What changed in this filing

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Item 1A. Risk Factors

2023-02-28 compared with 2022-02-24 · 99 added, 100 removed, 287 unchanged (41% of the section changed)

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"Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to COVID-19

Our results of operations have been adversely affected and, in the future, could be materially adversely impacted by the coronavirus (COVID-19) pandemic.

The continuing impact of the COVID-19 pandemic has created significant volatility, uncertainty and disruption to the global economy.

The pandemic has adversely impacted and, in the future, could materially adversely impact our business, operations and financial results.

The extent to which the COVID-19 pandemic continues to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including:

• the duration of the pandemic;

• the long-term efficacy of vaccines or treatments for COVID-19, including against new variants and the willingness of the population to take the vaccines;

• governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic, including quarantines, social distancing and other risk mitigating measures taken to prevent the spread of COVID-19;

• the effect on our clients and client demand for our services and solutions, including the impact on the healthcare and higher education industries which are areas of significant focus for our business;

• the health and welfare of our employees, including our senior management team, practice leaders and managing directors, and their ongoing ability to serve clients and manage operations if they contract COVID-19;

• the impact on our key third-party vendors;

• the effect on the businesses in which we have invested;

• our ability to sell and provide our services and solutions and maintain adequate utilization levels, including as a result of travel restrictions, shelter-in-place and quarantine orders and people working from home;

• the ability of our clients to pay for our services and solutions;

• any disruption to the internet and related systems, which may impact our ability to provide our services and solutions remotely, and increased vulnerability to hackers or third parties seeking to disrupt operations;

• any closures of our clients’ offices and facilities.

Additionally, in some instances, clients have slowed down decision making, delayed planned work or are seeking to reduce the scope of current engagements or terminate existing agreements, which may continue.

Any of these events could cause or contribute to the risks and uncertainties discussed below and could materially adversely affect our business, financial condition, results of operations and/or stock price.

Risks Related to Human Capital Resources

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Members of our senior management team and our other managing directors could choose to leave or join one of our competitors and some of our clients could choose to use the services of that competitor instead of our services.

If one or more members of our senior management team or our other managing directors leave and we cannot replace them with a suitable candidate quickly, we could experience difficulty in securing and successfully completing engagements and managing our business properly, which could harm our business prospects and results of operations.

If one or more members of our senior management team or our other managing directors leave and we cannot replace them with a suitable candidate quickly, or if legal restrictions on non-competition agreements are put into place, we could experience difficulty in securing and successfully completing engagements and managing our business properly, which could harm our business prospects and results of operations.

If we are unable to hire and retain talented people in an industry where there is great competition for talent, it could have a serious negative effect on our prospects and results of operations.

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Increasing competition for these revenue-generating professionals may also significantly increase our labor costs, which could negatively affect our margins and results of operations.

If we are unable to manage the organizational challenges associated with our continued growth, we might be unable to achieve our business objectives.

As we continue to grow and evolve, it might become increasingly difficult to maintain effective standards across a large enterprise and effectively institutionalize our knowledge or to effectively change the strategy, operations or culture of our Company in a timely manner.

It might also become more difficult to maintain our culture;

effectively manage and monitor our people and operations;

effectively communicate our core values, policies and procedures, strategies and goals;

and motivate, engage and retain our people, particularly given the distribution of our employees across the U.S.

and internationally, the rate of new hires, the breadth of skills and expertise across all of our solutions, and the fact that essentially all of our employees have the option to work remotely.

The size and scope of our operations increase the possibility that we will have employees who expose us to unacceptable business risks, despite our efforts to train them and maintain internal controls to prevent such instances.

For example, employee misconduct could involve the improper use of sensitive or confidential information entrusted to us, or obtained inappropriately, or the failure to comply with legislation or regulations regarding the protection of sensitive or confidential information, including personal data and proprietary information.

Furthermore, the inappropriate use of social networking sites by our employees could result in breaches of confidentiality, unauthorized disclosure of non-public company information or damage to our reputation.

If we do not continue to develop and implement the right processes and tools to manage our enterprise and instill our culture and core values into all of our employees, our ability to compete successfully and achieve our business objectives could be impaired.

