Huron Consulting Group Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure. 39 Table of Contents Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for the Company. Internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (i) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In connection with the preparation of this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the internal control over financial reporting as of December 31, 2021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013) . As a result of that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2021. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on page F-2 of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors, Executive Officers, Promoters and Control Persons The information required by this item is incorporated by reference from portions of our definitive proxy statement for our annual meeting of stockholders to be filed with the SEC pursuant to Regulation 14A by May 2, 2022 (the “Proxy Statement”) under “Nominees to Board of Directors,” “Directors Not Standing For Election” and “Executive Officers.” Compliance with Section 16(a) of the Exchange Act The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Delinquent Section 16(a) Reports.” 40 Table of Contents Code of Business Conduct and Ethics We have adopted a Code of Business Conduct and Ethics (the “Code”) that is applicable to all of our employees, officers and directors. The Code is available on the Corporate Governance page of our website at ir.huronconsultinggroup.com. If we make any amendments to or grant any waivers from the Code which are required to be disclosed pursuant to the Securities Exchange Act of 1934, we will make such disclosures on our website. Corporate Governance The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Board Meetings and Committees.” ITEM 11. EXECUTIVE COMPENSATION. Executive Compensation The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Executive Compensation.” Compensation Committee Interlocks and Insider Participation The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Compensation Committee Interlocks and Insider Participation.” Compensation Committee Report The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Compensation Committee Report.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes information with respect to equity compensation plans approved by shareholders as of December 31, 2021. We do not have equity compensation plans that have not been approved by shareholders. Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Options Weighted Average Exercise Price of Outstanding Options Number of Shares Remaining Available for Future Issuance (excluding shares in 1 st column) Equity compensation plans approved by shareholders: 2004 Omnibus Stock Plan (1) 10,805 $ 38.18 — 2012 Omnibus Incentive Plan (2) 81,785 $ 47.32 1,180,121 Stock Ownership Participation Program (3) — N/A 283,206 Equity compensation plans not approved by shareholders N/A N/A N/A Total 92,590 $ 46.25 1,463,327 (1) Our 2004 Omnibus Stock Plan was approved by the existing shareholders prior to our initial public offering. Upon adoption of the 2012 Omnibus Incentive Plan, we terminated the 2004 Omnibus Stock Plan with respect to future awards and no further awards will be granted under this plan. (2) Our 2012 Omnibus Incentive Plan was approved by our shareholders at our annual meeting held on May 1, 2012. Subsequent to the initial approval and through December 31, 2021, our shareholders have approved amendments to the 2012 Omnibus Incentive Plan to increase the number of shares authorized for issuance to 4.6 million shares, in the aggregate. (3) Our Stock Ownership Participation Program was approved by our shareholders at our annual meeting held on May 1, 2015. Subsequent to the initial approval and through December 31, 2021, our shareholders have approved amendments to the Stock Ownership Participation Program to increase the number of shares authorized for issuance to 0.7 million shares, in the aggregate. 41 Table of Contents Security Ownership of Certain Beneficial Owners and Management The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Stock Ownership of Certain Beneficial Owners and Management.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Certain Relationships and Related Transactions The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Certain Relationships and Related Transactions.” Director Independence The information required by this item is incorporated by reference from portions of the Proxy Statement under “Nominees to Board of Directors,” “Directors Not Standing For Election,” and “Board Meetings and Committees.” ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required by this item is incorporated by reference from a portion of the Proxy Statement under “Audit and Non-Audit Fees.” 42 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Documents filed as part of this Annual Report on Form 10-K. 1. Financial Statements—Our independent registered public accounting firm’s report and our Consolidated Financial Statements are listed below and begin on page F-1 of this Form 10-K. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations and Other Comprehensive Income (Loss) Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 2. Financial Statement Schedules—The financial statement schedules required by this item are included in the Consolidated Financial Statements and accompanying notes. 3. Exhibit Index Exhibit Number Exhibit Description Filed herewith Furnished herewith Incorporated by Reference Form Period Ending Exhibit Filing Date 3.1 Third Amended and Restated Certificate of Incorporation of Huron Consulting Group Inc. 10-K 12/31/2004 3.1 2/16/2005 3.2 Amended and Restated Bylaws of Huron Consulting Group Inc. 8-K 3.1 10/28/2015 4.1 Specimen Stock Certificate. S-1 (File No. 333- 115434) 4.1 10/5/2004 4.2 Description of Securities. 10-K 12/31/2019 4.2 2/26/2020 10.1 Office Lease, dated December 2003, between Union Tower, LLC and Huron Consulting Services LLC (formerly known as Huron Consulting Group LLC). S-1 (File No. 333- 115434) 10.1 10/5/2004 10.2* Amended and Restated Huron Consulting Group Inc. 2004 Omnibus Stock Plan. S-8 10.1 5/5/2010 10.3* Huron Consulting Group Inc. Deferred Compensation Plan as Amended and Restated effective January 1, 2009. 10-K 12/31/2008 10.12 2/24/2009 10.4* Senior Management Agreement by and between Huron Consulting Group Inc. and John D. Kelly. 8-K 10.1 1/6/2017 10.5* Amended and Restated Senior Management Agreement by and between Huron Consulting Group Inc. and James H. Roth. 8-K 10.2 1/6/2017 10.6* Senior Management Agreement by and between Huron Consulting Group Inc. and C. Mark Hussey. 8-K 10.3 1/6/2017 10.7 First Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated August 23, 2004. 10-K 12/31/2012 10.17 2/21/2013 10.8 Second Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated March 14, 2007. 10-K 12/31/2012 10.18 2/21/2013 10.9 Third Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated April 2, 2010. 10-K 12/31/2012 10.19 2/21/2013 10.10 Fourth Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated December 31, 2012. 8-K 10.1 1/4/2013 43 Table of Contents Exhibit Number Exhibit Description Filed herewith Furnished herewith Incorporated by Reference Form Period Ending Exhibit Filing Date 10.11 † Fifth Amendment to Lease by and between Huron Consulting Services LLC and Union Tower, LLC, dated December 1, 2013. 10-K 12/31/2019 10.13 2/26/2020 10.12 Sixth Amendment to Lease by and between Huron Consulting Services LLC and Onni Van Buren Chicago LLC, dated October 3, 2019. 8-K 10.1 10/16/2019 10.13* Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan Restricted Stock Agreement. 10-K 12/31/2012 10.20 2/21/2013 10.14* Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan Performance Stock Unit Agreement. 10-K 12/31/2014 10.32 2/24/2015 10.15* Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan Stock Option Agreement. 10-K 12/31/2014 10.33 2/24/2015 10.16* Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan NEO Performance Stock Unit Agreement. 10-K 12/31/2014 10.34 2/24/2015 10.17 Second Amended and Restated Credit Agreement, dated as of March 31, 2015, among Huron Consulting Group Inc., as Borrower, certain subsidiaries as Guarantors, the Lenders Party Hereto and Bank of America, N.A., as Administrative Agent and Collateral Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, PNC Bank, Bank of Montreal and Key Bank National Association as Co-Documentation Agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Managers . 8-K 10.1 4/2/2015 10.18 Second Amended and Restated Security Agreement, dated as of March 31, 2015. 8-K 10.2 4/2/2015 10.19 Second Amended and Restated Pledge Agreement, dated as of March 31, 2015. 8-K 10.3 4/2/2015 10.20* Huron Consulting Group Inc. Stock Ownership Participation Program, as amended effective December 1, 2020. 10-K 12/31/2020 10.23 2/23/2021 10.21* Huron Consulting Group Inc. 2012 Omnibus Incentive Plan, as amended and restated effective February 13, 2020. 10-K 12/31/2019 10.34 2/26/2020 10.22 Amendment No. 1 of the Second Amended and Restated Credit Agreement, dated as of February 28, 2017, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders. 8-K 10.1 3/6/2017 10.23 Amendment No. 2 of the Second Amended and Restated Credit Agreement, dated as of October 24, 2017, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders. 10-Q 9/30/2017 10.1 11/1/2017 10.24 Amendment No. 3 of the Credit Agreement, dated as of March 23, 2018, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders. 8-K 10.1 3/29/2018 44 Table of Contents Exhibit Number Exhibit Description Filed herewith Furnished herewith Incorporated by Reference Form Period Ending Exhibit Filing Date 10.25 Amendment No. 4 of the Credit Agreement, the Pledge Agreement and the Security Agreement, dated as of September 27, 2019, by and among Huron Consulting Group Inc., as Borrower, certain subsidiaries, as Guarantors, and Bank of America, N.A., as Administrative Agent for and on behalf of the Lenders. 8-K 10.1 10/3/2019 10.26* Senior Management Agreement by and between Huron Consulting Group Inc. and Ernest W. Torain, Jr. 10-Q 3/31/2020 10.1 4/30/2020 10.27* Amendment to the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan. DEF 14A Appendix A 3/26/2020 10.28* Form of Retention Bonus Agreement 8-K 10.1 4/14/2021 10.29* Amendment to the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan. DEF 14A Appendix A 3/26/2021 10.30* Form of the Huron Consulting Group Inc. 2012 Omnibus Incentive Plan Restricted Stock Unit Agreement 10-Q 9/30/2021 10.1 11/2/2021 21.1 List of Subsidiaries of Huron Consulting Group Inc. X 23.1 Consent of PricewaterhouseCoopers LLP. X 31.1 Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1 Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2 Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) X * Indicates the exhibit is a management contract or compensatory plan or arrangement. † Pursuant to Regulation S-K 601(b)(10)(iv), certain exhibits to this Exhibit have been omitted. The Company agrees to furnish supplementally to the Securities and Exchange Commission, upon its request, a copy of any or all omitted exhibits. ITEM 16. FORM 10-K SUMMARY Not applicable. 45 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Huron Consulting Group Inc. (Registrant) Signature Title Date /s/ JAMES H. ROTH Chief Executive Officer and Director 2/24/2022 James H. Roth POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James H. Roth, John D. Kelly, and Ernest W. Torain, Jr., and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated. Signature Title Date /s/ JAMES H. ROTH Chief Executive Officer and Director (Principal Executive Officer) 2/24/2022 James H. Roth /s/ JOHN F. MCCARTNEY Non-Executive Chairman of the Board 2/24/2022 John F. McCartney /s/ JOHN D. KELLY Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 2/24/2022 John D. Kelly /s/ H. EUGENE LOCKHART Director 2/24/2022 H. Eugene Lockhart /s/ HUGH E. SAWYER Director 2/24/2022 Hugh E. Sawyer /s/ EKTA SINGH-BUSHELL Director 2/24/2022 Ekta Singh-Bushell /s/ DEBRA ZUMWALT Director 2/24/2022 Debra Zumwalt 46 Table of Contents HURON CONSULTING GROUP INC. CONSOLIDATED FINANCIAL STATEMENTS INDEX Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) F-2 Consolidated Balance Sheets at December 31, 2021 and 2020 F-4 Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the years ended December 31, 2021, 2020, and 2019 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, and 2019 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 20 21, 2020, and 2019 F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Huron Consulting Group Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Huron Consulting Group Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and other comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of F-2 Table of Contents critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Fixed-Fee and Healthcare Performance-Based Billing Arrangements As described in Notes 2 and 19 to the consolidated financial statements, in fixed-fee billing arrangements, which accounted for $400.1 million of revenues for the year ended December 31, 2021, the Company agrees to a pre-established fee in exchange for a predetermined set of professional services. As disclosed by management, under fixed-fee arrangements, revenues are recognized based upon work completed to date versus management’s estimates of the total services to be provided under the engagement. Additionally, the Company’s Healthcare practice enters into performance-based billing arrangements whereby fees are tied to the attainment of contractually defined objectives, as a result of adopting the Company’s recommendations, which accounted for $73.4 million of revenues for the year ended December 31, 2021. Under performance-based billing arrangements, revenue is recognized based on an estimate of variable consideration and work completed to date versus the estimates of the total services to be provided under the engagement. Variable consideration is estimated based on a probability-weighted assessment of the fees to be earned, net of a constraint to limit the amount that could be reversed when the uncertainty is resolved. The principal considerations for our determination that performing procedures relating to revenue recognition under fixed-fee and Healthcare performance-based billing arrangements is a critical audit matter are the significant judgments by management when developing the estimates of revenue to be recognized for these billing arrangements, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions related to work completed to date versus management’s estimates of the total services to be provided for fixed-fee and performance-based billing arrangements and the probability of attaining contractually defined objectives in performance-based billing arrangements. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process under fixed-fee and performance-based billing arrangements. These procedures also included, among others, testing the accuracy of the total contract amounts and evaluating the reasonableness of management’s assumption of work completed to-date versus management’s estimates of the total services to be provided by (i) inquiring with the Company’s employees regarding the expected remaining efforts for a sample of engagements, (ii) evaluating trends in past performance, and (iii) evaluating performance to date. Additionally, for performance-based billing arrangements, procedures included, among others (i) evaluating the reasonableness of management’s assumption of the probability of attaining the contractually defined objectives by inquiring with the Company’s employees regarding the expected remaining efforts and the probability weighting of variable consideration to be earned for a sample of engagements and by evaluating trends in past performance, (ii) evaluating the necessity of applying a constraint based upon consideration of the initial forecasts developed during project procurement, and (iii) evaluating performance to date towards the attainment of contractually defined objectives. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 24, 2022 We have served as the Company's auditor since 2002. F-3 Table of Contents HURON CONSULTING GROUP INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 20,781 $ 67,177 Receivables from clients, net of allowances of $ 8,827 and $ 7,680 , respectively 122,316 87,687 Unbilled services, net of allowances of $ 2,637 and $ 2,603 , respectively 91,285 53,959 Income tax receivable 8,071 5,121 Prepaid expenses and other current assets 15,229 16,569 Total current assets 257,682 230,513 Property and equipment, net 31,004 29,093 Deferred income taxes, net 1,804 4,191 Long-term investments 72,584 71,030 Operating lease right-of-use assets 35,311 39,360 Other non-current assets 68,191 62,068 Intangible assets, net 31,894 20,483 Goodwill 620,879 594,237 Total assets $ 1,119,349 $ 1,050,975 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 13,621 $ 648 Accrued expenses and other current liabilities 22,519 14,874 Accrued payroll and related benefits 139,131 133,830 Current maturities of long-term debt 559 499 Current maturities of operating lease liabilities 10,142 8,771 Deferred revenues 19,212 28,247 Total current liabilities 205,184 186,869 Non-current liabilities: Deferred compensation and other liabilities 43,458 47,131 Long-term debt, net of current portion 232,221 202,780 Operating lease liabilities, net of current portion 54,313 61,825 Deferred income taxes, net 12,273 428 Total non-current liabilities 342,265 312,164 Commitments and contingencies Stockholders’ equity Common stock; $ 0.01 par value; 500,000,000 shares authorized; 24,364,814 and 25,346,916 shares issued, respectively 239 246 Treasury stock, at cost, 2,495,172 and 2,584,119 shares, respectively ( 135,969 ) ( 129,886 ) Additional paid-in capital 413,794 454,512 Retained earnings 276,996 214,009 Accumulated other comprehensive income 16,840 13,061 Total stockholders’ equity 571,900 551,942 Total liabilities and stockholders’ equity $ 1,119,349 $ 1,050,975 The accompanying notes are an integral part of the consolidated financial statements. F-4 Table of Contents HURON CONSULTING GROUP INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) Year Ended December 31, 2021 2020 2019 Revenues and reimbursable expenses: Revenues $ 905,640 $ 844,127 $ 876,757 Reimbursable expenses 21,318 26,887 88,717 Total revenues and reimbursable expenses 926,958 871,014 965,474 Direct costs and reimbursable expenses (exclusive of depreciation and amortization shown in operating expenses): Direct costs 636,776 592,428 575,602 Amortization of intangible assets and software development costs 3,803 5,366 5,375 Reimbursable expenses 21,369 26,918 88,696 Total direct costs and reimbursable expenses 661,948 624,712 669,673 Operating expenses and other losses (gains), net: Selling, general and administrative expenses 177,886 170,686 203,071 Restructuring charges 12,401 20,525 1,855 Litigation and other losses (gains) 198 ( 150 ) ( 1,196 ) Depreciation and amortization 21,686 24,277 28,365 Goodwill impairment charges — 59,816 — Total operating expenses and other losses (gains), net 212,171 275,154 232,095 Operating income (loss) 52,839 ( 28,852 ) 63,706 Other income (expense), net: Interest expense, net of interest income ( 8,150 ) ( 9,292 ) ( 15,648 ) Other income, net 35,347 4,271 4,433 Total other income (expense), net 27,197 ( 5,021 ) ( 11,215 ) Income (loss) from continuing operations before taxes 80,036 ( 33,873 ) 52,491 Income tax expense (benefit) 17,049 ( 10,155 ) 10,512 Net income (loss) from continuing operations 62,987 ( 23,718 ) 41,979 Loss from discontinued operations, net of tax — ( 122 ) ( 236 ) Net income (loss) $ 62,987 $ ( 23,840 ) $ 41,743 Net earnings (loss) per basic share: Net income (loss) from continuing operations $ 2.94 $ ( 1.08 ) $ 1.91 Loss from discontinued operations, net of tax — ( 0.01 ) ( 0.01 ) Net income (loss) $ 2.94 $ ( 1.09 ) $ 1.90 Net earnings (loss) per diluted share: Net income (loss) from continuing operations $ 2.89 $ ( 1.08 ) $ 1.87 Loss from discontinued operations, net of tax — ( 0.01 ) ( 0.02 ) Net income (loss) $ 2.89 $ ( 1.09 ) $ 1.85 Weighted average shares used in calculating earnings per share: Basic 21,439 21,882 21,993 Diluted 21,809 21,882 22,507 Comprehensive income (loss): Net income (loss) $ 62,987 $ ( 23,840 ) $ 41,743 Foreign currency translation adjustments, net of tax ( 925 ) 348 99 Unrealized gain (loss) on investment, net of tax 1,169 1,323 ( 702 ) Unrealized gain (loss) on cash flow hedging instruments, net of tax 3,535 ( 3,546 ) ( 956 ) Other comprehensive income (loss) 3,779 ( 1,875 ) ( 1,559 ) Comprehensive income (loss) $ 66,766 $ ( 25,715 ) $ 40,184 The accompanying notes are an integral part of the consolidated financial statements. F-5 Table of Contents HURON CONSULTING GROUP INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share amounts) Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Stockholders' Equity Shares Amount Shares Amount Balance at December 31, 2018 24,418,252 $ 244 ( 2,671,962 ) $ ( 124,794 ) $ 452,573 $ 196,106 $ 16,495 $ 540,624 Comprehensive income (loss) 41,743 ( 1,559 ) 40,184 Issuance of common stock in connection with: Restricted stock awards, net of cancellations 347,589 4 20,171 1,828 ( 1,832 ) — Exercise of stock options 47,904 1 1,243 1,244 Share-based compensation 22,854 22,854 Shares redeemed for employee tax withholdings ( 111,511 ) ( 5,382 ) ( 5,382 ) Other capital contributions 160 160 Share repurchases ( 210,437 ) ( 2 ) ( 14,217 ) ( 14,219 ) Balance at December 31, 2019 24,603,308 $ 247 ( 2,763,302 ) $ ( 128,348 ) $ 460,781 $ 237,849 $ 14,936 $ 585,465 Comprehensive loss ( 23,840 ) ( 1,875 ) ( 25,715 ) Issuance of common stock in connection with: Restricted stock awards, net of cancellations 342,311 3 87,155 6,365 ( 6,368 ) — Exercise of stock options 40,400 — 1,003 1,003 Share-based compensation 24,998 24,998 Shares redeemed for employee tax withholdings ( 136,749 ) ( 7,903 ) ( 7,903 ) Share repurchases ( 425,164 ) ( 4 ) ( 25,902 ) ( 25,906 ) Balance at December 31, 2020 24,560,855 $ 246 ( 2,812,896 ) $ ( 129,886 ) $ 454,512 $ 214,009 $ 13,061 $ 551,942 Comprehensive income 62,987 3,779 66,766 Issuance of common stock in connection with: Restricted stock awards, net of cancellations 475,250 5 101,236 4,020 ( 4,025 ) — Exercise of stock options 23,403 — 804 804 Purchase of business 74,671 1 3,322 3,323 Share-based compensation 23,971 23,971 Shares redeemed for employee tax withholdings ( 197,189 ) ( 10,103 ) ( 10,103 ) Share repurchases ( 1,265,261 ) ( 13 ) ( 64,790 ) ( 64,803 ) Balance at December 31, 2021 23,868,918 $ 239 ( 2,908,849 ) $ ( 135,969 ) $ 413,794 $ 276,996 $ 16,840 $ 571,900 The accompanying notes are an integral part of the consolidated financial statements. F-6 Table of Contents HURON CONSULTING GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 62,987 $ ( 23,840 ) $ 41,743 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 25,978 30,222 34,405 Non-cash lease expense 6,967 7,763 8,397 Lease impairment charges — 13,217 805 Share-based compensation 25,857 24,081 24,213 Amortization of debt discount and issuance costs 794 793 8,264 Goodwill impairment charges — 59,816 — Allowances for doubtful accounts 13 1,050 250 Deferred income taxes 12,480 ( 9,859 ) 8,795 (Gain) loss on sales of businesses, excluding transaction costs ( 32,824 ) 1,603 — Change in fair value of contingent consideration liabilities 173 — ( 1,506 ) Change in fair value of preferred stock investment — ( 1,667 ) — Other, net ( 421 ) ( 25 ) ( 789 ) Changes in operating assets and liabilities, net of acquisitions and divestitures: (Increase) decrease in receivables from clients, net ( 39,845 ) 33,051 ( 10,123 ) (Increase) decrease in unbilled services, net ( 38,820 ) 18,876 ( 10,269 ) (Increase) decrease in current income tax receivable / payable, net ( 2,723 ) ( 3,662 ) 4,442 (Increase) decrease in other assets ( 2,670 ) ( 11,972 ) ( 144 ) Increase (decrease) in accounts payable and accrued liabilities 10,394 ( 7,786 ) ( 6,884 ) Increase (decrease) in accrued payroll and related benefits ( 2,636 ) ( 1,169 ) 30,339 Increase (decrease) in deferred revenues ( 7,717 ) 6,246 282 Net cash provided by operating activities 17,987 136,738 132,220 Cash flows from investing activities: Purchases of property and equipment ( 10,871 ) ( 8,125 ) ( 13,240 ) Investment in life insurance policies ( 1,245 ) ( 2,462 ) ( 4,703 ) Purchases of businesses, net of cash acquired ( 44,819 ) ( 8,701 ) ( 2,500 ) Purchases of investment securities — ( 13,000 ) ( 5,000 ) Capitalization of internally developed software ( 4,889 ) ( 8,272 ) ( 10,312 ) Proceeds from sale of property and equipment 408 25 753 Divestitures of businesses, net of cash sold 41,273 ( 1,499 ) — Net cash used in investing activities ( 20,143 ) ( 42,034 ) ( 35,002 ) Cash flows from financing activities: Proceeds from exercises of stock options 804 1,003 1,244 Shares redeemed for employee tax withholdings ( 10,103 ) ( 7,903 ) ( 5,382 ) Share repurchases ( 64,612 ) ( 27,141 ) ( 12,985 ) Proceeds from bank borrowings 235,000 283,000 347,000 Repayments of bank borrowings ( 205,499 ) ( 288,574 ) ( 192,515 ) Repayment of convertible notes — — ( 250,000 ) Payments for debt issuance costs — — ( 1,524 ) Payments for contingent consideration liabilities — — ( 4,674 ) Net cash used in financing activities ( 44,410 ) ( 39,615 ) ( 118,836 ) Effect of exchange rate changes on cash 170 484 115 Net increase (decrease) in cash and cash equivalents ( 46,396 ) 55,573 ( 21,503 ) Cash and cash equivalents at beginning of the period 67,177 11,604 33,107 Cash and cash equivalents at end of the period $ 20,781 $ 67,177 $ 11,604 Supplemental disclosure of cash flow information: Non-cash investing and financing activities: Property and equipment expenditures and capitalized software included in accounts payable, accrued expenses and accrued payroll and related benefits $ 4,733 $ 1,178 $ 2,600 Contingent consideration related to purchases of businesses $ 1,800 $ 1,770 $ — Common stock issued related to purchase of business $ 3,323 $ — $ — Share repurchases included in accounts payable $ 191 $ — $ 1,234 Cash paid during the year for: Interest $ 7,976 $ 8,309 $ 7,971 Income taxes $ 8,449 $ 4,721 $ 1,429 The accompanying notes are an integral part of the consolidated financial statements. F-7 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 1. Description of Business Huron is a global consultancy that collaborates with clients to drive strategic growth, ignite innovation and navigate constant change. Through a combination of strategy, expertise and creativity, we help clients accelerate operational, digital and cultural transformation, enabling the change our clients need to own their future. By embracing diverse perspectives, encouraging new ideas and challenging the status quo, Huron delivers sustainable results for the organizations it serves. We provide our services and manage our business under three operating segments: Healthcare, Business Advisory, and Education. See Note 19 “Segment Information” 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. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements reflect the financial position at December 31, 2021 and 2020, and the results of operations and cash flows for the years ended December 31, 2021, 2020, and 2019. The consolidated financial statements include the accounts of Huron Consulting Group Inc. and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated in consolidation. During the first quarter of 2021, we identified an error on our previously reported consolidated balance sheet as of December 31, 2020 related to the classification between receivables from clients, unbilled services, and deferred revenues. Our consolidated balance sheet as of December 31, 2020 has been revised to reflect the correction of this error. The results of this correction on our consolidated balance sheet were a decrease in unbilled services of $ 7.2 million, an increase in receivables from clients of $ 0.7 million, and a decrease in deferred revenues of $ 6.5 million. This error had no impact on our consolidated statement of operations and other comprehensive income and consolidated statements of cash flows for any current or prior period. We evaluated the materiality of this error from both quantitative and qualitative perspectives and concluded that the impact of the error was not material to the financial statements for the year ended December 31, 2020. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Actual results may differ from these estimates and assumptions. Revenue Recognition We generate substantially all of our revenues from providing professional services to our clients. We also generate revenues from software licenses; software support and maintenance and subscriptions to our cloud-based analytic tools and solutions; speaking engagements; conferences; and publications. 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. F-8 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 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: fixed-fee (including software license revenue); time-and-expense; performance-based; and software support, maintenance and subscriptions. In fixed-fee billing arrangements, we agree to a pre-established fee in exchange for a predetermined set of professional services. We set the fees based on our estimates of the costs and timing for completing the engagements. 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. 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 and the portion of our Healthcare Managed Services contracts that are billed under time-and-expense arrangements. 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. In performance-based billing arrangements, fees are tied to the attainment of contractually defined objectives. We enter into performance-based engagements in essentially two forms. First, we generally earn fees that are directly related to the savings formally acknowledged by the client as a result of adopting our recommendations for improving operational and cost effectiveness in the areas we review. Second, we have performance-based engagements in which we earn a success fee when and if certain predefined outcomes occur. We recognize revenue under performance-based billing arrangements using the following steps: 1) estimate variable consideration using a probability-weighted assessment of the fees to be earned, 2) apply a constraint to the estimated variable consideration to limit the amount that could be reversed when the uncertainty is resolved (the “constraint”), and 3) recognize revenue of estimated variable consideration, net of the constraint, based on work completed to-date versus our estimates of the total services to be provided under the engagement. 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. 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 F-9 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 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. The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets. Revenues recognized for services performed but not yet billed to clients are recorded as unbilled services. Revenues recognized, but for which we are not yet entitled to bill because certain events, such as the completion of the measurement period or client approval, must occur, are recorded as contract assets and included within unbilled services. Client prepayments and retainers are classified as deferred revenues and recognized over future periods as earned in accordance with the applicable engagement agreement. Capitalized Sales Commissions Sales commissions earned by our sales professionals are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions with an expected amortization period greater than one year are deferred and amortized on a straight-line basis over the period of the associated contract. We elected to apply the practical expedient to expense sales commissions as incurred when the expected amortization period is one year or less. Amortization expense is recorded to direct costs. During the years ended December 31, 2021, 2020, and 2019, we amortized $ 0.4 million, $ 0.4 million, and $ 0.3 million, respectively, of capitalized sales commissions. Unamortized sales commissions were $ 0.6 million and $ 0.7 million as of December 31, 2021 and 2020, respectively. Allowances for Doubtful Accounts and Unbilled Services We maintain allowances for doubtful accounts and for services performed but not yet billed based on several factors, including the estimated cash realization from amounts due from clients, an assessment of a client’s ability to make required payments, and the historical percentages of fee adjustments and write-offs by age of receivables and unbilled services. The allowances are assessed by management on a regular basis. These estimates may differ from actual results. If the financial condition of a client deteriorates in the future, impacting the client’s ability to make payments, an increase to our allowance might be required or our allowance may not be sufficient to cover actual write-offs. We record the provision for doubtful accounts and unbilled services as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client’s inability to make required payments on accounts receivables, we record the provision to selling, general and administrative expenses. Direct Costs and Reimbursable Expenses Direct costs and reimbursable expenses consist primarily of revenue-generating employee compensation and their related benefits and share-based compensation costs; as well as technology costs, commissions, the cost of outside consultants or subcontractors assigned to revenue-generating activities, other third-party costs directly attributable to our revenue-generating activities, and direct expenses to be reimbursed by clients. Direct costs and reimbursable expenses incurred on engagements are expensed in the period incurred. Cash and Cash Equivalents We consider all highly liquid investments, including overnight investments and commercial paper, with original maturities of three months or less to be cash equivalents. Concentrations of Credit Risk To the extent receivables from clients become delinquent, collection activities commence. No single client balance is considered large enough to pose a material credit risk. The allowances for doubtful accounts and unbilled services are based upon the expected ability to collect accounts receivable and bill and collect unbilled services. Management does not anticipate incurring losses on accounts receivable in excess of established allowances. See Note 19 “Segment Information” for concentration of accounts receivable and unbilled services. We hold our cash in accounts at multiple third-party financial institutions. These deposits, at times, may exceed federally insured limits. We review the credit ratings of these financial institutions, regularly monitor the cash balances in these accounts, and adjust the balances as appropriate. However, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. F-10 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Long-term Investments Our long-term investments consist of our convertible debt investment in Shorelight Holdings, LLC (“Shorelight”) and preferred stock investment in Medically Home Group, Inc. (“Medically Home”). We classified the convertible debt investment in Shorelight as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. The investment is carried at fair value with unrealized holding gains and losses reported in other comprehensive income. If the investment is in an unrealized loss position due to significant credit deterioration of the investee, we recognize an allowance to decrease the carrying value of the investment to the fair value, which may be reversed in the event that the credit of an issuer improves. In the event there are realized gains and losses or credit allowances recognized, we will record the amount in earnings. We have not recognized any credit allowance on our convertible debt investment or realized gains or losses as of December 31, 2021. See Note 13 “Fair Value of Financial Instruments” for additional information on our convertible debt investment. We classified the preferred stock investment in Medically Home as an equity security without a readily determinable value at the time of purchase and reevaluate such classification as of each balance sheet date. We elected to apply the measurement alternative at the time of purchase and will continue to do so until the investment does not qualify to be so measured. Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in Medically Home. Any unrealized holding gains and losses resulting from observable price changes are recorded in our consolidated statement of operations. Following our purchase, we have not identified any impairment of our investment. See Note 13 “Fair Value of Financial Instruments” for additional information on our preferred stock investment and the unrealized gain recognized in 2020. Fair Value of Financial Instruments See Note 13 “Fair Value of Financial Instruments” for the accounting policies used to measure the fair value of our financial assets and liabilities that are measured at fair value on a recurring basis. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is computed on a straight-line basis over the estimated useful lives of the assets. Software, computers, and related equipment are depreciated over an estimated useful life of two to four years . Furniture and fixtures are depreciated over five years . Aircraft are depreciated over ten years . Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the initial term of the lease. Leases We determine if an arrangement contains a lease and the classification of such lease at inception. As of December 31, 2021 and 2020, all of our material leases are classified as operating leases; we have not entered into any material finance leases. For all operating leases with an initial term greater than 12 months, we recognize an operating lease right-of-use (“ROU”) asset and operating lease liability. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Operating lease ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date and provided by the administrative agent for our senior secured credit facility in determining the present value of lease payments. Operating lease ROU assets exclude lease incentives. We elected the practical expedient to combine lease and nonlease components. Certain lease agreements contain variable lease payments that do not depend on an index or rate. These variable lease payments are not included in the calculation of the operating lease ROU asset and operating lease liability; instead, they are expensed as incurred. Our leases may contain options to extend or terminate the lease, and we include these terms in our calculation of the operating lease ROU asset and operating lease liability when it is reasonably certain that we will exercise the option. Operating lease expense is recognized on a straight-line basis over the lease term and recorded within selling, general and administrative expenses on our consolidated statement of operations. In accordance with our accounting policy for impairment of long-lived assets, operating lease ROU assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group to which the operating lease ROU asset is assigned may not be recoverable. We evaluate the recoverability of the asset group based on forecasted undiscounted cash flows. See Note 5 “Leases” for additional information on our leases, including the lease impairment charges recorded in 2020 and 2019. F-11 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Software Development Costs We incur internal and external software development costs related to our cloud computing applications and software for internal use. We capitalize these software development costs incurred during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Once the project is substantially complete and ready for its intended use, these costs are amortized on a straight-line basis over the technology's estimated useful life. Acquired technology assets are initially recorded at fair value and amortized on a straight-line basis over the estimated useful life. Development costs related to software products that will be sold, leased, or otherwise marketed are expensed until technological feasibility has been established. Thereafter, and until the software is available for general release to customers, these software development costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. These capitalized development costs are amortized in proportion to current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product. We did not capitalize any development costs for this type of software during 2021 or 2020. We classify capitalized software development costs, which primarily relate to cloud computing applications and software for internal use, as other non-current assets on our consolidated balance sheet. As of December 31, 2021, gross capitalized software development costs and related accumulated amortization was $ 33.6 million and $ 15.6 million, respectively. As of December 31, 2020, gross capitalized software development costs and related accumulated amortization was $ 28.5 million and $ 10.6 million, respectively. During the years ended December 31, 2021, 2020, and 2019, we amortized $ 5.2 million, $ 4.7 million, and $ 3.0 million, respectively, of capitalized software development costs. Implementation Costs Incurred in a Cloud Computing Arrangement We incur costs to implement cloud computing arrangements that are service contracts. We capitalize certain costs associated with the implementation of the cloud computing arrangements, including employee payroll and related benefits and third party consulting costs, incurred during the application development stage of a project. These costs are amortized on a straight-line basis over the term of the hosting service contracts, including renewal periods we are reasonably certain to exercise, and recognized as a component of selling, general and administrative expenses on our consolidated statement of operations. As of December 31, 2021 gross capitalized implementation costs incurred in a cloud computing arrangement and related accumulated amortization were $ 6.5 million and $ 0.9 million, respectively. As of December 31, 2020, gross capitalized implementation costs incurred in a cloud computing arrangement were $ 5.4 million, which began amortizing in January 2021. Our capitalized implementation costs primarily relate to the implementation of a new enterprise resource planning (“ERP”) system during 2020 and 2021. In January 2021, we successfully went live with the new ERP system, and we continue to progress with additional functionality and integrations as scheduled. These capitalized costs are included as a component of prepaid expenses and other current assets and other non-current assets on our consolidated balance sheet. Intangible Assets Other Than Goodwill Identifiable intangible assets are amortized over their expected useful lives using a method that reflects the economic benefit expected to be derived from the assets or on a straight-line basis. We evaluate the recoverability of intangible assets periodically by considering events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. Impairment of Long-Lived Assets Long-lived assets, including property and equipment, right-of-use assets, and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a significant decline in forecasted operating results over an extended period of time. We evaluate the recoverability of long-lived assets based on forecasted undiscounted cash flows. See Note 5 “Leases” and Note 11 “Restructuring Charges” for information on our operating lease right-of-use asset and fixed asset impairment charges recorded in 2020 and 2019. No material impairment charges for other long-lived assets were recorded in 2021, 2020, or 2019. Goodwill For acquisitions accounted for as a business combination, goodwill represents the excess of the cost over the fair value of the net assets acquired. We are required to test goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate the fair value of a reporting unit may be below its carrying value. We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. We assign goodwill to reporting units based on our integration plans and the expected synergies resulting from the acquisition. As of December 31, 2021, we have five reporting units: Healthcare, Education, Business Advisory, Enterprise Solutions and Analytics, and Strategy and Innovation. The Business Advisory, Enterprise Solutions and F-12 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Analytics, and Strategy and Innovation reporting units make up our Business Advisory operating segment. During the fourth quarter of 2021, we completed the divestiture of our Life Sciences business, which was a reporting unit within the Business Advisory segment. We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of November 30 and monitor for interim triggering events on an ongoing basis. Pursuant to our policy, we performed the annual goodwill impairment test as of November 30, 2021 and determined that no impairment of goodwill existed as of that date. Further, we evaluated whether any events have occurred, or any circumstances have changed since November 30, 2021 that would indicate goodwill may have become impaired since our annual impairment test. Based on our evaluation as of December 31, 2021, we determined that no indications of impairment have arisen since our annual goodwill impairment test. In 2020, we performed two goodwill impairment tests: an interim impairment test on our Strategy and Innovation and Life Sciences reporting units in the first quarter of 2020 and the annual impairment test on all reporting units with a goodwill balance in the fourth quarter of 2020. As a result of the interim impairment test performed in the first quarter of 2020, we recorded total non-cash pretax goodwill impairment charges of $ 59.8 million. We did not identify any additional impairments during our annual impairment test performed in the fourth quarter of 2020. No goodwill impairment charges were recorded in 2019. See Note 4 “Goodwill and Intangible Assets” for additional information on our interim and annual goodwill impairment tests, and the non-cash goodwill impairment charges recorded in 2020. Business Combinations We use the acquisition method of accounting for business combinations . Each acquired company’s operating results are included in our consolidated financial statements starting on the date of acquisition. The purchase price is equivalent to the fair value of consideration transferred. 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 tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. Goodwill is recognized for the excess of purchase price over the net value of tangible and intangible assets acquired and liabilities assumed. Contingent consideration, which is primarily based on the business achieving certain performance targets, is recognized at its fair value on the acquisition date, and changes in fair value are recognized in earnings until settled. Refer to Note 3 “Acquisitions and Divestitures” for additional information on our business acquisitions and refer to Note 13 “Fair Value of Financial Instruments” for additional information regarding our contingent acquisition liability balances. Income Taxes Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. We have elected to recognize the tax expense related to Global Intangible Low-Taxed Income ("GILTI") as a current period expense when incurred. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. To the extent that deferred tax assets will not likely be recovered from future taxable income, a valuation allowance is established against such deferred tax assets. Refer to Note 17 "Income Taxes" for further information regarding incomes taxes. Share-Based Compensation Share-based compensation cost is measured based on the grant date fair value of the respective awards. We generally recognize share-based compensation ratably using the straight-line attribution method; however, for those awards with performance criteria and graded vesting features, we use the graded vesting attribution method. It is our policy to account for forfeitures as they occur. Sponsorship and Advertising Costs Sponsorship and advertising costs are expensed as incurred. Such expenses for the years ended December 31, 2021, 2020, and 2019 totaled $ 4.3 million, $ 4.1 million, and $ 8.4 million, respectively, and are a component of selling, general and administrative expenses on our consolidated statement of operations. Debt Issuance Costs We amortize the costs we incur to obtain debt financing over the contractual life of the related debt using the effective interest method for non-revolving debt and the straight-line method for revolving debt. The amortization expense is included in interest expense, net of interest F-13 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) income in our statement of operations. Unamortized debt issuance costs attributable to our revolving credit facility are included as a component of other non-current assets. Foreign Currency Assets and liabilities of foreign subsidiaries whose functional currency is not the United States Dollar (USD) are translated into USD using the exchange rates in effect at period end. Revenue and expense items are translated using the average exchange rates for the period. Foreign currency translation adjustments are included in accumulated other comprehensive income, which is a component of stockholders’ equity. Foreign currency transaction gains and losses are included in other income, net on the consolidated statement of operations. We recognized $ 0.4 million of foreign currency transaction losses in 2021, less than $ 0.1 million of foreign currency transaction gains in 2020, and $ 0.2 million of foreign currency transaction losses in 2019. Segment Reporting Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. As of December 31, 2021, our chief operating decision maker manages the business under three operating segments, which are our reportable segments: Healthcare, Business Advisory, and Education. See Note 19 "Segment Information" for additional information on the segment reorganization effective in the first quarter of 2022. New Accounting Pronouncements Recently Adopted In January 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-01 , Investments - Equity Securities (Topic 321) - Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 . ASU 2020-01 clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purpose of applying the measurement alternative in accordance with Topic 321. We elected to early adopt ASU 2020-10 effective January 1, 2021, which did not have any impact on our consolidated financial statements. In October 2020, the FASB issued ASU 2020-10, Codification Improvements. ASU 2020-10 situates all disclosure guidance within the appropriate disclosure section of the Codification and makes other improvements and technical corrections to the Codification. We adopted ASU 2020-10 effective January 1, 2021, which did not have any impact on our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments of this ASU require entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. We elected to early adopt ASU 2021-08 in the fourth quarter of 2021 on a retrospective basis for all 2021 acquisitions, which had no impact on our consolidated financial statements. Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . In January 2021, the FASB clarified the scope of that guidance with the issuance of ASU 2021-01, Reference Rate Reform (Topic 848): Scope . Together, these ASUs provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting under GAAP. This standard is optional and may be applied by entities after March 12, 2020, but no later than December 31, 2022. We have certain debt instruments and related interest rate swaps that are indexed to LIBOR; as such, we are currently evaluating the potential impact this guidance will have on our consolidated financial statements. F-14 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 3. Acquisitions and Divestitures Acquisitions 2021 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 in our consolidated financial statements and results of operations of our 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. These acquisition were accounted for using the acquisition method of accounting. Contract assets and contract liabilities are recorded at their carrying value under Topic 606: Revenue from Contracts with Customers as we adopted ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers in the fourth quarter of 2021. All other tangible and identifiable intangible assets acquired and liabilities assumed are recorded at fair value as of the acquisition date. The current acquisition date values of assets acquired and liabilities assumed of the Whiteboard and Perception Health acquisitions are considered preliminary and are based on the information that was available as of the dates of the acquisitions. We believe that the information provides a reasonable basis for estimating the preliminary values of assets acquired and liabilities assumed but certain items, such as the intangible assets valuations and the working capital adjustments, among other things, may be subject to change as additional information is received. Thus, the provisional measurements of assets acquired, including goodwill, and liabilities assumed related to the Whiteboard and Perception Health acquisitions are subject to change. We expect to finalize the valuations as soon as practicable, but not later than one year from the acquisition dates. 2020 B3i Analytics, LLC On August 1, 2020, we completed the acquisition of B3i Analytics, LLC (“B3i Analytics”), a software firm that provides a software as a solution (“SaaS”) application to leverage internal and external data to help higher education institutions forecast research revenue. The results of operations of B3i Analytics are included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition. ForceIQ, Inc. On November 1, 2020, we completed the acquisition of ForceIQ, Inc. (“ForceIQ”), a Salesforce Industries partner focused on helping clients drive digital transformation and innovation at scale powered by the cloud. The acquisition expands our cloud-based technology offerings within the Business Advisory segment. The results of operations of ForceIQ are included in our consolidated financial statements and results of operations of our Business Advisory segment from the date of acquisition. F-15 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The acquisitions of B3i Analytics and ForceIQ are not significant to our consolidated financial statements individually or in the aggregate as of and for the year ended December 31, 2020. In 2019, we completed the acquisition of an immaterial business in our Education segment. The results of operations of the acquired business is included in our consolidated financial statements and results of operations of our Education segment from the date of acquisition. Divestitures 2021 Life Sciences On November 1, 2021, we completed the divestiture of our Life Sciences business, a reporting unit within our Business Advisory segment to a third-party. In connection with the sale, we recorded a $ 31.5 million pre-tax gain which is included in other income, net on our consolidated statement of operations. The Life Sciences business was not significant to our consolidated financial statements and did not qualify as a discontinued operation for reporting under GAAP. For the ten months ended October 31, 2021, this business generated $ 16.7 million of revenues. 