10-Q 1 hurn-20220331.htm 10-Q hurn-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-50976 
HURON CONSULTING GROUP INC.
(Exact name of registrant as specified in its charter)
 
Delaware 01-0666114
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification Number)
550 West Van Buren Street
Chicago, Illinois
60607
(Address of principal executive offices)
(Zip Code)
(312) 583-8700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareHURNNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting 
Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of April 26, 2022, 21,261,900 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


Huron Consulting Group Inc.
HURON CONSULTING GROUP INC.
INDEX



PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) 
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$9,748 $20,781 
Receivables from clients, net of allowances of $7,125 and $8,827, respectively
116,527 122,316 
Unbilled services, net of allowances of $2,673 and $2,637, respectively
125,791 91,285 
Income tax receivable4,997 8,071 
Prepaid expenses and other current assets17,134 15,229 
Total current assets274,197 257,682 
Property and equipment, net26,836 31,004 
Deferred income taxes, net1,791 1,804 
Long-term investments95,930 72,584 
Operating lease right-of-use assets33,737 35,311 
Other non-current assets69,764 68,191 
Intangible assets, net31,089 31,894 
Goodwill623,841 620,879 
Total assets$1,157,185 $1,119,349 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$12,364 $13,621 
Accrued expenses and other current liabilities19,470 22,519 
Accrued payroll and related benefits64,169 139,131 
Current maturities of long-term debt 559 
Current maturities of operating lease liabilities10,213 10,142 
Deferred revenues21,632 19,212 
Total current liabilities127,848 205,184 
Non-current liabilities:
Deferred compensation and other liabilities40,296 43,458 
Long-term debt, net of current portion335,000 232,221 
Operating lease liabilities, net of current portion51,756 54,313 
Deferred income taxes, net20,003 12,273 
Total non-current liabilities447,055 342,265 
Commitments and contingencies
Stockholders’ equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 23,976,090 and 24,364,814 shares issued, respectively
237 239 
Treasury stock, at cost, 2,645,999 and 2,495,172 shares, respectively
(135,367)(135,969)
Additional paid-in capital395,103 413,794 
Retained earnings303,848 276,996 
Accumulated other comprehensive income18,461 16,840 
Total stockholders’ equity582,282 571,900 
Total liabilities and stockholders’ equity$1,157,185 $1,119,349 
The accompanying notes are an integral part of the consolidated financial statements.
1

HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited) 
Three Months Ended
March 31,
20222021
Revenues and reimbursable expenses:
Revenues$260,049 $203,213 
Reimbursable expenses4,726 1,934 
Total revenues and reimbursable expenses264,775 205,147 
Operating expenses:
Direct costs (exclusive of depreciation and amortization included below) 187,247 148,115 
Reimbursable expenses4,756 2,003 
Selling, general and administrative expenses48,395 39,808 
Restructuring charges1,555 628 
Depreciation and amortization6,864 6,353 
Total operating expenses248,817 196,907 
Operating income 15,958 8,240 
Other income (expense), net:
Interest expense, net of interest income(2,196)(1,719)
Other income, net24,365 420 
Total other income (expense), net22,169 (1,299)
Income before taxes38,127 6,941 
Income tax expense 11,275 1,536 
Net income $26,852 $5,405 
Earnings per share:
Net income per basic share$1.29 $0.25 
Net income per diluted share$1.27 $0.24 
Weighted average shares used in calculating earnings per share:
Basic20,850 21,932 
Diluted21,167 22,341 
Comprehensive income (loss):
Net income $26,852 $5,405 
Foreign currency translation adjustments, net of tax(43)400 
Unrealized loss on investment, net of tax(2,661)(4,648)
Unrealized gain on cash flow hedging instruments, net of tax4,325 1,429 
Other comprehensive income (loss)1,621 (2,819)
Comprehensive income $28,473 $2,586 
The accompanying notes are an integral part of the consolidated financial statements.
2

HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income
Stockholders’
Equity
SharesAmountSharesAmount
Balance at December 31, 202123,868,918 $239 (2,908,849)$(135,969)$413,794 $276,996 $16,840 $571,900 
Comprehensive income26,852 1,621 28,473 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations277,629 3 130,240 7,486 (7,489) 
Exercise of stock options16,805 — 647 647 
Share-based compensation12,051 12,051 
Shares redeemed for employee tax withholdings(139,491)(6,884)(6,884)
Share repurchases(523,399)(5)(23,900)(23,905)
Balance at March 31, 202223,639,953 $237 (2,918,100)$(135,367)$395,103 $303,848 $18,461 $582,282 
Balance at December 31, 202024,560,855 $246 (2,812,896)$(129,886)$454,512 $214,009 $13,061 551,942 
Comprehensive income5,405 (2,819)2,586 
Issuance of common stock in connection with:
Restricted stock awards, net of cancellations376,731 4 90,100 3,778 (3,782) 
Exercise of stock options6,631 — 174 174 
Share-based compensation7,988 7,988 
Shares redeemed for employee tax withholdings(165,203)(8,503)(8,503)
Share repurchases(245,718)(3)(13,181)(13,184)
Balance at March 31, 202124,698,499 $247 (2,887,999)$(134,611)$445,711 $219,414 $10,242 $541,003 
The accompanying notes are an integral part of the consolidated financial statements.
3

HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
20222021
Cash flows from operating activities:
Net income$26,852 $5,405 
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization6,864 6,567 
Non-cash lease expense1,640 1,693 
Share-based compensation7,935 5,625 
Amortization of debt discount and issuance costs198 198 
Allowances for doubtful accounts28  
Deferred income taxes7,129  
Gain on sale of property and equipment, excluding transaction costs(1,067) 
Change in fair value of contingent consideration liabilities12 42 
Change in fair value of preferred stock investment(26,964) 
Changes in operating assets and liabilities, net of acquisitions and divestiture:
(Increase) decrease in receivables from clients, net5,791 1,178 
(Increase) decrease in unbilled services, net(35,239)(23,086)
(Increase) decrease in current income tax receivable / payable, net3,266 573 
(Increase) decrease in other assets1,361 327 
Increase (decrease) in accounts payable and other liabilities(7,044)2,566 
Increase (decrease) in accrued payroll and related benefits(70,689)(74,273)
Increase (decrease) in deferred revenues828 (9,569)
Net cash used in operating activities(79,099)(82,754)
Cash flows from investing activities:
Purchases of property and equipment(3,924)(637)
Purchases of business, net of cash acquired(2,289)(6,000)
Capitalization of internally developed software costs(2,060)(1,400)
Proceeds from sale of property and equipment4,750  
Divestiture of business207  
Net cash used in investing activities(3,316)(8,037)
Cash flows from financing activities:
Proceeds from exercises of stock options648 174 
Shares redeemed for employee tax withholdings(6,884)(8,503)
Share repurchases(24,097)(11,454)
Proceeds from bank borrowings150,000 89,000 
Repayments of bank borrowings(47,780)(24,135)
Deferred payment on business acquisition(500) 
Net cash provided by financing activities71,387 45,082 
Effect of exchange rate changes on cash(5)155 
Net decrease in cash and cash equivalents(11,033)(45,554)
Cash and cash equivalents at beginning of the period20,781 67,177 
Cash and cash equivalents at end of the period$9,748 $21,623 
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Property and equipment expenditures and capitalized software included in accounts payable, accrued expenses and accrued payroll and related benefits$2,682 $3,545 
Operating lease right-of-use asset obtained in exchange for operating lease liability$102 $ 
Contingent consideration related to purchase of business$869 $ 
Share repurchases included in accounts payable$ $1,729 
Deferred payment on business acquisition$ $1,000 
    
The accompanying notes are an integral part of the consolidated financial statements.
4


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)

1. Description of Business
Huron is a global professional services firm that collaborates with clients to put possible into practice by creating sound strategies, optimizing operations, accelerating digital transformation, and empowering businesses and their people to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.
We provide our services and manage our business under three operating segments: Healthcare, Education and Commercial. See Note 14 “Segment Information” for a discussion of our three segments.
Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.
To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving visibility into the core drivers of our business.
2. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited consolidated financial statements reflect the financial position, results of operations, and cash flows as of and for the three months ended March 31, 2022 and 2021. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. These financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.
In order to better align with industry standards, in the first quarter of 2022, we revised the presentation of our consolidated statement of operations and other comprehensive income (loss) to present depreciation and amortization expense inclusive of amortization of intangible assets and software development costs previously presented within total direct costs and reimbursable expenses. We also aggregated immaterial line items within selling, general and administrative expenses. The change in presentation has no effect on our consolidated results, and our historical consolidated statements of operations and other comprehensive income (loss) were revised for consistent presentation.
Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related disclosures. The business and economic uncertainty resulting from the coronavirus (COVID-19) pandemic has made such estimates and assumptions more difficult to predict. Accordingly, actual results and outcomes could differ from those estimates.
5


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
3. New Accounting Pronouncements
Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform (Topic 848): Scope. Together, these ASUs provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting under GAAP. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. Our senior secured credit facility and related interest rate swaps are indexed to LIBOR; as such, we are currently evaluating the potential impact this guidance will have on our consolidated financial statements.
4. Goodwill and Intangible Assets
The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, 2022.

