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Table of Contents




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM 10-Q 
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-50976 
 
HURON CONSULTING GROUP INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
01-0666114
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification Number)
550 West Van Buren Street
Chicago, Illinois
60607
(Address of principal executive offices)
(Zip Code)
(312) 583-8700
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
HURN
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting 
Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 24, 2020, 22,873,628 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
 


Table of Contents




Huron Consulting Group Inc.
HURON CONSULTING GROUP INC.
INDEX

 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 



Table of Contents




PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

HURON CONSULTING GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited) 
 
June 30,
2020
 
December 31,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
83,212

 
$
11,604

Receivables from clients, net of allowances of $8,906 and $8,907, respectively
117,632

 
116,571

Unbilled services, net of allowances of $3,640 and $2,994, respectively
82,932

 
79,937

Income tax receivable
323

 
2,376

Prepaid expenses and other current assets
13,863

 
14,248

Total current assets
297,962

 
224,736

Property and equipment, net
37,082

 
38,413

Deferred income taxes, net
12,426

 
1,145

Long-term investments
59,524

 
54,541

Operating lease right-of-use assets
52,298

 
54,954

Other non-current assets
55,083

 
52,177

Intangible assets, net
24,916

 
31,625

Goodwill
586,235

 
646,680

Total assets
$
1,125,526

 
$
1,104,271

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
5,046

 
$
7,944

Accrued expenses and other current liabilities
23,532

 
18,554

Accrued payroll and related benefits
80,066

 
141,605

Current maturities of long-term debt
536

 
529

Current maturities of operating lease liabilities
8,559

 
7,469

Deferred revenues
35,044

 
28,443

Total current liabilities
152,783

 
204,544

Non-current liabilities:
 
 
 
Deferred compensation and other liabilities
38,557

 
28,635

Long-term debt, net of current portion
331,054

 
208,324

Operating lease liabilities, net of current portion
66,547

 
69,233

Deferred income taxes, net
571

 
8,070

Total non-current liabilities
436,729

 
314,262

Commitments and contingencies

 

Stockholders’ equity
 
 
 
Common stock; $0.01 par value; 500,000,000 shares authorized; 25,421,974 and 25,144,764 shares issued at June 30, 2020 and December 31, 2019, respectively
246

 
247

Treasury stock, at cost, 2,556,012 and 2,425,430 shares at June 30, 2020 and December 31, 2019, respectively
(128,646
)
 
(128,348
)
Additional paid-in capital
450,391

 
460,781

Retained earnings
209,088

 
237,849

Accumulated other comprehensive income
4,935

 
14,936

Total stockholders’ equity
536,014

 
585,465

Total liabilities and stockholders’ equity
$
1,125,526

 
$
1,104,271

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

1

Table of Contents




HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited) 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
Revenues and reimbursable expenses:
 
 
 
 
 
 
 
Revenues
$
217,857

 
$
220,754

 
$
440,476

 
$
425,199

Reimbursable expenses
2,970

 
23,534

 
22,273

 
42,151

Total revenues and reimbursable expenses
220,827

 
244,288

 
462,749

 
467,350

Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses):
 
 
 
 
 
 
 
Direct costs
149,514

 
141,628

 
305,762

 
279,408

Amortization of intangible assets and software development costs
1,334

 
1,171

 
2,635

 
2,288

Reimbursable expenses
2,866

 
23,657

 
22,255

 
42,326

Total direct costs and reimbursable expenses
153,714

 
166,456

 
330,652

 
324,022

Operating expenses and other losses (gains), net
 
 
 
 
 
 
 
Selling, general and administrative expenses
44,857

 
52,537

 
88,303

 
103,286

Restructuring charges
109

 
754

 
1,718

 
2,029

Litigation and other gains

 
(485
)
 
(150
)
 
(941
)
Depreciation and amortization
6,193

 
7,151

 
12,307

 
14,323

Goodwill impairment charges

 

 
59,816

 

Total operating expenses and other losses (gains), net
51,159

 
59,957

 
161,994

 
118,697

Operating income (loss)
15,954

 
17,875

 
(29,897
)
 
24,631

Other income (expense), net:
 
 
 
 
 
 
 
Interest expense, net of interest income
(2,916
)
 
(4,524
)
 
(5,257
)
 
(8,782
)
Other income (expense), net
3,948

 
695

 
(1,348
)
 
