What changed in this filing

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Item 9A. Controls and Procedures

2021-02-23 compared with 2020-02-26 · 650 added, 581 removed, 1171 unchanged (51% of the section changed)

6 unchanged sentences

Internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

(i) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

10 unchanged sentences

Compliance with Section 16(a) of the Exchange Act

The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Section 16(a) Beneficial Ownership Reporting Compliance.”

Not applicable.

Code of Business Conduct and Ethics

15 unchanged sentences

We do not have equity compensation plans that have not been approved by shareholders.

Plan Category

Number of Shares

Plan Category Number of Shares

to be Issued Upon

Outstanding Options

Weighted Average

Outstanding Options Weighted Average

Exercise Price of

Outstanding Options

Number of Shares

Outstanding Options Number of Shares

Remaining Available

3 unchanged sentences

2004 Omnibus Stock Plan (1)

34,208 $ 35.55 —

2012 Omnibus Incentive Plan (2)

31,785 $ 39.19 930,920

Stock Ownership Participation Program (3)

Equity compensation plans not approved by shareholders

— $ — 347,941

Equity compensation plans not approved by shareholders N/A N/A N/A

Total 65,993 $ 37.31 1,278,861

(1) Our 2004 Omnibus Stock Plan was approved by the existing shareholders prior to our initial public offering.

1 unchanged sentence

(2) Our 2012 Omnibus Incentive Plan was approved by our shareholders at our annual meeting held on May 1, 2012.

Subsequent to the initial approval and through December 31, 2019, our shareholders have approved amendments to the 2012 Omnibus Incentive Plan to increase the number of shares reserved for issuance by 2,254,000, in the aggregate.

Subsequent to the initial approval and through December 31, 2020, our shareholders have approved amendments to the 2012 Omnibus Incentive Plan to increase the number of shares authorized for issuance to 3.9 million shares, in the aggregate.

(3) Our Stock Ownership Participation Program was approved by our shareholders at our annual meeting held on May 1, 2015.

Subsequent to the initial approval and through December 31, 2020, our shareholders have approved amendments to the Stock Ownership Participation Program to increase the number of shares authorized for issuance to 0.7 million shares, in the aggregate.

Security Ownership of Certain Beneficial Owners and Management

12 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations and Other Comprehensive Income

Consolidated Statements of Operations and Other Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

3 unchanged sentences

Exhibit Index

Exhibit Description

Incorporated by Reference

Number Exhibit Description Filed

herewith Furnished

herewith Incorporated by Reference

Ending Exhibit Filing Date

3.1 Third Amended and Restated Certificate of Incorporation of Huron Consulting Group Inc.

10-K 12/31/2004 3.1 2/16/2005

3.2 Amended and Restated Bylaws of Huron Consulting Group Inc.

8-K 3.1 10/28/2015

4.1 Specimen Stock Certificate.

115434) 4.1 10/5/2004

4.2 Description of Securities.

Indenture (including Form of Note) with respect to the Company’s 1.25% Convertible Senior Notes due 2019, dated as of September 10, 2014, between Huron Consulting Group Inc.

Bank National Association, as trustee.

10-K 12/31/2019 4.2 2/26/2020

10.1 Office Lease, dated December 2003, between Union Tower, LLC and Huron Consulting Services LLC (formerly known as Huron Consulting Group LLC).

115434) 10.1 10/5/2004

10.2* Amended and Restated Huron Consulting Group Inc.

2004 Omnibus Stock Plan.

S-8 10.1 5/5/2010

10.3* Huron Consulting Group Inc.

Deferred Compensation Plan as Amended and Restated effective January 1, 2009.

10-K 12/31/2008 10.12 2/24/2009

10.4* Senior Management Agreement by and between Huron Consulting Group Inc.

8-K 10.1 1/6/2017

10.5* Amended and Restated Senior Management Agreement by and between Huron Consulting Group Inc.

8-K 10.2 1/6/2017

10.6* Senior Management Agreement by and between Huron Consulting Group Inc.

8-K 10.3 1/6/2017

10.7* Senior Management Agreement by and between Huron Consulting Group Inc.

8-K 10.4 1/6/2017

10.8* Transitional Retirement Agreement by and between Huron Consulting Group Inc.

Exhibit Description

Incorporated by Reference

8-K 10.1 9/16/2019

10.9 First Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated August 23, 2004.

10-K 12/31/2012 10.17 2/21/2013

10.10 Second Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated March 14, 2007.

10-K 12/31/2012 10.18 2/21/2013

Number Exhibit Description Filed

herewith Furnished

herewith Incorporated by Reference

Ending Exhibit Filing Date

10.11 Third Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated April 2, 2010.

10-K 12/31/2012 10.19 2/21/2013

10.12 Fourth Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated December 31, 2012.

8-K 10.1 1/4/2013

Fifth Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated December 1, 2013.

10-K 12/31/2019 10.13 2/26/2020

10.14 Sixth Amendment to Lease by and between Huron Consulting Services LLC and Onni Van Buren Chicago LLC, dated October 3, 2019.

8-K 10.1 10/16/2019

10.15* Form of the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan Restricted Stock Agreement.

Base Convertible Bond Hedge Transaction Confirmation, dated as of September 4, 2014, by and between Huron Consulting Group Inc.

and Bank of America, N.A.

Base Convertible Bond Hedge Transaction Confirmation, dated as of September 4, 2014, by and between Huron Consulting Group Inc.

Morgan Securities LLC, as an agent for JPMorgan Chase Bank, National Association, London Branch.

Base Issuer Warrant Transaction Confirmation, dated as of September 4, 2014, by and between Huron Consulting Group Inc.

and Bank of America, N.A.

Base Issuer Warrant Transaction Confirmation, dated as of September 4, 2014, by and between Huron Consulting Group Inc.

Morgan Securities LLC, as an agent for JPMorgan Chase Bank, National Association, London Branch.

Additional Convertible Bond Hedge Transaction Confirmation, dated as of September 10, 2014, by and between Huron Consulting Group Inc.

and Bank of America, N.A.

Additional Convertible Bond Hedge Transaction Confirmation, dated as of September 10, 2014, by and between Huron Consulting Group Inc.

Morgan Securities LLC, as an agent for JPMorgan Chase Bank, National Association, London Branch.

Additional Issuer Warrant Transaction Confirmation, dated as of September 10, 2014, by and between Huron Consulting Group Inc.

and Bank of America, N.A.

Additional Issuer Warrant Transaction Confirmation, dated as of September 10, 2014, by and between Huron Consulting Group Inc.

Morgan Securities LLC, as an agent for JPMorgan Chase Bank, National Association, London Branch.

Exhibit Description

Incorporated by Reference

Form of the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan Restricted Stock Agreement (Stock Ownership Participation Program).

10-K 12/31/2012 10.20 2/21/2013

10.16* Form of the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan Performance Stock Unit Agreement.

10-K 12/31/2014 10.32 2/24/2015

10.17* Form of the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan Stock Option Agreement.

10-K 12/31/2014 10.33 2/24/2015

10.18* Form of the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan NEO Performance Stock Unit Agreement.

10-K 12/31/2014 10.34 2/24/2015

10.19 Second Amended and Restated Credit Agreement, dated as of March 31, 2015, among Huron Consulting Group Inc., as Borrower, certain subsidiaries as Guarantors, the Lenders Party Hereto and Bank of America, N.A., as Administrative Agent and Collateral Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, PNC Bank, Bank of Montreal and Key Bank National Association as Co-Documentation Agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.

Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Managers .

8-K 10.1 4/2/2015

10.20 Second Amended and Restated Security Agreement, dated as of March 31, 2015.

8-K 10.2 4/2/2015

10.21 Second Amended and Restated Pledge Agreement, dated as of March 31, 2015.

8-K 10.3 4/2/2015

10.22* Huron Consulting Group Inc.

Stock Ownership Participation Program.

DEF 14A Appendix A 3/20/2015

10.23* Huron Consulting Group Inc.

Stock Ownership Participation Program, as amended effective December 1, 2020.

10.24* Huron Consulting Group Inc.

2012 Omnibus Incentive Plan, as amended and restated effective May 1, 2017.

DEF 14A Appendix A 3/27/2017

10.25* Amendment to the Huron Consulting Group Inc.

Amended and Restated 2012 Omnibus Incentive Plan.

DEF 14A Appendix A 3/22/2019

10.26* Huron Consulting Group Inc.

2012 Omnibus Incentive Plan, as amended and restated effective February 13, 2020.

10-K 12/31/2019 10.3 2/26/2020

10.27 Amendment No.

1 of the Second Amended and Restated Credit Agreement, dated as of February 28, 2017, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders.

8-K 10.1 3/6/2017

Number Exhibit Description Filed

herewith Furnished

herewith Incorporated by Reference

Ending Exhibit Filing Date

10.28 Amendment No.

2 of the Second Amended and Restated Credit Agreement, dated as of October 24, 2017, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders.

10-Q 9/30/2017 10.1 11/1/2017

10.29 Amendment No.

3 of the Credit Agreement, dated as of March 23, 2018, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders.

Exhibit Description

Incorporated by Reference

8-K 10.1 3/29/2018

10.30 Amendment No.

4 of the Credit Agreement, the Pledge Agreement and the Security Agreement, dated as of September 27, 2019, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders.

8-K 10.1 10/3/2019

10.31* Senior Management Agreement by and between Huron Consulting Group Inc.

and Ernest W.

10-Q 3/31/2020 10.1 4/30/2020

10.32* Amendment to the Huron Consulting Group Inc.

2012 Omnibus Incentive Plan.

DEF 14A Appendix A 3/26/2020

10.33* Amendment to the Huron Consulting Group Inc.

Stock Ownership Participation Program.

DEF 14A Appendix B 3/26/2020

21.1 List of Subsidiaries of Huron Consulting Group Inc.

6 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH Inline XBRL Taxonomy Extension Schema Document X

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) X

* Indicates the exhibit is a management contract or compensatory plan or arrangement.

5 unchanged sentences

Huron Consulting Group Inc.

Chief Executive Officer and Director

Signature Title Date

ROTH Chief Executive Officer and Director 2/23/2021

POWER OF ATTORNEY

1 unchanged sentence

Roth, John D.

Kelly, and Diane Ratekin, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Kelly, and Ernest W.

Torain, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

Chief Executive Officer and Director

Signature Title Date

ROTH Chief Executive Officer and Director

(Principal Executive Officer)

Non-Executive Chairman of the Board

/s/ GEORGE E.

Vice Chairman of the Board

Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Chief Accounting Officer (Principal Accounting Officer)

EUGENE LOCKHART

MCCARTNEY Non-Executive Chairman of the Board 2/23/2021

KELLY Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

EUGENE LOCKHART Director 2/23/2021

Eugene Lockhart

/s/ EKTA SINGH-BUSHELL

SAWYER Director 2/23/2021

/s/ EKTA SINGH-BUSHELL Director 2/23/2021

Ekta Singh-Bushell

/s/ DEBRA ZUMWALT

/s/ DEBRA ZUMWALT Director 2/23/2021

Debra Zumwalt

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2019 and 2018

Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the years ended December 31, 2019, 2018, and 2017

Consolidated Balance Sheets at December 31, 2020 and 2019 F-5

Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the years ended December 31, 2020, 2019, and 2018 F-6

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019, and 2018

9 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of January 1, 2019 and the manner in which it accounts for revenue from contracts with customers as of January 1, 2018.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of January 1, 2019.

Basis for Opinions

20 unchanged sentences

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Fixed-Fee and Healthcare Performance-Based Billing Arrangements

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Variable consideration is estimated based on a probability-weighted assessment of the fees to be earned, net of a constraint to limit the amount that could be reversed when the uncertainty is resolved.

The principal considerations for our determination that performing procedures relating to revenue recognition under fixed-fee and healthcare performance-based billing arrangements is a critical audit matter are there was significant judgment by management when developing their estimates of revenue to be recognized from these billing arrangements.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions, including work completed to date versus management’s estimates of the total services to be provided for fixed-fee and performance-based billing arrangements, and the probability of attaining contractually defined objectives in performance-based billing arrangements.

The principal considerations for our determination that performing procedures relating to revenue recognition under fixed-fee and Healthcare performance-based billing arrangements is a critical audit matter are the significant judgment by management when developing the estimates of revenue to be recognized for these billing arrangements, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions related to work completed to date versus management’s estimates of the total services to be provided for fixed-fee and performance-based billing arrangements and the probability of attaining contractually defined objectives in performance-based billing arrangements.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

2 unchanged sentences

Additionally, for performance-based billing arrangements, procedures included, among others (i) evaluating the reasonableness of management’s assumption of the probability of attaining the contractually defined objectives by inquiring with the Company’s employees regarding the expected remaining efforts and the probability weighting of variable consideration to be earned for a sample of engagements and by evaluating trends in past performance, (ii) evaluating the necessity of applying a constraint based upon consideration of the initial forecasts developed during project procurement, and (iii) evaluating performance to date towards the attainment of contractually defined objectives.

Goodwill Impairment Assessment - Strategy and Innovation Reporting Unit

As described in Notes 2 and 4 to the consolidated financial statements, the Company’s consolidated goodwill balance was $646.7 million as of December 31, 2019, of which $87.4 million is attributed to the Strategy and Innovation reporting unit.

Management conducts an annual goodwill impairment test as of November 30, and when events or circumstances indicate the fair value of a reporting unit may be below its carrying value.

As disclosed by management, in performing the analysis, management first assesses 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 the reporting units is greater than its carrying value.

If management determines 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 management concludes otherwise, a quantitative impairment test is performed by calculating the fair value of the reporting unit and comparing the fair value with the carrying value of the reporting unit, including goodwill.

Goodwill Impairment Assessments - Strategy and Innovation and Life Sciences Reporting Units

As described in Notes 2 and 4 to the consolidated financial statements, the Company’s consolidated goodwill balance was $594.2 million as of December 31, 2020, of which $37.5 million and $0.0 million are attributed to the Strategy and Innovation and Life Sciences reporting units, respectively.

Management performs its annual goodwill impairment test as of November 30, or when events or circumstances indicate the fair value of a reporting unit may be below its carrying value.

Fair value is estimated using a combination of the income approach, utilizing a discounted cash flow analysis, and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.

The determination of fair value using the income approach requires the use of significant estimates and assumptions, including long-term projections of future cash flows, estimated revenues, operating margin, market conditions, tax rates, and discount rates.

The determination of fair value using the market approach requires the

use of valuation multiples based on operating data from guideline publicly traded companies.

As disclosed by management, the determination of fair value using the income approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted EBITDA margins and discount rates.

The determination of fair value using the market approach requires the use of revenue and EBITDA multiples, as applicable, based on operating data from guideline publicly traded companies.

If the fair value of the reporting unit is less than its carrying value, a non-cash 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.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Strategy and Innovation reporting unit is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management's cash flow projections and significant assumptions, including estimated revenues, operating margin, discount rate, and market multiples.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Based on internal projections and considering the expected decrease in demand due to the COVID-19 pandemic, during the first quarter of 2020 management believed it was more likely than not that the fair value of the Strategy and Innovation and Life Sciences reporting units no longer exceeded their carrying values and performed an interim impairment test on both reporting units as of March 31, 2020.

As a result of the first quarter impairment tests, management recorded a partial impairment charge of $49.9 million for the Strategy and Innovation reporting unit and a full impairment charge of $9.9 million for the Life Sciences reporting unit.

