Segment Information

6 Months Ended

Jun. 30, 2020

Segments are defined as components of a company that engage in business activities from which they may earn revenues and incur expenses, and for which separate financial information is available and is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker, who is our chief executive officer, manages the business under three operating segments, which are our reportable segments: Healthcare, Business Advisory, and Education.


•	Healthcare

Our Healthcare segment has a depth of expertise in financial and operational improvement, care transformation, culture and organizational excellence, strategy, and technology and analytics. We serve national and regional hospitals, integrated health systems, academic medical centers, community hospitals, and medical groups. Our solutions help clients evolve and adapt to the rapidly changing healthcare environment and achieve growth, optimize performance, enhance profitability, improve quality and clinical outcomes, align leaders, improve organizational culture, and drive physician, patient, and employee engagement across the enterprise to deliver better consumer outcomes.

We help organizations transform and innovate their delivery model to focus on patient wellness by improving quality outcomes, minimizing care variation and fundamentally improving patient and population health. Our consultants partner with clients to help build and sustain today’s business to invest in the future by reducing complexity, improving operational efficiency and growing market share. We enable the healthcare of the future by identifying, integrating and optimizing technology investments to collect data that transforms care delivery and improves patient outcomes. We also develop future leaders capable of driving meaningful cultural and organizational change and who transform the consumer experience.


•	Business Advisory

Our Business Advisory segment provides services to large and middle market organizations, lending institutions, law firms, investment banks, private equity firms, and not-for-profit organizations, including higher education and healthcare institutions. We assist clients in a broad range of industries and across the spectrum from healthy, well-capitalized companies to organizations in transition, as well as creditors, equity owners, and other key constituents. Our Enterprise Solutions and Analytics experts advise, deliver, and optimize technology and analytics solutions that enable organizations to manage and optimize their financial performance, operational efficiency, and client or stakeholder experience. Our Business Advisory experts resolve complex business issues and enhance client enterprise value through a suite of services including capital advisory, transaction advisory, operational improvement, restructuring and turnaround, valuation, and dispute advisory. Our Strategy and Innovation professionals collaborate with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Our Life Sciences professionals provide strategic solutions to help pharmaceutical, medical device, and biotechnology companies deliver more value to patients, payers, and providers, and comply with regulations.


•	Education

Our Education segment provides consulting and technology solutions to higher education institutions and academic medical centers. We collaborate with clients to address challenges relating to business and technology strategy, financial and operational excellence, student success, research administration, and regulatory compliance. Our research enterprise solutions assist clients in identifying and implementing institutional research strategy, optimizing clinical research operations, improving financial management and cost reimbursement, improving service to faculty, and mitigating risk compliance. Our technology strategy, enterprise applications, and analytics solutions transform and optimize operations, deliver time and cost savings, and enhance the student experience. Our institutional strategy, budgeting and financial management, and business operations align missions with business priorities, improve quality, and reduce costs institution-wide. Our student solutions improve attraction, retention and graduation rates, increase student satisfaction and help generate quality outcomes.

Segment operating income consists of the revenues generated by a segment, less the direct costs of revenue and selling, general and administrative expenses that are incurred directly by the segment. Unallocated corporate costs include costs related to administrative functions that are performed in a centralized manner that are not attributable to a particular segment. These administrative function costs include costs for corporate office support, certain office facility costs, costs relating to accounting and finance, human resources, legal, marketing, information technology, and company-wide business development functions, as well as costs related to overall corporate management.

The table below sets forth information about our operating segments for the three and six months ended June 30, 2020 and 2019, along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Healthcare:
Revenues	$	85,356		$	101,939		$	180,934		$	195,621
Operating income	$	21,171		$	33,344		$	45,221		$	61,195
Segment operating income as a percentage of segment revenues	24.8		%	32.7		%	25.0		%	31.3		%
Business Advisory:
Revenues	$	70,470		$	62,277		$	135,375		$	121,083
Operating income	$	16,684		$	11,474		$	26,526		$	21,055
Segment operating income as a percentage of segment revenues	23.7		%	18.4		%	19.6		%	17.4		%
Education:
Revenues	$	62,031		$	56,538		$	124,167		$	108,495
Operating income	$	16,128		$	16,204		$	29,244		$	28,822
Segment operating income as a percentage of segment revenues	26.0		%	28.7		%	23.6		%	26.6		%
Total Company:
Revenues	$	217,857		$	220,754		$	440,476		$	425,199
Reimbursable expenses	2,970			23,534			22,273			42,151
Total revenues and reimbursable expenses	$	220,827		$	244,288		$	462,749		$	467,350

Segment operating income	$	53,983		$	61,022		$	100,991		$	111,072
Items not allocated at the segment level:
Other operating expenses	31,638			36,481			58,784			73,059
Litigation and other gains	—			(485		)	(150		)	(941		)
Depreciation and amortization	6,391			7,151			12,438			14,323
Goodwill impairment charges¹	—			—			59,816			—
Other expense (income), net	(1,032		)	3,829			6,605			5,870
Income (loss) from continuing operations before taxes	$	16,986		$	14,046		$	(36,502	)	$	18,761


(1)	The non-cash goodwill impairment charges are not allocated at the segment level because the underlying goodwill asset is reflective of our corporate investment in the segments. We do not include the impact of goodwill impairment charges in our evaluation of segment performance.

The following table illustrates the disaggregation of revenues by billing arrangements, employee types, and timing of revenue recognition, including a reconciliation of the disaggregated revenues to revenues from our three operating segments for the three and six months ended June 30, 2020 and 2019.



	Three Months Ended June 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	50,803	$	27,374	$	11,397	$	89,574
Time and expense	14,029		40,264		44,568		98,861
Performance-based	14,480		1,586		695		16,761
Software support, maintenance and subscriptions	6,044		1,246		5,371		12,661
Total	$	85,356	$	70,470	$	62,031	$	217,857

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	58,221	$	67,269	$	53,187	$	178,677
Revenue generated by full-time equivalents	27,135		3,201		8,844		39,180
Total	$	85,356	$	70,470	$	62,031	$	217,857

Timing of Revenue Recognition
Revenue recognized over time	$	84,941	$	70,470	$	62,030	$	217,441
Revenue recognized at a point in time	415		—		1		416
Total	$	85,356	$	70,470	$	62,031	$	217,857



	Six Months Ended June 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	106,588	$	52,767	$	24,572	$	183,927
Time and expense	28,762		77,853		88,279		194,894
Performance-based	33,401		2,232		695		36,328
Software support, maintenance and subscriptions	12,183		2,523		10,621		25,327
Total	$	180,934	$	135,375	$	124,167	$	440,476

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	123,666	$	129,226	$	106,623	$	359,515
Revenue generated by full-time equivalents	57,268		6,149		17,544		80,961
Total	$	180,934	$	135,375	$	124,167	$	440,476

Timing of Revenue Recognition
Revenue recognized over time	$	179,400	$	135,375	$	124,052	$	438,827
Revenue recognized at a point in time	1,534		—		115		1,649
Total	$	180,934	$	135,375	$	124,167	$	440,476



	Three Months Ended June 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	59,681	$	26,688	$	13,125	$	99,494
Time and expense	14,275		33,804		39,076		87,155
Performance-based	22,021		532		—		22,553
Software support, maintenance and subscriptions	5,962		1,253		4,337		11,552
Total	$	101,939	$	62,277	$	56,538	$	220,754

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	69,548	$	60,054	$	49,403	$	179,005
Revenue generated by full-time equivalents	32,391		2,223		7,135		41,749
Total	$	101,939	$	62,277	$	56,538	$	220,754

Timing of Revenue Recognition
Revenue recognized over time	$	99,606	$	62,277	$	56,179	$	218,062
Revenue recognized at a point in time	2,333		—		359		2,692
Total	$	101,939	$	62,277	$	56,538	$	220,754



	Six Months Ended June 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	123,265	$	48,360	$	25,508	$	197,133
Time and expense	27,038		69,113		74,434		170,585
Performance-based	33,831		1,196		—		35,027
Software support, maintenance and subscriptions	11,487		2,414		8,553		22,454
Total	$	195,621	$	121,083	$	108,495	$	425,199

Employee Type ⁽¹⁾
Revenue generated by full-time billable consultants	$	134,366	$	117,148	$	95,410	$	346,924
Revenue generated by full-time equivalents	61,255		3,935		13,085		78,275
Total	$	195,621	$	121,083	$	108,495	$	425,199

Timing of Revenue Recognition
Revenue recognized over time	$	191,248	$	121,083	$	107,890	$	420,221
Revenue recognized at a point in time	4,373		—		605		4,978
Total	$	195,621	$	121,083	$	108,495	$	425,199

(1)

Full-time billable consultants consist of our full-time professionals who provide consulting services to our clients and are billable to our clients based on the number of hours worked. Full-time equivalent professionals consist of leadership coaches and their support staff within our Culture and Organizational Excellence solution, consultants who work variable schedules as needed by our clients, and full-time employees who provide software support and maintenance services to our clients.

At June 30, 2020 one client in our Healthcare segment had a total receivable and unbilled services balance that accounted for 16.5% of our combined balance of receivables from clients, net and unbilled services, net. The outstanding balance for this client is the result of outstanding invoices due in the normal course of the contract payment terms and services performed in advance of the contract billing schedule. At December 31, 2019, no single client accounted for greater than 10% of our combined balance of receivables from clients, net

and unbilled services, net. During the three and six months ended June 30, 2020 and 2019, no single client generated greater than 10% of our consolidated revenues.