What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-23 · 319 added, 379 removed, 440 unchanged (61% of the section changed)

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

Management's Discussion and Analysis of Financial Condition and Results of Operations ( “ MD&A ” ) should be read in conjunction with the information under Part II—Item 6.

“ Selected Financial Data, ” and our Consolidated Financial Statements and related notes appearing under Part II—Item 8.

Management's Discussion and Analysis of Financial Condition and Results of Operations ( “ MD&A ” ) should be read in conjunction with our Consolidated Financial Statements and related notes appearing under Part II—Item 8.

“ Financial Statements and Supplementary Data.

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Huron is a global consultancy that collaborates with clients to drive strategic growth, ignite innovation and navigate constant change.

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

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

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

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

We provide our services and manage our business under three operating segments:

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“Business—Overview—Our Services” and Note 19 “Segment Information” within the notes to our consolidated financial statements for a discussion of our three segments.

Effective January 1, 2022, we modified our operating model to expand and more deeply integrate our industry expertise with our digital, strategic and financial advisory capabilities.

The new operating model will strengthen Huron’s go-to-market strategy, drive efficiencies that support margin expansion, and position the company to accelerate growth.

To align with the new operating model, effective with reporting for periods beginning January 1, 2022, we will begin reporting under the following three industries, which will be our reportable segments:

Healthcare, Education and Commercial.

The Commercial segment will include all industries outside of healthcare and education, including, but not limited to, financial services and energy and utilities.

In the new reporting structure, each segment will include all revenue and costs associated with engagements delivered in the respective industry segments.

The new Healthcare and Education segments will include some revenue and costs historically reported in the Business Advisory segment and the Healthcare segment will include some revenue and costs historically reported in the Education segment.

We will also provide revenue reporting across two principal capabilities:

i) Consulting and Managed Services and ii) Digital.

These changes will create greater transparency for investors by improving visibility into the core drivers of our business.

While our consolidated results will not be impacted, we will recast our historical segment information during 2022 for consistent presentation.

Coronavirus (COVID- 19)

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

This pandemic has had an unfavorable impact on aspects of our business, operations, and financial results, and has caused us to significantly change the way we operate.

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

The pandemic had an unfavorable impact on aspects of our business, operations, and financial results, and caused us to significantly change the way we operate.

Near the end of the first quarter of 2020, we suspended almost all business travel and our employees began working from their homes.

While traditionally a majority of the work performed by our revenue-generating professionals occurred at client sites, the nature of the services we provide and enhanced available technology allows our revenue-generating professionals to effectively serve clients in a remote work environment.

As state and local governments ease their restrictions, we continue to refine our comprehensive plan to return to our offices and client sites with our people’s safety and the needs of our clients guiding how we implement our phased transition.

As federal, state and local government restrictions evolve, we continue to refine our comprehensive plan to return to our offices and client sites with our people’s safety and the needs of our clients guiding how we implement our phased transition.

As of December 31, 2021, our employees continue to primarily work from their homes;

however, most of our offices are open and we are providing our employees the flexibility to choose to work remotely, from our offices, or from client sites as needed and in accordance with recommended public health guidelines.

In each of our operating segments, we are working closely with our clients to support them and their ongoing business needs and provide relevant services to address their needs caused by the COVID-19 pandemic.

However, as some clients reprioritized and delayed projects as a result of the pandemic, demand for certain offerings has been negatively impacted, particularly within our Healthcare and Education segments.

Revenues in the first half of 2020 increased 3.6% compared to the same prior year period, while revenues in the second half of 2020 declined 10.6% compared to the same prior year period, resulting in a full year revenue decline of 3.7% in 2020 compared to full year 2019.

In addition to the impact on 2020 revenues, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services, particularly within our Healthcare and Education segments.

Given the uncertainties around the duration of the COVID-19 pandemic, we continue to remain cautious about revenue growth for the first half of 2021.

The COVID-19 pandemic has strengthened demand for other services we provide, such as our cloud-based technology and analytics solutions within our Business Advisory segment and our restructuring and capital advisory solutions provided to organizations in transition also within our Business Advisory segment.

However, since the beginning of the pandemic in 2020, some clients reprioritized and delayed projects which negatively impacted demand for certain offerings, particularly within our Healthcare and Education segments.

Conversely, the COVID-19 pandemic strengthened demand for other services we provide, such as our cloud-based technology and analytics solutions within our Business Advisory segment and our restructuring and capital advisory solutions provided to organizations in transition also within our Business Advisory segment.

Beginning in the second quarter of 2021 and continuing through the end of 2021, we saw strengthened demand for services in all of our segments compared to the same prior year period.

As a result, total revenues in the fourth quarter of 2021 increased 25.2% compared to the

fourth quarter of 2020, and full year 2021 revenues increased 7.3% compared to 2020.

We expect continued revenue growth in 2022 compared to 2021.

In order to support our liquidity during the COVID-19 pandemic, we took proactive measures to increase available cash on hand including, but not limited to, borrowing under our senior secured credit facility in the first quarter of 2020 and reducing discretionary operating and capital spending.

In each quarter subsequent to the first quarter of 2020, we made repayments on our borrowings to reduce our total debt outstanding due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources.

To further support our liquidity during the COVID-19 pandemic, we elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through the end of the year, which we expect to pay in equal installments in the fourth quarters of 2021 and 2022, as provided for under the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act.

In the second, third and fourth quarters of 2020, we made repayments on our borrowings to reduce our total debt outstanding to pre-pandemic levels due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources.

In 2021, we borrowed under our credit facility primarily to fund our annual performance bonus payment in March 2021 and our acquisitions of businesses during the year.

To further support our liquidity during the COVID-19 pandemic, we elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through December 31, 2020, as provided for under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

These deferred payments, which totaled $12.2 million, were paid in full in the third quarter of 2021.

See the “Liquidity and Capital Resources” section below for additional information on these items.

Fourth Quarter 2020 Restructuring Plan

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, which was substantially complete in the fourth quarter of 2020, provided for a reduction in certain

leased office spaces and a reduction in workforce of approximately 125 employees;

and resulted in an aggregate restructuring charge, including non-cash lease impairment charges, of $18.7 million.

The reduction in leased office spaces includes a portion of our principal executive office in Chicago, Illinois, as well as certain other office space in the U.S, which resulted in the recognition of $13.2 million of non-cash lease impairment charges on the related operating lease right-of-use (“ROU”) assets and fixed assets that 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.

The reduction in workforce resulted in a $4.8 million restructuring charge related to cash employee severance costs;

of which $2.0 million related to our Education segment, $1.2 million related to our Healthcare segment, $1.0 million related to our Business Advisory segment, and $0.6 million related to our corporate operations.

We do not expect to incur additional significant employee severance costs or non-cash lease impairment charges in 2021 related to the fourth quarter 2020 restructuring plan.

However, any significant decline in the estimated amount or delayed timing of sublease income used in the calculation of each non-cash lease impairment charge could result in additional non-cash lease impairment charges through the end of the lease terms.

We expect approximately $2.5 million of ongoing lease-related costs to be reflected as restructuring charges in 2021.

As a result of the reduction in workforce, we expect to realize annualized savings of approximately $21.0 million related to employee salaries and related benefits.

As a result of the reduction in leased office space, we expect to realize annualized savings of approximately $1.0 million in lease-related expense.

First Quarter 2020 Goodwill Impairment Charges

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 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 goodwill impairment test on both reporting units.

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.

The non-cash goodwill impairment charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $37.5 million as of March 31, 2020.

The non-cash goodwill impairment charge related to the Life Sciences reporting unit reduced the goodwill balance to zero as of March 31, 2020.

During the same time, we did not identify any indicators 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.

Additionally, during the second and third quarters of 2020, we did not identify any indicators that would lead us to believe that the fair values of our reporting units would not exceed their carrying values.

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2020 on all reporting units with goodwill balances and concluded that the fair value of all reporting units exceeded their carrying values.

See the “Critical Accounting Policies” section below and Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the goodwill impairment tests performed in 2020.

Enterprise Resource Planning System Implementation

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In January 2021, we successfully went live with the new ERP system, and we continue to progress with additional functionality and integrations as scheduled.

The implementation progressed on schedule and has not been significantly impacted by the COVID-19 pandemic due to the ability of our implementation team to work and collaborate remotely and the enhanced technology and cloud-based nature of our new ERP system.

The implementation progressed on schedule and was not significantly impacted by the COVID-19 pandemic due to the ability of our implementation team to work and collaborate remotely and the enhanced technology and cloud-based nature of our new ERP system.

We believe our investment in this new system will position our teams to drive efficiencies and provide more robust management reporting and data analytics to support future growth and the goals and vision of the company.

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

Acquisitions and Divestiture

During 2021, we completed the following acquisitions:

• Unico Solution, Inc.

- On February 1, 2021, we completed the acquisition of Unico Solution, Inc.

(“Unico Solutions”), a data strategy and technology consulting firm focused on helping clients enhance the use of their data to speed business transformation and accelerate cloud adoption.

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

The results of operations of Unico Solutions are included within the Business Advisory segment from the date of acquisition.

• Bad Rabbit, Inc.

- On October 1, 2021, we completed the acquisition of the research administration software services team of Bad Rabbit, Inc.

(“Bad Rabbit”).

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

• Whiteboard Communications Ltd.

- On December 1, 2021, we completed the acquisition of Whiteboard Communications Ltd.

(“Whiteboard”), a student enrollment advisory firm that helps colleges and universities with recruitment initiatives and financial aid strategies.

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

• Perception Health, Inc.

- On December 31, 2021, we completed the acquisition of Perception Health, Inc.

(“Perception Health”), a healthcare predictive analytics company focused on bringing data sources together for improved clinical and business decision-making.

The results of operations of Perception Health will be included in our consolidated financial statements and results of operations of our Healthcare segment beginning January, 1, 2022.

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

On November 1, 2021, we completed the divestiture of our Life Sciences business to a third-party.

The Life Sciences business, a reporting unit within the Business Advisory segment, provides commercial and research and development strategy, pricing and market access strategy solutions to customers in the life sciences industries.

For the ten months ended October 31, 2021, Life Sciences revenues were $16.7 million.

The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

How We Generate Revenues

A large portion of our revenues is generated by our full-time consultants who provide consulting services to our clients and are billable to our clients based on the number of hours worked.

A smaller portion of our revenues is generated by our other professionals, also referred to as full-time equivalents, some of whom work variable schedules as needed by our clients.

Full-time equivalent professionals consist of our coaches and their support staff from our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, employees who provide managed services in our Healthcare segment, and our employees who provide software support and maintenance services to our clients.

We translate the hours that these other professionals work on client engagements into a full-time

equivalent measure that we use to manage our business.

We refer to our full-time consultants and other professionals collectively as revenue-generating professionals.

Revenues generated by our full-time consultants are primarily driven by the number of consultants we employ and their utilization rates, as well as the billing rates we charge our clients.

A large portion of our revenues is generated by our full-time consultants who provide consulting and other professional services to our clients and are billable to our clients based on the number of hours worked, services provided, or achieved outcomes.

A smaller portion of our

revenues is generated by our other professionals, also referred to as full-time equivalents, some of whom work variable schedules as needed by our clients.