As a result of the annual impairment assessment for the Strategy and Innovation reporting unit, management concluded that there is no indication of goodwill impairment.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Strategy and Innovation and Life Sciences reporting units is a critical audit matter are the significant judgment by management when developing the fair value measurements of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management's significant assumptions related to forecasted revenue growth rates, forecasted EBITDA margins, discount rates, and revenue and EBITDA multiples, as applicable.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s annual goodwill impairment test, including controls over the determination of the fair value of the Strategy and Innovation reporting unit.

These procedures also included, among others, testing management’s process for developing the fair value estimate;

evaluating the allocation of assets to the reporting unit;

evaluating the appropriateness of the income and market approaches;

testing the completeness, accuracy and relevance of underlying data used in the income approach;

testing the reasonableness and accuracy of the underlying data used in the market approach;

and evaluating the significant assumptions used by management, including estimated revenues, operating margin, discount rate, and market multiples.

Evaluating management’s assumptions related to estimated revenues, operating margin, discount rate, and market multiples involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the actions necessary to achieve future forecasts, (iii) the consistency with external market and industry data, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the discounted cash flow analysis and certain significant assumptions, including the discount rate, as well as the selection and calculation of market multiples.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the determination of the fair value of the Strategy and Innovation and Life Sciences reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the reporting units, (ii) evaluating the allocation of assets and liabilities to the reporting units, (iii) evaluating the appropriateness of the income and market approaches, (iv) testing the completeness and accuracy of the underlying data used in the income and market approaches, and (v) evaluating the significant assumptions used by management related to forecasted revenue growth rates, forecasted EBITDA margins, discount rates, and revenue and EBITDA multiples, as applicable.

Evaluating management’s assumptions related to forecasted revenue growth rates and forecasted EBITDA margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the actions necessary to achieve future forecasts, (iii) the consistency with external market data, and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the income approach and the discount rates, as well as the selection and calculation of revenue and EBITDA multiples, as applicable.

/s/ PricewaterhouseCoopers LLP

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(In thousands, except share and per share amounts)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets:

Cash and cash equivalents $ 67,177 $ 11,604

Receivables from clients, net

Unbilled services, net

Receivables from clients, net of allowances of $7,680 and $8,907, respectively 86,966 116,571

Unbilled services, net of allowances of $2,603 and $2,994, respectively 61,181 79,937

Income tax receivable 5,121 2,376

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Intangible assets, net 20,483 31,625

Goodwill 594,237 646,680

Total assets $ 1,057,476 $ 1,104,271

Liabilities and stockholders’ equity

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Accrued payroll and related benefits 133,830 141,605

Accrued contingent consideration for business acquisitions

Current maturities of long-term debt 499 529

4 unchanged sentences

Deferred compensation and other liabilities 45,361 28,635

Accrued contingent consideration for business acquisitions, net of current portion

Accrued contingent consideration for business acquisitions 1,770 —

Long-term debt, net of current portion 202,780 208,324

Operating lease liabilities, net of current portion 61,825 69,233

Deferred lease incentives

Deferred income taxes, net 428 8,070

17 unchanged sentences

Year Ended December 31,

2020 2019 2018

Revenues and reimbursable expenses:

Revenues $ 844,127 $ 876,757 $ 795,125

Reimbursable expenses 26,887 88,717 82,874

1 unchanged sentence

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

Direct costs 592,428 575,602 521,537

Amortization of intangible assets and software development costs 5,366 5,375 4,247

4 unchanged sentences

Restructuring charges 20,525 1,855 3,657

Litigation and other losses (gains), net

Litigation and other gains, net ( 150 ) ( 1,196 ) ( 2,019 )

Depreciation and amortization 24,277 28,365 34,575

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Net income (loss) from continuing operations ( 23,718 ) 41,979 13,944

Income (loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax ( 122 ) ( 236 ) ( 298 )

Net income (loss) $ ( 23,840 ) $ 41,743 $ 13,646

1 unchanged sentence

Net income (loss) from continuing operations $ ( 1.08 ) $ 1.91 $ 0.64

Income (loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax ( 0.01 ) ( 0.01 ) ( 0.01 )

Net income (loss) $ ( 1.09 ) $ 1.90 $ 0.63

1 unchanged sentence

Net income (loss) from continuing operations $ ( 1.08 ) $ 1.87 $ 0.63

Income (loss) from discontinued operations, net of tax

Loss from discontinued operations, net of tax ( 0.01 ) ( 0.02 ) ( 0.01 )

Net income (loss) $ ( 1.09 ) $ 1.85 $ 0.62

Weighted average shares used in calculating earnings per share:

Basic 21,882 21,993 21,706

Diluted 21,882 22,507 22,058

Comprehensive income (loss):

9 unchanged sentences

(In thousands, except share amounts)

Treasury Stock

Common Stock Treasury Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Stockholders'

Income Stockholders'

Shares Amount Shares Amount

Balance at December 31, 2017 24,098,822 $ 241 ( 2,591,135 ) $ ( 121,994 ) $ 434,256 $ 180,443 $ 10,370 $ 503,316

2 unchanged sentences

Restricted stock awards, net of cancellations 279,430 3 5,986 387 ( 390 ) —

Business acquisition

Exercise of stock options 40,000 — 937 937

Share-based compensation 17,770 17,770

1 unchanged sentence

Cumulative-effect adjustment from adoption of ASU 2014-09 2,017 2,017

Cumulative-effect adjustment from adoption of ASU 2018-02

Balance at December 31, 2018 24,418,252 $ 244 ( 2,671,962 ) $ ( 124,794 ) $ 452,573 $ 196,106 $ 16,495 $ 540,624

5 unchanged sentences

Shares redeemed for employee tax withholdings ( 111,511 ) ( 5,382 ) ( 5,382 )

Cumulative-effect adjustment from adoption of ASU 2014-09

Other capital contributions 160 160

Share repurchases ( 210,437 ) ( 2 ) ( 14,217 ) ( 14,219 )

Balance at December 31, 2019 24,603,308 $ 247 ( 2,763,302 ) $ ( 128,348 ) $ 460,781 $ 237,849 $ 14,936 $ 585,465

Comprehensive income

Comprehensive loss ( 23,840 ) ( 1,875 ) ( 25,715 )

Issuance of common stock in connection with:

3 unchanged sentences

Shares redeemed for employee tax withholdings ( 136,749 ) ( 7,903 ) ( 7,903 )

Other capital contributions

Share repurchases ( 425,164 ) ( 4 ) ( 25,902 ) ( 25,906 )

5 unchanged sentences

Year Ended December 31,

2020 2019 2018

Cash flows from operating activities:

3 unchanged sentences

Non-cash lease expense 7,763 8,397 —

Lease impairment charges 13,217 805 —

Share-based compensation 24,081 24,213 18,818

3 unchanged sentences

Deferred income taxes ( 9,859 ) 8,795 10,717

Loss (gain) on sale of businesses

Losses on sales of businesses 1,603 — 5,807

Change in fair value of contingent consideration liabilities — ( 1,506 ) 381

Changes in operating assets and liabilities, net of acquisitions and divestiture:

Change in fair value of preferred stock investment ( 1,667 ) — —

Other, net ( 25 ) ( 789 ) —

Changes in operating assets and liabilities, net of acquisitions and divestitures:

(Increase) decrease in receivables from clients 33,051 ( 10,123 ) ( 10,509 )

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Investment in life insurance policies ( 2,462 ) ( 4,703 ) ( 2,037 )

Distributions from life insurance policies

Purchases of businesses, net of cash acquired ( 8,701 ) ( 2,500 ) ( 215 )

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Payments for contingent consideration liabilities — ( 4,674 ) ( 7,554 )

Net cash provided by (used in) financing activities

Net cash used in financing activities ( 39,615 ) ( 118,836 ) ( 66,690 )

Effect of exchange rate changes on cash 484 115 ( 208 )

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Non-cash investing and financing activities:

Property and equipment expenditures and capitalized software included in accounts payable and accrued expenses

Promissory note assumed for purchase of property and equipment

Property and equipment expenditures and capitalized software included in accounts payable, accrued expenses and accrued payroll and related benefits $ 1,178 $ 2,600 $ 2,358

Contingent consideration related to business acquisitions $ 1,770 $ — $ 212

Common stock issued related to business acquisition

Share repurchases included in accounts payable $ — $ 1,234 $ —

Cash paid during the year for:

Interest $ 8,309 $ 7,971 $ 8,887

Income taxes $ 4,721 $ 1,429 $ 3,349

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

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Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change they need to own their future.

By embracing diverse perspectives, encouraging new ideas and challenging the status quo, we create sustainable results for the organizations we serve.

By embracing diverse perspectives, encouraging new ideas and challenging the status quo, Huron creates sustainable results for the organizations it serves.

Summary of Significant Accounting Policies

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All intercompany balances and transactions have been eliminated in consolidation.

On January 1, 2019, we adopted Accounting Standard Update ("ASU") 2016-02, Leases .

For additional information on the adoption of ASU 2016-02, refer to our leases policy and new accounting pronouncements below.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers , a new Topic, ASC 606, which superseded ASC 605, Revenue Recognition .

The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized.

The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We adopted ASC 606 on a modified retrospective basis to all open contracts, as modified, as of that date.

Adoption of the new standard resulted in changes to our accounting policy for revenue recognition, most notably for performance-based billing arrangements, and sales commissions.

Adopting ASC 606 on a modified retrospective basis had no impact on our consolidated financial statements in the prior periods presented.

Upon adoption, we recorded a $ 2.0 million cumulative-effect adjustment to record a net increase to retained earnings for the portion of performance-based billing arrangements that have been earned as of the adoption date but for which we had not recognized as revenue under previous revenue recognition guidance, the capitalization of sales commissions paid on open contracts as of the adoption date, and the related tax effects.

Refer to our revenue recognition and capitalized sales commissions policies below for additional information.

On January 1, 2019, we adopted Accounting Standard Update (“ASU”) 2016-02, Leases , as a new Topic, ASC 842, which superseded ASC Topic 840, Leases , and sets forth the principles for the recognition, measurement, presentation, and disclosure of leases for lessees and lessors.

ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record on the balance sheet a right-of-use asset and a lease liability, equal to the present value of the remaining lease payments, for all leases with a term greater than 12 months regardless of the lease classification.

The lease classification will determine whether the lease expense is recognized using an effective interest rate method or on a straight-line basis over the term of the lease.

In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provided an optional transition method that allowed entities to initially apply ASC 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings on the adoption date.

We adopted ASC 842 effective January 1, 2019 on a modified retrospective basis for existing leases using the transition method allowed by ASU 2018-11, which had no impact on our consolidated financial statements in the prior periods presented.

Upon adoption, we recorded $ 56.5 million of operating lease right-of-use assets on our consolidated balance sheet, with an off-setting $ 56.5 million net increase in total liabilities on our consolidated balance sheet.

The adoption of ASU 2016-02 had no impact on our consolidated statement of operations.

Refer to our leases policy below for additional information.

Use of Estimates

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Other performance obligations, such as certain software licenses, speaking engagements, conferences, and publications, are satisfied at a point in time.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

We generate our revenues under four types of billing arrangements:

3 unchanged sentences

and software support, maintenance and subscriptions.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a predetermined set of professional services.

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Revenues recognized for services performed but not yet billed to clients are recorded as unbilled services.

Revenues recognized, but for which we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval, must occur, are recorded as contract assets

Client prepayments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable engagement agreement.

HURON CONSULTING GROUP INC.

1 unchanged sentence

(Tabular amounts in thousands, except per share amounts)

and included within unbilled services.

Client prepayments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable engagement agreement.

Capitalized Sales Commissions

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Amortization expense is recorded to direct costs.

During the years ended December 31, 2019 and 2018 , we amortized $ 0.3 million and $ 0.2 million , respectively, of capitalized sales commissions.

During the years ended December 31, 2020, 2019, and 2018, we amortized $ 0.4 million, $ 0.3 million, and $ 0.2 million, respectively, of capitalized sales commissions.

Unamortized sales commissions were $ 0.7 million and $ 0.8 million as of December 31, 2020 and 2019, respectively.

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Direct costs and reimbursable expenses consist primarily of revenue-generating employee compensation and their related benefits and share-based compensation costs;

as well as commissions, the cost of outside consultants or subcontractors assigned to revenue-generating activities, technology costs, other third-party costs directly attributable to our revenue-generating activities, and direct expenses to be reimbursed by clients.

as well as technology costs, commissions, the cost of outside consultants or subcontractors assigned to revenue-generating activities, other third-party costs directly attributable to our revenue-generating activities, and direct expenses to be reimbursed by clients.

Direct costs and reimbursable expenses incurred on engagements are expensed in the period incurred.

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The investment is carried at fair value with unrealized holding gains and losses reported in other comprehensive income.

If the investment is in an unrealized loss position, we assess whether the investment is other-than-temporarily impaired.

We consider impairments to be other-than-temporary if they are related to significant credit deterioration or if it is likely we will sell the security before the recovery of its cost basis.

We have not identified any other-than-temporary impairments for our convertible debt investment.

In the event there are realized gains and losses or declines in value judged to be other-than-temporary, we will record the amount in earnings.

If the investment is in an unrealized loss position due to significant credit deterioration of the investee, we recognize an allowance to decrease the carrying value of the investment to the fair value, which may be reversed in the event that the credit of an issuer improves.

In the event there are realized gains and losses or credit allowances recognized, we will record the amount in earnings.

We have not recognized any credit allowance on our convertible debt investment or realized gains or losses as of December 31, 2020.

See Note 13 “Fair Value of Financial Instruments” for additional information on our convertible debt investment.

We classified the preferred stock investment in Medically Home as an equity security without a readily determinable value at the time of purchase and reevaluate such classification as of each balance sheet date.

We elected to apply the measurement alternative at the time of

HURON CONSULTING GROUP INC.

1 unchanged sentence

(Tabular amounts in thousands, except per share amounts)

We elected the measurement alternative to value this equity security without a readily determinable fair value.

Under the measurement alternative, the investment is recorded at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in Medically Home.

purchase and will continue to do so until the investment does not qualify to be so measured.

Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in Medically Home.

Any unrealized holding gains and losses resulting from observable price changes are recorded in our consolidated statement of operations.

Following our purchase, there has been no impairment, nor any observable price changes to our investment.

See Note 13 “Fair Value of Financial Instruments” for further information on our long-term investments.

Following our purchase, we have not identified any impairment of our investment.

See Note 13 “Fair Value of Financial Instruments” for additional information on our preferred stock investment and the unrealized gain recognized in 2020.

Fair Value of Financial Instruments

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We determine if an arrangement contains a lease and the classification of such lease at inception.

As of December 31, 2019, all of our material leases are classified as operating leases;

As of December 31, 2020 and 2019, all of our material leases are classified as operating leases;

we have not entered into any material finance leases.

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We evaluate the recoverability of the asset group based on forecasted undiscounted cash flows.

See Note 5 "Leases" for additional information on our leases, including the lease impairment charges recorded in 2019.

See Note 5 “Leases” for additional information on our leases, including the lease impairment charges recorded in 2020 and 2019.

Software Development Costs

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Thereafter, and until the software is available for general release to customers, these software development costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value.

These capitalized development costs are

These capitalized development costs are amortized in proportion to current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.

We did not capitalize any development costs for this type of software during 2020 or 2019.

