Huron Consulting Group
Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT 2023 ANNUAL REPORT | HURON | I A L E T T E R F R O M C H I E F E XE C U T I V E O F F I C E R A N D P R E S I D E N T M A R K H U S S E Y 2023 culminated in record performance for our business. Driven by strong growth in all three operating segments and across our digital capability, we achieved record revenues and expanded our adjusted EBITDA margins for the third consecutive year. Two years ago, we committed to achieving sustainable revenue growth and margin expansion, while returning capital to shareholders. Our financial performance demonstrates the incredible work of our talented team and the foundation we have established to continue delivering on those medium-term investor objectives. 2023 Performance Highlights ■ We achieved record revenues of $1.36 ■ Digital capability revenues grew 17% over billion in 2023, growing 20% over 2022. the prior year as our clients continued ■ Healthcare segment revenues grew 26% over 2022, led by strong growth across our portfolio of performance improvement, financial advisory, strategy and innovation, and digital offerings. ■ Education segment revenues grew 19% over the prior year, led by strong growth their focus on aligning their strategy and digital initiatives to better serve their customers, advance their competitive positioning, and optimize their businesses. ■ Our consolidated adjusted EBITDA margin increased 70 basis points in 2023, compared to 2022. across our portfolio of digital, strategy and ■ During 2023, we deployed $124 million to operations, and research offerings. repurchase 1.5 million shares, representing 7.4% of our outstanding shares as of the beginning of the year. ■ Commercial segment revenues grew 9% over 2022, led by strong growth in our financial advisory offerings and continued growth in our digital capability. II | HURON | 2023 ANNUAL REPORT Executing Our Growth Strategy Our growth strategy has delivered strong Growing Presence in Commercial Industries results in recent years, and we believe it will continue to be the bedrock from which we will achieve top- and bottom-line growth into the future. Each pillar of our growth strategy reinforces and builds upon one another, and when executed together will help us enhance our ability to deliver on our clients’ most complex challenges, strengthen our competitive advantage, and create value for our shareholders. Accelerating Growth in Healthcare and Education Despite macroeconomic headwinds and uncertainties, our Commercial segment grew 9% in 2023 over 2022. Our financial advisory business had a record year driven by the demand for our restructuring and turnaround offerings as clients managed through distressed environments. We also achieved growth in our digital offerings despite slower buying patterns for larger, transformational opportunities in some industries due to economic uncertainty. Within Commercial, we remain focused on diversifying our portfolio and end markets by expanding on To maintain and advance our leading market the range of capabilities we deliver to clients positions in the healthcare and education in commercial industries, primarily financial industries, we continue to innovate and services, energy and utilities, and the public expand our offerings. In 2023, we achieved sector. We believe that new avenues for combined growth in our healthcare and growth in the Commercial segment will help education segments of 23% compared to position us to achieve accelerated growth in 2022. We believe the combination of our the years ahead. deep industry expertise, the breadth of our consulting, digital and managed services offerings, and our proven track record of delivering results for our clients positions us well to create more sustainable growth in our two largest businesses and increase value for our shareholders. Rapidly Growing Our Digital Capability Driven primarily by strong demand in the healthcare and education industries, our digital capability grew 17% in 2023 over 2022. Our ability to provide a broad portfolio of digital offerings that supports the strategic and operational needs of our clients is at the foundation of our strategy. Technology, data 2023 ANNUAL REPORT | HURON | III and analytics continue to rapidly evolve, Strong Balance Sheet and Cash Flows and we are well positioned to help our clients integrate digital solutions into their businesses to increase their competitive positions in their markets. Solid Foundation for Margin Expansion 2023 culminated in our third consecutive year of 50+ basis point adjusted EBITDA margin improvement. While we still have work to do to achieve our mid-teen level margin goal, we believe we have the right operating model, incentives and leadership commitment to drive sustainable margin improvement – while still funding the organic investments necessary in our people and our business to achieve our growth goals. One of the critical elements of our strategy is to maintain a strong balance sheet and execute a balanced capital allocation strategy. In 2023, we generated free cash flow of $100 million, and used our cash to return $124 million to shareholders via share repurchases, while investing $35 million in our business via capital expenditures. While we closed one acquisition in 2023, we continued to execute against a strong M&A pipeline, evaluating and engaging in due diligence on multiple opportunities. We will continue to be in the market to invest in businesses that enhance our competitive position and drive