Huron Consulting Group Announces Second Quarter 2012 Financial Results

  • Revenues were $144.7 million for Q2 2012 compared to $153.1 million in Q2 2011, and increased sequentially from $138.6 million in Q1 2012.
  • Diluted earnings per share from continuing operations for Q2 2012 was $0.28 compared to $0.43 in Q2 2011.
  • Adjusted diluted earnings per share from continuing operations(6), a non-GAAP measure, was $0.37 in Q2 2012 compared to $0.56 in Q2 2011.
  • Average number of full-time billable consultants(2) rose 13.3% to 1,302 for Q2 2012 compared to 1,149 for Q2 2011.
  • Company updated full year 2012 revenue guidance to a range of $630.0 million to $650.0 million, including approximately $10.0 million for the recent acquisition of AdamsGrayson.

CHICAGO--()--Huron Consulting Group Inc. (NASDAQ: HURN), a leading provider of business consulting services, today announced financial results for the second quarter ended June 30, 2012.

“Huron’s two largest business segments continued to benefit from attractive market conditions,” said James H. Roth, chief executive officer and president, Huron Consulting Group. “Our Health and Education Consulting segment again had solid utilization in the second quarter, and we continue to be successful in hiring new personnel to meet market demand. As expected, performance-based fees in the healthcare practice were lower in Q2 2012 compared to second quarter last year, when performance-based revenue was the highest of any quarter. Our Legal Consulting segment continues to benefit from e-discovery needs among global corporations resulting from large-scale litigation and investigations. We expect this segment to be further strengthened by the recently announced acquisitions of AdamsGrayson and Ascertus. The market for Huron’s services remains vibrant, and we are looking forward to a strong second half as we assist our clients with the complexities and challenges stemming from this uncertain economy.”

Second Quarter 2012 Results

The following information is reported on a “continuing operations” basis unless otherwise noted.

Revenues for the second quarter of 2012 were $144.7 million compared to $153.1 million for the second quarter of 2011. The Company's second quarter 2012 operating income was $14.7 million compared to $22.3 million in the second quarter of 2011. Net income from continuing operations was $6.3 million, or diluted earnings per share of $0.28, for the second quarter of 2012 compared to $9.2 million, or $0.43 per diluted share, for the same period last year. Net income was $6.5 million, or $0.29 per diluted share, for the second quarter of 2012 compared to $9.5 million, or $0.44 per diluted share, for the same period last year.

Second quarter 2012 earnings before interest, taxes, depreciation and amortization ("EBITDA")(6) was $19.9 million, or 13.8% of revenues, compared to $28.0 million, or 18.3% of revenues, in the comparable quarter last year.

In evaluating the Company’s financial performance, management uses non-GAAP financial measures, which exclude the effect of the following items (in thousands):

 

Three Months Ended
June 30,

2012   2011
Amortization of intangible assets $ 1,607 $ 2,067
Restatement related expenses $ 212 $ 1,785
Restructuring charges $ 229 $ 461
Litigation settlements, net $ 1,150 $ 508
Tax effect $ (1,279 ) $ (1,928 )

Adjusted EBITDA(6) was $21.5 million, or 14.9% of revenues, in the second quarter of 2012 compared to $30.8 million, or 20.1% of revenues, in the comparable quarter last year. Adjusted Net Income from continuing operations(6) was $8.2 million, or $0.37 per diluted share, for the second quarter of 2012 compared to $12.1 million, or $0.56 per diluted share, for the comparable period in 2011.

Reconciliations of the aforementioned non-GAAP financial measures to comparable GAAP measures are provided in the financial schedules accompanying this news release.

The average number of full-time billable consultants(2) rose 13.3% to 1,302 in the second quarter of 2012 compared to 1,149 in the same quarter last year. Full-time billable consultant utilization rate(3) increased to 74.5% during the second quarter of 2012 compared with 71.9% during the same period last year. Average billing rate per hour for full-time billable consultants(4) was $210 for the second quarter of 2012 compared to $270 for the second quarter of 2011. The average number of full-time equivalent professionals(5) totaled 1,097 in the second quarter of 2012 compared to 1,120 for the comparable period in 2011.

Year-to-Date Results

The following information is reported on a “continuing operations” basis unless otherwise noted.