HURON CONSULTING GROUP INC.

1 unchanged sentence

(Tabular amounts in thousands, except per share amounts)

amortized in proportion to current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.

We did not capitalize any development costs for this type of software during 2019 or 2018.

We classify capitalized software development costs, which primarily relate to cloud computing applications and software for internal use, as other non-current assets on our consolidated balance sheet.

2 unchanged sentences

During the years ended December 31, 2020, 2019, and 2018, we amortized $ 4.7 million, $ 3.0 million, and $ 1.4 million, respectively, of capitalized software development costs.

Implementation Costs Incurred in a Cloud Computing Arrangement

We incur costs to implement cloud computing arrangements that are service contracts.

We capitalize certain costs associated with the implementation of the cloud computing arrangements, including employee payroll and related benefits and third party consulting costs, incurred during the application development stage of a project.

These costs are amortized on a straight-line basis over the term of the hosting service contracts, including renewal periods we are reasonably certain to exercise.

As of December 31, 2020, capitalized implementation costs incurred in a cloud computing arrangement were $ 5.4 million and related to the ongoing implementation of a new enterprise resource planning (“ERP”) system during 2020.

These costs are included as a component of prepaid expenses and other current assets and other non-current assets, and are expected to begin amortizing on January 1, 2021 when the ERP system is placed in service.

In 2019, we capitalized an immaterial amount of costs to implement cloud computing arrangements that are service contracts.

Intangible Assets Other Than Goodwill

5 unchanged sentences

We evaluate the recoverability of long-lived assets based on forecasted undiscounted cash flows.

See Note 5 "Leases" for information on our right-of-use asset impairment charges recorded in 2019.

See Note 5 “Leases” and Note 11 “Restructuring Charges” for information on our operating lease right-of-use asset and fixed asset impairment charges recorded in 2020 and 2019.

No material impairment charges for other long-lived assets were recorded in 2020, 2019, or 2018.

7 unchanged sentences

The Business Advisory, Enterprise Solutions and Analytics, Strategy and Innovation, and Life Sciences reporting units make up our Business Advisory operating segment.

Pursuant to our policy, we performed the annual goodwill impairment test as of November 30, 2019 and determined that no impairment of goodwill existed as of that date.

Further, we evaluated whether any events have occurred, or any circumstances have changed since November 30, 2019 that would indicate goodwill may have become impaired since our annual impairment test.

Based on our evaluation as of December 31, 2019, we determined that no indications of impairment have arisen since our annual goodwill impairment test.

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have

We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis.

In 2020, we performed two goodwill impairment tests:

an interim impairment test on our Strategy and Innovation and Life Sciences reporting units in the first quarter of 2020 and the annual impairment test on all reporting units with a goodwill balance in the fourth quarter of 2020.

As a result of the interim impairment test performed in the first quarter of 2020, we recorded total non-cash pretax goodwill impairment charges of $59.8 million.

We did not identify any additional impairments during our annual impairment test performed in the fourth quarter of 2020.

No goodwill impairment charges were recorded in 2019 or 2018.

See Note 4 “Goodwill and Intangible Assets” for additional information on our interim and annual goodwill impairment tests, and the non-cash goodwill impairment charges recorded in 2020.

Business Combinations

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Tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the acquisition date.

Goodwill is recognized for the excess of purchase price over the net fair value of tangible and intangible assets acquired and liabilities assumed.

Contingent consideration, which is primarily based on the business achieving certain performance targets, is recognized at its fair value on the acquisition date, and changes in fair value are recognized in earnings until settled.

Refer to Note 13 “Fair Value of Financial Instruments” for further information regarding our contingent acquisition liability balances.

HURON CONSULTING GROUP INC.

1 unchanged sentence

(Tabular amounts in thousands, except per share amounts)

Goodwill is recognized for the excess of purchase price over the net fair value of tangible and intangible assets acquired and liabilities assumed.

Refer to Note 3 “Acquisitions” for additional information on our business acquisitions and refer to Note 13 “Fair Value of Financial Instruments” for additional information regarding our contingent acquisition liability balances.

Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year.

We have elected to recognize the tax expense related to Global Intangible Low-Taxed Income ("GILTI") as a period expense in the period the tax is incurred.

We have elected to recognize the tax expense related to Global Intangible Low-Taxed Income ("GILTI") as a current period expense when incurred.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

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Foreign Currency

Assets and liabilities of foreign subsidiaries whose functional currency is not the United States Dollar (USD) are translated into the USD using the exchange rates in effect at period end.

Assets and liabilities of foreign subsidiaries whose functional currency is not the United States Dollar (USD) are translated into USD using the exchange rates in effect at period end.

Revenue and expense items are translated using the average exchange rates for the period.

1 unchanged sentence

Foreign currency transaction gains and losses are included in other income, net on the consolidated statement of operations.

We recognized $ 0.2 million of foreign currency transaction losses in 2019 , $ 0.5 million of foreign currency transaction losses in 2018 , and $ 0.4 million of foreign currency transaction gains in 2017 .

We recognized less than $ 0.1 million of foreign currency transaction gains in 2020, $ 0.2 million of foreign currency transaction losses in 2019, and $ 0.5 million of foreign currency transaction losses in 2018.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Segment Reporting

2 unchanged sentences

Healthcare, Business Advisory, and Education.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

New Accounting Pronouncements

Recently Adopted

In March 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases , as a new Topic, ASC 842, which superseded ASC Topic 840, Leases , and sets forth the principles for the recognition, measurement, presentation, and disclosure of leases for lessees and lessors.

The lease classification will determine whether the lease expense is recognized using an effective interest rate method or on a straight-line basis over the term of the lease.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provides an optional transition method that allows entities to initially apply ASC 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings on the adoption date.

The new lease standard had a material impact on our consolidated balance sheet upon adoption but did not impact our consolidated statement of operations.

The most significant impact to our consolidated balance sheet is the recognition of ROU assets and lease liabilities for operating leases.

The impact of the new lease standard on our consolidated balance sheet upon adoption follows:

December 31, 2018

January 1, 2019

Operating lease right-of-use assets

Accrued expenses and other current liabilities

Current maturities of operating lease liabilities

Deferred compensation and other liabilities

Deferred lease incentives

Operating lease liabilities, net of current portion

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

This update aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Capitalized implementation costs are amortized on a straight-line basis generally over the term of the service contract with the amortization recognized in the same financial statement line item as the fees related to the service contract.

ASU 2018-15 is effective beginning January 1, 2020, with early adoption permitted.

We adopted this ASU in the third quarter of 2019 on a prospective basis.

In 2019, we capitalized an immaterial amount of implementation costs for cloud computing arrangements that are service contracts.

The future impact of adoption of this ASU on our consolidated financial statements will depend on the magnitude of implementation costs we may incur to implement cloud computing arrangements that are service contracts.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments which provides a new current expected credit loss model to account for credit losses on certain financial assets, including trade receivables.

That model requires an entity to estimate lifetime credit losses based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the collectability of the reported amount.

The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a direct write-down of the investment, which may be reversed in the event that the credit of an issuer improves.

We adopted ASU 2016-13 effective January 1, 2020, which did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies certain disclosure requirements related to fair value measurements.

ASU 2018-13 will be effective for us beginning January 1, 2020.

We do not expect this guidance to have an impact on the amounts reported on our consolidated financial statements, and we will update our disclosures within the notes to our consolidated financial statements as required by ASU 2018-13.

We adopted ASU 2018-13 effective January 1, 2020, which had no impact on the amounts reported on our consolidated financial statements.

We updated our disclosures within the notes to our consolidated financial statements as required by ASU 2018-13.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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The new guidance also simplifies other aspects of the accounting for franchise taxes and enacted changes in tax laws or tax rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 will be effective for us beginning January 1, 2021, with early adoption permitted.

We are currently evaluating the potential impact this guidance will have on our consolidated financial statements.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

During the twelve months ended December 31, 2019 and 2018, we completed no acquisitions that were significant to our consolidated financial statements individually or in the aggregate.

Pope Woodhead and Associates Limited

On January 9, 2017, we completed our acquisition of Pope Woodhead and Associates Limited ("Pope Woodhead"), a U.K.-based consulting firm providing market access capabilities to assist clients in developing value propositions for innovative medicines and technologies.

The acquisition expands our life sciences strategy expertise and strengthens our ability to lead clients through complex payer and regulatory environments.

Pope Woodhead's results of operations have been included in our consolidated financial statements and the results of operations of our Business Advisory segment from the date of acquisition.

ADI Strategies, Inc.

On April 1, 2017, we completed our acquisition of the international assets of ADI Strategies, Inc.

("ADI Strategies") in Dubai and India.

We acquired the U.S.

assets of ADI Strategies in the second quarter of 2016.

ADI Strategies is a leading enterprise performance management, risk management and business intelligence firm.

The international results of operations of ADI Strategies have been included in our consolidated financial statements and results of operations of the Business Advisory segment from the date of acquisition.

During the second quarter of 2018, we sold our Middle East practice, which primarily consisted of the international assets of the ADI Strategies acquisition, to a former employee who was the practice leader of that business at the time.

The acquisitions of ADI Strategies and Pope Woodhead are not significant to our consolidated financial statements individually or in the aggregate as of and for the twelve months ended December 31, 2017.

Innosight Holdings, LLC

On March 1, 2017 , we acquired 100 % of the membership interests of Innosight Holdings, LLC ("Innosight").

Innosight is a growth strategy firm focused on helping companies navigate disruptive change and manage strategic transformation.

Together with Innosight, we use our strategic, operational, and technology capabilities to help clients across multiple industries develop pioneering solutions to address disruption and achieve sustained growth.

The acquisition date fair value of the consideration transferred for Innosight was $113.6 million, which consisted of the following:

Fair value of consideration transferred

March 1, 2017

Contingent consideration liability

Net working capital adjustment

Total consideration transferred

We funded the cash component of the purchase price with cash on hand and borrowings of $ 89.0 million under our senior secured credit facility.

We issued 221,558 shares of our common stock as part of the consideration transferred, with an acquisition date fair value of $9.6 million based on our common stock's closing price of $ 43.15 on the date of acquisition.

The contingent consideration liability of $12.1 million represents the acquisition date fair value of the contingent consideration arrangement, pursuant to which we may be required to pay additional consideration to the sellers if specific financial performance targets are met over a four-year term.

The maximum amount of contingent consideration that may be paid is $ 35.0 million .

See Note 13 "Fair Value of Financial Instruments" for additional information on the valuation of contingent consideration liabilities.

The acquisition was accounted for using the acquisition method of accounting.

Tangible and identifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the acquisition date.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

The following table summarizes the allocation of the purchase price to the fair value of assets acquired and liabilities assumed as of the acquisition date.

March 1, 2017

Assets acquired:

Accounts receivable

Unbilled services

Prepaid expenses and other current assets

Property and equipment

Intangible assets

Liabilities assumed:

Accounts payable

Accrued expenses and other current liabilities

Accrued payroll and related benefits

Deferred revenues

Total identifiable net assets

Total purchase price

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the acquisition date.

Useful Life in

Customer relationships

Customer contracts

Non-compete agreements

Favorable lease contract

Total intangible assets subject to amortization

The weighted average amortization period for the identifiable intangible assets shown above is 5.6 years.

Customer relationships and customer contracts represent the fair values of the underlying relationships and agreements with Innosight customers.

The trade name represents the fair value of the brand and name recognition associated with the marketing of Innosight's service offerings.

Non-compete agreements represent the value derived from preventing certain Innosight executives from entering into or starting a similar, competing business.

The favorable lease contract represents the difference between the fair value and minimum lease obligations under the current outstanding lease.

Goodwill is recognized for the excess of purchase price over the net fair value of assets acquired and liabilities assumed, and largely reflects the expanded market opportunities expected from combining the service offerings of Huron and Innosight, as well as the assembled workforce of Innosight.

Goodwill recognized in conjunction with the acquisition of Innosight was recorded in the Business Advisory segment.

Goodwill of $ 87.4 million is expected to be deductible for income tax purposes.

Innosight’s results of operations have been included in our consolidated statements of operations and results of operations of our Business Advisory segment from the date of acquisition.

For the year ended December 31, 2017, revenues from Innosight were $ 34.3 million and operating loss was $ 0.9 million , which included $ 3.4 million of amortization expense for intangible assets acquired.

In connection with the acquisition of Innosight, we incurred $ 1.7 million of transaction and acquisition-related expenses in 2017.

These costs are recorded in selling, general and administrative expenses.

On January 1, 2020, we elected to early adopt ASU 2019-12 on a modified retrospective basis for those amendments that are not applied on a prospective basis.

The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

During 2019 and 2018, we completed no acquisitions that were significant to our consolidated financial statements individually or in the aggregate.

Below is a summary of the acquisitions completed in 2020.

B3i Analytics, LLC

On August 1, 2020, we completed the acquisition of B3i Analytics, LLC (“B3i Analytics”), a software firm that provides a software as a solution (“SaaS”) application to leverage internal and external data to help higher education institutions forecast research revenue.

The results of operations of B3i Analytics are included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition.

ForceIQ, Inc.

On November 1, 2020, we completed the acquisition of ForceIQ, Inc.

(“ForceIQ”), a Salesforce Industries partner focused on helping clients drive digital transformation and innovation at scale powered by the cloud.

The acquisition expands our cloud-based technology offerings within the Business Advisory segment.

The results of operations of ForceIQ are included in our consolidated financial statements and results of operations of our Business Advisory segment from the date of acquisition.

The acquisitions of B3i Analytics and ForceIQ are not significant to our consolidated financial statements individually or in the aggregate as of and for the year ended December 31, 2020.

HURON CONSULTING GROUP INC.

1 unchanged sentence

(Tabular amounts in thousands, except per share amounts)

The following unaudited supplemental pro forma information summarizes the combined results of operations of Huron and Innosight as though the companies were combined on January 1, 2016.

December 31, 2017

Net income (loss) from continuing operations

Net income (loss) from continuing operations per share - basic

Net income (loss) from continuing operations per share - diluted

The historical financial information has been adjusted to give effect to pro forma adjustments consisting of intangible asset amortization expense, acquisition-related costs, interest expense, and the related income tax effects.

The unaudited pro forma information above includes adjustments to include additional expense of $ 0.6 million for the year ended December 31, 2017.

Additionally, the historical financial information has been adjusted to give effect to the shares issued as consideration.

All of these adjustments are based upon currently available information and certain assumptions.

Therefore, the pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2016.

The historical results included in the pro forma consolidated results do not purport to project future results of operations of the combined companies nor do they reflect the expected realization of any cost savings or revenue synergies associated with the acquisition.

Goodwill and Intangible Assets

The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2020 and 2019.

Healthcare Business

Advisory Education Total

Balance as of December 31, 2018:

Goodwill $ 636,810 $ 301,700 $ 102,829 $ 1,041,339

Accumulated impairment losses ( 208,081 ) ( 187,995 ) — ( 396,076 )

1 unchanged sentence

Goodwill recorded in connection with a business combination (1)

— — 1,060 1,060

Foreign currency translation — 357 — 357

Balance as of December 31, 2019:

Goodwill 636,810 302,057 103,889 1,042,756

Accumulated impairment losses ( 208,081 ) ( 187,995 ) — ( 396,076 )

Goodwill, net as of December 31, 2019 $ 428,729 $ 114,062 $ 103,889 $ 646,680

Goodwill recorded in connection with a business combination (1)

Goodwill recorded in connection with business combinations (2)

— 7,507 495 8,002

Goodwill impairment charges — ( 59,816 ) — ( 59,816 )

Foreign currency translation — ( 629 ) — ( 629 )

Balance as of December 31, 2020:

Goodwill 636,810 308,935 104,384 1,050,129

Accumulated impairment losses ( 208,081 ) ( 247,811 ) — ( 455,892 )

Goodwill, net as of December 31, 2020:

$ 428,729 $ 61,124 $ 104,384 $ 594,237

(1) On September 30, 2019, we completed the acquisition of a business in our Education segment.