Healthcare
Education
Commercial(1)
Total
Balance as of December 31, 2021:
Goodwill$642,951 $121,570 $312,250 $1,076,771 
Accumulated impairment losses(208,081) (247,811)(455,892)
Goodwill, net as of December 31, 2021434,870 121,570 64,439 620,879 
Goodwill reallocation(1)
18,057 (1,417)(16,640) 
Goodwill recorded in connection with business acquisitions (2)(3)
162 2,082 718 2,962 
Goodwill, net as of March 31, 2022$453,089 $122,235 $48,517 $623,841 
(1)The goodwill balance as of December 31, 2021 shown within the Commercial segment related to our Business Advisory segment prior to the modification of our operating model. Effective January 1, 2022, we reallocated a portion of the goodwill within our Business Advisory segment to our Healthcare and Education segments. The remaining goodwill was allocated to our new Commercial segment.
(2)On January 18, 2022, we completed the acquisition of AIMDATA, LLC ("AIMDATA"), an advisory and implementation consulting services firm focused on strategy, technology and business transformation. The results of operations of AIMDATA are included within our consolidated financial statements as of the acquisition date and allocated among our three operating industries, which are our reportable segments, based on the engagements delivered by the business. The acquisition of AIMDATA is not significant to our consolidated financial statements.
(3)In the first quarter of 2022, we finalized the measurement of assets acquired, including goodwill, and liabilities assumed in the acquisition of Whiteboard Communications Ltd. ("Whiteboard"), a student enrollment advisory firm that helps colleges and universities with recruitment initiatives and financial aid strategies that we acquired in December 2021. The results of operations of Whiteboard are included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition.
First Quarter 2022 Goodwill Reallocation
Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment.
6


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The three reportable segments of Healthcare, Education and Commercial are also our reporting units for goodwill impairment testing purposes. As a result of the reorganization, we reallocated the goodwill balances of our historical reporting units to our new reporting units based on the relative estimated fair values of each component of the historical reporting units to be allocated to the new reporting units. Additionally, we performed a goodwill impairment test on the goodwill balances of each of our reporting units as of January 1, 2022 by comparing the fair value of the reporting unit to its carrying value, including the reallocated goodwill. Based on the results of the goodwill impairment test, we determined the fair values of the Healthcare, Education, and Commercial reporting units exceeded their carrying values by 37%, 199%, and 105%, respectively. As such, we concluded that there was no indication of goodwill impairment for all three reporting units as of January 1, 2022.
We relied on the income approach to estimate the fair value of the reporting units for both the goodwill reallocation and the goodwill impairment test. The income approach utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each business and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted EBITDA margins, and discount rates that reflect the risk inherent in the future cash flows. In estimating future cash flows, we relied on internally generated ten-year forecasts. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.
Intangible Assets
Intangible assets as of March 31, 2022 and December 31, 2021 consisted of the following:
As of March 31, 2022As of December 31, 2021
Useful Life 
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Customer relationships
3 to 13
$77,763 $55,340 $75,908 $53,421 
Trade names66,000 5,338 6,000 5,148 
Technology and software
2 to 5
13,330 6,199 13,330 5,607 
Non-competition agreements
2 to 5
920 153 2,020 1,347 
Customer contracts1260 154 260 101 
Total$98,273 $67,184 $97,518 $65,624 
Identifiable intangible assets with finite lives are amortized over their estimated useful lives. Customer relationships and customer contracts, as well as certain trade names and technology and software, are amortized on an accelerated basis to correspond to the cash flows expected to be derived from the assets. All other intangible assets with finite lives are amortized on a straight-line basis.
Intangible asset amortization expense was $2.9 million and $2.4 million for the three months ended March 31, 2022 and 2021, respectively. The table below sets forth the estimated annual amortization expense for the intangible assets recorded as of March 31, 2022.
Year Ending December 31,
Estimated Amortization Expense(1)
2022$11,198 
2023$7,904 
2024$4,514 
2025$3,386 
2026$2,435 
Actual future amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, and other factors.
7


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
5. Revenues
For the three months ended March 31, 2022 and 2021, we recognized revenues of $260.0 million and $203.2 million, respectively. Of the $260.0 million recognized in the first quarter of 2022, we recognized revenues of $1.9 million from obligations satisfied, or partially satisfied, in prior periods, of which $1.0 million was primarily due to the release of allowances on receivables from clients and unbilled services, and $0.9 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements. Of the $203.2 million recognized in the first quarter of 2021, we recognized revenues of $4.8 million from obligations satisfied, or partially satisfied, in prior periods, of which $2.5 million was primarily due to the release of allowances on receivables from clients and unbilled services, and $2.3 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements.
As of March 31, 2022, we had $89.8 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 $89.8 million of performance obligations, we expect to recognize approximately $35.6 million as revenue in 2022, $28.5 million in 2023, and the remaining $25.7 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.
Contract Assets and Liabilities
The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets.
Unbilled services include revenues recognized for services performed but not yet billed to clients. Services performed that we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval in performance-based engagements, must occur are recorded as contract assets and included within unbilled services, net. The contract asset balance as of March 31, 2022 and December 31, 2021 was $33.1 million and $23.7 million, respectively. The $9.4 million increase primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.
Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition policy. Our deferred revenues balance as of March 31, 2022 and December 31, 2021, was $21.6 million and $19.2 million, respectively. The $2.4 million increase primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the three months ended March 31, 2022, $13.1 million of revenues recognized were included in the deferred revenues balance as of December 31, 2021.
8