Full-time equivalent professionals consist of our coaches and their support staff from our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, and our employees who provide software support and maintenance services to our clients.

We translate the hours that these other professionals work on client engagements into a full-time equivalent measure that we use to manage our business.

Another portion of our revenue is generated by our Healthcare Managed Services employees within our Healthcare segment.

Our Healthcare Managed Services employees manage and provide revenue cycle billing, collections, insurance verification and change integrity services to clients.

We refer to our billable consultants, full-time equivalents and Healthcare Managed Services employees as revenue-generating professionals.

Revenues generated by our billable consultants are primarily driven by the number of consultants we employ and their utilization rates, as well as the billing rates we charge our clients.

Revenues generated by our other professionals, or full-time equivalents, are largely dependent on the number of consultants we employ, their hours worked, and billing rates charged.

Revenues generated by our coaches are largely dependent on the number of coaches we employ and the total value, scope, and terms of the consulting contracts under which they provide services, which are primarily fixed-fee contracts.

Revenues generated by our Managed Services solution are dependent on the total value, scope and terms of the related contracts.

Revenues generated by our Healthcare Managed Services employees are largely dependent on the total value, scope and terms of the related contracts.

We generate our revenues from providing professional services under four types of billing arrangements:

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Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-generating professionals at agreed upon rates.

Time-and-expense arrangements also include certain speaking engagements, conferences and publications purchased by our clients outside of Partner Contracts within our Culture and Organizational Excellence solution and the portion of our Healthcare Managed Services contracts that are billed under time-and-expense arrangements.

We recognize revenues under time-and-expense billing arrangements as the related services or publications are provided.

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For example, during the third and fourth quarters of the year, vacations taken by our clients can result in the deferral of activity on existing and new engagements, which would negatively affect our utilization rate.

The number of business work days is also affected by the number of vacation days taken by our consultants and holidays in

each quarter.

The number of business work days is also affected by the number of vacation days taken by our consultants and holidays in each quarter.

We typically have fewer business work days available in the fourth quarter of the year, which can impact revenues during that period.

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Our most significant expenses are costs classified as total direct costs.

These total direct costs primarily include salaries, performance bonuses, signing and retention bonuses, payroll taxes, and benefits for revenue-generating professionals, as well as technology costs, product and event costs, commissions, and fees paid to independent contractors that we retain to supplement our revenue-generating professionals, typically on an as-needed basis for specific client engagements.

Total direct costs primarily include salaries, performance bonuses, signing and retention bonuses, payroll taxes, and benefits for revenue-generating professionals, as well as technology costs, product and event costs, commissions, and fees paid to independent contractors that we retain to supplement our revenue-generating professionals, typically on an as-needed basis for specific client engagements.

Direct costs also include share-based compensation, which represents the cost of restricted stock and performance-based share awards, granted to our revenue-generating professionals.

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sales and marketing related expenses;

professional fees;

third-party professional fees;

recruiting and training expenses;

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Unallocated costs include corporate costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment.

These administrative function costs include corporate office support costs, office facility costs, costs 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.

These administrative function costs include corporate office support costs, office facility costs, costs related to accounting and finance, human resources, legal, marketing, information technology, and company-wide business development functions, as well as costs related to overall corporate management.

RESULTS OF OPERATIONS

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

In conjunction with our continuous evaluation of the appropriate level of disaggregation of revenues as our business evolves and in consideration of a group hire of approximately 300 employees in our Healthcare Managed Services solution within our Healthcare segment in the second quarter of 2021, we began assessing our operating performance by the following three employee types:

billable consultants, full-time equivalents, and Healthcare Managed Services employees.

The other operating data previously reported for the twelve months ended December 31, 2020 and 2019 was revised below to reflect this change.

This change has no impact on our consolidated total revenues or total revenues by segment.

Year Ended December 31,

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Other operating expenses 131,372 135,255 140,285

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

Litigation and other losses (gains) 173 (150) (1,196)

Depreciation and amortization 20,634 24,405 28,365

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Total operating income (loss) 52,839 (28,852) 63,706

Other expense, net 5,021 11,215 26,875

Other income (expense), net 27,197 (5,021) (11,215)

Income (loss) from continuing operations before taxes 80,036 (33,873) 52,491

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Other Operating Data:

Number of full-time billable consultants (at period end) (2) :

Number of billable consultants (at period end) (2) :

Healthcare 869 820 890

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Total 2,886 2,608 2,576

Average number of full-time billable consultants (for the period) (2) :

Average number of billable consultants (for the period) (2) :

Healthcare 822 863 849

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Total 2,716 2,600 2,427

Full-time billable consultant utilization rate (3) :

Billable consultant utilization rate (3) :

Healthcare 72.0 % 69.0 % 79.4 %

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Total 71.1 % 70.7 % 76.1 %

Full-time billable consultant average billing rate per hour (4) :

Billable consultant average billing rate per hour (4) :

Healthcare $ 243 $ 227 $ 229

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$ 209 $ 202 $ 211

Revenue per full-time billable consultant (in thousands):

Revenue per billable consultant (in thousands):

Healthcare $ 305 $ 272 $ 328

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Total $ 528 $ 504 $ 530

Healthcare Managed Services (7) :

Total revenues (in thousands) $ 47,718 $ 28,663 $ 4,453

Average number of Healthcare Managed Services employees (for the period) 382 91 14

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

We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

(2) Consists of our full-time professionals who provide consulting services and generate revenues based on the number of hours worked.

(3) Utilization rate for our full-time billable consultants is calculated by dividing the number of hours all of our full-time billable consultants worked on client assignments during a period by the total available working hours for all of these consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days.

(4) Average billing rate per hour for our full-time billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.

(2) Consists of our consulting professionals who provide consulting services and generate revenues based on the number of hours worked.

(3) Utilization rate for our billable consultants is calculated by dividing the number of hours all of our billable consultants worked on client assignments during a period by the total available working hours for all of these consultants during the same period, assuming a forty-hour work week, less paid holidays and vacation days.

(4) Average billing rate per hour for our billable consultants is calculated by dividing revenues for a period by the number of hours worked on client assignments during the same period.

(5) The Business Advisory segment includes operations of Huron Eurasia India.

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Absent the impact of Huron Eurasia India, Huron's consolidated average billing rate per hour would have been $216, $209, and $220 for the years ended December 31, 2021, 2020 and 2019, respectively.

(6) Consists of coaches and their support staff within our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, employees who provide managed services in our Healthcare segment, and full-time employees who provide software support and maintenance services to our clients.

(6) Consists of coaches and their support staff within our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, and full-time employees who provide software support and maintenance services to our clients.

(7) Consists of employees who manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients.

Non-GAAP Measures

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Restructuring and other charges 12,401 21,374 1,855

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

Litigation and other losses (gains) 198 (150) (1,196)

Transaction-related expenses 1,782 1,132 2,680

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Unrealized gain on preferred stock investment — (1,667) —

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

Losses (gains) on sales of businesses (31,510) 1,603 —

Foreign currency transaction losses (gains), net 419 (31) 160

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Restructuring and other charges 12,401 21,374 1,855

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

Litigation and other losses (gains), net 198 (150) (1,196)

Transaction-related expenses 1,782 1,132 2,680

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Unrealized gain on preferred stock investment — (1,667) —

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

Losses (gains) on sales of businesses (31,510) 1,603 —

Tax effect of adjustments 1,742 (23,199) (7,200)

Tax expense related to the enactment of Tax Cuts and Jobs Act of 2017 — — 1,749

Tax benefit related to “check-the-box” election

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We have excluded the effect of amortization of intangible assets from the calculation of adjusted net income from continuing operations presented above.

Amortization of intangibles is inconsistent in its amount and frequency and is significantly affected by the timing and size of our acquisitions.

Amortization of intangible assets is inconsistent in its amount and frequency and is significantly affected by the timing and size of our acquisitions.

Restructuring and other charges:

We have incurred charges due to the restructuring of various parts of our business, including the restructuring plan announced in the fourth quarter of 2020 to reduce operating costs to address the impact of the COVID-19 pandemic on our business.

Restructuring charges have primarily consisted of costs associated with office space consolidations, including lease impairment charges and accelerated depreciation on lease-related property and equipment, and severance charges.

We have incurred charges due to the restructuring of various parts of our business, including restructuring charges related to the sale of the Life Sciences business in the fourth quarter of 2021 and the restructuring plan announced in the fourth quarter of 2020 to reduce operating costs to address the impact of the COVID-19 pandemic on our business.

These restructuring charges primarily consist of costs associated with office space consolidations, including lease impairment charges and accelerated depreciation on lease-related property and equipment, and employee-related charges.

Additionally, we have excluded the effect of a $0.8 million one-time charge incurred during the first quarter of 2020 related to redundant administrative costs in our corporate operations which is recorded within selling, general and administrative expenses on our consolidated statement of operations.

We have excluded the effect of the restructuring charges and other charges from our non-GAAP measures to permit comparability with periods that were not impacted by these items.

Litigation and other gains, net:

We have excluded the effects of litigation and other gains, net which primarily consist of net remeasurement gains related to contingent acquisition liabilities and litigation settlement losses and gains to permit comparability with periods that were not impacted by these items.

We have excluded the effect of the restructuring and other charges from our non-GAAP measures to permit comparability with periods that were not impacted by these items.

Litigation and other losses (gains), net:

We have excluded the effects of litigation and other losses (gains), net which primarily relate to the remeasurement of our contingent consideration liabilities related to business acquisitions and litigation settlement losses and gains to permit comparability with periods that were not impacted by these items.

Transaction-related expenses:

To permit comparability with prior periods, we excluded the impact of third-party legal and accounting fees incurred in 2020 related to the acquisitions of ForceIQ, Inc., which closed effective November 1, 2020, and Unico Solution, Inc., which closed effective February 1, 2021.

See Note 3 “Acquisitions” within the notes to our consolidated financial statements and the “Subsequent Event” section below for additional information on these acquisitions.

To permit comparability with prior periods, we excluded the impact of third-party legal and accounting fees incurred in 2021 and 2020 related to business acquisitions.

We also excluded the impact of third-party legal and accounting fees incurred in 2019 related to the evaluation of a potential acquisition that ultimately did not consummate.

Goodwill impairment charges:

We excluded the effect of the goodwill impairment charges recognized in the first quarter of 2020 as these are infrequent events and their exclusion permits comparability with periods that were not impacted by such charges.

We have excluded the effect of the goodwill impairment charges recognized in the first quarter of 2020 as these are infrequent events and their exclusion permits comparability with periods that were not impacted by such charges.

Non-cash interest on convertible notes:

We incurred non-cash interest expense relating to the implied value of the equity conversion component of our Convertible Notes.

We incurred non-cash interest expense relating to the implied value of the equity conversion component of our Convertible Notes, which matured in October 2019.

The value of the equity conversion component was treated as a debt discount and amortized to interest expense over the life of the Convertible Notes using the effective interest rate method.

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Unrealized gain on preferred stock investment:

We have excluded the effect of an unrealized gain recognized in 2020 related to the fair value of our preferred stock investment in Medically Home Group, Inc.

(“Medically Home”), which is included as a component of other income (expense), net, as management believes that this gain is not indicative of the ongoing performance of our business and its exclusion permits comparability with prior periods.

See Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment in Medically Home.

Losses on sales of businesses:

We have excluded the effect of non-operating losses recognized as a result of sales of businesses as they are infrequent, management believes that these items are not indicative of the ongoing performance of our business, and their exclusion permits comparability with periods that were not impacted by such items.

The 2020 loss primarily relates to the sale of our U.K.

We have excluded the effect of an unrealized gain recognized in other income (expense), net in 2020 related to the fair value of our preferred stock investment in Medically Home Group, Inc.

(“Medically Home”), as management believes that this gain is not indicative of the ongoing performance of our business and its exclusion permits comparability with prior periods.

Losses (gains) on sales of businesses:

We have excluded the effect of non-operating losses and gains recognized as a result of sales of businesses as they are infrequent, management believes that these items are not indicative of the ongoing performance of our business, and their exclusion permits comparability with periods that were not impacted by such items.

The 2021 gain relates to the sale of our Life Sciences business within the Business Advisory segment in the fourth quarter of 2021, and the 2020 loss primarily relates to the sale of our U.K.

life sciences drug safety practice within the Business Advisory segment in the fourth quarter of 2020.

and the 2018 loss relates to the sale of our Middle East practice within the Business Advisory segment in the second quarter of 2018.

Foreign currency transaction losses (gains), net:

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The non-GAAP income tax adjustment reflects the incremental tax impact applicable to the non-GAAP adjustments.

Tax expense related to the enactment of Tax Cuts and Jobs Act of 2017 ( “ 2017 Tax Reform ” ):

We have excluded the impact of the 2017 Tax Reform, which was enacted in the fourth quarter of 2017.

The net tax expense recorded in 2018 was due to a valuation allowance for foreign tax credits and an adjustment to our withholding tax on outside basis differences due to our change in assertion for permanent reinvestment, which were partially offset by U.S.

federal return to provision adjustments related to 2017 Tax Reform items on our 2017 corporate tax return.

The exclusion of the 2017 Tax Reform impact permits comparability with periods that were not impacted by this item.

Tax benefit related to "check-the-box" election:

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The exclusion of this discrete tax benefit permits comparability with periods that were not impacted by this item.

Refer to Note 17 “Income Taxes” within the notes to the consolidated financial statements for additional information.

Income tax expense, Interest expense, net of interest income, Depreciation and amortization:

We have excluded the effects of income tax expense, interest expense, net of interest income, and depreciation and amortization in the calculation of EBITDA as these are customary exclusions as defined by the calculation of EBITDA to arrive at meaningful earnings from core operations excluding the effect of such items.

Included within the depreciation and amortization adjustment is the amortization of capitalized implementation costs of our ERP and other related software, which is included within selling, general and administrative expenses on our consolidated statement of operations.

Adjusted weighted average shares - diluted:

3 unchanged sentences

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

Revenues decreased $32.6 million, or 3.7%, to $844.1 million for the year ended December 31, 2020, from $876.8 million for the year ended December 31, 2019.

Revenues in 2020 were negatively impacted by the COVID-19 pandemic as some clients reprioritized or delayed certain projects, primarily in our Healthcare and Education segments.

Of the overall $32.6 million decrease in revenues, $20.3 million was attributable to our full-time billable consultants and $12.3 million was attributable to our full-time equivalents.

The decrease in full-time billable consultant revenues was attributable to decreased demand for services in our Healthcare and Education segments, partially offset by strengthened demand for services in our Business Advisory segment, as discussed below in Segment Results.

The overall decrease in full-time billable consultant revenues reflected overall decreases in the consultant utilization rate and average billing rate, partially offset by an overall increase in the average number of full-time billable consultants in 2020 compared to 2019.

The decrease in full-time equivalent revenues was attributable to a decrease in full-time equivalent revenues in our Healthcare segment, partially offset by increases in full-time equivalent revenues in our Business Advisory and Education segments, as discussed below in Segment Results;

and reflected an overall decrease in revenue per full-time equivalent, partially offset by an overall increase in the average number of full-time equivalents.

In 2020, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services, particularly within our Healthcare and Education segments where some clients reprioritized or delayed certain projects.

Given the uncertainties around the duration of the COVID-19 pandemic, we continue to remain cautious about revenue growth in the first half of 2021.

Revenues increased $61.5 million, or 7.3%, to $905.6 million for the year ended December 31, 2021, from $844.1 million for the year ended December 31, 2020.

The increase in revenues reflected strengthened demand for services in all of our segments and the incremental revenues from our acquisitions, as discussed below in Segment Results.

Of the overall $61.5 million increase in revenues, $41.2 million was attributable to our billable consultants, $19.1 million was attributable to our Healthcare Managed Services employees and $1.2 million was attributable to our full-time equivalents.

The increase in billable consultant revenues was attributable to an increase in demand for services in all of our segments, as discussed below in Segment Results.

The overall increase in billable consultant revenues reflected overall increases in the average number of billable consultants, average billing rate, and consultant utilization rate in 2021 compared to 2020.

The increase in Healthcare Managed Services revenues was primarily attributable to an increase in demand for these services, which led to an increase in the average number of Healthcare Managed Services employees in 2021 compared to the prior year.

At the beginning of the second quarter of 2021, we hired approximately 300 employees to expand our capacity to manage and provide revenue cycle billing, collections, insurance verification and change integrity services to our healthcare clients.

These employees are serving clients in our Healthcare Managed Services capability, including serving under a short-term contract with an existing client which we entered into in connection with this group hire.

The increase in full-time equivalent revenues was attributable to an increase in full-time equivalent revenues in our Education and Business Advisory segments, partially offset by a decrease in full-time equivalent revenues in our Healthcare segment, as discussed below in Segment Results;

and reflected an overall increase in revenue per full-time equivalent, partially offset by an overall decrease in the average number of full-time equivalents in 2021 compared to 2020.

In most of 2020 and the first quarter of 2021, the COVID-19 pandemic negatively impacted sales and elongated the sales cycle for new opportunities for certain services, particularly within our Healthcare and Education segments as some clients reprioritized or delayed certain projects.

Subsequent to the first quarter of 2021, we saw an increase in our sales pipeline and the pace of signings in our Healthcare and Education businesses.

While overall demand for our services in the first quarter of 2021 was negatively impacted by the COVID-19 pandemic, the overall demand for our services strengthened in 2021 compared to 2020 and we expect continued revenue growth in 2022 compared to 2021.

The COVID-19 pandemic has caused the need for many companies to accelerate their digital transformation to drive operational efficiencies, better engage with their customers, and make better data-driven decisions.

This has resulted in strong demand for our digital, technology and analytic offerings, particularly within our Business Advisory segment.

Indicative of our expectations for future growth in this segment, we continue to make investments in these offerings, both organically and through strategic acquisitions, such as our acquisitions of ForceIQ in November 2020 and Unico Solutions in February 2021, and new offerings and capabilities within this segment where we see strategic opportunities.

Indicative of our expectations for future growth in this capability, we continue to make investments in these offerings, both organically and through strategic acquisitions, such as our acquisitions of ForceIQ in 2020 and Unico Solutions and Perception Health in 2021, and through the addition of new offerings and solutions where we see strategic opportunities in the digital capability.

Total Direct Costs

Direct costs, excluding amortization of intangible assets and software development costs, increased $44.3 million, or 7.5%, to $636.8 million for the year ended December 31, 2021 from $592.4 million for the year ended December 31, 2020.

The overall $16.8 million increase in direct costs primarily related to a $27.1 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by increased headcount in all of our segments and primarily reflected hiring that occurred prior to the COVID-19 pandemic, as well as a $2.9 million increase in technology expenses and a $2.3 million increase in share-based compensation expense for our revenue-generating professionals.

These increases were partially offset by an $8.0 million decrease in performance bonus expense for our revenue-generating professionals, a $4.5 million decrease in signing, retention and other bonus expense for our revenue-generating professionals, and a $2.3 million decrease in product and event costs.

As a percentage of revenues, our direct costs increased to 70.2% during 2020 compared to 65.7% during 2019, primarily due to the increase in salaries and related expenses for our revenue-generating professionals, partially offset by the decrease in performance bonus expense for our revenue-generating professionals, as a percentage of revenues.

Total direct costs included $5.4 million of amortization expense for internal software development costs and intangible assets for both years ended December 31, 2020 and 2019.

The overall $44.3 million increase in direct costs primarily related to a $32.5 million increase in salaries and related expenses for our revenue-generating professionals, which was largely driven by an overall increase in headcount;

an $8.0 million increase in performance bonus expense for our revenue-generating professionals;

and a $3.4 million increase in signing, retention and other bonus expense for our revenue-generating professionals.

As a percentage of revenues, our direct costs slightly increased to 70.3% during 2021 compared to 70.2% during 2020.

Total direct costs for the year ended December 31, 2021 included $3.8 million of amortization expense for internal software development costs and intangible assets, compared to $5.4 million of amortization expense in same the prior year period.

Intangible asset amortization included within total direct costs related to technology and software, certain customer relationships, and customer contracts acquired in connection with our business acquisitions.

See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on our intangible assets.

Operating Expenses and Other Gains, Net

Selling, general and administrative expenses decreased $32.4 million, or 15.9%, to $170.7 million for the year ended December 31, 2020, compared to $203.1 million for the year ended December 31, 2019.

The $32.4 million decrease primarily related to an $11.9 million decrease in promotion and marketing expenses, a $5.1 million decrease in performance bonus expense for our support personnel, a $3.2 million decrease in training expenses, a $3.2 million decrease in practice administration and meetings expenses, a $2.3 million decrease in facilities expenses, a $2.2 million decrease in third-party consulting expenses, a $1.8 million decrease in recruiting expenses, a $1.7 million decrease in share-based compensation expense for our support personnel, and a $1.1 million decrease in legal expenses.

The decreases in promotion and marketing expenses, training expenses, practice administration and meetings expenses, and recruiting expenses primarily related to the cancellation or delay of in-person meetings and events and business travel due to the COVID-19 pandemic.

The decrease in share-based compensation expense primarily related to a decrease in the expected funding of performance-based share awards for executive officers.

The decrease in legal expenses was primarily due to third-party transaction-related expenses related to the evaluation of a potential acquisition in the second quarter of 2019 that ultimately did not consummate.

As a percentage of revenues, selling, general and administrative expenses decreased to 20.2% during 2020 compared to 23.2% during 2019, primarily due to the decreases in promotion and marketing expenses, performance bonus expense for our support personnel and training expenses, all as percentages of revenues.

Operating Expenses and Other Losses (Gains), Net

Selling, general and administrative expenses increased $7.2 million, or 4.2%, to $177.9 million for the year ended December 31, 2021, compared to $170.7 million for the year ended December 31, 2020.

The $7.2 million increase primarily related to a $3.0 million increase in performance bonus expense for our support personnel, a $2.4 million increase in legal expense, a $2.1 million increase in software and data hosting expense, a $1.9 million increase in salaries and related expenses for our support personnel, a $1.7 million increase in third-party professional advisory expense, and a $1.6 million increase in signing, retention and other bonus expense for our support personnel.

