Huron Consulting Group Inc. (HURN)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and related notes appearing under Part II—Item 8. “Financial Statements and Supplementary Data.” The following MD&A contains forward-looking statements and involves numerous risks and uncertainties, including, without limitation, those described under Part I—Item 1A. “Risk Factors” and “Forward-Looking Statements” of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

The following information summarizes our results of operations for 2024, 2023 and 2022; and discusses those results of operations for 2024 compared to 2023. For a discussion of our results of operations for 2023 compared to 2022 refer to Part II—Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the United States Securities and Exchange Commission on February 27, 2024.

OVERVIEW

Huron is a global professional services firm that partners with clients to put possible into practice by creating sound strategies, optimizing operations, accelerating digital transformation, and empowering businesses to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.

We provide our services and products and manage our business under three operating segments: Healthcare, Education and Commercial. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. See Part I—Item 1. “Business—Overview—Our Services” and Note 19 “Segment Information” within the notes to our consolidated financial statements for a discussion of our segments and capabilities.

COMPONENTS OF OPERATING RESULTS

Total Revenues

Revenues before Reimbursable Expenses

Revenues before reimbursable expenses 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 before reimbursable expenses 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 before reimbursable expenses 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 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 including our cloud-based revenue cycle management software and research administration and compliance software. 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.

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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. 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, which includes salaries, performance bonuses, share-based compensation, signing and retention bonuses, payroll taxes, benefits and deferred compensation expense attributable to the change in market value of our deferred compensation liability. Changes in the market value of our deferred compensation liability are offset with the changes in market value of investments that are used to fund our deferred compensation liability, which are recorded within other income (expense), net. 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. Unallocated corporate expenses not allocated at the segment level include costs related to administrative functions that are performed in a centralized manner, as well as restructuring charges, depreciation and amortization, and interest expense that are not attributable to a particular segment. The 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 before reimbursable expenses, 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

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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 in 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 of $3.3 million incurred during 2024 specific to this litigation matter, as this net gain is not indicative of the ongoing performance of our business. Third-party legal costs incurred for this litigation matter in 2023 and 2022 were $4.0 million and $2.0 million, respectively. Our third-party legal expenses are recorded as a component of selling, general and administrative expenses on our statement of operations.

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.

Unrealized losses (gains) on preferred stock investment: We exclude the effect of unrealized losses and gains related to changes in the fair value of our preferred stock investment in a hospital-at-home company arising from observable price changes or impairment losses. These unrealized losses and gains are included as a component of other income (expense), net. We believe that these unrealized losses and gains are not indicative of the ongoing performance of our business and their exclusion permits comparability with prior periods.

Losses (gains) on sale of business: We exclude the effect of non-operating losses and gains recognized as a result of sales of businesses as they are infrequent, management believes that these items are not indicative of the ongoing performance of our business, and their exclusion permits comparability with periods that were not impacted by such items. The 2024 gain relates to the divestiture of our Studer Education practice in the fourth quarter of 2024.

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;

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and our Managed Services professionals who provide revenue cycle management and research administration managed services and outsourcing at our healthcare, education and research-focused 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 year ended December 31, 2024 include the following:

•Revenues before reimbursable expenses increased 9.1% to $1.49 billion in 2024 from $1.36 billion in 2023.

•Net income as a percentage of total revenues increased to 7.7% in 2024, compared to 4.5% in 2023.

•Adjusted EBITDA as a percentage of revenues before reimbursable expenses increased to 13.5% in 2024 from 12.3% in 2023.

•Diluted EPS increased 96.6% to $6.27 for 2024, compared to $3.19 for 2023. Results for 2024 include a litigation settlement gain related to a completed legal matter in which Huron was the plaintiff, which had a favorable impact of $0.60 on diluted earnings per share in 2024; and results for 2023 include a non-cash unrealized loss related to our investment in a hospital-at-home company, which had an unfavorable impact of $0.99 on diluted earnings per share in 2023.

•Adjusted diluted EPS increased 31.8% to $6.47 for 2024, compared to $4.91 for 2023.

•Net cash provided by operating activities increased 48.8% to $201.3 million for 2024, compared to $135.3 million for 2023.

•Returned $122.2 million shareholders by repurchasing 1,218,434 shares of our common stock in 2024.

Revenues before reimbursable expenses increased $124.0 million, or 9.1%, to $1.49 billion for the year ended December 31, 2024 from $1.36 billion for the year ended December 31, 2023. The overall increase in revenues before reimbursable expenses reflects continued strength in demand for both our Consulting and Managed Services capability and Digital capability within our Healthcare and Education segments, 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 and Consulting and Managed Services capabilities.

Revenues before reimbursable expenses within our Consulting and Managed Services capability increased 10.5% to $863.9 million in 2024, compared to $782.0 million in 2023; and reflected strengthened demand in our Healthcare and Education segments, partially offset by a decrease in demand in our Commercial segment. The utilization rate within our Consulting capability decreased to 73.6% in 2024, compared to 76.6% in 2023.

Revenues before reimbursable expenses within our Digital capability increased 7.3% to $622.2 million in 2024, compared to $580.0 million in 2023; and reflected strengthened demand in our Healthcare and Education segments, partially offset by a decrease in demand in our Commercial segment. The utilization rate within our Digital capability increased to 76.0% in 2024, compared to 75.3% in 2023.

Our total number of revenue-generating professionals, excluding Managed Services professionals, increased 5.0% to 4,694 as of December 31, 2024, compared to 4,469 as of December 31, 2023, as a result of hiring to support the overall increase in demand for our services. The number of Managed Services professionals increased 45.7% to 1,530 as of December 31, 2024 from 1,050 as of December 31, 2023. 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 $54.1 million, or 86.7%, to $116.6 million, or 7.7% of total revenues, for the year ended December 31, 2024 from $62.5 million, or 4.5% of total revenues, for the same period last year. Results for 2024 include an $11.1 million litigation settlement gain, net of tax, recognized in the second quarter of 2024 related to a completed legal matter in which Huron was the plaintiff. Results for 2023 include a non-cash impairment loss of $19.4 million, net of tax, related to our investment in a hospital-at-home company. As a result of the increase in net income and a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan, diluted earnings per share increased 96.6% to $6.27 for 2024, compared to $3.19 for 2023. Adjusted diluted earnings per share, which excludes the impact of the litigation settlement gain in 2024 and the non-cash impairment loss on our investment in 2023, increased 31.8% to $6.47 for 2024 from $4.91 for 2023.

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Adjusted EBITDA increased $33.8 million, or 20.2%, to $201.2 million, or 13.5% of revenues before reimbursable expenses, in 2024, compared to $167.3 million, or 12.3% of revenues before reimbursable expenses, in 2023.

Net cash provided by operating activities increased 48.8% to $201.3 million in 2024, compared to $135.3 million in 2023. The increase in net cash provided by operating activities primarily related to an increase in cash collections in 2024, a $15 million litigation settlement received in 2024, and a decrease in payments for contractor expenses in 2024 compared to 2023; partially offset by an increase in payments for salaries and related expenses for our revenue-generating professionals, an increase in the amount paid for annual performance bonuses in the first quarter of 2024 compared to the first quarter of 2023, and an increase in payments for selling, general and administrative expenses in 2024 compared to the prior year.

During 2024, we deployed $122.2 million of capital to repurchase 1,218,434 shares of our common stock, representing 6.6% 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.

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(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.

(3)We have separately presented the total number of revenue-generating professionals within our Managed Services capabilities of our Healthcare and Education segments. Our Healthcare Managed Services professionals provide revenue cycle billing, collections, insurance verification and change integrity services to clients. Our Education Managed Services professionals provide research administration managed services and outsourcing at our education and research-focused clients. See footnote 7 below for additional information on the number of Managed Services professionals within our Healthcare and Education segments.

(4)During the first quarter of 2024, we reclassified one of the offerings within Education's Consulting capability to Education's Managed Services capability. This reclassification did not impact the aggregate revenues before reimbursable expenses for any period, and the prior period Education Managed Services capability revenues before reimbursable expenses and headcount in the following footnotes have been revised for consistent presentation.

(5)Managed Services capability revenues before reimbursable expenses within our Healthcare segment was $77.5 million, $70.1 million and $67.6 million for the years ended 2024, 2023 and 2022, respectively.

Managed Services capability revenues before reimbursable expenses within our Education segment was $28.2 million, $29.6 million and $30.6 million for the years ended 2024, 2023 and 2022, respectively.

(6)During the fourth quarter of 2024, we revised the presentation of our revenue-generating professionals by capability to separately present our revenue-generating professionals in our Consulting capability from our revenue-generating professionals in our Managed Services capability. This change in presentation did not impact the headcount by capability for any period, and the prior period headcount has been revised for consistent presentation.

(7)The number of Managed Services professionals within our Healthcare segment was 1,420, 924 and 715 as of December 31, 2024, 2023 and 2022, respectively.

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The number of Managed Services professionals within our Education segment was 110, 126 and 160 as of December 31, 2024, 2023 and 2022, respectively.

(8)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

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

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenues before Reimbursable Expenses

Revenues before reimbursable expenses by segment and capability for the years ended December 31, 2024 and 2023 were as follows:

Revenues before reimbursable expenses increased $124.0 million, or 9.1%, to $1.49 billion for the year ended December 31, 2024 from $1.36 billion for the year ended December 31, 2023. The overall increase in revenues before reimbursable expenses reflects continued strength in demand for both our Consulting and Managed Services capability and Digital capability within our Healthcare and Education segments, and reflects our focus on accelerating growth in the healthcare and education industries. These increases in demand were partially offset by a decrease in demand for our Digital and Consulting and Managed Services capabilities within our Commercial segment. Additional information on our revenues before reimbursable expense by segment follows.

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•Healthcare revenues before reimbursable expenses increased $82.3 million, or 12.2%, driven by continued strength in demand for our performance improvement, revenue cycle managed services, culture and organizational excellence and strategy and innovation solutions within our Consulting and Managed Services capability and our technology and analytics services within our Digital capability. These increases in demand were partially offset by a decrease in demand for our financial and capital advisory solution within our Consulting and Managed Services capability. Revenues before reimbursable expenses for the year ended December 31, 2024 included $0.6 million of incremental revenues before reimbursable expenses from our acquisition of Roundtable Analytics completed in September 2023.

On December 31, 2024, we completed the divestiture of our Studer Education practice within our Healthcare segment. This business generated revenues before reimbursable expenses of $13.7 million and $12.3 million in 2024 and 2023, respectively. The Studer Education practice was not significant to our consolidated financial statements and did not qualify as a discontinued operation for reporting under GAAP.

The number of revenue-generating professionals within our Healthcare segment, excluding Managed Services professionals, grew 8.2% to 1,218 as of December 31, 2024, compared to 1,126 as of December 31, 2023.

•Education revenues before reimbursable expenses increased $44.6 million, or 10.4%, and includes $18.6 million of incremental revenues from our acquisition of Grenzebach Glier and Associates, Inc. (“GG+A”) completed in March 2024. The increase in Education revenues before reimbursable expenses was also driven by continued strength in demand for our technology and analytics services and software products within our Digital capability and our strategy and operations solution within our Consulting and Managed Services capability.

The number of revenue-generating professionals within our Education segment, excluding Managed Services professionals, grew 5.6% to 1,141 as of December 31, 2024, compared to 1,080 as of December 31, 2023. Our acquisition of GG+A in March 2024 added approximately 70 revenue-generating professionals.

•Commercial revenues before reimbursable expenses decreased $2.8 million, or 1.1%. Revenues before reimbursable expenses for the year ended December 31, 2024 included $3.1 million of incremental revenues before reimbursable expenses from our acquisition of AXIA Consulting, Inc. (“AXIA Consulting”), which was completed in December 2024. The decrease in revenues before reimbursable expenses was primarily due to the decreases in demand for our strategy and innovation solution within our Consulting and Managed Services capability and 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, the majority of which provide services across all of our industries, grew 3.2% to 2,335 as of December 31, 2024, compared to 2,263 as of December 31, 2023, including our acquisition of AXIA Consulting in December 2024 which added approximately 130 revenue-generating professionals.

Operating Expenses

Operating expenses for the year ended December 31, 2024 increased $79.6 million, or 6.2%, over the year ended December 31, 2023.

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

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Direct Costs

Direct costs increased $67.4 million, or 7.1%, to $1.01 billion for the year ended December 31, 2024 from $942.7 million for the year ended December 31, 2023. The $67.4 million increase primarily related to a $79.1 million increase in compensation costs for our revenue-generating professionals and a $4.0 million increase in technology costs, partially offset by a $14.4 million decrease in contractor expenses. The $79.1 million increase in compensation costs reflects our investment to grow our talented team to meet increased market demand and is primarily attributable to a $76.7 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 and a $5.5 million increase in performance bonus expense; partially offset by a $2.8 million decrease in signing, retention and other bonus expense. As a percentage of revenues before reimbursable expenses, direct costs decreased to 68.0% during 2024, compared to 69.2% during 2023, primarily attributable to the decrease in contractor expenses and revenue growth that outpaced the increase in performance bonus expense for our revenue-generating professionals; partially offset by an increase in salaries and related expenses for our revenue-generating professionals, as a percentage of revenues before reimbursable 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. 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 $28.7 million, or 11.1%, to $286.7 million for the year ended December 31, 2024 from $257.9 million for the year ended December 31, 2023. The $28.7 million increase primarily related to a $16.1 million increase in non-payroll costs, driven by a $5.9 million increase in software and data hosting expenses, a $3.3 million increase in practice administration and meetings expenses, a $2.7 million increase in bad debt expense, and a $1.3 million increase in promotion and marketing expenses, partially offset by a $1.3 million decrease in training expenses. Additionally, selling, general and administrative expenses increased $12.7 million due to an increase in compensation costs for our support personnel driven by a $14.5 million increase in salaries and related expenses and a $1.2 million increase in performance bonus expense; partially offset by a $1.6 million decrease in share-based compensation expense and a $1.2 million decrease in signing, retention and other bonus expense. As a percentage of revenues before reimbursable expenses, selling, general and administrative expenses increased to 19.3% during 2024, compared to 18.9% during 2023. This increase was primarily attributable to increases in salaries and related expenses for our support personnel and software and data hosting expenses, as percentages of revenues before reimbursable expenses; partially offset by a decrease in share-based compensation expense for our support personnel.

Other Gains, Net

Other gains, net totaled $14.2 million for the year ended December 31, 2024 and $0.4 million for the year ended December 31, 2023. The $14.2 million of other gains, net for the year ended December 31, 2024 primarily consisted of a pre-tax $15.0 million litigation settlement gain for a completed legal matter in which Huron was the plaintiff and $0.5 million of net remeasurement gains to decrease the fair value of our contingent consideration liabilities related to business combinations. The $0.4 million of other gains, net for the year ended December 31, 2023 primarily consisted of net remeasurement gains to decrease the fair value of our contingent consideration liabilities related to business combinations.

See Note 13 “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 year ended December 31, 2024 were $9.9 million, compared to $11.6 million for the year ended December 31, 2023. During 2024, we exited our office space previously occupied by GG+A and a portion of our office space in New York, New York resulting in non-cash impairment charges of $1.4 million and $1.2 million, respectively, on the related right-of-use operating lease assets and fixed assets. Additionally, we exited the remaining portion of our office space in Denver, Colorado resulting in $0.5 million of accelerated depreciation and amortization on the related fixed assets and right-of-use operating lease assets we abandoned. Furthermore, in the fourth quarter of 2024, we completed the divestiture of our Studer Education practice and incurred $1.3 million of restructuring charges, consisting of $1.0 million of transaction-related employee payments and $0.3 million of third-party legal and professional advisory fees. Restructuring charges incurred in 2024 also included $2.3 million of severance-related expenses unrelated to the divestiture; $2.3 million of rent and related expenses, net of sublease income, for previously vacated office spaces; and $0.8 million related to non-cash lease impairment charges driven by updated sublease assumptions for our previously vacated office spaces.