In addition, we have recently made, and may continue to make, changes to our operating model, including how we are organized as the needs and size of our business change, and if we do not successfully implement the changes, our business and results of operation may be negatively impacted.

Risks Related to Business Growth and Development

We may incur costs to support our business and the inability to effectively build a support structure for the business could have an adverse impact on our growth and profitability.

We have grown significantly since we commenced operations and have increased the number of our full-time professionals from 249 in 2002 to 4,609 as of December 31, 2021.

We have grown significantly since we commenced operations and have increased the number of our full-time professionals from 249 in 2002 to approximately 5,660 as of December 31, 2022.

Additionally, our considerable growth has placed demands on our management and our internal systems, procedures, and controls and will continue to do so in the future.

To successfully manage growth, we must periodically adjust and strengthen our operating, financial, accounting, and other systems, procedures, and controls, which may increase our total costs and may adversely affect our gross profits and our ability to sustain profitability if we do not generate increased revenues to offset the costs.

To successfully manage growth, we must periodically adjust and strengthen our operating, financial, accounting, and other systems, procedures, and controls, which may increase our total costs and may adversely affect our operating income and our ability to sustain profitability if we do not generate increased revenues to offset the costs.

As a public company, our information and control systems must enable us to prepare accurate and timely financial information and other required disclosures.

If we discover deficiencies in our existing information and control systems that impede our ability to satisfy our reporting requirements, we must successfully implement improvements to those systems in an efficient and timely manner.

In the fourth quarter of 2019, we began the implementation of a new enterprise resource planning (“ERP”) system designed to improve the efficiency of our internal operational, financial and administrative activities.

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

The full implementation of a new ERP system in its entirety, which will take place over several years, subjects us to inherent costs and risks including substantial capital expenditures, additional administration and operating expenses, potential disruption of our internal control structure, retention of sufficiently skilled personnel to implement and operate the new system, demand on management time, and other risks and costs of delays or difficulties in transition.

Our system implementation may not result in productivity improvements at a level that outweighs the costs of implementation, or at all.

In addition, the difficulties with implementing a new ERP system may cause disruptions or have an adverse effect on our business operations, if not anticipated and appropriately mitigated.

Our international expansion could result in additional risks.

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dollar and foreign currencies;

• restrictions on the repatriation of earnings;

• potentially adverse tax consequences and limitations on our ability to utilize losses generated in our foreign operations;

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• greater personal security risks for employees traveling to or located in unstable locations;

• health emergencies or pandemics, including COVID-19;

• civil disturbances or other catastrophic events.

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In addition, expanding into new geographic areas and expanding current service offerings is challenging and may require integrating new employees into our culture as well as assessing the demand in the applicable market.

If we cannot manage the risks associated with new service offerings or new locations effectively, we are unlikely to be successful in these efforts, which could harm our ability to sustain profitability and our business prospects.

If we cannot manage the risks associated with new employees, new service offerings or new locations effectively, we are unlikely to be successful in these efforts, which could harm our ability to sustain profitability and our business prospects.

The Company has significant operations in India, which presents additional risks.

We have significant operations in India, including more than 900 employees, which subjects the Company to various country-specific risks.

We have significant operations in India, including over 1,500 employees, which subjects the Company to various country-specific risks.

For example, from time to time, India has experienced instances of civil unrest, terrorism and hostilities among neighboring countries.

Terrorist attacks, military activity, rioting, or civil or political unrest in the future could influence the Indian economy and our operations by disrupting operations and communications and making travel within India more difficult and less desirable.

As such, our operations and employees in India may be adversely affected by social and political uncertainties or change, military activity, health-related risks or acts of terrorism.

Additionally, India’s reputation for potential corruption and the challenges presented by India’s complex business environment may increase our risk of violating applicable anti-corruption and anti-bribery laws.

We face the risk that we, our employees or any third parties we engage to do work on our behalf may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the Foreign Corrupt Practices Act, India’s Prevention of Money Laundering Act, 2002 and Indian Penal Code.

If we violate applicable anti-corruption laws or our internal policies designed to ensure ethical business practices, we could face financial penalties and/or reputational harm that would negatively impact our financial condition and results of operations.

Further, India has experienced natural disasters such as earthquakes, tsunamis, floods, landslides and drought in the past few years.