Revenues for the first six months of 2012 were $283.3 million compared to $289.7 million for the first half of 2011. The Company's operating income for the first six months of 2012 was $18.3 million compared to $33.1 million in the first six months of 2011. Net income from continuing operations was $6.9 million, or $0.31 per diluted share, for the first six months of 2012 compared to $12.6 million, or $0.59 per diluted share, for the same period last year. Net income was $7.4 million, or $0.33 per diluted share, for the first half of 2012 compared to $13.5 million, or $0.63 per diluted share, for the same period last year.

EBITDA(6) was $29.3 million, or 10.4% of revenues, for the first half of 2012 compared to $44.5 million, or 15.4% of revenues, for the same period in 2011.

In evaluating the Company’s financial performance, management uses non-GAAP financial measures, which exclude the effect of the following items (in thousands):

 

Six Months Ended
June 30,

2012   2011
Amortization of intangible assets $ 3,226 $ 4,284
Restatement related expenses $ 1,717 $ 3,025
Restructuring charges $ 1,059 $ 985
Litigation settlements, net $ 1,150 $ 1,096
Tax effect $ (2,861 ) $ (3,756 )

Adjusted EBITDA(6) was $33.3 million, or 11.7% of revenues, in the first six months of 2012 compared to $49.6 million, or 17.1% of revenues, in the comparable period last year.

Adjusted net income from continuing operations(6) was $11.2 million, or $0.50 per diluted share, for the first half of 2012 compared to $18.3 million, or $0.86 per diluted share, for the comparable period in 2011.

Reconciliations of the aforementioned non-GAAP financial measures to comparable GAAP measures are provided in the financial schedules accompanying this news release.

The average number of full-time billable consultants(2) was 1,279 in the first half of 2012 compared to 1,129 in the same period last year. Full-time billable consultant utilization rate(3) was 76.0% during the first half of 2012 compared with 75.0% during the same period last year. Average billing rate per hour for full-time billable consultants(4) was $208 for the first half of 2012 compared to $246 for the first half of 2011. The average number of full-time equivalent professionals(5) was 1,070 in the first half of 2012 compared to 1,068 in the same period in 2011.

Acquisitions

In June, the Company announced the acquisitions of AdamsGrayson, a managed review and legal staffing firm based in Washington, D.C., and Ascertus Ltd., a London-based source of software solutions and professional services for corporate legal departments and law firms, within the Company’s Legal Consulting segment. The AdamsGrayson transaction closed on July 2, 2012.

Securities and Exchange Commission (“SEC”) Settlement

On July 19, 2012, the Company reached a final settlement with the SEC resolving the previously disclosed investigation into the Company’s August 2009 restatement. In connection with the settlement, the SEC considered remedial acts promptly undertaken by the Company and the Company’s cooperation with the SEC staff during the course of the investigation. The Company agreed to the settlement without admitting or denying the SEC’s factual findings. The SEC imposed a monetary penalty of $1 million on the Company. In the fourth quarter of 2011, the Company established a reserve in that amount for the potential settlement of this matter. The SEC also reached settlements with two former employees of the Company with respect to the restatement. The Company is obligated to indemnify its former employees for their defense costs in connection with this matter, but is not obligated to reimburse them for the monetary penalties imposed on them by the SEC in connection with the settlements. Following the settlements reached with these two former employees, the Company does not expect to incur additional material indemnity costs for former employees in connection with the restatement.

Operating Segments

Huron’s results reflect a portfolio of service offerings focused on helping clients address complex business challenges. The Company has three operating segments: Health and Education Consulting; Legal Consulting; and Financial Consulting, representing 66%, 31%, and 3% of year-to-date total revenues, respectively.

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, 2012.

Outlook for 2012

Based on currently available information, the Company updated guidance for full year 2012 revenues before reimbursable expenses in a range of $630.0 million to $650.0 million, including approximately $10.0 million for the recent acquisition of AdamsGrayson. The Company also anticipates EBITDA in a range of $107.0 million to $112.5 million, Adjusted EBITDA in a range of $116.0 million to $121.5 million, GAAP diluted earnings per share in a range of $1.90 to $2.05, and non-GAAP adjusted diluted earnings per share in a range of $2.30 to $2.45.