2,912

Total other income (expense), net
1,032

 
(3,829
)
 
(6,605
)
 
(5,870
)
Income (loss) from continuing operations before taxes
16,986

 
14,046

 
(36,502
)
 
18,761

Income tax expense (benefit)
3,414

 
3,477

 
(7,801
)
 
4,842

Net income (loss) from continuing operations
13,572

 
10,569

 
(28,701
)
 
13,919

Loss from discontinued operations, net of tax
(25
)
 
(97
)
 
(60
)
 
(143
)
Net income (loss)
$
13,547

 
$
10,472

 
$
(28,761
)
 
$
13,776

Net earnings (loss) per basic share:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
0.62

 
$
0.48

 
$
(1.31
)
 
$
0.63

Loss from discontinued operations, net of tax

 

 
(0.01
)
 

Net income (loss)
$
0.62

 
$
0.48

 
$
(1.32
)
 
$
0.63

Net earnings (loss) per diluted share:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
0.61

 
$
0.47

 
$
(1.31
)
 
$
0.62

Loss from discontinued operations, net of tax

 

 
(0.01
)
 

Net income (loss)
$
0.61

 
$
0.47

 
$
(1.32
)
 
$
0.62

Weighted average shares used in calculating earnings (loss) per share:
 
 
 
 
 
 
 
Basic
21,869

 
21,997

 
21,848

 
21,933

Diluted
22,116

 
22,400

 
21,848

 
22,356

Comprehensive income:
 
 
 
 
 
 
 
Net income (loss)
$
13,547

 
$
10,472

 
$
(28,761
)
 
$
13,776

Foreign currency translation adjustments, net of tax
104

 
(359
)
 
(675
)
 
(43
)
Unrealized gain (loss) on investment, net of tax
(5,678
)
 
3,915

 
(5,936
)
 
6,572

Unrealized loss on cash flow hedging instruments, net of tax
(1,705
)
 
(612
)
 
(3,390
)
 
(849
)
Other comprehensive income (loss)
(7,279
)
 
2,944

 
(10,001
)
 
5,680

Comprehensive income (loss)
$
6,268

 
$
13,416

 
$
(38,762
)
 
$
19,456

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

2

Table of Contents




HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
 
Three Months Ended June 30,
 
Common Stock
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Income
 
Stockholders’
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at March 31, 2020
24,559,854

 
$
246

 
(2,780,835
)
 
$
(128,366
)
 
$
444,974

 
$
195,541

 
$
12,214

 
$
524,609

Comprehensive income
 
 
 
 
 
 
 
 
 
 
13,547

 
(7,279
)
 
6,268

Issuance of common stock in connection with:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards, net of cancellations
19,582

 

 
(4,157
)
 
(196
)
 
196

 
 
 
 
 

Exercise of stock options
6,800

 

 
 
 
 
 
178

 
 
 
 
 
178

Share-based compensation
 
 
 
 
 
 
 
 
5,043

 
 
 
 
 
5,043

Shares redeemed for employee tax withholdings
 
 
 
 
(1,806
)
 
(84
)
 
 
 
 
 
 
 
(84
)
Balance at June 30, 2020
24,586,236


$
246


(2,786,798
)

$
(128,646
)
 
$
450,391


$
209,088


$
4,935

 
$
536,014

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2019
24,682,802

 
$
247


(2,738,850
)

$
(126,983
)

$
457,748


$
199,410


$
19,231


$
549,653

Comprehensive income
 
 
 
 
 
 
 
 
 
 
10,472

 
2,944

 
13,416

Issuance of common stock in connection with:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards, net of cancellations
18,391

 

 
(2,438
)
 
(75
)
 
75

 
 
 
 
 

Exercise of stock options
10,000

 

 
 
 
 
 
234

 
 
 
 
 
234

Share-based compensation
 
 
 
 
 
 
 
 
5,133

 
 
 
 
 
5,133

Shares redeemed for employee tax withholdings
 
 
 
 
(1,538
)
 
(75
)
 
 
 
 
 
 
 
(75
)
Balance at June 30, 2019
24,711,193

 
$
247

 
(2,742,826
)
 
$
(127,133
)
 
$
463,190

 
$
209,882

 
$
22,175

 
$
568,361

 
Six Months Ended June 30,
 
Common Stock
 
Treasury Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Income
 
Stockholders’
Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2019
24,603,308