The extent and severity of these natural disasters determines their impact on the Indian economy.

Such future disasters could have a negative impact on the Indian economy and the Company’s India-based employees, causing our business to suffer.

Our operations and employees in India may be adversely affected by these or other social and political uncertainties or change, military activity, health-related risks, acts of terrorism or natural disasters.

Additionally, as the

overall population of India is large, and the cities in which we operate are dense, the impact of any such occurrences could have a disproportionate adverse effect on our operations.

We face the risk that our employees or any third parties we engage to do work on our behalf may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the Foreign Corrupt Practices Act, India’s Prevention of Money Laundering Act, 2002 and Indian Penal Code.

Additionally, since 1991, successive Indian governments have generally pursued policies of economic liberalization and financial sector reforms, including by significantly relaxing restrictions on the private sector.

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Dispositions may also involve continued financial involvement, as we may be required to retain responsibility for, or agree to indemnify buyers against, liabilities related to a business sold.

Additionally, effective January 1, 2022, we modified our operating model to report under three industries, which are our new reportable segments.

Additionally, effective January 1, 2022, we modified our operating model to report under three industries, which are our reportable segments.

The new operating model was designed to strengthen Huron's go-to-market strategy and support our growth.

If we do not successfully implement this change to our operating model, our business and results of operation may be negatively impacted.

The full implementation across all areas of our business to effect this change may take place over several years.

If we do not successfully implement and continue to refine this change to our operating model, our business and results of operation may be negatively impacted.

The healthcare and education industries are areas of significant focus for our business, and factors that adversely affect the financial condition of these industries could consequently affect our business.

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Existing and new federal and state laws and regulations affecting the healthcare and education industries could create unexpected liabilities for us, could cause us or our clients to incur additional costs, and could restrict our or our clients’ operations.

Our healthcare and education clients operate in highly regulated industries.

Regulatory and legislative changes in these industries could reduce the demand for our services, decreasing our competitive position or potentially rendering certain of our service offerings obsolete, change client buying patterns or decision making or require us to make unplanned modifications to our service offerings, which could require additional time and investment.

If we fail to accurately anticipate the application of the laws and regulations affecting our clients and the industries they serve, if anticipated changes in regulation or regulatory uncertainty impact client buying patterns, or if such laws and regulations decrease our competitive position or limit the applicability of our service offerings, our results of operations and financial condition could be adversely impacted.

Additionally, regulatory and legislative changes in these industries could reduce the demand for our services, decreasing our competitive position or potentially rendering certain of our service offerings obsolete, change client buying patterns or decision making or require us to make unplanned modifications to our service offerings, which could require additional time and investment.

If we fail to accurately anticipate

the application of the laws and regulations affecting our clients and the industries they serve, if anticipated changes in regulation or regulatory uncertainty impact client buying patterns, or if such laws and regulations decrease our competitive position or limit the applicability of our service offerings, our results of operations and financial condition could be adversely impacted.

Similarly, certain of our healthcare and education clients may experience or anticipate experiencing financial distress or face complex challenges as a result of general economic conditions or operations-specific reasons.

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healthcare system at both the federal and state level, such as the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and continue to consider further significant reforms.

Due to the significant

implementation issues arising under these laws and potential new legislation, it is unclear what long-term effects they will have on the healthcare industry and in turn on our business, financial condition, and results of operations.

Due to the significant implementation issues arising under these laws and potential new legislation, it is unclear what long-term effects they will have on the healthcare industry and in turn on our business, financial condition, and results of operations.

Our failure to accurately anticipate the application of new laws and regulations, or our failure to comply with such laws and regulations, could create liability for us, result in adverse publicity and negatively affect our business.

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If the tax-exempt status of any of our clients is revoked or compromised by new legislation or interpretation of existing legislation, that client’s financial health could be adversely affected, which could adversely impact demand for our services, our sales, revenue, financial condition, and results of operations.

Our digital offerings are a significant focal point for our business, including a focus on the adaptation and expansion of our services and products in response to ongoing changes in customer demand, and a significant reduction in such demand or an inability to respond to the evolving technological environment could materially affect our results of operations.