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

Second Quarter 2012 Webcast

The Company will host a webcast to discuss its financial results today, July 25, 2012, at 5:00 p.m. Eastern Time (4:00 p.m. Central Time). The conference call is being webcast by Thomson 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.

About Huron Consulting Group

Huron Consulting Group helps clients in diverse industries improve performance, comply with complex regulations, reduce costs, recover from distress, leverage technology, and stimulate growth. The Company teams with its clients to deliver sustainable and measurable results. Huron provides services to a wide variety of both financially sound and distressed organizations, including leading academic institutions, healthcare organizations, Fortune 500 companies, medium-sized businesses, and the law firms that represent these various organizations. Learn more at www.huronconsultinggroup.com.

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 without the effect of non-cash or other one-time items and the Company’s ability to generate cash flows from operations that are available for taxes, capital expenditures, and to repay debt. 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.

Statements in this press release, including the information incorporated by reference herein, 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,” “meets,” “could,” “intends,” “might,” “predicts,” “seeks,” “would,” “believes,” “estimates” or “continues”. Risks, uncertainties and assumptions that could impact the Company’s forward-looking statements relate, among other things, to future indemnity costs for former employees with respect to the restatement. In addition, these forward-looking statements reflect our current expectation about our future requirements and needs, results, levels of activity, performance, or achievements, including, without limitation, that our business continues to grow at the 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, 2011 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.

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,

      2012   2011 2012   2011
Revenues and reimbursable expenses:
Revenues $ 144,671 $ 153,070 $ 283,308 $ 289,691
Reimbursable expenses   14,554     13,216     28,350     25,140  
Total revenues and reimbursable expenses 159,225 166,286 311,658 314,831
Direct costs and reimbursable expenses (exclusive of depreciation
and amortization shown in operating expenses):
Direct costs 91,878 91,132 188,659 179,207
Intangible assets amortization 1,142 1,369 2,284 2,802
Reimbursable expenses   14,585     13,326     28,403     25,381  
Total direct costs and reimbursable expenses   107,605     105,827     219,346     207,390  
Operating expenses:
Selling, general and administrative 31,275 31,070 61,342 60,639
Restructuring charges 229 461 1,059 985
Restatement related expenses 212 1,785 1,717 3,025
Litigation settlements, net 1,150 508 1,150 1,096
Depreciation and amortization   4,053     4,336     8,706     8,582  
Total operating expenses   36,919     38,160     73,974     74,327  
Operating income 14,701 22,299 18,338 33,114
Other income (expense):
Interest (expense), net of interest income (2,015 ) (3,535 ) (3,881 ) (7,107 )
Other (expense) income   (163 )   (65 )   170     39  
Total other expense   (2,178 )   (3,600 )   (3,711 )   (7,068 )
Income from continuing operations before income tax expense 12,523 18,699 14,627 26,046
Income tax expense   6,218     9,535     7,735     13,408  
Net income from continuing operations 6,305 9,164 6,892 12,638
Income from discontinued operations, net of tax   202     305     471     887  
Net income $ 6,507   $ 9,469   $ 7,363   $ 13,525  
 
Net earnings per basic share:
Net income from continuing operations $ 0.29 $ 0.43 $ 0.32 $ 0.60
Income from discontinued operations, net of tax $ 0.01   $ 0.02   $ 0.02   $ 0.04  
Net income $ 0.30   $ 0.45   $ 0.34   $ 0.64  
 
Net earnings per diluted share:
Net income from continuing operations $ 0.28 $ 0.43 $ 0.31 $ 0.59
Income from discontinued operations, net of tax $ 0.01   $ 0.01   $ 0.02   $ 0.04  
Net income $ 0.29   $ 0.44   $ 0.33   $ 0.63  
 
Weighted average shares used in calculating earnings per share:
Basic 21,918 21,190 21,847 21,058
Diluted 22,248 21,476 22,206 21,316
   
HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
   

June 30,
2012

 