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
6. Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, excluding unvested restricted common stock. Diluted earnings per share reflects the potential reduction in earnings per share that could occur if securities or other contracts to issue common stock were exercised or converted into common stock under the treasury stock method. Such securities or other contracts include unvested restricted stock awards, unvested restricted stock units, and outstanding common stock options, to the extent dilutive. In periods for which we report a net loss, diluted weighted average common shares outstanding excludes all potential common stock equivalents as their impact on diluted net loss per share would be anti-dilutive.
Earnings per share under the basic and diluted computations are as follows: 
 Three Months Ended
March 31,
 20222021
Net income$26,852 $5,405 
Weighted average common shares outstanding – basic20,850 21,932 
Weighted average common stock equivalents317 409 
Weighted average common shares outstanding – diluted21,167 22,341 
Net income per basic share$1.29 $0.25 
Net income per diluted share$1.27 $0.24 
The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above for the three months ended March 31, 2022 and 2021 were 0.4 million shares and less than 0.1 million shares, respectively, and related to unvested restricted stock and outstanding common stock options.
In November 2020, our board of directors authorized a share repurchase program permitting us to repurchase up to $50 million of our common stock through December 31, 2021. During the third quarter of 2021, our board of directors authorized an extension of the share repurchase program through December 31, 2022 and increased the authorized amount to $100 million. During the first quarter of 2022, our board of directors authorized a further extension through December 31, 2023 and increased the authorized amount to $200 million. The amount and timing of repurchases under the share repurchase program were and will continue to be determined by management and depend on a variety of factors, including the trading price of our common stock, capacity under our credit facility, general market and business conditions, and applicable legal requirements. All shares repurchased and retired are reflected as a reduction to our basic weighted average shares outstanding based on the trade date of the share repurchase.
In the three months ended March 31, 2022, we repurchased and retired 523,399 shares for $23.9 million, and settled the repurchase of 3,820 shares for $0.2 million that were accrued as of December 31, 2021. In the three months ended March 31, 2021, we repurchased and retired 245,718 shares for $13.2 million, of which $1.7 million settled in the second quarter of 2021. As of March 31, 2022, $106.3 million remained available for share repurchases under our share repurchase program.
9


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
7. Financing Arrangements
A summary of the carrying amounts of our debt follows:
March 31,
2022
December 31,
2021
Senior secured credit facility$335,000 $230,000 
Promissory note due 2024 2,780 
Total long-term debt335,000 232,780 
Current maturities of long-term debt (559)
Long-term debt, net of current portion$335,000 $232,221 
Senior Secured Credit Facility
The Company has a $600 million senior secured revolving credit facility, subject to the terms of a Second Amended and Restated Credit Agreement dated as of March 31, 2015, as amended to date (as amended and modified the "Amended Credit Agreement"), that becomes due and payable in full upon maturity on September 27, 2024. The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount of up to $150 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Amended Credit Agreement of $750 million. The initial borrowings under the Amended Credit Agreement were used to refinance borrowings outstanding under a prior credit agreement, and future borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, acquisitions of businesses, share repurchases, and general corporate purposes.
Fees and interest on borrowings vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, borrowings under the Amended Credit Agreement will bear interest at one, two, three or six-month LIBOR or an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.125% per annum and 1.875% per annum, in the case of LIBOR borrowings, or between 0.125% per annum and 0.875% per annum, in the case of base rate loans, based upon our Consolidated Leverage Ratio at such time.
Amounts borrowed under the Amended Credit Agreement may be prepaid at any time without premium or penalty. We are required to prepay the amounts outstanding under the Amended Credit Agreement in certain circumstances, including upon an Event of Default (as defined in the Amended Credit Agreement). In addition, we have the right to permanently reduce or terminate the unused portion of the commitments provided under the Amended Credit Agreement at any time.
The loans and obligations under the Amended Credit Agreement are secured pursuant to a Second Amended and Restated Security Agreement and a Second Amended and Restated Pledge Agreement (the “Pledge Agreement”) with Bank of America, N.A. as collateral agent, pursuant to which the Company and the subsidiary guarantors grant Bank of America, N.A., for the ratable benefit of the lenders under the Amended Credit Agreement, a first-priority lien, subject to permitted liens, on substantially all of the personal property assets of the Company and the subsidiary guarantors, and a pledge of 100% of the stock or other equity interests in all domestic subsidiaries and 65% of the stock or other equity interests in each “material first-tier foreign subsidiary” (as defined in the Pledge Agreement).
The Amended Credit Agreement contains usual and customary representations and warranties; affirmative and negative covenants, which include limitations on liens, investments, additional indebtedness, and restricted payments; and two quarterly financial covenants as follows: (i) a maximum Consolidated Leverage Ratio (defined as the ratio of debt to consolidated EBITDA) of 3.75 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 upon the occurrence of certain transactions, and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.50 to 1.00. Consolidated EBITDA for purposes of the financial covenants is calculated on a continuing operations basis and includes adjustments to add back non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, pro forma historical EBITDA for businesses 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 March 31, 2022, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of 2.24 to 1.00 and a Consolidated Interest Coverage Ratio of 19.08 to 1.00.
Borrowings outstanding under the Amended Credit Agreement at March 31, 2022 totaled $335.0 million. These borrowings carried a weighted average interest rate of 2.1%, including the effect of the interest rate swaps described in Note 9 “Derivative Instruments and Hedging Activity.” Borrowings outstanding under the Amended Credit Agreement at December 31, 2021 were $230.0 million and carried a weighted average interest rate of 2.7%, including the effect of the interest rate swaps. The borrowing capacity under the revolving credit facility is reduced by any outstanding borrowings under the revolving credit facility and outstanding letters of credit. At March 31, 2022, we
10