Our financial results depend, in part, on our ability to continue to develop and implement services and solutions that anticipate and respond to rapid and continuing changes in technology to serve the evolving needs of our clients.

Examples of areas of significant change include digital and analytic services and products, which are continually evolving.

Technological developments may materially affect the cost and use of current technology by our clients and some of these technological developments may reduce and replace some of our historical services and products.

This changing technological landscape may cause clients to delay spending under existing contracts and engagements and delay entering into new contracts while they evaluate new technologies.

Such spending delays can negatively impact our results of operations.

Technological developments, which may be rapid, also could shift demand to new services and products.

If, as a result of new technologies, our clients demand new services and products, we may be less competitive in these new areas or we may need to make significant investment in our portfolio of software products to meet that demand.

Our growth strategy focuses on responding to these types of developments by driving innovation that will enable us to expand our business into new growth areas and enhance our current portfolio of software products.

If we do not sufficiently invest in new technology, adapt to industry developments, evolve and expand our business at sufficient speed and scale, or make the right strategic investments, or fail to timely deliver on our product roadmap for our portfolio of software products to respond to these developments and successfully drive innovation, our services and products, our results of operations, and our ability to develop and maintain a competitive advantage and execute on our growth strategy could be adversely affected.

Additionally, as we expand our services and products into these new areas, we may be exposed to operational, legal, regulatory, ethical, technological and other risks specific to such new areas, which may negatively affect our reputation and demand for our services and products.

Many of our client contracts are short-term in duration and may be terminated by our clients with little or no notice and without penalty, which may cause our operating results to be unpredictable and may result in unexpected declines in our utilization and revenues.

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The volume of work performed for any particular client is likely to vary from year to year, and a major client in one fiscal period may not require or may decide not to use our services in any subsequent fiscal period.

Moreover, a large portion of our new engagements comes from existing clients.

Moreover, a large portion of our new engagements come from existing clients.

Accordingly, the failure to obtain new large engagements or multiple engagements from existing or new clients could have a material adverse effect on the amount of revenues we generate.

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We face competition from other business operations and financial consulting firms, general management consulting firms, the consulting practices of major accounting firms, technical and economic advisory firms, regional and specialty consulting firms, consulting divisions of our technology partners, and the internal professional resources of organizations.

In addition, because there are relatively low barriers to entry, we expect to continue to face additional competition from new entrants into the business operations and financial consulting industries.

In addition, because there are relatively low barriers to entry, we expect to continue to face competition from new entrants into the business operations and financial consulting industries.

Competition in several of the sectors in which we operate is particularly intense as many of our competitors are seeking to expand their market share in these sectors.

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In addition, these competitors may generate greater revenues and have greater name recognition than we do.

Some of our competitors may also have lower overhead and other costs and, therefore, may be able to more

effectively compete through lower cost service offerings.

Some of our competitors may also have lower overhead and other costs and, therefore, may be able to more effectively compete through lower cost service offerings.

Our ability to compete also depends in part on the ability of our competitors to hire, retain, and motivate skilled professionals, the price at which others offer comparable services, the ability of our competitors to offer new and valuable products and services to clients, and our competitors’ responsiveness to their clients.

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We depend on the use of sophisticated technologies and systems.

Some of our practices provide services that are increasingly dependent on the use of software applications and systems that we do not own and could become unavailable.

Many of our practices provide services that are increasingly dependent on the use of software applications and systems that we do not own and which could become unavailable.

Moreover, our technology platforms will require continuing investments by us in order to expand existing service offerings and develop complementary services.

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Our future success depends on our ability to adapt our services and infrastructure while continuing to improve the performance, features, and reliability of our services in response to the evolving demands of the marketplace.

Adverse changes to our relationships with key third-party vendors, or in the business of our key third-party vendors, could unfavorably impact our business.

Adverse changes to our relationships with key third-party vendors or the business of our key third-party vendors could unfavorably impact our business.

A portion of our services and solutions depend on technology or software provided by third-party vendors.

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These third-party vendors could terminate their relationship with us without cause and with little or no notice, which could limit our service offerings and harm our financial condition and operating results.

In addition, if a third-party vendor’s business changes, is reduced or fails to adapt to changing market demands, that could adversely affect our business.