December 31,
2011

Assets
Current assets:
Cash and cash equivalents $ 5,772 $ 5,080
Receivables from clients, net 86,066 107,820
Unbilled services, net 48,568 49,056
Income tax receivable 7,419 19,501
Deferred income taxes, net 10,697 12,531
Prepaid expenses and other current assets 15,610 14,191
Current assets of discontinued operations   435     3,345  
Total current assets 174,567 211,524
Property and equipment, net 33,545 31,176
Other non-current assets 13,191 14,892
Intangible assets, net 14,173 16,867
Goodwill   512,830     512,185  
Total assets $ 748,306   $ 786,644  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 11,591 $ 8,084
Accrued expenses 17,065 22,505
Accrued payroll and related benefits 37,837 66,464
Accrued consideration for business acquisitions, current portion 3,500 35,062
Income tax payable 186 101
Deferred revenues 25,213 36,721
Current liabilities of discontinued operations   103     765  
Total current liabilities 95,495 169,702
Non-current liabilities:
Deferred compensation and other liabilities 7,732 7,856
Bank borrowings 213,500 193,500
Deferred lease incentives 6,905 6,670
Deferred income taxes 14,179 12,078
Non-current liabilities of discontinued operations   -     49  
Total non-current liabilities 242,316 220,153
 
Commitments and Contingencies
 
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized;
24,738,777 and 24,208,549 shares issued at June 30, 2012
and December 31, 2011, respectively 237 234
Treasury stock, at cost, 1,788,117 and 1,642,018 shares at
June 30, 2012 and December 31, 2011, respectively (80,820 ) (75,735 )
Additional paid-in capital 412,352 400,597
Retained earnings 80,265 72,902
Accumulated other comprehensive loss   (1,539 )   (1,209 )
Total stockholders’ equity   410,495     396,789  
Total liabilities and stockholders’ equity $ 748,306   $ 786,644  
   
HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 

Six Months Ended
June 30,

    2012   2011
Cash flows from operating activities:
Net income $ 7,363 $ 13,525
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,644 11,501
Share-based compensation 8,591 9,694
Allowances for doubtful accounts and unbilled services (2,488 ) 1,685
Deferred income taxes 3,184 13,023
Gain on disposal of property and equipment - (46 )
Non-cash portion of litigation settlement - 1,096
Changes in operating assets and liabilities, net of businesses acquired:
Decrease in receivables from clients 27,881 7,941
Decrease (increase) in unbilled services 226 (18,933 )
Decrease (increase) in current income tax receivable, net 12,167 (4,247 )
Decrease in other assets 921 717
(Decrease) increase in accounts payable and accrued liabilities (2,638 ) 516
Decrease in accrued payroll and related benefits (28,058 ) (9,122 )
(Decrease) increase in deferred revenues   (11,271 )   4,700  
Net cash provided by operating activities   28,522     32,050  
 
Cash flows from investing activities:
Purchases of property and equipment, net (11,760 ) (6,193 )
Net investment in life insurance policies (264 ) (618 )
Purchases of businesses   (33,136 )   (23,881 )
Net cash used in investing activities   (45,160 )   (30,692 )
 
Cash flows from financing activities:
Proceeds from exercise of stock options 29 219
Shares redeemed for employee tax withholdings (3,825 ) (2,531 )
Tax benefit from share-based compensation 1,253 200
Proceeds from borrowings under credit facility 138,500 168,500
Repayments on credit facility (118,500 ) (171,500 )
Payments of capital lease obligations   (6 )   (45 )
Net cash provided by financing activities   17,451     (5,157 )
 
Effect of exchange rate changes on cash (121 ) 710
 
Net decrease in cash and cash equivalents 692 (3,089 )
Cash and cash equivalents at beginning of the period (*)   5,080     6,347  
Cash and cash equivalents at end of the period $ 5,772   $ 3,258  

 

(*) Cash and cash equivalents presented herein includes $0.1 million of cash and cash equivalents classified as
discontinued operations as of December 31, 2010.
   