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During 2023, we exited our office spaces in Hillsboro, Oregon and Lexington, Massachusetts, resulting in non-cash impairment charges of $1.9 million and $3.5 million, respectively, on the related right-of-use operating lease assets and fixed assets. Additionally, restructuring charges incurred in 2023 included $3.0 million of severance-related expenses; $1.8 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.9 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces; and $0.3 million related to the abandonment of a capitalized software development project.

Depreciation and Amortization

Depreciation and amortization expense decreased $0.1 million, or 0.3%, to $24.8 million for the year ended December 31, 2024, compared to $24.9 million for the year ended December 31, 2023. The $0.1 million decrease in depreciation and amortization expense was primarily attributable to a decrease in amortization of intangible assets, largely offset by an increase in amortization of internally developed software.

Operating Income

Operating income increased $43.5 million to $168.8 million for the year ended December 31, 2024 from $125.3 million for the year ended December 31, 2023. Operating margin, which is defined as operating income expressed as a percentage of revenues before reimbursable expenses, increased to 11.4% for 2024, compared to 9.2% for 2023.

Operating income and operating margin for each of our segments as well as unallocated corporate expenses were as follows:

•Healthcare operating income increased $36.0 million, or 20.8%, primarily due to the increase in revenues before reimbursable expenses and a decrease in contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals, practice administration and meetings expenses, technology costs, bad debt expense, and promotion and marketing expenses. The increases in compensation costs for our revenue-generating professionals were primarily driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2024, an increase in performance bonus expense, and an increase in share-based compensation expenses; partially offset by a decrease in signing, retention and other bonus expense. Healthcare operating margin increased to 27.6% from 25.7% primarily due to the decrease in contractor expenses; partially offset by an increase in practice administration and meetings expenses, as a percentage of revenues before reimbursable expenses.

•Education operating income increased $9.4 million, or 9.5%, primarily due to the increase in revenues before reimbursable expenses as well as decreases in training expenses and contractor expenses; partially offset by increases in compensation costs for our revenue-generating professionals and support personnel and amortization of capitalized software development 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 decreases in performance bonus expense and share-based compensation expense for our revenue-generating professionals. The increase in amortization of capitalized software development costs primarily relates to the redesign of Huron Research Suite that successfully went live in 2024 and reflects our focus on advancing our Education software products. Education operating margin decreased to 22.9% from 23.1% primarily driven by an increase in salaries and related expenses for our revenue-generating professionals, as a percentage of revenues before reimbursable expenses; partially offset by the decrease in performance bonus expense for our revenue-generating professionals.

•Commercial operating income decreased $3.0 million, or 5.5%, primarily due to the decrease in revenues before reimbursable expenses as well as increases in compensation costs for our revenue-generating professionals and software and data hosting expenses; partially offset by decreases in promotion and marketing expenses and restructuring charges. The increase in compensation costs for our revenue-generating professionals was primarily driven by annual salary increases that went into effect in the first quarter of 2024 and an increase in headcount due to the acquisition of AXIA Consulting in the fourth quarter of 2024; partially offset by decreases in signing, retention and other bonus expense and performance bonus expense for our revenue-generating professionals. Commercial operating margin decreased to 20.0% from 21.0% primarily driven by the increase in salaries

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and related expenses for our revenue-generating professionals; partially offset by a decrease in promotion and marketing expenses, as a percentage of revenues before reimbursable expenses.

•Unallocated corporate expenses increased $16.0 million, or 9.1%, primarily due to increases in compensation costs for our support personnel and software and data hosting expenses. The increase in compensation costs for our support personnel was primarily driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2024 and an increase in performance bonus expense; partially offset by decreases in share-based compensation expense and signing, retention and other bonus expense.

Other Income (Expense), Net

Interest expense, net of interest income increased $5.8 million to $25.3 million for the year ended December 31, 2024 from $19.6 million for the year ended December 31, 2023, which was primarily attributable to higher levels of borrowing and higher interest rates under our Amended Credit Facility in 2024 compared to 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 (expense), net increased $32.4 million to income of $10.5 million for the year ended December 31, 2024 from expense of $21.9 million for the year ended December 31, 2023. In 2024, we recognized a $4.6 million gain for the market value of our investments that are used to fund our deferred compensation liability, a $3.6 million gain related to the divestiture of our Studer Education practice, and $2.1 million of foreign currency transaction gains. In 2023, we recognized a non-cash impairment loss of $26.3 million on our preferred stock investment in a hospital-at-home company and $0.5 million of foreign currency transaction losses, which were partially offset by a $4.8 million gain for the market value of our investments that are used to fund our deferred compensation liability. The gains recognized in 2024 and 2023 related to the market value of our investments that are used to fund our deferred compensation liability were offset with deferred compensation expense attributable to the change in the market value of our deferred compensation liability which is recognized as a component of selling, general and administrative expenses on our consolidated statements of operations. See Note 3 "Acquisitions and Divestitures" within the notes to our consolidated financial statements for additional information on the divestiture completed in 2024, Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment, and Note 15 “Employee Benefit and Deferred Compensation Plans” within the notes to our consolidated financial statements for additional information on our deferred compensation plan.

Income Tax Expense

For the year ended December 31, 2024, our effective tax rate was 24.3% as we recognized income tax expense of $37.4 million on income of $154.0 million. The effective tax rate of 24.3% was more favorable than the statutory rate, inclusive of state income taxes, of 26.0%, primarily due to a discrete tax benefit for share-based compensation awards that vested during the year. This favorable item was partially offset by certain nondeductible expense items.

For the year ended December 31, 2023, our effective tax rate was 25.5% as we recognized income tax expense of $21.4 million on income of $83.9 million. The effective tax rate of 25.5% was more favorable than the statutory rate, inclusive of state income taxes, of 26.2%, primarily due to a discrete tax benefit for share-based compensation awards that vested during the year and the positive impact of certain federal tax credits. These favorable items were partially offset by certain nondeductible expense items.

See Note 17 “Income Taxes” within the notes to our consolidated financial statements for additional information on our income tax expense.

Net Income and Earnings per Share

Net income increased $54.1 million to $116.6 million for the year ended December 31, 2024 from $62.5 million for the year ended December 31, 2023. Net income for the year ended December 31, 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 in which Huron was the plaintiff. Net income for the year ended December 31, 2023 includes a non-cash impairment loss of $19.4 million, net of tax, related to our preferred stock investment in a hospital-at-home company. Diluted earnings per share for the year ended December 31, 2024 increased to $6.27, compared to $3.19 for the year ended December 31, 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. The 2024 litigation settlement gain related to a completed legal matter in which Huron was the plaintiff had a favorable impact of $0.60 on diluted earnings per share in 2024, while the 2023 change in fair value of our preferred stock investment in a hospital-at-home company had an unfavorable impact on our diluted earnings per share of $0.99 in 2023.

EBITDA and Adjusted EBITDA

EBITDA increased $75.9 million to $205.0 million for the year ended December 31, 2024 from $129.1 million for the year ended December 31, 2023. The increase in EBITDA was attributable to the increases in Healthcare and Education operating income, excluding segment depreciation and amortization; the $26.3 million non-cash impairment loss related to our preferred stock investment in a hospital-at-home company recognized in 2023; and the pre-tax $15.0 million litigation settlement gain recognized in the second quarter of 2024 for a

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completed legal matter in which Huron was the plaintiff. These increases to EBITDA were partially offset by the increase in unallocated corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability.

Adjusted EBITDA increased $33.8 million to $201.2 million for the year ended December 31, 2024 from $167.3 million for the year ended December 31, 2023. The increase in adjusted EBITDA was primarily attributable to the increases in Healthcare and Education operating income, excluding the impact of segment depreciation and amortization and segment restructuring charges; partially offset by the increase in unallocated corporate expenses, excluding the impacts of the change in the market value of our deferred compensation liability and transaction-related expenses.

Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income increased $24.2 million to $120.4 million for the year ended December 31, 2024, compared to $96.2 million for the year ended December 31, 2023. Adjusted diluted earnings per share increased to $6.47 in 2024, compared to $4.91 in 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 $21.9 million, $12.1 million, and $11.8 million at December 31, 2024, 2023, and 2022, respectively. As of December 31, 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.

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 provided by operating activities increased $66.1 million to $201.3 million in 2024 from $135.3 million in 2023. The increase in net cash provided by operating activities primarily related to an increase in cash collections in 2024, a $15 million litigation settlement received in 2024 for a completed legal matter in which Huron was the plaintiff, and a decrease in payments for contractor expenses in 2024 compared to 2023; partially offset by an increase in payments for salaries and related expenses for our revenue-generating professionals, an increase in the amount paid for annual performance bonuses in the first quarter of 2024 compared to the first quarter of 2023, and an increase in payments for selling, general and administrative expenses in 2024 compared to the prior year.

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 $79.7 million for 2024 which primarily consisted of $49.5 million for purchases of businesses; $23.9 million for payments related to internally developed software to advance our Healthcare and Education software products; $8.7 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements for certain office spaces; and $2.6 million for contributions to our life insurance policies. These uses of cash for investing activities were partially offset by $4.7 million of cash received related to the divestiture of our Studer Education practice in the fourth quarter of 2024.

Net cash used in investing activities was $36.7 million for 2023 which primarily consisted of $25.7 million for payments related to internally developed software to advance our Healthcare and Education software products; $9.4 million for purchases of property and equipment,

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primarily related to purchases of computers and related equipment and leasehold improvements for certain office spaces; $3.1 million for contributions to our life insurance policies; and $1.6 million for the purchase of a business. 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 2025 will total approximately $35 million to $40 million; primarily consisting of software development costs, information technology-related equipment to support our corporate infrastructure, and leasehold improvements and furniture and fixtures for certain office locations

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 used in financing activities was $111.6 million in 2024. During 2024, we borrowed $743.5 million and made repayments on our borrowings of $709.8 million. The borrowings and repayments during 2024 include the $275.0 million Term Loan proceeds which were used to repay borrowings under the Revolver in the first quarter of 2024. The net borrowings of $33.7 million were primarily used to fund our operations, including our annual performance bonus payments in the first quarter of 2024. Additionally, during 2024, we paid $123.0 million for the settlement of share repurchases and we reacquired $22.1 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 $1.8 million of cash received from stock option exercises in 2024.

Net cash used in financing activities was $98.3 million in 2023. During 2023, we borrowed $354.0 million primarily to fund our operations, including our annual performance bonus payments in the first quarter of 2023,and made repayments on our borrowings of $320.0 million. Additionally, in 2023, we paid $122.8 million for the settlement of share repurchases and we reacquired $10.5 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. These uses of cash for financing activities were partially offset by $2.5 million of cash received from stock option exercises in 2023.

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 $64.5 million remains available as of December 31, 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 December 31, 2024, we had $357.7 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 which began June 30, 2024 and continue 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. 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,

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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 December 31, 2024 and December 31, 2023, we were in compliance with these financial covenants. Our Consolidated Leverage Ratio as of December 31, 2024 was 1.39 to 1.00, compared to 1.59 to 1.00 as of December 31, 2023. Our Consolidated Interest Coverage Ratio as of December 31, 2024 was 10.50 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 December 31, 2024 and 2023 totaled $357.7 million and $324.0 million, respectively. Of the $357.7 million outstanding as of December 31, 2024, $93.0 million was outstanding under the Revolver and $264.7 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 4.7% at December 31, 2024 and 4.2% at December 31, 2023 including the impact of the interest rate swaps described in Note 12 “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 agreement and outstanding letters of credit. At December 31, 2024 and 2023, we had outstanding letters of credit totaling $0.4 million and $0.5 million, respectively, which are used as security deposits for our office facilities. As of December 31, 2024 and 2023, the unused borrowing capacity under the Revolver was $506.6 million and $275.5 million, respectively.

Refer to Note 7 “Financing Arrangements” for additional information on our senior secured credit facility within the notes to the consolidated financial statements. For a discussion of certain risks and uncertainties related to the Current Credit Agreement, see Part I—Item 1A. “Risk Factors.”

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.

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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”). Our significant accounting policies are discussed in Note 2 “Summary of Significant Accounting Policies” within the notes to our consolidated financial statements. 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.

Revenue Recognition

We generate substantially all of our revenues from providing professional services to our clients. We also generate revenues from software licenses, software support and maintenance and subscriptions to our cloud-based analytic tools and solutions, speaking engagements, conferences, and publications.

Our revenue is generated under four types of billing arrangements: fixed-fee (including software license revenue); time-and-expense; performance-based; and software support, maintenance and subscriptions. Determining the method and amount of revenue to recognize requires us to make judgments and estimates. Specifically, multiple performance obligation arrangements require us to allocate the total transaction price to each performance obligation based on its relative standalone selling price, for which we rely on our overall pricing objectives, taking into consideration market conditions and other factors. Provisions are recorded for the estimated realization on all engagements, including engagements for which fees are subject to review by the bankruptcy courts. We continually evaluate our estimates of the provisions based on available information and experiences. Additionally, when accounting for fixed-fee and performance-based billing arrangements, we must make additional judgments and estimates as further described below.

In fixed-fee billing arrangements for professional services, 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. We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed to date versus our estimates of the total services to be provided under the engagement. Estimates of total engagement revenues and cost of services are monitored regularly during the term of the engagement. Any increased or unexpected costs or unanticipated delays in connection with the performance of these engagements could make these contracts less profitable or unprofitable.

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. We recognize revenue under performance-based billing arrangements using the following steps: 1) estimate variable consideration using either the expected value method or the most likely amount method, as appropriate, 2) apply a constraint to the estimated variable consideration to limit the amount that could be reversed when the uncertainty is resolved (the “constraint”), and 3) recognize revenue of estimated variable consideration, net of the constraint, based on work completed to date versus our estimates of the total services to be provided under the engagement. Our estimates are monitored throughout the life of each contract and are based on an assessment of our anticipated performance, historical experience, and other information available at the time. While we believe that the estimates and assumptions we use for revenue recognition for performance-based billing arrangements are reasonable, subsequent changes could materially impact our results of operations.

See Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements for additional information on our revenue recognition accounting policy.

Allowances for Doubtful Accounts and Unbilled Services

We maintain allowances for doubtful accounts and for services performed but not yet billed based on several factors, including the estimated cash realization from amounts due from clients, an assessment of a client’s ability to make required payments, and the historical percentages of fee adjustments and write-offs by age of receivables and unbilled services. The allowances are assessed by management on a regular basis. These estimates may differ from actual results. If the financial condition of a client deteriorates in the future, impacting the client’s ability to make payments, an increase to our allowance might be required or our allowance may not be sufficient to cover actual write-offs.

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We record the provision for doubtful accounts and unbilled services as a reduction in revenue. To the extent we write-off accounts receivable due to a client’s inability to pay, the charge is recognized as a component of selling, general and administrative expenses.

Business Combinations

We use the acquisition method of accounting for business combinations. The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date, with the exception of contract assets and liabilities which are recognized and measured in accordance with our revenue recognition accounting policy described in Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements. Goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the net value of the assets acquired and liabilities assumed. We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible assets, discount rates that reflect the risk factors associated with future cash flows, and estimates of useful lives.

We measure and recognize contingent consideration at fair value as of the acquisition date. We estimate the fair value of contingent consideration based on either a probability-weighted assessment of the specific financial performance targets being achieved or a Monte Carlo simulation model, as appropriate. These fair value measurements require the use of significant judgments, estimates, and assumptions, including financial performance projections and discount rates. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest financial projections and input provided by practice leaders and management, with any change in the fair value estimate recorded in earnings in that period. Increases or decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could materially impact the financial statements.

