# Huron Consulting Group Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Huron Consulting Group Inc.](/companies/hurn.md) (CIK 1289848)
- Form: 10-Q
- Filed: 2024-07-30
- Accepted by EDGAR: Jul 30, 2024, 16:21 ET
- Period: 2024-06-30
- Accession: 0001289848-24-000172
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1289848/000128984824000172/hurn-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1289848/000128984824000172/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $381.0m | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $744.4m | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $71.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $144.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $59.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $79.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $14.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $14.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $37.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $55.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $2.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $2.96 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $2.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $3.08 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 18,454,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 18,741,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$23.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $3.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $97.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $17.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $435.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.33bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $225.8m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-06-30 | $496.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $13.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $500.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 92,066 characters.

*In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Huron,” “Company,” “we,” “us” and “our” refer to Huron Consulting Group Inc. and its subsidiaries.*

*Statements in this Quarterly Report on Form 10-Q that are not historical in nature, including those concerning the Company’s current expectations about its future results, are “forward-looking” statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as “may,” “should,” “expects,” “provides,” “anticipates,” “assumes,” “can,” “will,” “meets,” “could,” “likely,” “intends,” “might,” “predicts,” “seeks,” “would,” “believes,” “estimates,” “plans,” “continues,” “goals,” “guidance,” or “outlook,” or similar expressions. These forward-looking statements reflect our current expectations about our future requirements and needs, results, levels of activity, performance, or achievements. Some of the factors that could cause actual results to differ materially from the forward-looking statements contained herein include, without limitation: failure to achieve expected utilization rates, billing rates, and the necessary number of revenue-generating professionals; inability to expand or adjust our service offerings in response to market demands; our dependence on renewal of client-based services; dependence on new business and retention of current clients and qualified personnel; failure to maintain third-party provider relationships and strategic alliances; inability to license technology to and from third parties; the impairment of goodwill; various factors related to income and other taxes; difficulties in successfully integrating the businesses we acquire and achieving expected benefits from such acquisitions; risks relating to privacy, information security, and related laws and standards; and a general downturn in market conditions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, among others, those described under Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 that may cause actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. We disclaim any obligation to update or revise any forward-looking statements as a result of new information or future events, or for any other reason.*

### OVERVIEW

Huron is a global professional services firm that partners with clients to develop growth strategies, optimize operations and accelerate digital transformation, including using an enterprise portfolio of technology, data and analytics solutions, to empower clients to own their future. By collaborating with clients, embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.

### OUR STRATEGY

The combination of our deep industry expertise and breadth of our offerings is the foundation of our growth strategy and why our clients choose Huron as their trusted advisor. Key focus areas of our growth strategy include:

- **Accelerating Growth in Healthcare and Education:** Huron has leading market positions in healthcare and education, providing comprehensive offerings to the largest health systems, academic medical centers, colleges and universities, and research institutes in the United States.
- **Growing Presence in Commercial Industries:** Huron’s commercial industry focus has increased the diversification of the Company’s portfolio and end markets while expanding the range of capabilities it can deliver to clients, providing new avenues for growth and an important balance to its healthcare and education focus.
- **Rapidly Growing Global Digital Capability:** Huron’s ability to provide a broad portfolio of digital offerings that support the strategic and operational needs of its clients is at the foundation of the Company’s strategy. Huron will continue to advance its integrated digital platform to support its strong growth trajectory.
- **Solid Foundation for Margin Expansion:** The Company is well-positioned to achieve consistent margin expansion as well as strong annual adjusted diluted earnings per share growth. We are committed to operating income margin expansion by growing the areas of the business that provide the most attractive returns, improving the operational efficiency of our delivery for clients, and scaling our selling, general, and administrative expenses as we grow.
- **Strong Balance Sheet and Cash Flows:** Strong free cash flows have and will continue to be a hallmark of Huron’s financial strength and business model. The Company is committed to deploying capital in a strategic and balanced way, including returning capital to shareholders and executing strategic, tuck-in acquisitions.

### OUR SERVICES AND PRODUCTS

We provide our services and products and manage our business under three operating 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. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital, which are methods by which we deliver our services and products.

### Operating Industries

- ***Healthcare***

Our Healthcare segment serves acute care providers, including national and regional health systems; academic health systems; community health systems; the federal health system; 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-focused services and products include financial and operational performance improvement consulting, which spans revenue cycle, cost and care delivery transformation; digital offerings, spanning technology and analytic-related services, including enterprise health record (“EHR”), enterprise resource planning (“ERP”) and enterprise performance management (“EPM”), customer relationship management (“CRM”), data management and technology managed services, and a portfolio of software products; organizational transformation; revenue cycle managed services and outsourcing; financial and capital advisory consulting; and strategy and innovation consulting.

To best serve our clients, we continue to diversify our portfolio of offerings. For example, we have broadened our capabilities beyond our leading profit and loss-focused offerings (e.g., revenue cycle, cost transformation) into offerings dedicated to optimizing our clients' financial positions through financial advisory and transaction-related services; transforming care delivery models through virtual health, health equity and social determinants of health models; and evolving organizations by supporting change management and developing the next generation of leaders by applying our best practices (e.g., revenue cycle leadership).

- ***Education***

Our Education segment serves public and private colleges and universities, research institutes and other education-related organizations. Our education and research-focused services and products include our digital offerings, spanning technology and analytic-related services, including student information systems, ERP and EPM, CRM, data management and technology managed services and our Huron Research Suite product suite (the leading software suite designed to facilitate and improve research administration service delivery and compliance); our research-focused consulting and managed services; and our strategy and operations consulting services, which span finance, accounting, operations and philanthropy functions, organization and talent strategy, and student and academic strategy. We continue to broaden our offerings into new areas. Most recently, we expanded our research managed services, advancement, campus health and well-being, and athletics offerings.

- ***Commercial***

Our Commercial segment is focused on serving industries and organizations facing significant disruption and regulatory change by helping them adapt to rapidly changing environments and accelerate business transformation. Our Commercial professionals work primarily with six primary buyers: the chief executive officer, the chief financial officer, the chief strategy officer, the chief human resources officer, the chief operating officer, and organizational advisors, including lenders and law firms. We have a deep focus on serving organizations in the financial services, energy and utilities, industrials and manufacturing industries and the public sector while opportunistically serving commercial industries more broadly, including professional and business services, life sciences, consumer products, and nonprofit. Our Commercial professionals use their deep industry, functional and technical expertise to deliver our digital services and software products, financial advisory (special situation advisory and corporate finance advisory) services, and strategy and innovation consulting services.

### Capabilities

Within each of our operating segments, we provide our offerings under two principal capabilities: i) Consulting and Managed Services and ii) Digital.

- ***Consulting and Managed Services***

Our Consulting and Managed Services capabilities represent our management consulting services, managed services (excluding technology-related managed services) and outsourcing services delivered across industries. Our Consulting and Managed Services experts help our clients address a variety of strategic, operational, financial, people and organizational-related challenges. These services are often combined with technology, analytic and data-driven solutions powered by our Digital capability to support long-term relationships with our clients and drive lasting impact. Examples include the areas of revenue cycle management and research administration managed services and outsourcing at our healthcare, education and research-focused clients, where our projects are often coupled with our digital services and product offerings and management consulting services to sustain improved performance.

- ***Digital***

Our Digital capabilities represent our technology and analytics services, including technology-related managed services, and software products delivered across industries. Our Digital experts help clients address a variety of business challenges, including, but not limited to, designing and implementing technologies to accelerate transformation, facilitate data-driven decision making and improve customer and employee experiences. We have invested organically and inorganically to expand our Digital offerings, which now span beyond traditional ERP implementations into a broader set of administrative systems, industry-specific systems of record and systems of engagement that act as the “digital front door” to an organization. We also have grown our data, analytics and automation offerings to deliver a unified and actionable technology ecosystem for our clients.

We have expanded our ecosystem to work with more than 25 technology partners. We are a Leading Modern Oracle Network Partner; a Summit-level consulting partner with Salesforce.com and a Premium Partner with Salesforce.org; a Workday Services, Preferred Channel, Extend, and Application Management Services Partner; an Amazon Web Services consulting partner; an Informatica Platinum Partner; an SAP Concur implementation partner; and a Boomi Elite Partner.