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)

 

Three Months
Ended June 30,

Percent
Increase
(Decrease)

Segment and Consolidated Operating Results (in thousands):   2012   2011  
Health and Education Consulting (1):  
Revenues $ 94,481 $ 104,100 (9.2 %)
Operating income $ 28,515 $ 36,863 (22.6 %)
Segment operating income as a percent of segment revenues 30.2 % 35.4 %
Legal Consulting:
Revenues $ 45,907 $ 39,972 14.8 %
Operating income $ 12,499 $ 9,629 29.8 %
Segment operating income as a percent of segment revenues 27.2 % 24.1 %
Financial Consulting (1):
Revenues $ 4,283 $ 8,998 (52.4 %)
Operating income $ (337 ) $ 2,768 (112.2 %)
Segment operating income as a percent of segment revenues (7.9 %) 30.8 %
Total Company:
Revenues $ 144,671 $ 153,070 (5.5 %)
Reimbursable expenses   14,554     13,216   10.1 %
Total revenues and reimbursable expenses $ 159,225   $ 166,286   (4.2 %)
 
Statement of Earnings reconciliation:
Segment operating income $ 40,677 $ 49,260 (17.4 %)
Charges not allocated at the segment level:
Other selling, general and administrative expenses 21,923 22,625 (3.1 %)
Depreciation and amortization expense   4,053     4,336   (6.5 %)
Total operating income 14,701 22,299 (34.1 %)
Other expense, net   2,178     3,600   (39.5 %)
Income from continuing operations before income tax expense $ 12,523   $ 18,699   (33.0 %)
 
Other Operating Data:            
Number of full-time billable consultants (at period end) (2):
Health and Education Consulting (1) 1,139 962 18.4 %
Legal Consulting 129 115 12.2 %
Financial Consulting (1)   69     75   (8.0 %)
Total 1,337 1,152 16.1 %
Average number of full-time billable consultants (for the period) (2):
Health and Education Consulting (1) 1,110 951
Legal Consulting 123 123
Financial Consulting (1)   69     75  
Total 1,302 1,149
Full-time billable consultant utilization rate (3):
Health and Education Consulting (1) 76.6 % 73.6 %
Legal Consulting 68.7 % 54.9 %
Financial Consulting (1) 49.3 % 76.3 %
Total 74.5 % 71.9 %
 

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)

 

Three Months Ended
June 30,

Other Operating Data:   2012   2011
Full-time billable consultant average billing rate per hour (4):  
Health and Education Consulting (1) $ 205 $ 269
Legal Consulting $ 239 $ 231
Financial Consulting (1) $ 275 $ 315
Total $ 210 $ 270
Revenue per full-time billable consultant (in thousands):
Health and Education Consulting (1) $ 74 $ 97
Legal Consulting $ 78 $ 55
Financial Consulting (1) $ 61 $ 115
Total $ 73 $ 94
Average number of full-time equivalents (for the period) (5):
Health and Education Consulting (1) 142 144
Legal Consulting 954 973
Financial Consulting (1)   1   3
Total 1,097 1,120
Revenue per full-time equivalents (in thousands):
Health and Education Consulting (1) $ 91 $ 82
Legal Consulting $ 38 $ 34
Financial Consulting (1) $ 41 $ 134
Total $ 45 $ 41
   

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA

(Unaudited)

 

Six Months
Ended June 30,

Percent
Increase
(Decrease)

Segment and Consolidated Operating Results (in thousands):   2012   2011  
Health and Education Consulting (1):  
Revenues $ 185,886 $ 193,758 (4.1 %)
Operating income $ 50,012 $ 62,754 (20.3 %)
Segment operating income as a percent of segment revenues 26.9 % 32.4 %
Legal Consulting:
Revenues $ 87,290 $ 77,289 12.9 %
Operating income $ 22,010 $ 19,224 14.5 %
Segment operating income as a percent of segment revenues 25.2 % 24.9 %
Financial Consulting (1):
Revenues $ 10,132 $ 18,644 (45.7 %)
Operating income $ (104 ) $ 5,738 (101.8 %)
Segment operating income as a percent of segment revenues (1.0 %) 30.8 %
Total Company:
Revenues $ 283,308 $ 289,691 (2.2 %)
Reimbursable expenses   28,350     25,140   12.8 %
Total revenues and reimbursable expenses $ 311,658   $ 314,831   (1.0 %)
 