strong growth and returns for our shareholders. KEY PILLARS WITHIN OUR GROWTH STRATEGY Accelerating Growth in Healthcare and Solid Foundation for Margin Expansion: Education: Huron has leading market The Company is well positioned to achieve positions in healthcare and education, consistent margin expansion as well as providing comprehensive offerings to the strong annual adjusted diluted earnings largest health systems, academic medical per share growth. We are committed centers, colleges and universities, and to adjusted EBITDA margin expansion research institutes in the United States. by growing the areas of the business 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 that provide the most attractive returns, improving the operational efficiency of our client delivery, and scaling our selling, general, and administrative expense as we grow. deliver to clients, providing new avenues Strong Balance Sheet and Cash Flows: for growth and an important balance to its Strong free cash flow has and will continue healthcare and education focus. to be a hallmark of Huron’s financial Rapidly Growing Global Digital Capability: Huron’s ability to provide a broad portfolio of digital offerings that supports 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. strength and business model. The Company is committed to deploying capital in a strategic and balanced manner, including returning capital to shareholders and executing strategic, tuck-in acquisitions. IV | HURON | 2023 ANNUAL REPORT Commitment To Our People United by our common purpose to empower our clients, our people, and the communities we serve to own the future, we have attracted and retained talent by creating a diverse, inclusive, and innovative culture where our employees excel both personally and professionally. We are dedicated to ensuring that our employees’ journeys are fulfilling, rewarding, and full of opportunities for growth and connection. In 2023, our employees took advantage of learning and talent development Employees at the Chicago office during the Women in Leadership Summit opportunities, including personalized We will continue to invest in our highly learning and productivity days, mentorship talented team, who make the work we do programs, peer networks, and hands- each day possible. They have an unwavering on practice. And, we have expanded our commitment to our clients, our business and total rewards package to further support one another, and I am incredibly grateful for the physical and mental well-being of their dedication to shaping an even brighter employees and their families. future for Huron and those we serve every day. We performed incredibly well in 2023, and I am pleased with all we have accomplished. As we turn to 2024, I am excited about the possibilities that lie ahead for our business as we continue executing on our growth strategy. With our strong market positioning, incredible team, and highly collaborative culture, we are well positioned to achieve our growth goals. Mark Hussey Chief Executive Officer and President 2023 ANNUAL REPORT | HURON | V Financial and Operating Highlights Year ended December 31, 2023 (In thousands, except for earnings per share) 2019 2020 2021 2022 2023 Revenues (before reimbursable expenses) $ 876,757 $ 844,127 $ 905,640 $ 1,132,455 $ 1,362,060 Operating Income Operating Margin(1) $ 63,706 $ (28,852) $ 52,839 $ 99,760 $ 125,348 7.3% -3.4% 5.8% 8.8% 9.2% Net Income (Loss) from Continuing Operations $ 41,979 $ (23,718) $ 62,987 $ 75,552 $ 62,479 Income (Loss) from Discontinued Operations, net of tax $ (236) $ (122) $ – $ – $ – Net Income (Loss) $ 41,743 $ (23,840) $ 62,987 $ 75,552 $ 62,479 Diluted Earnings (Loss) Per Share from Continuing Operations Diluted Earnings (Loss) Per Share Return on Assets(2) Return on Equity(3) $ $ $ $ 1.87 1.85 3.8% 7.4% (1.08) (1.09) -2.1% -4.3% $ $ $ $ 2.89 2.89 5.9% $ $ 3.64 3.64 6.5% 3.19 3.19 5.0% 11.5% 13.3% 11.5% (1) Operating margin is defined as operating income (loss) expressed as a percentage of revenues. (2) Return on assets is calculated by dividing net income by average total assets. The average total assets for the years ended December 31, 2019, 2020, 2021, 2022, and 2023 were $1,104.4 million, $1,126.1 million, $1,074.0 million, $1,169.6 million, and $1,247.9 million, respectively. (3) Return on equity is calculated by dividing net income by average total stockholders’ equity. The average total stockholders’ equity for the years ended December 31, 2019, 2020, 2021, 2022, and 2023 were $566.3 million, $550.6 million, $547.3 million, $567.6 million, and $543.8 million, respectively. Revenues In millions Operating Segments As a Percentage of Total Revenues $1,132.5 $1,362.1 Commercial 19% Healthcare 49% $876.8 $844.1 $905.6 Education & Research 32% 2019 2020 2021 2022 2023 Note: The financial and operating information presented above is on a continuing operations basis, unless otherwise noted. VI | HURON | 2023 ANNUAL REPORT Board of Directors & Board of Directors & Executive Team Executive Team Board of Directors John F. McCartney(1)(3) Non-Executive Chairman of the Board Board of Directors Granite Ridge Resources, Inc. EQT Corporation C. Mark Hussey Chief Executive Officer and President Joy T. Brown(2)(4)(5) Board of Directors Tractor Supply Company Ekta Singh-Bushell(3)(4)(5) Board of Directors Lesaka Technologies Inc. TTEC Holdings, Inc. ChargePoint Holdings, Inc. Strategic Advisor DecisionGPS, LLC H. Eugene Lockhart(1)(2)(5) Chairman MissionOG LLC Community Choice Financial Peter K. Markell(1)(3)(4) Board of Trustees Boston College Board of Directors Eastern Bank James H. Roth Vice Chairman, Client Services Board of Directors Shorelight Holdings LLC Lurie Children’s Pediatric Anesthesia Associates Hugh E. Sawyer(1)(2)(3) Debra L. Zumwalt(2)(3)(4) Vice President and General Counsel Stanford University Board of Directors Exponent, Inc. Board of Trustees American University of Afghanistan Executive Team C. Mark Hussey Chief Executive Officer and President Hope Katz Corporate Vice President, Legal Affairs and Corporate Secretary John D. Kelly Executive Vice President, Chief Financial Officer and Treasurer J. Ronald Dail Executive Vice President and Chief Operating Officer Committees: (1) Audit, (2) Compensation, (3) Nominating and Corporate Governance, (4) Technology and Information Security (5) Finance and Capital Allocation Committee Board of Directors and Executive Team as of March 22, 2024 [This page intentionally left blank] [This page intentionally left blank] [This page intentionally left blank] Company Information Stock Performance Corporate Headquarters Huron Consulting Group Inc. 550 W. Van Buren Street Chicago, IL 60607 312-583-8700 www.huronconsultinggroup.com Media Contact Allie Bovis Senior Manager, Communications 312-583-8700 x671422 abovis@hcg.com Investor Relations John D. Kelly Executive Vice President, Chief Financial Officer and Treasurer 312-583-8722 investor@hcg.com Corporate Secretary Hope Katz Corporate Vice President, Legal Affairs and Corporate Secretary 312-583-8700 x852022 corporatesecretary@hcg.com Transfer Agent Computershare P.O. Box 505000 Louisville, KY 40233-5000 312-588-4990 www.computershare.com/investor Stock Market Information Common Stock is traded on the NASDAQ Global Select Market under the symbol HURN Independent Accountants PricewaterhouseCoopers LLP One North Wacker Drive Chicago, IL 60606 Annual Meeting of Stockholders 11:00 a.m. CDT, Friday, May 3, 2024 $250 $200 $150 $100 $50 $0 2018 2019 2020 2021 2022 2023 Huron Consulting Group Inc. The NASDAQ Composite Index Peer Group Index Value of Investment 2018 2019 2020 2021 2022 2023 % Return Huron Consulting Group Inc. $ 100.00 $ 133.93 $ 114.89 $ 97.25 $ 141.49 $ 200.35 100% The NASDAQ Composite Index $ 100.00 $ 135.23 $ 194.24 $ 235.78 $ 157.74 $ 226.24 126% Peer Group Index $ 100.00 $ 135.21 $ 127.19 $ 168.29 $ 165.08 $ 169.67 70% The above graph and table compare the cumulative total shareholder return on our common stock from December 31, 2018 through December 31, 2023, against the cumulative total shareholder return of The NASDAQ Composite Index and the stocks making up an industry peer group. The peer group is comprised of the following compa- nies: CRA International, Inc., FTI Consulting, Inc., ICF International, Inc., Premier, Inc. and Resources Connection, Inc. The graph and table assume a $100 investment in Huron Consulting Group Inc. common stock, The NASDAQ Composite Index, and an index of our peer group on December 31, 2018, and any dividends are assumed to be reinvested. Form 10-K Huron Consulting Group Inc. will provide to any investor, without charge, a copy of its annual report (which includes the Company’s Annual Report on Form 10-K as filed with the United States Securi- ties and Exchange Commission). Cop- ies of all the exhibits as filed with the Securities and Exchange Commission will also be provided without charge upon specific request. Requests can be made via the Company’s website at www.huronconsultinggroup.com. Forward-Looking Statements Statements in this annual report that are not historical in nature, including those con- cerning the company’s current expectations about its future results, are “forward-look- ing” statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litiga- tion Reform Act of 1995. Forward-looking statements are identified by words such as “may,” “should,” “expects,” “provides,” “an- ticipates,” “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 fu- ture requirements and needs, results, levels of activity, performance, or achievements. Some of the factors that could cause actual results to differ materially from the for- ward-looking statements contained herein include, without limitation: failure to achieve expected utilization rates, billing rates, and the necessary number of revenue-gener- ating professionals; inability to expand or adjust our service offerings in response to market demands; our dependence on re- newal 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 re- lated to income and other taxes; difficulties in successfully integrating the businesses we acquire and achieving expected benefits from such acquisitions; risks relating to pri- vacy, 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, 2023 that may cause actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activi- ty, performance, or achievements expressed or implied by these forward-looking state- ments. The company disclaims any obliga- tion to update or revise any forward-looking statements as a result of new information or future events, or for any other reason. huronconsultinggroup.com LinkedIn.com/company/HuronConsulting X.com/Huron Facebook.com/HuronConsulting © 2024 Huron Consulting Group Inc. and affiliates. Huron is a global consultancy and not a CPA firm, and does not provide attest services, audits, or other engagements in accordance with standards established by the AICPA or auditing standards promulgated by the Public Company Accounting Oversight Board (“PCAOB”). 

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