We have also grown our proprietary software product portfolio to address our clients' challenges with solutions that expand our base of recurring revenue and further differentiate our consulting, digital and managed services offerings. Our product portfolio bundles our deep industry expertise and unique intellectual property together to serve our clients outside of our traditional consulting offerings. Our product portfolio includes, among others: Huron Research Suite, the leading software suite designed to facilitate and improve research administration service delivery and compliance; Huron Intelligence™ Rounding, the #1 ranked Digital Rounding solution in the 2024 Best in KLAS® Software & Services report; and Huron Intelligence™ Analytic Suite in Healthcare, a predictive analytics suite to improve care delivery while lowering costs.

### COMPONENTS OF OPERATING RESULTS

### Revenues

Our revenues are primarily generated by our employees who provide consulting and other professional services to our clients and are billable to our clients based on the number of hours worked, services provided, or achieved outcomes. We refer to these employees as our revenue-generating professionals. Revenues are primarily driven by the number of revenue-generating professionals we employ as well as the total value, scope, and terms of the consulting contracts under which they provide services. We also engage independent contractors to supplement our revenue-generating professionals on client engagements as needed.

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

- *Fixed-fee (including software license revenue):* In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. Fixed-fee arrangements also include software licenses for our revenue cycle management software and research administration and compliance software.
- *Time-and-expense:* Under time-and-expense billing arrangements, we invoice our clients based on the number of hours worked by our revenue-generating professionals at agreed upon rates. Time-and-expense arrangements also include speaking engagements, conferences and publications purchased by our clients.
- *Performance-based:* In performance-based billing arrangements, fees are tied to the attainment of contractually defined objectives. We enter into performance-based engagements in essentially two forms. First, we generally earn fees that are directly related to the savings formally acknowledged by the client as a result of adopting our recommendations for improving operational and cost effectiveness in the areas we review. Second, we earn a success fee when and if certain predefined outcomes occur. Often, performance-based fees supplement our fixed-fee or time-and-expense engagements. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide.
- *Software support, maintenance and subscriptions:* Clients that have purchased one of our software licenses can pay an annual fee for software support and maintenance. We also generate subscription revenue from our cloud-based analytic tools and solutions. Software support, maintenance and subscription revenues are recognized ratably over the support or subscription period. These fees are generally billed in advance and included in deferred revenues until recognized.

Time-and-expense engagements do not provide us with a high degree of predictability as to performance in future periods. Unexpected changes in the demand for our services can result in significant variations in utilization and revenues and present a challenge to optimal hiring and staffing. Moreover, our clients typically retain us on an engagement-by-engagement basis, rather than under long-term recurring contracts. The volume of work performed for any particular client can vary widely from period to period.

Our quarterly results are impacted principally by the total value, scope, and terms of our client contracts, the number of our revenue-generating professionals who are available to work, our revenue-generating professionals' utilization rate, and the bill rates we charge our clients. Our utilization rate can be negatively affected by increased hiring because there is generally a transition period for new professionals that results in a temporary drop in our utilization rate. Our utilization rate can also be affected by seasonal variations in the demand for our services from our clients. For example, during the third and fourth quarters of the year, vacations taken by our clients can result in the deferral of activity on existing and new engagements, which would negatively affect our utilization rate. The number of business work days is also affected by the number of vacation days taken by our consultants and holidays in each quarter. We typically have fewer business work days available in the fourth quarter of the year, which can impact revenues during that period.

### Reimbursable Expenses

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

### Operating Expenses

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

Selling, general and administrative expenses consist primarily of compensation costs for our support personnel. Also included in selling, general and administrative expenses are third-party professional fees, software licenses and data hosting expenses, rent and other office related expenses, sales and marketing related expenses, recruiting and training expenses, and practice administration and meetings expenses.

Other operating expenses include restructuring charges, other gains and losses, depreciation expense, and amortization expense related to internally developed software costs and intangible assets acquired in business combinations.

### Segment Results

Segment operating income consists of the revenues generated by a segment, less operating expenses that are incurred directly by the segment. Other operating expenses not allocated at the segment level include corporate costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. These administrative function costs include corporate office support costs, office facility costs, costs related to accounting and finance, human resources, legal, marketing, information technology, and company-wide business development functions, and costs related to overall corporate management.

### Non-GAAP Measures

We also assess our results of operations using the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted EBITDA as a percentage of revenues, adjusted net income, and adjusted diluted earnings per share. These non-GAAP financial measures differ from GAAP because they exclude a number of items required by GAAP, each discussed below. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows, or liquidity prepared in accordance with GAAP. Our non-GAAP financial measures may be defined differently from time to time and may be defined differently than similar terms used by other companies, and accordingly, care should be exercised in understanding how we define our non-GAAP financial measures.

Our management uses the non-GAAP financial measures to gain an understanding of our comparative operating performance, for example when comparing such results with previous periods or forecasts. These non-GAAP financial measures are used by management in their financial and operating decision making because management believes they reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons. Management also uses these non-GAAP financial measures when publicly providing our business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. We believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating Huron’s current operating performance and future prospects in the same manner as management does and in comparing in a consistent manner Huron’s current financial results with Huron’s past financial results.

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

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

*Restructuring charges:* We have incurred charges due to restructuring various parts of our business. These restructuring charges have primarily consisted of costs associated with office space consolidations, including lease impairment charges and accelerated depreciation on lease-related property and equipment, and employee severance charges. We exclude the effect of the restructuring charges from our non-GAAP measures to permit comparability with periods that were not impacted by these items. We do not include normal, recurring, cash operating expenses in our restructuring charges.

*2024 litigation settlement gain:* In the second quarter of 2024, we settled a litigation matter for which Huron was the plaintiff for $15.0 million, on a pre-tax basis. This $15.0 million settlement gain was recorded as a component of other gains, net on our consolidated statement of operations. We have excluded from our non-GAAP measures $11.7 million, which is the value of the settlement gain that exceeds the third-party legal costs incurred during 2024 specific to this litigation matter, as this net gain is not indicative of the ongoing performance of our business. Of the $3.3 million third-party legal costs incurred for this matter in the first half of 2024, $2.7 million was incurred in the first quarter and $0.6 million was incurred in the second quarter. Our third-party legal expenses are recorded as a component of selling, general and administrative expenses on our statement of operations. Third-party legal costs incurred for this litigation matter during the three and six months ended June 30, 2023 were $0.4 million and $1.0 million, respectively.

*Other losses (gains), net:* We exclude the effects of other losses and gains, which primarily relate to changes in the estimated fair value of our liabilities for contingent consideration related to business acquisitions and litigation settlement losses and gains, excluding the 2024 litigation settlement gain presented separately, to permit comparability with periods that are not impacted by these items. These items are recorded as a component of other gains, net on our consolidated statement of operations.

*Transaction-related expenses*: To permit comparability with prior periods, we exclude the impact of third-party advisory, legal, and accounting fees and other corporate costs incurred directly related to the evaluation and/or consummation of business acquisitions.

*Foreign currency transaction losses (gains), net:* We exclude the effect of foreign currency transaction losses and gains from the calculation of adjusted EBITDA because the amount of each loss or gain is significantly affected by changes in foreign exchange rates.

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

*Income tax expense, interest expense, net of interest income, depreciation and amortization:* We exclude the effects of income tax expense, interest expense, net of interest income, and depreciation and amortization in the calculation of EBITDA, as these are customary exclusions as defined by the calculation of EBITDA to arrive at meaningful earnings from core operations excluding the effect of such items. We include, within the depreciation and amortization adjustment, the amortization of capitalized implementation costs of our ERP and other related software, which is included within selling, general and administrative expenses in our consolidated statements of operations.

### Revenue-Generating Professionals

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

### Utilization Rate

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

### RESULTS OF OPERATIONS

### Executive Highlights

Highlights from the second quarter of 2024 include:

- Total revenues increased 7.2% to $371.7 million for the second quarter of 2024 from $346.8 million for the second quarter of 2023.
- Diluted EPS increased 59.8% to $2.03 for the second quarter of 2024, compared to $1.27 for the second quarter of 2023. Diluted EPS for the second quarter of 2024 includes a litigation settlement gain related to a completed legal matter for which Huron was the plaintiff, which had a favorable $0.60 impact on diluted EPS.
- Adjusted diluted EPS increased 21.7% to $1.68 for the second quarter of 2024, compared to $1.38 for the second quarter of 2023.
- Net cash provided by operating activities was $107.2 million for the second quarter of 2024, compared to $78.2 million for the second quarter of 2023.
- Returned $96.7 million to shareholders in the first six months of 2024 by repurchasing 1,001,191 shares of our common stock.

Total revenues increased $24.9 million, or 7.2%, to $371.7 million for the second quarter of 2024 from $346.8 million for the second quarter of 2023. The increase in revenues was driven by continued strength in demand for Healthcare's Consulting and Managed Services and Digital capabilities, as well as an increase in demand for Education's Consulting and Managed Services capability, reflecting our focus on accelerating growth in our healthcare and education industries. These increases were partially offset by a decrease in demand for Commercial's Digital capability.

In our Consulting and Managed Services capability, revenues for the second quarter of 2024 increased 10.7%, compared to the second quarter of 2023, and reflected strengthened demand in our Education and Healthcare segments. The utilization rate within our Consulting capability decreased to 73.7% in the second quarter of 2024, compared to 76.0% in the second quarter of 2023.

Revenues within our Digital capability increased 2.5% in the second quarter of 2024, compared to the second quarter of 2023, and reflected strengthened demand in our Healthcare segment, partially offset by a decrease in demand in our Commercial segment. The utilization rate within our Digital capability increased to 75.0% in the second quarter of 2024, compared to 74.7% in the second quarter of 2023.

The total number of revenue-generating professionals increased 13.0% to 5,848 as of June 30, 2024, compared to 5,174 as of June 30, 2023, as a result of hiring to support the overall increase in demand for our services, and includes approximately 70 hires as a result of our acquisition of GG+A in the first quarter of 2024. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services as employee compensation costs are the most significant portion of our operating expenses.

Net income increased $12.8 million, or 51.7%, to $37.5 million for the three months ended June 30, 2024 from $24.7 million for the same period last year. Net income for the second quarter of 2024 includes an $11.1 million litigation settlement gain, net of tax, related to a completed legal matter for which Huron was the plaintiff. As a result of the increase in net income and a reduction in diluted shares outstanding resulting from share repurchases, diluted earnings per share for the second quarter of 2024 increased 59.8% to $2.03, compared to $1.27 for the second quarter of 2023. The litigation settlement gain recognized in the second quarter of 2024 had a favorable $0.60 impact on diluted earnings per share. Adjusted diluted earnings per share increased 21.7% to $1.68 for the second quarter of 2024, compared to $1.38 for the second quarter of 2023.

Net cash provided by operating activities for the second quarter of 2024 was $107.2 million, compared to $78.2 million for the second quarter of 2023. The increase in net cash provided by operating activities was primarily related to an increase in cash collections during the second quarter of 2024 compared to the second quarter of 2023; partially offset by increases in payments for salaries and related expenses for our revenue-generating professionals and selling, general and administrative expenses during the second quarter of 2024 compared to the second quarter of 2023.

In the first six months of 2024, we deployed $96.7 million of capital to repurchase 1,001,191 shares of our common stock, representing 5.4% of our common stock outstanding as of December 31, 2023.

### Summary of Results

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

| Segment and Consolidated Operating Results (in thousands, except per share amounts): 2024 Healthcare: | Three Months Ended June 30, 2023 | 2024 | Six Months Ended June 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $190,098 | $173,768 | $370,840 | $322,817 |
| Operating income | $55,246 | $49,151 | $97,940 | $81,406 |
| Segment operating income as a percentage of segment revenues | 29.1% | 28.3% | 26.4% | 25.2% |
| **Education:** |  |  |  |  |
| Revenues | $122,753 | $110,694 | $234,336 | $214,841 |
| Operating income | $30,792 | $27,397 | $52,748 | $50,562 |
| Segment operating income as a percentage of segment revenues | 25.1% | 24.8% | 22.5% | 23.5% |
| **Commercial:** |  |  |  |  |
| Revenues | $58,803 | $62,297 | $122,439 | $126,996 |
| Operating income | $9,015 | $10,472 | $23,054 | $24,539 |
| Segment operating income as a percentage of segment revenues | 15.3% | 16.8% | 18.8% | 19.3% |
| **Total Huron:** |  |  |  |  |
| Revenues | $371,654 | $346,759 | $727,615 | $664,654 |
| Reimbursable expenses | 9,363 | 8,140 | 16,787 | 16,630 |
| **Total revenues and reimbursable expenses** | $381,017 | $354,899 | $744,402 | $681,284 |
| Segment operating income | $95,053 | $87,020 | $173,742 | $156,507 |
| Items not allocated at the segment level: |  |  |  |  |

26

| Segment and Consolidated Operating Results (in thousands, except per share amounts): 2024 | Three Months Ended June 30, 2023 | 2024 | Six Months Ended June 30, 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Other operating expenses | 45,626 | 43,044 | 96,565 | 86,665 |
| Other gains, net | (15,917) | (623) | (14,349) | (188) |
| Restructuring charges | 2,047 | 502 | 4,280 | 2,786 |
| Depreciation and amortization | 3,894 | 4,378 | 7,922 | 9,094 |
| Operating income | 59,403 | 39,719 | 79,324 | 58,150 |
| Other expense, net | (7,308) | (4,734) | (9,669) | (7,318) |
| Income before taxes | 52,095 | 34,985 | 69,655 | 50,832 |
| Income tax expense | 14,613 | 10,273 | 14,167 | 12,701 |
| Net income | $37,482 | $24,712 | $55,488 | $38,131 |
| Earnings per share: |  |  |  |  |
| Basic | $2.10 | $1.30 | $3.08 | $2.00 |
| Diluted | $2.03 | $1.27 | $2.96 | $1.95 |
| **Other Operating Data:** |  |  |  |  |
| **Number of revenue-generating professionals by segment (at period end)(1):** |  |  |  |  |
| Healthcare | 2,339 | 1,852 | 2,339 | 1,852 |
| Education | 1,243 | 1,124 | 1,243 | 1,124 |
| Commercial (2) | 2,266 | 2,198 | 2,266 | 2,198 |
| Total | 5,848 | 5,174 | 5,848 | 5,174 |
| **Revenue by capability:** |  |  |  |  |
| Consulting and Managed Services (3)(4) | $218,339 | $197,255 | $419,898 | $374,449 |
| Digital | 153,315 | 149,504 | 307,717 | 290,205 |
| Total | $371,654 | $346,759 | $727,615 | $664,654 |
| **Number of revenue-generating professionals by capability (at period end):** |  |  |  |  |
| Consulting and Managed Services (3)(5) | 2,935 | 2,473 | 2,935 | 2,473 |
| Digital | 2,913 | 2,701 | 2,913 | 2,701 |
| Total | 5,848 | 5,174 | 5,848 | 5,174 |
| **Utilization rate by capability (6):** |  |  |  |  |
| Consulting | 73.7% | 76.0% | 72.0% | 76.1% |
| Digital | 75.0% | 74.7% | 74.6% | 72.8% |

(1) During the first quarter of 2024, we reclassified certain revenue-generating professionals within our Digital capability from our Healthcare and Education segments to our Commercial segment as these professionals are able to provide services across all of our industries. This reclassification did not impact the total Digital capability headcount for any period. The prior period headcount has been revised for consistent presentation.

(2) The majority of our revenue-generating professionals within our Commercial segment can provide services across all of our industries, including healthcare and education, and the related costs of these professionals are allocated to each of the segments.

(3) During the first quarter of 2024, we reclassified one of the offerings within Education's Consulting capability to Education's Managed Services capability. Revenues generated by this offering during the quarters ended March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023 were $2.8 million, $2.2 million, $2.4 million, and $2.7 million, respectively, and during the years ended December 31, 2022 and 2023 were $15.0 million and $10.1 million, respectively. The number of revenue-generating professionals within this offering as of December 31, 2022, March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023 were 54, 24, 24, 24 and 23, respectively.

This reclassification did not impact the aggregate revenues or headcount reported for the Education Consulting and Managed Services capability for any period, and the prior period Education Managed Services capability revenues and headcount in the following footnotes have been revised for consistent presentation.

(4) Managed Services capability revenues within our Healthcare segment was $16.7 million and $17.3 million for the three months ended June 30, 2024 and 2023, respectively; and $34.2 million and $37.1 million for the six months ended June 30, 2024 and 2023, respectively.

Managed Services capability revenues within our Education segment was $6.8 million and $7.1 million for the three months ended June 30, 2024 and 2023, respectively; and $14.2 million and $14.5 million for the six months ended June 30, 2024 and 2023, respectively.

(5) The number of Managed Services revenue-generating professionals within our Healthcare segment was 1,116 and 772 as of June 30, 2024 and 2023, respectively.

The number of Managed Services revenue-generating professionals within our Education segment was 128 and 130 as of June 30, 2024 and 2023, respectively.

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

### Non-GAAP Measures

### Reconciliation of Net Income to EBITDA and Adjusted EBITDA

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Revenues** | $371,654 | $346,759 | $727,615 | $664,654 |
| Net income | $37,482 | $24,712 | $55,488 | $38,131 |
| Add back: |  |  |  |  |
| Income tax expense | 14,613 | 10,273 | 14,167 | 12,701 |
| Interest expense, net of interest income | 7,954 | 5,796 | 13,094 | 10,099 |
| Depreciation and amortization | 6,244 | 6,330 | 12,425 | 12,883 |
| **EBITDA** | 66,293 | 47,111 | 95,174 | 73,814 |
| Add back: |  |  |  |  |
| Restructuring charges | 2,056 | 1,699 | 4,393 | 3,983 |
| 2024 litigation settlement gain | (11,701) | — | (11,701) | — |
| Other losses (gains), net | (917) | (623) | 651 | (188) |
| Transaction-related expenses | 103 | — | 1,600 | — |
| Foreign currency transaction losses (gains), net | (150) | 288 | (615) | 368 |
| **Adjusted EBITDA** | $55,684 | $48,475 | $89,502 | $77,977 |
| **Adjusted EBITDA as a percentage of revenues** | 15.0% | 14.0% | 12.3% | 11.7% |

### Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted Earnings per Share

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| **Net income** | $37,482 | $24,712 | $55,488 | $38,131 |
| **Weighted average shares - diluted** | 18,454 | 19,486 | 18,741 | 19,598 |
| **Diluted earnings per share** | $2.03 | $1.27 | $2.96 | $1.95 |
| Add back: |  |  |  |  |
| Amortization of intangible assets | 1,627 | 1,974 | 3,317 | 4,205 |
| Restructuring charges | 2,056 | 1,699 | 4,393 | 3,983 |
| 2024 litigation settlement gain | (11,701) | — | (11,701) | — |
| Other losses (gains), net | (917) | (623) | 651 | (188) |
| Transaction-related expenses | 103 | — | 1,600 | — |
| Tax effect of adjustments | 2,296 | (808) | 452 | (2,120) |
| Total adjustments, net of tax | (6,536) | 2,242 | (1,288) | 5,880 |
| **Adjusted net income** | $30,946 | $26,954 | $54,200 | $44,011 |
| **Adjusted weighted average shares - diluted** | 18,454 | 19,486 | 18,741 | 19,598 |
| **Adjusted diluted earnings per share** | $1.68 | $1.38 | $2.89 | $2.25 |

28

### Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

### Revenues

Revenues by segment and capability for the three months ended June 30, 2024 and 2023 were as follows:

| Revenues (in thousands) 2024 Segment: | Three Months Ended June 30, 2023 |  | Increase / (Decrease) $% |  |
| --- | ---: | ---: | ---: | ---: |
| Healthcare | $190,098 | $173,768 | $16,330 | 9.4% |
| Education | 122,753 | 110,694 | 12,059 | 10.9% |
| Commercial | 58,803 | 62,297 | (3,494) | (5.6)% |
| **Total revenues** | $371,654 | $346,759 | $24,895 | 7.2% |
| **Capability:** |  |  |  |  |
| Consulting and Managed Services | $218,339 | $197,255 | $21,084 | 10.7% |
| Digital | 153,315 | 149,504 | 3,811 | 2.5% |
| **Total revenues** | $371,654 | $346,759 | $24,895 | 7.2% |

Revenues increased $24.9 million, or 7.2%, to $371.7 million for the second quarter of 2024 from $346.8 million for the second quarter of 2023. The overall increase in revenues was driven by continued strength in demand for Healthcare's Consulting and Managed Services and Digital capabilities, as well as an increase in demand for Education's Consulting and Managed Services capability, reflecting our focus on accelerating growth in our healthcare and education industries. These increases in demand were partially offset by a decrease in demand for Commercial's Digital capability. Additional information on our revenues by segment follows.

- **Healthcare** revenues increased $16.3 million, or 9.4%, driven by continued strength in demand for our performance improvement, culture and organizational excellence, and strategy and innovation solutions within our Consulting and Managed Services capability, as well as an increase in demand for our technology and analytics services within our Digital capability. These increases in demand were partially offset by a decrease in demand for our financial advisory solutions within our Consulting and Managed Services capability. Revenues in the second quarter of 2024 included $0.3 million of incremental revenues from our acquisition of Roundtable Analytics completed in September 2023.

The number of revenue-generating professionals within our Healthcare segment grew 26.3% to 2,339 as of June 30, 2024, compared to 1,852 as of June 30, 2023.

- **Education** revenues increased $12.1 million, or 10.9%, and includes $6.8 million of incremental revenues from our acquisition of GG+A completed in March 2024. The increase in Education revenues was also driven by increases in demand for our strategy and operations solution within our Consulting and Managed Services capability and our software products within our Digital capability.

The number of revenue-generating professionals within our Education segment grew 10.6% to 1,243 as of June 30, 2024, compared to 1,124 as of June 30, 2023. Our acquisition of GG+A in March 2024 added approximately 70 revenue-generating professionals.

- **Commercial** revenues decreased $3.5 million, or 5.6%, primarily due to a decrease in demand for our technology and analytics services within our Digital capability, partially offset by an increase in demand for our financial advisory solutions within our Consulting and Managed Services capability.

The number of revenue-generating professionals within our Commercial segment grew 3.1% to 2,266 as of June 30, 2024, compared to 2,198 as of June 30, 2023.

### Operating Expenses

Operating expenses for the second quarter of 2024 increased $6.4 million, or 2.0%, over the second quarter of 2023.

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

| Operating Expenses (in thousands, except amounts as a percentage of revenues) | Three Months Ended June 30, 2024 |  | 2023 |  | Increase / (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Direct costs | $248,605 | 66.9% | $235,198 | 67.8% | $13,407 |
| Reimbursable expenses | 9,427 | 2.5% | 8,121 | 2.3% | 1,306 |
| Selling, general and administrative expenses | 71,410 | 19.2% | 64,642 | 18.6% | 6,768 |
| Other gains, net | (15,917) | (4.3)% | (623) | (0.1)% | (15,294) |
| Restructuring charges | 2,056 | 0.6% | 1,699 | 0.5% | 357 |
| Depreciation and amortization | 6,033 | 1.6% | 6,143 | 1.8% | (110) |
| **Total operating expenses** | $321,614 | 86.5% | $315,180 | 90.9% | $6,434 |

### Direct Costs

Direct costs increased $13.4 million, or 5.7%, to $248.6 million for the second quarter of 2024 from $235.2 million for the second quarter of 2023. The $13.4 million increase primarily related to a $20.0 million increase in compensation costs for our revenue-generating professionals and a $1.1 million increase in technology costs, partially offset by a $6.5 million decrease in contractor expenses. The increase in compensation costs reflects our investment to grow our talented team to meet increased market demand and is primarily attributable to a $20.7 million increase in salaries and related expenses driven by increased headcount and annual salary increases that went into effect in the first quarter of 2024. As a percentage of revenues, direct costs decreased to 66.9% during the second quarter of 2024, compared to 67.8% during the second quarter of 2023. This decrease was primarily due to the decrease in contractor expenses; partially offset by an increase in compensation costs for our revenue-generating professionals, as a percentage of revenues.

### Reimbursable Expenses

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

### Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $6.8 million, or 10.5%, to $71.4 million in the second quarter of 2024 from $64.6 million in the second quarter of 2023. The $6.8 million increase primarily related to a $5.1 million increase in non-payroll costs, driven by a $2.3 million increase in bad debt expense, a $1.5 million increase in software and data hosting expense, and a $1.7 million increase in compensation costs for our support personnel. The increase in compensation costs for our support personnel was primarily driven by a $3.1 million increase in salaries and related expenses driven by increased headcount and annual salary increases that went into effect in the first quarter of 2024, partially offset by a $0.8 million decrease in performance bonus expense. As a percentage of revenues, selling, general and administrative expenses increased to 19.2% during the second quarter of 2024, compared to 18.6% during the second quarter of 2023, primarily attributable to an increase in bad debt expense, as a percentage of revenues.

### Other Gains, Net

Other gains, net totaled $15.9 million in the second quarter of 2024 compared to $0.6 million in the second quarter of 2023. The $15.9 million of other gains, net in the second quarter of 2024 consisted of a pre-tax $15.0 million litigation settlement gain for a completed legal matter for which Huron was the plaintiff, as well as $0.9 million of remeasurement gains to decrease the fair value of our contingent consideration liabilities related to business combinations. The $0.6 million of other gains, net in the second quarter of 2023 primarily consisted of remeasurement gains to decrease the fair value of our contingent consideration liabilities related to business combinations.

See Note 10 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on the fair value of contingent consideration liabilities.

### Restructuring Charges

Restructuring charges for the second quarter of 2024 were $2.1 million, compared to $1.7 million for the second quarter of 2023. In the second quarter of 2024, we exited the office space previously occupied by GG+A, which resulted in a $1.4 million non-cash impairment charge on the related right-of-use operating lease asset and fixed assets of that office space. Additionally, in the second quarter of 2024, we recognized $0.6 million of restructuring expense for rent and related expenses, net of sublease income, for previously vacated office spaces.

The $1.7 million of restructuring charges recognized in the second quarter of 2023 included $0.9 million of employee-related expenses; $0.3 million related to the abandonment of a capitalized software development project; $0.2 million of rent and related expenses, net of sublease income, for previously vacated office spaces; and $0.2 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces.

### Depreciation and Amortization

Depreciation and amortization expense decreased $0.1 million, or 1.8%, to $6.0 million in the second quarter of 2024, compared to $6.1 million in the second quarter of 2023. The $0.1 million decrease in depreciation and amortization expense was primarily attributable to intangible assets acquired in business acquisitions that were fully amortized in prior periods and a decrease in amortization of intangible assets acquired in business acquisitions due to the accelerated basis of amortization in prior periods, partially offset by an an increase in amortization of intangible assets acquired in business acquisitions completed subsequent to the second quarter of 2023.

### Operating Income and Operating Margin

Operating income increased $19.7 million, or 49.6%, to $59.4 million in the second quarter of 2024 from $39.7 million in the second quarter of 2023. Operating margin, which is defined as operating income expressed as a percentage of revenues was 16.0% for the three months ended June 30, 2024, compared to 11.5% for the three months ended June 30, 2023.

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

| Segment Operating Income (in thousands, except operating margin percentages) | Three Months Ended June 30, 2024 |  | 2023 |  | Increase / (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Healthcare | $55,246 | 29.1% | $49,151 | 28.3% | $6,095 |
| Education | 30,792 | 25.1% | 27,397 | 24.8% | 3,395 |
| Commercial | 9,015 | 15.3% | 10,472 | 16.8% | (1,457) |
| **Total segment operating income** | $95,053 |  | $87,020 |  | $8,033 |

- **Healthcare** operating income increased $6.1 million, or 12.4%, primarily due to the increase in revenues and a decrease in contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals and bad debt expense. The increase in compensation costs for our revenue-generating professionals was primarily driven by an increase in headcount, annual salary increases that went into effect in the first quarter of 2024, and an increase in performance bonus expense. Healthcare operating margin increased to 29.1% from 28.3% primarily due to the decrease in contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals and bad debt expense, as percentages of revenues.
- **Education** operating income increased $3.4 million, or 12.4%, primarily due to the increase in revenues; partially offset by increases in compensation costs for our revenue-generating professionals and support personnel. The increases in compensation costs for our revenue-generating professionals and support personnel were primarily driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2024, partially offset by a decrease in performance bonus expenses for our revenue-generating professionals. Education operating margin increased to 25.1% from 24.8% primarily driven by revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals and a decrease in contractor expenses; partially offset by an increase in compensation costs for our support personnel, as a percentage of revenue.
- **Commercial** operating income decreased $1.5 million, or 14%, primarily due to the decrease in revenues, partially offset by decreases in restructuring charges and contractor expenses. Commercial operating margin decreased to 15.3% from 16.8% primarily due to an increase in compensation costs for our revenue-generating professionals, as a percentage of revenues; partially offset by decreases in restructuring charges and contractor expenses, as percentages of revenues.

### Other Income (Expense), Net

Interest expense, net of interest income increased $2.2 million to $8.0 million in the second quarter of 2024 from $5.8 million in the second quarter of 2023, which was primarily attributable to higher interest rates and higher levels of borrowing under our Amended Credit Facility during the second quarter of 2024 compared to the second quarter of 2023. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information about our Amended Credit Facility.

Other income, net decreased $0.4 million to $0.6 million in the second quarter of 2024 from $1.1 million in the second quarter of 2023. The decrease in other income, net includes a $0.9 million decrease in the gain recognized for the market value of our investments that are used to fund our deferred compensation liability, partially offset by a $0.5 million increase in foreign currency transaction gains. During the second quarter of 2024 we recognized a $0.5 million gain for the market value of our deferred compensation investments compared to a $1.3 million gain recognized in the second quarter of 2023.

### Income Tax Expense

For the three months ended June 30, 2024, our effective tax rate was 28.1% as we recognized income tax expense of $14.6 million on income of $52.1 million. The effective tax rate of 28.1% was less favorable than the statutory rate, inclusive of state income taxes, of 26.1%, primarily due to certain nondeductible expense items.

For the three months ended June 30, 2023, our effective tax rate was 29.4% as we recognized income tax expense of $10.3 million on income of $35.0 million. The effective tax rate of 29.4% was less favorable than the statutory rate, inclusive of state income taxes, of 26.6%, primarily due to certain nondeductible expense items, partially offset by a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability.

### Net Income and Earnings per Share

Net income increased $12.8 million, or 51.7%, to $37.5 million for the three months ended June 30, 2024 from $24.7 million for the same period last year, driven by the $11.1 million litigation settlement gain, net of tax, recognized in the second quarter of 2024 related to a completed legal matter for which Huron was the plaintiff. Diluted earnings per share for the second quarter of 2024 increased to $2.03 from $1.27 for the second quarter of 2023, driven by the increase in net income and a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan.

### EBITDA and Adjusted EBITDA

EBITDA increased $19.2 million to $66.3 million for the second quarter of 2024 from $47.1 million for the second quarter of 2023. The increase in EBITDA was primarily attributable to the pre-tax $15.0 million litigation settlement gain recognized for a completed legal matter for which Huron was the plaintiff, as well as the increase in segment operating income.

Adjusted EBITDA increased $7.2 million to $55.7 million in the second quarter of 2024 from $48.5 million in the second quarter of 2023. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income, excluding the impact of segment restructuring charges.

### Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income increased $4.0 million, or 14.8%, to $30.9 million in the second quarter of 2024, compared to $27.0 million in the second quarter of 2023. As a result of the increase in adjusted net income as well as a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan, adjusted diluted earnings per share increased to $1.68 for the second quarter of 2024 compared to $1.38 for the second quarter of 2023.

### Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

### Revenues

Revenues by segment and capability for the six months ended June 30, 2024 and 2023 were as follows:

| Revenues (in thousands) 2024 Segment: | Six Months Ended June 30, 2023 |  | Increase / (Decrease) $% |  |
| --- | ---: | ---: | ---: | ---: |
| Healthcare | $370,840 | $322,817 | $48,023 | 14.9% |
| Education | 234,336 | 214,841 | 19,495 | 9.1% |
| Commercial | 122,439 | 126,996 | (4,557) | (3.6)% |
| **Total revenues** | $727,615 | $664,654 | $62,961 | 9.5% |
| **Capability:** |  |  |  |  |
| Consulting and Managed Services | $419,898 | $374,449 | $45,449 | 12.1% |
| Digital | 307,717 | 290,205 | 17,512 | 6.0% |
| **Total revenues** | $727,615 | $664,654 | $62,961 | 9.5% |

Revenues increased $63.0 million, or 9.5%, to $727.6 million for the first six months of 2024 from $664.7 million for the first six months of 2023. The overall increase in revenues reflects continued strength in demand for both our Consulting and Managed Services capability and Digital capability within Healthcare and Education, and reflects our focus on accelerating growth in our healthcare and education industries. These increases in demand were partially offset by a decrease in demand for Commercial's Digital capability. Additional information on our revenues by segment follows.

- **Healthcare** revenues increased $48.0 million, or 14.9%, driven by continued strength in demand for our performance improvement, strategy and innovation and culture and organizational excellence solutions within our Consulting and Managed Services capability, as well as strengthened demand for our technology and analytics services within our Digital capability. These increases in demand were partially offset by a decrease in demand for our revenue cycle managed services solution within our Consulting and Managed services capability. Revenues in the first six months of 2024 included $0.5 million of incremental revenues from our acquisition of Roundtable Analytics completed in September 2023.