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
had outstanding letters of credit totaling $0.7 million, which are used as security deposits for our office facilities. As of March 31, 2022, the unused borrowing capacity under the revolving credit facility was $264.3 million.
Promissory Note due 2024
On June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed from the sellers of the aircraft a promissory note with an outstanding principal balance of $5.1 million. In the first quarter of 2022, we completed the sale of the aircraft to a third-party and used a portion of the sale proceeds to pay the remaining principal and unpaid interest on the promissory note. Prior to the repayment of the promissory note, the principal balance of the promissory note was subject to scheduled monthly principal payments until the maturity date of March 1, 2024. Under the terms of the promissory note, we paid interest on the outstanding principal amount at a rate of one month LIBOR plus 1.97% per annum. At December 31, 2021, the outstanding principal amount of the promissory note was $2.8 million, and the aircraft had a carrying amount of $3.7 million. As a result of the sale, we recognized a gain of $1.0 million and we no longer own any aircraft.
8. Restructuring Charges
Restructuring charges for the three months ended March 31, 2022 were $1.6 million, compared to $0.6 million for the three months ended March 31, 2021. The $1.6 million of restructuring charges recognized in the first quarter of 2022 included $0.6 million of rent and related expenses, net of sublease income, for previously vacated office spaces, $0.5 million of employee-related expenses, $0.3 million of accelerated amortization of capitalized software implementation costs for a cloud-computing arrangement that is no longer in use, and $0.1 million for third-party transaction expenses related to the modification of our operating model. The $0.6 million of restructuring charges recognized in the first quarter of 2021 primarily related to rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for vacated office spaces.
The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the three months ended March 31, 2022.
Employee CostsOther Total
Balance as of December 31, 2021$573 $567 $1,140 
Additions500 95 595 
Payments(324)(121)(445)
Adjustments
7  7 
Balance as of March 31, 2022$756 $541 $1,297 
All of the $0.8 million restructuring charge liability related to employee costs at March 31, 2022 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 $0.5 million other restructuring charge liability at March 31, 2022 is expected to be paid over the next 12 months and is included as a component of accrued expenses and other current liabilities in our consolidated balance sheet.
9. Derivative Instruments and Hedging Activity
On June 22, 2017, we entered into a forward interest rate swap agreement effective August 31, 2017 and ending August 31, 2022, with a notional amount of $50.0 million. We entered into this derivative instrument to hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.900%.
On January 30, 2020, we entered into a forward interest rate swap agreement effective December 31, 2019 and ending December 31, 2024, with a notional amount of $50.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.500%.
On March 16, 2020, we entered into a forward interest rate swap agreement effective February 28, 2020 and ending February 28, 2025, with a notional amount of $100.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 0.885%.
11


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
We recognize all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet. We have designated these derivative instruments as cash flow hedges. Therefore, changes in the fair value of the derivative instruments are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified into interest expense, net of interest income upon settlement. As of March 31, 2022, it was anticipated that $0.6 million of the gains, net of tax, currently recorded in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.
The table below sets forth additional information relating to the interest rate swaps designated as a cash flow hedging instrument as of March 31, 2022 and December 31, 2021.
 Fair Value (Derivative Asset and Liability)
Balance Sheet LocationMarch 31,
2022
December 31,
2021
Prepaid expenses and other current assets$1,019 $ 
Other non-current assets$4,501 $1,210 
Accrued expenses and other current liabilities$183 $1,604 
Deferred compensation and other liabilities$ $149 
All of our derivative instruments are transacted under the International Swaps and Derivatives Association (ISDA) master agreements. These agreements permit the net settlement of amounts owed in the event of default and certain other termination events. Although netting is permitted, it is our policy to record all derivative assets and liabilities on a gross basis in our consolidated balance sheet.
We do not use derivative instruments for trading or other speculative purposes. Refer to Note 11 “Other Comprehensive Income (Loss)” for additional information on our derivative instruments.
10. Fair Value of Financial Instruments
Certain of our assets and liabilities are measured at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy for inputs used in measuring fair value and requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy consists of three levels based on the objectivity of the inputs as follows:
Level 1 Inputs
Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 InputsQuoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 InputsUnobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.
12