The increase in legal expense and third-party professional advisory expense was primarily attributable to transaction-related expenses incurred with the acquisitions completed in 2021.

These increases in selling, general and administrative expenses were partially offset by a $3.2 million decrease in practice administration and meetings expense and a $1.4 million decrease in office supplies expense.

As a percentage of revenues, selling, general and administrative expenses decreased to 19.6% during 2021 compared to 20.2% during 2020, primarily due to revenue growth that outpaced the increase in salaries and related expenses for our support personnel and the decrease in practice administration and meetings expense.

Restructuring charges for the year ended December 31, 2021 totaled $12.4 million, compared to $20.5 million for the year ended December 31, 2020.

On November 1, 2021, we completed the sale of our Life Sciences business, a reporting unit within the Business Advisory segment, to a third-party.

In connection with the sale, we incurred $8.5 million of restructuring charges, consisting of $6.8 million of transaction-related employee payments, $0.9 million of third-party legal and professional advisory fees, and $0.8 million of accelerated amortization and depreciation on the operating lease right-of-use asset ("ROU") and fixed assets related to our London, U.K.

office space, which we vacated as a result of the Life Sciences divestiture.

In the ten months ended October 31, 2021, the Life Sciences business generated $16.7 million of revenue and is not significant to our consolidated financial statements.

Additionally, in 2021, we incurred $2.3 million of rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for other previously vacated office spaces, $1.3 million of other employee-related expenses in our Business Advisory segment, and $0.2 million of third-party professional advisory fees related to the reorganization of our internal operating and financial reporting structure.

See Note 19 "Segment Information" within the notes to our consolidated financial statements for more information on our segment reorganization that is effective in the first quarter of 2022.

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 on the related operating lease right-of-use (“ROU”) assets and fixed assets which we intend to sublease, and $0.7 million of accelerated amortization and depreciation on the related operating lease ROU assets and fixed assets we intend to abandon.

The non-cash lease impairment charges include an estimate of future sublease income.

Any significant decline in the estimated amount or delayed timing of sublease income could result in additional non-cash lease impairment charges.

See Note 5 “Leases” within the notes to our consolidated financial statements for additional information on our leases.

The restructuring plan announced in the fourth quarter of 2020 also included a reduction in workforce, which resulted in a $4.8 million restructuring charge for employee severance costs;

The restructuring plan provided for a reduction in certain leased office spaces which included a portion of our principal executive office in Chicago, Illinois, and additional domestic locations.

As a result, we recognized $13.2 million of non-cash lease impairment charges on the related operating lease ROU assets and fixed assets which we intend to sublease, and $0.7 million of accelerated amortization and depreciation on the related operating lease ROU assets and fixed assets we abandoned.

The fourth quarter 2020 restructuring plan also included a reduction in workforce, which resulted in a $4.8 million restructuring charge for employee severance costs;

As of December 31, 2020, $2.4 million of the $4.8 million restructuring charge related to employee severance costs remained outstanding and is expected to be paid in the first quarter of 2021.

We expect approximately $2.5 million of ongoing lease-related costs to be reflected as restructuring charges in 2021.

result of the reduction in workforce, we expect to realize annualized savings of approximately $21.0 million related to employee salaries and related benefits.

As a result of the reduction in leased office space, we expect to realize annualized savings of approximately $1.0 million in lease-related expense.

Additional restructuring charges recognized in 2020 include a $1.2 million accrual for the termination of a third-party advisor agreement in our Business Advisory segment and $0.4 million related to workforce reductions completed prior to the fourth quarter of 2020 to better align resources with market demand.

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.

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

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

See Note 5 “Leases” within the notes to our consolidated financial statements for additional information on our leases.

Additional restructuring charges during 2019 included $0.6 million related to workforce reductions to better align resources with market demand and workforce reductions in our corporate operations.

See Note 11 “Restructuring Charges” within the notes to our consolidated financial statements for additional information on our restructuring events.

Litigation and other losses (gains), net totaled a loss of $0.2 million for the year ended December 31, 2021, which primarily consisted of remeasurement losses to increase the fair value of our contingent consideration liability related to a business combination.

Litigation and other gains, net totaled a gain of $0.2 million for the year ended December 31, 2020, which consisted of a litigation settlement gain for the resolution of a claim that was settled in the first quarter of 2020.

Litigation and other gains, net totaled a net gain of $1.2 million for the year ended December 31, 2019, which primarily consisted of $1.5 million of remeasurement gains to decrease the estimated fair value of our liabilities for contingent consideration payments related to business acquisitions, partially offset by a $0.4 million litigation loss accrual related to the legal claim that was subsequently settled during the first quarter of 2020.

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.

See Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on the fair value of contingent consideration liabilities.

Depreciation and amortization expense decreased $2.6 million, or 10.7%, to $21.7 million for the year ended December 31, 2021, from $24.3 million for the year ended December 31, 2020.

The decrease was primarily attributable to a decrease in amortization expense for the trade name acquired in our Studer Group acquisition that was fully amortized in the fourth quarter of 2019;

decreasing amortization expense for customer relationships due to the accelerated basis of amortization in prior periods, including the customer relationships acquired in our Studer Group acquisition;

The decrease was primarily attributable to decreasing amortization expense for customer relationships acquired in business acquisitions due to the accelerated basis of amortization in prior periods, including the customer relationships acquired in our Studer Group acquisition;

and customer relationships acquired in other business acquisitions that were fully amortized in prior periods;

Intangible asset amortization included within operating expenses for the years ended December 31, 2020 and 2019 primarily related to certain customer relationships, trade names and non-competition agreements acquired in connection with our business acquisitions.

as well as a decrease in depreciation expense for leasehold improvements and furniture and fixtures related to vacated office spaces.

Intangible asset amortization expense included within operating expenses primarily related to certain customer relationships, trade names, and non-competition agreements acquired in connection with our business acquisitions.

See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on our intangible assets.

During the first quarter of 2020, we recorded $59.8 million of non-cash pretax goodwill impairment charges related to our Strategy and Innovation and Life Sciences reporting units within our Business Advisory segment primarily related to the expected decline in sales, increased uncertainty in the backlog and a decrease in the demand for the services these reporting units provide as a result of the COVID-19 pandemic.

These charges are non-cash in nature and do not affect our liquidity or debt covenants.

The non-cash goodwill impairment charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $37.5 million as of March 31, 2020.

The non-cash goodwill impairment charge related to the Life Sciences reporting unit reduced the goodwill balance to zero as of March 31, 2020.

primarily related to the expected decline in sales, increased uncertainty in the backlog and a decrease in the demand for the services these reporting units provide, as a result of the COVID-19 pandemic.

These charges were non-cash in nature and did not affect our liquidity or debt covenants.

See Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the charges.

Operating Income (Loss)

Operating income decreased $92.6 million, to an operating loss of $28.9 million for the year ended December 31, 2020, from operating income of $63.7 million for the year ended December 31, 2019.

This decrease is primarily attributable to the $59.8 million non-cash pretax goodwill impairment charges related to our Business Advisory segment that were recognized in the first quarter of 2020, the decrease in revenues, the increase in salaries and related expenses for our revenue-generating professionals, and the increase in restructuring charges;

partially offset by the decrease in selling, general and administrative expenses as discussed above.

Operating margin, which is defined as operating income (loss) expressed as a percentage of revenues, decreased to (3.4)% in 2020 compared to 7.3% in 2019.

The decrease in operating margin was primarily attributable to the goodwill impairment charges recognized in 2020 and the increases in salaries and related expenses for our revenue-generating professionals

and restructuring charges.

These decreases to the operating margin were partially offset by the decrease in selling, general and administrative expenses, as a percentage of revenues.

Total Other Expense, Net

Interest expense, net of interest income decreased $6.4 million to $9.3 million for the year ended December 31, 2020 from $15.6 million for the year ended December 31, 2019, primarily due to the maturity of our Convertible Notes on October 1, 2019, partially offset by higher levels of borrowing under our credit facility in 2020 compared to 2019.

See the “Liquidity and Capital Resources” section below and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information on our Convertible Notes and credit facility.

Other income, net totaled $4.3 million for the year ended December 31, 2020 and primarily consisted of a $4.1 million net gain related to the increase in the market value of our investments that are used to fund our deferred compensation liability;

a $1.7 million unrealized gain related to the increase in the fair value of our preferred stock investment in Medically Home Group, Inc.;

and a $1.5 million loss on sale of business recorded in the fourth quarter of 2020.

On December 30, 2020, we sold our U.K.

life sciences drug safety practice that was part of the Life Sciences reporting unit within our Business Advisory segment to former employees.

The sale did not meet the criteria for reporting separately as discontinued operations.

In 2020, this practice generated $2.3 million of revenue and was not significant to our consolidated financial statements.

Other income, net totaled $4.4 million for the year ended December 31, 2019 and primarily consisted of a $4.5 million net gain related to the increase in the market value of our investments that are used to fund our deferred compensation liability.

Operating income increased $81.7 million, to income of $52.8 million for the year ended December 31, 2021, from a loss of $28.9 million for the year ended December 31, 2020.

This increase is primarily attributable to the $59.8 million non-cash pretax goodwill impairment charges recognized in the first quarter of 2020 that related to our Business Advisory segment.

The increase in operating income is also attributable to the increase in revenues and the decrease in restructuring charges for 2021 compared to 2020, partially offset by the increases in salaries and related expenses for our revenue-generating professionals, performance bonus expense for our revenue-generating professionals, and selling, general and administrative expenses in 2021 compared to 2020.

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

The increase in operating margin was primarily attributable to the goodwill impairment charges recognized in 2020, the decrease in restructuring charges and the increase in revenues in 2021 compared to 2020.

Total Other Income (Expense), Net

Interest expense, net of interest income decreased $1.1 million to $8.2 million for the year ended December 31, 2021 from $9.3 million for the year ended December 31, 2020, primarily attributable to lower levels of borrowing under our credit facility during 2021 compared to 2020.

See Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for additional information about our senior secured credit facility.

Other income, net totaled $35.3 million for the year ended December 31, 2021 and primarily consisted of a $31.5 million pre-tax gain recognized on the sale of our Life Sciences business in the fourth quarter of 2021 and a $4.2 million net unrealized gain in the market value of our investments that are used to fund our deferred compensation liability.

Other income, net totaled $4.3 million for the year ended December 31, 2020 and primarily consisted of a $4.1 million net unrealized gain in the market value of our investments that are used to fund our deferred compensation liability;

a $1.7 million unrealized gain in the fair value of our preferred stock investment in Medically Home Group, Inc.;

and a $1.5 million loss on the sale of our U.K.

life sciences drug safety practice in the fourth quarter of 2020.

See Note 13 “Fair Value of Financial Instruments” within the notes to our consolidated financial statements for additional information on our preferred stock investment in Medically Home Group, Inc, and Note 3 "Acquisitions and Divestitures" within the notes to our consolidated financial statements for additional information on the divestitures completed in 2021 and 2020.

Income Tax Expense (Benefit)

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

For the year ended December 31, 2020, our effective tax rate was 30.0% as we recognized an income tax benefit from continuing operations of $10.2 million on a loss from continuing operations of $33.9 million.

For the year ended December 31, 2021, our effective tax rate was 21.3% as we recognized income tax expense from continuing operations of $17.0 million on income from continuing operations of $80.0 million.

The effective tax rate for 2020 was more favorable than the statutory rate, inclusive of state income taxes, of 26.5%, primarily due to the tax benefit related to the CARES Act described above, a discrete tax benefit for share-based compensation awards that vested primarily in the first quarter of 2020, the positive impact of certain federal tax credits and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability.

The effective tax rate for 2021 was more favorable than the statutory rate, inclusive of state income taxes, of 26.3% primarily due to the tax benefits related to the CARES Act described below.

The effective tax rate also reflected the positive impact of certain federal tax credits and a discrete tax benefit recognized during the second quarter of 2021 related to electing the Global Intangible Low-Taxed Income (“GILTI”) high-tax exclusion retroactively for the 2018 tax year.

On July 20, 2020, the U.S.

Treasury issued and enacted final regulations related to GILTI that allow certain U.S.

taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from their GILTI inclusions.

The GILTI high-tax exclusion is an annual election and is retroactively available.

These favorable items were partially offset by certain nondeductible business expenses and increases in our valuation allowance primarily due to increases in deferred tax assets recorded for foreign tax credits.

The effective tax rate for 2020 was more favorable than the statutory rate, inclusive of state income taxes, of 26.5%, primarily due to the tax benefit related to the CARES Act described below, a discrete tax benefit for share-based compensation awards that vested primarily in the first quarter of 2020, the positive impact of certain federal tax credits and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability.

These favorable items were partially offset by increases in our valuation allowance primarily due to increases in deferred tax assets recorded for foreign tax credits, certain nondeductible business expenses and the nondeductible portion of the goodwill impairment charges recorded during the first quarter of 2020.

The effective tax rate for 2019 was more favorable than the statutory rate, inclusive of state income taxes, of 25.9%, primarily due to federal and state tax credits, a tax benefit related to the change in valuation allowance primarily due to realizing deferred tax assets recorded for foreign tax credits, and a tax benefit related to non-taxable gains on our investments used to fund our deferred compensation liability.

These favorable items were partially offset by additional tax expense related to disallowed executive compensation.

The CARES Act, which was signed into law on March 27, 2020, is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to the net operating loss carryback period, options to defer payroll tax payments for a limited period and technical corrections to tax depreciation methods for qualified improvement property.

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

As a result of electing the retroactive GILTI high-tax exlusion in the second quarter of 2021, we recognized a $1.0 million tax benefit of which $0.4 million related to carrying back our increased 2018 federal net operating loss to prior year income for a refund at the higher, prior year tax rate.

During the third quarter of 2021, we recognized an additional tax benefit of $2.0 million, primarily related to the U.S.

federal return to provision adjustments for carrying back our increased 2020 federal net operating loss to prior year income for a refund at the higher, prior year tax rate.

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

Net Income (Loss) from Continuing Operations and Earnings (Loss) per Share

Net income from continuing operations decreased by $65.7 million to a net loss from continuing operations of $23.7 million for the year ended December 31, 2020, from net income from continuing operations of $42.0 million for the year ended December 31, 2019.

This decrease is primarily attributable to the $59.8 million non-cash goodwill impairment charges related to our Business Advisory segment recognized in the first quarter of 2020;

the decrease in revenues;

the increase in salaries and related expenses for our revenue-generating professionals;

and the increase in restructuring charges in 2020 compared to 2019, primarily related to the $18.7 million of restructuring charges recognized in the fourth quarter of 2020;

partially offset by the decrease in selling, general and administrative expenses in 2020 compared to 2019 and the related tax impact of these items.

Diluted loss per share from continuing operations for the year ended December 31, 2020 was $1.08 compared to diluted earnings per share from continuing operations of $1.87 for 2019.

The non-cash goodwill impairment charges and the

restructuring charges related to the fourth quarter 2020 restructuring plan had unfavorable impacts on our diluted earnings per share from continuing operations of $2.07 and $0.63, respectively.

Net income from continuing operations increased by $86.7 million to net income from continuing operations of $63.0 million for the year ended December 31, 2021, from a net loss from continuing operations of $23.7 million for the year ended December 31, 2020.

This increase is primarily attributable to the $59.8 million non-cash pre-tax goodwill impairment charges related to our Business Advisory segment recognized in the first quarter of 2020 and the $31.5 million pre-tax gain on sale of our Life Sciences business in the fourth quarter of 2021, partially offset by the tax impact of these items, as well as the increase in revenues partially offset by the increases in direct costs and selling, general and administrative expenses discussed above.

As a result of the increase in net income from continuing operations, diluted earnings per share from continuing operations for the year ended December 31, 2021 was $2.89 compared to a diluted loss per share from continuing operations of $1.08 for 2020.

The gain on sale of our Life Sciences business in the fourth quarter of 2021 had a $1.09 favorable impact on diluted earnings per share from continuing operations in 2021 and the non-cash goodwill impairment charges had a $2.07 unfavorable impact on diluted earnings per share from continuing operations in 2020.

EBITDA and Adjusted EBITDA

EBITDA decreased $96.8 million to $5.1 million for the year ended December 31, 2020, from $101.9 million for the year ended December 31, 2019.

The decrease in EBITDA was primarily attributable to the non-cash goodwill impairment charges of $59.8 million recognized in the first quarter of 2020, the decrease in revenues, and the increases in salaries and related expenses for our revenue-generating professionals and restructuring charges in 2020 compared to 2019;

partially offset by the decrease in selling, general and administrative expenses in 2020 compared to 2019.

Adjusted EBITDA decreased $18.2 million to $87.1 million in 2020 from $105.4 million in 2019.

The decrease in adjusted EBITDA was primarily attributable to the decrease in revenues and increase in salaries and related expenses for our revenue-generating professionals in 2020 compared to 2019;

partially offset by the decrease in selling, general and administrative expenses, excluding transaction-related expenses related to the evaluation of acquisitions, in 2020 compared to 2019.

EBITDA increased $109.5 million to $114.5 million for the year ended December 31, 2021, from $5.1 million for the year ended December 31, 2020.

The increase in EBITDA was primarily attributable to the $59.8 million non-cash goodwill impairment charges related to our Business Advisory segment recognized in the first quarter of 2020;

the $31.5 million gain on sale of our Life Sciences business in the fourth quarter of 2021;

and the increase in segment operating income, as discussed in Segment Results below.

Adjusted EBITDA increased $10.7 million to $97.8 million in 2021 from $87.1 million in 2020.

The increase in adjusted EBITDA was primarily attributable to the increase in segment operating income, partially offset by an increase in corporate expenses, excluding the impact of restructuring charges on these items.

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share

Adjusted net income from continuing operations decreased $13.7 million to $47.9 million for the year ended December 31, 2020, compared to $61.6 million for the year ended December 31, 2019.

As a result of the decrease in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was $2.15 in 2020 compared to $2.74 in 2019.

Adjusted net income from continuing operations increased $9.0 million to $56.9 million for the year ended December 31, 2021, compared to $47.9 million for the year ended December 31, 2020.

As a result of the increase in adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations was $2.61 in 2021 compared to $2.15 in 2020.

Segment Results

Healthcare segment revenues decreased $45.8 million, or 11.5%, to $353.4 million for the year ended December 31, 2020, from $399.2 million for the year ended December 31, 2019, primarily due to the negative impact of the COVID-19 pandemic on demand for our services within this segment, as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

Healthcare segment revenues increased $24.1 million, or 6.8%, to $377.6 million for the year ended December 31, 2021, from $353.4 million for the year ended December 31, 2020.

The overall increase was primarily due to strengthened demand for this segment's services

subsequent to the first quarter of 2021 and the favorable comparison against 2020, which was more significantly impacted by the COVID-19 pandemic as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

For the year ended December 31, 2021, revenues from fixed-fee arrangements;

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The level of performance-based fees earned may vary based on our clients’ risk sharing preferences and the mix of services we provide.

Of the overall $45.8 million decrease in revenues, $26.3 million was attributable to a decrease in revenues from our full-time billable consultants and $19.5 million was attributable to our full-time equivalents.

The decrease in revenues attributable to our full-time billable consultants reflected a decrease in the consultant utilization rate, partially offset by increases in the average billing rate and the average number of full-time billable consultants in 2020 compared to 2019.

The decrease in revenues attributable to our full-time equivalents reflected a decrease in revenue per full-time equivalent, partially offset by an increase in the average number of full-time equivalents in 2020 compared to 2019.

Of the overall $24.1 million increase in revenues, $19.1 million was attributable to an increase in revenues from our Healthcare Managed Services employees and $15.6 million was attributable to an increase in revenues from our billable consultants, partially offset by a $10.5 million decrease in revenues from our full-time equivalents.

The increase in revenues attributable to our Healthcare Managed Services employees was primarily attributable to an increase in demand for these services, which led to an increase in the average number of managed services employees in 2021 compared to the prior year.

The increase in revenues attributable to our billable consultants reflected increases in the average billing rate and the consultant utilization rate, partially offset by a decrease in the average number of billable consultants during 2021 compared to the prior year.

The decrease in full-time equivalent revenues was primarily driven by a decrease in demand for certain services and a decreased use of contractors and project consultants;

and reflected a decrease in the average number of full-time equivalents, partially offset by an increase in revenue per full-time equivalent during 2021 compared to the same prior year period.

Operating Income

Healthcare segment operating income decreased $30.8 million, or 24.5%, to $94.9 million for the year ended December 31, 2020, from $125.7 million for the year ended December 31, 2019.

The Healthcare segment operating margin, defined as segment operating income expressed as a percentage of segment revenues, decreased to 26.9% in 2020 from 31.5% in 2019.

The decrease in this segment’s operating margin was primarily attributable to an increase in salaries and related expenses for our revenue-generating professionals;

partially offset by decreases in performance bonus expense for our revenue-generating professionals, product and event costs, and contractor expenses, all as percentages of revenues.

Healthcare segment operating income increased $9.1 million, or 9.6%, to $104.0 million for the year ended December 31, 2021, from $94.9 million for the year ended December 31, 2020.

The Healthcare segment operating margin, defined as segment operating income expressed as a percentage of segment revenues, increased to 27.5% in 2021 from 26.9% in 2020.

The increase in this segment’s operating margin was primarily attributable to decreases in salaries and related expenses for our support personnel, contractor expense, practice administration and meetings expense, and restructuring charges.

These increases to the segment operating margin were partially offset by an increase in performance bonus expense for our revenue-generating professionals, as a percentage of revenues.

Business Advisory

Business Advisory segment revenues increased $14.9 million, or 5.9%, to $267.4 million for the year ended December 31, 2020, from $252.5 million for the year ended December 31, 2019, primarily related to strengthened demand for our cloud-based technology and analytics solutions and our restructuring and capital advisory solutions provided to organizations in transition.

Business Advisory segment revenues increased $24.3 million, or 9.1%, to $291.7 million for the year ended December 31, 2021, from $267.4 million for the year ended December 31, 2020, primarily related to strengthened demand for our cloud-based technology and analytics solutions and our strategy and innovation solutions.

Revenues in 2021 included $14.3 million of incremental revenues from our acquisitions of ForceIQ and Unico Solutions, which were completed in November 2020 and February 2021, respectively.

