Huron Consulting Group Inc. (HURN) Bundle
Understanding Huron Consulting Group Inc. (HURN) Revenue Streams
Understanding Huron Consulting Group Inc.’s Revenue Streams
Huron Consulting Group Inc. generates revenue from various sources, primarily categorized into Healthcare, Education, and Commercial segments. The company's ability to adapt and respond to market demands is reflected in its revenue streams.
Breakdown of Primary Revenue Sources
| Segment | Revenues Before Reimbursable Expenses (Q3 2024) | Revenues Before Reimbursable Expenses (Q3 2023) | Year-over-Year Change |
|---|---|---|---|
| Healthcare | $183,136,000 | $179,177,000 | +2.2% |
| Education | $121,048,000 | $111,043,000 | +9.0% |
| Commercial | $65,865,000 | $67,958,000 | -3.1% |
| Total Revenues Before Reimbursable Expenses | $370,049,000 | $358,178,000 | +3.3% |
Year-over-Year Revenue Growth Rate
For the first nine months of 2024, total revenues before reimbursable expenses increased to $1,097,664,000, compared to $1,022,832,000 in the same period of 2023, representing a growth rate of 7.3%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenues Before Reimbursable Expenses (9M 2024) | Revenues Before Reimbursable Expenses (9M 2023) | Year-over-Year Change |
|---|---|---|---|
| Healthcare | $553,976,000 | $501,994,000 | +10.4% |
| Education | $355,384,000 | $325,884,000 | +9.1% |
| Commercial | $188,304,000 | $194,954,000 | -3.4% |
| Total Revenues Before Reimbursable Expenses | $1,097,664,000 | $1,022,832,000 | +7.3% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, revenues before reimbursable expenses within the Digital capability rose by 8.4% to $155,532,000 from $143,490,000 in the previous year. This increase is attributed to heightened demand across all segments.
Conversely, the Commercial segment experienced a decline in revenues, decreasing by 3.1% in Q3 2024 compared to Q3 2023, primarily due to reduced demand for consulting services.
Overall, the company’s revenue-generating professionals increased by 10.4% to 5,896 as of September 30, 2024, compared to 5,341 in the same period last year, indicating a strategic hiring approach to meet rising service demands.
A Deep Dive into Huron Consulting Group Inc. (HURN) Profitability
A Deep Dive into Huron Consulting Group Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was calculated based on total revenues of $378.1 million and cost of revenues amounting to $249.1 million, resulting in a gross profit of $129.0 million and a gross profit margin of 34.1%. In comparison, for the same period in 2023, gross profit margin stood at 32.8%.
Operating Profit Margin: The operating income for the third quarter of 2024 was $42.4 million, leading to an operating profit margin of 11.5%, up from 10.4% in the third quarter of 2023. This reflects improved operational efficiency and higher revenue generation.
Net Profit Margin: The net income for the third quarter of 2024 reached $27.1 million, translating to a net profit margin of 7.2%, compared to 5.9% in the previous year. This increase is indicative of better cost management and operational performance.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 34.1% | 32.8% | +1.3% |
| Operating Profit Margin | 11.5% | 10.4% | +1.1% |
| Net Profit Margin | 7.2% | 5.9% | +1.3% |
Trends in Profitability: Over the last year, profitability metrics have shown positive trends. The gross profit margin increased from 32.8% to 34.1%, indicating improved pricing power and cost control. Operating income rose by 13.7% year-over-year, contributing to the enhanced operating margin.
Comparison with Industry Averages: The industry average for consulting firms is typically around 30% for gross profit margins, 10% for operating margins, and 5-6% for net profit margins. Huron Consulting Group's performance is above average, reflecting its competitive positioning and operational effectiveness.
Operational Efficiency Analysis: The company has focused on cost management, leading to a decrease in direct costs as a percentage of revenues before reimbursable expenses to 67.0% in Q3 2024, down from 68.3% in Q3 2023. This improvement highlights effective cost control measures and strategic resource allocation.
| Segment | Operating Income (in thousands) | Operating Margin |
|---|---|---|
| Healthcare | $49,651 | 27.1% |
| Education | $29,158 | 24.1% |
| Commercial | $16,144 | 24.5% |
In summary, the profitability metrics of Huron Consulting Group Inc. reflect a strong financial health, with gross, operating, and net profit margins all improving year-over-year. The company’s operational efficiency has been enhanced through effective cost management strategies, positioning it favorably against industry benchmarks.
Debt vs. Equity: How Huron Consulting Group Inc. (HURN) Finances Its Growth
Debt vs. Equity: How Huron Consulting Group Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Huron Consulting Group Inc. reported total borrowings of $443.1 million. This includes $175.0 million outstanding under its revolving credit facility and $268.1 million under its term loan facility. The term loan was established in February 2024, with the total long-term debt reaching $441.9 million after accounting for current maturities of $13.8 million.
| Debt Type | Amount (in millions) |
|---|---|
| Revolving Credit Facility | $175.0 |
| Term Loan | $268.1 |
| Total Borrowings | $443.1 |
| Total Long-term Debt | $441.9 |
| Current Maturities | $13.8 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Huron Consulting Group Inc. as of September 30, 2024, stands at approximately 0.87. This value is below the industry average of 1.0, indicating a more conservative approach to leveraging compared to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In February 2024, the company established a $275 million senior secured term loan facility. The company’s existing credit arrangements, including the term loan, are set to mature on November 15, 2027. The credit ratings for the company reflect a stable outlook, with a weighted average interest rate on borrowings of 4.9%.
How the Company Balances Between Debt Financing and Equity Funding
Huron Consulting Group has maintained a balance between debt financing and equity funding through a disciplined share repurchase program. As of September 30, 2024, the company had repurchased 1,067,545 shares at a cost of $104 million. The strategy aims to enhance shareholder value while managing leverage effectively.
As of September 30, 2024, cash and cash equivalents amounted to $18.5 million, which provides additional flexibility in managing both operational needs and financing obligations.
Assessing Huron Consulting Group Inc. (HURN) Liquidity
Assessing Huron Consulting Group Inc.'s Liquidity
Current and Quick Ratios
The current ratio, which measures a company's ability to cover its short-term liabilities with its short-term assets, is a crucial indicator of liquidity. As of September 30, 2024, Huron Consulting Group Inc. reported a current ratio of 1.58, reflecting a solid liquidity position. The quick ratio, which excludes inventory from current assets, stands at 1.45 for the same period, indicating that the company can meet its immediate obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is another vital measure of liquidity. For the nine months ended September 30, 2024, Huron's working capital increased to $75.4 million, compared to $63.1 million for the same period in 2023. This increase suggests a strengthening liquidity position, driven by enhanced operational efficiency and cash collection processes.
Cash Flow Statements Overview
Analyzing the cash flow statements reveals the following trends:
- Operating Cash Flow: Net cash provided by operating activities for the nine months ended September 30, 2024, was $61.7 million, an increase from $54.9 million in the same period of 2023.
- Investing Cash Flow: Net cash used in investing activities was $48.0 million for the nine months ended September 30, 2024, compared to $25.8 million in 2023.
- Financing Cash Flow: Net cash used in financing activities was $7.3 million in 2024, a decrease from $31.5 million in 2023.
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $61,704 | $54,894 |
| Net Cash Used in Investing Activities | ($48,048) | ($25,799) |
| Net Cash Used in Financing Activities | ($7,315) | ($31,518) |
Potential Liquidity Concerns or Strengths
Despite a robust current and quick ratio, potential liquidity concerns may arise from the significant cash outflows in investing activities, reflecting Huron's strategic acquisitions and investments in technology. However, the increase in cash and cash equivalents to $18.5 million as of September 30, 2024, from $12.1 million at the end of 2023, indicates a positive cash flow trend, enhancing overall liquidity strength.
Is Huron Consulting Group Inc. (HURN) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of Huron Consulting Group Inc. (HURN), we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is an essential metric for evaluating whether a stock is overvalued or undervalued. As of September 30, 2024, Huron's diluted earnings per share (EPS) stood at $4.43. With a stock price of approximately $65.00, this results in a P/E ratio of:
P/E = Stock Price / EPS = $65.00 / $4.43 ≈ 14.68
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the total shareholders' equity was $522.77 million with 20.79 million shares outstanding, leading to a book value per share of:
Book Value per Share = Total Shareholders' Equity / Shares Outstanding = $522.77 million / 20.79 million ≈ $25.14
Thus, the P/B ratio is:
P/B = Stock Price / Book Value per Share = $65.00 / $25.14 ≈ 2.58
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we first determine the enterprise value (EV). The total debt as of September 30, 2024, is $443.1 million and cash and cash equivalents are $18.5 million. Thus, the EV is:
EV = Market Capitalization + Total Debt - Cash = ($65.00 20.79 million) + $443.1 million - $18.5 million
EV ≈ $1.352 billion
Next, we find EBITDA for the last twelve months (LTM), which is $146.1 million for the nine months ended September 30, 2024. We annualize this to estimate:
EBITDA (Annualized) ≈ $146.1 million (12/9) ≈ $194.8 million
The EV/EBITDA ratio is then:
EV/EBITDA = EV / EBITDA ≈ $1.352 billion / $194.8 million ≈ 6.94
Stock Price Trends
Over the last 12 months, the stock price of HURN has shown a significant increase. For instance, the stock price was approximately $50.00 in early October 2023 and has appreciated to $65.00 by September 30, 2024, reflecting a growth of:
Growth = (New Price - Old Price) / Old Price 100 = ($65.00 - $50.00) / $50.00 100 = 30%
Dividend Yield and Payout Ratios
As of September 30, 2024, Huron does not currently pay a dividend, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus is a "Buy" with a majority projecting continued growth based on the company's strong performance in healthcare and education consulting sectors.
| Metric | Value |
|---|---|
| P/E Ratio | 14.68 |
| P/B Ratio | 2.58 |
| EV/EBITDA Ratio | 6.94 |
| Stock Price (Sept 30, 2024) | $65.00 |
| Stock Price Growth (Last 12 Months) | 30% |
| Dividend Yield | 0% |
| Analyst Consensus | Buy |
Key Risks Facing Huron Consulting Group Inc. (HURN)
Key Risks Facing Huron Consulting Group Inc.
Overview of Internal and External Risks
The company faces several internal and external risks that can impact its financial health. Key risk factors include:
- Industry Competition: The consulting industry is highly competitive, with numerous firms vying for market share. This competition can pressure pricing and margins.
- Regulatory Changes: Changes in regulations, particularly in healthcare and education sectors, can affect operations and compliance costs.
- Market Conditions: Economic downturns can lead to reduced client spending on consulting services, impacting revenue.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Utilization Rates: The utilization rate of revenue-generating professionals decreased to 73.6% in Q3 2024 from 77.3% in Q3 2023, indicating potential inefficiencies in resource allocation.
- Segment Performance: The Commercial segment reported a decrease in revenues before reimbursable expenses of (3.4%) year-over-year.
- Legal Risks: The company recognized a $15 million litigation settlement gain in Q2 2024, which may indicate ongoing legal exposure.
Mitigation Strategies
The company employs various strategies to mitigate identified risks:
- Workforce Management: The total number of revenue-generating professionals increased 10.4% to 5,896 as of September 30, 2024, to better align with service demand.
- Financial Management: Net cash provided by operating activities grew 23.9% to $85.2 million in Q3 2024, reflecting improved cash collection processes.
- Investment in Technology: The company continues to invest in digital capabilities, with revenues from Digital services increasing 8.4% to $155.5 million in Q3 2024.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition in consulting sector | Pressure on pricing and margins |
| Regulatory Changes | Changes in healthcare and education regulations | Increased compliance costs |
| Market Conditions | Economic downturn impacts client spending | Reduction in consulting revenue |
| Utilization Rates | Decrease to 73.6% in Q3 2024 | Potential inefficiencies |
| Segment Performance | Commercial segment revenues fell by 3.4% | Negative impact on overall growth |
| Legal Risks | Ongoing litigations and settlements | Potential financial liabilities |
Future Growth Prospects for Huron Consulting Group Inc. (HURN)
Future Growth Prospects for Huron Consulting Group Inc.
Analysis of Key Growth Drivers
Huron Consulting Group Inc. is poised for growth driven by several factors. Key growth drivers include:
- Product Innovations: The company has reported increased demand for its digital capabilities, particularly in healthcare and education sectors. Revenues from digital capabilities rose 8.4% to $155.5 million in Q3 2024 compared to Q3 2023.
- Market Expansions: The number of revenue-generating professionals has increased by 10.4%, reaching 5,896 as of September 30, 2024. This expansion supports enhanced service delivery and market penetration.
- Acquisitions: The acquisition of Roundtable Analytics in September 2023 contributed to a 10.4% increase in healthcare revenues. Another acquisition, GG+A, completed in March 2024, added approximately 70 professionals.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ending September 30, 2024, total revenues before reimbursable expenses increased by 7.3% to $1.10 billion from $1.02 billion in the same period of 2023. Revenue projections suggest continued upward trends, particularly in healthcare and education, which remain focal points for growth.
Earnings estimates are positive, with net income for the nine months ended September 30, 2024, rising 38.5% to $82.6 million, compared to $59.6 million for the same period in 2023. Diluted earnings per share also increased to $4.43 from $3.05.
Strategic Initiatives or Partnerships
Strategic initiatives are pivotal for future growth:
- Share Repurchase Program: The company has a current authorization to repurchase up to $500 million of its common stock, with $82.7 million remaining as of September 30, 2024. This program aims to enhance shareholder value and reduce share dilution.
- Investment in Technology: Huron plans to invest approximately $35 million to $40 million in technology and software development in 2024, aimed at enhancing healthcare and education products.
Competitive Advantages
Huron has established several competitive advantages that position the company favorably for growth:
- Diverse Service Offerings: The company has strong capabilities in healthcare and education, which are high-demand sectors. Revenues from healthcare increased by 10.4% to $553.9 million in the first nine months of 2024.
- Experienced Workforce: The increase in the number of professionals enhances the capacity for service delivery, catering to rising client demands.
- Strong Financial Performance: The company reported an adjusted EBITDA of $144.4 million for the first nine months of 2024, a 14.6% increase from the previous year.
| Growth Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenues before Reimbursable Expenses | $370.0 million | $358.2 million | 3.3% |
| Net Income | $27.1 million | $21.5 million | 26.2% |
| Adjusted EBITDA | $54.9 million | $48.0 million | 14.3% |
| Number of Revenue-Generating Professionals | 5,896 | 5,341 | 10.4% |
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Article updated on 8 Nov 2024
Resources:
- Huron Consulting Group Inc. (HURN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Huron Consulting Group Inc. (HURN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Huron Consulting Group Inc. (HURN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.