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The table below sets forth our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.
Level 1Level 2Level 3Total
March 31, 2022
Assets:
Interest rate swap$ $5,520 $ $5,520 
Convertible debt investment  62,301 62,301 
Deferred compensation assets 36,913  36,913 
Total assets$ $42,433 $62,301 $104,734 
Liabilities:
Interest rate swaps$ $183 $ $183 
Contingent consideration for business acquisitions  4,620 4,620 
Total liabilities$ $183 $4,620 $4,803 
December 31, 2021
Assets:
Interest rate swap$ $627 $ $627 
Convertible debt investment  65,918 65,918 
Deferred compensation assets 39,430  39,430 
Total assets$ $40,057 $65,918 $105,975 
Liabilities:
Interest rate swaps$ $1,170 $ $1,170 
Contingent consideration for business acquisition  3,743 3,743 
Total liabilities$ $1,170 $3,743 $4,913 
Interest rate swaps: The fair values of our interest rate swaps were derived using estimates to settle the interest rate swap agreements, which are based on the net present value of expected future cash flows on each leg of the swaps utilizing market-based inputs and a discount rate reflecting the risks involved. Refer to Note 9 “Derivative Instruments and Hedging Activity” for additional information on our interest rate swaps.
Convertible debt investment: Since 2014, we have invested $40.9 million in the form of 1.69% convertible debt in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight, a U.S.-based company that partners with leading nonprofit universities to increase access to and retention of international students, boost institutional growth, and enhance an institution’s global footprint. The convertible notes will mature on January 17, 2024, unless converted earlier.
To determine the appropriate accounting treatment for our investment, we performed a variable interest entity (“VIE”) analysis and concluded that Shorelight does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the convertible notes are not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment, we concluded the appropriate accounting treatment to be that of an available-for-sale debt security.
The investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income. We estimate the fair value of our investment using a scenario-based approach in the form of a hybrid analysis that consists of a Monte Carlo simulation model and an expected return analysis. The conclusion of value for our investment is based on the probability-weighted assessment of both scenarios. The hybrid analysis utilizes certain assumptions including the assumed holding period through the maturity date of January 17, 2024; the applicable waterfall distribution at the end of the expected holding period based on the rights and privileges of the various instruments; cash flow projections discounted at the risk-adjusted rate of 22.5% as of both March 31, 2022 and December 31, 2021; and the concluded equity volatility of 40.0% and 45.0% as of March 31, 2022 and December 31, 2021, respectively, all of which are Level 3 inputs. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the investment, which would result in different impacts to our consolidated balance sheet and comprehensive income. Actual results may differ from our estimates. The fair value of the convertible debt investment is recorded in long-term investments in our consolidated balance sheets.
13


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The table below sets forth the changes in the balance of the convertible debt investment for the three months ended March 31, 2022.
Convertible Debt Investment
Balance as of December 31, 2021$65,918 
Change in fair value(3,617)
Balance as of March 31, 2022$62,301 
Deferred compensation assets: We have a non-qualified deferred compensation plan (the “Plan”) for the members of our board of directors and a select group of our employees. The deferred compensation liability is funded by the Plan assets, which consist of life insurance policies maintained within a trust. The cash surrender value of the life insurance policies approximates fair value and is based on third-party broker statements which provide the fair value of the life insurance policies' underlying investments, which are Level 2 inputs. The cash surrender value of the life insurance policies is invested primarily in mutual funds. The Plan assets are included in other non-current assets in our consolidated balance sheets. Realized and unrealized gains (losses) from the deferred compensation assets are recorded to other income (expense), net in our consolidated statements of operations.
Contingent consideration for business 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 2.6% as of March 31, 2022. As of December 31, 2021, the discount rate used in the fair value measurements of our contingent consideration was in a range of 2.4% to 5.1% with a weighted average of 3.7%. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest projections and input provided by practice leaders and management. Any change in the fair value estimate is recorded in our consolidated statement of operations for that period. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of our contingent consideration liability, which would result in different impacts to our consolidated balance sheets and consolidated statements of operations. Actual results may differ from our estimates.
14