1 unchanged sentence

This acquisition is not significant to our consolidated financial statements.

(2) Refer to Note 3 “Acquisitions” for additional information on business combinations completed in 2020.

First Quarter 2020 Goodwill Impairment Charges

The worldwide spread of the COVID-19 pandemic in the first quarter of 2020 has created significant volatility, uncertainty and disruption to the global economy.

From the onset of the COVID-19 pandemic, we closely monitored the impact it could have on all aspects of our business, including how we expect it to negatively impact our clients, employees and business partners.

While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expected it to have an unfavorable impact on sales, increase uncertainty in the backlog and negatively impact full year 2020 results.

The services provided by our Strategy and Innovation and Life Sciences reporting units within our Business Advisory segment focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the duration of the projects within these practices are typically short-term.

Therefore, at the onset of the COVID-19 pandemic in the U.S.

and due to the uncertainty caused by the pandemic, we were cautious about near-term results for these two reporting units.

Based on our internal projections and the preparation of our financial statements for the quarter ended March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, during the first quarter of 2020 we believed it was more likely than not that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on both reporting units as of March 31, 2020.

Based on the estimated fair values of the Strategy and Innovation and Life Sciences reporting units, we recorded non-cash pretax goodwill impairment charges of $ 49.9 million and $ 9.9 million, respectively, in the first quarter of 2020.

The $ 49.9 million non-cash pretax charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $ 37.5 million.

The $ 9.9 million non-cash pretax charge related to the Life Sciences reporting unit reduced the goodwill balance of the reporting unit to zero.

Our goodwill impairment test was performed by comparing the fair value of each of the Strategy and Innovation and Life Sciences reporting units with its respective carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair

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(Tabular amounts in thousands, except per share amounts)

To estimate the fair value of each reporting unit, we relied on a combination of the income approach and the market approach with a fifty-fifty weighting.

In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money.

This approach requires the use of significant estimates and assumptions, including 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 seven-year forecasts.

Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information.

In the market approach, we utilized the guideline company method, which involved calculating revenue multiples based on operating data from guideline publicly traded companies.

Multiples derived from guideline companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company.

These multiples were evaluated and adjusted based on specific characteristics of the Strategy and Innovation and Life Sciences reporting units relative to the selected guideline companies and applied to the reporting units' operating data to arrive at an indication of value.

Concurrently with the goodwill impairment tests performed over the Strategy and Innovation and Life Sciences reporting units, we evaluated whether any indicators existed that would lead us to believe that the fair values of our Healthcare, Education, and Business Advisory reporting units would not exceed their carrying values.

Based on our internal projections, consideration of the impact of the COVID-19 pandemic on these reporting units, and review of the amounts by which the fair values of these reporting units exceeded their carrying values in the most recent quantitative goodwill impairment analysis performed, we did not identify any indicators that would lead us to believe that it was more likely than not that the fair values of these reporting units would not exceed their carrying values as of March 31, 2020.

In connection with the goodwill impairment tests performed on the Strategy and Innovation and Life Sciences reporting units as of March 31, 2020, we performed impairment tests on the long-lived assets allocated to the asset groups of the Strategy and Innovation and Life Sciences reporting units.

Based on the impairment tests performed, we concluded that the long-lived assets allocated to the asset groups were not impaired as of March 31, 2020.

We did not identify any indicators that would lead us to believe that the carrying values of the long-lived assets allocated to our other asset groups may not be recoverable as of March 31, 2020.

2020 Annual Goodwill Impairment Test

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2020 on our five reporting units with goodwill balances:

Healthcare, Education, Business Advisory, Strategy and Innovation, and Life Sciences.

We performed a quantitative impairment test for Strategy and Innovation as the reporting unit is a relatively new business resulting from an acquisition in 2017 and also fell slightly short of internal financial expectations in 2019.

We performed qualitative assessments over the Healthcare, Education, Business Advisory, and Life Sciences 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.

Healthcare, Education, Business Advisory, Strategy and Innovation, and Enterprise Solutions and Analytics.

We elected to bypass the qualitative assessment and proceeded directly to the quantitative goodwill impairment test.

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 unit, we relied on a combination of the income approach and the market approach utilizing the guideline company method, with a fifty-fifty weighting.

Based on the results of the goodwill impairment test, we determined the fair value of the Healthcare, Education, Business Advisory, Strategy and Innovation, and Enterprise Solutions and Analytics reporting units exceeded their carrying value by 42 %, 132 %, 584 %, 29 %, and 146 %, respectively.

As such, we concluded that there is no indication of goodwill impairment for these five reporting units.

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.

In the market approach, we utilized the guideline company method, which involved calculating revenue and 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 were evaluated and adjusted based on specific characteristics of each 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.

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For the Strategy and Innovation 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 unit, we relied on a combination of the income approach and the market approach utilizing the guideline company method, with a fifty-fifty weighting.

Based on the results of the goodwill impairment test, we determined the fair value of Strategy and Innovation reporting unit exceeded its carrying value by 41 % .

As such, we concluded that there is no indication of goodwill impairment for the reporting unit.

For our qualitative assessment of the Healthcare, Education, Business Advisory and Life Sciences reporting units, we considered the most recent quantitative analysis performed for these reporting units, which was as of November 30, 2017, 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 2019 and 2018 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 considered the market-based valuation multiples used in the market approach within our prior quantitative analysis, which were derived from guideline companies, and noted that the valuation multiples generally increased compared to November 30, 2017.

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 of the Healthcare, Education, Business Advisory and Life Sciences reporting units exceeded their respective carrying amounts.

As such, the goodwill for these reporting units was not considered impaired as of November 30, 2019, and a quantitative goodwill impairment analysis was not necessary.

Further, we evaluated whether any events occurred or any circumstances changed since November 30, 2020 that would indicate goodwill may have become impaired since our annual impairment test.

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Any significant decline in our operations could result in non-cash goodwill impairment charges.

2017 Goodwill Impairment Charges

During the second quarter of 2017, we performed a goodwill impairment analysis for our Healthcare reporting unit as our Healthcare business was experiencing a prolonged period of declining revenues at the time, primarily driven by softness in our revenue cycle offering within our performance improvement solution.

This softness was attributable to decreased demand for our services, the winding down of some of our larger projects, and a trend toward smaller projects, as well as fewer large integrated projects.

Based on forecasts prepared in the second quarter of 2017 in connection with our quarterly forecasting cycle, we determined that the likely time frame to improve the financial results of this segment would take longer than originally anticipated.

As such, we concluded, during the second quarter of 2017, that the fair value of the Healthcare reporting unit may no longer exceed its carrying value.

In connection with the preparation of our financial statements for the quarter ended June 30, 2017, we performed an interim impairment test on the Healthcare reporting unit.

Our goodwill impairment test was performed by comparing the fair value of the Healthcare reporting unit to its carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair value.

To estimate the fair value of the Healthcare reporting unit, we relied on a combination of the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.

Based on the estimated fair value of the Healthcare reporting unit, we recorded a $ 208.1 million non-cash pretax goodwill impairment charge in 2017 to reduce the carrying value of goodwill in our Healthcare reporting unit.

Enterprise Solutions and Analytics

Our Enterprise Solutions and Analytics reporting unit was established with the acquisition of Blue Stone International, LLC in 2013.

Since that time, we completed five additional business acquisitions within the reporting unit, most recently the acquisitions of the U.S.

assets and international assets of ADI Strategies in May 2016 and April 2017, respectively.

We record the assets acquired and liabilities assumed in business combinations, including identifiable intangible assets, at their estimated fair values as of the acquisition date, and goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the fair value of the net assets acquired.

Therefore, the initial accounting for an acquisition results in its fair value equaling its carrying value.

Due to this reporting unit’s relatively low headroom, in the event that the financial performance of the reporting unit did not meet our expectations during 2017, we could be required to take a non-cash impairment charge as a result of any goodwill impairment test.

During the first three quarters of 2017,

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the performance of Enterprise Solutions and Analytics continued to reasonably meet our expectations.

However, both revenues and operating margin during the fourth quarter of 2017 fell short of our expectations resulting in a reduction in workforce within the reporting unit during that quarter.

Further, in connection with our annual budget process for 2018, which coincided with our annual goodwill impairment test during the fourth quarter of 2017, we determined that the reporting unit's expected future revenue growth rates and operating margin would be lower than previously anticipated for this reporting unit.

As a result, our goodwill impairment test indicated that the fair value of the Enterprise Solutions and Analytics reporting unit no longer exceeded its carrying value.

Our goodwill impairment test was performed by comparing the fair value of the Enterprise Solutions and Analytics reporting unit to its carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair value.

To estimate the fair value of the Enterprise Solutions and Analytics reporting unit, we relied on a combination of the income approach and the market approach, utilizing the guideline company method, with a fifty-fifty weighting.

Based on the estimated fair value of the Enterprise Solutions and Analytics reporting unit, we recorded a $ 45.0 million non-cash pretax goodwill impairment charge to reduce the carrying value of this reporting unit's goodwill to zero.

Intangible Assets

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As of December 31,

Customer relationships

in Years Gross

Amount Accumulated

Amortization Gross

Amount Accumulated

Customer relationships 3 to 13 $ 73,629 $ 56,232 $ 87,577 $ 61,882

Trade names 5 to 6 6,130 4,287 28,930 25,894

Technology and software 5 5,800 5,380 5,694 4,321

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Customer contracts 2 800 526 800 52

Favorable lease contract

Total $ 88,449 $ 67,966 $ 125,221 $ 93,596

Identifiable intangible assets with finite lives are amortized over their estimated useful lives.

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The table below sets forth the estimated annual amortization expense for each of the five succeeding years for the intangible assets recorded as of December 31, 2020.

Year Ending December 31,

Year Ending December 31, Estimated

Amortization Expense

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Our operating leases include fixed payments plus, in some cases, scheduled base rent increases over the term of the lease.

Certain leases require variable payments of real estate taxes, insurance and

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operating expenses.

Certain leases require variable payments of real estate taxes, insurance and operating expenses.

We exclude these variable payments from the measurements of our lease liabilities and expense them as incurred.

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First, we test the asset group for recoverability by comparing the undiscounted cash flows of the asset group, which include expected future lease and nonlease payments under the lease agreement offset by expected sublease income, to the carrying amount of the asset group.

If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset group is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset group to its carrying amount and recognizing a lease impairment charge for the amount by which the carrying amount exceeds the fair value.

If the first step of the

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long-lived asset impairment test concludes that the carrying amount of the asset group is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset group to its carrying amount and recognizing a lease impairment charge for the amount by which the carrying amount exceeds the fair value.

To estimate the fair value of the asset group, we rely on a discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate.

During 2019, we recorded $ 0.8 million of lease impairment charges for office spaces vacated during the year, of which $ 0.6 million was allocated to the operating lease ROU assets and $ 0.2 million was allocated to the leasehold improvements based on their relative carrying amounts.

The $ 0.8 million lease impairment charge was recognized in restructuring charges on our consolidated statement of operations.

Fourth Quarter 2020 Lease Impairment Charges

In the fourth quarter of 2020, we announced a restructuring plan to reduce operating costs to address the impact of the COVID-19 pandemic on our business.

The restructuring plan provided for a reduction in certain leased office spaces which included a portion of our principal executive office in Chicago, Illinois;

the remaining portion of our Lake Oswego, Oregon office;

our Boston, Massachusetts and Detroit, Michigan offices;

and portions of our Denver, Colorado, New York City, New York, and Pensacola, Florida offices.

As a result, we recognized $ 13.2 million of non-cash lease impairment charges, of which $ 9.1 million was allocated to the operating lease ROU assets and $ 4.1 million was allocated to the related fixed assets based on their relative carrying amounts.

The $ 13.2 million of non-cash lease impairment charges was recognized in restructuring charges on our consolidated statement of operations.

See Note 11 “Restructuring Charges” for additional information on our restructuring activities.

Fourth Quarter 2019 Lease Impairment Charge

During 2019, we exited a portion of our Lake Oswego, Oregon office, the remaining portion of our Middleton, Wisconsin office, and an office in Houston Texas, which resulted in $0.8 million of non-cash lease impairment charges, of which $ 0.6 million was allocated to the operating lease ROU assets and $ 0.2 million was allocated to the leasehold improvements based on their relative carrying amounts.

The $0.8 million of non-cash lease impairment charges were recognized in restructuring charges on our consolidated statement of operations.

See Note 11 “Restructuring Charges” for additional information on our restructuring activities.

Fourth Quarter 2019 Lease Modification

In the fourth quarter of 2019, we entered into an amendment to the office lease agreement for our principal executive offices in Chicago, Illinois, which resulted in a non-cash gain on lease modification of $ 0.8 million.

Among other items, this amendment i) extends the term of the lease from September 30, 2024 to September 30, 2029;

ii) provides a renewal option to extend the lease for an additional five year period to September 30, 2034;

iii) terminates the lease with respect to certain leased spaces previously vacated;

iv) provides abatement of certain future base rent payments and our pro rata share of operating expenses and taxes;

and v) provides a one-time cash payment from the lessor as an incentive.

Additional information on our operating leases as of December 31, 2019 follows.

Among other items, this amendment i) extended the term of the lease from September 30, 2024 to September 30, 2029;

ii) provided a renewal option to extend the lease for an additional five year period to September 30, 2034;

iii) terminated the lease with respect to certain leased spaces previously vacated;

iv) provided abatement of certain future base rent payments and our pro rata share of operating expenses and taxes;

and v) provided a one-time cash payment from the lessor as an incentive.

Additional information on our operating leases as of December 31, 2020 and 2019 follows.

As of December 31,

Balance Sheet 2020 2019

December 31, 2019

Operating lease right-of-use assets $ 39,360 $ 54,954

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Total lease liabilities $ 70,596 $ 76,702

December 31, 2019

Year Ended December 31,

Lease Cost 2020 2019

Operating lease cost $ 11,045 $ 11,883

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Net lease cost (2)(3)(4)

$ 10,994 $ 13,223

(1) Includes variable lease costs related to short-term leases.

Net lease cost includes $ 0.4 million for the year ended December 31, 2019 , recorded as restructuring charges as they relate to vacated office spaces.

(2) Net lease cost includes $ 0.3 million and $ 0.4 million for the years ended December 31, 2020 and 2019, respectively, recorded as restructuring charges as they relate to vacated office spaces.

See Note 11 “Restructuring Charges” for additional information on our vacated office spaces.

Net lease cost includes $ 0.3 million for the year ended December 31, 2019 , related to vacated office spaces directly related to discontinued operations.

Rent expense, including operating expenses, real estate taxes and insurance, recorded under ASC 840 for the years ended December 31, 2018 and 2017 was $ 15.1 million and $ 14.3 million , respectively.