Statement of Earnings reconciliation:
Segment operating income $ 71,918 $ 87,716 (18.0 %)
Charges not allocated at the segment level:
Other selling, general and administrative expenses 44,874 46,020 (2.5 %)
Depreciation and amortization expense   8,706     8,582   1.4 %
Total operating income 18,338 33,114 (44.6 %)
Other expense, net   3,711     7,068   (47.5 %)
Income from continuing operations before income tax expense $ 14,627   $ 26,046   (43.8 %)
 
Other Operating Data:            
Number of full-time billable consultants (at period end) (2):
Health and Education Consulting (1) 1,139 962 18.4 %
Legal Consulting 129 115 12.2 %
Financial Consulting (1)   69     75   (8.0 %)
Total 1,337 1,152 16.1 %
Average number of full-time billable consultants (for the period) (2):
Health and Education Consulting (1) 1,090 934
Legal Consulting 120 120
Financial Consulting (1)   69     75  
Total 1,279 1,129
Full-time billable consultant utilization rate (3):
Health and Education Consulting (1) 78.0 % 77.3 %
Legal Consulting 69.7 % 55.4 %
Financial Consulting (1) 54.5 % 75.6 %
Total 76.0 % 75.0 %
 

HURON CONSULTING GROUP INC.

SEGMENT OPERATING RESULTS AND OTHER OPERATING DATA (CONTINUED)

(Unaudited)

 

Six Months Ended
June 30,

Other Operating Data:   2012   2011
Full-time billable consultant average billing rate per hour (4):  
Health and Education Consulting (1) $ 202 $ 241
Legal Consulting $ 237 $ 233
Financial Consulting (1) $ 275 $ 328
Total $ 208 $ 246
Revenue per full-time billable consultant (in thousands):
Health and Education Consulting (1) $ 148 $ 181
Legal Consulting $ 157 $ 110
Financial Consulting (1) $ 140 $ 242
Total $ 149 $ 177
Average number of full-time equivalents (for the period) (5):
Health and Education Consulting (1) 142 147
Legal Consulting 926 919
Financial Consulting (1)   2   2
Total 1,070 1,068
Revenue per full-time equivalents (in thousands):
Health and Education Consulting (1) $ 173 $ 168
Legal Consulting $ 74 $ 70
Financial Consulting (1) $ 208 $ 257
Total $ 87 $ 84
 

(1)

 

Reflects the reclassification of our healthcare valuation consulting practice from our Health and Education Consulting segment to our Financial Consulting segment in conjunction with an internal reorganization during the first quarter of 2012.

 

(2)

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

 

(3)

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

 

(4)

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

 

(5)

Consists of 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.

   

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 ended
June 30,

Six months ended
June 30,

2012   2011 2012   2011
Revenues $ 144,671   $ 153,070   $ 283,308   $ 289,691  
 
Net income from continuing operations $ 6,305 $ 9,164 $ 6,892 $ 12,638
Add back:
Income tax expense 6,218 9,535 7,735 13,408
Interest and other expenses 2,178 3,600 3,711 7,068
Depreciation and amortization   5,195     5,705     10,990     11,384  
Earnings before interest, taxes, depreciation and amortization (EBITDA) (6) 19,896 28,004 29,328 44,498
Add back:
Restatement related expenses 212 1,785 1,717 3,025
Restructuring charges 229 461 1,059 985
Litigation settlements, net   1,150     508     1,150     1,096  
Adjusted EBITDA (6) $ 21,487   $ 30,758   $ 33,254   $ 49,604  
Adjusted EBITDA as a percentage of revenues (6)   14.9 %   20.1 %   11.7 %   17.1 %
     

HURON CONSULTING GROUP INC.

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (6)

(In thousands)

(Unaudited)

 
 

Three months ended
June 30,

Six months ended
June 30,

2012 2011 2012 2011
Net income from continuing operations $ 6,305   $ 9,164  

 

$ 6,892   $ 12,638  

Weighted average shares - diluted

22,248

21,476

22,206

21,316

Diluted earnings per share from continuing operations $ 0.28   $

0.43

 

 

$

0.31

 

 

$

0.59

 
Add back:
Amortization of intangible assets 1,607 2,067

 

3,226 4,284
Restatement related expenses 212 1,785

 

1,717 3,025
Restructuring charges 229 461

 

1,059 985
Litigation settlements, net 1,150 508

 

1,150 1,096
Tax effect   (1,279 )   (1,928 )

 

