Huron announces first quarter 2022 financial results and updates 2022 guidance
Chicago--(business wire)--global professional services firm huron (nasdaq: hurn) today announced financial results for the first quarter ended march 31, 2022. “our strong first quarter results reflect the continued momentum that started in early 2021 and resulted in growth in all three of our operating segments,” said james h. roth, chief executive officer of huron. “revenues grew 28% over the prior year quarter, reflective of the significant growth opportunities in each of our core industries.” “demand for our healthcare and education industry offerings and our digital, strategy and financial advisory capabilities remains strong, enabling us to increase our annual revenue and earnings guidance. market conditions remain favorable for our core offerings, and we believe that we will continue to achieve strong results consistent with the outlook we described in our recent investor day presentation,” added roth. first quarter 2022 results revenues increased $56.8 million, or 28.0%, to $260.0 million for the first quarter of 2022, compared to $203.2 million for the first quarter of 2021. net income increased $21.4 million to $26.9 million for the first quarter of 2022, compared to $5.4 million for the same quarter last year. diluted earnings per share increased $1.03 to $1.27 for the first quarter of 2022, compared to $0.24 for the first quarter of 2021. results for the first quarter of 2022 include an unrealized gain of $19.8 million, net of tax, related to the increase in fair value of the company's investment in a hospital-at-home company. first quarter 2022 earnings before interest, taxes, depreciation and amortization ("ebitda")(7) increased $32.2 million to $47.4 million, compared $15.2 million in the same prior year period. in addition to using ebitda to evaluate the company’s financial performance, management uses other non-gaap financial measures, which exclude the effect of the following items (in thousands): three months ended march 31, 2022 2021 amortization of intangible assets $ 2,860 $ 2,399 restructuring and other charges $ 1,555 $ 628 other losses $ 12 $ 42 transaction-related expenses $ 50 $ 170 unrealized gain on preferred stock investment $ (26,964 ) $ — tax effect of adjustments $ 5,959 $ (858 ) foreign currency transaction losses, net $ 19 $ 403 adjusted ebitda(7) increased $5.7 million, or 34.4%, to $22.1 million, or 8.5% of revenues, in the first quarter of 2022, compared to $16.5 million, or 8.1% of revenues, in the same quarter last year. adjusted net income(7) increased $2.5 million to $10.3 million, or $0.49 per diluted share, for the first quarter of 2022, compared to $7.8 million, or $0.35 per diluted share, for the same quarter in 2021. the number of revenue-generating professionals(1) increased 29.1% to 4,023 in the first quarter of 2022 from 3,116 in the same quarter last year. the utilization rate(5) of the company's consulting capability increased to 71.4% during the first quarter 2022, compared to 66.4% during the same period last year. the utilization rate(5) for the company's digital capability increased to 72.4% during the first quarter 2022, compared to 71.3% during the same period last year. operating industries huron’s results reflect a portfolio of service offerings focused on helping clients address complex business challenges. the company’s first quarter 2022 revenues by operating segment as a percentage of total company revenues are as follows: healthcare (47%); education (31%); and commercial (22%). financial results by operating industry are included in the attached schedules and in huron's forthcoming quarterly report on form 10-q filing for the quarter ended march 31, 2022. outlook for 2022 based on currently available information, the company increased guidance for full year 2022 revenues before reimbursable expenses to a range of $1.00 billion to $1.05 billion. the company anticipates adjusted ebitda as a percentage of revenues in a range of 11.25% to 12.25% and non-gaap adjusted diluted earnings per share in a range of $3.00 to $3.40. management will provide a more detailed discussion of its outlook during the company's earnings conference call webcast. first quarter 2022 webcast the company will host a webcast to discuss its financial results today, may 3, 2022, at 5:00 p.m. eastern time, 4:00 p.m. central time. the conference call is being webcast by nasdaq and can be accessed from huron's website at http://ir.huronconsultinggroup.com. a replay will be available approximately two hours after the conclusion of the webcast and for 90 days thereafter. use of non-gaap financial measures(7) in evaluating the company’s financial performance and outlook, management uses ebitda, adjusted ebitda, adjusted ebitda as a percentage of revenues, adjusted net income, and adjusted diluted earnings per share, which are non-gaap measures. management uses these non-gaap financial measures to gain an