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the three months ended March 31, 2022.
Contingent Consideration for Business Acquisitions
Balance as of December 31, 2021
$3,743 
Acquisition869 
Payment(4)
Change in fair value12 
Balance as of March 31, 2022
$4,620 
Financial assets and liabilities not recorded at fair value on a recurring basis are as follows:
Medically Home Preferred Stock Investment
In the fourth quarter of 2019, we invested $5.0 million in Medically Home Group, Inc. (“Medically Home”), a hospital-at-home company. The investment was made in the form of preferred stock. To determine the appropriate accounting treatment for our preferred stock investment, we performed a VIE analysis and concluded that Medically Home does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the preferred stock is not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment, we concluded the appropriate accounting treatment for our investment in Medically Home to be that of an equity security with no readily determinable fair value. We elected to apply the measurement alternative at the time of the purchase and will continue to do so until the investment does not qualify to be so measured. Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in Medically Home. On a quarterly basis, we review the information available to determine whether an orderly and observable transaction for the same or similar equity instrument occurred, and remeasure to the fair value of the preferred stock using such identified transactions, with changes in the fair value recorded in consolidated statement of operations.
As of December 31, 2021, the carrying amount of our preferred stock investment was $6.7 million. During the first quarter of 2022, we recognized an unrealized gain of $27.0 million to increase the carrying amount of our preferred stock investment to $33.6 million, based on an observable price change of preferred stock issued by Medically Home with similar rights and preferences to our preferred stock investment. This observable price change is a Level 2 input. The $27.0 million unrealized gain is recorded to other income (expense), net in our consolidated statement of operations. Since our initial investment, we have recognized cumulative unrealized gains of $28.6 million. We have not identified any impairments of our investment.
Senior Secured Credit Facility
The carrying value of our borrowings outstanding under our senior secured credit facility is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the senior secured credit facility bears interest at variable rates based on current market rates as set forth in the Amended Credit Agreement. Refer to Note 7 “Financing Arrangements” for additional information on our senior secured credit facility.
Promissory Note due 2024
In the first quarter of 2022, we completed the sale of our aircraft to a third-party and used a portion of the sale proceeds to pay the remaining principal and unpaid interest on our promissory note due 2024. The carrying value of our promissory note due 2024 was stated at cost. The carrying value approximated fair value, using Level 2 inputs, as the promissory note bore interest at rates based on then-current market rates as set forth in the terms of the promissory note. Refer to Note 7 “Financing Arrangements” for additional information on our promissory note due 2024.
Cash and Cash Equivalents and Other Financial Instruments
Cash and cash equivalents are stated at cost, which approximates fair market value. The carrying values of all other financial instruments not described above reasonably approximate fair market value due to the nature of the financial instruments and the short-term maturity of these items.
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HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
11. Other Comprehensive Income (Loss)
The table below sets forth the components of other comprehensive income (loss), net of tax, for the three months ended March 31, 2022 and 2021.
Three Months Ended
March 31, 2022
Three Months Ended
March 31, 2021
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Before
Taxes
Tax
(Expense)
Benefit
Net of
Taxes
Other comprehensive income (loss):
Foreign currency translation adjustments$(43)$ $(43)$400 $ $400 
Unrealized gain (loss) on investment$(3,617)$956 $(2,661)$(6,328)$1,680 $(4,648)
Unrealized gain (loss) on cash flow hedges:
Change in fair value$5,668 $(1,499)$4,169 $1,189 $(337)$852 
Reclassification adjustments into earnings212 (56)156 780 (203)577 
Net unrealized gain (loss)$5,880 $(1,555)$4,325 $1,969 $(540)$1,429 
Other comprehensive income (loss)$2,220 $(599)$1,621 $(3,959)$1,140 $(2,819)
The before tax amounts reclassified from accumulated other comprehensive income related to our cash flow hedges are recorded to interest expense, net of interest income.
Accumulated other comprehensive income, net of tax, includes the following components: 
Foreign Currency
Translation
Available-for-Sale InvestmentCash Flow HedgesTotal
Balance, December 31, 2021$(1,143)$18,374 $(391)$16,840 
Current period change(43)(2,661)4,325 1,621 
Balance, March 31, 2022$(1,186)$15,713 $3,934 $18,461 
12. Income Taxes
For the three months ended March 31, 2022, our effective tax rate was 29.6% as we recognized income tax expense of $11.3 million on income of $38.1 million. The effective tax rate of 29.6% was less favorable than the statutory rate, inclusive of state income taxes, of 26.4%, primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.
For the three months ended March 31, 2021, our effective tax rate was 22.1% as we recognized income tax expense of $1.5 million on income of $6.9 million. The effective tax rate of 22.1% was more favorable than the statutory rate, inclusive of state income taxes, of 26.6%, primarily due to a discrete tax benefit for share-based compensation awards that vested during the first quarter of 2021. This favorable item was partially offset by certain nondeductible expense items
As of March 31, 2022, we had $0.7 million of unrecognized tax benefits which would affect the effective tax rate of continuing operations if recognized. It is reasonably possible that approximately $0.1 million of the liability for unrecognized tax benefits could decrease in the next twelve months due to the expiration of statutes of limitations.
13. Commitments, Contingencies and Guarantees
Litigation
Oaktree
On November 9, 2018, Huron Consulting Services LLC, a wholly owned subsidiary of Huron, was engaged by Oaktree Medical Centre LLC, a management services organization (“Oaktree”), to perform interim management and financial advisory services. As part of the services, a Huron employee was appointed by Oaktree’s board of directors to serve as Chief Restructuring Officer of Oaktree (the “CRO”). The engagement letter through which Oaktree retained Huron’s services (the “Engagement Letter”) states that all disputes or claims arising
16