 
$
247

 
(2,763,302
)
 
$
(128,348
)
 
$
460,781

 
$
237,849

 
$
14,936

 
$
585,465

Comprehensive income
 
 
 
 
 
 
 
 
 
 
(28,761
)
 
(10,001
)
 
(38,762
)
Issuance of common stock in connection with:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards, net of cancellations
270,126

 
2

 
98,310

 
6,919

 
(6,921
)
 
 
 
 
 

Exercise of stock options
26,800

 

 
 
 
 
 
646

 
 
 
 
 
646

Share-based compensation
 
 
 
 
 
 
 
 
16,763

 
 
 
 
 
16,763

Shares redeemed for employee tax withholdings
 
 
 
 
(121,806
)
 
(7,217
)
 
 
 
 
 
 
 
(7,217
)
Share repurchases
(313,998
)
 
(3
)
 
 
 
 
 
(20,878
)
 
 
 
 
 
(20,881
)
Balance at June 30, 2020
24,586,236

 
$
246

 
(2,786,798
)
 
$
(128,646
)
 
$
450,391

 
$
209,088

 
$
4,935

 
$
536,014

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
24,418,252

 
$
244

 
(2,671,962
)
 
$
(124,794
)
 
$
452,573

 
$
196,106

 
$
16,495

 
$
540,624

Comprehensive income
 
 
 
 
 
 
 
 
 
 
13,776

 
5,680

 
19,456

Issuance of common stock in connection with:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards, net of cancellations
272,941

 
3

 
25,174

 
2,121

 
(2,124
)
 
 
 
 
 

Exercise of stock options
20,000

 

 
 
 
 
 
468

 
 
 
 
 
468

Share-based compensation
 
 
 
 
 
 
 
 
12,273

 
 
 
 
 
12,273

Shares redeemed for employee tax withholdings
 
 
 
 
(96,038
)
 
(4,460
)
 
 
 

 
 
 
(4,460
)
Balance at June 30, 2019
24,711,193

 
$
247

 
(2,742,826
)
 
$
(127,133
)
 
$
463,190

 
$
209,882

 
$
22,175

 
$
568,361

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

3

Table of Contents




HURON CONSULTING GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Six Months Ended
June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(28,761
)
 
$
13,776

Adjustments to reconcile net income (loss) to cash flows from operating activities:
 
 
 
Depreciation and amortization
14,942

 
17,285

Non-cash lease expense
3,880

 
4,397

Lease impairment charge

 
805

Share-based compensation
14,527

 
11,483

Amortization of debt discount and issuance costs
397

 
5,264

Goodwill impairment charges
59,816

 

Allowances for doubtful accounts
512

 
170

Deferred income taxes
(15,515
)
 

Loss on sale of business
102

 

Change in fair value of contingent consideration liabilities

 
(876
)
Changes in operating assets and liabilities, net of divestiture:
 
 
 
(Increase) decrease in receivables from clients, net
(339
)
 
(6,984
)
(Increase) decrease in unbilled services, net
(3,059
)
 
(22,105
)
(Increase) decrease in current income tax receivable / payable, net
6,546

 
6,486

(Increase) decrease in other assets
(1,674
)
 
(4,743
)
Increase (decrease) in accounts payable and other liabilities
(2,787
)
 
(133
)
Increase (decrease) in accrued payroll and related benefits
(53,420
)
 
(30,462
)
Increase (decrease) in deferred revenues
6,638

 
(570
)
Net cash provided by (used in) operating activities
1,805

 
(6,207
)
Cash flows from investing activities:
 
 
 
Purchases of property and equipment, net
(4,417
)
 
(6,384
)
Purchases of investment securities
(13,000
)
 

Investment in life insurance policies
(1,540
)
 
(4,087
)
Capitalization of internally developed software costs
(5,184
)
 
(4,409
)
Net cash used in investing activities
(24,141
)

(14,880
)
Cash flows from financing activities:
 
 
 
Proceeds from exercises of stock options
646

 
469

Shares redeemed for employee tax withholdings
(7,217
)
 
(4,460
)
Share repurchases
(22,115
)
 

Proceeds from bank borrowings
283,000

 
87,500

Repayments of bank borrowings
(160,263
)
 
