Segment Information

9 Months Ended

Sep. 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 nine months ended September 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 September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Healthcare:
Revenues	$	87,406		$	100,000		$	268,340		$	295,621
Operating income	$	25,610		$	32,863		$	70,831		$	94,058
Segment operating income as a percentage of segment revenues	29.3		%	32.9		%	26.4		%	31.8		%
Business Advisory:
Revenues	$	66,048		$	62,519		$	201,423		$	183,602
Operating income	$	10,780		$	11,942		$	37,306		$	32,997
Segment operating income as a percentage of segment revenues	16.3		%	19.1		%	18.5		%	18.0		%
Education:
Revenues	$	51,850		$	56,770		$	176,017		$	165,265
Operating income	$	12,548		$	14,413		$	41,792		$	43,235
Segment operating income as a percentage of segment revenues	24.2		%	25.4		%	23.7		%	26.2		%
Total Company:
Revenues	$	205,304		$	219,289		$	645,780		$	644,488
Reimbursable expenses	2,860			23,636			25,133			65,787
Total revenues and reimbursable expenses	$	208,164		$	242,925		$	670,913		$	710,275

Segment operating income	$	48,938		$	59,218		$	149,929		$	170,290
Items not allocated at the segment level:
Other operating expenses	29,042			32,310			87,826			105,369
Litigation and other gains	—			(630)			(150)			(1,571)
Depreciation and amortization	6,197			6,962			18,635			21,285
Goodwill impairment charges1	—			—			59,816			—
Other expense, net	224			4,456			6,829			10,326
Income (loss) from continuing operations before taxes	$	13,475		$	16,120		$	(23,027)		$	34,881

(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 nine months ended September 30, 2020 and 2019.


	Three Months Ended September 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	51,491	$	20,675	$	10,958	$	83,124
Time and expense	14,627		40,511		35,214		90,352
Performance-based	15,641		3,671		—		19,312
Software support, maintenance and subscriptions	5,647		1,191		5,678		12,516
Total	$	87,406	$	66,048	$	51,850	$	205,304

Employee Type (1)
Revenue generated by full-time billable consultants	$	65,084	$	62,340	$	44,234	$	171,658
Revenue generated by full-time equivalents	22,322		3,708		7,616		33,646
Total	$	87,406	$	66,048	$	51,850	$	205,304

Timing of Revenue Recognition
Revenue recognized over time	$	86,413	$	66,048	$	51,663	$	204,124
Revenue recognized at a point in time	993		—		187		1,180
Total	$	87,406	$	66,048	$	51,850	$	205,304


	Nine Months Ended September 30, 2020
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	158,079	$	73,442	$	35,530	$	267,051
Time and expense	43,389		118,364		123,493		285,246
Performance-based	49,042		5,903		695		55,640
Software support, maintenance and subscriptions	17,830		3,714		16,299		37,843
Total	$	268,340	$	201,423	$	176,017	$	645,780

Employee Type (1)
Revenue generated by full-time billable consultants	$	188,750	$	191,566	$	150,857	$	531,173
Revenue generated by full-time equivalents	79,590		9,857		25,160		114,607
Total	$	268,340	$	201,423	$	176,017	$	645,780

Timing of Revenue Recognition
Revenue recognized over time	$	265,813	$	201,423	$	175,715	$	642,951
Revenue recognized at a point in time	2,527		—		302		2,829
Total	$	268,340	$	201,423	$	176,017	$	645,780


	Three Months Ended September 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	65,610	$	24,333	$	12,418	$	102,361
Time and expense	12,307		35,212		39,688		87,207
Performance-based	16,313		1,614		—		17,927
Software support, maintenance and subscriptions	5,770		1,360		4,664		11,794
Total	$	100,000	$	62,519	$	56,770	$	219,289

Employee Type (1)
Revenue generated by full-time billable consultants	$	72,142	$	60,131	$	48,928	$	181,201
Revenue generated by full-time equivalents	27,858		2,388		7,842		38,088
Total	$	100,000	$	62,519	$	56,770	$	219,289

Timing of Revenue Recognition
Revenue recognized over time	$	98,204	$	62,519	$	56,274	$	216,997
Revenue recognized at a point in time	1,796		—		496		2,292
Total	$	100,000	$	62,519	$	56,770	$	219,289


	Nine Months Ended September 30, 2019
	Healthcare		Business Advisory		Education		Total
Billing Arrangements
Fixed-fee	$	188,875	$	72,693	$	37,926	$	299,494
Time and expense	39,345		104,325		114,122		257,792
Performance-based	50,144		2,810		—		52,954
Software support, maintenance and subscriptions	17,257		3,774		13,217		34,248
Total	$	295,621	$	183,602	$	165,265	$	644,488

Employee Type (1)
Revenue generated by full-time billable consultants	$	206,508	$	177,279	$	144,338	$	528,125
Revenue generated by full-time equivalents	89,113		6,323		20,927		116,363
Total	$	295,621	$	183,602	$	165,265	$	644,488

Timing of Revenue Recognition
Revenue recognized over time	$	289,452	$	183,602	$	164,164	$	637,218
Revenue recognized at a point in time	6,169		—		1,101		7,270
Total	$	295,621	$	183,602	$	165,265	$	644,488

(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 September 30, 2020 one client in our Healthcare segment had a total receivable and unbilled services balance that accounted for 15.0% 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 nine months ended September 30, 2020 and 2019, no single client generated greater than 10% of our consolidated revenues.