalent was unchanged. The impact on our total Company results was immaterial.

N/M – Not meaningful

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO

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

(In thousands)

(Unaudited)
  Three Months EndedJune 30,   Six Months EndedJune 30,
2014   2013 2014   2013
Revenues $ 209,405 $ 170,407 $ 420,136 $ 334,443
 
Net income from continuing operations $ 19,913 $ 15,814 $ 54,039 $ 27,183
Add back:
Income tax expense 12,685 12,877 19,183 21,001
Interest and other expenses 1,425 1,858 2,620 3,708
Depreciation and amortization   7,557   5,551   14,714   10,988
Earnings before interest, taxes, depreciation and amortization (EBITDA) (6) 41,580 36,100 90,556 62,880
Add back:
Restructuring charges 1,034 596 1,163 596
Litigation and other gains   (440)     (440)   (1,150)
Adjusted EBITDA (6) $ 42,174 $ 36,696 $ 91,279 $ 62,326
Adjusted EBITDA as a percentage of revenues (6)   20.1%   21.5%   21.7%   18.6%

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (6)

(In thousands)

(Unaudited)
 
Three Months EndedJune 30,   Six Months EndedJune 30,
2014   2013 2014   2013
Net income from continuing operations $ 19,913   $ 15,814  

 
$ 54,039   $ 27,183  
Weighted average shares - diluted 23,098 22,760

 
23,092 22,624
Diluted earnings per share from continuing operations $ 0.86   $ 0.69  

 
$ 2.34   $ 1.20  
Add back:
Amortization of intangible assets 2,912 1,451

 
5,430 2,907
Restructuring charges 1,034 596

 
1,163 596
Litigation and other gains (440 )

 
(440 ) (1,150 )
Tax effect (1,402 ) (819 )

 
(2,461 ) (941 )
Net tax benefit related to “check-the-box” election        

 
  (10,244 )    
Total adjustments, net of tax   2,104     1,228  

 
  (6,552 )   1,412  
Adjusted net income from continuing operations (6) $ 22,017   $ 17,042  

 
$ 47,487   $ 28,595  
Adjusted diluted earnings per share from continuing operations (6) $ 0.95   $ 0.75  

 
$ 2.06   $ 1.26  

(6) In evaluating the Company’s financial performance, management uses 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 from continuing operations, which are non-GAAP measures. Our management uses these non-GAAP financial measures to gain an understanding of our comparative operating performance (when comparing such results with previous periods or forecasts). These non-GAAP financial measures are used by management in their financial and operating decision making because management believes they reflect 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, if they so choose, and in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.
HURON CONSULTING GROUP INC.
RECONCILIATION OF NON-GAAP MEASURES FOR FULL YEAR 2014 OUTLOOK
 
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (7)
(In millions)
(Unaudited)
  Year EndingDecember 31, 2014
Guidance Range
Low   High
Projected revenues – GAAP $ 805.0     $ 825.0  
Projected net income from continuing operations – GAAP $ 79.0   $ 82.5
Add back:
Income tax expense 37.0 39.5
Interest and other expenses 5.7 5.7
Depreciation and amortization   30.0       30.0  
Projected earnings before interest, taxes, depreciation andamortization (EBITDA) (7) 151.7 157.7
Add back:
Restructuring charges 1.2 1.2
Other gain   (0.4 )     (0.4 )
Projected adjusted EBITDA (7) $ 152.5     $ 158.5  
Projected adjusted EBITDA as a percentage of projected revenues (7)  

18.9%

 
   

19.2%

 

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (7)

(In millions)

(Unaudited)
 
Year EndingDecember 31, 2014
Guidance Range
Low   High
Projected net income from continuing operations – GAAP $ 79.0     $ 82.5  
Projected diluted earnings per share from continuing operations – GAAP $ 3.40     $ 3.55  
Add back:  
Amortization of intangible assets 10.5 10.5
Restructuring charges 1.2 1.2
Other gain (0.4 ) (0.4 )
Tax effect (4.6 ) (4.6 )
Net tax benefit related to “check-the-box” election   (10.2 )     (10.2 )
Total adjustments, net of tax (3.5 ) (3.5 )
Projected adjusted net income from continuing operations (7) $ 75.5     $ 79.0  
Projected adjusted diluted earnings per share fromcontinuing operations (7) $ 3.25     $ 3.40  

(7) In evaluating the Company’s outlook, management uses Projected EBITDA, Projected adjusted EBITDA, Projected adjusted EBITDA as a percentage of revenues, Projected adjusted net income from continuing operations, and Projected adjusted diluted earnings per share from continuing operations, which are non-GAAP measures. Management believes that the use of such measures, as supplements to Projected net income from continuing operations and Projected diluted earnings per share from continuing operations and other GAAP measures, are useful indicators for investors. These useful indicators can help readers gain a meaningful understanding of the Company’s core operating results and future prospects without the effect of non-cash or other one-time items. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States.

Copyright Business Wire 2010

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