Moreover, if third-party technology or software that is important to our business does not continue to be available or utilized within the marketplace, or if the services that we provide to clients is no longer relevant in the marketplace, our business may be unfavorably impacted.

In addition, if a third-party vendor’s business changes, is reduced, or fails to adapt to changing market demands, it could adversely affect our business.

Moreover, if third-party technology or software that is important to our business does not continue to be available or utilized within the marketplace, or if the services that we provide to clients are no longer relevant in the marketplace, our business may be unfavorably impacted.

We could experience system failures, service interruptions, or security breaches that could negatively impact our business.

Our organization is comprised of employees who work on matters throughout the United States and overseas around the world.

Our organization is comprised of employees who work on matters throughout the United States and around the world.

Our technology platform is a “virtual office” from which we all operate.

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jurisdictions have adopted, proposed or are considering adopting or proposing, additional data security and/or data privacy statutes or regulations.

governmental focus on data security and privacy may lead to additional legislative and regulatory action, which could increase the complexity of doing business.

Continued governmental focus on data security and privacy may lead to additional legislative and regulatory action, which could increase the complexity of doing business.

The increased emphasis on information security and the requirements to comply with applicable U.S.

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In addition, we carry professional liability insurance to cover many of these types of claims, but the policy limits and the breadth of coverage may be inadequate to cover any particular claim or all claims plus the cost of legal defense.

For example, we provide services on engagements in which the impact on a client may substantially exceed the limits of our errors and omissions insurance coverage.

For example, we provide services on engagements in which the impact on a client may substantially exceed the limits of our errors

and omissions insurance coverage.

If we are found to have professional liability with respect to work performed on such an engagement, we may not have sufficient insurance to cover the entire liability.

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For example, our recently launched Huron Managed Services business within the Healthcare industry provides revenue cycle managed services to hospitals and health systems.

These services include the coding, preparation, submission and collection of claims for medical service to payers for reimbursement.

These services include the coding, preparation, submission and collection of claims for medical service to payors for reimbursement.

Such claims are governed by U.S.

federal and state laws.

federal law provides civil liability to any persons that knowingly submit, or cause to be submitted, a claim to a payer, including Medicare, Medicaid and private health plans, seeking payment for any services or items that overbills or bills for services or items that have not been provided to the patient.

federal law provides civil liability to any persons that knowingly submit, or cause to be submitted, a claim to a payor, including Medicare, Medicaid and private health plans, seeking payment for any services or items that overbills or bills for services or items that have not been provided to the patient.

federal law may also impose criminal penalties for intentionally submitting such false claims.

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In connection with these laws, we may be subjected to U.S.

federal or state government investigations and possible penalties may be imposed upon us, false claims actions may have to be defended and private payers may file claims against us.

federal or state government investigations and possible penalties may be imposed upon us, false claims actions may have to be defended and private payors may file claims against us.

Any investigation or proceeding related to these laws, even if unwarranted or without merit, may have a material adverse effect on our reputation, business, results of operations and financial condition.

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Risks Related to Financial Management and Performance

Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable billing rates for our consultants, or if we are unable to deliver our services due to factors that disrupt travel to our client sites.

Our financial results could suffer if we are unable to achieve or maintain adequate utilization and suitable billing rates for our consultants, or if we are slow to respond to the market's return to a predominantly in-person service delivery model.

Our profitability depends to a large extent on the utilization and billing rates of our professionals.

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• the hiring of additional consultants because there is generally a transition period for new consultants that results in a temporary drop in our utilization rate;

• the use of independent contractors as a substitute for hiring additional consultants;

• unanticipated changes in the scope of client engagements;

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If we are unable to achieve and maintain adequate overall utilization as well as maintain or increase the billing rates for our consultants, our financial results could materially suffer.

Traditionally, most of our consultants have performed services at the physical locations of our clients.

Starting in 2020 and in response to the proliferation of the coronavirus, substantially all of our services were delivered remotely.

If our consultants are unable to continue delivering services remotely or if we are out of step with a general market return to in person service delivery, our business could be materially adversely affected.

Our quarterly results of operations have fluctuated in the past and may continue to fluctuate in the future as a result of certain factors, some of which may be outside of our control.