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(3) Net lease cost includes $ 0.2 million and $ 0.3 million for the years ended December 31, 2020 and 2019, respectively, related to vacated office spaces directly related to discontinued operations.

(4) Rent expense, including operating expenses, real estate taxes and insurance, recorded under ASC 840 for the year ended December 31, 2018 was $ 15.1 million.

The table below summarizes the remaining expected lease payments under our operating leases as of December 31, 2020.

Future Lease Payments

Future Lease Payments December 31,

2021 $ 11,572

Thereafter 24,613

Total operating lease payments $ 81,743

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Present value of operating lease liabilities

The table below summarizes the future minimum rental commitments, as defined by ASC 840, under our non-cancelable operating leases as of December 31, 2018.

Lease Payments

As of December 31, 2018, the expected total future minimum sublease income to be received was $ 10.2 million .

Year Ended December 31,

Other Information 2020 2019

December 31, 2019

Cash paid for operating lease liabilities $ 11,307 $ 13,902

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 1,456 $ 12,842

Weighted average remaining lease term - operating leases

Weighted average remaining lease term - operating leases 7.0 years 7.7 years

Weighted average discount rate - operating leases 4.3 % 4.3 %

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Property and Equipment, Net

Depreciation expense for property and equipment was $ 12.2 million, $ 13.0 million, and $ 13.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2020, 2019 and 2018, we recognized an additional $ 0.6 million, $ 0.5 million, and $ 0.5 million, respectively, of accelerated depreciation expense for fixed assets related to vacated office spaces.

This accelerated depreciation expense is included as a component of restructuring charges.

See Note 11 “Restructuring Charges” for additional information on our restructuring charges incurred in 2020, 2019 and 2018.

Property and equipment, net at December 31, 2020 and 2019 consisted of the following:

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Furniture and fixtures 14,126 16,273

Aircraft 7,667 7,667

Assets under construction 502 250

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Property and equipment, net $ 29,093 $ 38,413

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Financing Arrangements

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As of December 31,

1.25% convertible senior notes due 2019

Senior secured credit facility $ 200,000 $ 205,000

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Principal Payments of Long-Term Debt

2024 $ 201,646

Convertible Notes

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Prior to maturity, upon conversion, the Convertible Notes would have been settled, at our election, in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock.

On October 1, 2019, one holder of the Convertible Notes converted their holding, which we settled in cash and resulted in an immaterial gain on conversion.

Our intent and policy was to settle conversions with a combination of shares of common stock with the principal amount of the Convertible Notes paid in cash, in accordance with the settlement provisions of the indenture.

Upon issuance, we separated the Convertible Notes into liability and equity components.

The carrying amount of the liability component was determined by measuring the fair value of a similar liability that does not have an associated convertible feature, assuming our non-

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convertible debt borrowing rate.

The carrying value of the equity component representing the conversion option, which was recognized as a debt discount, was determined by deducting the fair value of the liability component from the proceeds of the Convertible Notes.

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The equity component was not remeasured as it continued to meet the conditions for equity classification.

The transaction costs related to the issuance of the Convertible Notes were separated into liability and equity components based on their relative values, as determined above.

The transaction costs related to the issuance of the Convertible Notes were separated into liability and equity components based on their relative values.

Transaction costs attributable to the liability component were recorded as a deduction to the carrying amount of the liability and amortized to interest expense over the term of the Convertible Notes;

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Total debt issuance costs were approximately $ 7.3 million, of which $ 6.2 million was allocated to liability issuance costs and $ 1.1 million was allocated to equity issuance costs.

As of December 31, 2018 , the Convertible Notes consisted of the following:

As of December 31, 2018

Liability component:

debt discount, net of amortization

debt issuance costs, net of amortization

Net carrying amount

Equity component (1)

Included in additional paid-in capital on the consolidated balance sheet.

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The following table presents the amount of interest expense recognized related to the Convertible Notes for the periods presented.

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The convertible note hedge transactions were intended to reduce the potential future economic dilution associated with the conversion of the Convertible Notes and, combined with the warrants, effectively raised the price at which economic dilution would occur from the initial conversion price of approximately $ 79.89 to approximately $ 97.12 per share.

For purposes of the computation of diluted earnings per share in accordance with GAAP, dilution would occur when the average share price of our common stock for a given period exceeds the conversion price of the Convertible Notes, which initially is equal to approximately $ 79.89 per share.

The convertible note hedge transactions and warrant transactions are discussed separately below.

Convertible Note Hedge Transactions .

In connection with the issuance of the Convertible Notes, the Company entered into convertible note hedge transactions whereby the Company had call options to purchase a total of approximately 3.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the Convertible Notes in full, at a price of approximately $ 79.89 , which corresponded to the initial conversion price of the Convertible Notes, subject to customary anti-dilution adjustments substantially similar to those in the Convertible Notes.

The convertible note hedge transactions were exercisable upon conversion of the Convertible Notes and expired in the third quarter of 2019.

We paid an aggregate amount of $ 42.1 million for the convertible note hedge transactions, which was recorded as additional paid-in capital on the consolidated balance sheet.

The convertible note hedge transactions were separate transactions and were not part of the terms of the Convertible Notes.

In connection with the issuance of the Convertible Notes, the Company sold warrants whereby the holders of the warrants have the option to purchase a total of approximately 3.1 million shares of the Company’s common stock at a strike price of approximately $ 97.12 .

The warrants will expire incrementally on 100 different dates from January 6, 2020 to May 28, 2020 and are exercisable at each such expiry date.

If the average market value per share of our common stock for the reporting period exceeds the strike price of the warrants, the warrants will have a dilutive effect on our earnings per share.

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aggregate proceeds of $ 23.6 million from the sale of the warrants, which was recorded as additional paid-in capital on the consolidated balance sheets.

The warrants are separate transactions and are not part of the terms of the Convertible Notes or the convertible note hedge transactions.

The Company recorded an initial deferred tax liability of $ 15.4 million in connection with the debt discount associated with the Convertible Notes and recorded an initial deferred tax asset of $ 16.5 million in connection with the convertible note hedge transactions.

The deferred tax liability and deferred tax asset were included in deferred income taxes, net on the consolidated balance sheets.

The convertible note hedge transactions expired in the third quarter of 2019.

The holders of the warrants had the option to purchase an initial total of approximately 3.1 million shares of the Company’s common stock at a strike price of approximately $ 97.12 .

The warrants expired in the second quarter of 2020.

If the average market value per share of our common stock for the reporting period exceeded the strike price of the warrants, the warrants would have had a dilutive effect on our earnings per share.

The warrants were separate transactions and were not part of the terms of the Convertible Notes or the convertible note hedge transactions.

Senior Secured Credit Facility

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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.

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.

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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

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total debt is on a gross basis and is not netted against our cash balances.

At December 31, 2020, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of 1.94 to 1.00 and a Consolidated Interest Coverage Ratio of 12.51 to 1.00.

Borrowings outstanding under the Amended Credit Agreement at December 31, 2020 totaled $ 200.0 million.

These borrowings carried a weighted average interest rate of 3.0 % , including the impact of the interest rate swap described in Note 12 “Derivative Instruments and Hedging Activity." Borrowings outstanding under the Amended Credit Agreement at December 31, 2018 were $ 50.0 million and carried a weighted average interest rate of 3.7 % , including the impact of the interest rate swap described in Note 12 "Derivative Instruments and Hedging Activity." The borrowing capacity under the revolving credit facility is reduced by any outstanding borrowings under the revolving credit facility and outstanding letters of credit.

These borrowings carried a weighted average interest rate of 2.5 %, including the effect of the interest rate swaps described in Note 12 “Derivative Instruments and Hedging Activity.” Borrowings outstanding under the Amended Credit Agreement at December 31, 2019 were $ 205.0 million and carried a weighted average interest rate of 3.0 %, including the effect of the interest rate swap outstanding at the time and described in Note 12 “Derivative Instruments and Hedging Activity.” 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 December 31, 2020, we had outstanding letters of credit totaling $ 1.6 million, which are primarily used as security deposits for our office facilities.

As of December 31, 2020, the unused borrowing capacity under the revolving credit facility was $ 398.4 million.

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Promissory Note due 2024

In 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $ 5.1 million .

On June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $ 5.1 million.

The principal balance of the promissory note is subject to scheduled monthly principal payments until the maturity date of March 1, 2024 , at which time a final payment of $ 1.5 million, plus any accrued and unpaid interest, will be due.

Under the terms of the promissory note, we will pay interest on the outstanding principal amount at a rate of one month LIBOR plus 1.97 % per annum.

Under the terms of the promissory note, we pay interest on the outstanding principal amount at a rate of one month LIBOR plus 1.97 % per annum.

The obligations under the promissory note are secured pursuant to a Loan and Aircraft Security Agreement with Banc of America Leasing & Capital, LLC, which grants the lender a first priority security interest in the aircraft.

At December 31, 2019 , the outstanding principal amount of the promissory note was $3.9 million.

As of December 31, 2019 , the aircraft had a carrying amount of $ 5.1 million .

At December 31, 2020, the outstanding principal amount of the promissory note was $3.3 million, and the aircraft had a carrying amount of $ 4.4 million.

At December 31, 2019, the outstanding principal amount of the promissory note was $3.9 million, and the aircraft had a carrying amount of $ 5.1 million.

Capital Structure

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For the years ended December 31, 2020, 2019 and 2018 we recognized revenues of $844.1 million, $876.8 million, and $795.1 million, respectively.

Of the $844.1 million recognized in 2020, we recognized revenues of $ 12.2 million from obligations satisfied, or partially satisfied, in prior periods, of which $ 7.5 million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ 4.7 million was primarily due to the release of allowances on unbilled services as a result of securing contract amendments.

Of the $876.8 million recognized in 2019, we recognized revenues of $ 2.8 million from obligations satisfied, or partially satisfied, in prior periods due to the release of allowances on unbilled services as a result of securing contract amendments.

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As of December 31, 2020, we had $ 60.2 million of remaining performance obligations under engagements with original expected durations greater than one year.

These remaining performance obligations exclude obligations under contracts with an original expected duration of one year or less, variable consideration which has been excluded from the total transaction price due to the constraint, and performance obligations under time-and-expense engagements which are recognized in the amount invoiced.

Of the $ 90.1 million of performance obligations, we expect to recognize approximately $ 58.1 million as revenue in 2020, $ 20.9 million in 2021, and the remaining $ 11.1 million thereafter.

These remaining performance obligations exclude obligations under contracts with an original expected duration of

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one year or less, variable consideration which has been excluded from the total transaction price due to the constraint, and performance obligations under time-and-expense engagements which are recognized in the amount invoiced.

Of the $ 60.2 million of performance obligations, we expect to recognize approximately $ 39.2 million as revenue in 2021, $ 10.4 million as revenue in 2022, and the remaining $ 10.6 million thereafter.

Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors.

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The $ 4.7 million increase primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms.

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Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition policy.

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For the year ended December 31, 2019, $ 22.8 million of revenues recognized were included in the deferred revenue balance as of December 31, 2018.

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Earnings Per Share

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Year Ended December 31,

2020 2019 2018

Net income (loss) from continuing operations $ ( 23,718 ) $ 41,979 $ 13,944

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As of December 31,

2020 2019 2018

Unvested restricted stock awards 1,016 — —

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Total anti-dilutive securities 1,082 3,129 6,258

See Note 7 “Financing Arrangements” for further information on the convertible senior notes and warrants related to the issuance of convertible notes.

In November 2020, our board of directors authorized a share repurchase program (the “2020 Share Repurchase Program”) permitting us to repurchase up to $ 50 million of our common stock through December 31, 2021.

The 2020 Share Repurchase Program was authorized subsequent to the expiration of our prior share repurchase program (the “2015 Share Repurchase Program”) on October 31, 2020.

The 2015 Share Repurchase Program permitted us to repurchase up to $ 125 million of our common stock through October 31, 2020.

The amount and timing of repurchases under both share repurchase programs were determined by management and depend on a variety of factors, including

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See Note 7 “Financing Arrangements” for further information on the convertible senior notes and warrants related to the issuance of convertible notes.

We currently have a share repurchase program permitting us to repurchase up to $ 125 million of our common stock through October 31, 2020 (the "Share Repurchase Program").

The amount and timing of the repurchases will be determined by management and will 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.

In 2019, we repurchased and retired 210,437 shares for $ 14.2 million , of which $ 1.2 million settled in the first quarter of 2020.

the trading price of our common stock, capacity under our credit facility, general market and business conditions, and applicable legal requirements.

Under the 2020 Share Repurchase Program, we repurchased and retired 111,166 shares for $ 5.0 million in the fourth quarter of 2020, which are reflected as a reduction to our basic weighted average shares outstanding for the year ended December 31, 2020 based on the trade date of the share repurchase.

As of December 31, 2020, $ 45.0 million remains available under the plan for share repurchases.

Under the 2015 Share Repurchase Program, we repurchased and retired 313,998 shares for $ 20.9 million in the first quarter of 2020, which are reflected as a reduction to our basic weighted average shares outstanding for the year ended December 31, 2020 based on the trade date of the share repurchase.

Additionally, in the first quarter of 2020, we settled the repurchase of 18,000 shares for $ 1.2 million that were accrued as of December 31, 2019.

In 2019, we repurchased and retired 210,437 shares for $ 14.2 million, including the 18,000 shares for $ 1.2 million which settled in the first quarter of 2020.

All of the 210,437 shares repurchased and retired in 2019 were included as a reduction to our basic weighted average shares outstanding for the year ended December 31, 2019 based on the trade date of the share repurchase.

No shares were repurchased under this program in 2018 or 2017.

As of December 31, 2019 , $ 20.9 million remains available for share repurchases.

No shares were repurchased under the 2015 Share Repurchase Program in 2018.

Restructuring Charges

In 2020, we incurred $20.5 million of total pretax restructuring expense.

Of the $20.5 million pretax restructuring expense, $ 18.7 million related to the restructuring plan executed in the fourth quarter of 2020 to reduce operating costs to address the impact of the COVID-19 pandemic on our business.

The total pretax restructuring expense of $20.5 million recognized in 2020 consisted of the following charges:

Severance - We incurred $ 5.3 million of severance-related restructuring expense, of which, $ 4.8 million related to the fourth quarter 2020 restructuring plan and $ 0.4 million related to workforce reductions completed prior to the fourth quarter of 2020 to better align resources with market demand.

Of the total $ 5.3 million of severance-related restructuring expense, $ 2.0 million related to our Education segment, $ 1.5 million related to our Healthcare segment, $ 1.0 million related to our Business Advisory segment, and $ 0.8 million related to our corporate operations.

Office space reductions - We incurred $ 14.0 million of restructuring expense related to office space reductions, which primarily related to the fourth quarter 2020 restructuring plan.

The fourth quarter 2020 restructuring plan provided for a reduction in certain leased office spaces which included a portion of our principal executive office in Chicago, Illinois;

the remaining portion of our Lake Oswego, Oregon office;

our Boston, Massachusetts and Detroit, Michigan offices;

and portions of our Denver, Colorado, New York City, New York, and Pensacola, Florida offices.

As a result, we recognized $ 13.2 million of non-cash lease impairment charges on the related operating lease right-of-use (“ROU”) assets and fixed assets for those we intend to sublease, as well as $ 0.7 million of accelerated amortization and depreciation on the related operating lease ROU assets and fixed assets we intend to abandon.