See Note 3 “Acquisitions and Divestiture” within the notes to our consolidated financial statements for additional information on our acquisitions and Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our contingent consideration liabilities.

Carrying Values of Goodwill and Other Intangible Assets

We test goodwill for impairment, at the reporting unit level, annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition. As of December 31, 2024, we have three reporting units: Healthcare, Education, and Commercial.

Under GAAP, we have the option to first assess qualitative factors to determine whether the existence of current events or circumstances would lead to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying value. If we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying value, no further testing is necessary. However, if we conclude otherwise, then we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment charge is recorded in an amount equal to that difference with the loss not to exceed the total amount of goodwill allocated to the reporting unit.

We determine the fair value of our reporting units using a combination of the income approach and the market approach. For a company such as ours, the income and market approaches will generally provide the most reliable indications of fair value because the value of such companies is dependent on their ability to generate earnings.

In the income approach, we utilize a discounted cash flow analysis, which involves 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 forecasted revenue growth rates, forecasted EBITDA margins, and discount rates. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

In the market approach, we utilize the guideline company method, which involves calculating EBITDA 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 are evaluated and adjusted based on

specific characteristics of the reporting units relative to the selected guideline companies and applied to the reporting units' operating data to

arrive at an indication of value.

The following is a discussion of the goodwill impairment test performed during 2024.

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Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2024 for our three reporting units: Healthcare, Education, and Commercial. We elected to bypass the qualitative assessment and utilized the quantitative goodwill impairment test to provide an updated fair value for each reporting unit as the most recent valuation quantitative analysis performed was as of January 1, 2022.

For each reporting unit, we reviewed goodwill for impairment by comparing the fair value of the reporting unit to its carrying value, including goodwill. In estimating the fair value of the reporting units, we relied on a combination of the income approach and the market approach, as discussed above, with a fifty-fifty weighting. Based on the results of the goodwill impairment test, we determined the fair value of the Healthcare, Education, and Commercial reporting units exceeded their carrying value by approximately 105%, 185%, and 335%, respectively. As such, we concluded that there is no indication of goodwill impairment for these three reporting units.

Determining the fair value of a reporting unit requires us to make significant judgments, estimates, and assumptions. While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether or not a non-cash goodwill impairment charge is recognized and also the magnitude of any such charge. The results of an impairment analysis are as of a point in time. There is no assurance that the actual future earnings or cash flows of our reporting units will be consistent with our projections. We will monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods. Any significant decline in our operations could result in non-cash goodwill impairment charges.

The carrying value of goodwill for each of our reporting units as of December 31, 2024 is as follows (in thousands):

Intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill. Our intangible assets, net of accumulated amortization, totaled $26.1 million at December 31, 2024 and primarily consist of customer relationships, technology and software, trade names, customer contracts, and non-competition agreements, all of which were acquired through business combinations. We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. No impairment charges for intangible assets were recorded in 2024.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. In determining our provision for income taxes on an interim basis, we estimate our annual effective tax rate based on information available at each interim period. Changes in applicable U.S. state, federal or foreign tax laws and regulations, or their interpretation and application, could materially affect our tax expense.

Deferred tax assets and liabilities are recorded for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in management’s opinion, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors.

Our tax positions are subject to income tax audits by federal, state, local, and foreign tax authorities. A tax benefit from an uncertain position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based on its technical merits. We measure the tax benefit recognized as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that positions taken on our tax returns are fully supported. However, final determinations of prior year tax positions upon settlement with the taxing authority could be materially different from estimates. The outcome of these final determinations could have a material impact on our provision for taxes, net income, or cash flows in the period in which that determination is made.

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NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements for information on new accounting pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and related notes appearing under Part II—Item 8. “Financial Statements and Supplementary Data.” The following MD&A contains forward-looking statements and involves numerous risks and uncertainties, including, without limitation, those described under Part I—Item 1A. “Risk Factors” and “Forward-Looking Statements” of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

The following information summarizes our results of operations for 2023, 2022 and 2021; and discusses those results of operations for 2023 compared to 2022. For a discussion of our results of operations for 2022 compared to 2021 refer to Part II—Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the United States Securities and Exchange Commission on February 28, 2023.

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.

We provide our services and products and manage our business under three operating segments: Healthcare, Education and Commercial. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. See Part I—Item 1. “Business—Overview—Our Services” and Note 19 “Segment Information” within the notes to our consolidated financial statements for a discussion of our segments and capabilities.

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

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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 is 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, depreciation expense, amortization expense related to internally developed software costs and amortization of 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: 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.

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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. In addition, restructuring charges in 2021 include costs related to the sale of the Life Sciences business in the fourth quarter of 2021. 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.

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, to permit comparability with periods that are not impacted by these items.

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

Unrealized losses (gains) on preferred stock investment: We exclude the effect of unrealized losses and gains related to changes in the fair value of our preferred stock investment in a hospital-at-home company arising from observable price changes or impairment losses. These unrealized losses and gains are included as a component of other income (expense), net. We believe that these unrealized losses and gains are not indicative of the ongoing performance of our business and their exclusion permits comparability with prior periods.

Losses (gains) on sales of businesses: We exclude the effect of non-operating losses and gains recognized as a result of sales of businesses as they are infrequent, management believes that these items are not indicative of the ongoing performance of our business, and their exclusion permits comparability with periods that were not impacted by such items. The 2021 gain relates to the sale of our Life Sciences business in the fourth quarter of 2021.

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.

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RESULTS OF OPERATIONS

Executive Highlights

Highlights from the year ended December 31, 2023 include:

•Total revenues increased 20.3% to $1.36 billion in 2023 from $1.13 billion in 2022.

•Healthcare segment revenues increased 26.0% to $674.0 million in 2023 from $535.0 million in 2022.

•Operating margin increased to 9.2% in 2023, compared to 8.8% in 2022.

•Adjusted EBITDA as a percentage of revenues increased 70 basis points to 12.3% from 11.6% in 2022.

•Diluted EPS was $3.19 for 2023, compared to $3.64 for 2022. Results for 2023 and 2022 include a non-cash unrealized loss and a non-cash unrealized gain related to our investment in a hospital-at-home company, which had an unfavorable impact of $0.99 and a favorable impact of $0.96 on diluted earnings per share in 2023 and 2022, respectively.

•Adjusted diluted EPS increased 43.1% to $4.91 for 2023, compared to $3.43 for 2022.

•Net cash provided by operating activities increased 58.4% to $135.3 million for 2023, compared to $85.4 million for 2022.

•Returned $123.6 million shareholders by repurchasing 1,461,815 shares of our common stock in 2023.

Total revenues increased $229.6 million, or 20.3%, to $1.36 billion for the year ended December 31, 2023 from $1.13 billion for the year ended December 31, 2022. The increase in revenues reflects continued strength in demand for both our Consulting and Managed Services capability and Digital capability across all segments, which demonstrates our focus on accelerating growth in our healthcare and education industries and growing our presence in commercial industries.

In our Consulting and Managed Services capability, revenues for the year ended December 31, 2023 increased 22.6% to $782.0 million, compared to $638.0 million for the year ended December 31, 2022, and reflected strengthened demand in all of our segments. The utilization rate within our Consulting capability increased to 76.6% in 2023, compared to 75.2% in 2022.

Revenues within our Digital capability increased 17.3% to $580.0 million for the year ended December 31, 2023, compared to $494.5 million for the year ended December 31, 2022, and reflected strengthened demand in all of our segments. The utilization rate within our Digital capability increased to 75.3% in 2023, compared to 71.0% in 2022.

The total number of revenue-generating professionals increased 14.2% to 5,519 as of December 31, 2023, compared to 4,832 as of December 31, 2022, as a result of hiring to support the overall increase in demand for our services within all of our segments. 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.

Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 9.2% for the year ended December 31, 2023, compared to 8.8% for the year ended December 31, 2022, driven by strong revenue growth that outpaced increases in operating expenses.

Net income was $62.5 million for the year ended December 31, 2023, compared to $75.6 million for the year ended December 31, 2022. Results for 2023 include a non-cash impairment loss of $19.4 million, net of tax, related to our investment in a hospital-at-home company; and results for 2022 include a non-cash unrealized gain of $19.8 million, net of tax, related to the same investment. Diluted earnings per share was $3.19 for 2023, compared to $3.64 for 2022. The non-cash unrealized loss related to the investment had an unfavorable impact of $0.99 on diluted earnings per share in 2023, and the non-cash unrealized gain had a favorable impact of $0.96 on diluted earnings per share in 2022. See Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment and the non-cash unrealized gains and impairment loss recognized to date. As of December 31, 2023, the investment's carrying value was $7.4 million, reflecting a net unrealized gain of $2.4 million since inception.

Adjusted diluted earnings per share increased 43.1% to $4.91 for 2023 from $3.43 for 2022, driven by an increase in operating income and a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan.

Net cash provided by operating activities increased 58.4% to $135.3 million in 2023, compared to $85.4 million in 2022. The increase in net net cash provided by operating activities was primarily related to an increase in cash collections in 2023 compared to the prior year; partially offset by an increase in salaries and related expenses for our revenue-generating professionals, an increase in payments for selling, general and administrative expenses in 2023 compared to the prior year, and an increase in the amount paid for annual performance bonuses in the first quarter of 2023 compared to the first quarter of 2022.

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During 2023, we deployed $123.6 million of capital to repurchase 1,461,815 shares of our common stock, representing 7.4% of our common stock outstanding as of December 31, 2022.

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. The results of operations for acquired businesses have been included in our results of operations since the date of their respective acquisition.

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(1)The majority of our revenue-generating professionals within our Commercial segment can provide services across all of our industries, including healthcare and education.

(2)Managed Services capability revenues within our Healthcare segment was $70.1 million, $67.6 million and $47.7 million for the years ended 2023, 2022 and 2021, respectively.

Managed Services capability revenues within our Education segment was $19.5 million, $15.7 million and $9.1 million for the years ended 2023, 2022 and 2021, respectively.

(3)The number of Managed Services revenue-generating professionals within our Healthcare segment was 924, 715 and 509 as of December 31, 2023, 2022 and 2021, respectively.

The number of Managed Services revenue-generating professionals within our Education segment was 103, 106 and 72 as of December 31, 2023, 2022 and 2021, respectively.

(4)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.

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Non-GAAP Measures

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

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

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenues

Revenues by segment and capability for the years ended December 31, 2023 and 2022 were as follows:

Total revenues increased $229.6 million, or 20.3%, to $1.36 billion for the year ended December 31, 2023 from $1.13 billion for the year ended December 31, 2022. The overall increase in revenues reflects continued strength in demand for both our Consulting and Managed Services capability and Digital capability across all segments, which demonstrates our focus on accelerating growth in our healthcare and education industries and growing our presence in commercial industries.

•Healthcare revenues increased $139.0 million, or 26.0%, driven by strengthened demand for our performance improvement, financial advisory and strategy and innovation solutions within our Consulting and Managed Services capability, as well as strengthened demand for our technology and analytics services within our Digital capability. Revenues for the year ended December 31, 2023 included $1.1 million of incremental revenues from our acquisitions of Customer Evolution, LLC and Roundtable Analytics, Inc, which were completed in December 2022 and September 2023, respectively.

The number of revenue-generating professionals within our Healthcare segment grew 20.1% to 2,270 as of December 31, 2023, compared to 1,890 as of December 31, 2022.

•Education revenues increased $69.8 million, or 19.4%, driven by strengthened demand for our technology and analytics services and software products within our Digital capability, as well as strengthened demand for our strategy and operations and research solutions within our Consulting and Managed Services capability.

The number of revenue-generating professionals within our Education segment grew 13.2% to 1,788 as of December 31, 2023, compared to 1,579 as of December 31, 2022.

•Commercial revenues increased $20.8 million, or 8.7%, driven by strengthened demand for our financial advisory solutions within our Consulting and Managed Services capability and our technology and analytics services within our Digital capability, partially offset by a decrease in demand for our strategy and innovation solution within our Consulting and Managed Services capability.

The number of revenue-generating professionals within our Commercial segment grew 7.2% to 1,461 as of December 31, 2023, compared to 1,363 as of December 31, 2022.

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Operating Expenses

Operating expenses for the year ended December 31, 2023 increased $214.2 million, or 20.2%, over the year ended December 31, 2022.

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

Direct Costs

Direct costs increased $156.8 million, or 20.0%, to $942.7 million for the year ended December 31, 2023 from $785.9 million for the year ended December 31, 2022. The $156.8 million increase primarily related to a $143.2 million increase in compensation costs for our revenue-generating professionals as we continue to invest in and grow our talented team to meet increased market demand. Specifically, the increase in compensation costs is primarily attributable to a $92.7 million increase in salaries and related expenses driven by increased headcount and annual salary increases that went into effect in the first quarter of 2023, a $42.7 million increase in performance bonus expense, and a $6.9 million increase in share-based compensation expense. Additional increases in direct costs include a $6.2 million increase in technology costs, and a $4.0 million increase in contractor expenses. As a percentage of revenues, direct costs decreased to 69.2% during 2023, compared to 69.4% during 2022. The decrease was primarily due to revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals; largely offset by an increase in performance bonus expense, as a percentage of revenue.

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 $48.1 million, or 23.0%, to $257.5 million for the year ended December 31, 2023 from $209.4 million for the year ended December 31, 2022. The $48.1 million increase primarily related to a $37.2 million increase in compensation costs for our support personnel driven by a $14.4 million increase in salaries and related expenses, a $12.3 million increase in deferred compensation expense attributable to the change in market value of our deferred compensation liability, a $5.9 million increase in share-based compensation expense, and a $4.8 million increase in performance bonus expense. The increase in deferred compensation expense is offset by an increase in the gain recognized for the change in the market value of investments that are used to fund our deferred compensation liability and recognized in other income (expense), net. Additionally, selling, general and administrative expenses increased $10.8 million for non-payroll costs driven by a $3.3 million increase in promotion and marketing expenses, a $2.8 million increase in practice administration and meetings expenses, a $2.6 million increase in legal expenses, and a $1.6 million increase in software and data hosting expenses. As a percentage of revenues, selling, general and administrative expenses increased to 18.9% during 2023, compared to 18.5% during 2022. This increase was primarily attributable to the increase in deferred compensation expense attributable to the change in market value of our deferred compensation liability, as a percentage of revenues; partially offset by revenue growth that outpaced the increases in total non-payroll costs.

Restructuring Charges

Restructuring charges for the year ended December 31, 2023 were $11.6 million, compared to $9.9 million for the year ended December 31, 2022. During 2023, we exited our office spaces in Hillsboro, Oregon and Lexington, Massachusetts, resulting in non-cash impairment charges of $1.9 million and $3.5 million, respectively, on the related right-of-use operating lease assets and fixed assets. Additionally, restructuring charges incurred in 2023 included $3.0 million of severance-related expenses; $1.8 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.9 million related to non-cash lease impairment charges driven by updated sublease assumptions for previously vacated office spaces; and $0.3 million related to the abandonment of a capitalized software development project.

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The $9.9 million of restructuring charges incurred in 2022 included $5.7 million of severance-related expenses; $2.3 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.7 million for third-party professional advisory fees related to the modification of our operating model; and $0.6 million for the early termination of a contract.

Depreciation and Amortization

Depreciation and amortization expense decreased $2.5 million, or 9.0%, to $24.9 million for the year ended December 31, 2023, compared to $27.4 million for the year ended December 31, 2022. The $2.5 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 amortization of intangible assets acquired in business acquisitions due to the accelerated basis of amortization in prior periods.