The number of revenue-generating professionals within our Healthcare segment grew 26.3% to 2,339 as of June 30, 2024, compared to 1,852 as of June 30, 2023.

- **Education** revenues increased $19.5 million, or 9.1%, and includes $8.1 million of incremental revenues from our acquisition of GG+A completed in March 2024. The increase in Education revenues was also driven by increases in demand for our strategy and operations solutions within our Consulting and Managed Services capability and our software products and technology and analytics services within our Digital capability.

The number of revenue-generating professionals within our Education segment grew 10.6% to 1,243 as of June 30, 2024, compared to 1,124 as of June 30, 2023. Our acquisition of GG+A in March 2024 added approximately 70 revenue-generating professionals.

- **Commercial** revenues decreased $4.6 million, or 3.6%, primarily due to decreases in demand for our technology and analytics services within our Digital capability and our strategy and innovation solution within our Consulting and Managed Services capability, partially offset by an increase in demand for our financial advisory solutions within our Consulting and Managed Services capability.

The number of revenue-generating professionals within our Commercial segment grew 3.1% to 2,266 as of June 30, 2024, compared to 2,198 as of June 30, 2023.

### Operating Expenses

Operating expenses for the first six months of 2024 increased $41.9 million, or 6.7%, over the first six months of 2023.

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

| Operating Expenses (in thousands, except amounts as a percentage of revenues) | Six Months Ended June 30, 2024 |  | 2023 |  | Increase / (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Direct costs | $501,908 | 69.0% | $463,581 | 69.7% | $38,327 |
| Reimbursable expenses | 17,011 | 2.3% | 16,745 | 2.5% | 266 |
| Selling, general and administrative expenses | 144,110 | 19.8% | 126,496 | 19.0% | 17,614 |
| Other gains, net | (14,349) | (2.0)% | (188) | —% | (14,161) |
| Restructuring charges | 4,393 | 0.6% | 3,983 | 0.6% | 410 |
| Depreciation and amortization | 12,005 | 1.6% | 12,517 | 2.0% | (512) |
| **Total operating expenses** | $665,078 | 91.4% | $623,134 | 93.8% | $41,944 |

### Direct Costs

Direct costs increased $38.3 million, or 8.3%, to $501.9 million for the first six months of 2024 from $463.6 million for the first six months of 2023. The $38.3 million increase primarily related to a $43.5 million increase in compensation costs for our revenue-generating professionals and a $2.2 million increase in technology costs, partially offset by a $5.9 million decrease in contractor expenses. The $43.5 million increase in compensation costs reflects our investment to grow our talented team to meet increased market demand and is primarily attributable to a $41.2 million increase in salaries and related expenses driven by increased headcount and annual salary increases that went into effect in the first quarter of 2024, a $1.8 million increase in performance bonus expense, and a $1.7 million increase in share-based compensation expense; partially offset by a $1.2 million decrease in signing, retention and other bonus expense. As a percentage of revenues, direct costs decreased to 69.0% during the first six months of 2024, compared to 69.7% during the first six months of 2023, primarily attributable to the decrease in contractor expenses.

### Reimbursable Expenses

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

### Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $17.6 million, or 13.9%, to $144.1 million in the first six months of 2024 from $126.5 million in the first six months of 2023. The $17.6 million increase primarily related to a $12.7 million increase in non-payroll costs, driven by a $4.0 million increase in legal expenses, a $3.2 million increase in practice administration and meetings expenses, a $2.3 million increase in bad debt expense, and a $2.1 million increase in software and data hosting expenses. The increase in legal expenses is driven by professional fees for a completed legal matter for which Huron was the plaintiff as well as professional fees for acquisition activity. Additionally, selling, general and administrative expenses increased $5.0 million due to an increase in compensation costs for our support personnel driven by a $6.9 increase in salaries and related expenses, partially offset by a $1.4 million decrease in performance bonus expense. As a percentage of revenues, selling, general and administrative expenses increased to 19.8% during the first six months of 2024, compared to 19.0% during the first six months of 2023. This increase was primarily attributable to increases in legal expenses and practice administration and meetings expenses, as percentages of revenues.

### Other Gains, Net

Other gains, net totaled $14.3 million in the first six months of 2024 and $0.2 million in the first six months of 2023. The $14.3 million of other gains, net in the first six months of 2024 primarily consisted of a pre-tax $15.0 million litigation settlement gain for a completed legal matter for which Huron was the plaintiff. The $0.2 million of other gains, net in the first six months of 2023 primarily consisted of remeasurement gains to decrease the fair value of our contingent consideration liabilities related to business combinations.

See Note 10 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on the fair value of contingent consideration liabilities.

### Restructuring Charges

Restructuring charges for the first six months of 2024 were $4.4 million, compared to $4.0 million for the first six months of 2023. In the second quarter of 2024, we exited the office space previously occupied by GG+A, which resulted in a $1.4 million non-cash impairment charge on the related right-of-use operating lease asset and fixed assets of that office space. Additionally, in the first six months of 2024, we recognized $1.1 million of rent and related expenses, net of sublease income, for previously vacated office spaces; $1.0 million of severance-related expenses; and $0.8 million related to non-cash lease impairment charges driven by updated sublease assumptions for our previously vacated office spaces.

The $4.0 million of restructuring charges incurred in the first six months of 2023 included a $1.9 million non-cash impairment charge on the fixed assets and right-of-use operating lease asset related to our office space in Hillsboro, Oregon, which we exited in the first quarter of 2023; $0.9 million of employee-related expenses; $0.6 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.3 million related to the abandonment of a capitalized software development project; and $0.2 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces.

### Depreciation and Amortization

Depreciation and amortization expense decreased $0.5 million, or 4.1%, to $12.0 million for the first six months of 2024, compared to $12.5 million for first six months of 2023. The $0.5 million decrease in depreciation and amortization expense was primarily attributable to intangible assets acquired in business acquisitions that were fully amortized in prior periods and a decrease in the amortization of intangible assets acquired in business acquisitions due to the accelerated basis of amortization in prior periods, partially offset by an an increase in amortization of intangible assets acquired in business acquisitions completed subsequent to the second quarter of 2023.

### Operating Income and Operating Margin

Operating income increased $21.2 million to $79.3 million in the first six months of 2024 from $58.2 million in the first six months of 2023. Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 10.9% for the first six months of 2024, compared to 8.7% for the first six months of 2023.

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

| Segment Operating Income (in thousands, except operating margin percentages) | Six Months Ended June 30, 2024 |  | 2023 |  | Increase / (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Healthcare | $97,940 | 26.4% | $81,406 | 25.2% | $16,534 |
| Education | 52,748 | 22.5% | 50,562 | 23.5% | 2,186 |
| Commercial | 23,054 | 18.8% | 24,539 | 19.3% | (1,485) |
| **Total segment operating income** | $173,742 |  | $156,507 |  | $17,235 |

- **Healthcare** operating income increased $16.5 million, or 20.3%, primarily due to the increase in revenues and a decrease in contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals, practice administration and meetings expenses, bad debt expense, technology costs, and compensation costs for our support personnel. The increases in compensation costs for our revenue-generating professionals and support personnel were primarily driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2024, as well as increases in performance bonus expense and share-based compensation expense for our revenue-generating professionals. Healthcare operating margin increased to 26.4% from 25.2% primarily due to the decrease in contractor expenses; partially offset by increases in practice administration and meetings expenses and bad debt expense, as percentages of revenues.
- **Education** operating income increased $2.2 million, or 4.3%, primarily due to the increase in revenues as well as a decrease in contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals and support personnel and technology costs. The increases in compensation costs for our revenue-generating professionals and support personnel were primarily driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2024; partially offset by a decrease in performance bonus expense for our revenue-generating professionals. Education operating margin decreased to 22.5% from 23.5% primarily driven by increases in compensation costs for our revenue-generating professionals and support personnel, as percentages of revenues; partially offset by the decrease in contractor expenses.
- **Commercial** operating income decreased $1.5 million, or 6.1%, primarily due to the decrease in revenues, partially offset by decreases in restructuring charges and compensation costs for our revenue-generating professionals. The decrease in compensation costs for our revenue-generating professionals was primarily driven by a decrease in performance bonus expense. Commercial operating margin decreased to 18.8% from 19.3% primarily driven by an increase in compensation costs for our revenue-generating professionals, as a percentage of revenues; partially offset by a decrease in restructuring charges, as a percentage of revenues.

### Other Income (Expense), Net

Interest expense, net of interest income increased $3.0 million to $13.1 million in the first six months of 2024 from $10.1 million in the first six months of 2023, which was primarily attributable to higher interest rates and higher levels of borrowing under our Amended Credit Facility during the first six months of 2024 compared to the first six months of 2023. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information about our senior secured credit facility.

Other income, net increased $0.6 million to $3.4 million in the first six months of 2024 from $2.8 million in the first six months of 2023. The increase in other income, net was primarily attributable to a $1.0 million increase in foreign currency transaction gains, partially offset by a $0.3 million decrease in the gain recognized for the market value of our investments that are used to fund our deferred compensation liability. During the first six months of 2024, we recognized a $2.8 million gain for the market value of our deferred compensation investments compared to a $3.1 million gain recognized in the first six months of 2023.

### Income Tax Expense

For the six months ended June 30, 2024, our effective tax rate was 20.3% as we recognized income tax expense of $14.2 million on income of $69.7 million. The effective tax rate of 20.3% was more favorable than the statutory rate, inclusive of state income taxes, of 26.1%, primarily due to a discrete tax benefit for share-based compensation awards that vested during the first quarter of 2024 and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability. These favorable items were partially offset by certain nondeductible expense items.

For the six months ended June 30, 2023, our effective tax rate was 25.0% as we recognized income tax expense of $12.7 million on income of $50.8 million. The effective tax rate of 25.0% 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 2023 and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability. These favorable items were partially offset by certain nondeductible expense items.

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

Net income increased $17.4 million, or 45.5%, to $55.5 million for the six months ended June 30, 2024 from $38.1 million for the same period last year. Net income for the first six months of 2024 includes the $11.1 million litigation settlement gain, net of tax, recognized in the second quarter of 2024 related to a completed legal matter for which Huron was the plaintiff. Diluted earnings per share for the six months ended June 30, 2024 increased to $2.96 compared to $1.95 for the six months ended June 30, 2023, driven by the increase in net income and a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan.

### EBITDA and Adjusted EBITDA

EBITDA increased $21.4 million to $95.2 million for the six months ended June 30, 2024 from $73.8 million for the six months ended June 30, 2023. The increase in EBITDA was primarily attributable to the increase in segment operating income, as well as the pre-tax $15.0 million litigation settlement gain recognized for a completed legal matter for which Huron was the plaintiff; partially offset by the increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability.

Adjusted EBITDA increased $11.5 million to $89.5 million in the first six months of 2024 from $78.0 million in the first six months of 2023. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income, excluding the impact of segment restructuring charges; partially offset by the increase in corporate expenses, excluding the impacts of the change in the market value of our deferred compensation liability, corporate restructuring charges and transaction-related expenses.

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

Adjusted net income increased $10.2 million, or 23.2%, to $54.2 million in the first six months of 2024 compared to $44.0 million in the first six months of 2023. Adjusted diluted earnings per share increased to $2.89 for the six months ended June 30, 2024, compared to $2.25 for the six months ended June 30, 2023, driven by the increase in adjusted net income and a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan.

### LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $17.6 million and $12.1 million at June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, our primary sources of liquidity are cash on hand, cash flows from our U.S. operations, and borrowing capacity available under our credit facility.

| Cash Flows (in thousands): | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(23,503) | $(13,880) |
| Net cash used in investing activities | (39,677) | (15,763) |
| Net cash provided by financing activities | 68,726 | 34,333 |
| Effect of exchange rate changes on cash | (49) | 59 |
| Net increase in cash and cash equivalents | $5,497 | $4,749 |

### Operating Activities

Our operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable and accrued expenses, accrued payroll and related benefits, operating lease obligations and deferred revenues. The volume of services rendered and the related billings and timing of collections on those billings, as well as payments of our accounts payable and salaries, bonuses, and related benefits to employees affect these account balances. Our purchase obligations primarily consist of payments for software and other information technology products to support our business and corporate infrastructure.

Net cash used in operating activities increased by $9.6 million to $23.5 million for the six months ended June 30, 2024 from $13.9 million for the six months ended June 30, 2023. The increase in net cash used in operating activities was primarily related to an increase in the amount paid for annual performance bonuses in the first quarter of 2024 compared to the first quarter of 2023, as well as increases in payments for salaries and related expenses for our revenue-generating professionals and selling, general and administrative expenses; partially offset by an increase in cash collections in the first six months of 2024 compared to the same prior year period.

### Investing Activities

Our investing activities primarily consist of purchases of complementary businesses; purchases of property and equipment, primarily related to computers and related equipment for our employees and leasehold improvements and furniture and fixtures for office spaces; payments related to internally developed cloud-based software sold to our clients; and investments. Our investments include a convertible note investment in Shorelight Holdings, LLC, a preferred stock investment in a hospital-at-home company, and investments in life insurance policies that are used to fund our deferred compensation liability.

Net cash used in investing activities was $39.7 million for the six months ended June 30, 2024, which primarily consisted of $20.8 million for the purchases of businesses; $14.1 million for payments related to internally developed software to advance our Healthcare and Education software products; $3.7 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements for certain office spaces; and $1.4 million for contributions to our life insurance policies.

Net cash used in investing activities was $15.8 million for the six months ended June 30, 2023, which primarily consisted of $13.0 million for payments related to internally developed software to advance our Healthcare and Education software products; $3.7 million for purchases of property and equipment, primarily related to purchases of computers and related equipment; and $2.2 million for contributions to our life insurance polices. These uses of cash for investing activities were partially offset by $3.0 million of cash received for distributions from our life insurance policies that are used to fund our deferred compensation liability.

We estimate that cash utilized for purchases of property and equipment and software development in 2024 will total approximately $35 million to $40 million; primarily consisting of software development costs, leasehold improvements and furniture and fixtures for certain office locations, and information technology related equipment to support our corporate infrastructure.

### Financing Activities

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

Net cash provided by financing activities was $68.7 million for the six months ended June 30, 2024. During the six months ended June 30, 2024, we borrowed $618.5 million and made repayments on our borrowings of $430.9 million. The borrowings and repayments during the first three months of 2024 include the $275.0 million Term Loan proceeds which were used to repay borrowings under the Revolver. The net borrowings of $187.6 million were primarily used to fund our operations, including our annual performance bonus payments in the first quarter of 2024. Additionally, during the first six months of 2024, we paid $97.3 million for the settlement of share repurchases and we reacquired $21.1 million of common stock as a result of tax withholdings upon vesting of share-based compensation. We also made payments of $1.4 million for debt issuance costs related to the Term Loan. These uses of cash for financing activities were partially offset by $1.2 million of cash received from stock option exercises in the first six months of 2024.

Net cash provided by financing activities was $34.3 million for the six months ended June 30, 2023. During the six months ended June 30, 2023, we borrowed $230.0 million primarily to fund our operations, including our annual performance bonus payment in the first quarter of 2023, and made repayments on our borrowings of $125.0 million. Additionally, during the first six months of 2023, we paid $60.4 million for the settlement of share repurchases and we reacquired $9.7 million of common stock as a result of tax withholdings upon vesting of share-based compensation. We also made deferred acquisition payments of $1.5 million to the sellers of certain businesses we acquired. These payments were primarily the result of achieving specified financial performance targets in accordance with the related purchase agreements.

#### Share Repurchase Program

In November 2020, our board of directors authorized a share repurchase program permitting us to repurchase up to $50 million of our common stock through December 31, 2021.The share repurchase program has been subsequently extended and increased, most recently in the second quarter of 2024. The current authorization extends the share repurchase program through December 31, 2025 with a repurchase amount of $500 million, of which $89.9 million remains available as of June 30, 2024. 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.

### Financing Arrangements

At June 30, 2024, we had $511.6 million outstanding under our Amended Credit Agreement, as discussed below.

The Company has a $600 million senior secured revolving credit facility (the “Revolver”) and a $275 million senior secured term loan facility (the “Term Loan”), subject to the terms of the Third Amended and Restated Credit Agreement dated as of November 15, 2022 (as amended, the “Amended Credit Agreement”), both of which fully mature on November 15, 2027. The Term Loan was established in February 2024 with the execution of Amendment No. 2 to the Third Amended and Restated Credit Agreement. The Term Loan is subject to scheduled quarterly amortization payments of $3.4 million beginning June 30, 2024 through the maturity date of November 15, 2027, at which time the outstanding principal balance and all accrued interest will be due.

Fees and interest on borrowings under the Amended Credit Agreement vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, these borrowings will bear interest at one, three or six month Term SOFR or, in the case of the Revolver, an alternate base rate, in each case plus the applicable margin. The applicable margin for borrowings under the Revolver will fluctuate between 1.125% per annum and 1.875% per annum, in the case of Term SOFR 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. The applicable margin for the outstanding principal under the Term Loan will range between 1.625% per annum and 2.375% per annum based upon our Consolidated Leverage Ratio at such time. The fees and interest are subject to further adjustment based upon the Company's performance against specified key performance indicators related to certain environmental, social and governance goals of the Company. Based upon the performance of the Company against those key performance indicators in each Reference Year (as defined in the Amended Credit Agreement), certain adjustments to the otherwise applicable rates for interest, commitment fees and letter of credit fees will be made. These annual adjustments will not exceed an increase or decrease of 0.01% in the aggregate for all key performance indicators in the case of the commitment fee rate or an increase or decrease of 0.05% in the aggregate for all key performance indicators in the case of the Term SOFR borrowings, base rate borrowings or letter of credit fee rate.

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 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 4.25 to 1.00 upon the occurrence of a Qualified Acquisition (as defined in the Amended Credit Agreement), and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.00 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 June 30, 2024 and December 31, 2023, we were in compliance with these financial covenants. Our Consolidated Leverage Ratio as of June 30, 2024 was 2.24 to 1.00, compared to 1.59 to 1.00 as of December 31, 2023. Our Consolidated Interest Coverage Ratio as of June 30, 2024 was 10.55 to 1.00, compared to 10.85 to 1.00 as of December 31, 2023.

The Amended Credit Agreement contains restricted payment provisions, including a potential limit on the amount of dividends we may pay. Pursuant to the terms of the Amended Credit Agreement, if our Consolidated Leverage Ratio is greater than 3.50, the amount of dividends and other Restricted Payments (as defined in the Amended Credit Agreement) we may pay is limited to an amount up to $50 million.

Borrowings outstanding under the Amended Credit Agreement at June 30, 2024 and December 31, 2023 totaled $511.6 million and $324.0 million, respectively. Of the $511.6 million outstanding as of June 30, 2024, $240.0 million was outstanding under the Revolver and $271.6 million was outstanding under the Term Loan. There were no borrowings outstanding under the Term Loan at December 31, 2023. These borrowings carried a weighted average interest rate of 5.2% at June 30, 2024 and 4.2% at December 31, 2023, including the impact of the interest rate swaps described in Note 9 “Derivative Instruments and Hedging Activity” within the notes to the consolidated financial statements.

The borrowing capacity under the Revolver is reduced by any outstanding borrowings under the Revolver and outstanding letters of credit. At June 30, 2024, we had outstanding letters of credit totaling $0.6 million, which are used as security deposits for our office facilities. As of June 30, 2024, the unused borrowing capacity under the Revolver was $359.4 million.

Refer to Note 7 “Financing Arrangements” for additional information on our senior secured credit facility within the notes to the consolidated financial statements.

### Future Financing Needs

Our primary financing need is to fund our long-term growth. Our growth strategy is to expand our service offerings, which may require investments in new hires, acquisitions of complementary businesses, possible expansion into other geographic areas, and related capital expenditures.

We believe our internally generated liquidity, together with our available cash, and the borrowing capacity available under our senior secured credit facility will be adequate to support our current financing needs and long-term growth strategy. Our ability to secure additional financing in the future, if needed, will depend on several factors, including our future profitability, the quality of our accounts receivable and unbilled services, our relative levels of debt and equity, and the overall condition of the credit markets.

### OFF-BALANCE SHEET ARRANGEMENTS

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

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We regularly review our financial reporting and disclosure practices and accounting policies to ensure that our financial reporting and disclosures provide accurate information relative to the current economic and business environment. The preparation of financial statements in conformity with GAAP requires management to make assessments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Critical accounting policies and estimates are those policies and estimates that we believe present the most complex or subjective measurements and have the most potential to impact our financial position and operating results. While all decisions regarding accounting policies and estimates are important, we believe that there are five accounting policies and estimates that could be considered critical: revenue recognition, allowances for doubtful accounts and unbilled services, business combinations, carrying values of goodwill and other intangible assets, and accounting for income taxes. For a detailed discussion of these critical accounting policies, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our critical accounting policies during the six months ended June 30, 2024.

### NEW ACCOUNTING PRONOUNCEMENTS

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

## Market risk

As filed, 5,072 characters.

We are exposed to market risks primarily from changes in interest rates and foreign currency exchange rates and changes in the market value of our investments. We use certain derivative instruments to hedge a portion of the interest rate and foreign currency exchange rate risks.

### Interest Rate Risk

We have exposure to changes in interest rates associated with borrowings under our senior secured credit facility. At our option, these borrowings bear interest at one, three or six month Term SOFR or, in the case of the Revolver, an alternate base rate. At June 30, 2024, we had borrowings outstanding under the credit facility totaling $511.6 million that carried a weighted average interest rate of 5.2%, including the impact of the interest rate swaps described below. A hypothetical 100 basis point change in the interest rate would have a $2.1 million effect on our pretax income on an annualized basis, including the effect of the interest rate swaps. At December 31, 2023, we had borrowings outstanding under the credit facility totaling $324.0 million that carried a weighted average interest rate of 4.2% including the impact of the interest rate swaps described below. A hypothetical 100 basis point change in the interest rate would have had a $0.7 million effect on our pretax income on an annualized basis, including the effect of the interest rate swaps.

We enter into forward interest rate swap agreements 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 Term SOFR and we pay to the counterparty a stated, fixed rate. As of June 30, 2024 and December 31, 2023, the aggregate notional amount of our forward interest rate swap agreements was $300.0 million and $250.0 million, respectively. The outstanding interest rate swap agreements as of June 30, 2024 are scheduled to mature on a staggered basis through January 31, 2029.

### Foreign Currency Risk

We have exposure to changes in foreign currency exchange rates between the U.S. Dollar (USD) and the Indian Rupee (INR) related to our operations in India. We hedge a portion of our cash flow exposure related to our INR-denominated intercompany expenses by entering into non-deliverable foreign exchange forward contracts. As of June 30, 2024 and December 31, 2023, the aggregate notional amounts of these contracts were INR 629.2 million, or $7.5 million, and INR 1,375.7 million, or $16.6 million, respectively, based on the exchange rates in effect as of each period end. The outstanding foreign exchange forward contracts as of June 30, 2024 are scheduled to mature monthly through April 30, 2025.

We use a sensitivity analysis to determine the effects that market foreign currency exchange rate fluctuations may have on the fair value of our foreign currency exchange rate hedge portfolio. The sensitivity of the hedge portfolio is computed based on the market value of future cash flows as affected by changes in exchange rates. This sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the offsetting gain or loss on the underlying exposure. A hypothetical 100 basis point change in the foreign currency exchange rate between the USD and INR would have an immaterial impact on the fair value of our hedge instruments as of June 30, 2024 and December 31, 2023.

### Market Risk

We have a 1.69% convertible debt investment in Shorelight Holdings, LLC, a privately-held company, which we account for as an available-for-sale debt security. As such, the investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income. As of June 30, 2024, the fair value of the investment was $57.6 million, with a total cost basis of $40.9 million. At December 31, 2023, the fair value of the investment was $68.0 million, with a total cost basis of $40.9 million.

We have a preferred stock investment in a privately-held hospital-at-home company, which we account for as an equity security without a readily determinable fair value using the measurement alternative. As such, the investment is carried at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment. As of June 30, 2024 and December 31, 2023, the carrying value of the investment was $7.4 million with a total cost basis of $5.0 million.

We do not use derivative instruments for trading or other speculative purposes. From time to time, we invest excess cash in short-term marketable securities. These investments principally consist of overnight sweep accounts. Due to the short maturity of these investments, we have concluded that we do not have material market risk exposure. Refer to Note 9 “Derivative Instruments and Hedging Activity” within the notes to our consolidated financial statements for additional information on our derivative instruments.

## Controls and procedures

As filed, 1,257 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of June 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2024, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 254 characters.

See Part 1, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 27, 2024, for a complete description of the material risks we face.

Filed Jul 30, 2024.
Source: SEC EDGAR, the filing index for accession 0001289848-24-000172. Last ingested by Listed: Nov 3, 2026, 19:28 ET. No prices; not investment advice.