  (2,861 )   (3,756 )
Total adjustments, net of tax   1,919     2,893  

 

  4,291     5,634  
Adjusted net income from continuing operations (6) $ 8,224   $ 12,057  

 

$ 11,183   $ 18,272  
Adjusted diluted earnings per share from continuing operations (6) $ 0.37   $ 0.56  

 

$ 0.50   $ 0.86  

(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 (a) in understanding and evaluating Huron’s current operating performance and future prospects in the same manner as management does, if they so choose, (b) in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results and (c) in understanding the Company’s ability to generate cash flows from operations that are available for taxes, capital expenditures, and debt repayment. 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 2012 OUTLOOK

 

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (8)

(In millions)

(Unaudited)

 
  Year Ending
December 31, 2012
Guidance Range
Low   High
Projected revenues – GAAP $ 630.0     $ 650.0  
Projected net income from continuing operations – GAAP $ 42.5   $ 46.0
Add back:
Income tax expense 35.0 37.0
Interest and other expenses 7.5 7.5
Depreciation and amortization   22.0       22.0  

Projected earnings before interest, taxes, depreciation and amortization (EBITDA) (8)

 

107.0 112.5
Add back:

Restructuring charges, restatement related expenses, and litigation settlement (7)

  9.0       9.0  
Projected adjusted EBITDA (8) $ 116.0     $ 121.5  
Projected adjusted EBITDA as a percentage of projected revenues (8)   18.4 %     18.7 %
 

RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS

TO ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (8)

(In millions)

(Unaudited)

 
 

Year Ending
December 31, 2012

Guidance Range
Low   High
Projected net income from continuing operations – GAAP $ 42.5     $ 46.0  
Projected diluted earnings per share from continuing operations – GAAP $ 1.90     $ 2.05  
Add back:  
Amortization of intangible assets 6.5 6.5

Restructuring charges, restatement related expenses, and litigation settlement (7)

9.0

9.0

Tax effect   (6.0 )     (6.0 )
Total adjustments, net of tax 9.5 9.5
Projected adjusted net income from continuing operations (8) $ 52.0     $ 55.5  

Projected adjusted diluted earnings per share from continuing operations (8)

$ 2.30     $ 2.45  

(7)

 

Restatement related expenses reflect estimated legal fees, indemnity obligations to former employees, and other costs expected to be incurred in connection with the restatement, the Company’s inquiries into the facts and circumstances underlying the restatement, the SEC investigation, the SEC settlement, and the derivative lawsuits. On July 19, 2012, the Company reached a final settlement with the SEC resolving the SEC investigation into the restatement. The SEC imposed a monetary penalty of $1 million on the Company. In the fourth quarter of 2011, the Company established a reserve in that amount for the potential settlement of this matter. The SEC also reached settlements with two former employees of the Company with respect to the restatement. The Company is obligated to indemnify its former employees for their defense costs in connection with this matter, but is not obligated to reimburse them for the monetary penalties imposed on them by the SEC in connection with the settlements. Following the settlements reached with these two former employees, the Company does not expect to incur additional material indemnity costs for former employees in connection with the restatement. See the Company’s Form 10-K for the year ended December 31, 2011 and Form 10-Q for the quarter ended March 31, 2012, filed on February 23, 2012 and April 26, 2012, respectively, as well as the Company’s forthcoming Form 10-Q for the quarter ended June 30, 2012 for additional information about the SEC investigation, the SEC settlement, and the derivative lawsuits.

 

(8)

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 and the Company’s ability to generate cash flows from operations that are available for taxes, capital expenditures, and to repay debt. 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 GAAP.

Contacts

Huron Consulting Group Inc.
Media Contact:
Jennifer Frost Hennagir, 312-880-3260
jfrost-hennagir@huronconsultinggroup.com
or
Investor Contact:
C. Mark Hussey or Ellen Wong, 312-583-8722
investor@huronconsultinggroup.com

Contacts

Huron Consulting Group Inc.
Media Contact:
Jennifer Frost Hennagir, 312-880-3260
jfrost-hennagir@huronconsultinggroup.com
or
Investor Contact:
C. Mark Hussey or Ellen Wong, 312-583-8722
investor@huronconsultinggroup.com