Huron Consulting Group (HURN) Q4 2008 earnings summary

Executive summary

• FY08 revenue rose 22.0% to $615.5M, but net income fell 3.0% to $40.7M and diluted EPS declined 8.2% to $2.13.

• Healthcare and legal demand drove growth, offsetting a 14.1% revenue decline in Accounting and Financial Consulting as large engagements wound down.

• Stockamp expanded healthcare consulting from July; acquisition funding lifted year-end borrowings to $280.0M.

Financial highlights

• Revenue increased 22.0% to $615.5M; operating income rose 9.4% to $91.6M, while operating margin declined to 14.9% from 16.6%.

• Net income was $40.7M vs. $41.9M; diluted EPS was $2.13 vs. $2.32, including dilution from shares issued for Stockamp and the Wellspring amendment.

• Direct costs rose 22.8% to $360.4M; SG&A grew 28.4% to $131.1M, including higher marketing, staffing, facilities, share compensation and bad-debt provision.

• Operating cash flow increased to $101.2M from $55.9M, helped by faster collections and higher deferred revenue; investing cash outflow was $250.9M.

Outlook and guidance

• 2009 direct costs and operating expenses expected to rise; plans include hiring managing directors and select managers, associates and analysts, while using variable consultants as demand requires.

• 2009 capital expenditures estimated at $25.0M, mainly for leasehold improvements, computer equipment and software.

• Internally generated liquidity and available revolver capacity expected to fund long-term growth, earn-outs, commitments and debt service; financing access remains dependent on profitability, receivables, leverage and credit-market conditions.