2020 U.K. Life Sciences Drug Safety Practice On December 30, 2020, we sold our U.K. life sciences drug safety business that was part of the Life Sciences reporting unit to former employees. In connection with the sale, we recorded a $ 1.5 million loss which is included in other income, net on our consolidated statement of operations. The U.K. life sciences drug safety practice was not significant to our consolidated financial statements and did not meet the criteria for reporting separately as discontinued operations. In 2020, this business generated $ 2.3 million of revenues. 4. Goodwill and Intangible Assets The table below sets forth the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2021 and 2020. Healthcare Business Advisory Education Total Balance as of December 31, 2019: Goodwill $ 636,810 $ 302,057 $ 103,889 $ 1,042,756 Accumulated impairment losses ( 208,081 ) ( 187,995 ) — ( 396,076 ) Goodwill, net as of December 31, 2019 $ 428,729 $ 114,062 $ 103,889 $ 646,680 Goodwill recorded in connection with a business combination (1) — 7,507 495 8,002 Goodwill impairment charges — ( 59,816 ) — ( 59,816 ) Foreign currency translation — ( 629 ) — ( 629 ) Balance as of December 31, 2020: Goodwill 636,810 308,935 104,384 1,050,129 Accumulated impairment losses ( 208,081 ) ( 247,811 ) — ( 455,892 ) Goodwill, net as of December 31, 2020 $ 428,729 $ 61,124 $ 104,384 $ 594,237 Goodwill recorded in connection with business combinations (1) 6,141 3,315 17,186 26,642 Balance as of December 31, 2021: Goodwill 642,951 312,250 121,570 1,076,771 Accumulated impairment losses ( 208,081 ) ( 247,811 ) — ( 455,892 ) Goodwill, net as of December 31, 2021: $ 434,870 $ 64,439 $ 121,570 $ 620,879 (1) See Note 3 “Acquisitions and Divestitures” for additional information on business combinations completed in 2021 and 2020. F-16 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 2021 Annual Goodwill Impairment Test 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 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. Further, we evaluated whether any events have occurred or any circumstances have changed since November 30, 2021 that would indicate goodwill may have become impaired since our annual impairment test. Based on our evaluation as of December 31, 2021, we determined that no indications of impairment have arisen since our annual goodwill impairment test. The results of an impairment analysis are as of a point in time. There is no assurance that the actual future earnings or cash flows of our reporting units will be consistent with our projections. We will monitor any changes to our assumptions and will evaluate goodwill as deemed warranted during future periods. Any significant decline in our operations could result in non-cash goodwill impairment charges. First Quarter 2020 Goodwill Impairment Charges The worldwide spread of the COVID-19 pandemic in the first quarter of 2020 has created significant volatility, uncertainty and disruption to the global economy. From the onset of the COVID-19 pandemic, we closely monitored the impact it could have on all aspects of our business, including how we expect it to negatively impact our clients, employees and business partners. While the COVID-19 pandemic did not have a significant impact on our consolidated revenues in the first quarter of 2020, we expected it to have an unfavorable impact on sales, increase uncertainty in the backlog and negatively impact full year 2020 results. The services provided by our Strategy and Innovation and Life Sciences reporting units within our Business Advisory segment focus on strategic solutions for healthy, well-capitalized companies to identify new growth opportunities, which may be considered by our clients to be more discretionary in nature, and the duration of the projects within these practices are typically short-term. Therefore, at the onset of the COVID-19 pandemic in the U.S. and due to the uncertainty caused by the pandemic, we were cautious about near-term results for these two reporting units. Based on our internal projections and the preparation of our financial statements for the quarter ended March 31, 2020, and considering the expected decrease in demand due to the COVID-19 pandemic, during the first quarter of 2020 we believed it was more likely than not that the fair value of these two reporting units no longer exceeded their carrying values and performed an interim impairment test on both reporting units as of March 31, 2020. Based on the estimated fair values of the Strategy and Innovation and Life Sciences reporting units, we recorded non-cash pretax goodwill impairment charges of $ 49.9 million and $ 9.9 million, respectively, in the first quarter of 2020. The $ 49.9 million non-cash pretax charge related to the Strategy and Innovation reporting unit reduced the goodwill balance of the reporting unit to $ 37.5 million. The $ 9.9 million non-cash pretax charge related to the Life Sciences reporting unit reduced the goodwill balance of the reporting unit to zero. Our goodwill impairment test was performed by comparing the fair value of each of the Strategy and Innovation and Life Sciences reporting units with its respective carrying value and recognizing an impairment charge for the amount by which the carrying value exceeded the fair value. To estimate the fair value of each reporting unit, we relied on a combination of the income approach and the market approach with a fifty-fifty weighting. In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected after-tax cash flows that will be generated by each reporting unit and then discounting those cash flows to present value, reflecting the relevant risks associated with each reporting unit and the time value of money. This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted EBITDA margins, and discount rates that reflect the risk inherent in the future cash flows. In estimating F-17 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) future cash flows, we relied on internally generated seven-year forecasts. Our forecasts are based on historical experience, current backlog, expected market demand, and other industry information. In the market approach, we utilized the guideline company method, which involved calculating revenue multiples based on operating data from guideline publicly traded companies. Multiples derived from guideline companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples were evaluated and adjusted based on specific characteristics of the Strategy and Innovation and Life Sciences reporting units relative to the selected guideline companies and applied to the reporting units' operating data to arrive at an indication of value. Intangible Assets Intangible assets as of December 31, 2021 and 2020 consisted of the following: As of December 31, 2021 2020 Useful Life in Years Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer relationships 3 to 13 $ 75,908 $ 53,421 $ 73,629 $ 56,232 Trade names 6 6,000 5,148 6,130 4,287 Technology and software 2 to 5 13,330 5,607 5,800 5,380 Non-competition agreements 4 to 5 2,020 1,347 2,090 1,541 Customer contracts 1 260 101 800 526 Total $ 97,518 $ 65,624 $ 88,449 $ 67,966 In connection with the divestiture of our Life Sciences business within our Business Advisory segment in 2021, we included $ 2.1 million of intangible assets in the calculation of the gain on sale recognized in other income (loss) on our consolidated statement of operations. The $2.1 million of intangible assets represents the carrying value of the Life Sciences customer relationships intangible asset as of the closing date. Identifiable intangible assets with finite lives are amortized over their estimated useful lives. Customer relationships and customer contracts, as well as certain trade names and technology and software, are amortized on an accelerated basis to correspond to the cash flows expected to be derived from the assets. All other intangible assets with finite lives are amortized on a straight-line basis. Intangible assets amortization expense was $ 9.3 million, $ 12.7 million, and $ 17.8 million for the years ended December 31, 2021, 2020, and 2019, respectively. The table below sets forth the estimated annual amortization expense for each of the five succeeding years for the intangible assets recorded as of December 31, 2021. Year Ending December 31, Estimated Amortization Expense 2022 $ 10,670 2023 $ 7,481 2024 $ 4,263 2025 $ 3,178 2026 $ 2,271 Actual future amortization expense could differ from these estimated amounts as a result of future acquisitions, dispositions, and other factors. 5. Leases We lease office space, data centers and certain equipment under operating leases expiring on various dates through 2029, with various renewal options that can extend the lease terms by one to ten years . Our operating leases include fixed payments plus, in some cases, scheduled base rent increases over the term of the lease. Certain leases require variable payments of real estate taxes, insurance and operating expenses. We exclude these variable payments from the measurements of our lease liabilities and expense them as incurred. We elected the practical expedient to combine lease and nonlease components. No lease agreements contain any residual value guarantees or F-18 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) material restrictive covenants. As of December 31, 2021, we have not entered into any material finance leases. We sublease certain office spaces to third parties resulting from restructuring activities in certain locations. Operating lease right-of-use (“ROU”) assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group to which the operating lease ROU asset is assigned may not be recoverable. First, we test the asset group for recoverability by comparing the undiscounted cash flows of the asset group, which include expected future lease and nonlease payments under the lease agreement offset by expected sublease income, to the carrying amount of the asset group. If the first step of the long-lived asset impairment test concludes that the carrying amount of the asset group is not recoverable, we perform the second step of the long-lived asset impairment test by comparing the fair value of the asset group to its carrying amount and recognizing a lease impairment charge for the amount by which the carrying amount exceeds the fair value. To estimate the fair value of the asset group, we rely on a discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate. Fourth Quarter 2020 Lease Impairment Charges In the fourth quarter of 2020, we announced a restructuring plan to reduce operating costs to address the impact of the COVID-19 pandemic on our business. The restructuring plan provided for a reduction in certain leased office spaces which included a portion of our principal executive office in Chicago, Illinois; the remaining portion of our Lake Oswego, Oregon office; our Boston, Massachusetts and Detroit, Michigan offices; and portions of our Denver, Colorado, New York City, New York, and Pensacola, Florida offices. As a result, we recognized $ 13.2 million of non-cash lease impairment charges, of which $ 9.1 million was allocated to the operating lease ROU assets and $ 4.1 million was allocated to the related fixed assets based on their relative carrying amounts. The $ 13.2 million of non-cash lease impairment charges was recognized in restructuring charges on our consolidated statement of operations. See Note 11 “Restructuring Charges” for additional information on our restructuring activities. Fourth Quarter 2019 Lease Impairment Charge During 2019, we exited a portion of our Lake Oswego, Oregon office, the remaining portion of our Middleton, Wisconsin office, and an office in Houston Texas, which resulted in $ 0.8 million of non-cash lease impairment charges, of which $ 0.6 million was allocated to the operating lease ROU assets and $ 0.2 million was allocated to the leasehold improvements based on their relative carrying amounts. The $ 0.8 million of non-cash lease impairment charges were recognized in restructuring charges on our consolidated statement of operations. See Note 11 “Restructuring Charges” for additional information on our restructuring activities. Fourth Quarter 2019 Lease Modification In the fourth quarter of 2019, we entered into an amendment to the office lease agreement for our principal executive offices in Chicago, Illinois, which resulted in a non-cash gain on lease modification of $ 0.8 million. Among other items, this amendment i) extended the term of the lease from September 30, 2024 to September 30, 2029; ii) provided a renewal option to extend the lease for an additional five year period to September 30, 2034; iii) terminated the lease with respect to certain leased spaces previously vacated; iv) provided abatement of certain future base rent payments and our pro rata share of operating expenses and taxes; and v) provided a one-time cash payment from the lessor as an incentive. Additional information on our operating leases as of December 31, 2021 and 2020 follows. As of December 31, Balance Sheet 2021 2020 Operating lease right-of-use assets $ 35,311 $ 39,360 Current maturities of operating lease liabilities $ 10,142 $ 8,771 Operating lease liabilities, net of current portion 54,313 61,825 Total lease liabilities $ 64,455 $ 70,596 F-19 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Year Ended December 31, Lease Cost 2021 2020 2019 Operating lease cost $ 9,755 $ 11,045 $ 11,883 Short-term leases (1) 225 229 322 Variable lease costs 3,765 1,693 3,656 Sublease income ( 1,660 ) ( 1,973 ) ( 2,638 ) Net lease cost (2)(3) $ 12,085 $ 10,994 $ 13,223 (1) Includes variable lease costs related to short-term leases. (2) Net lease cost includes $ 2.6 million, $ 0.3 million and $ 0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, recorded as restructuring charges as they relate to vacated office spaces. See Note 11 “Restructuring Charges” for additional information on our vacated office spaces. (3) Net lease cost includes $ 0.2 million and $ 0.3 million for the years ended December 31, 2020 and 2019, respectively, related to vacated office spaces directly related to discontinued operations. The table below summarizes the remaining expected lease payments under our operating leases as of December 31, 2021. Future Lease Payments December 31, 2021 2022 $ 12,575 2023 12,352 2024 11,648 2025 11,345 2026 10,522 Thereafter 14,462 Total operating lease payments $ 72,904 Less: imputed interest ( 8,449 ) Present value of operating lease liabilities $ 64,455 Year Ended December 31, Other Information 2021 2020 2019 Cash paid for operating lease liabilities $ 12,573 $ 11,307 $ 13,902 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 2,960 $ 1,456 $ 12,842 Weighted average remaining lease term - operating leases 6.1 years 7.0 years 7.7 years Weighted average discount rate - operating leases 4.1 % 4.3 % 4.3 % 6. Property and Equipment, Net Depreciation expense for property and equipment was $ 11.0 million, $ 12.2 million, and $ 13.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. During the years ended December 31, 2021, 2020 and 2019, we recognized an additional $ 0.4 million, $ 0.6 million, and $ 0.5 million, respectively, of accelerated depreciation expense for fixed assets related to vacated office spaces. This accelerated depreciation expense is included as a component of restructuring charges. See Note 11 “Restructuring Charges” for additional F-20 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) information on our restructuring charges incurred in 2021, 2020 and 2019. Property and equipment, net at December 31, 2021 and 2020 consisted of the following: As of December 31, 2021 2020 Computers, related equipment, and software $ 33,682 $ 27,943 Leasehold improvements 40,336 39,952 Furniture and fixtures 12,023 14,126 Aircraft 6,800 7,667 Assets under construction 1,113 502 Property and equipment 93,954 90,190 Accumulated depreciation and amortization ( 62,950 ) ( 61,097 ) Property and equipment, net $ 31,004 $ 29,093 In the first quarter of 2022, we completed the sale of the aircraft to a third-party. As a result of the sale, we no longer own any aircraft. 7. Financing Arrangements A summary of the carrying amounts of our debt follows: As of December 31, 2021 2020 Senior secured credit facility $ 230,000 $ 200,000 Promissory note due 2024 2,780 3,279 Total long-term debt $ 232,780 $ 203,279 Current maturities of long-term debt ( 559 ) ( 499 ) Long-term debt, net of current portion $ 232,221 $ 202,780 Below is a summary of the scheduled remaining principal payments of our debt as of December 31, 2021. Principal Payments of Long-Term Debt 2022 $ 559 2023 $ 575 2024 $ 231,646 Senior Secured Credit Facility The Company has a $ 600 million senior secured revolving credit facility, subject to the terms of a Second Amended and Restated Credit Agreement dated as of March 31, 2015, as amended to date (as amended and modified the “Amended Credit Agreement”), that becomes due and payable in full upon maturity on September 27, 2024 . The Amended Credit Agreement provides the option to increase the revolving credit facility or establish term loan facilities in an aggregate amount of up to $ 150 million, subject to customary conditions and the approval of any lender whose commitment would be increased, resulting in a maximum available principal amount under the Amended Credit Agreement of $ 750 million. The initial borrowings under the Amended Credit Agreement were used to refinance borrowings outstanding under a prior credit agreement, and future borrowings under the Amended Credit Agreement may be used for working capital, capital expenditures, acquisitions of businesses, share repurchases, and general corporate purposes. Fees and interest on borrowings vary based on our Consolidated Leverage Ratio (as defined in the Amended Credit Agreement). At our option, borrowings under the Amended Credit Agreement will bear interest at one, two, three or six-month LIBOR or an alternate base rate, in each case plus the applicable margin. The applicable margin will fluctuate between 1.125 % per annum and 1.875 % per annum, in the case of 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. F-21 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Amounts borrowed under the Amended Credit Agreement may be prepaid at any time without premium or penalty. We are required to prepay the amounts outstanding under the Amended Credit Agreement in certain circumstances, including upon an Event of Default (as defined in the Amended Credit Agreement). In addition, we have the right to permanently reduce or terminate the unused portion of the commitments provided under the Amended Credit Agreement at any time. The loans and obligations under the Amended Credit Agreement are secured pursuant to a Second Amended and Restated Security Agreement and a Second Amended and Restated Pledge Agreement (the “Pledge Agreement”) with Bank of America, N.A. as collateral agent, pursuant to which the Company and the subsidiary guarantors grant Bank of America, N.A., for the ratable benefit of the lenders under the Amended Credit Agreement, a first-priority lien, subject to permitted liens, on substantially all of the personal property assets of the Company and the subsidiary guarantors, and a pledge of 100 % of the stock or other equity interests in all domestic subsidiaries and 65 % of the stock or other equity interests in each “material first-tier foreign subsidiary” (as defined in the Pledge Agreement). The Amended Credit Agreement contains usual and customary representations and warranties; affirmative and negative covenants, which include limitations on liens, investments, additional indebtedness, and restricted payments; and two quarterly financial covenants as follows: (i) a maximum Consolidated Leverage Ratio (defined as the ratio of debt to consolidated EBITDA) of 3.75 to 1.00; however the maximum permitted Consolidated Leverage Ratio will increase to 4.00 to 1.00 upon the occurrence of certain transactions, 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. For purposes of the Consolidated Leverage Ratio total debt is on a gross basis and is not netted against our cash balances. At December 31, 2021, we were in compliance with these financial covenants with a Consolidated Leverage Ratio of 1.73 to 1.00 and a Consolidated Interest Coverage Ratio of 18.43 to 1.00. Borrowings outstanding under the Amended Credit Agreement at December 31, 2021 totaled $ 230.0 million. These borrowings carried a weighted average interest rate of 2.7 %, including the effect of the interest rate swaps described in Note 12 “Derivative Instruments and Hedging Activity.” Borrowings outstanding under the Amended Credit Agreement at December 31, 2020 were $ 200.0 million and carried a weighted average interest rate of 2.5 %, including the effect of the interest rate swaps. The borrowing capacity under the revolving credit facility is reduced by any outstanding borrowings under the revolving credit facility and outstanding letters of credit. At December 31, 2021, we had outstanding letters of credit totaling $ 0.7 million, which are primarily used as security deposits for our office facilities. As of December 31, 2021, the unused borrowing capacity under the revolving credit facility was $ 369.3 million. Promissory Note due 2024 On June 30, 2017, in conjunction with our purchase of an aircraft related to the acquisition of Innosight, we assumed, from the sellers of the aircraft, a promissory note with an outstanding principal balance of $ 5.1 million. The principal balance of the promissory note is subject to scheduled monthly principal payments until the maturity date of March 1, 2024 , at which time a final payment of $ 1.5 million, plus any accrued and unpaid interest, will be due. Under the terms of the promissory note, we pay interest on the outstanding principal amount at a rate of one month LIBOR plus 1.97 % per annum. The obligations under the promissory note are secured pursuant to a Loan and Aircraft Security Agreement with Banc of America Leasing & Capital, LLC, which grants the lender a first priority security interest in the aircraft. At December 31, 2021, the outstanding principal amount of the promissory note was $2.8 million, and the aircraft had a carrying amount of $ 3.7 million. At December 31, 2020, the outstanding principal amount of the promissory note was $3.3 million, and the aircraft had a carrying amount of $ 4.4 million. 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. 8. Capital Structure Preferred Stock We are authorized to issue up to 50,000,000 shares of preferred stock. Our certificate of incorporation authorizes our board of directors, without any further stockholder action or approval, to issue these shares in one or more classes or series, to establish from time to time the number of shares to be included in each class or series, and to fix the rights, preferences and privileges of the shares of each wholly unissued class or series and any of its qualifications, limitations or restrictions. As of December 31, 2021 and 2020, no such preferred stock has been approved or issued. Common Stock We are authorized to issue up to 500,000,000 shares of common stock, par value $ .01 per share. The holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Subject to the rights and preferences of the F-22 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) holders of any series of preferred stock that may at the time be outstanding, holders of common stock are entitled to such dividends as our board of directors may declare. In the event of any liquidation, dissolution or winding-up of our affairs, after payment of all of our debts and liabilities and subject to the rights and preferences of the holders of any series of preferred stock that may at the time be outstanding, holders of common stock will be entitled to receive the distribution of any of our remaining assets. 9 . Revenues For the years ended December 31, 2021, 2020 and 2019 we recognized revenues of $905.6 million, $844.1 million, and $876.8 million, respectively. Of the $905.6 million recognized in 2021, we recognized revenues of $ 22.9 million from obligations satisfied, or partially satisfied, in prior periods, of which $ 14.6 million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ 8.3 million was primarily due to the release of allowances on unbilled services. Of the $844.1 million recognized in 2020, we recognized revenues of $ 12.2 million from obligations satisfied, or partially satisfied, in prior periods, of which $ 7.5 million was primarily due to changes in the estimates of our variable consideration under performance-based billing arrangements and $ 4.7 million was primarily due to the release of allowances on unbilled services. Of the $876.8 million recognized in 2019, we recognized revenues of $ 2.8 million from obligations satisfied, or partially satisfied, in prior periods due to the release of allowances on unbilled services. During 2019, we recognized a $ 1.0 million decrease to revenues due to changes in the estimates of our variable consideration under performance-based billing arrangements. As of December 31, 2021, we had $ 100.0 million of remaining performance obligations under engagements with original expected durations greater than one year. These remaining performance obligations exclude obligations under contracts with an original expected duration of one year or less, variable consideration which has been excluded from the total transaction price due to the constraint, and performance obligations under time-and-expense engagements which are recognized in the amount invoiced. Of the $ 100.0 million of performance obligations, we expect to recognize approximately $ 55.2 million as revenue in 2022, $ 25.6 million in 2023, and the remaining $ 19.2 million thereafter. Actual revenue recognition could differ from these amounts as a result of changes in the estimated timing of work to be performed, adjustments to estimated variable consideration in performance-based arrangements, or other factors. Contract Assets and Liabilities The payment terms and conditions in our customer contracts vary. Differences between the timing of billings and the recognition of revenue are recognized as either unbilled services or deferred revenues in the consolidated balance sheets. Unbilled services include revenues recognized for services performed but not yet billed to clients. Services performed that we are not yet entitled to bill because certain events must occur, such as the completion of the measurement period or client approval in performance-based engagements, are recorded as contract assets and included within unbilled services, net. The contract asset balance as of December 31, 2021 and 2020 was $ 23.7 million and $ 17.3 million, respectively. The $ 6.4 million increase primarily reflects timing differences between the completion of our performance obligations and the amounts billed or billable to clients in accordance with their contractual billing terms. Client prepayments and retainers are classified as deferred revenues and recognized over future periods in accordance with the applicable engagement agreement and our revenue recognition policy. Our deferred revenues balance as of December 31, 2021 and December 31, 2020 was $19.2 million and $28.2 million respectively. The $ 9.0 million decrease primarily reflects timing differences between client payments in accordance with their contract terms and the completion of our performance obligations. For the year ended December 31, 2021, $ 27.6 million of revenues recognized were included in the deferred revenue balance as of December 31, 2020. For the year ended December 31, 2020, $ 25.1 million of revenues recognized were included in the deferred revenue balance as of December 31, 2019. F-23 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 10. Earnings Per Share Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period, excluding unvested restricted common stock. Diluted earnings per share reflects the potential reduction in earnings per share that could occur if securities or other contracts to issue common stock were exercised or converted into common stock under the treasury stock method. Such securities or other contracts include unvested restricted stock awards, outstanding common stock options, convertible senior notes, and outstanding warrants, to the extent dilutive. In periods for which we report a net loss from continuing operations, diluted weighted average common shares outstanding excludes all potential common stock equivalents as their impact on diluted net loss from continuing operations per share would be anti-dilutive. Earnings (loss) per share under the basic and diluted computations are as follows: Year Ended December 31, 2021 2020 2019 Net income (loss) from continuing operations $ 62,987 $ ( 23,718 ) $ 41,979 Loss from discontinued operations, net of tax — ( 122 ) ( 236 ) Net income (loss) $ 62,987 $ ( 23,840 ) $ 41,743 Weighted average common shares outstanding—basic 21,439 21,882 21,993 Weighted average common stock equivalents 370 — 514 Weighted average common shares outstanding—diluted 21,809 21,882 22,507 Net earnings (loss) per basic share: Net income (loss) from continuing operations $ 2.94 $ ( 1.08 ) $ 1.91 Loss from discontinued operations, net of tax — ( 0.01 ) ( 0.01 ) Net income (loss) $ 2.94 $ ( 1.09 ) $ 1.90 Net earnings (loss) per diluted share: Net income (loss) from continuing operations $ 2.89 $ ( 1.08 ) $ 1.87 Loss from discontinued operations, net of tax — ( 0.01 ) ( 0.02 ) Net income (loss) $ 2.89 $ ( 1.09 ) $ 1.85 The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above at December 31, 2021 and 2020 were 0.1 million and 1.1 million, respectively, and related to unvested restricted stock. The number of anti-dilutive securities excluded from the computation of the weighted average common stock equivalents presented above at December 31, 2019 were 3.1 million and related to the warrants sold in conjunction with the issuance of our convertible senior notes. As of December 31, In November 2020, our board of directors authorized a share repurchase program (the “2020 Share Repurchase Program”) permitting us to repurchase up to $ 50 million of our common stock through December 31, 2021. The 2020 Share Repurchase Program was authorized subsequent to the expiration of our prior share repurchase program (the “2015 Share Repurchase Program”) on October 31, 2020. The 2015 Share Repurchase Program permitted us to repurchase up to $ 125 million of our common stock through October 31, 2020. 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. All shares repurchased and retired are reflected as a reduction to our basic weighted average shares outstanding based on the trade date of the share repurchase. During 2021, we repurchased and retired 1,265,261 shares for $ 64.8 million under the 2020 Share Repurchase Program, including 3,820 shares for $ 0.2 million which settled in the first quarter of 2022. During 2020, we repurchased and retired 313,998 shares for $ 20.9 million under the 2015 Share Repurchase Program and 111,166 shares for $ 5.0 million under the 2020 Share Repurchase Program. Additionally, during the first quarter of 2020, we settled the repurchase of 18,000 shares for $ 1.2 million that were accrued as of December 31, 2019. In 2019, we repurchased and retired 210,437 shares for $ 14.2 million under the 2015 Share Repurchase Program, including the 18,000 shares F-24 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) for $ 1.2 million which settled in the first quarter of 2020. As of December 31, 2021, $ 30.2 million remains available under the plan for share repurchases. 11. Restructuring Charges 2021 In 2021, we incurred $12.4 million of total pretax restructuring expense. Of the $12.4 million pretax restructuring expense, $ 8.5 million related to the divestiture of our Life Sciences business, a reporting unit within the Business Advisory segment. On November 1, 2021, we completed the sale of the Life Sciences business to a third-party, and recognized a $ 31.5 million pre-tax gain which is included within other income (expense), net on our consolidated statement of operations. For the ten months ended October 31, 2021, the Life Sciences business generated $ 16.7 million of revenue and is not considered significant to our consolidated financial statements. The total pretax restructuring expense of $12.4 million recognized in 2021 consisted of the following charges: Employee Costs - We incurred $ 8.1 million of employee-related restructuring expense, of which $ 6.8 million related to transaction-related employee payments made in connection with the divestiture of our Life Sciences businesses and $ 1.3 million related to other employee-related expenses in our Business Advisory segment. Office space reductions - We incurred $ 3.1 million of restructuring expense related to office space reductions, of which $ 2.3 million related to rent and related expenses, net of sublease income, and accelerated depreciation on furniture and fixtures for previously vacated office spaces and $ 0.8 million related to accelerated amortization and depreciation on the operating lease ROU asset and fixed assets related to our London, U.K. office which we vacated in connection with the divestiture of our Life Sciences business. Other - We incurred $ 1.2 million of other restructuring charges, of which $ 0.9 million related to third-party legal and professional advisory fees incurred in connection with the divestiture of our Life Sciences business and $ 0.2 million related to third-party advisory fees related to the reorganization of our internal operating and financial reporting structure. See Note 19 "Segment Information" for more information on our reorganization which is effective in the first quarter of 2022. Of the total $12.4 million pretax restructuring charge, $ 7.9 million was recognized in the results of operations of our Business Advisory segment and $ 4.5 million was recognized in our corporate operations. 2020 In 2020, we incurred $20.5 million of total pretax restructuring expense. Of the $20.5 million pretax restructuring expense, $ 18.7 million related to the restructuring plan executed in the fourth quarter of 2020 to reduce operating costs to address the impact of the COVID-19 pandemic on our business. The total pretax restructuring expense of $20.5 million recognized in 2020 consisted of the following charges: Employee Costs - We incurred $ 5.3 million of severance-related restructuring expense, of which, $ 4.8 million related to the fourth quarter 2020 restructuring plan and $ 0.4 million related to workforce reductions completed prior to the fourth quarter of 2020 to better align resources with market demand. Of the total $ 5.3 million of severance-related restructuring expense, $ 2.0 million related to our Education segment, $ 1.5 million related to our Healthcare segment, $ 1.0 million related to our Business Advisory segment, and $ 0.8 million related to our corporate operations. Office space reductions - We incurred $ 14.0 million of restructuring expense related to office space reductions, which primarily related to the fourth quarter 2020 restructuring plan. The fourth quarter 2020 restructuring plan provided for a reduction in certain leased office spaces which included a portion of our principal executive office in Chicago, Illinois; the remaining portion of our Lake Oswego, Oregon office; our Boston, Massachusetts and Detroit, Michigan offices; and portions of our Denver, Colorado, New York City, New York, and Pensacola, Florida offices. As a result, we recognized $ 13.2 million of non-cash lease impairment charges on the related operating lease ROU assets and fixed assets for those we intend to sublease, as well as $ 0.7 million of accelerated amortization and depreciation on the related operating lease ROU assets and fixed assets we abandoned. See Note 5 “Leases” for additional information on the long-lived asset impairment test performed in 2020. We also incurred $ 0.1 million related to rent and related expenses, net of sublease income, for previously vacated office spaces. Other - We incurred $ 1.2 million of other restructuring charges primarily related to an accrual for the termination of a third-party advisor agreement in our Business Advisory segment. Of the total $20.5 million pretax restructuring charge, $ 14.8 million related to our corporate operations, $ 2.2 million related to our Business Advisory segment, $ 2.0 million related to our Education segment, and $ 1.5 million related to our Healthcare segment. F-25 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 2019 In 2019, we incurred $1.9 million of pretax restructuring expense. This expense primarily consisted of the following charges: Employee Costs - We incurred $ 0.6 million of severance expense as a result of workforce reductions to better align resources with market demand and workforce reductions in our corporate operations. Office space reductions - We incurred $ 1.2 million of restructuring expense related to office space reductions. During 2019, we exited a portion of our Lake Oswego, Oregon office resulting in a $ 0.7 million lease impairment charge on the related operating lease ROU asset and leasehold improvements and $ 0.2 million of accelerated depreciation on furniture and fixtures in that office. See Note 5 “Leases” for additional information on the long-lived asset impairment test performed in 2019. Additionally, during 2019, we exited the remaining portion of our Middleton, Wisconsin office and an office in Houston, Texas, resulting in restructuring charges of $ 0.4 million and $ 0.1 million, respectively, which primarily consisted of accelerated depreciation on furniture and fixtures in those offices. During the fourth quarter of 2019, we entered into an amendment to the lease of our principal executive office in Chicago, Illinois. Among other items, the amendment terminated the lease with respect to certain leased space which we previously vacated and subleased to a third-party. As a result of the amendment, we recognized a restructuring gain of $ 0.4 million. See Note 5 “Leases” for additional information on the amendment. Of the $1.9 million pretax restructuring charge, $ 1.5 million related to our corporate operations, $ 0.3 million related to our Healthcare segment, and $ 0.1 million related to our Business Advisory segment. The table below sets forth the changes in the carrying amount of our restructuring charge liability by restructuring type for the years ended December 31, 2021 and 2020. Employee Costs Office Space Reductions Other Total Balance as of December 31, 2019 $ 68 $ 91 $ — $ 159 Additions (1) (2) 5,290 — 1,256 6,546 Payments ( 2,907 ) — ( 363 ) ( 3,270 ) Adjustments (1) (2) ( 4 ) ( 7 ) — ( 11 ) Balance as of December 31, 2020 2,447 84 893 3,424 Additions (1)(2) 8,132 — 1,156 9,288 Payments ( 9,993 ) ( 84 ) ( 1,482 ) ( 11,559 ) Adjustments (1)(2) ( 13 ) — — ( 13 ) Balance as of December 31, 2021 $ 573 $ — $ 567 $ 1,140 (1) Additions and adjustments for the years ended December 31, 2021 and 2020 include restructuring charges of $ 0.1 million and $ 0.2 million, respectively, related to office space reductions directly related to discontinued operations . (2) Additions and adjustments exclude non-cash items related to vacated office spaces, such as lease impairment charges and accelerated depreciation on abandoned operating lease ROU assets and fixed assets, which are recorded as restructuring charges on our consolidated statements of operations. All of the $0.6 million restructuring charge liability related to employee costs at December 31, 2021 is expected to be paid in the next 12 months and is included as a component of accrued payroll and related benefits. Substantially all of the $0.6 million other restructuring charge liability at December 31, 2021 is expected to be paid in the next 12 months and is included as a component of accrued expenses and other current liabilities. F-26 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 12. Derivative Instruments and Hedging Activity On June 22, 2017, we entered into a forward interest rate swap agreement effective August 31, 2017 and ending August 31, 2022 , with a notional amount of $ 50.0 million. We entered into this derivative instrument to hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.900 %. On January 30, 2020, we entered into a forward interest rate swap agreement effective December 31, 2019 and ending December 31, 2024 , with a notional amount of $ 50.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 1.500 %. On March 16, 2020, we entered into a forward interest rate swap agreement effective February 28, 2020 and ending February 28, 2025 , with a notional amount of $ 100.0 million. We entered into this derivative instrument to further hedge against the interest rate risks of our variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one month LIBOR and we pay to the counterparty a fixed rate of 0.885 %. We recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. We have designated these derivative instruments as cash flow hedges. Therefore, changes in the fair value of the derivative instruments are recorded to other comprehensive income (“OCI”) to the extent effective and reclassified into interest expense upon settlement. As of December 31, 2021, it was anticipated that $ 1.1 million of the losses, net of tax, currently recorded in accumulated other comprehensive income will be reclassified into earnings within the next 12 months. The table below sets forth additional information relating to our interest rate swaps designated as cash flow hedging instruments as of December 31, 2021 and 2020. Fair Value (Derivative Asset and Liability) As of December 31, Balance Sheet Location 2021 2020 Other non-current assets $ 1,210 $ — Accrued expenses and other current liabilities $ 1,604 $ 2,100 Deferred compensation and other liabilities $ 149 $ 3,297 All of our derivative instruments are transacted under the International Swaps and Derivatives Association (ISDA) master agreements. These agreements permit the net settlement of amounts owed in the event of default and certain other termination events. Although netting is permitted, it is our policy to record all derivative assets and liabilities on a gross basis on our consolidated balance sheet. We do not use derivative instruments for trading or other speculative purposes. Refer to Note 14 “Other Comprehensive Income (Loss)” for additional information on our derivative instruments. F-27 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 13. Fair Value of Financial Instruments Certain of our assets and liabilities are measured at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy for inputs used in measuring fair value and requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy consists of three levels based on the objectivity of the inputs as follows: Level 1 Inputs Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 Inputs Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs Unobservable inputs for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability. The tables below sets forth our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020. Level 1 Level 2 Level 3 Total December 31, 2021 Assets: Interest rate swap $ — $ 627 $ — $ 627 Convertible debt investment — — 65,918 65,918 Deferred compensation assets — 39,430 — 39,430 Total assets $ — $ 40,057 $ 65,918 $ 105,975 Liabilities: Interest rate swaps $ — $ 1,170 $ — $ 1,170 Contingent consideration for business acquisition — — 3,743 3,743 Total liabilities $ — $ 1,170 $ 3,743 $ 4,913 Level 1 Level 2 Level 3 Total December 31, 2020 Assets: Convertible debt investment $ — $ — $ 64,364 $ 64,364 Deferred compensation assets — 34,056 — 34,056 Total assets $ — $ 34,056 $ 64,364 $ 98,420 Liabilities: Interest rate swaps $ — $ 5,397 $ — $ 5,397 Contingent consideration for business acquisition — — 1,770 1,770 Total liabilities $ — $ 5,397 $ 1,770 $ 7,167 Interest rate swaps: The fair values of our interest rate swaps were derived using estimates to settle the interest rate swap agreements, which are based on the net present value of expected future cash flows on each leg of the swap utilizing market-based inputs and discount rates reflecting the risks involved. See Note 12 "Derivative Instruments and Hedging Activity" for additional information on our interest rate swaps. Convertible debt investment: In 2014 and 2015, we invested $ 27.9 million, in the form of zero coupon convertible debt (the “initial convertible notes”), in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight, a U.S.-based company that partners with leading nonprofit universities to increase access to and retention of international students, boost institutional growth, and enhance an institution’s global footprint. In the first quarter of 2020, we invested an additional $ 13.0 million, in the form of 1.69 % convertible debt with a senior liquidation preference to the initial convertible notes (the “additional convertible note”); and amended our initial convertible notes to include a F-28 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) coupon rate of 1.69 % and extend the maturity date to January 17, 2024 , which coincides with the maturity date of the additional convertible note. To determine the appropriate accounting treatment for our investment, we performed a variable interest entity (“VIE”) analysis and concluded that Shorelight does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the convertible notes are not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment, we concluded the appropriate accounting treatment to be that of an available-for-sale debt security. The investment is carried at fair value with unrealized holding gains and losses excluded from earnings and reported in other comprehensive income. We estimate the fair value of our investment using a scenario-based approach in the form of a hybrid analysis that consists of a Monte Carlo simulation model and an expected return analysis. The conclusion of value for our investment is based on the probability-weighted assessment of both scenarios. The hybrid analysis utilizes certain assumptions including the assumed holding period through the maturity date of January 17, 2024 , the applicable waterfall distribution at the end of the expected holding period based on the rights and privileges of the various instruments, cash flow projections discounted at the risk-adjusted rate of 22.5 % and 24.0 % as of December 31, 2021 and 2020, respectively; and the concluded equity volatility of 45.0 % as of both December 31, 2021 and 2020, all of which are Level 3 inputs. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the investment, which would result in different impacts to our consolidated balance sheet and comprehensive income. Actual results may differ from our estimates. The fair value of the convertible debt investment is recorded in long-term investments on our consolidated balance sheets. The table below sets forth the changes in the balance of the convertible debt investment for the years ended December 31, 2021 and 2020. Convertible Debt Investment Balance as of December 31, 2019 $ 49,542 Purchases 13,000 Change in fair value of convertible debt investment 1,822 Balance as of December 31, 2020 64,364 Change in fair value of convertible debt investment 1,554 Balance as of December 31, 2021 $ 65,918 Deferred compensation assets: We have a non-qualified deferred compensation plan (the “Plan”) for the members of our board of directors and a select group of our employees. The deferred compensation liability is fully funded by the Plan assets, which consist of life insurance policies maintained within a trust. The cash surrender value of the life insurance policies approximates fair value and is based on third-party broker statements which provide the fair value of the life insurance policies' underlying investments, which are Level 2 inputs. The cash surrender value of the life insurance policies is invested primarily in mutual funds. The Plan assets are included in other non-current assets on our consolidated balance sheets. Realized and unrealized gains (losses) from the deferred compensation assets are recorded to other income (expense), net in our consolidated statements of operations. Contingent consideration for business acquisitions: We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted assessment of the specific financial performance targets being measured or a Monte Carlo simulation model, as appropriate. These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 inputs. The significant unobservable inputs used in the fair value measurements of our contingent consideration are our measures of the estimated payouts based on internally generated financial projections on a probability-weighted basis and a discount rate which was in a range of 2.4 % to 5.1 % with a weighted average of 3.7 % as of December 31, 2021 and was 2.4 % as of December 31, 2020. The weighted average discount rate was calculated using the relative fair values of the contingent consideration as of December 31, 2021. The fair value of the contingent consideration is reassessed quarterly based on assumptions used in our latest projections and input provided by practice leaders and management. Any change in the fair value estimate is recorded in our consolidated statement of operations for that period. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of our contingent consideration liability, which would result in different impacts to our consolidated balance sheets and consolidated statements of operations. Actual results may differ from our estimates. F-29 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The table below sets forth the changes in the balance of the contingent consideration for business acquisitions for the years ended December 31, 2021 and 2020. Contingent Consideration for Business Acquisitions Balance as of December 31, 2019 $ — Acquisition 1,770 Balance as of December 31, 2020 1,770 Acquisition 1,800 Change in fair value of contingent consideration for business acquisition 173 Balance as of December 31, 2021 $ 3,743 Financial assets and liabilities not recorded at fair value on a recurring basis are as follows: Preferred Stock Investment In the fourth quarter of 2019, we invested $ 5.0 million, in the form of preferred stock, in Medically Home Group, Inc. (“Medically Home”), a healthcare technology-enabled services company. To determine the appropriate accounting treatment for our investment, we performed a VIE analysis and concluded that Medically Home does not meet the definition of a VIE. We also reviewed the characteristics of our investment to confirm that the preferred stock is not in-substance common stock that would warrant equity method accounting. After we reviewed all of the terms of the investment, we concluded the appropriate accounting treatment for our investment in Medically Home to be that of an equity security with no readily determinable fair value. We elected to apply the measurement alternative at the time of the purchase and will continue to do so until the investment does not qualify to be so measured. Under the measurement alternative, the investment is carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in Medically Home. On a quarterly basis, we review the information available to determine whether an orderly and observable transaction for the same or similar equity instrument occurred, and remeasure the fair value of the preferred stock using such identified transactions, with changes in the fair value recorded to other income (expense), net in our consolidated statement of operations. In October 2020, we recognized an unrealized gain of $ 1.7 million to increase the carrying amount of our preferred stock investment to $ 6.7 million, based on an observable price change of preferred stock with similar rights and preferences to our preferred stock investment issued by Medically Home, a Level 2 input. The unrealized gain of $ 1.7 million was recorded in other income (expense), net on our consolidated statement of operations. During the year ended December 31, 2021, there has been no impairment, nor any observable price change related to our investment. As of December 31, 2021 and 2020, the carrying amount of our preferred stock investment was $ 6.7 million. Senior Secured Credit Facility The carrying value of our borrowings outstanding under our senior secured credit facility is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the senior secured credit facility bears interest at variable rates based on current market rates as set forth in the Amended Credit Agreement. Refer to Note 7 “Financing Arrangements” for additional information on our senior secured credit facility. Promissory Note due 2024 The carrying value of our promissory note due 2024 is stated at cost. Our carrying value approximates fair value, using Level 2 inputs, as the promissory note bears interest at rates based on current market rates as set forth in the terms of the promissory note. Refer to Note 7 “Financing Arrangements” for additional information on our promissory note due 2024. Cash and Cash Equivalents and Other Financial Instruments Cash and cash equivalents are stated at cost, which approximates fair market value. The carrying values of all other financial instruments not described above reasonably approximate fair market value due to the nature of the financial instruments and the short-term maturity of these items. F-30 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 14. Other Comprehensive Income (Loss) The table below sets forth the components of accumulated other comprehensive income (loss), net of tax for the years ended December 31, 2021, 2020, and 2019. Foreign Currency Translation Available-for- Sale Investments Cash Flow Hedges (1) Total Balance as of December 31, 2018 $ ( 665 ) $ 16,584 $ 576 $ 16,495 Foreign currency translation adjustment, net of tax of $0 99 — — 99 Unrealized gain (loss) on investments: Change in fair value, net of tax of $185 — ( 702 ) — ( 702 ) Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $295 — — ( 819 ) ( 819 ) Reclassification adjustment into earnings, net of tax of $48 — — ( 137 ) ( 137 ) Balance as of December 31, 2019 ( 566 ) 15,882 ( 380 ) 14,936 Foreign currency translation adjustment, net of tax of $0 348 — — 348 Unrealized gain (loss) on investments: Change in fair value, net of tax of $(499) — 1,323 — 1,323 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $1,693 — — ( 4,652 ) ( 4,652 ) Reclassification adjustment into earnings, net of tax of $(388) — — 1,106 1,106 Balance as of December 31, 2020 ( 218 ) 17,205 ( 3,926 ) 13,061 Foreign currency translation adjustment, net of tax of $0 157 — — 157 Reclassification adjustments into earnings, net of tax of $0 (2) ( 1,082 ) — — ( 1,082 ) Unrealized gain (loss) on investments: Change in fair value, net of tax of $(385) — 1,169 — 1,169 Unrealized gain (loss) on cash flow hedges: Change in fair value, net of tax of $(641) — — 1,606 1,606 Reclassification adjustment into earnings, net of tax of $(678) — — 1,929 1,929 Balance as of December 31, 2021 $ ( 1,143 ) $ 18,374 $ ( 391 ) $ 16,840 (1) The before tax amounts reclassified from accumulated other comprehensive income (loss) related to our cash flow hedges are recorded to interest expense, net of interest income. (2) In connection with the divestiture of the Life Sciences business, which included a substantially complete liquidation of an investment within a foreign entity, we included $1.1 million of accumulated translation gains in the calculation of our gain on sale recorded within other income, net on our consolidated statement of operations. See Note 3 "Acquisitions and Divestitures" for additional information on the divestiture of the Life Sciences business in 2021. 15. Employee Benefit and Deferred Compensation Plans We sponsor a qualified defined contribution 401(k) plan covering substantially all of our employees. Under the plan, employees are entitled to make pretax, post-tax, and/or Roth post-tax contributions up to the annual maximums established by the Internal Revenue Service. We match an amount equal to the employees’ contributions up to 6 % of the employees’ eligible earnings. Our matching contributions for the years ended December 31, 2021, 2020, and 2019 were $ 29.9 million, $ 25.1 million, and $ 22.8 million, respectively. We have a non-qualified deferred compensation plan (the “Plan”) that is administered by our board of directors or a committee designated by the board of directors. Under the Plan, members of the board of directors and a select group of our employees may elect to defer the receipt of their director retainers and meeting fees or base salary and bonus, as applicable. Additionally, we may credit amounts to a participant’s deferred compensation account in accordance with employment or other agreements entered into between us and the participant. At our sole discretion, we may, but are not required to, credit any additional amount we desire to any participant’s deferred compensation account. F-31 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Amounts credited are subject to vesting schedules set forth in the Plan, employment agreement, or any other agreement entered into between us and the participant. The deferred compensation liability at December 31, 2021 and 2020 was $ 39.1 million and $ 34.3 million, respectively. This deferred compensation liability is fully funded by the Plan assets. 16. Equity Incentive Plans In 2012, Huron adopted the 2012 Omnibus Incentive Plan (the “2012 Plan”) which replaced, on a prospective basis, our 2004 Omnibus Stock Plan (the "2004 Plan") such that future grants will be granted under the 2012 Plan and any outstanding awards granted under the 2004 Plan that are cancelled, expired, forfeited, settled in cash, or otherwise terminated without a delivery of shares to the participant will not become available for grant under the 2012 Plan. The 2012 Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other share-based or cash-based awards valued in whole or in part by reference to, or otherwise based on, our common stock. Subsequent to the initial approval of the 2012 Plan and through December 31, 2021, our shareholders approved amendments to the 2012 Plan to increase the number of shares authorized for issuance to 4.6 million, in the aggregate. As of December 31, 2021, 1.2 million shares remain available for issuance under the 2012 Plan. On May 1, 2015, we adopted the Stock Ownership Participation Program (the “SOPP”), which is available to Huron employees below the managing director level who do not receive equity-based awards as part of their normal compensation plan. Under the SOPP, eligible employees may elect to use after-tax payroll deductions to purchase shares of the Company’s common stock on certain designated purchase dates. Employees who purchase stock under the SOPP are granted restricted stock equal to 25 % of their purchased shares. Vesting of the restricted stock is subject to both a time-based vesting schedule and a requirement that the purchased shares be held for a specified period. Subsequent to the initial approval of the SOPP and through December 31, 2021, our shareholders approved amendments to the SOPP to increase the total number of shares authorized for issuance to 0.7 million, in the aggregate. Prior to the adoption of the SOPP, the matching share grants and the employee purchased shares under the stock ownership participation program were governed by the 2012 Plan. As of December 31, 2021, 0.3 million shares remain available for issuance under the SOPP. It has been our practice to issue shares of common stock upon exercise of stock options and granting of restricted stock from authorized but unissued shares, with the exception of the SOPP under which shares are issued from treasury stock. Certain grants of restricted stock under the 2012 Plan may be issued from treasury stock at the direction of the Compensation Committee. Share-based awards outstanding under our 2012 Plan and our 2004 Plan provide for a retirement eligibility provision, under which eligible employees who have reached 62 years of age and have completed seven years of employment with Huron will continue vesting in their share-based awards after retirement, subject to certain conditions. The Compensation Committee of the board of directors has the responsibility of interpreting the 2012 Plan and SOPP and determining all of the terms and conditions of awards made under the plans, including when the awards will become exercisable or otherwise vest. Total share-based compensation cost recognized for the years ended December 31, 2021, 2020, and 2019 was $ 25.9 million, $ 23.9 million, and $ 24.2 million, respectively, with related income tax benefits of $ 6.3 million, $ 5.4 million, and $ 5.3 million, respectively.The $ 25.9 million of share-based compensation cost recognized in 2021 included $ 1.9 million recorded to restructuring charges as it related to the modification of certain nonvested share-based compensation awards to accelerate vesting upon the completed sale of the Life Sciences business. As of December 31, 2021, there was $ 28.7 million of total unrecognized compensation cost related to nonvested share-based awards. This cost is expected to be recognized over a weighted average period of 2.4 years. Restricted Stock The grant date fair values of our restricted stock are measured based on the fair value of our common stock at grant date and amortized into expense over the service period. Subject to acceleration under certain conditions, the majority of our restricted stock vests annually over four years . F-32 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The table below summarizes the restricted stock activity for the year ended December 31, 2021. Number of Shares Weighted Average Grant Date Fair Value (in dollars) 2012 Omnibus Incentive Plan Stock Ownership Participation Program Total Nonvested restricted stock at December 31, 2020 881 18 899 $ 51.12 Granted 404 16 420 $ 53.84 Vested ( 369 ) ( 16 ) ( 385 ) $ 48.40 Forfeited ( 48 ) ( 4 ) ( 52 ) $ 52.67 Nonvested restricted stock at December 31, 2021 868 14 882 $ 53.51 The aggregate fair value of restricted stock that vested during the years ended December 31, 2021, 2020, and 2019 was $ 19.8 million, $ 18.6 million, and $ 14.5 million, respectively. The weighted average grant date fair value per share of restricted stock granted during 2020 and 2019 was $ 58.13 and $ 48.57 , respectively. Performance-based Share Awards The total number of shares earned by recipients of performance-based share awards is contingent upon meeting practice specific and company-wide performance goals. Following the performance period, certain awards are subject to the completion of a service period, which is generally an additional two years . These earned awards vest on a graded vesting schedule over the service period. For certain performance awards, the recipients may earn additional shares of stock for performance achieved above the stated target. The grant date fair values of our performance-based share awards are measured based on the fair value of our common stock at grant date. Compensation cost is amortized into expense over the service period, including the performance period. The table below summarizes the performance-based stock activity for the year ended December 31, 2021. All nonvested performance-based stock outstanding at December 31, 2021 and 2020 was granted under the 2012 Omnibus Incentive Plan. Number of Shares Weighted Average Grant Date Fair Value (in dollars) Nonvested performance-based stock at December 31, 2020 519 $ 49.42 Granted (1) 272 $ 53.75 Vested ( 191 ) $ 39.04 Forfeited (2) ( 162 ) $ 53.80 Nonvested performance-based stock at December 31, 2021 (3) 438 $ 53.08 (1) Shares granted in 2021 are presented at the stated target, which represents the base number of shares that could be earned. Actual shares earned may be below or, for certain grants, above the target based on the achievement of specific financial goals. (2) Forfeited shares include shares forfeited as a result of not meeting the performance criteria of the award as well as shares forfeited upon termination. (3) Of the 438,000 nonvested performance-based shares outstanding as of December 31, 2021, 383,167 shares were unearned and subject to achievement of specific financial goals. Once earned, the awards will be subject to time-based vesting according to the terms of the award. Based on 2021 financial results, approximately 189,161 of the 383,167 unearned shares will be forfeited in the first quarter of 2022. The aggregate fair value of performance-based stock that vested during the years ended December 31, 2021, 2020, and 2019 was $ 9.8 million , $ 5.9 million, and $ 3.4 million, respectively. The weighted average grant date fair value per share of performance-based stock granted during 2020 and 2019 was $ 58.84 and $ 47.93 , respectively. F-33 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Stock Options We grant stock options at exercise prices equal to the fair value of the Company’s common stock on the date of grant. Subject to acceleration under certain conditions, our stock options vest annually over four years . Our stock options have a contractual term between 7 and 10 years. The fair value of the options granted during 2021 were calculated using the Black-Scholes option pricing model using the following assumptions: 2021 Black-Scholes option pricing model: Expected dividend yield — % Expected volatility 40.0 % Risk-free rate 0.9 % Expected option life (in years) 4.75 years Expected volatility was based on our historical stock prices as we believe that our historical volatility provides the most reliable indication of future volatility and sufficient historical daily stock price observations are available. The risk-free interest rate was based on the rate of U.S. Treasury bills with an equivalent expected term of the stock options at the time of the option grant. The expected option life was estimated using the simplified method, which is a weighted average of the vesting term and the contractual term, to determine the expected term.The simplified method was used due to the lack of sufficient data available to provide a reasonable basis upon which to estimate the expected term. Stock option activity for the year ended December 31, 2021 was as follows: Number of Options (in thousands) Weighted Average Exercise Price (in dollars) Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2020 66 $ 37.31 1.5 $ 1.4 Granted 50 $ 52.49 Exercised ( 23 ) $ 34.34 $ 0.4 Forfeited or expired — Outstanding at December 31, 2021 (1) 93 $ 46.25 4.1 $ 0.3 Exercisable at December 31, 2021 43 $ 38.93 0.9 $ 0.5 (1) Of the 93,000 outstanding options, approximately 11,000 were granted under the 2004 Omnibus Stock Plan, and the remaining 82,000 options were granted under the 2012 Omnibus Incentive Plan. The weighted average grant date fair value of stock options granted during 2021 was $ 18.42 . No stock options were granted in 2020 and 2019. The aggregate intrinsic value of options exercised during 2020 and 2019 was $ 1.1 million and $ 1.6 million, respectively. 17. Income Taxes The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was signed into law on March 27, 2020, is an approximately $2 trillion emergency economic stimulus package in response to the COVID-19 outbreak, which among other items, includes income tax provisions relating to net operating loss carryback period, options to defer payroll tax payments for a limited period and technical corrections to tax depreciation methods for qualified improvement property. 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 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 Global Intangible Low-Taxed Income (“GILTI”) high-tax exclusion in the second quarter of 2021, we recognized a $ 1.0 million tax benefit of which $ 0.4 million related to carrying back our increased 2018 federal net operating loss to prior year income for a refund at the higher, prior year tax rate. During the third quarter of 2021, we recognized an additional tax benefit of $ 2.0 million, primarily related to the U.S. federal return to provision adjustments for carrying back our increased 2020 federal net operating loss to prior year income for a refund at the higher, prior year tax rate. F-34 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Through December 31, 2020, we deferred $ 12.2 million of payroll tax payments, of which $ 6.1 million was expected to be paid in the fourth quarter of 2021 and $ 6.1 million was expected to be paid in the fourth quarter of 2022, and were included as components of accrued payroll and related benefits and deferred compensation and other liabilities on our consolidated balance sheet as of December 31, 2020. In the third quarter of 2021, all of the $ 12.2 million of deferred payroll tax payments were repaid. The income tax expense for continuing operations for the years ended December 31, 2021, 2020, and 2019 consisted of the following: Year Ended December 31, 2021 2020 2019 Current: Federal $ ( 934 ) $ ( 2,480 ) $ 125 State 1,974 168 2,014 Foreign 3,529 2,016 ( 422 ) Total current 4,569 ( 296 ) 1,717 Deferred: Federal 10,951 ( 7,414 ) 7,467 State 2,372 ( 2,025 ) 1,610 Foreign ( 843 ) ( 420 ) ( 282 ) Total deferred 12,480 ( 9,859 ) 8,795 Income tax expense for continuing operations $ 17,049 $ ( 10,155 ) $ 10,512 The components of income from continuing operations before taxes were as follows: Year Ended December 31, 2021 2020 2019 U.S. $ 70,963 $ ( 35,054 ) $ 53,898 Foreign 9,073 1,181 ( 1,407 ) Total $ 80,036 $ ( 33,873 ) $ 52,491 A reconciliation of the U.S. statutory income tax rate to our effective tax rate for continuing operations is as follows: Year Ended December 31, 2021 2020 2019 Percent of pretax income from continuing operations: At U.S. statutory tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 5.2 4.4 6.1 Disallowed executive compensation 1.2 ( 2.8 ) 2.0 Valuation allowance 1.1 ( 3.1 ) ( 2.9 ) Meals and entertainment 0.1 ( 0.6 ) 1.6 CARES Act net operating loss carryback ( 3.8 ) 4.4 — Tax credits ( 1.3 ) 3.0 ( 3.1 ) Realized investment gains/losses ( 1.1 ) 2.6 ( 1.8 ) Stock-based compensation ( 0.7 ) 4.3 ( 1.1 ) Foreign source income ( 0.2 ) 0.5 ( 0.5 ) Deferred tax adjustments ( 0.2 ) 1.7 0.6 Goodwill impairment charges — ( 2.6 ) — Unrecognized tax benefits — ( 2.0 ) ( 0.4 ) Net tax benefit related to “check-the-box” election — — ( 1.4 ) Other — ( 0.8 ) ( 0.1 ) Effective income tax rate for continuing operations 21.3 % 30.0 % 20.0 % F-35 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The net deferred tax asset (liability) for continuing operations at December 31, 2021 and 2020 consisted of the following: As of December 31, 2021 2020 Deferred tax assets: Operating lease liabilities $ 17,542 $ 19,617 Deferred compensation liability 10,331 9,002 Share-based compensation 8,062 7,579 Accrued payroll and payroll related liabilities 5,645 3,745 Tax credits 1,828 1,773 Net operating loss carryforwards 1,243 944 Deferred payroll tax payments — 3,235 Other 2,009 3,278 Total deferred tax assets 46,660 49,173 Valuation allowance ( 2,876 ) ( 2,112 ) Net deferred tax assets 43,784 47,061 Deferred tax liabilities: Intangibles and goodwill ( 24,375 ) ( 12,956 ) Operating lease right-of-use assets ( 9,837 ) ( 11,079 ) Convertible debt investment ( 6,604 ) ( 6,219 ) Software development costs ( 6,071 ) ( 6,054 ) Property and equipment ( 2,730 ) ( 3,007 ) Prepaid expenses ( 2,137 ) ( 2,708 ) Other ( 2,499 ) ( 1,275 ) Total deferred tax liabilities ( 54,253 ) ( 43,298 ) Net deferred tax asset (liability) for continuing operations $ ( 10,469 ) $ 3,763 As of December 31, 2021 and 2020, we had valuation allowances of $2.9 million and $2.1 million, respectively, primarily due to uncertainties relating to the ability to realize deferred tax assets recorded for foreign losses and tax credits. The increase in valuation allowances in 2021 primarily related to an increase in the valuation allowance for foreign losses and tax credits. We have foreign net operating losses of $ 5.9 million which begin to expire in 2027 and state net operating loss carryforwards of $ 4.9 million which will begin to expire in 2030, if not utilized. We have federal and state tax credit carryforwards of $ 1.8 million which will begin to expire in 2022, if not utilized. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. A reconciliation of our beginning and ending amount of unrecognized tax benefits is as follows: Unrecognized Tax Benefits Balance at January 1, 2019 $ 900 Decrease due to settlements of prior year tax positions ( 115 ) Decrease due to lapse of statute of limitations ( 735 ) Balance at December 31, 2019 50 Additions based on tax positions related to prior years 694 Balance at December 31, 2020 744 Balance at December 31, 2021 $ 744 As of both December 31, 2021 and 2020, we had $0.7 million of unrecognized tax benefits which would affect the effective tax rate of continuing operations if recognized. It is reasonably possible that approximately $ 0.1 million of the liability for unrecognized tax benefits at December 31, 2021 could decrease in the next twelve months primarily due to the expiration of statutes of limitations. F-36 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) As of December 31, 2021 and 2020, we had $ 0.1 million and less than $ 0.1 million, respectively, accrued for the potential payment of interest and penalties. Accrued interest and penalties are recorded as a component of provision for income taxes on our consolidated statement of operations. We file income tax returns with federal, state, local and foreign jurisdictions. Tax years 2018 through 2020 are subject to future examinations by federal tax authorities. Tax years 2015 through 2020 are subject to future examinations by state and local tax authorities. Our foreign income tax filings are subject to future examinations by the local foreign tax authorities for tax years 2016 through 2020 . Currently, we are not under audit by any tax authority. 18. Commitments, Contingencies and Guarantees Lease Commitments We lease office space, data centers and certain equipment under non-cancelable operating lease arrangements expiring on various dates through 2029, with various renewal options. Office facilities under operating leases include fixed payments plus, in some cases, scheduled base rent increases over the term of the lease. Certain leases require variable payments of real estate taxes, insurance and operating expenses. See Note 5 “Leases” for additional information on our leases, including the remaining expected lease payments under our operating leases as of December 31, 2021. Litigation Oaktree On November 9, 2018, Huron Consulting Services LLC, a wholly owned subsidiary of Huron, was engaged by Oaktree Medical Centre LLC, a management services organization (“Oaktree”), to perform interim management and financial advisory services. As part of the services, a Huron employee was appointed by Oaktree’s board of directors to serve as Chief Restructuring Officer of Oaktree (the “CRO”). The engagement letter through which Oaktree retained Huron’s services (the “Engagement Letter”) states that all disputes or claims arising thereunder are subject to binding arbitration, disclaims special, consequential, incidental and exemplary damages and losses and caps liability to the fees paid for the portion of the engagement giving rise to any liability. On September 19, 2019, Oaktree and certain of its affiliates filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of North Carolina, with the cases subsequently transferred to the District of South Carolina. As a result of the bankruptcy filing, a Chapter 7 trustee was appointed to oversee the bankruptcy estates, at which time Huron’s services for Oaktree concluded. In April 2021, Trustee’s counsel communicated in writing to Huron its intent to pursue various claims against Huron and the CRO, among others, on behalf of the bankruptcy estates related to the services carried out by Huron and the CRO during the engagement. On September 17, 2021, the Trustee filed a complaint in the Bankruptcy Court for the District of South Carolina against Huron and the CRO, among others (the “Complaint”), alleging breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, negligence, violations of the South Carolina Unfair Trade Practices Act, fraud, civil conspiracy, unjust enrichment, and recovery of avoided transfers under sections 547, 548 and 550 of the Bankruptcy Code. On December 7, 2021, the Trustee filed an amended version of the Complaint (the “Amended Complaint”), generally alleging the same claims asserted in the initial Complaint but (i) removing the claim for a violation of the South Carolina Unfair Trade Practices Act and (ii) adding a claim for breach of contract. In the Amended Complaint, the Trustee asserts that Huron and the CRO, among others, did not develop and implement a Chapter 11 restructuring plan on a timely basis and that their failure to do so led to significant damages. The Trustee seeks an unspecified amount of monetary damages in the Amended Complaint. We believe the Trustee’s allegations with respect to Huron and the CRO are without merit, and we are vigorously defending ourselves against the allegations raised in the Amended Complaint. On December 21, 2021, we filed a motion to dismiss all of the claims in the Amended Complaint; the motion remains pending. Notwithstanding the foregoing, given the inherent risk and uncertainty associated with all litigation, we cannot estimate the potential liability with respect to such allegations at this time. From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. As of the date of this Annual Report on Form 10-K, we are not a party to any litigation or legal proceeding or subject to any claim that, in the current opinion of management, could reasonably be expected to have a material adverse effect on our financial position or results of operations. However, due to the risks and uncertainties inherent in legal proceedings, actual results could differ from current expected results. Guarantees Guarantees in the form of letters of credit totaling $ 0.7 million and $ 1.6 million were outstanding at December 31, 2021 and 2020, respectively, primarily to support certain office lease obligations. F-37 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) In connection with certain business acquisitions, we may be required to pay post-closing consideration to the sellers if specific financial performance targets are met over a number of years as specified in the related purchase agreements. As of December 31, 2021 and 2020, the total estimated fair value of our outstanding contingent consideration liability was $3.7 million and $1.8 million, respectively. To the extent permitted by law, our bylaws and articles of incorporation require that we indemnify our officers and directors against judgments, fines and amounts paid in settlement, including attorneys’ fees, incurred in connection with civil or criminal action or proceedings, as it relates to their services to us if such person acted in good faith. Although there is no limit on the amount of indemnification, we may have recourse against our insurance carrier for certain payments made. 19. Segment Information Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker, who is our chief executive officer, manages the business under three operating segments, which are our reportable segments: Healthcare, Business Advisory, and Education. • Healthcare Our Healthcare segment serves providers and payors including national and regional hospitals, integrated health systems, academic medical centers, community hospitals, medical groups and health plans. Our Healthcare professionals have a depth of expertise in business operations, including financial and operational improvement, care transformation, and revenue cycle managed services; organizational transformation; and digital, technology and analytic solutions. Most healthcare organizations are focused on changing the way care is delivered; establishing a sustainable business model centered around optimal cost structures, reimbursement models and financial strategies; evolving their digital, technology and analytic capabilities; and exceeding the expectations of their employees and patients. Our solutions help clients adapt to this rapidly changing healthcare environment to become a more nimble, efficient and consumer-centric organization. We use our deep industry expertise to help clients solve a diverse set of business issues, including, but not limited to, optimizing financial and operational performance, improving care delivery and clinical outcomes, increasing physician, patient and employee satisfaction, evolving organizational culture, and maximizing return on technology investments. • Business Advisory Our Business Advisory segment works with C-suite executives and business unit and functional leadership across a diverse set of organizations, including healthy, well-capitalized companies to organizations in transition, and across a broad range of industries, including healthcare, energy and utilities, financial services, life sciences, industrials and manufacturing, education, and the public sector. Our Business Advisory professionals have deep industry, functional and technical expertise that they put forward when delivering our digital, technology and analytics, strategy and innovation and restructuring and corporate finance services. In today’s disruptive environment, organizations must reimagine their historical strategies and financial and operating models to sustain and advance their competitive advantage. Organizations also recognize the need to adopt technologies, automation and analytics to improve their operations and compete in a rapidly changing landscape. Our experts help organizations across industries with a variety of business challenges, including, but not limited to, embedding technology and analytics throughout their internal and customer-facing operations, developing insights into the needs of tomorrow’s customers to evolve their enterprise and business unit strategies, bringing new products to market, and managing through stressed and distressed situations to create a viable path forward for stakeholders. • Education Our Education segment serves public and private colleges and universities, academic medical centers, research institutes and other not-for-profit organizations. Our Education professionals have a depth of expertise in strategy; business operations, including in the areas of the research enterprise and student lifecycle; digital, technology and analytic solutions; and organizational transformation. Our Education segment clients are increasingly faced with financial and/or demographic and enrollment challenges as well as increased competition. To remain competitive, organizations must challenge traditional operating and financial models and reimagine strategic, operational and research-centered opportunities that advance their mission while strengthening their business models. We collaborate with clients to address these challenges and ensure they have a sustainable future. We combine our deep industry, functional and technical expertise to help clients solve their most pressing challenges, including, but not limited to, transforming business operations with technology; strengthening research strategies and support services; evolving their organizational strategy; optimizing financial and operational performance; and enhancing the student experience. F-38 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Unallocated corporate costs include 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 costs for corporate office support, certain 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. 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. F-39 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The tables below set forth information about our operating segments for the years ended December 31, 2021, 2020, and 2019, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements. We do not present financial information by geographic area because the financial results of our international operations are not significant to our consolidated financial statements. Year Ended December 31, 2021 2020 2019 Healthcare: Revenues $ 377,577 $ 353,437 $ 399,221 Operating income $ 104,010 $ 94,925 $ 125,724 Segment operating income as a percentage of segment revenues 27.5 % 26.9 % 31.5 % Business Advisory: Revenues $ 291,663 $ 267,361 $ 252,508 Operating income $ 48,236 $ 48,046 $ 49,695 Segment operating income as a percentage of segment revenues 16.5 % 18.0 % 19.7 % Education: Revenues $ 236,400 $ 223,329 $ 225,028 Operating income $ 52,772 $ 47,503 $ 55,741 Segment operating income as a percentage of segment revenues 22.3 % 21.3 % 24.8 % Total Company: Revenues $ 905,640 $ 844,127 $ 876,757 Reimbursable expenses 21,318 26,887 88,717 Total revenues and reimbursable expenses $ 926,958 $ 871,014 $ 965,474 Segment operating income $ 205,018 $ 190,474 $ 231,160 Items not allocated at the segment level: Other operating expenses 131,372 135,255 140,285 Litigation and other losses (gains) 173 ( 150 ) ( 1,196 ) Depreciation and amortization 20,634 24,405 28,365 Goodwill impairment charges (1) — 59,816 — Other income (expense), net 27,197 ( 5,021 ) ( 11,215 ) Income (loss) from continuing operations before taxes $ 80,036 $ ( 33,873 ) $ 52,491 (1) The 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. As of December 31, Segment Assets: 2021 2020 2019 Healthcare $ 90,059 $ 40,217 $ 73,019 Business Advisory 57,738 38,402 59,315 Education 46,592 34,534 38,881 Unallocated assets (1) 924,960 937,822 933,056 Total assets $ 1,119,349 $ 1,050,975 $ 1,104,271 (1) Unallocated assets include goodwill and intangible assets and our long-term investments, as management does not evaluate these items at the segment level when assessing segment performance or allocating resources. Refer to Note 4 “Goodwill and Intangible Assets” and Note 13 “Fair Value of Financial Instruments” for further information on these assets. F-40 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) The following table illustrates the disaggregation of revenues by billing arrangements, employee types, and timing of revenue recognition, including a reconciliation of the disaggregated revenues to revenues from our three operating segments for the year ended December 31, 2021, 2020 and 2019. 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 disaggregation of revenues by employee type 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, 2021 Healthcare Business Advisory Education Total Billing Arrangements Fixed-fee $ 218,415 $ 121,648 $ 60,077 $ 400,140 Time and expense 64,394 143,024 147,245 354,663 Performance-based 73,360 18,296 — 91,656 Software support, maintenance and subscriptions 21,408 8,695 29,078 59,181 Total $ 377,577 $ 291,663 $ 236,400 $ 905,640 Employee Type (1) Revenue generated by billable consultants $ 250,552 $ 273,680 $ 197,221 $ 721,453 Revenue generated by full-time equivalents 79,307 17,983 39,179 136,469 Revenue generated by Healthcare Managed Services employees 47,718 — — 47,718 Total $ 377,577 $ 291,663 $ 236,400 $ 905,640 Timing of Revenue Recognition Revenue recognized over time $ 373,148 $ 291,663 $ 236,058 $ 900,869 Revenue recognized at a point in time 4,429 — 342 4,771 Total $ 377,577 $ 291,663 $ 236,400 $ 905,640 Year Ended December 31, 2020 Healthcare Business Advisory Education Total Billing Arrangements Fixed-fee $ 202,513 $ 101,561 $ 44,839 $ 348,913 Time and expense 58,322 152,716 155,510 366,548 Performance-based 69,316 8,059 695 78,070 Software support, maintenance and subscriptions 23,286 5,025 22,285 50,596 Total $ 353,437 $ 267,361 $ 223,329 $ 844,127 Employee Type (1) Revenue generated by billable consultants $ 234,951 $ 253,747 $ 191,467 $ 680,165 Revenue generated by full-time equivalents 89,823 13,614 31,862 135,299 Revenue generated by Healthcare Managed Services employees 28,663 — — 28,663 Total $ 353,437 $ 267,361 $ 223,329 $ 844,127 Timing of Revenue Recognition Revenue recognized over time $ 349,676 $ 267,361 $ 223,007 $ 840,044 Revenue recognized at a point in time 3,761 — 322 4,083 Total $ 353,437 $ 267,361 $ 223,329 $ 844,127 F-41 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) Year Ended December 31, 2019 Healthcare Business Advisory Education Total Billing Arrangements Fixed-fee $ 249,479 $ 100,635 $ 51,826 $ 401,940 Time and expense 55,204 139,610 154,893 349,707 Performance-based 71,051 6,856 — 77,907 Software support, maintenance and subscriptions 23,487 5,407 18,309 47,203 Total $ 399,221 $ 252,508 $ 225,028 $ 876,757 Employee Type (1) Revenue generated by billable consultants $ 278,733 $ 243,350 $ 195,844 $ 717,927 Revenue generated by full-time equivalents 116,035 9,158 29,184 154,377 Revenue generated by Healthcare Managed Services employees 4,453 — — 4,453 Total $ 399,221 $ 252,508 $ 225,028 $ 876,757 Timing of Revenue Recognition Revenue recognized over time $ 390,884 $ 252,508 $ 223,673 $ 867,065 Revenue recognized at a point in time 8,337 — 1,355 9,692 Total $ 399,221 $ 252,508 $ 225,028 $ 876,757 (1) Billable consultants consist of our consulting professionals who provide consulting services to our clients and are billable to our clients based on the number of hours worked. Full-time equivalent professionals consist of leadership 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. Healthcare Managed Services employees manage and provide revenue cycle billing, collections, insurance verification and change integrity services to healthcare clients. For the years ended December 31, 2021, 2020, and 2019, substantially all of our revenues and long-lived assets were attributed to or located in the United States. At December 31, 2021 and 2020, no single client accounted for greater than 10 % of our combined balance of receivables from clients, net and unbilled services, net. During the years ended December 31, 2021, 2020, and 2019, no single client generated greater than 10% of our consolidated revenues. F-42 Table of Contents HURON CONSULTING GROUP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share amounts) 20. Valuation and Qualifying Accounts The table below sets forth the changes in the carrying amount of our allowances for doubtful accounts and unbilled services and valuation allowance for deferred tax assets for the years ended December 31, 2021, 2020, and 2019. Allowances for doubtful accounts and unbilled services includes allowances for fee adjustments and other discretionary pricing adjustments as well as allowances related to clients' inability to make required payments on accounts receivable. Beginning balance Additions (1) Deductions Ending balance Year ended December 31, 2019: Allowances for doubtful accounts and unbilled services $ 22,241 69,979 73,552 $ 18,668 Valuation allowance for deferred tax assets $ 3,143 1 2,128 $ 1,016 Year ended December 31, 2020: Allowances for doubtful accounts and unbilled services $ 18,668 63,268 60,630 $ 21,306 Valuation allowance for deferred tax assets $ 1,016 1,160 64 $ 2,112 Year ended December 31, 2021: Allowances for doubtful accounts and unbilled services $ 21,306 9,852 15,363 $ 15,795 Valuation allowance for deferred tax assets $ 2,112 1,090 326 $ 2,876 (1) Additions to allowances for doubtful accounts and unbilled services are charged to revenues to the extent the provision relates to fee adjustments and other discretionary pricing adjustments. To the extent the provision relates to a client’s inability to make required payments on accounts receivable, the provision is charged to operating expenses. 21. Subsequent Event 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. F-43