Huron Consulting Group Inc. - Annual Report: 2024 (Form 10-K)

$ $ Net income per diluted share$ $ $ Weighted average shares used in calculating earnings per share:Basic Diluted

Comprehensive income (loss):

Net income$ $ $ Foreign currency translation adjustments, net of tax() ()Unrealized gain (loss) on investment, net of tax() ()Unrealized gain (loss) on cash flow hedging instruments, net of tax()()

Other comprehensive income (loss)

() Comprehensive income$ $ $

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

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HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Common Stock

Treasury Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Stockholders'
Equity

Amount

Balance at December 31, 2021

()

Comprehensive income

Issuance of common stock in connection with:

Restricted stock awards, net of cancellations

()

Exercise of stock options

Share-based compensation

Shares redeemed for employee tax withholdings

()

Share repurchases

()

Balance at December 31, 2022

()

Comprehensive income

Issuance of common stock in connection with:

Restricted stock awards, net of cancellations

()

Exercise of stock options

Purchase of business

Share-based compensation

Shares redeemed for employee tax withholdings

()

Share repurchases

()

Balance at December 31, 2023

()

Comprehensive income

()

Issuance of common stock in connection with:

Restricted stock awards, net of cancellations

()

Exercise of stock options

Purchases of businesses

Share-based compensation

Shares redeemed for employee tax withholdings

()

Other capital contributions

Share repurchases

()

Balance at December 31, 2024

()

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

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HURON CONSULTING GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Year Ended December 31,
	2024	2023	2022
Cash flows from operating activities:
Net income	$	$	$
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
Non-cash lease expense
Lease-related impairment charges
Share-based compensation
Amortization of debt discount and issuance costs
Allowances for doubtful accounts
Deferred income taxes		()
Gain on sale of property and equipment, excluding transaction costs	()	()	()
Gain on sale of businesses, excluding transaction costs	()
Change in fair value of contingent consideration liabilities	()	()	()
Change in fair value of preferred stock investment			()
Other, net
Changes in operating assets and liabilities, net of acquisitions and divestiture:
(Increase) decrease in receivables from clients, net	()	()	()
(Increase) decrease in unbilled services, net		()	()
(Increase) decrease in current income tax receivable / payable, net		()
(Increase) decrease in other assets	()	()
Increase (decrease) in accounts payable and other liabilities	()	()	()
Increase (decrease) in accrued payroll and related benefits
Increase (decrease) in deferred revenues
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment	()	()	()
Investments in life insurance policies	()	()	()
Distributions from life insurance policies
Purchases of businesses, net of cash acquired	()	()	()
Capitalization of internally developed software costs	()	()	()
Proceeds from note receivable
Proceeds from sale of property and equipment
Proceeds from divestitures of businesses
Net cash used in investing activities	()	()	()
Cash flows from financing activities:
Proceeds from exercises of stock options
Shares redeemed for employee tax withholdings	()	()	()
Share repurchases	()	()	()
Proceeds from bank borrowings
Repayments of bank borrowings	()	()	()
Payments for debt issuance costs	()	()	()
Deferred payments on business acquisition	()	()	()
Net cash used in financing activities	()	()	()
Effect of exchange rate changes on cash	()		()
Net increase (decrease) in cash and cash equivalents			()
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period	$	$	$
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Property and equipment expenditures and capitalized software included in current liabilities	$	$	$
Common stock issued related to purchases of businesses	$	$	$
Contingent consideration accrued related to purchases of businesses	$	$	$
Note receivable issued related to divestiture of business	$	$	$
Share repurchases included in current liabilities	$	$	$
Excise tax on net share repurchases included in current liabilities	$	$	$	—
Cash paid during the year for:
Interest	$	$	$
Income taxes	$	$	$

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)

See Note 19 “Segment Information” for a discussion of our segments.

In the second quarter of 2024, we revised the presentation of our consolidated statement of operations and other comprehensive income (loss) to separately present other gains, net previously presented within selling, general and administrative expenses. The change in presentation had no effect on our consolidated results, and our historical consolidated statements of operations and other comprehensive income (loss) were revised for consistent presentation.

In the third quarter of 2024, we revised the line item descriptions of revenues to rename revenues as revenues before reimbursable expenses and to rename total revenues and reimbursable expenses as total revenues. The change in line item description has no impact on the line item totals for any periods presented.