understanding of the company's comparative operating performance (when comparing such results with previous periods or forecasts). these non-gaap financial measures are used by management in their financial and operating decision making because management believes they reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons. management also uses these non-gaap financial measures when publicly providing their business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. management believes that these non-gaap financial measures provide useful information to investors and others in understanding and evaluating huron’s current operating performance and future prospects in the same manner as management does, if they so choose, and in comparing in a consistent manner huron’s current financial results with huron’s past financial results. investors should recognize that these non-gaap measures might not be comparable to similarly titled measures of other companies. these measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the united states. management has provided its outlook regarding adjusted ebitda and adjusted diluted earnings per share, both of which are non-gaap financial measures and exclude certain charges. management has not reconciled these non-gaap financial measures to the corresponding gaap financial measures because guidance for the various reconciling items is not provided. management is unable to provide guidance for these reconciling items because they cannot determine their probable significance, as certain items are outside of the company's control and cannot be reasonably predicted since these items could vary significantly from period to period. accordingly, reconciliations to the corresponding gaap financial measures are not available without unreasonable effort. about huron huron is a global professional services firm that collaborates with clients to put possible into practice by creating sound strategies, optimizing operations, accelerating digital transformation, and empowering businesses and their people to own their future. by embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve. learn more at www.huronconsultinggroup.com. statements in this press release that are not historical in nature, including those concerning the company’s current expectations about its future results, are “forward-looking” statements as defined in section 21e of the securities exchange act of 1934, as amended, 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 the company's current expectations about 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: the impact of the covid-19 pandemic on the economy, our clients and client demand for our services, and our ability to sell and provide services, including the measures taken by governmental authorities and businesses in response to the pandemic, which may cause or contribute to other risks and uncertainties that we face; failure to achieve expected utilization rates, billing rates and the 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 huron's annual report on form 10-k for the year ended december 31, 2021 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. the company disclaims any obligation to update or revise any forward-looking statements as a result of new information or future events, or for any other reason. huron consulting group inc. consolidated statements of operations and other comprehensive income (loss) (in thousands, except per share amounts) (unaudited) three months ended march 31, 2022 2021 revenues and reimbursable expenses: revenues $ 260,049 $ 203,213 reimbursable expenses 4,726 1,934 total revenues and reimbursable expenses 264,775 205,147 operating expenses: direct costs (exclusive of depreciation and amortization included below) 187,247 148,115 reimbursable expenses 4,756 2,003 selling, general and administrative expenses 48,395 39,808 restructuring charges 1,555 628 depreciation and amortization 6,864 6,353 total operating expenses 248,817 196,907 operating income 15,958 8,240 other income (expense), net: interest expense, net of interest income (2,196 ) (1,719 ) other income, net 24,365 420 total other income (expense), net 22,169 (1,299 ) income before taxes 38,127 6,941 income tax expense 11,275 1,536 net income $ 26,852 $ 5,405 earnings per share: net income per basic share $ 1.29 $ 0.25 net income per diluted share $ 1.27 $ 0.24 weighted average shares used in calculating earnings per share: basic 20,850 21,932 diluted 21,167 22,341 comprehensive income (loss): net income $ 26,852 $ 5,405 foreign currency translation adjustments, net of tax (43 ) 400 unrealized loss on investment, net of tax (2,661 ) (4,648 ) unrealized gain on cash flow hedging instruments, net of tax 4,325 1,429 other comprehensive income (loss) 1,621 (2,819 ) comprehensive income $ 28,473 $ 2,586 huron consulting group inc. consolidated balance sheets (in thousands, except share and per share amounts) (unaudited) march 31, 2022 december 31, 2021 assets current assets: cash and cash equivalents $ 9,748 $ 20,781 receivables from clients, net 116,527 122,316 unbilled services, net 125,791 91,285 income tax receivable 4,997 8,071 prepaid expenses and other current assets 17,134 15,229 total current assets 274,197 257,682 property and equipment, net 26,836 31,004 deferred income taxes, net 1,791 1,804 long-term investments 95,930 72,584 operating lease right-of-use assets 33,737 35,311 other non-current assets 69,764 68,191 intangible assets, net 31,089 31,894 goodwill 623,841 620,879 total assets $ 1,157,185 $ 1,119,349 liabilities and stockholders’ equity current liabilities: accounts payable $ 12,364 $ 13,621 accrued expenses and other current liabilities 19,470 22,519 accrued payroll and related benefits 64,169 139,131 current maturities of long-term debt — 559 current maturities of operating lease liabilities 10,213 10,142 deferred revenues 21,632 19,212 total current liabilities 127,848 205,184 non-current liabilities: deferred compensation and other liabilities 40,296 43,458 long-term debt, net of current portion 335,000 232,221 operating lease liabilities, net of current portion 51,756 54,313 deferred income taxes, net 20,003 12,273 total non-current liabilities 447,055 342,265 commitments and contingencies stockholders’ equity common stock; $0.01 par value; 500,000,000 shares authorized; 23,976,090 and 24,364,814 shares issued, respectively 237 239 treasury stock, at cost, 2,645,999 and 2,495,172 shares, respectively (135,367 ) (135,969 ) additional paid-in capital 395,103 413,794 retained earnings 303,848 276,996 accumulated other comprehensive income 18,461 16,840 total stockholders’ equity 582,282 571,900 total liabilities and stockholders’ equity $ 1,157,185 $ 1,119,349 huron consulting group inc. consolidated statements of cash flows (in thousands) (unaudited) three months ended march 31, 2022 2021 cash flows from operating activities: net income $ 26,852 $ 5,405 adjustments to reconcile net income to cash flows from operating activities: depreciation and amortization 6,864 6,567 non-cash lease expense 1,640 1,693 share-based compensation 7,935 5,625 amortization of debt discount and issuance costs 198 198 allowances for doubtful accounts 28 — deferred income taxes 7,129 — gain on sale of property and equipment, excluding transaction costs (1,067 ) — change in fair value of contingent consideration liabilities 12 42 change in fair value of preferred stock investment (26,964 ) — changes in operating assets and liabilities, net of acquisitions and divestiture: (increase) decrease in receivables from clients, net 5,791 1,178 (increase) decrease in unbilled services, net (35,239 ) (23,086 ) (increase) decrease in current income tax receivable / payable, net 3,266 573 (increase) decrease in other assets 1,361 327 increase (decrease) in accounts payable and other liabilities (7,044 ) 2,566 increase (decrease) in accrued payroll and related benefits (70,689 ) (74,273 ) increase (decrease) in deferred revenues 828 (9,569 ) net cash used in operating activities (79,099 ) (82,754 ) cash flows from investing activities: purchases of property and equipment (3,924 ) (637 ) purchases of businesses, net of cash acquired (2,289 ) (6,000 ) capitalization of internally developed software costs (2,060 ) (1,400 ) proceeds from sale of property and equipment 4,750 — divestiture of business 207 — net cash used in investing activities (3,316 ) (8,037 ) cash flows from financing activities: proceeds from exercise of stock options 648 174 shares redeemed for employee tax withholdings (6,884 ) (8,503 ) share repurchases (24,097 ) (11,454 ) proceeds from bank borrowings 150,000 89,000 repayments of bank borrowings (47,780 ) (24,135 ) deferred payment on business acquisition (500 ) — net cash used in financing activities 71,387 45,082 effect of exchange rate changes on cash (5 ) 155 net decrease in cash and cash equivalents (11,033 ) (45,554 ) cash and cash equivalents at beginning of the period 20,781 67,177 cash and cash equivalents at end of the period $ 9,748 $ 21,623 huron consulting group inc. segment operating results and other operating data (unaudited) three months ended march 31, percent increase (decrease) segment and consolidated operating results (in thousands): 2022 2021 healthcare: revenues $ 121,876 $ 95,975 27.0 % operating income $ 28,032 $ 23,827 17.6 % segment operating income as a percentage of segment revenues 23.0 % 24.8 % education: revenues $ 80,662 $ 51,342 57.1 % operating income $ 14,306 $ 8,537 67.6 % segment operating income as a percentage of segment revenues 17.7 % 16.6 % commercial: revenues $ 57,511 $ 55,896 2.9 % operating income $ 12,214 $ 9,850 24.0 % segment operating income as a percentage of segment revenues 21.2 % 17.6 % total huron: revenues $ 260,049 $ 203,213 28.0 % reimbursable expenses 4,726 1,934 144.4 % total revenues and reimbursable expenses $ 264,775 $ 205,147 29.1 % segment operating income $ 54,552 $ 42,214 29.2 % items not allocated at the segment level: other operating expenses 33,548 28,879 16.2 % depreciation and amortization 5,046 5,095 (1.0 ) % total operating income 15,958 8,240 93.7 % other income (expense), net 22,169 (1,299 ) n/m income before taxes $ 38,127 $ 6,941 n/m other operating data: number of revenue-generating professionals by segment (at period end)(1)(6): healthcare 1,647 1,130 education 1,231 871 commercial (2) 1,145 1,115 total 4,023 3,116 revenue by capability: consulting and managed services (3) $ 150,584 $ 122,551 digital 109,465 80,662 total $ 260,049 $ 203,213 number of revenue-generating professionals by capability (at period end)(1): consulting and managed services (4) 2,003 1,376 digital 2,020 1,740 total 4,023 3,116 utilization rate by capability(5): consulting 71.4 % 66.4 % digital 72.4 % 71.3 % (1) consists 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. (2) the majority of our revenue-generating professionals within our commercial segment can provide services across all of our industries, including healthcare and education. (3) managed services capability revenue within our healthcare segment for the three months ended march 31, 2022 and march 31, 2021 was $13.8 million and $7.7 million, respectively. managed services capability revenue within our education segment for the three months ended march 31, 2022 and march 31, 2021 was $3.4 million and $2.2 million, respectively. (4) the number of managed services revenue-generating professionals within our healthcare segment as of march 31, 2022 and march 31, 2021 was 543 and 114, respectively. the number of managed services revenue-generating professionals within our education segment as of march 31, 2022 and march 31, 2021 was 92 and 52, respectively. (5) utilization rate 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 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 have not presented utilization rates for our managed services professionals as most of the revenues generated by these employees are not billed on an hourly basis. n/m - not meaningful huron consulting group inc. reconciliation of net income to adjusted earnings before interest, taxes, depreciation and amortization (7) (in thousands) (unaudited) three months ended march 31, 2022 2021 revenues $ 260,049 $ 203,213 net income $ 26,852 $ 5,405 add back: income tax expense 11,275 1,536 interest expense, net of interest income 2,196 1,719 depreciation and amortization 7,122 6,551 earnings before interest, taxes, depreciation and amortization (ebitda) (7) 47,445 15,211 add back: restructuring and other charges 1,555 628 other losses 12 42 transaction-related expenses 50 170 unrealized gain on preferred stock investment (26,964 ) — foreign currency transaction losses, net 19 403 adjusted ebitda (7) $ 22,117 $ 16,454 adjusted ebitda as a percentage of revenues (7) 8.5 % 8.1 % huron consulting group inc. reconciliation of net income to adjusted net income (7) (in thousands, except per share amounts) (unaudited) three months ended march 31, 2022 2021 net income $ 26,852 $ 5,405 weighted average shares - diluted 21,167 22,341 diluted earnings per share $ 1.27 $ 0.24 add back: amortization of intangible assets 2,860 2,399 restructuring and other charges 1,555 628 other losses 12 42 transaction-related expenses 50 170 unrealized gain on preferred stock investment (26,964 ) — tax effect of adjustments 5,959 (858 ) total adjustments, net of tax (16,528 ) 2,381 adjusted net income (7) $ 10,324 $ 7,786 adjusted weighted average shares - diluted 21,167 22,341 adjusted diluted earnings per share (7) $ 0.49 $ 0.35 (7) in evaluating the company’s financial performance and outlook, management uses 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, which are non-gaap measures. management uses these non-gaap financial measures to gain an understanding of the company's comparative operating performance (when comparing such results with previous periods or forecasts). these non-gaap financial measures are used by management in their financial and operating decision making because management believes they reflect the company's ongoing business in a manner that allows for meaningful period-to-period comparisons. management also uses these non-gaap financial measures when publicly providing the company's business outlook, for internal management purposes, and as a basis for evaluating potential acquisitions and dispositions. management believes that these non-gaap financial measures provide useful information to investors and others in understanding and evaluating huron’s current operating performance and future prospects in the same manner as management does, if they so choose, and in comparing in a consistent manner huron’s current financial results with huron’s past financial results. investors should recognize that these non-gaap measures might not be comparable to similarly titled measures of other companies. these measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the united states.