For the year ended December 31, 2021, revenues from fixed-fee arrangements;

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The level of performance-based fees earned may vary based on our clients’ preferences and the mix of services we provide.

Of the overall $14.9 million increase in revenues, $10.4 million was attributable to an increase in revenues generated by our full-time billable consultants and $4.5 million was attributable to an increase in revenues generated by our full-time equivalents.

The increase in revenues from our full-time billable consultants reflected an increase in the average number of full-time billable consultants, partially offset by a decrease in the average billing rate in 2020 compared to 2019.

Of the overall $24.3 million increase in revenues, $19.9 million was attributable to an increase in revenues generated by our billable consultants and $4.4 million was attributable to an increase in revenues generated by our full-time equivalents.

The increase in revenues from our full-time billable consultants reflected increases in the average number of billable consultants and the average billing rate, partially offset by a decrease in the consultant utilization rate in 2021 compared to 2020.

The increase in revenues from our full-time equivalents was driven by an increased use of contractors and reflected an increase in the average number of full-time equivalents, partially offset by a decrease in revenue per full-time equivalent in 2021 compared to 2020.

On November 1, 2021, we completed the divestiture of the Life Sciences business to a third-party.

For the ten months ended October 31, 2021, Life Sciences revenues were $16.7 million.

The Life Sciences business is not significant to our consolidated financial statements and does not qualify as a discontinued operation for reporting under GAAP.

Operating Income

Business Advisory segment operating income decreased by $1.6 million, or 3.3%, to $48.0 million for the year ended December 31, 2020, compared to $49.7 million for the year ended December 31, 2019.

Business Advisory segment operating income increased to $48.2 million for the year ended December 31, 2021, compared to $48.0 million for the year ended December 31, 2020.

The Business Advisory segment operating margin decreased to 16.5% for 2021 from 18.0% for 2020.

The decrease in this segment’s operating margin was partially attributable to a higher percentage of this segment's revenues derived from our lower margin solutions in 2020 compared to 2019.

Additionally, the decrease in this segment’s operating margin was attributable to overall increases in performance bonus expense for our revenue-generating professionals, contractor expenses, restructuring charges, and share-based compensation expense for our revenue-generating professionals, as percentages of revenues;

partially offset by overall decreases in promotion and marketing expenses and signing, retention and other bonus expense for our revenue-generating professionals.

The restructuring charges within the Business Advisory segment in 2020 primarily related to the termination of a third-party advisor agreement.

The non-cash goodwill impairment charges related to the Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment, which are discussed above within consolidated results, are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segment.

The decrease in this segment’s operating margin was primarily attributable to increases in restructuring charges, salaries and related expenses for our revenue-generating professionals and contractor expense, as percentages of revenues;

partially offset by a decrease in performance bonus expense for our revenue-generating professionals.

The first quarter 2020 non-cash goodwill impairment charges related to the Strategy and Innovation and Life Sciences reporting units within the Business Advisory segment, which are discussed above within consolidated results, are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segment.

We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

Education segment revenues decreased $1.7 million, or 0.8%, to $223.3 million for the year ended December 31, 2020, from $225.0 million for the year ended December 31, 2019.

The decrease in revenues was primarily related to the negative impact of the COVID-19 pandemic on demand for our on-premise technology consulting solutions, largely offset by an increase in demand for our cloud-based technology and analytics solutions and strategy and research consulting solutions in the first half of 2020.

See the “Critical Accounting Policies and Estimates” section below and Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for additional information on the goodwill impairment charges and our goodwill balances.

Education segment revenues increased $13.1 million, or 5.9%, to $236.4 million for the year ended December 31, 2021, from $223.3 million for the year ended December 31, 2020.

This segment's revenues were significantly impacted by the COVID-19 pandemic beginning in the third quarter of 2020 through the first half of 2021 as some clients reprioritized and delayed certain projects as a result of the uncertainties surrounding the pandemic.

In the second half of 2021, demand for this segment's services strengthened, driving an overall increase in total revenues for full year 2021 compared to full year 2020.

Revenues in 2021 included $0.6 million of incremental revenues from our acquisition of Whiteboard, which was completed in December 2021.

For the year ended December 31, 2021, revenues from fixed-fee arrangements;

time-and-expense arrangements;

performance-based arrangements;

and software support, maintenance and subscription arrangements represented 25.4%, 62.3%, and 12.3% of this segment’s revenues, respectively.

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time-and-expense arrangements;

performance-based arrangements;

and software support, maintenance and subscription arrangements represented 20.1%, 69.6%, 0.3%, and 10.0% of this segment's revenues, respectively, in 2020.

Of the overall $1.7 million decrease in revenues, $4.4 million was attributable to a decrease in revenues generated by our full-time billable consultants, partially offset by a $2.7 million increase in revenues generated by our full-time equivalents.

The decrease in revenues from our full-time billable consultants reflected decreases in the consultant utilization rate and average billing rate;

partially offset by an increase in the average number of full-time billable consultants in 2020 compared to 2019.

The increase in the average number of full-time billable consultants primarily related to hiring that occurred prior to the COVID-19 pandemic.

The increase in revenues from our full-time equivalents was primarily driven by an increase in software subscriptions and data hosting revenues;

and reflected an increase in the average number of full-time equivalents in 2020 compared to 2019.

Of the overall $13.1 million increase in revenues, $7.3 million was attributable to our full-time equivalents and $5.8 million was attributable to our billable consultants.

The increase in revenues from our full-time equivalents was primarily driven by an increase in software subscriptions, software support and maintenance, and data hosting revenues, partially offset by a decreased use of contractors and project consultants.

The overall increase in full-time equivalent revenues reflected an increase in revenue per full-time equivalent in 2021 compared to the same prior year period.

The increase in revenues from our billable consultants reflected increases in the consultant utilization rate, average billing rate, and the average number of billable consultants in 2021 compared to 2020.

Operating Income

Education segment operating income decreased $8.2 million, or 14.8%, to $47.5 million for the year ended December 31, 2020, from $55.7 million for the year ended December 31, 2019.

The Education segment operating margin decreased to 21.3% for 2020 from 24.8% for 2019.

The decrease in this segment's operating margin was primarily attributable to an increase in salaries and related expenses for our revenue-generating professionals, as well as increases in restructuring charges and technology expenses.

These decreases to the operating margin were partially offset by decreases in performance bonus expense for our revenue-generating professionals and promotion and marketing expenses, as percentages of revenues.

Education segment operating income increased $5.3 million, or 11.1%, to $52.8 million for the year ended December 31, 2021, from $47.5 million for the year ended December 31, 2020.

The Education segment operating margin increased to 22.3% for 2021 from 21.3% for 2020.

The increase in this segment's operating margin was primarily attributable to revenue growth that outpaced the increase in salaries and related expenses for our revenue-generating professionals, as well as a decrease in restructuring charges.

These increases to the operating margin were partially offset by increases in performance bonus expense and signing, retention and other bonus expense for our revenue-generating professionals, as percentages of revenues.

LIQUIDITY AND CAPITAL RESOURCES

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Operating Activities

Net cash provided by operating activities totaled $136.7 million and $132.2 million for the years ended December 31, 2020 and 2019, respectively.

Our operating assets and liabilities consist primarily of receivables from billed and unbilled services, accounts payable and accrued expenses, accrued payroll and related benefits, and deferred revenues.

The volume of services rendered and the related billings and timing of collections on those billings, as well as payments of our accounts payable and salaries, bonuses, and related benefits to employees affect these account balances.

The increase in cash provided by operating activities in 2020 compared to 2019 was primarily attributable to a decrease in selling, general and administrative expenses in 2020 compared to 2019 and the deferral of $12.2 million of our employer portion of social security taxes as provided for under the CARES Act.

These increases to cash provided by operating activities were partially offset by a decrease in cash collections from clients, which was driven by a decrease in revenues, an increase in payments to employees for salaries and related benefits in 2020 compared to 2019, and an increase in the amount paid for annual performance bonuses in the first quarter of 2020 compared to the first quarter of 2019.

Of the $12.2 million of social security taxes deferred, we expect to pay $6.1 million in the fourth quarter of 2021 and the remaining $6.1 million in the fourth quarter of 2022.

Our purchase obligations primarily consist of payments for software and other information technology products to support our business and corporate infrastructure.

See Note 5 "Leases" within the notes to our consolidated financial statements for information on our contractual obligations related to our office space leases.

Net cash provided by operating activities decreased $118.8 million to $18.0 million in 2021 from $136.7 million in 2020.

The decrease in net cash provided by operating activities in 2021 compared to 2020 was primarily attributable to a decrease in cash collections in 2021 compared to the prior year, increases in payments for salaries and related expenses for our employees and the $12.2 million payment in the third quarter of 2021 of the employer's portion of social security taxes deferred from 2020, as provided for under the CARES Act.

These decreases to net operating cash flows were partially offset by a decrease in the amount paid for annual performance bonuses in the first quarter of 2021 compared to the first quarter of 2020.

Investing Activities

Net cash used in investing activities was $42.0 million and $35.0 million for the years ended December 31, 2020 and 2019, respectively.

The use of cash in 2020 primarily consisted of $13.0 million for the purchase of of an additional convertible debt investment in Shorelight Holdings, LLC in the first quarter of 2020;

$8.7 million for purchases of businesses in the second half of 2020;

Our investing activities primarily consist of purchases of complementary businesses;

purchases of property and equipment, primarily related to computers and related equipment for our employees and leasehold improvements and furniture for office spaces;

payments related to internally developed cloud-based software sold to our clients;

and investments.

Our investments include a convertible note investment in Shorelight Holdings, LLC, a preferred stock investment in Medically Home Group, Inc., and investments in life insurance policies that are used to fund our deferred compensation liability.

The use of cash in 2021 primarily consisted of $44.8 million for the purchases of businesses;

$10.9 million for purchases of property and equipment;

$4.9 million for payments related to internally developed software;

$8.1 million for purchases of property and equipment, primarily related to purchases of computers and related equipment and leasehold improvements and furniture for certain office spaces;

$2.5 million for contributions to our life insurance policies which fund our deferred compensation plan;

and $1.2 million for contributions to our life insurance policies.

These uses of cash from investing activities were partially offset by $41.3 million of cash received for the sale of the Life Sciences business within the Business Advisory segment in the fourth quarter of 2021.

The use of cash in 2020 primarily consisted of $13.0 million for the purchase of an additional convertible debt investment in Shorelight

Holdings, LLC in the first quarter of 2020;

$8.7 million for the purchases of businesses in the second half of 2020;

$8.3 million for payments related to internally developed software;

$8.1 million for purchases of property and equipment;

$2.5 million for contributions to our life insurance policies;

and $1.5 million for payments related to the divestiture of our U.K.

life sciences drug safety practice within the Business Advisory segment.

The use of cash in 2019 primarily consisted of $13.2 million for purchases of property and equipment, primarily related to purchases of computers and network equipment and leasehold improvements for new office spaces in certain locations;

$10.3 million for payments related to internally developed software;

$5.0 million for a purchase of preferred stock securities of Medically Home Group, Inc.

in the fourth quarter of 2019;

$4.7 million for contributions to our life insurance policies which fund our deferred compensation plan;

and $2.5 million for the purchase of a business in the third quarter of 2019.