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. 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.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

During the years ended December 31, 2024, 2023, and 2022, we amortized $ million, $ million, and $ million, respectively, of capitalized sales commissions. Unamortized sales commissions were $ million and $ million as of December 31, 2024 and 2023, respectively.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

or less to be cash equivalents.

See Note 13 “Fair Value of Financial Instruments” for additional information on our preferred stock investment, including the cumulative unrealized gains recognized since our initial investment and the impairment loss recognized in 2023.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

. Furniture and fixtures are depreciated over a useful life of . Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the initial term of the lease.

See Note 5 “Leases” for additional information on our leases, including the lease impairment charges recorded in 2024, 2023 and 2022.

million and $ million, respectively. As of December 31, 2023, gross capitalized internal-use software development costs and related accumulated amortization was $ million and $ million, respectively. During the years ended December 31, 2024, 2023, and 2022, we amortized $ million, $ million, and $ million, respectively, of such software development costs.

Under ASC 985, software development costs are expensed until technological feasibility has been established. Thereafter, and until the software is available for general release to customers, these software development costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. These capitalized development costs are amortized in proportion to current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

million and $ million, respectively. During the year ended December 31, 2024, we amortized $ million of such capitalized costs. We did not capitalize any material development costs for this type of software during 2023.

Implementation Costs Incurred in a Cloud Computing Arrangement

million and $ million, respectively. As of December 31, 2023, gross capitalized implementation costs incurred in a cloud computing arrangement and related accumulated amortization was $ million and $ million, respectively. During the years ended December 31, 2024, 2023 and 2022 we recognized amortization of our capitalized implementation costs of $ million, $ million and $ million, respectively. Of the $ million amortization for capitalized implementation costs in 2022, $ million was recognized as a restructuring charge as it related to accelerated amortization of capitalized software implementation costs for a cloud-computing arrangement that is no longer in use. Our capitalized implementation costs primarily relate to the implementation of a new ERP system. In January 2021, we successfully went live with the new ERP system, and we continue to progress with additional functionality and integrations as scheduled. These capitalized costs are included as a component of prepaid expenses and other current assets and other non-current assets on our consolidated balance sheet.

See Note 5 “Leases” and Note 11 “Restructuring Charges” for information on our operating lease ROU asset impairment charges recorded in 2024, 2023, 2022 and fixed asset impairment charges recorded in 2024 and 2023. No material impairment charges for other long-lived assets were recorded in 2024, 2023, or 2022.

reporting units: Healthcare, Education, and Commercial.

In 2024, we performed the annual goodwill impairment test as of November 30, 2024, pursuant to our policy, and determined that no impairment of goodwill existed as of that date. Further, we evaluated whether any events have occurred, or any circumstances have changed since November 30, 2024 that would indicate goodwill may have become impaired since our annual impairment test. Based on our evaluation as of December 31, 2024, we determined that no indications of impairment have arisen since our annual goodwill impairment test.

In 2023, we performed the annual goodwill impairment test as of November 30, 2023, pursuant to our policy, and determined that no impairment of goodwill existed as of that date. In 2022, we performed two goodwill impairment tests: an interim impairment test for each of our reporting units as of January 1, 2022 in connection with our operating model modification and the annual impairment test for each of our reporting units as of November 30. We did not identify any impairments during our interim or annual impairment tests performed during 2022.

See Note 4 “Goodwill and Intangible Assets” for additional information on our 2024 and 2023 annual goodwill impairment tests.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Refer to Note 3 “Acquisitions and Divestiture” for additional information on our business acquisitions and refer to Note 13 “Fair Value of Financial Instruments” for additional information regarding our contingent acquisition liability balances.

Refer to Note 17 “Income Taxes” for further information regarding incomes taxes.

Such expenses for the years ended December 31, 2024, 2023, and 2022 totaled $ million, $ million, and $ million, respectively, and are a component of selling, general and administrative expenses on our consolidated statement of operations.