Operating Income and Operating Margin

Operating income increased $25.6 million to $125.3 million for the year ended December 31, 2023 from $99.8 million for the year ended December 31, 2022. Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 9.2% for 2023, compared to 8.8% for 2022.

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.

•Healthcare operating income increased $41.7 million, or 31.8%, primarily due to the increase in revenues; partially offset by increases in compensation costs for our revenue-generating professionals, contractor expenses, 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, annual salary increases that went into effect in the first quarter of 2023, an increase in performance bonus expense, and an increase in share-based compensation expense. Healthcare operating margin increased to 25.7% from 24.5% primarily due to the revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals; partially offset by an increase in contractor expenses, as a percentage of revenues.

•Education operating income increased $20.2 million, or 25.6%, primarily due to the increase in revenues as well as decreases in contractor expenses, restructuring charges, and software and data hosting expenses; partially offset by increases in compensation costs for our revenue-generating professionals, technology expenses, practice administration and meetings expenses, and promotion and marketing expenses. The increases in compensation costs for our revenue-generating professionals were primarily driven by an increase in headcount, annual salary increases that went into effect in the first quarter of 2023, and an increase in performance bonus expense. Education operating margin increased to 23.1% from 21.9% primarily driven by decreases in contractor expenses and restructuring charges; partially offset by increases in compensation costs for our revenue-generating professionals and technology expenses, as percentages of revenue.

•Commercial operating income increased $4.2 million, or 8.3%, 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, promotion and marketing expenses, and practice administration and meetings expenses. The increase in compensation costs for our revenue-generating professionals was primarily driven by an increase in performance bonus expense, an increase in headcount, and annual salary increases that went into effect in the first quarter of 2023. Commercial operating margin decreased slightly to 21.0% from 21.1% primarily driven by increases in compensation costs for our revenue-generating professionals and non-payroll selling, general and administrative costs, as percentages of revenues; partially offset by the decrease in contractor expenses.

Other Income (Expense), Net

Interest expense, net of interest income increased $7.7 million to $19.6 million for the year ended December 31, 2023 from $11.9 million for the year ended December 31, 2022, which was primarily attributable to higher interest rates and higher levels of borrowing under our credit facility in 2023 compared to 2022. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information on our senior secured credit facility.

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Other income (expense), net decreased $42.6 million to expense of $21.9 million for the year ended December 31, 2023 from income of $20.7 million for the year ended December 31, 2022. The decrease in other income, net was primarily attributable to changes in the fair value of our preferred stock investment in a hospital-at-home company. In the fourth quarter of 2023, we recognized a non-cash impairment loss of $26.3 million on our preferred stock investment based on the valuation established in a new round of financing expected to close in early 2024. In the first quarter of 2022, we recognized a non-cash unrealized gain of $27.0 million for the same investment, based on the valuation established in a round of financing that closed that quarter. As of December 31, 2023, the investment's carrying value was $7.4 million, reflecting a net unrealized gain of $2.4 million on the investment since inception. See Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment. This decrease in other income, net was partially offset by a $12.2 million increase in the gain recognized for the market value of our investments that are used to fund our deferred compensation liability. During 2023 we recognized a $4.8 million gain for the market value of our deferred compensation investments compared to a $7.4 million loss recognized in 2022.

Income Tax Expense

For the year ended December 31, 2023, our effective tax rate was 25.5% as we recognized income tax expense of $21.4 million on income of $83.9 million. The effective tax rate of 25.5% was more favorable than the statutory rate, inclusive of state income taxes, of 26.2%, primarily due to a discrete tax benefit for share-based compensation awards that vested during the year and the positive impact of certain federal tax credits. These favorable items were partially offset by certain nondeductible expense items.

For the year ended December 31, 2022, our effective tax rate was 30.4% as we recognized income tax expense of $33.0 million on income of $108.6 million. The effective tax rate of 30.4% was less favorable than the statutory rate, inclusive of state income taxes, of 26.7%, primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.

See Note 17 “Income Taxes” within the notes to our consolidated financial statements for additional information on our income tax expense.

Net Income and Earnings per Share

Net income decreased $13.1 million to $62.5 million for the year ended December 31, 2023 from $75.6 million for the year ended December 31, 2022. The decrease in net income was primarily attributable to the changes in the fair value of our preferred stock investment in a hospital-at-home company recorded in other income (expense), net; partially offset by the increase in operating income. In 2023, we recognized a non-cash impairment loss of $26.3 million related to our preferred stock investment; and in 2022, we recognized a non-cash unrealized gain of $27.0 million related to the same investment as discussed above. Diluted earnings per share for the year ended December 31, 2023 decreased to $3.19, compared to $3.64 for the year ended December 31, 2022, driven by the decrease in net income partially offset by a reduction in diluted shares outstanding resulting from share repurchases made under our share repurchase plan. The changes in fair value of our preferred stock investment in a hospital-at-home company had an unfavorable impact on our diluted earnings per share of $0.99 in 2023 and a favorable impact on our diluted earnings per share of $0.96 for 2022 .

EBITDA and Adjusted EBITDA

EBITDA decreased $19.6 million to $129.1 million for the year ended December 31, 2023 from $148.7 million for the year ended December 31, 2022. The decrease in EBITDA was primarily attributable to the changes in the fair value of our preferred stock investment in the hospital-at-home company, as well as the increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability; largely offset by the increase in segment operating income. In 2023, we recognized a non-cash impairment loss of $26.3 million related to our preferred stock investment; and in 2022, we recognized a non-cash unrealized gain of $27.0 million related to the same investment as discussed above.

Adjusted EBITDA increased $36.5 million to $167.3 million for the year ended December 31, 2023 from $130.8 million for the year ended December 31,2022. 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 and corporate restructuring charges.

Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income increased $25.1 million to $96.2 million for the year ended December 31, 2023, compared to $71.1 million for the year ended December 31, 2022. Adjusted diluted earnings per share increased to $4.91 in 2023, compared to $3.43 in 2022, 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.

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LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $12.1 million, $11.8 million, and $20.8 million at December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, our primary sources of liquidity are cash on hand, cash flows from our U.S. operations, and borrowing capacity available under our credit facility.

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 provided by operating activities increased $49.9 million to $135.3 million in 2023 from $85.4 million in 2022. The increase in net operating cash flows was primarily related to an increase in cash collections in 2023 compared to the prior year; partially offset by an increase in salaries and related expenses for our revenue-generating professionals, an increase in payments for selling, general and administrative expenses in 2023 compared to the prior year, and an increase in the amount paid for annual performance bonuses in the first quarter of 2023 compared to the first quarter of 2022.

Additionally, for 2023, our unbilled receivables increased partially driven by certain large Healthcare and Education engagements where our services performed and revenue recognized exceeded the amounts billed to clients in accordance with the contractual billing terms. In the future, we may enter into additional client engagements with similar deferred billing terms.

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 $36.7 million for 2023 which primarily consisted of $25.7 million for payments related to internally developed software to advance our Healthcare and Education software products; $9.4 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements for certain office spaces; $3.1 million for contributions to our life insurance policies; and $1.6 million for the purchase of a business. 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.

Net cash used in investing activities was $20.1 million for 2022. The use of cash in 2022 primarily consisted of $12.5 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements; $11.8 million for payments related to internally developed software; and $3.4 million for the purchases of businesses. These uses of cash for investing activities were partially offset by $4.8 million of cash received for the sale of our aircraft in the first quarter of 2022 and $3.4 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.

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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 used in financing activities was $98.3 million in 2023. During 2023, we borrowed $354.0 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 $320.0 million. Additionally, in 2023, we paid $122.8 million for share repurchases, including $1.1 million related to the settlement of share repurchases that were accrued as of December 31, 2022 and excluding $1.9 million that was accrued as of December 31, 2023. During 2023, we reacquired $10.5 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. These uses of cash for financing activities were partially offset by $2.5 million of cash received from stock option exercises in 2023.

Net cash used in financing activities was $74.1 million in 2022. During 2022, we borrowed $314.0 million under our senior secured credit facility primarily to fund our operations, including our annual performance bonus payment in the first quarter of 2022, and made repayments on our borrowings of $256.8 million. The repayments on our borrowings included the repayment of the outstanding principal of our promissory note due 2024 of $2.7 million from the proceeds received for the sale of our aircraft. Additionally, in 2022, we paid $120.4 million for share repurchases, including $0.2 million related to the settlement of share repurchases that were accrued as of December 31, 2021 and excluding $1.1 million that was accrued as of December 31, 2022. During 2022, we reacquired $7.8 million of common stock as a result of tax withholdings upon vesting of share-based compensation. Additionally, we made payments of $2.7 million for debt issuance costs related to the Third Amended and Restated Credit Agreement executed in the fourth quarter of 2022. We also made deferred acquisition payments of $1.9 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. These uses of cash for financing activities were partially offset by $1.4 million of cash received from stock option exercises in 2022.

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 fourth quarter of 2023. The current authorization extends the share repurchase program through December 31, 2024 with a repurchase amount of $400 million, of which $86.2 million remains available as of December 31, 2023. 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 December 31, 2023, we had $324.0 million outstanding under our senior secured credit facility, as discussed below.

The Company has a $600 million five-year senior secured revolving credit facility, subject to the terms of a Third Amended and Restated Credit Agreement dated as of November 15, 2022 and amended by Amendment No. 1 (collectively, the “Amended Credit Agreement”) that becomes due and payable in full upon maturity on November 15, 2027. In February 2024, the Company entered into Amendment No. 2 (the “Second Amendment”) to the Amended Credit Agreement to establish a $275 million term loan as discussed below under “2024 Term Loan.” Prior to the Second Amendment, the Amended Credit Agreement provided the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount up to $250 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Amended Credit Agreement of $850 million. The initial borrowings under the revolving credit facility were used to refinance borrowings outstanding under a prior credit agreement, and future revolving credit facility borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, share repurchases, permitted acquisitions, and other general corporate purposes.

Fees and interest on borrowings under the revolving credit facility 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 an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.125% per annum and 1.875% per annum, in the case of 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. Fees and interest on borrowings are paid on a monthly basis.

In April 2023, the Company and PNC Capital Markets, LLC, as Sustainability Structuring Agent, with the consent of the Required Lenders (as defined in the Amended Credit Agreement), entered into Amendment No. 1 to the Amended Credit Agreement (the “First Amendment”) to incorporate specified key performance indicators with respect to certain environmental, social and governance targets of the Company. Based upon the performance of the Company against those key performance indicators in each Reference Year (as defined in the First

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Amendment), 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 December 31, 2023 and December 31, 2022, we were in compliance with these financial covenants. Our Consolidated Leverage Ratio as of December 31, 2023 was 1.59 to 1.00, compared to 1.92 to 1.00 as of December 31, 2022. Our Consolidated Interest Coverage Ratio as of December 31, 2023 was 10.85 to 1.00, compared to 14.04 to 1.00 as of December 31, 2022.

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 revolving credit facility at December 31, 2023 and 2022 totaled $324.0 million and $290.0 million, respectively. These borrowings carried a weighted average interest rate of 4.2% at December 31, 2023 and 3.8% at December 31, 2022 including the impact of the interest rate swaps described in Note 12 “Derivative Instruments and Hedging Activity" within the notes to the consolidated financial statements. The borrowing capacity under the Amended Credit Agreement is reduced by any outstanding borrowings under the agreement and outstanding letters of credit. At December 31, 2023 and 2022, we had outstanding letters of credit totaling $0.5 million and $0.7 million, respectively, which are used as security deposits for our office facilities. As of December 31, 2023 and 2022, the unused borrowing capacity under the Amended Credit Agreement was $275.5 million and $309.3 million, respectively.

2024 Term Loan

In February 2024, the Company entered into Amendment No.2 to the Amended Credit Agreement (the “Second Amendment”), which established a $275 million term loan facility (the “Term Loan”) under the Amended Credit Agreement (as amended to date, the “Current 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. Additionally, the Second Amendment provided for the option to increase the revolving credit facility or establish additional term loan facilities in an aggregate amount up to $250 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Current Credit Agreement of $1.13 billion. The proceeds of the Term Loan will be used to reduce borrowings under the company's revolving credit facility.

Interest on the Term Loan varies based on our Consolidated Leverage Ratio (as defined in the Current Credit Agreement). At our option, the Term Loan will bear interest at one, three or six month Term SOFR plus the applicable margin. The applicable margin will range between 1.625% per annum and 2.375% per annum based upon our Consolidated Leverage Ratio at such time and subject to the adjustments allowed for performance against certain environmental, social and governance targets of the Company as outlined in the First Amendment.

The Current Credit Agreement maintains the same prepayment provisions, usual and customary representations and warranties, fee pricing schedule, and affirmative and negative covenants as the Amended Credit Agreement discussed above.

For further information, see Note 7 “Financing Arrangements” within the notes to the consolidated financial statements. For a discussion of certain risks and uncertainties related to the Current Credit Agreement, see Part I—Item 1A. “Risk Factors.”

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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”). Our significant accounting policies are discussed in Note 2 “Summary of Significant Accounting Policies” within the notes to our consolidated financial statements. 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.

Revenue Recognition

We generate substantially all of our revenues from providing professional services to our clients. We also generate revenues from software licenses, software support and maintenance and subscriptions to our cloud-based analytic tools and solutions, speaking engagements, conferences, and publications.

Our revenue is generated under four types of billing arrangements: fixed-fee (including software license revenue); time-and-expense; performance-based; and software support, maintenance and subscriptions. Determining the method and amount of revenue to recognize requires us to make judgments and estimates. Specifically, multiple performance obligation arrangements require us to allocate the total transaction price to each performance obligation based on its relative standalone selling price, for which we rely on our overall pricing objectives, taking into consideration market conditions and other factors. Provisions are recorded for the estimated realization on all engagements, including engagements for which fees are subject to review by the bankruptcy courts. We continually evaluate our estimates of the provisions based on available information and experiences. Additionally, when accounting for fixed-fee and performance-based billing arrangements, we must make additional judgments and estimates as further described below.

In fixed-fee billing arrangements for professional services, 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. We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed to date versus our estimates of the total services to be provided under the engagement. Estimates of total engagement revenues and cost of services are monitored regularly during the term of the engagement. Any increased or unexpected costs or unanticipated delays in connection with the performance of these engagements could make these contracts less profitable or unprofitable.

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. We recognize revenue under performance-based billing arrangements using the following steps: 1) estimate variable consideration using a probability-weighted assessment of the fees to be earned, 2) apply a constraint to the estimated variable consideration to limit the amount that could be reversed when the uncertainty is resolved (the “constraint”), and 3) recognize revenue of estimated variable consideration, net of the constraint, based on work completed to date versus our estimates of the total services to be provided under the engagement. Our estimates are monitored throughout the life of each contract and are based on an assessment of our anticipated performance, historical experience, and other information available at the time. While we

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believe that the estimates and assumptions we use for revenue recognition for performance-based billing arrangements are reasonable, subsequent changes could materially impact our results of operations.

See Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements for additional information on our revenue recognition accounting policy.

Allowances for Doubtful Accounts and Unbilled Services

We maintain allowances for doubtful accounts and for services performed but not yet billed based on several factors, including the estimated cash realization from amounts due from clients, an assessment of a client’s ability to make required payments, and the historical percentages of fee adjustments and write-offs by age of receivables and unbilled services. The allowances are assessed by management on a regular basis. These estimates may differ from actual results. If the financial condition of a client deteriorates in the future, impacting the client’s ability to make payments, an increase to our allowance might be required or our allowance may not be sufficient to cover actual write-offs.

We record the provision for doubtful accounts and unbilled services as a reduction in revenue. To the extent we write-off accounts receivable due to a client’s inability to pay, the charge is recognized as a component of selling, general and administrative expenses.