A key element of our strategy is to market our products and services directly to certain large organizations, such as health systems and acute care hospitals, and to increase the number of our products and services utilized by existing clients.

Prior to the COVID-19 pandemic, most of our consultants performed services at the physical locations of our clients.

Starting in 2020, in response to the shut downs that resulted from the proliferation of the COVID-19 pandemic, substantially all of our services were delivered remotely.

If we are out of step with a general market return to in-person service delivery, our business could be materially adversely affected.

Our quarterly and annual results of operations have fluctuated in the past and may continue to fluctuate in the future as a result of certain factors, some of which may be outside of our control.

A key element of our strategy is to market our products and services directly to certain large organizations, such as health systems and acute care hospitals and public universities, and to increase the number of our products and services utilized by existing clients.

The sales cycle for some of our products and services is often lengthy and may involve significant commitment of client personnel.

As a consequence, the commencement date of a client engagement often cannot be accurately forecasted.

As discussed below, certain of our client contracts contain terms that result in

revenue that is deferred and cannot be recognized until the occurrence of certain events.

As a result, the period of time between contract signing and recognition of associated revenue may be lengthy, and we are not able to predict with certainty the period in which revenue will be recognized.

As discussed below, certain of our client contracts contain terms that result in revenue that is deferred and cannot be recognized until the occurrence of certain events.

As a result, the period of time between contract signing and recognition of associated revenue may be lengthy, and we may not be able to predict with certainty the period in which revenue will be recognized.

Fee discounts, pressure to not increase or even decrease our rates, and less advantageous contract terms could result in the loss of clients, lower revenues and operating income, higher costs, and less profitable engagements.

More discounts or write-offs than we expect in any period would have a negative impact on our results of operations.

Other fluctuations in our quarterly results of operations may be due to a number of other factors, some of which are not within our control, including:

Other fluctuations in our results of operations may be due to a number of other factors, some of which are not within our control, including:

• the timing and volume of client invoices processed and payments received, which may affect the fees payable to us under certain of our engagements;

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• unforeseen legal expenses, including litigation and other settlement gains or losses.

We base our annual employee bonus expense upon our expected annual adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for that year.

Furthermore, we base our annual employee bonus expense, in part, upon our expected annual adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for that year.

If we experience lower adjusted EBITDA in a quarter without a corresponding change to our full-year adjusted EBITDA expectation, our estimated bonus expense will not be reduced, which will have a negative impact on our quarterly results of operations for that quarter.

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The results of one quarter should not be relied upon as an indication of future performance.

If our quarterly results of operations fall below the expectations of securities analysts or investors, the price of our common stock could decline substantially.

If our quarterly or annual results of operations fall below the expectations of our annual and long-term forecasts, and therefore fall below the expectations of securities analysts or investors, the price of our common stock could decline substantially.

Revenues from our performance-based engagements are difficult to predict, and the timing and extent of recovery of our costs is uncertain.

We have engagement agreements under which our fees include a significant performance-based component.

We have certain engagement agreements under which our fees include a significant performance-based component.

Performance-based fees are contingent on the achievement of specific measures, such as our clients meeting cost-saving or other contractually-defined goals.

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While we believe that the estimates and assumptions we have used for revenue recognition are reasonable, subsequent changes could have a material impact to our future financial results.

The percentage of our revenues derived from performance-based fees for the years ended December 31, 2021, 2020, and 2019, was 10.1%, 9.2%, and 8.9%, respectively.

A greater number of performance-based fee arrangements may result in increased volatility in our working capital requirements and greater variations in our quarter-to-quarter results, which could affect the price of our common stock.

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These estimates reflect our best judgment regarding the efficiencies of our methodologies and consultants as we plan to deploy them on engagements.

Any increased or unexpected costs or unanticipated delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which would have an adverse effect on our profit margin.

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

Any increased or unexpected costs, expansion in scope of work without a commensurate increase in fees, or unanticipated delays in connection with the performance of fixed-fee engagements, including delays caused by factors outside our control, could make these contracts less profitable or unprofitable, which would have an adverse effect on our profit margin.

Our business performance might not be sufficient for us to meet the full-year financial guidance that we provide publicly.