We recognized $ million of foreign currency transaction gains in 2024, $ million of foreign currency transaction losses in 2023, and $ million of foreign currency transaction gains in 2022.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

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

See Note 19 “Segment Information” for additional information on our reportable segments.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

million pretax gain which is included in other income (expense), net on our consolidated statement of operations. The Studer Education practice was not significant to our consolidated financial statements and did not qualify as a discontinued operation for reporting under GAAP.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ $ $ Accumulated impairment losses()()()()Goodwill, net as of December 31, 2022$ $ $ $

Goodwill recorded in connection with a business combination(1)

Balance as of December 31, 2023:Goodwill$ $ $ $ Accumulated impairment losses()()()()Goodwill, net as of December 31, 2023$ $ $ $

Goodwill recorded in connection with business combinations(1)

Goodwill allocated to disposal of business(2)

() ()Foreign currency translation () ()Balance as of December 31, 2024:Goodwill$ $ $ $ Accumulated impairment losses()()()()Goodwill, net as of December 31, 2024:$ $ $ $

(1) See Note 3 “Acquisitions and Divestiture” for additional information on business combinations completed in 2024, 2023 and 2022.

(2) In 2024, we completed the divestiture of our Studer Education practice within our Healthcare segment, and allocated a portion of goodwill within the Healthcare segment to the disposed practice based on the relative fair values of Studer Education and the remaining segment. The allocated goodwill of $ million was written off and included in the gain on sale of Studer Education. The sale of Studer Education did not meet the criteria for reporting separately as discontinued operations. In connection with the sale, we recorded a $ million pretax gain which is included in other income (expense), net in our consolidated statements of operations.

2024 Annual Goodwill Impairment Test

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2024 for our reporting units: Healthcare, Education, and Commercial. We elected to bypass the qualitative assessment and utilized a quantitative goodwill impairment test to provide an updated fair value for each reporting unit as of the most recent valuation quantitative analysis performed was as of January 1, 2022.

We reviewed goodwill for impairment by comparing the fair value of the reporting unit to its carrying value, including goodwill. In estimating the fair value of the reporting unit, we relied on a combination of the income approach and the market approach utilizing the guideline company method, with a fifty-fifty weighting. Based on the results of the goodwill impairment test, we determined the fair value of the Healthcare, Education, and Commercial reporting units exceeded their carrying value by approximately %, %, and %, respectively. As such, we concluded that there is no indication of goodwill impairment for these three reporting units.

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 ten-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 EBITDA 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 each of the reporting units relative to the selected guideline companies and applied to the reporting units' operating data to arrive at an indication of value.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

reporting units: Healthcare, Education, and Commercial. We performed a qualitative assessment considering the most recent quantitative analysis performed, actual performance, our internal financial projections, and current carrying value of each reporting unit; as well as other various factors, including macroeconomic conditions, relevant industry and market trends for each reporting unit, and other entity-specific events. Based on our evaluation as of November 30, 2023, we determined that there were no indications of goodwill impairment for any of our reporting units.

Intangible Assets

to $ $ $ $ Technology and software

Trade names Customer contracts

Non-competition agreements

Total$ $ $ $

We acquired intangible assets related to our acquisitions of $ million and $ million during the years ended December 31, 2024 and 2023, respectively. These acquired intangible assets consist of customer relationships, technology and software, customer contracts and non-competition agreements. See Note 3 “Acquisitions and Divestiture” for additional information on the business acquisitions completed in 2024 and 2023. During the years ended December 31, 2024 and 2023, we wrote-off $ million and $ million, respectively, of fully amortized intangible assets no longer in use; which primarily consisted of customer relationships.

Identifiable intangible assets with finite lives are amortized over their estimated useful lives using either an accelerated or straight-line basis to correspond to the cash flows expected to be derived from the assets. Intangible assets amortization expense was $ million, $ million, and $ million for the years ended December 31, 2024, 2023, and 2022, respectively. 2026$ 2027$ 2028$ 2029$

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

. Our operating leases include fixed payments plus, in some cases, scheduled base rent increases over the term of the lease. Certain leases require variable payments of real estate taxes, insurance and operating expenses. We exclude these variable payments from the measurements of our lease liabilities and expense them as incurred. We elected the practical expedient to combine lease and nonlease components. No lease agreements contain any residual value guarantees or material restrictive covenants. As of December 31, 2024, we have not entered into any material finance leases. We sublease certain office spaces to third parties resulting from restructuring activities in certain locations.

Lease Impairment Charges

Operating lease right-of-use (“ROU”) assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group to which the operating lease ROU asset is assigned may not be recoverable. First, we test the asset group for recoverability by comparing the undiscounted cash flows of the asset group, which include expected future lease and nonlease payments related to the lease agreement offset by expected sublease income, to the carrying amount of the asset group. If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset group is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset group to its carrying amount and recognizing a lease impairment charge for the amount by which the carrying amount exceeds the fair value. To estimate the fair value of the asset group, we rely on a discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate.

During the years ended December 31, 2024, 2023, and 2022 we recognized non-cash lease-related impairment charges of $ million, $ million, and $ million, respectively.

2024

During 2024, we exited our office space previously occupied by GG+A and a portion of our office space in New York, New York, resulting in non-cash impairment charges of $ million, of which $ million was allocated to the operating lease ROU assets and $ million was allocated to the related fixed assets based on their relative carrying amounts. Additionally, in 2024, we recognized $ million of lease-related impairment charges driven by updated sublease assumptions for our previously vacated office spaces in Lexington, Massachusetts; and Lake Oswego, Oregon. Of the $ million, $ million was allocated to the fixed assets related to the office spaces and $ million was allocated to the operating lease ROU assets based on their relative carrying amounts.

2023

During 2023, we exited our office spaces in Hillsboro, Oregon and Lexington, Massachusetts, resulting in non-cash impairment charges of $ million, of which $ million was allocated to the operating lease ROU assets and $ million was allocated to the related fixed assets based on their relative carrying amounts. Additionally, in 2023, we recognized $ million of lease-related impairment charges driven by updated sublease assumptions for our previously vacated office spaces in Hillsboro, Oregon; New York, New York; and Lake Oswego, Oregon. Of the $ million, $ million was allocated to the fixed assets related to the office spaces and $ million was allocated to the operating lease ROU assets based on their relative carrying amounts.

2022

The $ million lease-related impairment charge recognized in 2022 resulted from updated sublease assumptions for our previously vacated office space in New York, New York and was allocated to the operating lease ROU asset.

See Note 11 “Restructuring Charges” for additional information on our restructuring activities.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ Current maturities of operating lease liabilities$ $ Operating lease liabilities, net of current portion Total lease liabilities$ $ $ $

Short-term lease cost(1)

Variable lease costs Sublease income()()()

Net lease cost(2)

$ $ $ Assets under construction Property and equipment

Accumulated depreciation

()()Property and equipment, net$ $

million senior secured revolving credit facility (the “Revolver”) and a $ million senior secured term loan facility (the “Term Loan”), subject to the terms of the Third Amended and Restated Credit Agreement dated as of November 15, 2022 (as amended, the “Amended Credit Agreement”), both of which fully mature on . The Term Loan was established in February 2024 with the execution of Amendment No. 2 to the Third Amended and Restated Credit Agreement. The Term Loan is subject to scheduled quarterly amortization payments of $ million which began June 30, 2024 and continue through the maturity date of , at which time the outstanding principal balance and all accrued interest will be due.

As of December 31, 2024, we had total borrowings outstanding under our Amended Credit Agreement of $ million, consisting of $ million outstanding under the Revolver and $ million outstanding under the Term Loan.

2026

2027

The initial borrowings under the Revolver were used to refinance borrowings outstanding under a prior credit agreement, and future borrowings under the Revolver may be used for working capital, capital expenditures, share repurchases, permitted acquisitions, and other general corporate purposes. The proceeds of the Term Loan were used to reduce borrowings under the Revolver.

The Amended Credit Agreement provides the option to increase the revolving credit facility or establish additional term loan facilities in an aggregate amount up to $ 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 $ billion.

Fees and interest on borrowings under the Amended Credit Agreement vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, these borrowings will bear interest at one, three or six month Term SOFR or, in the case of the Revolver, an alternate base rate, in each case plus the applicable margin. The applicable margin for borrowings under the Revolver will fluctuate between % per annum and % per annum, in the case of Term SOFR borrowings, or between % per annum and % per annum, in the case of base rate loans, based upon our Consolidated Leverage Ratio at such time. The applicable margin for the outstanding principal under the Term Loan will range between % per annum and % per annum based upon our Consolidated Leverage Ratio at such time. The fees and interest are subject to further adjustment based upon the Company's performance against specified key performance indicators. Based upon the performance of the Company against those key performance indicators in each Reference Year (as defined in the Amended Credit Agreement), certain adjustments to the otherwise applicable rates for interest, commitment fees and letter of credit fees will be made. These annual adjustments will not exceed an increase or decrease of % in the aggregate for all key performance indicators in the case of the commitment fee rate or an increase or decrease of % in the aggregate for all key performance indicators in the case of the Term SOFR borrowings, base rate borrowings or letter of credit fee rate.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

% of the stock or other equity interests in all domestic subsidiaries and % of the stock or other equity interests in each “material first-tier foreign subsidiary” (as defined in the Pledge Agreement) entitled to vote and % of the stock or other equity interests in each material first-tier foreign subsidiary not entitled to vote.

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 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to to 1.00 upon the occurrence of a Qualified Acquisition (as defined in the Amended Credit Agreement), and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 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 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 December 31, 2024, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of to 1.00 and a Consolidated Interest Coverage Ratio of to 1.00.

Term Loan

Unamortized debt issuance costs - Term Loan1

() Total long-term debt

Current maturities of long-term debt

() Long-term debt, net of current portion$ $

(1)In connection with establishing the Term Loan, we incurred $ million of debt issuance costs which were recognized as a discount to the Term Loan. These debt issuance costs are amortized to interest expense using an effective interest rate of % over the term of the Term Loan. Unamortized debt issuance costs related to the Revolver are included as a component of other non-current assets and amortized to interest expense using the straight-line method over the term of the Revolver.

Borrowings outstanding under the Amended Credit Agreement as of December 31, 2024 and 2023 carried a weighted average interest rate of % and %, respectively, including the effect of the interest rate swaps described in Note 12 "Derivative Instruments and Hedging Activity."

The borrowing capacity under the Revolver is reduced by any outstanding borrowings under the Revolver and outstanding letters of credit. At December 31, 2024, we had outstanding letters of credit totaling $ million, which are used as security deposits for our office facilities. As of December 31, 2024, the unused borrowing capacity under the Revolver was $ million.

shares of preferred stock. Our certificate of incorporation authorizes our board of directors, without any further stockholder action or approval, to issue these shares in one or more classes or series, to establish from time to time the number of shares to be included in each class or series, and to fix the rights, preferences and privileges of the shares of each wholly unissued class or series and any of its qualifications, limitations or restrictions. As of December 31, 2024 and 2023, such preferred stock has been approved or issued.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

shares of common stock, par value $ per share. The holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Subject to the rights and preferences of the holders of any series of preferred stock that may at the time be outstanding, holders of common stock are entitled to such dividends as our board of directors may declare. In the event of any liquidation, dissolution or winding-up of our affairs, after payment of all of our debts and liabilities and subject to the rights and preferences of the holders of any series of preferred stock that may at the time be outstanding, holders of common stock will be entitled to receive the distribution of any of our remaining assets.

million from obligations satisfied, or partially satisfied, in prior periods, of which $ million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ million was primarily due to the release of allowances on receivables from clients and unbilled services. Of the $1.40 billion total revenues recognized in 2023, we recognized revenues of $ million from obligations satisfied, or partially satisfied, in prior periods, of which $ million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ million was primarily due to the release of allowances on receivables from clients and unbilled services. Of the $1.16 billion total revenues recognized in 2022, we recognized revenues of $ million from obligations satisfied, or partially satisfied, in prior periods, of which $ million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ million was primarily due to the release of allowances on receivables from clients and unbilled services.

As of December 31, 2024, we had $ million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude 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 $ million of performance obligations, we expect to recognize approximately $ million as revenue in 2025, $ million in 2026, and the remaining $ 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, net as of December 31, 2024 and 2023 was $ million and $ million, respectively. The $ million decrease primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.

Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition accounting policy. Our deferred revenues balance as of December 31, 2024 and 2023 was $ million and $ million respectively. The $ million increase primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the year ended December 31, 2024, $ million of revenues recognized were included in the deferred revenue balance as of December 31, 2023. For the year ended December 31, 2023, $ million of revenues recognized were included in the deferred revenue balance as of December 31, 2022.

10.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ $ Weighted average common shares outstanding—basic Weighted average common stock equivalents Weighted average common shares outstanding—diluted Net income per basic share$ $ $ Total ) ) $

(1)Additions and adjustments exclude non-cash items related to vacated office spaces, such as lease impairment charges and accelerated depreciation on abandoned operating lease ROU assets and fixed assets, which are recorded as restructuring charges on our consolidated statements of operations.

All of the $ million restructuring charge liability related to employee costs at December 31, 2024 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related benefits in our consolidated balance sheet. All of the $ million other restructuring charge liability at December 31, 2024, which primarily relates to the early termination of a contract in a prior period, is expected to be paid in the next 12 months and is included as a component of accrued expenses and other current liabilities in our consolidated balance sheet.

12.

million as of both December 31, 2024 and 2023. Under the terms of the interest rate swap agreements, we receive from the counterparty interest on the notional amount based on Term SOFR and we pay to the counterparty a stated, fixed rate. The forward interest rate swap agreements have staggered maturities through .

As of December 31, 2024, it was anticipated that $ million of the gains, net of tax, related to interest rate swaps currently recorded in accumulated other comprehensive income will be reclassified into interest expenses, net of interest income in our consolidated statement of operations within the next months.

Foreign Exchange Forward Contracts

We are party to non-deliverable foreign exchange forward contracts that are scheduled to mature monthly through . As of December 31, 2024 and 2023, the aggregate notional amounts of these contracts were INR billion, or $ million, and INR billion, or $ million, respectively, based on the exchange rates in effect as of each period end.

As of December 31, 2024, it was anticipated that all of the $ million losses, net of tax, related to foreign exchange forward contracts currently recorded in accumulated other comprehensive income will be reclassified into direct costs in our consolidated statement of operations within the next months.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ Interest rate swapsOther non-current assets Total Assets$ $ Interest rate swapsDeferred compensation and other liabilities Foreign exchange forward contractsAccrued expenses and other current liabilities Total Liabilities$ $

Refer to Note 14 “Other Comprehensive Income (Loss)” for additional information on our derivative instruments.

13.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$— $ Convertible debt investment— — Deferred compensation assets— — Total assets$— $ $ $ Liabilities:Change in fair value of convertible debt investment()

Balance as of December 31, 2024

Contingent consideration for business acquisitions: We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted assessment of the specific financial performance targets being 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 was % and % as of December 31, 2024 and 2023, respectively. 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 to other losses (gains), net 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.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Acquisition Payment()Change in fair value()

Balance as of December 31, 2023

Acquisition Payment()Change in fair value()

Balance as of December 31, 2024

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

Preferred Stock Investment

In the fourth quarter of 2019, we invested $ million in 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 the company 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 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, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same company. 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 or if factors indicate that a significant decrease in value has occurred. We remeasure to the fair value of the preferred stock using such identified information with changes in the fair value recorded to other income (expense), net in our consolidated statement of operations. The carrying value of the preferred stock investment is recorded in long-term investments in our consolidated balance sheets.

In the fourth quarter of 2023, we recognized a non-cash impairment loss of $ million on our preferred stock investment recorded to other income (expense), net in our consolidated statement of operations, based on the valuation established in the most recent financing round. During the first quarter of 2022, we recognized a non-cash unrealized gain of $ million, based on the observable price change of preferred stock issued by the company with similar rights and preferences to our preferred stock, a Level 2 input. There were no observable price changes or factors to indicate that a significant decrease in enterprise value occurred in 2024. Since our initial investment, we have recognized cumulative unrealized gains of $ million and cumulative unrealized losses of $ million. As of both December 31, 2024 and 2023, the carrying value of our preferred stock investment was $ million.

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.

Cash and Cash Equivalents and Other Financial Instruments

14.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

)$ $()$— $

Foreign currency translation adjustment, net of tax of $

()— — — ()Unrealized gain (loss) on investments:

Change in fair value, net of tax of $

— ()— — ()Unrealized gain (loss) on cash flow hedges:Interest rate swaps:

Change in fair value, net of tax of $()

— — —

Reclassification adjustment into earnings, net of tax of $

— — ()— ()Foreign exchange forward contracts:

Change in fair value, net of tax of $

— — — ()()

Reclassification adjustment into earnings, net of tax of $()

— — — Balance as of December 31, 2022() ()

Foreign currency translation adjustment, net of tax of $

— — — Balance at December 31, 2024$

As of both December 31, 2024 and 2023, there was no unrecognized tax benefit which would affect the effective tax rate if recognized.

As of both December 31, 2024 and 2023, no potential payment of interest and penalties was accrued. When we accrue interest and penalties, we record as a component of provision for income taxes on our consolidated statement of earnings.

We file income tax returns with federal, state, local and foreign jurisdictions. Tax years are subject to future examinations by federal tax authorities. Tax years are subject to future examinations by state and local tax authorities. The Company is

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

. The Company is currently under audit by the governments of India and Singapore. We do not expect the outcome of these audits to have a material adverse effect on our financial position or results of operations.

18.

million pre-tax litigation settlement gain related to a completed legal matter in which Huron was the plaintiff, which is included in other gains, net on our consolidated statement of operations. As of December 31, 2024, all of the $ million settlement was received.

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 Annual Report on Form 10-K, 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. 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 $ million and $ million were outstanding at December 31, 2024 and 2023, respectively, which are used as security deposits for our office facilities.

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 December 31, 2024 and 2023, the total estimated fair value of our outstanding contingent consideration liability was $ million and $ million, respectively.

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.

19.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

reportable segments. Our CODM uses segment operating income in the annual budgeting and quarterly forecasting process as well as on a monthly basis for evaluating the performance of each segment and making decisions about allocating capital and other resources to each segment. Our CODM does not evaluate segments using asset information.

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 related to administrative functions that are performed in a centralized manner, as well as restructuring charges, depreciation and amortization, and interest expense that are not attributable to a particular segment. The administrative function costs include corporate office support costs, office facility costs, costs 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.

$ $ Reimbursable expenses Total revenues Operating expenses:Direct costs Reimbursable expenses Selling, general and administrative expenses Depreciation and amortization

Other segment items(1)

Total segment operating expenses Segment operating income$ $ $ Education:Revenues before reimbursable expenses$ $ $ Reimbursable expenses Total revenues Operating expenses:Direct costs Reimbursable expenses

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Depreciation and amortization

Other segment items(1)

Total segment operating expenses Segment operating income$ $ $ Commercial:Revenues before reimbursable expenses$ $ $ Reimbursable expenses Total revenues Operating expenses:Direct costs Reimbursable expenses Selling, general and administrative expenses Depreciation and amortization

Other segment items(1)

Total segment operating expenses Segment operating income$ $ $ Total Huron:Revenues before reimbursable expenses$ $ $ Reimbursable expenses Total revenues$ $ $ Segment operating income$ $ $ Items not allocated at the segment level:

Unallocated corporate expenses

Other gains, net()()()Restructuring charges Depreciation and amortization Operating income Other income (expense), net()() Income before taxes$ $ $

(1)Other segment items in each segment primarily consists of restructuring charges for all periods presented.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ $ Digital Total revenues$ $ $ Education:Consulting and Managed Services$ $ $ Digital Total revenues$ $ $ Commercial:Consulting and Managed Services$ $ $ Digital Total revenues$ $ $ Total Huron:Consulting and Managed Services$ $ $ Digital Total revenues$ $ $


	Year Ended December 31,
Revenues before Reimbursable Expenses by Capability	2024	2023	2022
Healthcare:
Consulting and Managed Services	$	$	$
Digital
Total revenues before reimbursable expenses	$	$	$
Education:
Consulting and Managed Services	$	$	$
Digital
Total revenues before reimbursable expenses	$	$	$
Commercial:
Consulting and Managed Services	$	$	$
Digital
Total revenues before reimbursable expenses	$	$	$
Total Huron:
Consulting and Managed Services	$	$	$
Digital
Total revenues before reimbursable expenses	$	$	$

For the years ended December 31, 2024, 2023, and 2022, substantially all of our revenues were recognized over time.

% of our consolidated total revenues. At December 31, 2024 and 2023, no single client accounted for greater than % of our combined balance of receivables from clients, net and unbilled services, net.

20.

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HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

$ Valuation allowance for deferred tax assets$ $ Year ended December 31, 2023:Allowances for doubtful accounts and unbilled services$ $ Valuation allowance for deferred tax assets$ $ Year ended December 31, 2024:Allowances for doubtful accounts and unbilled services$ $ Valuation allowance for deferred tax assets$ $

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Huron Consulting Group Inc. - Annual Report: 2024 (Form 10-K)

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