We estimate that cash utilized for purchases of property and equipment and software development in 2022 will total approximately $20 million to $25 million;

primarily consisting of information technology related equipment to support our corporate infrastructure, leasehold improvements for certain office locations, and software development costs.

primarily consisting of software development costs, leasehold improvements and furniture and fixtures for certain office locations, and information technology related equipment to support our corporate infrastructure.

Financing Activities

Net cash used in financing activities was $39.6 million and $118.8 million for the years ended December 31, 2020 and 2019, respectively.

During 2020, we borrowed $283.0 million under our credit facility, all of which was in the first quarter of 2020, including $125.0 million in March 2020 to maintain excess cash and support liquidity during the period of uncertainty created by the COVID-19 pandemic, as well as to fund our annual performance bonus payment.

During 2020, we made repayments on our credit facility of $288.0 million due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources during the COVID-19 pandemic, and repayments of $0.6 million on our promissory note due 2024.

Our financing activities primarily consist of borrowings and repayments under our senior secured credit facility, share repurchases, shares redeemed for employee tax withholdings upon vesting of share-based compensation, and payments for contingent consideration liabilities related to business acquisitions.

See "Financing Arrangements" below for additional information on our senior secured credit facility.

Net cash used in financing activities increased by $4.8 million to $44.4 million in 2021 from $39.6 million in 2020.

During 2021, we borrowed $235.0 million under our senior secured credit facility, primarily to fund our operations, including our annual performance bonus payment in the first quarter of 2021 and for the acquisitions completed in the fourth quarter of 2021.

We made repayments on our credit facility of $205.0 million during 2021.

Additionally, we repurchased and retired $64.6 million of our common stock under our 2020 Share Repurchase Program, as defined below, and repurchased and retired $0.2 million of our common stock that was accrued as of December 31, 2021.

We also reacquired $10.1 million of common stock as a result of tax withholdings upon vesting of share-based compensation.

During 2020, we borrowed $283.0 million under our senior secured credit facility, all of which was in the first quarter of 2020, including $125.0 million in March 2020 to maintain excess cash and support liquidity during the period of uncertainty created by the COVID-19 pandemic, as well as to fund our annual performance bonus payment.

During 2020, we made repayments on our senior secured credit facility of $288.0 million due to our ability to maintain adequate cash flows from operations and improved clarity around access to capital resources during the COVID-19 pandemic, and repayments of $0.6 million on our promissory note due 2024.

Additionally, we repurchased and retired $25.9 million of our common stock under our share repurchase programs, discussed below, and settled $1.2 million of share repurchases that were accrued as of December 31, 2019.

During 2019, we borrowed $347.0 million under our credit facility, of which $217.0 million was used to repay a portion of the $250.0 million

outstanding principal on our Convertible Notes in the fourth quarter of 2019.

The remaining $33.0 million outstanding principal on our

Convertible Notes was repaid with cash on hand.

During 2019, we also made repayments on our credit facility of $192.5 million.

Additionally,

we repurchased and retired $14.2 million of our common stock under our share repurchase program discussed below, of which $1.2

million settled in the first quarter of 2020.

During 2019, we paid $10.0 million to the sellers of certain business acquisitions for achieving

specified financial performance targets in accordance with the related purchase agreements.

Of the total $10.0 million paid, $4.7 million is

classified as a cash outflow from financing activities and represents the amount paid up to the initial fair value of contingent consideration

liability recorded as of the acquisition date.

The remaining $5.3 million is classified as a cash outflow from operating activities.

We also reacquired $7.9 million of common stock as a result of tax withholdings upon vesting of share-based compensation.

Share Repurchase Programs

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

The 2020 Share Repurchase Program and 2015 Share Repurchase Program are collectively known as the “Share Repurchase Programs.” The amount and timing of repurchases under the Share Repurchase Programs were and will continue to be determined by management and depend on a variety of factors, including the trading price of our common stock, capacity under our credit facility, general market and business conditions, and applicable legal requirements.

In 2020, we repurchased and retired 425,164 shares for $25.9 million under the Share Repurchase Programs.

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.

As of December 31, 2020, $45.0 million remained available for share repurchases under the 2020 Share Repurchase Program.

During the third quarter of 2021, our board of directors authorized an extension of the 2020 Share Repurchase Program through December 31, 2022 and increased the authorized amount from $50 million to $100 million.The amount and timing of repurchases under our share repurchase programs is determined by management and depends 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.

As of December 31, 2021, $30.2 million remains available under the plan for share repurchases.

Financing Arrangements

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The applicable margin will fluctuate between 1.125% per annum and 1.875% per annum, in the case of LIBOR borrowings, or between 0.125% per annum and 0.875% per annum, in the case of base rate loans, based upon our Consolidated Leverage Ratio at such time.

Fees and interest on borrowings is paid on a monthly basis.

Amounts borrowed under the Amended Credit Agreement may be prepaid at any time without premium or penalty.

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(i) a maximum Consolidated Leverage Ratio (defined as the ratio of debt to consolidated EBITDA) of 3.75 to 1.00;

however, the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 upon the occurrence of certain Qualified Acquisitions (as defined in the

Amended Credit Agreement), and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.50 to 1.00.

however, the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 upon the occurrence of certain Qualified Acquisitions (as defined in the Amended Credit Agreement), and (ii) a minimum Consolidated Interest Coverage Ratio (defined as the ratio of consolidated EBITDA to interest) of 3.50 to 1.00.

Consolidated EBITDA for purposes of the financial covenants is calculated on a continuing operations basis and includes adjustments to add back non-cash goodwill impairment charges, share-based compensation costs, certain non-cash restructuring charges, pro forma historical EBITDA for businesses acquired, and other specified items in accordance with the Amended Credit Agreement.

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Our Consolidated Interest Coverage Ratio as of December 31, 2021 was 18.43 to 1.00, compared to 12.51 to 1.00 as of December 31, 2020.

The increase in our Consolidated Leverage Ratio as of December 31, 2020 compared to December 31, 2019 was driven by decreased profitability in 2020 compared to 2019, as discussed in the “Results of Operations” section above.

The Amended Credit Agreement contains restricted payment provisions, including a potential limit on the amount of dividends we may pay.

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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.

Principal and interest payments for the promissory note are paid on a monthly basis.

In the first quarter of 2022, we completed the sale of the aircraft to a third-party and used a portion of the sale proceeds to pay the remaining principal and unpaid interest on the promissory note.

As a result of the sale, we no longer own any aircraft.

For further information, see Note 7 “Financing Arrangements” within the notes to the consolidated financial statements.

Our current primary financing need is to support our operations during the COVID-19 pandemic.

The pandemic has created significant volatility and uncertainty in the economy, which could limit our access to capital resources and could increase our borrowing costs.

In order to support our liquidity during the pandemic, we took proactive measures to increase available cash on hand, including, but not limited to, borrowing under our senior secured credit facility in the first quarter of 2020 and reducing discretionary operating and capital expenses.

To further support our liquidity, we elected to defer the deposit of our employer portion of social security taxes beginning in April 2020 and through the end of the year, which we expect to pay in equal installments in the fourth quarters of 2021 and 2022, as provided for under the CARES Act.

Our long-term financing need has been to fund our growth.

Throughout 2020 and into 2021, our primary financing need was to support our operations and maintain our liquidity during the COVID-19 pandemic.

As such, we took proactive measures to increase available cash on hand, including, but not limited to, borrowing under our senior secured credit facility, reducing discretionary operating and capital expenses, and electing to defer the deposit of our employer portion of social security taxes as provided for under the CARES Act.

Given improved visibility to our project backlog and access to capital resources, our primary financing need has now returned to funding our long-term growth.

Our growth strategy is to expand our service offerings, which may require investments in new hires, acquisitions of complementary businesses, possible expansion into other geographic areas, and related capital expenditures.

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Our ability to secure additional financing, if needed, in the future will depend on several factors, including our future profitability, the quality of our accounts receivable and unbilled services, our relative levels of debt and equity, and the overall condition of the credit markets.

CONTRACTUAL OBLIGATIONS

The following table represents our significant obligations and commitments as of December 31, 2020 and the scheduled years of payments (in thousands).

Payments Due by Period

Total 2021 2022-2023 2024-2025 Thereafter

Long-term bank borrowings—principal and interest (1)

$ 224,441 $ 6,518 $ 13,035 $ 204,888 $ —

Promissory note—principal and interest (2)

3,442 558 1,229 1,655 —

Operating lease obligations (3)

81,743 11,572 23,506 22,052 24,613

Purchase obligations (4)

26,650 15,954 8,399 2,297 —

Deferred employer payroll taxes (5)

12,188 6,094 6,094 — —

Deferred compensation (6)

Uncertain tax positions (7)

Total contractual obligations $ 383,479 $ 40,696 $ 52,263 $ 230,892 $ 24,613

(1) The interest payments on long-term bank borrowings are estimated based on the principal amount outstanding and the interest rate in effect as of December 31, 2020.

Actual future interest payments will differ due to changes in our borrowings outstanding and the interest rate on those borrowings, as the interest rate varies based on the fluctuations in the variable base rates and the spread we pay over those base rates pursuant to the Amended Credit Agreement.

Refer to “Liquidity and Capital Resources” and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for more information on our outstanding borrowings.

(2) The interest payments on the promissory note are estimated based on the principal amount outstanding, scheduled principal payments, and the interest rate in effect as of December 31, 2020.

Actual future interest payments may differ due to changes in the principal amount outstanding and the interest rate on that principal amount, as the interest rate varies based on the fluctuations in the one-month LIBOR rate.

Refer to “Liquidity and Capital Resources” and Note 7 “Financing Arrangements” within the notes to our consolidated financial statements for more information on the promissory note.

(3) We lease our facilities under operating lease arrangements expiring on various dates through 2029, with various renewal options.

We lease office facilities under non-cancelable operating leases that include fixed or minimum payments plus, in some cases, scheduled base rent increases over the term of the lease.

Refer to Note 5 “Leases” within the notes to our consolidated financial statements for more information on our operating lease obligations.

(4) Purchase obligations include agreements to purchase goods or services that are enforceable, are legally binding, and specify all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum or variable price provisions;

and the approximate timing of the transaction.

Purchase obligations do not include agreements that are cancelable without penalty.

(5) As allowed under the provisions of the CARES Act enacted in the first quarter of 2020, we elected to defer the deposit of our employer portion of social security tax payments beginning in April 2020 through December 31, 2020.

As of December 31, 2020, we deferred $12.2 million of such payments, which we expect to pay in equal installments in the fourth quarters of 2021 and 2022.

(6) Included in deferred compensation and other liabilities on our consolidated balance sheet as of December 31, 2020 is a $34.3 million obligation for deferred compensation.

The specific payment dates for the deferred compensation are unknown;

therefore, the related balances have not been reflected in the “Payments Due by Period” section of the table.

This deferred compensation liability is funded by corresponding deferred compensation plan assets.

Refer to Note 15 “Employee Benefit and Deferred Compensation Plans” within the notes to our consolidated financial statements for more information on our deferred compensation plan.

(7) Our liabilities for uncertain tax positions are classified as non-current and includes the accrual of potential payment of interest and penalties.

We are unable to reasonably estimate the timing of future payments as it depends on examinations by taxing authorities;

as such, the related balance has not been reflected in the “Payments Due by Period” section of the table.

OFF-BALANCE SHEET ARRANGEMENTS

We are not a party to any material off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

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The preparation of financial statements in conformity with GAAP requires management to make assessments, estimates, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

Critical accounting policies are those policies that we believe present the most complex or subjective measurements and have the most potential to impact our financial position and operating results.

While all decisions regarding accounting policies are important, we believe that there are five accounting policies that could be considered critical:

Critical accounting policies and estimates are those policies and estimates that we believe present the most complex or subjective measurements and have the most potential to impact our financial position and operating results.

While all decisions regarding accounting policies and estimates are important, we believe that there are five accounting policies and estimates that could be considered critical:

revenue recognition, allowances for doubtful accounts and unbilled services, business combinations, carrying values of goodwill and other intangible assets, and accounting for income taxes.

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We generate substantially all of our revenues from providing professional services to our clients.

We also generate revenues from software licenses;

software support and maintenance and subscriptions to our cloud-based analytic tools and solutions;

speaking engagements;

and publications.

A single contract could include one or multiple performance obligations.

For those contracts that have multiple performance obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price, which is determined based on our overall pricing objectives, taking into consideration market conditions and other factors.

Revenue is recognized when control of the goods and services provided are transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services using the following steps:

1) identify the contract, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue as or when we satisfy the performance obligations.

We typically satisfy our performance obligations for professional services over time as the related services are provided.

The performance obligations related to software support and maintenance and subscriptions to our cloud-based analytic tools and solutions are typically satisfied evenly over the course of the service period.

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

We generate our revenues under four types of billing arrangements:

We also generate revenues from software licenses, software support and maintenance and subscriptions to our cloud-based analytic tools and solutions, speaking engagements, conferences, and publications.

Our revenue is generated under four types of billing arrangements:

fixed-fee (including software license revenue);

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and software support, maintenance and subscriptions.

Determining the method and amount of revenue to recognize requires us to make judgments and estimates.

Specifically, multiple performance obligation arrangements require us to allocate the total transaction price to each performance obligation based on its relative standalone selling price, for which we rely on our overall pricing objectives, taking into consideration market conditions and other factors.

Provisions are recorded for the estimated realization adjustments on all engagements, including engagements for which fees are subject to review by the bankruptcy courts.

We continually evaluate our estimates of the provisions based on available information and experiences.

Additionally, when accounting for fixed-fee and performance-based billing arrangements, as well as reimbursable expenses, we must make additional judgments and estimates as further described below.

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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We generally recognize revenues under fixed-fee billing arrangements using a proportionate performance approach, which is based on work completed to-date versus our estimates of the total services to be provided under the engagement.

Contracts within our Culture and Organizational Excellence solution include fixed-fee partner contracts with multiple performance obligations, which primarily consist of coaching services, as well as speaking engagements, conferences, publications and software products (“Partner Contracts”).

Revenues for coaching services and software products are generally recognized on a straight-line basis over the length of the contract.

All other revenues under Partner Contracts, including speaking engagements, conferences and publications, are recognized at the time the goods or services are provided.

Estimates of total engagement revenues and cost of services are monitored regularly during the term of the engagement.

If our estimates indicate a potential loss, such loss is recognized in the period in which the loss first becomes probable and reasonably estimable.

We also generate revenues from software licenses for our revenue cycle management software and research administration and compliance software.

Licenses for our revenue cycle management software are sold only as a component of our consulting projects, and the services we provide are essential to the functionality of the software.

Therefore, revenues from these software licenses are recognized over the term of the related consulting services contract.

License revenue from our research administration and compliance software is generally recognized in the month in which the software is delivered.

Time-and-expense billing arrangements require the client to pay based on the number of hours worked by our revenue-generating professionals at agreed upon rates.

Time-and-expense arrangements also include certain speaking engagements, conferences, and publications purchased by our clients outside of Partner Contracts within our Culture and Organizational Excellence solution.

We recognize revenues under time-and-expense arrangements as the related services or publications are provided, using the right to invoice practical expedient which allows us to recognize revenue in the amount that we have a right to invoice based on the number of hours worked and the agreed upon hourly rates or the value of the speaking engagements, conferences or publications purchased by our clients.

Any increased or unexpected costs or unanticipated delays in connection with the performance of these engagements could make these contracts less profitable or unprofitable.

In performance-based billing arrangements, fees are tied to the attainment of contractually defined objectives.

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1) estimate variable consideration using a probability-weighted assessment of the fees to be earned, 2) apply a constraint to the estimated variable consideration to limit the amount that could be reversed when the uncertainty is resolved (the “constraint”), and 3) recognize revenue of estimated variable consideration, net of the constraint, based on work completed to-date versus our estimates of the total services to be provided under the engagement.

Clients that have purchased one of our software licenses can pay an annual fee for software support and maintenance.

We also generate subscription revenue from our cloud-based analytic tools and solutions.

Software support, maintenance and subscription revenues are recognized ratably over the support or subscription period.

These fees are generally billed in advance and included in deferred revenues until recognized.

Provisions are recorded for the estimated realization adjustments on all engagements, including engagements for which fees are subject to review by the bankruptcy courts.

Our estimates are monitored throughout the life of each contract and are based on an assessment of our anticipated performance, historical experience, and other information available at the time.

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

Expense reimbursements that are billable to clients are included in total revenues and reimbursable expenses.

Under fixed-fee billing arrangements, we estimate the total amount of reimbursable expenses to be incurred over the course of the engagement and recognize the estimated amount as revenue using a proportionate performance approach, which is based on work completed to-date versus our estimates of the total services to be provided under the engagement.

Under time-and-expense billing arrangements we recognize reimbursable expenses as revenue as the related services are provided, using the right to invoice practical expedient.

Reimbursable expenses are recognized as expenses in the period in which the expense is incurred.

Subcontractors that are billed to clients at cost are also included in reimbursable expenses.

When billings do not specifically identify reimbursable expenses, we allocate the portion of the billings equivalent to these expenses to reimbursable expenses.

When billings do not specifically identify reimbursable expenses under any billing arrangement type, we allocate the portion of the billings equivalent to these expenses to reimbursable expenses.

Any increased or unexpected costs in the reimbursable expenses could impact our results of operations

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

Allowances for Doubtful Accounts and Unbilled Services

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Business Combinations

The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date.

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.

Upon our adoption of Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which we retrospectively applied to all acquisitions in 2021, contract assets and contract liabilities acquired are recorded at their carrying value under Topic 606:

Revenue from Contracts with Customers .

Prior to adoption of ASU 2021-08, contract assets and contract liabilities were recognized at their estimated fair values as of the acquisition date.

All other assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date.

Goodwill is recorded as the excess of the fair value of consideration transferred, including any contingent consideration, over the net value of the assets acquired and liabilities assumed.

We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates, and assumptions, such as the expected future cash flows to be derived from the intangible assets, discount rates that reflect the risk factors associated with future cash flows, and estimates of useful lives.

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Increases or decreases in the fair value of contingent consideration liabilities resulting from changes in the estimates or assumptions could materially impact the financial statements.

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

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

Carrying Values of Goodwill and Other Intangible Assets

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We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition.

As of December 31, 2020, we have six reporting units:

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

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

As of December 31, 2021, we have five reporting units:

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

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

Under GAAP, we have the option to first assess qualitative factors to determine whether the existence of current events or circumstances would lead to a determination that it is more likely than not that the fair value of one of our reporting units is greater than its carrying value.

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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.

We have the option to bypass the qualitative assessment for any reporting unit and proceed directly to performing the quantitative goodwill impairment test.

For reporting units where we perform the quantitative test, we determine the fair value using a combination of the income approach and the market approach.

We determine the fair value using a combination of the income approach and the market approach.

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

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

The following is a discussion of our goodwill impairment tests performed during 2020.

First Quarter 2020 Goodwill Impairment Test

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.

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.

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

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

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.

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.

Our Enterprise Solutions and Analytics reporting unit did not have a goodwill balance as of March 31, 2020.

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

The following is a discussion of our goodwill impairment test performed during 2021.

2021 Annual Goodwill Impairment Analysis

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

Pursuant to our policy, we performed our annual goodwill impairment test as of November 30, 2021 for our five reporting units with goodwill balances:

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, as discussed above, with a fifty-fifty weighting.

Based on the results of the goodwill impairment test, we determined the fair value of the Healthcare, Education, 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 was no indication of goodwill impairment for these five reporting units.

Further, we determined that neither a 100 basis point decrease in the estimated long-term growth rate nor a 100 basis point increase in the discount rate for each reporting unit would have resulted in an indication of goodwill impairment for any of the reporting units.

We performed a qualitative assessment over all reporting units to determine if it was more likely than not the respective fair values of these reporting units were less than their carrying amounts, including goodwill.

For our qualitative assessment, we considered the most recent quantitative analysis performed for each reporting unit, which was as of November 30, 2020, 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 2021 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 over the past year.

We also reviewed the current carrying value of each reporting unit in comparison to the carrying values as of the prior quantitative analysis.

In addition, we considered various factors, including macroeconomic conditions, relevant industry and market trends for each reporting unit, and other entity-specific events, that could indicate a potential change in the fair value of our reporting units or the composition of their carrying values.

Based on our assessments, we determined that it was more likely than not that the fair values for each of our reporting units exceeded their respective carrying amounts.

As such, the goodwill for our reporting units was not considered impaired as of November 30, 2021, and a quantitative goodwill impairment analysis was not necessary.

Determining the fair value of any reporting unit requires us to make significant judgments, estimates, and assumptions.

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Strategy and Innovation 37,522

Life Sciences —

Enterprise Solutions and Analytics 10,823

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In determining our provision for income taxes on an interim basis, we estimate our annual effective tax rate based on information available at each interim period.

Changes in applicable U.S.

state, federal or foreign tax laws and regulations, or their interpretation and application, could materially affect our tax expense.

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

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Deferred tax assets are reduced by a valuation allowance when, in management’s opinion, it is more likely than not that some portion or the entire deferred tax asset will not be realized.

Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located.

Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors.

Our tax positions are subject to income tax audits by federal, state, local, and foreign tax authorities.

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The estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time.

We believe that positions taken on our tax returns are fully supported.

However, final determinations of prior year tax positions upon settlement with the taxing authority could be materially different from estimates.

The outcome of these final determinations could have a material impact on our provision for taxes, net income, or cash flows in the period in which that determination is made.

NEW ACCOUNTING PRONOUNCEMENTS

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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.

The 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.

On January 18, 2022, we completed the acquisition of AIMDATA, LLC, (“AIMDATA”), an advisory and implementation consulting services firm focused on strategy, technology and business transformation.

The results of operations of AIMDATA will be included within our consolidated financial statements from the close date, and will be allocated among our three operating industries, which are our reportable segments, based on the engagements delivered by the business.

AIMDATA revenues will be reported in our Digital capability.

The acquisition of AIMDATA is not significant to our consolidated financial statements.

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What changed 10-K

Item 7. Management’s Discussion and Analysis