Huron Consulting Group (HURN) Q4 2014 earnings summary

Executive summary

• FY14 revenue before reimbursable expenses rose 12.6% to $811.3M; operating income increased 2.6% to $123.0M, while operating margin declined to 15.2% from 16.6%.

• Net income from continuing operations reached $79.1M and diluted EPS was $3.45; results benefited from a one-time $11.4M recognized tax benefit from a tax election.

• Growth reflected stronger Healthcare, Business Advisory, and Education and Life Sciences demand, plus acquisitions; Q4 Legal performance fell short of expectations.

Financial highlights

• Revenue before reimbursable expenses was $811.3M versus $720.5M in 2013; acquired businesses contributed $63.0M of the $90.8M increase.

• Operating income was $123.0M versus $119.9M; net income from continuing operations was $79.1M versus $66.5M, and diluted EPS from continuing operations was $3.45 versus $2.92.

• Adjusted EBITDA rose 12.5% to $155.7M; Adjusted net income from continuing operations increased 16.3% to $78.5M, excluding specified items including the tax-election benefit.

• Operating margin fell to 15.2% from 16.6%, mainly on higher revenue-generating professional costs as a share of revenue and lower litigation gains.

Outlook and guidance

• Legal leadership was pursuing performance and sales initiatives; management expected 2015 results to improve versus Q4 2014, with an interim goodwill test possible if H1 performance failed to meet expectations.

• Estimated 2015 property and equipment spending was $30.0M, mainly for IT equipment and leasehold improvements supporting infrastructure and document review and processing.

• Internally generated liquidity, cash, revolving credit capacity, and capital-market access were expected to fund long-term growth and capital needs; future financing access depends partly on profitability, receivables quality, leverage, and credit markets.