See Note 5 “Leases” for additional information on the long-lived asset impairment test.

We also incurred $ 0.1 million related to rent and related expenses, net of sublease income, for previously vacated office spaces.

Other - We incurred $ 1.2 million of other restructuring charges primarily related to an accrual for the termination of a third-party advisor agreement in our Business Advisory segment.

Of the total $20.5 million pretax restructuring charge, $ 14.8 million related to our corporate operations, $ 2.2 million related to our Business Advisory segment, $ 2.0 million related to our Education segment, and $ 1.5 million related to our Healthcare segment.

In 2019, we incurred $1.9 million of pretax restructuring expense.

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Severance - We incurred $ 0.6 million of severance expense as a result of workforce reductions to better align resources with market demand and workforce reductions in our corporate operations.

Office exit costs - We incurred $ 1.2 million of office exit costs.

During 2019, we exited a portion of our Lake Oswego, Oregon office resulting in a $ 0.7 million lease impairment charge on the related operating lease right-of-use asset and leasehold improvements and $ 0.2 million of accelerated depreciation on furniture and fixtures in that office.

The lease impairment charge was recognized in accordance with ASC 842, Leases , which we adopted on a modified retrospective basis on January 1, 2019.

See Note 2 "Summary of Significant Accounting Policies" for additional information on our adoption of ASC 842.

Office space reductions - We incurred $ 1.2 million of restructuring expense related to office space reductions.

During 2019, we exited a portion of our Lake Oswego, Oregon office resulting in a $ 0.7 million lease impairment charge on the related operating lease ROU asset and leasehold improvements and $ 0.2 million of accelerated depreciation on furniture and fixtures in that office.

See Note 5 “Leases” for additional information on the long-lived asset impairment test.

Additionally, during 2019, we exited the remaining portion of our Middleton, Wisconsin office and an office in Houston, Texas, resulting in restructuring charges of $ 0.4 million and $ 0.1 million, respectively, which primarily consisted of accelerated depreciation on furniture and fixtures in those offices.

During the fourth quarter of 2019, we entered into an amendment to the lease of our principal executive offices in Chicago, Illinois.

Among other items, the amendment terminated the lease with respect to certain leased space which we previously vacated and currently sublease to a third-party.

During the fourth quarter of 2019, we entered into an amendment to the lease of our principal executive office in Chicago, Illinois.

Among other items, the amendment terminated the lease with

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respect to certain leased space which we previously vacated and currently sublease to a third-party.

As a result of the amendment, we recognized a restructuring gain of $ 0.4 million.

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Severance - We incurred $ 2.1 million of severance expense as a result of workforce reductions to better align resources with market demand.

Office exit costs - We incurred $ 1.3 million of office exit costs.

Office space reductions - We incurred $ 1.3 million of restructuring expense related to office space reductions.

Of the $ 1.3 million, $ 0.8 million related to the accrual of remaining lease payments, net of estimated sublease income, accelerated depreciation on leasehold improvements, and moving expenses due to exiting a portion of our Middleton, Wisconsin office;

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and $ 0.1 million related to updated lease assumptions for our Chicago office consolidation.

The office exit costs incurred in the 2018 were accounted for in accordance with ASC 840, Leases.

The restructuring expense related to office space reductions incurred in 2018 were accounted for in accordance with ASC 840, Leases.

See Note 2 “Summary of Significant Accounting Policies” for additional information on our adoption of ASC 842 on a modified retrospective basis on January 1, 2019.

Other - We incurred $ 0.3 million related to the divestiture of our Middle East practice within the Business Advisory segment in the second quarter of 2018.

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Of the $3.7 million pretax restructuring charge, $ 1.1 million was related to our Healthcare segment, $ 1.0 million was related to our Business Advisory segment, and $ 1.6 million was related to our corporate operations.

In 2017, we incurred $ 6.2 million of pretax restructuring expense.

This expense primarily consisted of the following charges:

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Severance - We incurred $ 3.7 million of severance expense as a result of workforce reductions to better align resources with market demand and workforce reductions in our corporate operations.

Office exit costs - We incurred $ 2.4 million of office exit costs primarily related to the accrual of remaining lease obligations, net of estimated sublease income, due to relocating our San Francisco office to a smaller space and consolidating our Chicago and New York offices, and accelerated depreciation on leasehold improvements for our San Francisco office.

The office exit costs incurred in the 2017 were accounted for in accordance with ASC 840, Leases.

Of the $ 6.2 million pretax restructuring charge, $ 2.1 million was related to our Healthcare segment, $ 1.1 million was related to our Business Advisory segment, and $ 2.9 million was related to our corporate operations.

The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the years ended December 31, 2020 and 2019.

Employee Costs

Office Space Reductions

Employee Costs Office Space Reductions Other Total

Balance as of December 31, 2018 $ 443 $ 2,468 $ — $ 2,911

Adoption of ASC 842 (1)

— ( 1,119 ) — ( 1,119 )

Balance as of January 1, 2019 443 1,349 — 1,792

Additions (2) (3)

Payments ( 995 ) ( 383 ) — ( 1,378 )

Adjustments (2) (3)

( 16 ) ( 884 ) — ( 900 )

Balance as of December 31, 2019 68 91 — 159

Adoption of ASC 842 (3)

Balance as of January 1, 2019

Additions (2)(3)

5,290 — 1,256 6,546

Payments ( 2,907 ) — ( 363 ) ( 3,270 )

Adjustments (2)(3)

( 4 ) ( 7 ) — ( 11 )

Balance as of December 31, 2020 $ 2,447 $ 84 $ 893 $ 3,424

Additions and adjustments for the years ended December 31, 2019 and 2018 include restructuring charges of $ 0.1 million and $ 0.4 million , respectively related to office exit costs for vacated offices spaces directly related to discontinued operations .

Additions and adjustments exclude non-cash items related to vacated office spaces, such as lease impairment charges and accelerated depreciation on fixed assets, which are recorded as restructuring charges on our consolidated statements of operations.

(1) Upon adoption of ASC 842 on January 1, 2019, we reclassified the restructuring charge liabilities, which represented the present value of remaining lease payments, net of estimated sublease income, for vacated office spaces from restructuring charge liabilities to operating lease right-of-use assets.

See Note 2 “Summary of Significant Accounting Polices” for additional information on the impact of adoption.

(2) Additions and adjustments for the years ended December 31, 2020 and 2019 include restructuring charges of $ 0.2 million and $ 0.1 million, respectively, related to office space reductions directly related to discontinued operations .

(3) Additions and adjustments exclude non-cash items related to vacated office spaces, such as lease impairment charges and accelerated depreciation on abandoned operating lease ROU assets and fixed assets, which are recorded as restructuring charges on our consolidated statements of operations.

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All of the $2.4 million restructuring charge liability related to employee costs at December 31, 2020 relates to the fourth quarter 2020 restructuring plan.

This liability is included as a component of accrued payroll and related benefits and is expected to be paid in the first quarter of 2021.

The $0.1 million restructuring charge liability related to office space reductions at December 31, 2020 is included as a component of deferred compensation and other liabilities.

The $ 0.1 million restructuring charge liability related to employee costs at December 31, 2019 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related benefits.

The $0.9 million other restructuring charge liability at December 31, 2020 is primarily related to the termination of a third-party advisory agreement and is expected to be paid over the next 25 months.

This liability is included as a component of accrued expenses and other current liabilities and deferred compensation and other liabilities.

Derivative Instruments and Hedging Activity

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Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.900 %.

On January 30, 2020, we entered into a forward interest rate swap agreement effective December 31, 2019 and ending December 31, 2024 , with a notional amount of $ 50.0 million.

We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings.

Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.500 %.

On March 16, 2020, we entered into a forward interest rate swap agreement effective February 28, 2020 and ending February 28, 2025 , with a notional amount of $ 100.0 million.

We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings.

Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 0.885 %.

We recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet.

We have designated this derivative instrument as a cash flow hedge.

Therefore, changes in the fair value of the derivative instrument are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified into interest expense upon settlement.

We have designated these derivative instruments as cash flow hedges.

Therefore, changes in the fair value of the derivative instruments are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified into interest expense upon settlement.

As of December 31, 2020, it was anticipated that $ 1.8 million of the losses, net of tax, currently recorded in accumulated other comprehensive income will be reclassified into earnings within the next 12 months.

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The table below sets forth additional information relating to our interest rate swap designated as a cash flow hedging instrument as of December 31, 2019 and 2018 .

The table below sets forth additional information relating to our interest rate swaps designated as cash flow hedging instruments as of December 31, 2020 and 2019.

Fair Value (Derivative Asset and Liability)

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Balance Sheet Location 2020 2019

Prepaid expenses and other current assets

Other non-current assets

Accrued expenses $ 2,100 $ 159

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Refer to Note 14 “Other Comprehensive Income (Loss)” for additional information on our derivative instrument.

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Fair Value of Financial Instruments

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The fair value hierarchy consists of three levels based on the objectivity of the inputs as follows:

Level 1 Inputs

Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs

Quoted prices in active markets for similar assets or liabilities;

Level 1 Inputs Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs Quoted prices in active markets for similar assets or liabilities;

quoted prices for identical or similar assets or liabilities in markets that are not active;

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or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Inputs

Unobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.

Level 3 Inputs Unobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.

The tables below sets forth our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019.

Level 1 Level 2 Level 3 Total

December 31, 2020

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Deferred compensation assets — 34,056 — 34,056

Total assets $ — $ 34,056 $ 64,364 $ 98,420

Interest rate swap $ — $ 5,397 $ — $ 5,397

Contingent consideration for business acquisition — — 1,770 1,770

Total liabilities $ — $ 5,397 $ 1,770 $ 7,167

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Level 1 Level 2 Level 3 Total

December 31, 2019

Interest rate swap

Convertible debt investment $ — $ — $ 49,542 $ 49,542

Deferred compensation assets — 27,445 — 27,445

Contingent consideration for business acquisitions

Total assets $ — $ 27,445 $ 49,542 $ 76,987

Interest rate swaps

$ — $ 546 $ — 546

Total liabilities $ — $ 546 $ — $ 546

Interest rate swap:

The fair value of our interest rate swap was derived using estimates to settle the interest rate swap agreement, which is based on the net present value of expected future cash flows on each leg of the swap utilizing market-based inputs and discount rates reflecting the risks involved.

Interest rate swaps:

The fair values of our interest rate swaps were derived using estimates to settle the interest rate swap agreements, which are based on the net present value of expected future cash flows on each leg of the swap utilizing market-based inputs and discount rates reflecting the risks involved.

Convertible debt investment:

In 2014 and 2015, we invested $ 27.9 million, in the form of zero coupon convertible debt (the “initial convertible notes”), in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight, a U.S.-based company that partners with leading nonprofit universities to increase access to and retention of international students, boost institutional growth, and enhance an institution’s global footprint.

In the second quarter of 2019, we amended the initial investment to extend the maturity date by one year to July 1, 2021 , unless converted earlier.

In the first quarter of 2020, we invested an additional $ 13.0 million, in the form of 1.69 % convertible debt with a senior liquidation preference to the initial convertible notes (the “additional convertible note”);

and amended our initial convertible notes to extend the maturity date to January 17, 2024 , which coincides with the maturity date of the additional convertible note.

and amended our initial convertible notes to include a coupon rate of 1.69 % and extend the maturity date to January 17, 2024 , which coincides with the maturity date of the additional convertible note.

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To determine the appropriate accounting treatment for our investment, we performed a variable interest entity (“VIE”) analysis and concluded that Shorelight does not meet the definition of a VIE.

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The conclusion of value for our investment is based on the probability-weighted assessment of both scenarios.

The hybrid analysis utilizes certain assumptions related to the assumed holding period, the applicable waterfall distribution at the end of the expected holding period based on the rights and privileges of the various instruments, cash flow projections discounted at the risk-adjusted rate, and the concluded equity volatility, all of which are Level 3 inputs.

The hybrid analysis utilizes certain assumptions including the assumed holding period through the maturity date of January 17, 2024 , the applicable waterfall distribution at the end of the expected holding period based on the rights and privileges of the various instruments, cash flow projections discounted at the risk-adjusted rate of 24.0 %, and the concluded equity volatility of 45.0 %, all of which are Level 3 inputs.

The valuation of our investment as of December 31, 2019 takes into consideration the equity value indication as well as the dilutive impact of the convertible debt issued by Shorelight in the first quarter of 2020, the terms of which were known or knowable as of December 31, 2019.

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Balance as of December 31, 2019 49,542

Purchases 13,000

Change in fair value of convertible debt investment 1,822

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The cash surrender value of the life insurance policies approximates fair value and is based on third-party broker statements which provide the fair value of the life insurance policies' underlying investments, which are Level 2 inputs.

The cash surrender

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value of the life insurance policies is invested primarily in mutual funds.

The cash surrender value of the life insurance policies is invested primarily in mutual funds.

The Plan assets are included in other non-current assets on our consolidated balance sheets.

Realized and unrealized gains (losses) from the deferred compensation assets are recorded to other income (expense), net in our consolidated statements of operations.

Contingent consideration for business acquisitions:

Contingent consideration for business acquisition:

We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted assessment of the specific financial performance targets being measured or a Monte Carlo simulation model, as appropriate.

These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 inputs.

The significant unobservable inputs used in the fair value measurements of our contingent consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and discount rates, which typically reflect a risk-free rate.

The significant unobservable inputs used in the fair value measurements of our contingent consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and a discount rate which typically reflects a risk-free rate, and was 2.41 % as of December 31, 2020.

The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest projections and input provided by practice leaders and management.

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Actual results may differ from our estimates.

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The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the years ended December 31, 2020 and 2019.

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Balance as of December 31, 2018 $ 11,441

Remeasurement of contingent consideration for business acquisitions

Unrealized gain due to foreign currency translation

Balance as of December 31, 2018

Payments ( 10,041 )

Remeasurement of contingent consideration for business acquisitions ( 1,506 )

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Balance as of December 31, 2019 —

Acquisition 1,770

Balance as of December 31, 2020 $ 1,770

Financial assets and liabilities not recorded at fair value on a recurring basis are as follows:

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Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in Medically Home.

On a quarterly basis, we review the information available to determine whether an orderly and observable transaction for the same or similar equity instrument occurred, and remeasure the fair value of the preferred stock using such identified transactions, with changes in the fair value recorded in consolidated statement of operations.

Following our purchase, there has been no impairment, nor any observable price changes to our investment.

In October 2020, we recognized an unrealized gain of $ 1.7 million to increase the carrying amount of our preferred stock investment to $ 6.7 million, based on an observable price change of preferred stock with similar rights and preferences to our preferred stock investment issued by Medically Home, a Level 2 input.

The unrealized gain of $ 1.7 million is recorded to other income (expense), net on our consolidated statement of operations.

We have not identified any impairments or additional observable price changes in 2020.

Senior Secured Credit Facility

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Refer to Note 7 “Financing Arrangements” for additional information on our senior secured credit facility.

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Promissory Note due 2024

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Refer to Note 7 “Financing Arrangements” for additional information on our promissory note due 2024.

Convertible Notes

The carrying amount and estimated fair value of the Convertible Notes as of December 31, 2018 follows.

The Convertible Notes matured on October 1, 2019.

December 31, 2018

1.25% convertible senior notes due 2019

The difference between the $ 250 million principal amount of the Convertible Notes and the carrying amount shown above represented the unamortized debt discount and issuance costs.