(81,756
)
Payments of contingent consideration liabilities

 
(4,674
)
Net cash provided by (used in) financing activities
94,051

 
(2,921
)
Effect of exchange rate changes on cash
(107
)
 
78

Net increase (decrease) in cash and cash equivalents
71,608

 
(23,930
)
Cash and cash equivalents at beginning of the period
11,604

 
33,107

Cash and cash equivalents at end of the period
$
83,212

 
$
9,177

Supplemental disclosure of cash flow information:
 
 
 
Non-cash investing and financing activities:
 
 
 
Property and equipment expenditures and capitalized software included in accounts payable and accrued expenses
$
2,070

 
$
3,842

Operating lease right-of-use asset obtained in exchange for operating lease liability
$
1,397

 
$
3,611

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

4

Table of Contents

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


1. Description of Business
Huron is a global consultancy that collaborates with clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need 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.
2. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited consolidated financial statements reflect the financial position, results of operations, and cash flows as of and for the three and six months ended June 30, 2020 and 2019. These financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for Quarterly Reports on Form 10-Q. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. These financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2019 included in our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the period ended March 31, 2020. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.
Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related disclosures. The business and economic uncertainty resulting from the coronavirus (COVID-19) pandemic has made such estimates and assumptions more difficult to predict. Accordingly, actual results and outcomes could differ from those estimates.
3. New Accounting Pronouncements
Recently Adopted
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which provides a new current expected credit loss model to account for credit losses on certain financial assets, including trade receivables. That model requires an entity to estimate lifetime credit losses based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the collectability of the reported amount. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a direct write-down of the investment, which may be reversed in the event that the credit of an issuer improves. We adopted ASU 2016-13 effective January 1, 2020, which did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies certain disclosure requirements related to fair value measurements. We adopted ASU 2018-13 effective January 1, 2020, which had no impact on the amounts reported on our consolidated financial statements. We updated our disclosures within the notes to our consolidated financial statements as required by ASU 2018-13.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies other aspects of the accounting for franchise taxes and enacted changes in tax laws or tax rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. On January 1, 2020, we elected to early adopt ASU 2019-12 on a modified retrospective basis for those amendments that are not applied on a prospective basis. The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

5

Table of Contents

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

4. Goodwill and Intangible Assets
The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2020.
 

Healthcare
 

Business
Advisory
 
Education
 
Total
Balance as of December 31, 2019:
 
 
 
 
 
 
 
Goodwill
$
636,810

 
$
302,057

 
$
103,889

 
$
1,042,756

Accumulated impairment losses
(208,081
)
 
(187,995
)
 

 
(396,076
)
Goodwill, net as of December 31, 2019
428,729

 
114,062

 
103,889

 
646,680

Goodwill impairment charges

 
(59,816
)
 

 
(59,816
)
Foreign currency translation

 
(629
)
 

 
(629
)
Goodwill, net as of June 30, 2020
$
428,729

 
$
53,617

 
$
103,889

 
$
586,235


First Quarter 2020 Goodwill Impairment Charges
The worldwide spread of coronavirus (COVID-19) in the first quarter of 2020 created significant volatility, uncertainty and disruption to the global economy. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how we expect it will continue to negatively impact our clients, employees and business partners. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expected it to have an unfavorable impact on sales, increase uncertainty in the backlog and negatively impact full year 2020 results. The services provided by our Strategy and Innovation and Life Sciences reporting units within our Business Advisory segment focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the duration of the projects within these practices are typically short-term. Therefore, due to the uncertainty caused by the COVID-19 pandemic, we are cautious about near-term results for these two reporting units. Based on our internal projections and the preparation of our financial statements for the quarter ended March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, during the first quarter of 2020 we believed that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on both reporting units as of March 31, 2020.
Based on the estimated fair values of the Strategy and Innovation and Life Sciences reporting units, we recorded non-cash pretax goodwill impairment charges of $49.9 million and $9.9 million, respectively, in the first quarter of 2020. The $49.9 million non-cash pretax charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $37.5 million. The $9.9 million non-cash pretax charge related to the Life Sciences reporting unit reduced the goodwill balance of the reporting unit to zero.
Our goodwill impairment test was performed by comparing the fair value of each of the Strategy and Innovation and Life Sciences reporting units with its respective carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair value. To estimate the fair value of each reporting unit, we relied on a combination of the income approach and the market approach, with a fifty-fifty weighting.
In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including long-term projections of future cash flows, market conditions, and discount rates that reflects the risk inherent in the future cash flows. In estimating future cash flows, we relied on internally generated seven-year forecasts. For periods after the seven-year forecast, we assumed a long-term annual revenue growth rate of 3.0% for both the Strategy and Innovation and Life Sciences reporting units and a long-term EBITDA margin of 24.8% and 6.7%, respectively. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information. Our discounted cash flow analysis assumed weighted average cost of capital discount rates of 16.0% and 10.5% for the Strategy and Innovation and Life Sciences reporting units, respectively.
In the market approach, we utilized the guideline company method, which involved calculating valuation revenue multiples based on operating data from guideline publicly traded companies. Multiples derived from guideline companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples were evaluated and adjusted based on specific characteristics of the Strategy and Innovation and Life Sciences reporting units relative to the selected guideline companies and

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

applied to the reporting units' operating data to arrive at an indication of value. The range of revenue multiples used in the valuation of the Strategy and Innovation and Life Sciences reporting units was 1.20x to 1.70x and 0.30x to 0.40x, respectively.
Concurrently with the goodwill impairment tests performed over the Strategy and Innovation and Life Sciences reporting units, we evaluated whether any indicators exist that would lead us to believe that the fair values of our Healthcare, Education, and Business Advisory reporting units may not exceed their carrying values. Based on our internal projections, consideration of the impact of the COVID-19 pandemic on these reporting units, and review of the amounts by which the fair values of these reporting units exceeded their carrying values in the most recent quantitative goodwill impairment analysis performed, we did not identify any indicators that would lead us to believe that the fair values of these reporting units may not exceed their carrying values as of March 31, 2020.
In connection with the goodwill impairment tests performed on the Strategy and Innovation and Life Sciences reporting units as of March 31, 2020, we performed impairment tests on the long-lived assets allocated to the asset groups of the Strategy and Innovation and Life Sciences reporting units. Based on the impairment tests performed, we concluded that the long-lived assets allocated to the asset groups were not impaired as of March 31, 2020. We did not identify any indicators that would lead us to believe that the carrying values of the long-lived assets allocated to our other asset groups may not be recoverable as of March 31, 2020.
In the second quarter of 2020, we did not identify any indicators that would lead us to believe that the fair values of any of our reporting units may not exceed their carrying values, nor did we identify any indicators that would lead us to believe that the carrying values of the long-lived assets allocated to our asset groups may not be recoverable.
Intangible Assets
Intangible assets as of June 30, 2020 and December 31, 2019 consisted of the following:
 
 
 
As of June 30, 2020
 
As of December 31, 2019
 
Useful Life 
(in years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Customer relationships
3 to 13
 
$
87,072

 
$
66,358

 
$
87,577

 
$
61,882

Trade names
5 to 6
 
28,930

 
26,490

 
28,930

 
25,894

Technology and software
5
 
5,440

 
4,739

 
5,694

 
4,321

Non-competition agreements
5
 
2,220

 
1,670

 
2,220

 
1,447

Customer contracts
2
 
800

 
289

 
800

 
52

Total
 
 
$
124,462

 
$
99,546

 
$
125,221

 
$
93,596


Identifiable intangible assets with finite lives are amortized over their estimated useful lives. Customer relationships and customer contracts, as well as certain trade names and technology and software, are amortized on an accelerated basis to correspond to the cash flows expected to be derived from the assets. All other intangible assets with finite lives are amortized on a straight-line basis.
Intangible asset amortization expense was $3.2 million and $4.3 million for the three months ended June 30, 2020 and 2019, respectively; and $6.4 million and $8.8 million for the six months ended June 30, 2020 and 2019. The table below sets forth the estimated annual amortization expense for the intangible assets recorded as of June 30, 2020.
Year Ending December 31,
 
Estimated Amortization Expense
2020
 
$
12,561

2021
 
$
8,358

2022
 
$
6,111

2023
 
$
3,512

2024
 
$
741

Actual future amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, and other factors.