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
thereunder are subject to binding arbitration, disclaims special, consequential, incidental and exemplary damages and losses and caps liability to the fees paid for the portion of the engagement giving rise to any liability. On September 19, 2019, Oaktree and certain of its affiliates filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of North Carolina, with the cases subsequently transferred to the District of South Carolina. As a result of the bankruptcy filing, a Chapter 7 trustee was appointed to oversee the bankruptcy estates, at which time Huron’s services for Oaktree concluded.
In April 2021, Trustee’s counsel communicated in writing to Huron its intent to pursue various claims against Huron and the CRO, among others, on behalf of the bankruptcy estates related to the services carried out by Huron and the CRO during the engagement.
On September 17, 2021, the Trustee filed a complaint in the Bankruptcy Court for the District of South Carolina against Huron and the CRO, among others (the “Complaint”), alleging breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, negligence, violations of the South Carolina Unfair Trade Practices Act, fraud, civil conspiracy, unjust enrichment, and recovery of avoided transfers under sections 547, 548 and 550 of the Bankruptcy Code. On December 7, 2021, the Trustee filed an amended version of the Complaint (the “Amended Complaint”), generally alleging the same claims asserted in the initial Complaint but (i) removing the claim for a violation of the South Carolina Unfair Trade Practices Act and (ii) adding a claim for breach of contract.
In the Amended Complaint, the Trustee asserted that Huron and the CRO, among others, did not develop and implement a Chapter 11 restructuring plan on a timely basis and that their failure to do so led to significant damages. The Trustee sought an unspecified amount of monetary damages in the Amended Complaint. We believe the Trustee’s allegations with respect to Huron and the CRO are without merit. On December 21, 2021, we filed a motion to dismiss all of the claims in the Amended Complaint. On April 19, 2022, the bankruptcy court entered an order staying all of the Trustee’s claims against Huron and the CRO after (i) finding that the state law claims were subject to arbitration and (ii) exercising its discretion to stay the non-state-law claims pending the arbitration proceeding. The Trustee has until May 3, 2022 to appeal the court’s order. Notwithstanding the foregoing, given the inherent risk and uncertainty associated with all litigation, we cannot estimate the potential liability with respect to such allegations at this time.
From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. As of the date of this Quarterly Report on Form 10-Q, we are not a party to any litigation or legal proceeding or subject to any claim that, in the current opinion of management, could reasonably be expected to have a material adverse effect on our financial position or results of operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected results.
Guarantees
Guarantees in the form of letters of credit totaling $0.7 million were outstanding at both March 31, 2022 and December 31, 2021, primarily to support certain office lease obligations.
In connection with certain business acquisitions, we may be required to pay post-closing consideration to the sellers if specific financial performance targets are met over a number of years as specified in the related purchase agreements. As of March 31, 2022 and December 31, 2021, the total estimated fair value of our outstanding contingent consideration liability was $4.6 million and $3.7 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.
14. Segment Information
Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker, who is our chief executive officer, manages the business under three operating segments, which are our reportable segments: Healthcare, Education and Commercial.
Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.
17


HURON CONSULTING GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share amounts)
(Unaudited)
To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes create greater transparency for investors by improving visibility into the core drivers of our business. While our consolidated results have not been impacted, our historical segment information has been recast for consistent presentation.
Healthcare
Our Healthcare segment serves acute care providers, including national and regional health systems, academic health systems, community health systems, and public, children’s and critical access hospitals, and non-acute care providers, including physician practices and medical groups, payors, and long-term care or post-acute providers. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; digital solutions; organizational transformation; financial advisory and strategy and innovation. Most healthcare organizations are focused on establishing a sustainable long-term strategy and business model centered around optimal cost structures, reimbursement models and financial strategies; changing the way care is delivered, particularly in light of personnel shortages, and improving access to care; and evolving their digital capabilities to more effectively manage their business. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization. We use our deep industry, functional and technical expertise to help clients solve a diverse set of business issues, including, but not limited to, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, and maximizing return on technology investments.