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If we default on these obligations, our lenders may foreclose on our assets, including our pledged equity interest in our subsidiaries.

We entered into a second amended and restated security agreement with Bank of America (the “Security Agreement”) and a second amended and restated pledge agreement (the “Pledge Agreement”) in connection with our entry into the Second Amended and Restated Credit Agreement, dated as of March 31, 2015 (as amended and restated, the “Amended Credit Agreement”).

In the fourth quarter of 2022, we entered into a third amended and restated security agreement with Bank of America (the “Security Agreement”) and a third amended and restated pledge agreement (the “Pledge Agreement”) in connection with our entry into the Third Amended and Restated Credit Agreement, dated as of November 15, 2022 (the “Amended Credit Agreement”).

Pursuant to the Security Agreement and to secure our obligations under the Amended Credit Agreement, we granted our lenders a first-priority lien, subject to permitted liens, on substantially all of the personal property assets that we and the subsidiary grantors own.

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Our indebtedness could adversely affect our ability to raise additional capital to fund our operations and obligations, expose us to interest rate risk to the extent of our variable-rate debt, and adversely affect our financial results.

At December 31, 2021, we had outstanding indebtedness of $230.0 million on our revolving line of credit that becomes due and payable in full upon maturity on September 27, 2024, and $2.8 million principal amount of our promissory note due March 1, 2024.

The Amended Credit Agreement consists of a $600 million senior secured revolving credit facility.

At December 31, 2022, we had outstanding indebtedness of $290.0 million on our revolving line of credit that becomes due and payable in full upon maturity on November 15, 2027.

Our ability to make scheduled payments of the principal, to pay interest, or to refinance our indebtedness, depends on our future performance.

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Our ability to refinance our current indebtedness or future indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the current indebtedness or future indebtedness.

The interest rates on our revolving line of credit and promissory note are linked to LIBOR.

In 2017, the Financial Conduct Authority (FCA) in the U.K.

announced that it would phase out LIBOR as a benchmark rate by the end of 2021.

In March 2021, the ICE Benchmark Administration Limited, the administrator of LIBOR, extended the transition dates of certain LIBOR tenors (including all U.S.

Dollar LIBOR tenors other than one-week and two-month U.S.

Dollar LIBOR tenors) to June 30, 2023, after which LIBOR reference rates will cease to be provided.

Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S.

Dollar LIBOR should be entered into after December 31, 2021.

As a result of the discontinuance of LIBOR, the future method and rates used to calculate our interest rates and/or payments on our debt may result in interest rates and/or payments that are higher than, or that do not otherwise correlate over time with, the interest rates and/or payments that would have been applicable to our obligations if LIBOR was available in its current form, which could have a material adverse effect on our financial condition and results of operations.

While we continue to take steps to mitigate the impact of the phase-out or replacement of LIBOR, such efforts may not prove successful.

Furthermore, the U.S.

or global financial markets may be disrupted as a result of the phase-out or replacement of LIBOR, which could also have a material adverse effect on our business, financial condition and results of operations.

In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences such as exposing us to the risk of increased interest rates because some of our borrowings are at variable interest rates;

We may not be able to

engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the current indebtedness or future indebtedness.

making us more vulnerable to adverse changes in general U.S.

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or reducing our capacity to obtain additional financing and flexibility in planning for, or reacting to, changes in our business and our industry.

Under the Amended Credit Agreement, we are obligated to pay interest at either one, three or six month Term SOFR or an alternate base rate, in each case plus an applicable margin.

The Amended Credit Agreement replaced LIBOR with SOFR as the benchmark rate.

SOFR is a relatively new reference rate, has a very limited history and is based on short-term repurchase agreements backed by Treasury securities.

Changes in SOFR can be volatile and difficult to predict, and there is no assurance that SOFR will perform similarly to the way LIBOR, our previous benchmark rate, would have performed at any time.

Any of these factors could materially and adversely affect our business, financial condition, and results of operations.

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At December 31, 2022, goodwill and other intangible assets totaled $648.4 million, or 54%, of our total assets.

Goodwill results from our acquisitions, representing the excess of the fair value of consideration transferred over the fair value of the net assets acquired.

Goodwill results from our business acquisitions, representing the excess of the fair value of consideration transferred over the fair value of the net assets acquired.

We test goodwill for impairment at the reporting unit level, annually and whenever events or circumstances make it more likely than not that an impairment may have occurred.

Intangible assets other than goodwill represent purchased assets that lack physical substance but can be distinguished from goodwill.

Our intangible assets primarily

consist of customer relationships, trade names, technology and software, non-competition agreements, and customer contracts, all of which were acquired through business combinations.

Our intangible assets primarily consist of customer relationships, trade names, technology and software and non-competition agreements, all of which were acquired through business acquisitions.

We evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

During the year ended December 31, 2020, we recorded non-cash goodwill impairment charges totaling $59.8 million related to the Business Advisory segment.

During 2021 and 2019, we did not record any non-cash goodwill impairment charges.

No material impairment charges for intangible assets were recorded in 2021, 2020, or 2019.

During the year ended December 31, 2020, we recorded non-cash goodwill impairment charges totaling $59.8 million related to reporting units within the legacy Business Advisory segment.

During 2022 and 2021, we did not record any goodwill impairment charges.

No impairment charges for other intangible assets were recorded in 2022, 2021, or 2020.

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

While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether or not a non-cash goodwill impairment charge is recognized and also the magnitude of any such charge.

While we believe that the estimates and assumptions underlying our valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether or not a goodwill impairment charge is recognized and also the magnitude of any such charge.

The results of an impairment analysis are as of a point in time.

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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 additional non-cash goodwill impairment charges.

Any significant decline in our operations could result in additional goodwill impairment charges.

Refer to “Critical Accounting Policies and Estimates” within Part I - Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 4 “Goodwill and Intangible Assets” within the notes to our consolidated financial statements for further discussion of our business combinations, goodwill, intangible assets, and impairment tests performed.

We may incur impairment charges with respect to our convertible debt investment in Shorelight.

In 2014 and 2015, we invested $27.9 million, in the form of zero coupon convertible debt, in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight Education.

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.

We may incur impairment charges with respect to our convertible debt investment in Shorelight or our preferred stock investment in Medically Home.

Since 2014, we have invested $40.9 million, in the form of 1.69% convertible debt, in Shorelight Holdings, LLC (“Shorelight”), the parent company of Shorelight Education.

Our investment is carried at its fair value of $57.6 million as of December 31, 2022, with unrealized holding gains and losses reported in other comprehensive income.

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In the future, if there are adverse developments in Shorelight's business that may be the result of events within or outside of Shorelight's control, we may incur impairment charges with respect to our convertible debt investment, which could materially impact our results of operations.

In 2019, we invested $5.0 million, in the form of preferred stock, in Medically Home Group, Inc.

(“Medically Home”), a hospital-at-home company.

Our investment is carried at its fair value of $33.6 million as of December 31, 2022, with unrealized holding gains and losses reported in our results of operations when a observable price change for preferred stock issued by Medically Home with similar rights and preferences to our preferred stock investment occurs.

As of December 31, 2022, our investment in Medically Home is in an unrealized gain position.

If there is a significant deterioration in the earnings performance, credit rating, or business prospects of Medically Home, or a significant adverse change in the regulatory, economic, or technological environment of Medically Home, we would evaluate our investment for impairment.

If during such evaluation it was determined that the fair value of our investment was below its carrying value, we would recognize an impairment for such difference.

As of December 31, 2022, we have not identified any indicators of impairment of our

In the future, if such indicators arise, we may incur impairment charges with respect to our preferred stock investment in Medically Home, which could materially impact our results of operations.

General Risk Factors

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• changes in laws and regulations;

• political unrest, war, terrorism, geopolitical uncertainties, trade policies and sanctions, including the repercussions of an attack by Russia on Ukraine;

• other economic factors and general business conditions.

• political unrest, war, terrorism, geopolitical uncertainties, trade policies and sanctions, including the ongoing repercussions of the conflict between Russia and Ukraine;

• other economic factors and general business conditions, including inflation, rising interest rates, and the negative impact from the COVID-19 pandemic and its downstream impacts.

For example, some portion of the services we provide may be considered by our clients to be more discretionary in nature, as the demand for the services may be impacted by economic slowdowns.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors