Huron Consulting Group Inc. - 8-K Summary
Business Context and Reporting Period
This Form 8-K, dated August 19, 2009, serves as a Regulation FD disclosure regarding a webcast hosted by Huron Consulting Group Inc. The filing addresses previously announced financial results, a financial statement restatement, and the current state of the business. It provides full-year 2009 guidance and reconciliations of non-GAAP measures.
Key Financial Metrics and Guidance
The Company provided the following guidance ranges for the full year ending December 31, 2009 (in millions, unless otherwise noted):
- Projected Revenues (before reimbursable expenses): $650 million (Low) to $680 million (High).
- Projected Net Income (GAAP): $26 million (Low) to $36 million (High).
- Projected Diluted EPS (GAAP): $1.29 (Low) to $1.74 (High).
- Projected Adjusted Net Income: $58 million (Low) to $68 million (High).
- Projected Adjusted Diluted EPS: $2.85 (Low) to $3.30 (High).
- Projected Adjusted EBITDA: $135 million (Low) to $151 million (High).
- Adjusted EBITDA Margin: 20.8% (Low) to 22.2% (High).
Q2 2009 Revenue Performance: Reported consolidated revenue for the three months ended June 30, 2009, was $165.8 million, representing a 15.6% increase over the prior year. However, organic revenue (excluding acquisition-related revenues) declined 7.2% to $133.0 million.
Material Changes and Segment Performance
While reported revenue growth was positive, organic growth was negative due to the exclusion of acquisition-related revenues ($32.8 million). Segment organic performance for Q2 2009 varied significantly:
- Health and Education Consulting: Organic revenue increased 6.5%.
- Legal Consulting: Organic revenue increased 2.4%.
- Accounting and Financial Consulting: Organic revenue decreased 35.3%.
- Corporate Consulting: Organic revenue decreased 11.9%.
Outlook, Risks, and Contingencies
The guidance and outlook are subject to significant risks and contingencies, including:
- Restatement and Litigation: The guidance excludes potential settlement costs, penalties, fines, or damages related to the SEC investigation into the restatement, the SEC inquiry into the allocation of chargeable hours, and private litigation. These costs are currently unestimable but could be material.
- Accounting Treatment: Guidance assumes acquisition-related payments after August 1, 2009, will be accounted for as purchase consideration rather than non-cash compensation. Future discoveries could alter this treatment materially.
- Goodwill Impairment: The outlook excludes potential goodwill impairment charges resulting from the decline in the Company's stock price or increased costs associated with credit agreement amendments.
- Restructuring: The guidance includes $9 million in expenses related to the restatement and a previously announced cost reduction program.
Investor Verification Checklist
- Verify the status and potential financial impact of the ongoing SEC investigation and private litigation regarding the restatement.
- Confirm the accounting treatment for future acquisition-related payments and the risk of reclassification to non-cash compensation.
- Assess the likelihood and magnitude of a potential goodwill impairment charge given the decline in stock price.
- Review the detailed reconciliation of non-GAAP measures to GAAP measures provided in the Company's website and related filings (Form 10-K/A, 10-Q/A).
- Monitor the Company's credit agreement for potential covenant violations triggered by impairment charges or other costs.