Business Combinations

We use the acquisition method of accounting for business combinations. The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date, with the exception of contract assets and liabilities which are recognized and measured in accordance with our revenue recognition accounting policy described in Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements. Goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the net value of the assets acquired and liabilities assumed. We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible assets, discount rates that reflect the risk factors associated with future cash flows, and estimates of useful lives.

We measure and recognize contingent consideration at fair value as of the acquisition date. We estimate the fair value of contingent consideration based on either a probability-weighted assessment of the specific financial performance targets being achieved or a Monte Carlo simulation model, as appropriate. These fair value measurements require the use of significant judgments, estimates, and assumptions, including financial performance projections and discount rates. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest financial projections and input provided by practice leaders and management, with any change in the fair value estimate recorded in earnings in that period. Increases or decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could materially impact the financial statements.

See Note 3 “Acquisitions and Divestiture” within the notes to our consolidated financial statements for additional information on our acquisitions and Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our contingent consideration liabilities.

Carrying Values of Goodwill and Other Intangible Assets

We test goodwill for impairment, at the reporting unit level, annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition. As of December 31, 2023, we have three reporting units: Healthcare, Education, and Commercial.

Under GAAP, we have the option to first assess qualitative factors to determine whether the existence of current events or circumstances would lead to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying value. If we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying value, no further testing is necessary. However, if we conclude otherwise, then we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment charge is recorded in an amount equal to that difference with the loss not to exceed the total amount of goodwill allocated to the reporting unit.

We determine the fair value of our reporting units using the income approach. For a company such as ours, the income approach will generally provide the most reliable indication of fair value because the value of such companies is dependent on their ability to generate earnings. We utilize a discounted cash flow analysis, which involves 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 forecasted revenue growth

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rates, forecasted EBITDA margins, and discount rates. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

The following is a discussion of the goodwill impairment test performed during 2023.

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2023 for our three reporting units: Healthcare, Education, and Commercial. We performed a qualitative assessment over all reporting units to determine if it was more likely than not the respective fair values of these reporting units were less than their carrying amounts, including goodwill.

For our qualitative assessment, we considered the most recent quantitative analysis performed for each reporting unit, which was as of January 1, 2022, including the key assumptions used within that analysis, the indicated fair values, and the amount by which those fair values exceeded their carrying amounts. One of the key assumptions used within the prior quantitative analysis was our internal financial projections; therefore, we considered the actual performance of each reporting unit during 2022 and 2023 compared to the internal financial projections used, as well as specific outlooks for each reporting unit based on our most recent internal financial projections. We also reviewed the current carrying value of each reporting unit in comparison to the carrying values as of the prior quantitative analysis. In addition, we considered various factors, including macroeconomic conditions, relevant industry and market trends for each reporting unit, and other entity-specific events, that could indicate a potential change in the fair value of our reporting units or the composition of their carrying values. Based on our assessments, we determined that it was more likely than not that the fair values for each of our reporting units exceeded their respective carrying amounts. As such, the goodwill for our reporting units was not considered impaired as of November 30, 2023, and a quantitative goodwill impairment analysis was not necessary.

The results of an impairment analysis are as of a point in time. There is no assurance that the actual future earnings or cash flows of our reporting units will be consistent with our projections. We will monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods. Any significant decline in our operations could result in non-cash goodwill impairment charges.

The carrying value of goodwill for each of our reporting units as of December 31, 2023 is as follows (in thousands):

Intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill. Our intangible assets, net of accumulated amortization, totaled $18.1 million at December 31, 2023 and primarily consist of customer relationships, technology and software, trade names, and non-competition agreements, all of which were acquired through business combinations. We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. No impairment charges for intangible assets were recorded in 2023.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. In determining our provision for income taxes on an interim basis, we estimate our annual effective tax rate based on information available at each interim period. Changes in applicable U.S. state, federal or foreign tax laws and regulations, or their interpretation and application, could materially affect our tax expense.

Deferred tax assets and liabilities are recorded for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in management’s opinion, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors.

Our tax positions are subject to income tax audits by federal, state, local, and foreign tax authorities. A tax benefit from an uncertain position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based on its technical merits. We measure the tax benefit recognized as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks,

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facts and circumstances existing at that time. We believe that positions taken on our tax returns are fully supported. However, final determinations of prior year tax positions upon settlement with the taxing authority could be materially different from estimates. The outcome of these final determinations could have a material impact on our provision for taxes, net income, or cash flows in the period in which that determination is made.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements for information on new accounting pronouncements.

SUBSEQUENT EVENT

On February 11, 2024, we entered into an agreement to acquire Grenzebach Glier and Associates, Inc. (“GG+A”), a philanthropic management consulting firm that helps education institutions and healthcare, arts and other nonprofit organizations build and accelerate the philanthropic programs that support their mission. The transaction is expected to close in March 2024, subject to customary closing conditions. The results of operations of GG+A will be included within our consolidated financial statements and results of operations of our Education segment from the date of acquisition. We do not expect the acquisition of GG+A to be significant to our consolidated financial statements.

Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and related notes appearing under Part II—Item 8. “Financial Statements and Supplementary Data.” The following MD&A contains forward-looking statements and involves numerous risks and uncertainties, including, without limitation, those described under Part I—Item 1A. “Risk Factors” and “Forward-Looking Statements” of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

The following information summarizes our results of operations for 2022, 2021, and 2020; and discusses those results of operations for 2022 compared to 2021. Additionally, as a result of our operating segment modification effective January 1, 2022, the following MD&A discusses the segment revenue and operating income for 2021 compared to 2020. For a discussion of our consolidated results of operations for 2021 compared to 2020, which were not impacted by the operating segment modification, refer to Part II—Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the United States Securities and Exchange Commission on February 24, 2022.

OVERVIEW

Huron is a global professional services firm that partners with clients to develop growth strategies, optimize operations and accelerate digital transformation 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.

We provide our services and manage our business under three operating segments: Healthcare, Education and Commercial. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. See Part I—Item 1. “Business—Overview—Our Services” and Note 19 “Segment Information” within the notes to our consolidated financial statements for a discussion of our segments and capabilities, as well as information on the modification to our reportable segments effective January 1, 2022. As a result of the modification, we recast our historical segment information for consistent presentation. Our historical consolidated results have not been impacted.

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 require the client to pay 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 fee 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 time-and-expense or fixed-fee 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.

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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 payroll 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 salaries, performance bonuses, share-based compensation, payroll taxes and benefits for our support personnel. Also included in selling, general and administrative expenses is 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, depreciation expense, amortization expense related to internally developed software costs and amortization of intangible assets acquired in business combinations. In the first quarter of 2022, we began presenting depreciation and amortization expense in the aggregate with amortization of intangible assets and software development costs that were previously presented separately within total direct costs and reimbursable expenses. We have recast our historical presentation of our consolidated statement of operations for consistent presentation.

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 from continuing operations, and adjusted diluted earnings per share ("EPS") from continuing operations. 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

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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 and other charges: We have incurred charges due to the restructuring of various parts of our business, including restructuring charges related to the sale of the Life Sciences business in the fourth quarter of 2021 and the restructuring plan announced in the fourth quarter of 2020 to reduce operating costs to address the impact of the COVID-19 pandemic on our business. Restructuring charges primarily consist of costs associated with office space consolidations, including lease impairment charges and accelerated depreciation on lease-related property and equipment, and employee-related charges. Additionally, we have excluded the effect of a $0.8 million one-time charge incurred during the first quarter of 2020 related to redundant administrative costs in our corporate operations which is recorded within selling, general and administrative expenses on our consolidated statement of operations. We exclude the effect of the restructuring and other charges from our non-GAAP measures to permit comparability with periods that were not impacted by these items.

Other losses (gains): We exclude the effects of other losses (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, to permit comparability with periods that are not impacted by these items.

Transaction-related expenses: To permit comparability with prior periods, we exclude the impact of third-party legal and accounting fees incurred related to business acquisitions.

Goodwill impairment charges: We exclude the effect of goodwill impairment charges as these are infrequent events and their exclusion permits comparability with periods that were not impacted by such charges.

Unrealized gain on preferred stock investment: We exclude the effect of unrealized gains related to changes in the fair value of our preferred stock investment in Medically Home Group, Inc. (“Medically Home”), which are recognized when an observable price change occurs. These unrealized gains are included as a component of other income (expense), net. We believe that these unrealized gains are not indicative of the ongoing performance of our business and their exclusion permits comparability with prior periods.

Losses (gains) on sales of businesses: We exclude the effect of non-operating losses and gains recognized as a result of sales of businesses as they are infrequent, management believes that these items are not indicative of the ongoing performance of our business, and their exclusion permits comparability with periods that were not impacted by such items. The 2021 gain relates to the sale of our Life Sciences business in the fourth quarter of 2021, and the 2020 loss primarily relates to the sale of our U.K. life sciences drug safety practice in the fourth quarter of 2020.

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 enterprise resource planning ("ERP") and other related software, which is included within selling, general and administrative expenses on our consolidated statements of operations.

Adjusted weighted average shares - diluted: As we reported a net loss for the year ended December 31, 2020, GAAP diluted weighted average shares outstanding equals the basic weighted average shares outstanding for that period. For the year ended December 31, 2020,

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the non-GAAP adjustments described above resulted in adjusted net income from continuing operations. Therefore, we include the dilutive common stock equivalents in the calculation of adjusted diluted weighted average shares outstanding for that period.

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 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 year ended December 31, 2022 include:

•Total revenues increased 25.0% to $1.13 billion in 2022 from $905.6 million in 2021

•Revenues within our Digital capability increased 41.4% to $494.5 million in 2022 from $349.7 million 2021

•Operating margin increased to 8.8% for 2022, compared to 5.8% for 2021

•Diluted EPS from continuing operations increased 26.0% to $3.64 for 2022, compared to $2.89 for 2021

•Adjusted diluted EPS from continuing operations (a non-GAAP measure) increased 31.4% to $3.43 for 2022, compared to $2.61 for 2021

•Returned $121.3 million to shareholders by repurchasing 2.0 million shares of our common stock in 2022

•Refinanced our $600 million credit facility; including extending the maturity date to 2027 and transitioning to SOFR, while maintaining favorable pricing and flexibility

•Completed the acquisitions of AIMDATA, LLC and Customer Evolution, LLC in January 2022 and December 2022, respectively

Total revenues increased $226.8 million, or 25.0%, to $1.13 billion for the year ended December 31, 2022 from $905.6 million for the year ended December 31, 2021. The increase in total revenues reflects continued strength in demand for our Digital capability services across all our segments as companies continue to invest in cloud-based technology and analytic solutions, as well as strengthened demand for our Consulting and Managed Services offerings within our Education and Healthcare segments.

In our Consulting and Managed Services capability, revenues for the year ended December 31, 2022 increased 14.8% to $638.0 million, compared to $555.9 million the year ended December 31, 2021, and reflected strengthened demand in our Education and Healthcare segments. The utilization rate within our Consulting capability increased to 75.2% in 2022, compared to 70.6% in 2021.

Revenues within our Digital capability increased 41.4% to $494.5 million for the year ended December 31, 2022, compared to $349.7 million for the year ended December 31, 2021, and reflected strengthened demand in all of our segments. The utilization rate within our Digital capability decreased to 71.0% in 2022, compared to 72.5% in 2021.

The total number of revenue-generating professionals increased to 4,832 as of December 31, 2022, compared to 3,776 as of December 31, 2021, as a result of hiring to support the overall increase in demand for our services within all of our segments. 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 compensation costs are the most significant portion of our operating expenses.

Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 8.8% for the year ended December 31, 2022, compared to 5.8% for the year ended December 31, 2021, driven by strong revenue growth that outpaced increases in operating expenses.

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Net income from continuing operations increased $12.6 million, or 19.9%, to $75.6 million for the year ended December 31, 2022 from $63.0 million for the year ended December 31, 2021. As a result of the increase in net income from continuing operations, diluted earnings per share from continuing operations increased 26.0% to $3.64 for 2022 from $2.89 for 2021. Adjusted diluted earnings per share from continuing operations increased 31.4% to $3.43 for 2022 from $2.61 for 2021.

During 2022, we repurchased 2.0 million shares of our common stock for $121.3 million, representing 9.3% of our common stock outstanding as of December 31, 2021.

On November 15, 2022, we entered into an amended and restated credit agreement that, among other items, extends the maturity date of our credit facility from September 27, 2024 to November 15, 2027; maintains the aggregate revolving commitments of $600 million; maintains favorable pricing and flexibility to support our balanced approach to capital deployment; and provides flexibility to add pricing adjustments tied to the achievement of ESG key performance indicators.

During 2022, we completed the following acquisitions:

•AIMDATA, LLC - On January 18, 2022, we completed the acquisition of AIMDATA, LLC ("AIMDATA"), an advisory and implementation consulting services firm focused on strategy, technology and business transformation. The results of operations of AIMDATA are included within our consolidated financial statements as of the acquisition date and allocated among our three operating industries, which are our reportable segments, based on the engagements delivered by the business.

•Customer Evolution, LLC - Effective December 31, 2022, we completed the acquisition of Customer Evolution, LLC ("Customer Evolution"), a healthcare advisory and technology implementation consulting services firm. The results of operations of Customer Evolution are included in our consolidated financial statements and results of operations of our Healthcare segment from the date of acquisition.

The acquisitions of AIMDATA and Customer Evolution are not significant to our consolidated financial statements individually or in the aggregate as of and for the year ended December 31, 2022.

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Summary of Results

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model strengthens Huron’s go-to-market strategy, drives efficiencies that support margin expansion, and positions the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment. We also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes improve visibility into the core drivers of our business. While our consolidated results have not been impacted, our historical segment information has been recast for consistent presentation.

The following table sets forth, for the periods indicated, selected segment and consolidated operating results and other operating data, including non-GAAP measures. The results of operations for acquired businesses have been included in our results of operations since the date of their respective acquisition.

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(1)The non-cash goodwill impairment charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

(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 revenues within our Healthcare segment was $67.6 million, $47.7 million and $28.7 million for the years ended 2022, 2021 and 2020, respectively.

Managed Services capability revenues within our Education segment was $15.7 million, $9.1 million and $6.8 million for the years ended 2022, 2021 and 2020, respectively.

(4)The number of Managed Services revenue-generating professionals within our Healthcare segment as of December 31, 2022, 2021 and 2020, was 715, 509, and 96, respectively.

The number of Managed Services revenue-generating professionals within our Education segment as of December 31, 2022, 2021 and 2020, was 106, 72, and 49, respectively.

(5)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.

(6)During the first quarter of 2022, we reclassified certain Digital revenue-generating professionals within our Healthcare and Education segments to our Commercial segment as these professionals can provide services across all of our industries. This reclassification did not impact the total headcount within our Digital capability for any period. The prior period headcount has been revised for consistent presentation.

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Non-GAAP Measures

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues

Revenues by segment and capability for the years ended December 31, 2022 and 2021 were as follows:

Total revenues increased $226.8 million, or 25.0%, to $1.13 billion for the year ended December 31, 2022 from $905.6 million for the year ended December 31, 2021. The overall increase in revenues reflects continued strength in demand for our Digital capability services across all our segments as companies continue to invest in cloud-based technology and analytic solutions, as well as strengthened demand for our Consulting and Managed Services offerings within our Education and Healthcare segments partially the result of a favorable comparison against Education's results in the first two quarters of 2021 which were more significantly impacted by the COVID-19 pandemic. During 2020 and 2021, some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic. Additional information on our revenues by segment follows.