As of December 31, 2018 , the carrying value of the equity component of $39.3 million was unchanged from the date of issuance.

Refer to Note 7 “Financing Arrangements” for additional information on our Convertible Notes.

The estimated fair value of the Convertible Notes was determined based on the quoted bid price of the Convertible Notes in an over-the-counter market, which is a Level 2 input, on the last day of trading for the year ended December 31, 2018 .

Cash and Cash Equivalents and Other Financial Instruments

Cash and cash equivalents are stated at cost, which approximates fair market value.

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The table below sets forth the components of accumulated other comprehensive income (loss), net of tax for the years ended December 31, 2020, 2019, and 2018.

Available-for-

Translation Available-for-

Investments Cash Flow

Balance as of December 31, 2017 $ 1,149 $ 8,812 $ 409 $ 10,370

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Change in fair value, net of tax of $(2,753) — 7,772 — 7,772

Reclassification adjustment into retained earnings (2)

Unrealized gain (loss) on cash flow hedges:

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Reclassification adjustment into earnings, net of tax of $(10) — — ( 30 ) ( 30 )

Reclassification adjustment into retained earnings (2)

Balance as of December 31, 2018 ( 665 ) 16,584 576 16,495

Foreign currency translation adjustment, net of tax of $0 99 — — 99

Unrealized gain on investments:

Unrealized gain (loss) on investments:

Change in fair value, net of tax of $185 — ( 702 ) — ( 702 )

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(1) The before tax amounts reclassified from accumulated other comprehensive income (loss) related to our cash flow hedges are recorded to interest expense, net of interest income.

Upon adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, we reclassified $ 0.5 million of stranded tax effects, which resulted from the enactment of the 2017 Tax Reform, from accumulated other comprehensive income to retained earnings.

Employee Benefit and Deferred Compensation Plans

We sponsor a qualified defined contribution 401(k) plan covering substantially all of our employees.

Under the plan, employees are entitled to make pretax contributions and/or Roth post-tax contributions up to the annual maximums established by the Internal Revenue Service.

Under the plan, employees are entitled to make pretax, post-tax, and/or Roth post-tax contributions up to the annual maximums established by the Internal Revenue Service.

We match an amount equal to the employees’ contributions up to 6 % of the employees’ eligible earnings.

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Additionally, we may credit amounts to a participant’s deferred compensation account in accordance with employment or other agreements entered into between us and the participant.

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discretion, we may, but are not required to, credit any additional amount we desire to any participant’s deferred compensation account.

At our sole discretion, we may, but are not required to, credit any additional amount we desire to any participant’s deferred compensation account.

Amounts credited are subject to vesting schedules set forth in the Plan, employment agreement, or any other agreement entered into between us and the participant.

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This deferred compensation liability is funded by the Plan assets.

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Equity Incentive Plans

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The 2012 Plan permits the grant of stock options, stock appreciation rights, restricted stock, performance shares and other share-based or cash-based awards valued in whole or in part by reference to, or otherwise based on, our common stock.

Subsequent to the initial approval of the 2012 Plan and through December 31, 2019, our shareholders approved amendments to the 2012 Plan to increase the number of shares reserved for issuance by 2,254,000 , in the aggregate.

As of December 31, 2019 , approximately 1.1 million shares remain available for issuance under the 2012 Plan.

Subsequent to the initial approval of the 2012 Plan and through December 31, 2020, our shareholders approved amendments to the 2012 Plan to increase the number of shares authorized for issuance to 3.9 million, in the aggregate.

As of December 31, 2020, 0.9 million shares remain available for issuance under the 2012 Plan.

On May 1, 2015, we adopted the Stock Ownership Participation Program (the “SOPP”), which is available to Huron employees below the managing director level who do not receive equity-based awards as part of their normal compensation plan.

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Vesting of the restricted stock is subject to both a time-based vesting schedule and a requirement that the purchased shares be held for a specified period.

The initial number of shares available for issuance under the SOPP was 300,000 .

Subsequent to the initial approval of the SOPP and through December 31, 2020, our shareholders approved amendments to the SOPP to increase the total number of shares authorized for issuance to 0.7 million, in the aggregate.

Prior to the adoption of the SOPP, the matching share grants and the employee purchased shares under the stock ownership participation program were governed by the 2012 Plan.

As of December 31, 2019 , less than 0.1 million shares remain available for issuance under the SOPP.

As of December 31, 2020, 0.3 million shares remain available for issuance under the SOPP.

It has been our practice to issue shares of common stock upon exercise of stock options and granting of restricted stock from authorized but unissued shares, with the exception of the SOPP under which shares are issued from treasury stock.

9 unchanged sentences

Subject to acceleration under certain conditions, the majority of our restricted stock vests annually over four years .

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

The table below summarizes the restricted stock activity for the year ended December 31, 2020.

Number of Shares

Number of Shares Weighted

2012 Omnibus Incentive Plan

1 unchanged sentence

Nonvested restricted stock at December 31, 2019 774 12 786 $ 44.27

Granted 460 19 479 $ 58.13

Vested ( 319 ) ( 10 ) ( 329 ) $ 45.16

Forfeited ( 34 ) ( 3 ) ( 37 ) $ 51.95

Nonvested restricted stock at December 31, 2020 881 18 899 $ 51.12

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

The aggregate fair value of restricted stock that vested during the years ended December 31, 2020, 2019, and 2018 was $ 18.6 million, $ 14.5 million, and $ 9.1 million, respectively.

10 unchanged sentences

All nonvested performance-based stock outstanding at December 31, 2020 and 2019 was granted under the 2012 Omnibus Incentive Plan.

Shares Weighted

Nonvested performance-based stock at December 31, 2019 500 $ 42.72

Vested ( 100 ) $ 42.05

Forfeited (2)

( 117 ) $ 46.12

Nonvested performance-based stock at December 31, 2020 (3)

7 unchanged sentences

The weighted average grant date fair value per share of performance-based stock granted during 2019 and 2018 was $ 47.93 and $ 35.25 , respectively.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Stock Options

4 unchanged sentences

All stock options have a 10 -year contractual term.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

Stock option activity for the year ended December 31, 2020 was as follows:

(in thousands)

(in thousands) Weighted

(in dollars) Weighted

(in years) Aggregate

(in millions)

Outstanding at December 31, 2019 106 $ 32.57 1.9 $ 3.8

Exercised ( 40 ) $ 24.82 $ 1.1

Forfeited or expired —

Outstanding at December 31, 2020 (1)

66 $ 37.31 1.5 $ 1.4

Exercisable at December 31, 2020 66 $ 37.31 1.5 $ 1.4

(1) Of the 66,000 outstanding options, approximately 34,000 were granted under the 2004 Omnibus Stock Plan, and the remaining 32,000 options were granted under the 2012 Omnibus Incentive Plan.

The aggregate intrinsic value of options exercised during 2018 was $ 0.8 million .

No options were exercised in 2017.

The aggregate intrinsic value of options exercised during 2019 and 2018 was $ 1.6 million and $ 0.8 million, respectively.

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The CARES Act 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 a five-year 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.

During 2020, as a result of the CARES Act, we recognized a $ 1.5 million tax benefit related to the remeasurement of a portion of our income tax receivable for the federal net operating loss incurred in 2018 and the expected federal net operating loss in 2020 that will be carried back to prior year income, both for a refund at the higher, prior year tax rate.

Through December 31, 2020, we deferred $ 12.2 million of payroll tax payments, of which $ 6.1 million is expected to be paid in the fourth quarter of 2021 and $ 6.1 million is expected to be paid in the fourth quarter of 2022.

The deferred payroll tax payments are included as components of accrued payroll and related benefits and deferred compensation and other liabilities on our consolidated balance sheet.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“2017 Tax Reform”), a tax reform bill which, among other items, reduced the corporate federal income tax rate from 35% to 21% and moved from a worldwide tax system to a territorial system.

As a result of the enactment of this legislation during the fourth quarter of 2017, we estimated the remeasurement of our net deferred taxes based on the new lower tax rate, as well as provided for additional one-time income tax expense estimates primarily related to the transition tax on accumulated foreign earnings and elimination of foreign tax credits for dividends that are subject to the 100 percent exemption in our consolidated financial statements as of and for the year ended December 31, 2017.

In 2017 and the first nine months of 2018, we recorded provisional amounts for certain enactment-date effects of 2017 Tax Reform by applying the guidance in Staff Accounting Bulletin (“SAB”) No.

118 because we had not yet completed our enactment-date accounting for these effects.

During the fourth quarter of 2018, we completed our accounting for all of the enactment-date income tax effects of 2017 Tax Reform.

During 2018, we completed our accounting for all of the enactment-date income tax effects of 2017 Tax Reform.

For the year ended December 31, 2018, we recorded tax expense of $ 2.2 million related to establishing a valuation allowance for foreign tax credits, a tax benefit of $ 0.6 million related to the U.S.

federal return to provision adjustments for the remeasurement of our net deferred taxes based on the new lower rate and tax expense of $ 0.2 million related to withholding tax on outside basis differences due to our change in assertion for permanent reinvestment.

These amounts are recorded as a component of income tax expense from continuing operations.

2017 Tax Reform subjects a US shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740, No.

5, Accounting for Global Intangible Low-Taxed Income , states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred.

We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

These amounts were recorded as a component of income tax expense from continuing operations.

HURON CONSULTING GROUP INC.

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Year Ended December 31,

2020 2019 2018

Federal $ ( 2,480 ) $ 125 $ ( 1,611 )

State 168 2,014 286

Foreign 2,016 ( 422 ) 1,885

Total current ( 296 ) 1,717 560

Federal ( 7,414 ) 7,467 9,742

State ( 2,025 ) 1,610 2,008

Foreign ( 420 ) ( 282 ) ( 1,033 )

Total deferred ( 9,859 ) 8,795 10,717

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

$ ( 35,054 ) $ 53,898 $ 17,025

Foreign 1,181 ( 1,407 ) 8,196

Total $ ( 33,873 ) $ 52,491 $ 25,221

A reconciliation of the U.S.

1 unchanged sentence

Year Ended December 31,

2020 2019 2018

Percent of pretax income from continuing operations:

1 unchanged sentence

State income taxes, net of federal benefit 4.4 6.1 7.2

CARES Act net operating loss carryback 4.4 — —

Stock-based compensation 4.3 ( 1.1 ) 4.9

Tax credits 3.0 ( 3.1 ) ( 1.4 )

Realized investment gains/losses 2.6 ( 1.8 ) 1.3

Deferred tax adjustments 1.7 0.6 ( 1.7 )

Foreign source income 0.5 ( 0.5 ) ( 1.7 )

Valuation allowance ( 3.1 ) ( 2.9 ) 6.9

Disallowed executive compensation ( 2.8 ) 2.0 2.5

Goodwill impairment charges ( 2.6 ) — —

Unrecognized tax benefits ( 2.0 ) ( 0.4 ) 0.4

Meals and entertainment ( 0.6 ) 1.6 2.0

Valuation allowance

Realized investment (gains) losses

Net tax benefit related to “check-the-box” election — ( 1.4 ) —

Stock-based compensation

Foreign source income

Change in fair value of contingent consideration liabilities — — 2.4

1 unchanged sentence

Transition tax on accumulated foreign earnings, net of credits — — 0.8

federal rate change

Goodwill impairment charges

US federal rate change — — ( 2.3 )

Other ( 0.8 ) ( 0.1 ) 0.3

Effective income tax rate for continuing operations 30.0 % 20.0 % 44.7 %

The effective tax rate for discontinued operations in 2019 was 26.0 % , based on a tax benefit of $ 0.1 million and pretax loss from discontinued operations of $ 0.3 million , and was higher than the statutory tax rate primarily due to state income taxes.

The effective tax rate for discontinued operations in 2018 was 26.7 % , based on tax expense of $ 0.1 million and a pretax loss from discontinued operations of $ 0.4 million , and was higher than the statutory tax rate primarily due to state income taxes.

The effective tax rate for discontinued operations in

HURON CONSULTING GROUP INC.

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(Tabular amounts in thousands, except per share amounts)

2017 was 60.0 % , based on tax expense of $ 0.6 million and a pretax income from discontinued operations of $ 1.0 million , and was higher than the statutory tax rate primarily due the settlement of foreign tax audits.

The net deferred tax liabilities for continuing operations at December 31, 2019 and 2018 consisted of the following:

The net deferred tax asset (liability) for continuing operations at December 31, 2020 and 2019 consisted of the following:

As of December 31,

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Operating lease liabilities $ 19,617 $ 20,541

Accrued payroll and other liabilities

Deferred compensation liability 9,002 7,084

Share-based compensation 7,579 6,970

Accrued payroll and payroll related liabilities 3,745 5,205

Deferred payroll tax payments 3,235 —

Tax credits 1,773 465

Net operating loss carryforwards 944 280

Deferred lease incentives

Restructuring charge liability

Other 3,278 1,451

Total deferred tax assets 49,173 41,996

8 unchanged sentences

Prepaid expenses ( 2,708 ) ( 2,183 )

Other ( 1,275 ) ( 483 )

Total deferred tax liabilities ( 43,298 ) ( 47,905 )

1 unchanged sentence

As of December 31, 2020 and 2019, we had valuation allowances of $2.1 million and $1.0 million, respectively, primarily due to uncertainties relating to the ability to realize deferred tax assets recorded for foreign losses and tax credits.

The decrease in valuation allowances in 2019 primarily related to a decrease in the valuation allowance for foreign tax credits.

The increase in valuation allowances in 2020 primarily related to an increase in the valuation allowance for foreign losses and tax credits.

The Company has foreign net operating losses of $ 3.8 million which begin to expire in 2027 and state net operating loss carryforwards of $ 5.1 million which will begin to expire in 2023, if not utilized.

We have federal and state tax credit carryforwards of $ 1.8 million which will begin to expire in 2021, if not utilized.

We also have foreign net operating losses of $ 0.3 million , which carryforward indefinitely.

We have no federal or state net operating loss carryforwards as of December 31, 2019.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

A reconciliation of our beginning and ending amount of unrecognized tax benefits is as follows:

Unrecognized Tax Benefits

Balance at January 1, 2017

Decrease due to lapse of statute of limitations

Decrease based on tax positions related to prior years

Balance at December 1, 2017 $ 813

5 unchanged sentences

Balance at December 31, 2019 50

Additions based on tax positions related to prior years 694

Balance at December 31, 2020 $ 744

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

As of December 31, 2020, we had $0.7 million of unrecognized tax benefits which would affect the effective tax rate of continuing operations if recognized.

As of December 31, 2019 and 2018 , we had less than $0.1 million and $ 0.1 million accrued for the potential payment of interest and penalties.

As of both December 31, 2020 and 2019, we had less than $ 0.1 million accrued for the potential payment of interest and penalties.

Accrued interest and penalties are recorded as a component of provision for income taxes on our consolidated statement of operations.

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See Note 5 “Leases” for additional information on our leases, including the remaining expected lease payments under our operating leases as of December 31, 2020.

During the year ended December 31, 2019, we recorded a $ 0.4 million litigation loss accrual related to a legal claim that was subsequently settled during the first quarter of 2020.

During the year ended December 31, 2020, we recognized a $ 0.2 million litigation settlement gain for the resolution of a claim that was settled in the first quarter of 2020.

During the year ended December 31, 2019, we recorded a $ 0.4 million litigation loss accrual related to the legal claim that was subsequently settled during the first quarter of 2020.