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Table of Contents

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

5. Revenues
For the three months ended June 30, 2020 and 2019, we recognized revenues of $217.9 million and $220.8 million, respectively. Of the $217.9 million recognized in the second quarter of 2020, we recognized revenues of $5.6 million from obligations satisfied, or partially satisfied, in prior periods, of which $4.0 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments and $1.6 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements. Of the $220.8 million recognized in the second quarter of 2019, we recognized revenues of $3.6 million from obligations satisfied, or partially satisfied, in prior periods, primarily due to the release of allowances on unbilled services due to securing contract amendments. During the second quarter of 2019, we recognized a $0.3 million decrease to revenues due to changes in the estimates of our variable consideration under performance-based billing arrangements.
For the six months ended June 30, 2020 and 2019, we recognized revenues of $440.5 million and $425.2 million, respectively. Of the $440.5 million recognized in the first six months of 2020, we recognized revenues of $10.0 million from obligations satisfied, or partially satisfied, in prior periods, of which $6.2 million was due to changes in the estimates of our variable consideration under performance-based billing arrangements and $3.8 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments. Of the $425.2 million recognized in the first six months of 2019, we recognized revenues of $2.1 million from obligations satisfied, or partially satisfied, in prior periods, primarily due to the release of allowances on unbilled services due to securing contract amendments. During the first six months of 2019, we recognized a $1.5 million decrease to revenues due to changes in the estimates of our variable consideration under performance-based billing arrangements.
As of June 30, 2020, we had $76.4 million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude obligations under contracts with an original expected duration of one year or less, variable consideration which has been excluded from the total transaction price due to the constraint, and performance obligations under time-and-expense engagements which are recognized in the amount invoiced. Of the $76.4 million of performance obligations, we expect to recognize approximately $30.1 million as revenue in 2020, $29.7 million in 2021, and the remaining $16.6 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.
Contract Assets and Liabilities
The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets.
Unbilled services include revenues recognized for services performed but not yet billed to clients. Services performed that we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval in performance-based engagements, must occur are recorded as contract assets and included within unbilled services, net. The contract asset balance as of June 30, 2020 and December 31, 2019 was $12.7 million and $12.6 million, respectively. The $0.1 million increase primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.
Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition policy. Our deferred revenues balance as of June 30, 2020 and December 31, 2019, was $35.0 million and $28.4 million, respectively. The $6.6 million increase primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the three and six months ended June 30, 2020, $6.8 million and $21.3 million, respectively, of revenues recognized were included in the deferred revenue balance as of December 31, 2019.

8

Table of Contents

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

6. Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, excluding unvested restricted common stock. Diluted earnings per share reflects the potential reduction in earnings per share that could occur if securities or other contracts to issue common stock were exercised or converted into common stock under the treasury stock method. Such securities or other contracts include unvested restricted stock awards, outstanding common stock options, convertible senior notes, and outstanding warrants, to the extent dilutive. In periods for which we report a net loss from continuing operations, diluted weighted average common shares outstanding excludes all potential common stock equivalents as their impact on diluted net loss from continuing operations per share would be anti-dilutive. Earnings (loss) per share under the basic and diluted computations are as follows: 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
Net income (loss) from continuing operations
$
13,572

 
$
10,569

 
$
(28,701
)
 
$
13,919

Income (loss) from discontinued operations, net of tax
(25
)
 
(97
)
 
(60
)
 
(143
)
Net income (loss)
$
13,547

 
$
10,472

 
$
(28,761
)
 
$
13,776

 
 
 
 
 
 
 
 
Weighted average common shares outstanding – basic
21,869

 
21,997

 
21,848

 
21,933

Weighted average common stock equivalents
247

 
403

 

 
423

Weighted average common shares outstanding – diluted
22,116

 
22,400

 
21,848

 
22,356

 
 
 
 
 
 
 
 
Net earnings (loss) per basic share:
 
 
 
 

 

Net income (loss) from continuing operations
$
0.62

 
$
0.48

 
$
(1.31
)
 
$
0.63

Income (loss) from discontinued operations, net of tax

 

 
(0.01
)
 

Net income (loss)
$
0.62

 
$
0.48

 
$
(1.32
)
 
$
0.63

 
 
 
 
 
 
 
 
Net earnings (loss) per diluted share:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
0.61

 
$
0.47

 
$
(1.31
)
 
$
0.62

Income (loss) from discontinued operations, net of tax

 

 
(0.01
)
 

Net income (loss)
$
0.61

 
$
0.47

 
$
(1.32
)
 
$
0.62