•Healthcare revenues increased $90.2 million, or 20.3%, driven by strengthened demand for our technology and analytics services and software products within our Digital capability, as well as strengthened demand for our revenue cycle managed services and performance improvement solutions within our Consulting and Managed Services capability. Revenues for the year ended December 31, 2022 included $6.0 million of incremental revenues from our acquisition of Perception Health, Inc., which was completed in December 2021.

The number of revenue-generating professionals within our Healthcare segment grew 18.4% to 1,890 as of December 31, 2022, compared to 1,596 as of December 31, 2021.

•Education revenues increased $117.5 million, or 48.5%, driven by strengthened demand across all of our services and products within our Consulting and Managed Services and Digital capabilities. Revenues for the year ended December 31, 2022 included $8.2 million of incremental revenues from our acquisition of Whiteboard Communications Ltd., which was completed in December 2021.

The number of revenue-generating professionals within our Education segment grew 50.4% to 1,579 as of December 31, 2022, compared to 1,050 as of December 31, 2021.

•Commercial revenues increased $19.1 million, or 8.8%, driven by strengthened demand for our technology and analytics services within our Digital capability and our corporate finance advisory solution within our Consulting and Managed Services capability, partially offset by a decrease in revenues due to the divestiture of our Life Sciences business in the fourth quarter of 2021 and a decrease in demand for our financial advisory solutions within the Consulting and Managed Services capability. The Life Sciences business generated $16.7 million of revenues in the first ten months of 2021. Revenues for the year ended December 31, 2022 included $3.0 million of incremental revenues from our acquisitions of AIMDATA, LLC and Unico Solution, Inc., which were completed in January 2022 and February 2021, respectively. Excluding the revenue generated by Life Sciences in 2021 and the acquisitions of AIMDATA and Unico Solutions in 2022, Commercial revenues increased $32.9 million, or 16.3%.

The number of revenue-generating professionals within our Commercial segment grew 20.6% to 1,363 as of December 31, 2022, compared to 1,130 as of December 31, 2021. This increase includes the impact of the divestiture of our Life Sciences business completed in the fourth quarter of 2021. The Life Sciences business employed approximately 65 revenue-generating professionals prior to the divestiture.

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Operating Expenses

Operating expenses for the year ended December 31, 2022 increased $185.1 million, or 21.2%, over the year ended December 31, 2021.

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

Direct Costs

Direct costs increased $149.1 million, or 23.4%, to $785.9 million for the year ended December 31, 2022 from $636.8 million for the year ended December 31, 2021. The $149.1 million increase primarily related to an $113.9 million increase in compensation costs for our revenue-generating professionals, driven by increased headcount, annual salary increases that went into effect in the first quarter of 2022, and increases in performance bonus expense and share-based compensation expense. Additional increases in direct costs include a $26.2 million increase in contractor expense, a $5.7 million increase in technology costs, and a $2.5 million increase in product and event costs. As a percentage of revenues, direct costs decreased to 69.4% during 2022, compared to 70.3% during 2021, primarily due to revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals, partially offset by the increase in contractor expense, 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 $31.3 million, or 17.6%, to $209.4 million for the year ended December 31, 2022 from $178.1 million for the year ended December 31, 2021. The $31.3 million increase primarily related to a $21.0 million increase in non-payroll costs including a $7.0 million increase in promotion and marketing expenses, a $5.2 million increase in practice administration and meetings expenses, a $4.6 million increase in software and data hosting expenses, a $2.3 million increase in training expenses, and a $1.3 million increase in third-party professional fees; partially offset by a $2.0 million decrease in legal expenses. Additionally, selling, general and administrative expenses increased by $10.3 million related to compensation costs for our support personnel, which includes an $11.3 million increase in salaries and related expenses, a $6.3 million increase in performance bonus expense and a $3.4 million increase in share-based compensation expense; partially offset by an $11.7 million decrease in deferred compensation expense attributable to the change in the market value of our deferred compensation liability. The decrease in deferred compensation expense is offset by a decrease in the gain recognized for the change in the market value of investments that are used to fund our deferred compensation liability and recognized in other income (expense), net. As a percentage of revenues, selling, general and administrative expenses decreased to 18.5% during 2022, compared to 19.7% during 2021. This decrease was primarily due to the decrease in deferred compensation expense attributable to the change in the market value of our deferred compensation liability and revenue growth that outpaced the increase in salaries and related expenses for our support personnel, partially offset by the increases in promotion and marketing expenses and practice administration and meetings expenses, as percentages of revenue.

Restructuring Charges

Restructuring charges for the year ended December 31, 2022 were $9.9 million, compared to $12.4 million for the year ended December 31, 2021. The $9.9 million of restructuring charges incurred in 2022 included $5.7 million of employee-related expenses; $2.3 million for rent and related expenses, net of sublease income, for previously vacated office spaces; $0.7 million for third-party professional advisory fees related to the modification of our operating model; and $0.6 million for the early termination of a contract.

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Of the $12.4 million of restructuring charges incurred in 2021, $8.5 million was in connection with the sale of our Life Sciences business in the fourth quarter of 2021. The $8.5 million charge related to the sale consisted of $6.8 million of transaction-related employee payments; $0.9 million of third-party legal and professional advisory fees; and $0.8 million of accelerated amortization and depreciation on the operating lease right-of-use asset and fixed assets related to our London, U.K. office space, which we vacated as a result of the divestiture. Additionally, in 2021, we incurred $2.3 million of rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for other previously vacated office spaces, and $1.3 million of other employee-related expenses.

Depreciation and Amortization

Depreciation and amortization expense, which includes amortization of intangible assets and software development costs previously presented separately, increased $1.9 million, or 7.3%, to $27.4 million for the year ended December 31, 2022, compared to $25.5 million for the year ended December 31, 2021. The $1.9 million increase in depreciation and amortization expense was primarily attributable to an increase in amortization of intangible assets acquired in business acquisitions completed in the fourth quarter quarter of 2021 and in 2022, partially offset by decreasing amortization expense for certain intangible assets acquired due to the accelerated basis of amortization in prior periods.

Operating Income and Operating Margin

Operating income increased $46.9 million to $99.8 million for the year ended December 31, 2022 from $52.8 million for the year ended December 31, 2021. Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 8.8% for 2022, compared to 5.8% for 2021.

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.

•Healthcare operating income increased primarily due to the increase in revenues, partially offset by increases in compensation costs for our revenue-generating professionals, contractor expenses, practice administration and meetings expenses, compensation costs for our support personnel, amortization of intangible assets, and technology expenses. The increase in compensation costs for our revenue-generating professionals was driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2022, as well as increases in performance bonus expense and share-based compensation expense; partially offset by a decrease in signing, retention and other bonus expenses. Healthcare operating margin decreased primarily due to the increases in contractor expenses, practice administration and meetings expenses and amortization of intangible assets, as percentages of revenues; partially offset by revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals.

•Education operating income increased primarily due to the increase in revenues, partially offset by increases in compensation costs for our revenue-generating professionals, contractor expenses, restructuring charges, technology expenses, and promotion and marketing expenses. The increase in compensation costs for our revenue-generating professionals was driven by an increase in headcount and annual salary increases that went into effect in the first quarter of 2022, as well as increases in performance bonus expense and signing, retention and other bonus expenses. Education operating margin increased due to revenue growth that outpaced the increase in compensation costs; partially offset by the increases in non-payroll costs, as percentages of revenues.

•Commercial operating income increased primarily due to the increase in revenues, as well as a decrease in restructuring charges; partially offset by increases in contractor expenses, promotion and marketing expenses, and compensation costs for both our revenue-generating professionals and support personnel. The increase in compensation costs was driven by an increase in performance bonus expense, partially offset by a decrease in salaries and related expenses for our revenue-generating professionals primarily driven by the divestiture of our Life Sciences business in the fourth quarter of 2021. Commercial operating margin increased due to revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals and the decrease in restructuring charges; partially offset by the increases in promotion and marketing expenses and contractor expenses, as percentages of revenues.

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Other Income (Expense), Net

Interest expense, net of interest income increased $3.7 million to $11.9 million for the year ended December 31, 2022 from $8.2 million for the year ended December 31, 2021 primarily attributable to higher levels of borrowing under our credit facility in 2022 compared to 2021, as well as an increase in interest rates over the same periods. See “Liquidity and Capital Resources” below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information on our senior secured credit facility.

Other income, net decreased $14.6 million to $20.7 million for the year ended December 31, 2022 from $35.3 million for the year ended December 31, 2021. The $20.7 million of other income, net in 2022 includes a $27.0 million unrealized gain related to the increase in the fair value of our preferred stock investment in Medically Home, partially offset by a $7.4 million unrealized loss on the market value of our deferred compensation investments that are used to fund our deferred compensation liability. The $35.3 million of other income, net in 2021 includes a $31.5 million pre-tax gain on the sale of our Life Sciences business in the fourth quarter of 2021 and a $4.2 million unrealized gain on the market value of our deferred compensation investments. See Note 10 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment in Medically Home.

Income Tax Expense

For the year ended December 31, 2022, our effective tax rate was 30.4% as we recognized income tax expense of $33.0 million on income of $108.6 million. The effective tax rate of 30.4% was less favorable than the statutory rate, inclusive of state income taxes, of 26.7%, primarily due to tax expense related to nondeductible losses on our investments used to fund our deferred compensation liability and certain nondeductible expense items.

For the year ended December 31, 2021, our effective tax rate was 21.3% as we recognized income tax expense of $17.0 million on income of $80.0 million. The effective tax rate of 21.3% was more favorable than the statutory rate, inclusive of state income taxes, of 26.3%, primarily due to the discrete tax benefits related to the CARES Act described below. The effective tax rate also reflected the positive impact of certain federal tax credits and the discrete tax benefit recognized during the second quarter of 2021 related to electing the Global Intangible Low-Taxed Income (“GILTI”) high-tax exclusion retroactively for the 2018 tax year. On July 20, 2020, the U.S. Treasury issued and enacted final regulations related to GILTI that allow certain U.S. taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions. The GILTI high-tax exclusion is an annual election and is retroactively available. These favorable items were partially offset by certain nondeductible business expenses and increases in our valuation allowance primarily due to increases in deferred tax assets recorded for foreign tax credits.

The CARES Act, which was signed into law on March 27, 2020, is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback period, options to defer payroll tax payments for a limited period and technical corrections to tax depreciation methods for qualified improvement property. As a result of the CARES Act, we recognized a $1.5 million tax benefit in 2020 related to the remeasurement of a portion of our income tax receivable for the federal net operating losses incurred in 2018 and 2020 that were carried back to prior year income, both for a refund at the higher, prior year tax rate. As a result of electing the retroactive GILTI high-tax exclusion in the second quarter of 2021, we recognized a $1.0 million tax benefit of which $0.4 million related to carrying back our increased 2018 federal net operating loss to prior year income for a refund at the higher, prior year tax rate. During the third quarter of 2021, we recognized an additional tax benefit of $2.0 million, primarily related to the U.S. federal return to provision adjustments for carrying back our increased 2020 federal net operating loss to prior year income for a refund at the higher, prior year tax rate.

See Note 17 "Income Taxes" within the notes to our consolidated financial statements for additional information on our income tax expense (benefit).

Net Income from Continuing Operations and Earnings per Share

Net income from continuing operations increased $12.6 million to $75.6 million for the year ended December 31, 2022 from $63.0 million for the year ended December 31, 2021. As a result of the increase in net income from continuing operations, diluted earnings per share from continuing operations for the year ended December 31, 2022 was $3.64, compared to $2.89 for the year ended December 31, 2021.

EBITDA and Adjusted EBITDA

EBITDA increased $34.2 million to $148.7 million for the year ended December 31, 2022 from $114.5 million for the year ended December 31, 2021. The increase in EBITDA was primarily attributable to the increase in segment income and the $27.0 million unrealized gain recognized in the first quarter of 2022 related to the increase in the fair value of our preferred stock investment; partially offset by the $31.5 million gain on sale of our Life Sciences business recognized in the fourth quarter of 2021 and an increase in corporate expenses in 2022 compared to 2021, excluding the impact of the change in the market value of our deferred compensation liability on corporate expenses.

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Adjusted EBITDA increased $33.0 million to $130.8 million for the year ended December 31, 2022 from $97.8 million for the year ended December 31,2021. The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income; partially offset by an increase in corporate expenses, excluding the impact of the change in the market value of our deferred compensation liability and restructuring charges on segment operating income and corporate expenses.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income from continuing operations increased $14.3 million to $71.1 million for the year ended December 31, 2022, compared to $56.9 million for the year ended December 31, 2021. As a result of the increase in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was $3.43 in 2022, compared to $2.61 in 2021.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

As a result of our operating segment modification effective January 1, 2022, we recast our historical segment information for consistent presentation. Our consolidated results were not impacted by the operating segment modification. Therefore, the following discussion compares the recast segment revenue and segment operating income for 2021 to 2020. For a discussion of our consolidated results of operations for 2021 compared to 2020, which were not impacted by the operating segment modification, refer to Part II—Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the United States Securities and Exchange Commission on February 24, 2022.

Revenues

Revenues by segment and capability for the years ended December 31, 2021 and 2020 were as follows:

Total revenues increased $61.5 million, or 7.3% to $905.6 million for the year ended December 31, 2021 from $844.1 million for the year ended December 31, 2020. The increase in revenues reflected strengthened demand for services in all of our segments; the favorable comparison against 2020, which was more significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic, particularly within our Healthcare and Education segments; and the incremental revenues from our acquisitions. Additional information on our revenues by segment follows.

•Healthcare revenues increased $38.2 million, or 9.4%, which reflected strengthened demand for this segment's services as well as the favorable comparison against 2020, which was more significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic. The strengthened demand was primarily driven by our revenue cycle managed services, performance improvement, and corporate finance advisory solutions within our Consulting and Managed Services capability and our technology and analytics services within our Digital capability. These increases in demand were partially offset by a decrease in demand for our culture and organizational excellence solution within our Consulting and Managed Services capability. Revenues in 2021 included $6.5 million of incremental revenues from our acquisition of ForceIQ which was completed in November 2020.

The number of revenue-generating professionals within our Healthcare segment grew 42.9% to 1,596 as of December 31, 2021, compared to 1,117 as of December 31, 2020. The increase in revenue-generating professionals includes the hiring of approximately 300 employees during the second quarter of 2021 to expand our capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients. These employees serve clients in our Managed Services capability, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.

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•Education revenues increased $19.0 million, or 8.5%. This segment's revenues were significantly impacted by the COVID-19 pandemic beginning in the third quarter of 2020 through the first half of 2021 as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic. Demand for this segment's services strengthened over the course of 2021, primarily in our strategy and operations and research solutions within our Consulting and Managed Services capability, driving an overall increase in total revenues for full year 2021 compared to full year 2020. Revenues in 2021 included $1.0 million of incremental revenues from our acquisitions of Unico Solutions and Whiteboard, which were completed in February 2021 and December 2021, respectively.

The number of revenue-generating professionals within our Education segment grew 20.3% to 1,050 as of December 31, 2021, compared to 873 as of December 31, 2020.

•Commercial revenues increased $4.2 million, or 2.0%, driven by strengthened demand for our cloud-based technology and analytics solutions within our Digital capability, partially offset by the decrease in revenues related to the divestiture of our Life Sciences business in the fourth quarter of 2021. Revenues generated by the Life Sciences business in the first ten months of 2021 and full year 2020 were $16.7 million and $29.4 million, respectively. Revenues in 2021 included $7.4 million of incremental revenues from our acquisitions of ForceIQ, Inc. and Unico Solutions, which were completed in November 2020 and February 2021, respectively.

The number of revenue-generating professionals within our Commercial segment grew 6.7% to 1,130 as of December 31, 2021, compared to 1,059 as of December 31, 2020. This increase includes the impact of the divestiture of our Life Sciences business, which employed 99 revenue-generating professionals as of December 31, 2020.

Operating Income and Operating Margin

Operating income increased $81.7 million to $52.8 million for the year ended December 31, 2021 from a loss of $28.9 million for the year ended December 31, 2020. The operating loss for the year ended December 31, 2020 is primarily attributable to $59.8 million of non-cash pretax goodwill impairment charges recognized in the first quarter of 2020 that related to our legacy Business Advisory segment. The goodwill impairment charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segment and we do not include the impact of goodwill impairment charges in our evaluation of segment performance. See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the goodwill impairment charges recognized in the first quarter of 2020.

Operating margin, which is defined as operating income expressed as a percentage of revenues, increased to 5.8% in 2021, compared to (3.4%) in 2020.

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.

•Healthcare operating income increased primarily due to the increase in revenues, as well as decreases in practice administration and meetings expenses, restructuring charges and contractor expenses. These increases to operating income were partially offset by an increase in compensation costs for our revenue-generating professionals. The increase in compensation costs was driven by an increase in headcount, as well as increases in performance bonus expense and signing, retention and other bonus expense. Healthcare operating margin increased primarily due to decreases in compensation costs for our support personnel, contractor expenses, practice administration and meetings expenses and restructuring charges. These increases to the segment operating margin were partially offset by the increase in compensation costs for our revenue-generating professionals, as a percentage of revenues.

•Education operating income increased primarily due to the increase in revenues and a decrease in restructuring charges, partially offset by increases in compensation costs for our revenue-generating professionals and technology expenses. The increase in compensation costs was driven by an increase in headcount, as well as increases in performance bonus expense and signing, retention and other bonus expenses. Education operating margin increased due to the decrease in restructuring charges and revenue growth that outpaced the increase in compensation costs for our revenue-generating professionals.

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•Commercial operating income decreased primarily due to increases in restructuring charges, contractor expenses, and compensation costs for our support personnel, partially offset by the increase in revenues and a decrease in 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, largely offset by the increase in headcount. Commercial operating margin decreased primarily due to the increases in restructuring charges and contractor expenses, as percentages of revenues; partially offset by the decrease in compensation costs for our revenue-generating professionals.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $11.8 million, $20.8 million, and $67.2 million at December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, our primary sources of liquidity are cash on hand, cash flows from our U.S. operations, and borrowing capacity available under our credit facility.

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 provided by operating activities increased $67.4 million to $85.4 million in 2022 from $18.0 million in 2021. The increase in net cash provided by operating activities in 2022 compared to 2021 was primarily attributable to an increase in cash collections in 2022 compared to the prior year; partially offset by increases in payments for salaries and related expenses for our revenue-generating professionals, selling, general and administrative expenses and contractor expenses for 2022 compared to 2021 and an increase in the amount paid for annual performance bonuses in the first quarter of 2022 compared to the first quarter of 2021.

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 Medically Home Group, Inc., and investments in life insurance policies that are used to fund our deferred compensation liability.

Net cash used in investing activities was $20.1 million for 2022. The use of cash in 2022 primarily consisted of $12.5 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements; $11.8 million for payments related to internally developed software; and $3.4 million for the purchases of businesses. These uses of cash for investing activities were partially offset by $4.8 million of cash received for the sale of our aircraft in the first quarter of 2022 and $3.4 million of cash received for distributions from our life insurance policies that are used to fund our deferred compensation liability.

Net cash used in investing activities was $20.1 million for 2021. The use of cash in 2021 primarily consisted of $44.8 million for the purchases of businesses; $10.9 million for purchases of property and equipment, primarily related to leasehold improvements, computers and related equipment and furniture and fixtures for certain office spaces; $4.9 million for payments related to internally developed software; and $1.2 million for contributions to our life insurance policies. These uses of cash from investing activities were partially offset by $41.3 million of cash received for the sale of the Life Sciences business in the fourth quarter of 2021.

We estimate that cash utilized for purchases of property and equipment and software development in 2023 will total approximately $30 million to $35 million; primarily consisting of software development costs, information technology related equipment to support our corporate infrastructure, and leasehold improvements and furniture and fixtures for certain office locations.

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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 used in financing activities was $74.1 million in 2022. During 2022, we borrowed $314.0 million under our senior secured credit facility primarily to fund our operations, including our annual performance bonus payment in the first quarter of 2022, and made repayments on our borrowings of $256.8 million. The repayments on our borrowings included the repayment of the outstanding principal of our promissory note due 2024 of $2.7 million from the proceeds received for the sale of our aircraft. Additionally, during 2022, we repurchased and retired $121.3 million of our common stock under our share repurchase program discussed below, of which $1.1 million settled in the first quarter of 2023, and settled $0.2 million of share repurchases that were accrued as of December 31, 2021. During 2022, we reacquired $7.8 million of common stock as a result of tax withholdings upon vesting of share-based compensation. Additionally, we made payments of $2.7 million for debt issuance costs related to the Third Amended and Restated Credit Agreement executed in the fourth quarter of 2022. We also made deferred acquisition payments of $1.9 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.

Net cash used in financing activities was $44.4 million in 2021. During 2021, we borrowed $235.0 million under our senior secured credit facility, primarily to fund our operations, including our annual performance bonus payment in the first quarter of 2021 and for the acquisitions completed in the fourth quarter of 2021. We made repayments on our credit facility of $205.0 million during 2021. Additionally, during 2021, we repurchased and retired $64.6 million of our common stock under our share repurchase program, and repurchased and retired $0.2 million of our common stock that was accrued as of December 31, 2021. We also reacquired $10.1 million of common stock as a result of tax withholdings upon vesting of share-based compensation.

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 fourth quarter of 2022. The current authorization extends the share repurchase program through December 31, 2023 with a repurchase amount of $300 million, of which $108.9 million remains available as of December 31, 2022. 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 December 31, 2022, we had $290.0 million outstanding under our senior secured credit facility, as discussed below.

Senior Secured Credit Facility

On November 15, 2022, the Company entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement amended and restated, in its entirety, the Second Amended and Restated Credit Agreement entered into as of March 31, 2015 (as amended and modified, the "Existing Credit Agreement"). The Amended Credit Agreement consists of a $600 million five-year senior secured revolving credit facility that becomes due and payable in full upon maturity on November 15, 2027. The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount of up to $250 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Amended Credit Agreement of $850 million. The initial borrowings under the Amended Credit Agreement were used to refinance borrowings outstanding under the Existing Credit Agreement, and future borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, share repurchases, permitted acquisitions, and other general corporate purposes.

Fees and interest on borrowings vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, borrowings under the Amended Credit Agreement will bear interest at one, three or six month Term SOFR or an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.125% per annum and 1.875% per annum, in the case of 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. Fees and interest on borrowings are paid on a monthly basis.

The Company and PNC Capital Markets, LLC, as Sustainability Structuring Agent, may amend the Amended Credit Agreement, with the consent of the Required Lenders (as defined in the Amended Credit Agreement), in order to incorporate specified key performance indicators with respect to certain environmental, social and governance targets of the Company. Upon the effectiveness of any such amendment, and based upon the performance of the Company against those key performance indicators, certain adjustments to the otherwise applicable rates for interest, commitment fees and letter of credit fees will be made. These adjustments will not exceed an increase or decrease of 0.01% in

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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 December 31, 2022 and December 31, 2021, we were in compliance with these financial covenants. Our Consolidated Leverage Ratio as of December 31, 2022 was 1.92 to 1.00, compared to 1.73 to 1.00 as of December 31, 2021. Our Consolidated Interest Coverage Ratio as of December 31, 2022 was 14.04 to 1.00, compared to 18.43 to 1.00 as of December 31, 2021.

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.

Principal borrowings outstanding under the Amended Credit Agreement at December 31, 2022 and December 31, 2021 totaled $290.0 million and $230.0 million, respectively. These borrowings carried a weighted average interest rate of 3.8% at December 31, 2022 and 2.7% at December 31, 2021 including the impact of the interest rate swaps described in Note 12 “Derivative Instruments and Hedging Activity" within the notes to the consolidated financial statements. The borrowing capacity under the revolving credit facility is reduced by any outstanding borrowings under the revolving credit facility and outstanding letters of credit. At both December 31, 2022 and 2021, we had outstanding letters of credit totaling $0.7 million, which are used as security deposits for our office facilities. As of December 31, 2022 and 2021, the unused borrowing capacity under the revolving credit facility was $309.3 million and $369.3 million, respectively.

For further information, see Note 7 “Financing Arrangements” within the notes to the consolidated financial statements. For a discussion of certain risks and uncertainties related to the Amended Credit Agreement, see Part I—Item 1A. “Risk Factors.”

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 revolving 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.

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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”). Our significant accounting policies are discussed in Note 2 “Summary of Significant Accounting Policies” within the notes to our consolidated financial statements. 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.

Revenue Recognition

We generate substantially all of our revenues from providing professional services to our clients. We also generate revenues from software licenses, software support and maintenance and subscriptions to our cloud-based analytic tools and solutions, speaking engagements, conferences, and publications.

Our revenue is generated under four types of billing arrangements: fixed-fee (including software license revenue); time-and-expense; performance-based; and software support, maintenance and subscriptions. Determining the method and amount of revenue to recognize requires us to make judgments and estimates. Specifically, multiple performance obligation arrangements require us to allocate the total transaction price to each performance obligation based on its relative standalone selling price, for which we rely on our overall pricing objectives, taking into consideration market conditions and other factors. Provisions are recorded for the estimated realization adjustments on all engagements, including engagements for which fees are subject to review by the bankruptcy courts. We continually evaluate our estimates of the provisions based on available information and experiences. Additionally, when accounting for fixed-fee and performance-based billing arrangements, we must make additional judgments and estimates as further described below.

In fixed-fee billing arrangements for professional services, 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. We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed to-date versus our estimates of the total services to be provided under the engagement. Estimates of total engagement revenues and cost of services are monitored regularly during the term of the engagement. Any increased or unexpected costs or unanticipated delays in connection with the performance of these engagements could make these contracts less profitable or unprofitable.

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. We recognize revenue under performance-based billing arrangements using the following steps: 1) estimate variable consideration using a probability-weighted assessment of the fees to be earned, 2) apply a constraint to the estimated variable consideration to limit the amount that could be reversed when the uncertainty is resolved (the “constraint”), and 3) recognize revenue of estimated variable consideration, net of the constraint, based on work completed to-date versus our estimates of the total services to be provided under the engagement. Our estimates are monitored throughout the life of each contract and are based on an assessment of our anticipated performance, historical experience, and other information available at the time. While we believe that the estimates and assumptions we used for revenue recognition for performance-based billing arrangements are reasonable, subsequent changes could materially impact our results of operations.

See Note 2 “Summary of Significant Accounting Policies” within the notes to the consolidated financial statements for additional information on our revenue recognition accounting policy.

Allowances for Doubtful Accounts and Unbilled Services

We maintain allowances for doubtful accounts and for services performed but not yet billed based on several factors, including the estimated cash realization from amounts due from clients, an assessment of a client’s ability to make required payments, and the historical percentages of fee adjustments and write-offs by age of receivables and unbilled services. The allowances are assessed by management on a regular basis. These estimates may differ from actual results. If the financial condition of a client deteriorates in the future, impacting the client’s ability to make payments, an increase to our allowance might be required or our allowance may not be sufficient to cover actual write-offs.

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We record the provision for doubtful accounts and unbilled services as a reduction in revenue. To the extent we write-off accounts receivable due to a client’s inability to pay, the charge is recognized as a component of selling, general and administrative expenses.

Business Combinations

We use the acquisition method of accounting for business combinations. The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date, with the exception of contract assets and liabilities which are recognized and measured in accordance with our revenue recognition accounting policy described in Note 2 "Summary of Significant Accounting Policies" within the notes to the consolidated financial statements. Goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the net value of the assets acquired and liabilities assumed. We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible assets, discount rates that reflect the risk factors associated with future cash flows, and estimates of useful lives.

We measure and recognize contingent consideration at fair value as of the acquisition date. We estimate the fair value of contingent consideration based on either a probability-weighted assessment of the specific financial performance targets being achieved or a Monte Carlo simulation model, as appropriate. These fair value measurements require the use of significant judgments, estimates, and assumptions, including financial performance projections and discount rates. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest financial projections and input provided by practice leaders and management, with any change in the fair value estimate recorded in earnings in that period. Increases or decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could materially impact the financial statements.

See Note 3 “Acquisitions and Divestitures” within the notes to our consolidated financial statements for additional information on our acquisitions and Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our contingent consideration liabilities.

Carrying Values of Goodwill and Other Intangible Assets

We test goodwill for impairment, at the reporting unit level, annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition. As of December 31, 2022, we have three reporting units: Healthcare, Education, and Commercial.

Under GAAP, we have the option to first assess qualitative factors to determine whether the existence of current events or circumstances would lead to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying value. If we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying value, no further testing is necessary. However, if we conclude otherwise, then we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment charge is recorded in an amount equal to that difference with the loss not to exceed the total amount of goodwill allocated to the reporting unit.

For the goodwill reallocation and impairment tests performed in 2022, we determined the fair value of our reporting units using the income approach. For a company such as ours, the income approach will generally provide the most reliable indication of fair value because the value of such companies is dependent on their ability to generate earnings. We utilized a discounted cash flow analysis, which involves 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 forecasted revenue growth rates, forecasted EBITDA margins, and discount rates. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

The following is a discussion of the goodwill impairment tests performed during 2022.

First Quarter 2022 Goodwill Reallocation and Goodwill Impairment Test

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we began reporting under the following three industries, which are our reportable segments: Healthcare, Education and Commercial. The Commercial segment includes all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment includes all revenue and costs associated with engagements delivered in the respective segments' industries. The new Healthcare and Education segments include some revenue and costs historically reported in

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the Business Advisory segment and the Healthcare segment includes some revenue and costs historically reported in the Education segment.

The three reportable segments of Healthcare, Education and Commercial are also our reporting units for goodwill impairment testing purposes. As a result of the reorganization, we reallocated the goodwill balances of our historical reporting units to our new reporting units based on the relative estimated fair values of each component of the historical reporting units to be allocated to the new reporting units. Additionally, we performed a goodwill impairment test on the goodwill balances of each of our reporting units as of January 1, 2022 by comparing the fair value of the reporting unit to its carrying value, including the reallocated goodwill. Based on the results of the goodwill impairment test, we determined the fair values of the Healthcare, Education, and Commercial reporting units exceeded their carrying values by 37%, 199%, and 105%, respectively. As such, we concluded that there was no indication of goodwill impairment for all three reporting units as of January 1, 2022. Further, we determined that neither a 100 basis point decrease in the estimated long-term growth rate nor a 100 basis point increase in the discount rate for each reporting unit would have resulted in an indication of goodwill impairment for any of the reporting units.

We relied on the income approach to estimate the fair value of the reporting units for both the goodwill reallocation and the goodwill impairment test. The income approach utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each business and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted EBITDA margins, and discount rates that reflect the risk inherent in the future cash flows. In estimating future cash flows, we relied on internally generated ten-year forecasts. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

2022 Annual Goodwill Impairment Analysis

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2022 for our three reporting units: Healthcare, Education, and Commercial. We performed a qualitative assessment over all reporting units to determine if it was more likely than not the respective fair values of these reporting units were less than their carrying amounts, including goodwill.

For our qualitative assessment, we considered the most recent quantitative analysis performed for each reporting unit, which was as of January 1, 2022, including the key assumptions used within that analysis, the indicated fair values, and the amount by which those fair values exceeded their carrying amounts. One of the key assumptions used within the prior quantitative analysis was our internal financial projections; therefore, we considered the actual performance of each reporting unit during 2022 compared to the internal financial projections used, as well as specific outlooks for each reporting unit based on our most recent internal financial projections. We also reviewed the current carrying value of each reporting unit in comparison to the carrying values as of the prior quantitative analysis. In addition, we considered various factors, including macroeconomic conditions, relevant industry and market trends for each reporting unit, and other entity-specific events, that could indicate a potential change in the fair value of our reporting units or the composition of their carrying values. Based on our assessments, we determined that it was more likely than not that the fair values for each of our reporting units exceeded their respective carrying amounts. As such, the goodwill for our reporting units was not considered impaired as of November 30, 2022, and a quantitative goodwill impairment analysis was not necessary.

Determining the fair value of any reporting unit requires us to make significant judgments, estimates, and assumptions. While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and also the magnitude of such charge. The results of an impairment analysis are as of a point in time. There is no assurance that the actual future earnings or cash flows of our reporting units will be consistent with our projections. We will continue to monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods. Any significant decline in our operations compared to our internal forecasts could result in additional goodwill impairment charges, which could be material.

The carrying value of goodwill for each of our reporting units as of December 31, 2022 is as follows (in thousands):

Intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill. Our intangible assets, net of accumulated amortization, totaled $23.4 million at December 31, 2022 and primarily consist of customer relationships, technology and software, trade names, and non-competition agreements, all of which were acquired through business combinations. We evaluate our

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intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. No impairment charges for intangible assets were recorded in 2022.

Income Taxes

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. In determining our provision for income taxes on an interim basis, we estimate our annual effective tax rate based on information available at each interim period. Changes in applicable U.S. state, federal or foreign tax laws and regulations, or their interpretation and application, could materially affect our tax expense.

Deferred tax assets and liabilities are recorded for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in management’s opinion, it is more likely than not that some portion or the entire deferred tax asset will not be realized. Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors.

Our tax positions are subject to income tax audits by federal, state, local, and foreign tax authorities. A tax benefit from an uncertain position may be recognized in the financial statements only if it is more likely than not that the position is sustainable, based on its technical merits. We measure the tax benefit recognized as the largest amount of benefit which is more likely than not to be realized upon settlement with the taxing authority. The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that positions taken on our tax returns are fully supported. However, final determinations of prior year tax positions upon settlement with the taxing authority could be materially different from estimates. The outcome of these final determinations could have a material impact on our provision for taxes, net income, or cash flows in the period in which that determination is made.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 2 “Summary of Significant Accounting Policies" within the notes to the consolidated financial statements for information on new accounting pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and related notes appearing under Part II—Item 8. “Financial Statements and Supplementary Data.” The following MD&A contains forward-looking statements and involves numerous risks and uncertainties, including, without limitation, those described under Part I—Item 1A. “Risk Factors” and “Forward-Looking Statements” of this Annual Report on Form 10-K. Actual results may differ materially from those contained in any forward-looking statements.

The following information summarizes our results of operations for 2021, 2020, and 2019; and discusses those results of operations for 2021 compared to 2020. For a discussion of our results of operations for 2020 compared to 2019, refer to Part II—Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of the Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the United States Securities and Exchange Commission on February 23, 2021.

OVERVIEW

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 our clients need to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, Huron delivers sustainable results for the organizations it serves.

We provide our services and manage our business under three operating segments: Healthcare, Business Advisory, and Education. See Part I—Item 1. “Business—Overview—Our Services” and Note 19 “Segment Information” within the notes to our consolidated financial statements for a discussion of our three segments.

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities. The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we will begin reporting under the following three industries, which will be our reportable segments: Healthcare, Education and Commercial. The Commercial segment will include all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities. In the new reporting structure, each segment will include all revenue and costs associated with engagements delivered in the respective industry segments. The new Healthcare and Education segments will include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment will include some revenue and costs historically reported in the Education segment. We will also provide revenue reporting across two principal capabilities: i) Consulting and Managed Services and ii) Digital. These changes will create greater transparency for investors by improving visibility into the core drivers of our business. While our consolidated results will not be impacted, we will recast our historical segment information during 2022 for consistent presentation.

Coronavirus (COVID-19)

The worldwide spread of COVID-19 beginning in 2020 has created significant volatility, uncertainty and disruption to the global economy. The pandemic had an unfavorable impact on aspects of our business, operations, and financial results, and caused us to significantly change the way we operate. Near the end of the first quarter of 2020, we suspended almost all business travel and our employees began working from their homes. While traditionally a majority of the work performed by our revenue-generating professionals occurred at client sites, the nature of the services we provide and enhanced available technology allows our revenue-generating professionals to effectively serve clients in a remote work environment. As federal, state and local government restrictions evolve, we continue to refine our comprehensive plan to return to our offices and client sites with our people’s safety and the needs of our clients guiding how we implement our phased transition. As of December 31, 2021, our employees continue to primarily work from their homes; however, most of our offices are open and we are providing our employees the flexibility to choose to work remotely, from our offices, or from client sites as needed and in accordance with recommended public health guidelines.

In each of our operating segments, we are working closely with our clients to support them and their ongoing business needs and provide relevant services to address their needs caused by the COVID-19 pandemic. However, since the beginning of the pandemic in 2020, some clients reprioritized and delayed projects which negatively impacted demand for certain offerings, particularly within our Healthcare and Education segments. Conversely, the COVID-19 pandemic strengthened demand for other services we provide, such as our cloud-based technology and analytics solutions within our Business Advisory segment and our restructuring and capital advisory solutions provided to organizations in transition also within our Business Advisory segment.

Beginning in the second quarter of 2021 and continuing through the end of 2021, we saw strengthened demand for services in all of our segments compared to the same prior year period. As a result, total revenues in the fourth quarter of 2021 increased 25.2% compared to the

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fourth quarter of 2020, and full year 2021 revenues increased 7.3% compared to 2020. We expect continued revenue growth in 2022 compared to 2021.

In order to support our liquidity during the COVID-19 pandemic, we took proactive measures to increase available cash on hand including, but not limited to, borrowing under our senior secured credit facility in the first quarter of 2020 and reducing discretionary operating and capital spending. In the second, third and fourth quarters of 2020, we made repayments on our borrowings to reduce our total debt outstanding to pre-pandemic levels due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources. In 2021, we borrowed under our credit facility primarily to fund our annual performance bonus payment in March 2021 and our acquisitions of businesses during the year. To further support our liquidity during the COVID-19 pandemic, we elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through December 31, 2020, as provided for under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). These deferred payments, which totaled $12.2 million, were paid in full in the third quarter of 2021. See the “Liquidity and Capital Resources” section below for additional information on these items.

Enterprise Resource Planning System Implementation

In the fourth quarter of 2019, we began the implementation of a new cloud-based enterprise resource planning (“ERP”) system designed to improve the efficiency of our internal finance, human resources, resource planning, and administrative operations. In January 2021, we successfully went live with the new ERP system, and we continue to progress with additional functionality and integrations as scheduled. The implementation progressed on schedule and was not significantly impacted by the COVID-19 pandemic due to the ability of our implementation team to work and collaborate remotely and the enhanced technology and cloud-based nature of our new ERP system. We believe our investment in this new system will position our teams to drive efficiencies and provide more robust management reporting and data analytics to support future growth and the goals and vision of the company.

See Part II, Item 1A. “Risk Factors” of this Annual Report on Form 10-K for additional information on the potential impact the COVID-19 pandemic could have on our business, operations and financial results.

Acquisitions and Divestiture

During 2021, we completed the following acquisitions:

•Unico Solution, Inc. - On February 1, 2021, we completed the acquisition of Unico Solution, Inc. (“Unico Solutions”), a data strategy and technology consulting firm focused on helping clients enhance the use of their data to speed business transformation and accelerate cloud adoption. The acquisition expands our cloud-based technology offerings within the Business Advisory segment. The results of operations of Unico Solutions are included within the Business Advisory segment from the date of acquisition.

•Bad Rabbit, Inc. - On October 1, 2021, we completed the acquisition of the research administration software services team of Bad Rabbit, Inc. (“Bad Rabbit”). The results of operations of Bad Rabbit are included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition.

•Whiteboard Communications Ltd. - On December 1, 2021, we completed the acquisition of Whiteboard Communications Ltd. (“Whiteboard”), a student enrollment advisory firm that helps colleges and universities with recruitment initiatives and financial aid strategies. The results of operations of Whiteboard are included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition.

•Perception Health, Inc. - On December 31, 2021, we completed the acquisition of Perception Health, Inc. (“Perception Health”), a healthcare predictive analytics company focused on bringing data sources together for improved clinical and business decision-making. The results of operations of Perception Health will be included in our consolidated financial statements and results of operations of our Healthcare segment beginning January, 1, 2022.

The acquisitions of Unico Solutions, Bad Rabbit, Whiteboard and Perception Health are not significant to our consolidated financial statements individually or in the aggregate as of and for the year ended December 31, 2021.

On November 1, 2021, we completed the divestiture of our Life Sciences business to a third-party. The Life Sciences business, a reporting unit within the Business Advisory segment, provides commercial and research and development strategy, pricing and market access strategy solutions to customers in the life sciences industries. For the ten months ended October 31, 2021, Life Sciences revenues were $16.7 million. The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

How We Generate Revenues

A large portion of our revenues is generated by our full-time consultants 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. A smaller portion of our

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revenues is generated by our other professionals, also referred to as full-time equivalents, some of whom work variable schedules as needed by our clients. Full-time equivalent professionals consist of our coaches and their support staff from our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, and our employees who provide software support and maintenance services to our clients. We translate the hours that these other professionals work on client engagements into a full-time equivalent measure that we use to manage our business. Another portion of our revenue is generated by our Healthcare Managed Services employees within our Healthcare segment. Our Healthcare Managed Services employees manage and provide revenue cycle billing, collections, insurance verification and change integrity services to clients. We refer to our billable consultants, full-time equivalents and Healthcare Managed Services employees as revenue-generating professionals.

Revenues generated by our billable consultants are primarily driven by the number of consultants we employ and their utilization rates, as well as the billing rates we charge our clients. Revenues generated by our other professionals, or full-time equivalents, are largely dependent on the number of consultants we employ, their hours worked, and billing rates charged. Revenues generated by our coaches are largely dependent on the number of coaches we employ and the total value, scope, and terms of the consulting contracts under which they provide services, which are primarily fixed-fee contracts. Revenues generated by our Healthcare Managed Services employees are largely dependent on the total value, scope and terms of the related contracts.

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

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. It is the client’s expectation in these engagements that the pre-established fee will not be exceeded except in mutually agreed upon circumstances. We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed to-date versus our estimates of the total services to be provided under the engagement. Contracts within our Culture and Organizational Excellence solution include fixed-fee partner contracts with multiple performance obligations, which primarily consist of coaching services, as well as speaking engagements, conferences, publications and software products (“Partner Contracts”). Revenues for coaching services and software products are generally recognized on a straight-line basis over the length of the contract. All other revenues under Partner Contracts, including speaking engagements, conferences and publications, are recognized at the time the goods or services are provided.

Fixed-fee arrangements also include software licenses for our revenue cycle management software and research administration and compliance software. Licenses for our revenue cycle management software are sold only as a component of our consulting projects, and the services we provide are essential to the functionality of the software. Therefore, revenues from these software licenses are recognized over the term of the related consulting services contract. License revenue from our research administration and compliance software is generally recognized in the month in which the software is delivered.

Fixed-fee engagements represented 44.2%, 41.4%, and 45.8% of our revenues for the years ended December 31, 2021, 2020, and 2019, respectively.

Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-generating professionals at agreed upon rates. Time-and-expense arrangements also include certain speaking engagements, conferences and publications purchased by our clients outside of Partner Contracts within our Culture and Organizational Excellence solution and the portion of our Healthcare Managed Services contracts that are billed under time-and-expense arrangements. We recognize revenues under time-and-expense billing arrangements as the related services or publications are provided. Time-and-expense engagements represented 39.2%, 43.4%, and 39.9% of our revenues in 2021, 2020, and 2019, respectively.

In performance-based fee 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 have performance-based engagements in which we earn a success fee when and if certain predefined outcomes occur. Often, performance-based fees supplement our time-and-expense or fixed-fee engagements. We recognize revenues under performance-based billing arrangements by estimating the amount of variable consideration that is probable of being earned and recognizing that estimate over the length of the contract using a proportionate performance approach. Performance-based fee revenues represented 10.1%, 9.2%, and 8.9% of our revenues in 2021, 2020, and 2019, respectively. The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide.

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. Software support and maintenance and subscription-based revenues represented 6.5%, 6.0%, and 5.4% of our revenues in 2021, 2020, and 2019, respectively.

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Our quarterly results are impacted principally by our full-time consultants’ utilization rate, the bill rates we charge our clients, and the number of our revenue-generating professionals who are available to work. 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.

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.

Reimbursable Expenses

Reimbursable expenses that are billed to clients, primarily relating to travel and out-of-pocket expenses incurred in connection with engagements, are included in total revenues and reimbursable expenses. Under fixed-fee billing arrangements, we estimate the total amount of reimbursable expenses to be incurred over the course of the engagement and recognize the estimated amount as revenue using the proportionate performance approach, which is based on work completed to-date versus our estimates of the total services to be provided under the engagement. Under time-and-expense billing arrangements, we recognize reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient. Reimbursable expenses are recognized as expenses in the period in which the expense is incurred. Subcontractors that are billed to clients at cost are also included in reimbursable expenses. When billings do not specifically identify reimbursable expenses, we allocate the portion of the billings equivalent to these expenses to 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.

Total Direct Costs

Our most significant expenses are costs classified as total direct costs. Total direct costs primarily include salaries, performance bonuses, signing and retention bonuses, payroll taxes, and benefits for revenue-generating professionals, as well as technology costs, product and event costs, commissions, and fees paid to independent contractors that we retain to supplement our revenue-generating professionals, typically on an as-needed basis for specific client engagements. Direct costs also include share-based compensation, which represents the cost of restricted stock and performance-based share awards, granted to our revenue-generating professionals. Compensation expense for restricted stock awards and performance-based share awards is recognized ratably using either the straight-line attribution method or the graded vesting attribution method, as appropriate, over the requisite service period, which is generally three to four years. Total direct costs also include amortization of internally developed software costs and intangible assets primarily related to technology and software, certain customer relationships, and customer contracts acquired in business combinations.

Operating Expenses and Other Losses (Gains), Net

Our operating expenses include selling, general and administrative expenses, which consist primarily of salaries, performance bonuses, payroll taxes, benefits, and share-based compensation for our support personnel. Also included in selling, general and administrative expenses is rent and other office related expenses, referred to as facilities expenses; sales and marketing related expenses; third-party professional fees; recruiting and training expenses; and practice administration and meetings expenses. Other operating expenses include restructuring charges, other gains and losses, depreciation and certain amortization expenses not included in total direct costs.

Segment Results

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Unallocated costs 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, as well as costs related to overall corporate management.

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RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected segment and consolidated operating results and other operating data. The results of operations for acquired businesses have been included in our results of operations since the date of their respective acquisition.

In conjunction with our continuous evaluation of the appropriate level of disaggregation of revenues as our business evolves and in consideration of a group hire of approximately 300 employees in our Healthcare Managed Services solution within our Healthcare segment in the second quarter of 2021, we began assessing our operating performance by the following three employee types: billable consultants, full-time equivalents, and Healthcare Managed Services employees. The other operating data previously reported for the twelve months ended December 31, 2020 and 2019 was revised below to reflect this change. This change has no impact on our consolidated total revenues or total revenues by segment.

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