During the year ended December 31, 2018, we reached a settlement agreement related to Huron's claim in a class action lawsuit, resulting in a gain of $ 2.5 million.

These items are recorded in litigation and other losses (gains), net on our consolidated statement of operations.

These items are recorded in litigation and other gains, net on our consolidated statement of operations.

From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business.

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In connection with certain business acquisitions, we may be required to pay post-closing consideration to the sellers if specific financial performance targets are met over a number of years as specified in the related purchase agreements.

As of December 31, 2019 , the

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

estimated fair value of our outstanding contingent consideration liability was zero.

As of December 31, 2018 , the total estimated fair value of our contingent consideration liabilities was $11.4 million .

As of December 31, 2020, the estimated fair value of our outstanding contingent consideration liability was $1.8 million.

As of December 31, 2019, the total estimated fair value of our contingent consideration liabilities was zero.

To the extent permitted by law, our bylaws and articles of incorporation require that we indemnify our officers and directors against judgments, fines and amounts paid in settlement, including attorneys’ fees, incurred in connection with civil or criminal action or proceedings, as it relates to their services to us if such person acted in good faith.

4 unchanged sentences

Healthcare, Business Advisory, and Education.

Our Healthcare segment has a depth of expertise in financial and operational improvement, care transformation, culture and organizational excellence, strategy, and technology and analytics.

We serve national and regional hospitals, integrated health systems, academic medical centers, community hospitals, and medical groups.

Our solutions help clients evolve and adapt to the rapidly changing healthcare environment and achieve growth, optimize performance, enhance profitability, improve quality and clinical outcomes, align leaders, improve organizational culture, and drive physician, patient, and employee engagement across the enterprise to deliver better consumer outcomes.

We help organizations transform and innovate their delivery model to focus on patient wellness by improving quality outcomes, minimizing care variation and fundamentally improving patient and population health.

Our consultants collaborate with clients to help build and sustain today’s business to invest in the future by reducing complexity, improving operational efficiency and growing market share.

We enable the healthcare of the future by identifying, integrating and optimizing digital and technology investments to collect data that transforms care delivery and improves patient outcomes.

We also develop future leaders capable of driving meaningful cultural and organizational change and who transform the consumer experience.

Business Advisory

Our Business Advisory segment provides services to large and middle market organizations, lending institutions, law firms, investment banks, private equity firms, and not-for-profit organizations, including higher education and healthcare institutions.

We assist clients in a broad range of industries and across the spectrum from healthy, well-capitalized companies to organizations in transition, as well as creditors, equity owners, and other key constituents.

Our Enterprise Solutions and Analytics experts advise, deliver, and optimize technology and analytic solutions that enable organizations to manage and optimize their financial performance, operational efficiency, and client or stakeholder experience.

Our Business Advisory experts resolve complex business issues and enhance client enterprise value through a suite of services including capital advisory, transaction advisory, operational improvement, restructuring and turnaround, valuation, and dispute advisory.

Our Strategy and Innovation professionals collaborate with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change.

Our Life Sciences professionals provide strategic solutions to help pharmaceutical, medical device, and biotechnology companies deliver more value to patients, payers, and providers, and comply with regulations.

Our Education segment provides consulting and technology solutions to higher education institutions and academic medical centers.

We collaborate with clients to address challenges relating to business and technology strategy, financial and operational excellence, student success, research administration, and regulatory compliance.

Our research enterprise solutions assist clients in identifying and implementing institutional research strategy, optimizing clinical research operations, improving financial management and cost reimbursement, improving service to faculty, and mitigating risk compliance.

Our technology strategy, enterprise applications, and analytic solutions transform and optimize operations, deliver time and cost savings, and enhance the student experience.

Our institutional strategy, budgeting and financial management, and business operations align missions with business priorities, improve quality, and reduce costs institution-wide.

Our student solutions improve attraction, retention and graduation rates, increase student satisfaction and help generate quality outcomes.

HURON CONSULTING GROUP INC.

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(Tabular amounts in thousands, except per share amounts)

Our Healthcare segment serves national and regional hospitals, integrated health systems, academic medical centers, community hospitals, and medical groups.

Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services;

organizational transformation;

and digital, technology and analytic solutions.

Most healthcare organizations are focused on changing the way care is delivered;

establishing a sustainable business model centered around optimal cost structures, reimbursement models and financial strategies;

and evolving their digital, technology and analytic capabilities.

Our solutions help clients adapt to this rapidly changing healthcare environment to become a more agile, efficient and consumer-centric organization.

We use our deep industry expertise to help clients solve a diverse set of business issues, including, but not limited to, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, evolving organizational culture, and maximizing return on technology investments.

• Business Advisory

Our Business Advisory segment works with C-suite executives, boards, and business unit and functional leadership across a diverse set of organizations, including healthy, well-capitalized companies to organizations in transition, and across a broad range of industries, including life sciences, financial services, healthcare, education, energy and utilities, industrials and manufacturing, and the public sector.

Our Business Advisory professionals have deep industry, functional and technical expertise that they put forward when delivering our digital, technology and analytics, strategy and innovation and corporate finance and restructuring services.

In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage.

Organizations also recognize the need to adopt technologies, automation and analytics to improve their operations and compete in a rapidly changing environment.

Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and analytics throughout their internal and customer-facing operations, developing insights into the needs of tomorrow’s customers in order to evolve their enterprise and business unit strategies, bringing new products to market, and managing through stressed and distressed situations to create a viable path forward for stakeholders.

Our Education segment serves public and private colleges and universities, academic medical centers, research institutes and other not-for-profit organizations.

Our Education professionals have a depth of expertise in strategy and innovation;

business operations, including the research enterprise and student lifecycle;

digital, technology and analytic solutions;

and organizational transformation.

Our Education segment clients are increasingly faced with financial and/or demographic challenges as well as increased competition.

To remain competitive, organizations must challenge traditional operating and financial models and reimagine strategic, operational and research-centered opportunities that advance their mission while strengthening their business models.

We collaborate with clients to address these challenges and ensure they have a sustainable future.

We combine our deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology;

strengthening research strategies and support services;

evolving their organizational strategy;

optimizing financial and operational performance;

and enhancing the student lifecycle.

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.

1 unchanged sentence

These administrative function costs include costs for corporate office support, office facility costs, costs relating 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.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

The tables below set forth information about our operating segments for the years ended December 31, 2020, 2019, and 2018, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.

We do not present financial information by geographic area because our international operations are immaterial.

We do not present financial information by geographic area because the financial results of our international operations are not significant to our consolidated financial statements.

Year Ended December 31,

2020 2019 2018

Revenues $ 353,437 $ 399,221 $ 364,763

Operating income $ 94,925 $ 125,724 $ 108,060

1 unchanged sentence

Business Advisory:

Revenues $ 267,361 $ 252,508 $ 236,185

Operating income $ 48,046 $ 49,695 $ 50,625

Segment operating income as a percentage of segment revenues 18.0 % 19.7 % 21.4 %

Revenues $ 223,329 $ 225,028 $ 194,177

Operating income $ 47,503 $ 55,741 $ 48,243

1 unchanged sentence

Total Company:

Revenues $ 844,127 $ 876,757 $ 795,125

Reimbursable expenses 26,887 88,717 82,874

3 unchanged sentences

Other operating expenses 135,255 140,285 122,276

Litigation and other losses (gains), net

Litigation and other gains, net ( 150 ) ( 1,196 ) ( 2,019 )

Depreciation and amortization 24,405 28,365 34,575

4 unchanged sentences

We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

As of December 31,

Segment Assets:

2020 2019 2018

Healthcare $ 40,217 $ 73,019 $ 65,133

Business Advisory 38,402 59,315 59,017

Education 34,534 38,881 26,990

Unallocated assets (1)

944,323 933,056 898,392

Total assets $ 1,057,476 $ 1,104,271 $ 1,049,532

(1) Unallocated assets include goodwill and intangible assets and our long-term investments, as management does not evaluate these items at the segment level when assessing segment performance or allocating resources.

Refer to Note 4 “Goodwill and Intangible Assets” and Note 13 “Fair Value of Financial Instruments” for further information on these assets.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

The following table illustrates the disaggregation of revenues by billing arrangements, employee types, and timing of revenue recognition, including a reconciliation of the disaggregated revenues to revenues from our three operating segments for the year ended December 31, 2020, 2019 and 2018.

Year Ended December 31, 2020

Business Advisory

Healthcare Business Advisory Education Total

Billing Arrangements

Fixed-fee $ 202,513 $ 101,561 $ 44,839 $ 348,913

Time and expense 58,322 152,716 155,510 366,548

1 unchanged sentence

Software support, maintenance and subscriptions 23,286 5,025 22,285 50,596

Total $ 353,437 $ 267,361 $ 223,329 $ 844,127

Employee Type (1)

1 unchanged sentence

Revenue generated by full-time equivalents 98,842 13,614 31,862 144,318

Total $ 353,437 $ 267,361 $ 223,329 $ 844,127

Timing of Revenue Recognition

1 unchanged sentence

Revenue recognized at a point in time 3,761 — 322 4,083

Total $ 353,437 $ 267,361 $ 223,329 $ 844,127

Year Ended December 31, 2019

Healthcare Business Advisory Education Total

Billing Arrangements

Fixed-fee $ 249,479 $ 100,635 $ 51,826 $ 401,940

Time and expense 55,204 139,610 154,893 349,707

Performance-based 71,051 6,856 — 77,907

Software support, maintenance and subscriptions 23,487 5,407 18,309 47,203

Total $ 399,221 $ 252,508 $ 225,028 $ 876,757

Employee Type (1)

Revenue generated by full-time billable consultants $ 280,915 $ 243,350 $ 195,844 $ 720,109

Revenue generated by full-time equivalents 118,306 9,158 29,184 156,648

Total $ 399,221 $ 252,508 $ 225,028 $ 876,757

Timing of Revenue Recognition

Revenue recognized over time $ 390,884 $ 252,508 $ 223,673 $ 867,065

Revenue recognized at a point in time 8,337 — 1,355 9,692

Total $ 399,221 $ 252,508 $ 225,028 $ 876,757

HURON CONSULTING GROUP INC.

2 unchanged sentences

Year Ended December 31, 2018

Business Advisory

Healthcare Business Advisory Education Total

Billing Arrangements

Fixed-fee $ 239,263 $ 98,119 $ 39,586 $ 376,968

Time and expense 58,377 128,583 140,824 327,784

1 unchanged sentence

Software support, maintenance and subscriptions 24,439 4,078 13,767 42,284

Total $ 364,763 $ 236,185 $ 194,177 $ 795,125

Employee Type (1)

1 unchanged sentence

Revenue generated by full-time equivalents 117,347 10,850 23,681 151,878

Total $ 364,763 $ 236,185 $ 194,177 $ 795,125

Timing of Revenue Recognition

1 unchanged sentence

Revenue recognized at a point in time 7,937 — 3,651 11,588

Total $ 364,763 $ 236,185 $ 194,177 $ 795,125

(1) Full-time billable consultants consist of our full-time professionals who provide consulting services to our clients and are billable to our clients based on the number of hours worked.

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The table below sets forth the changes in the carrying amount of our allowances for doubtful accounts and unbilled services and valuation allowance for deferred tax assets for the years ended December 31, 2020, 2019, and 2018.

Additions (1)

Allowances for doubtful accounts and unbilled services includes allowances for fee adjustments and other discretionary pricing adjustments as well as allowances related to clients' inability to make required payments on accounts receivable.

balance Additions (1)

Deductions Ending

Year ended December 31, 2018:

7 unchanged sentences

Valuation allowance for deferred tax assets $ 1,016 1,160 64 $ 2,112

Additions to allowances for doubtful accounts and unbilled services are charged to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.

To the extent the provision relates to a client’s inability to make required payments on accounts receivables, the provision is charged to operating expenses.

Additions also include allowances acquired in business acquisitions, which were not material in any period presented.

HURON CONSULTING GROUP INC.

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(Tabular amounts in thousands, except per share amounts)

(1) Additions to allowances for doubtful accounts and unbilled services are charged to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.

To the extent the provision relates to a client’s inability to make required payments on accounts receivable, the provision is charged to operating expenses.

Selected Quarterly Financial Data (Unaudited)

Quarter Ended

Revenues $ 222,619 $ 217,857 $ 205,304 $ 198,347

Reimbursable expenses 19,303 2,970 2,860 1,754

Total revenues and reimbursable expenses 241,922 220,827 208,164 200,101

Operating income

Net income from continuing operations

Gross profit 64,984 67,113 58,495 55,710

Operating income (loss) ( 45,851 ) 15,954 13,699 ( 12,654 )

Net income (loss) from continuing operations ( 42,273 ) 13,572 11,087 ( 6,104 )

Loss from discontinued operations, net of tax ( 35 ) ( 25 ) ( 29 ) ( 33 )

Net income (loss) ( 42,308 ) 13,547 11,058 ( 6,137 )

Net earnings per basic share:

Net income from continuing operations

Net income (loss) from continuing operations $ ( 1.94 ) $ 0.62 $ 0.50 $ ( 0.28 )

Loss from discontinued operations, net of tax — — — —

Net income (loss) $ ( 1.94 ) $ 0.62 $ 0.50 $ ( 0.28 )

Net earnings per diluted share:

Net income from continuing operations

Net income (loss) from continuing operations $ ( 1.94 ) $ 0.61 $ 0.50 $ ( 0.28 )

Loss from discontinued operations, net of tax — — — —

Net income (loss) $ ( 1.94 ) $ 0.61 $ 0.50 $ ( 0.28 )

Weighted average shares used in calculating earnings per share:

Basic 21,827 21,869 21,905 21,903

Diluted 21,827 22,116 22,175 21,903

Quarter Ended

Revenues $ 204,445 $ 220,754 $ 219,289 $ 232,269

Reimbursable expenses 18,617 23,534 23,636 22,930

Total revenues and reimbursable expenses 223,062 244,288 242,925 255,199

Gross profit 65,496 77,832 75,158 77,315

Operating income 6,756 17,875 20,576 18,499

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Net earnings (loss) per basic share:

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Net earnings (loss) per diluted share:

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Net income from continuing operations 3,350 10,569 13,706 14,354

Loss from discontinued operations, net of tax ( 46 ) ( 97 ) ( 52 ) ( 41 )

Net income 3,304 10,472 13,654 14,313

Net earnings per basic share:

Net income from continuing operations $ 0.15 $ 0.48 $ 0.62 $ 0.65

Loss from discontinued operations, net of tax — — — —

Net income $ 0.15 $ 0.48 $ 0.62 $ 0.65

Net earnings per diluted share:

Net income from continuing operations $ 0.15 $ 0.47 $ 0.61 $ 0.63

Loss from discontinued operations, net of tax — — — —

Net income $ 0.15 $ 0.47 $ 0.61 $ 0.63

Weighted average shares used in calculating earnings per share:

Basic 21,868 21,997 22,052 22,051

Diluted 22,311 22,400 22,561 22,676

Subsequent Event

On January 7, 2021, we entered into an agreement to acquire 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.

HURON CONSULTING GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands, except per share amounts)

acquisition expands our cloud-based technology offerings within the Business Advisory segment.

The results of operations of Unico Solutions will be included within the Business Advisory segment from the close date, February 1, 2021.

The acquisition of Unico Solutions is not significant to our consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures