Huron's buyback room grows. Why isn't cash keeping pace?

Huron Consulting Group gave itself another $200 million of share-buying capacity after a quarter in which more revenue waited to become cash. The professional-services firm is raising its adjusted earnings outlook, but its latest cash generation makes the pace of future repurchases worth watching.

The board approved the increase on October 29 and extended the program through December 2028. Lifetime authorization is now $1.1 billion, including purchases already made. The increase permits future buying rather than committing the company to spend $200 million.

Huron's cash statement shows $233.7 million spent on repurchases in the first nine months, against $15.3 million generated by operations. That wide gap includes the first quarter's annual bonus payments. The fresh development is that third-quarter operating cash also fell, to $57.0 million from $93.8 million a year earlier.

Where the cash slowed

Research by Ticker Byline shows that larger cash use in billed and unbilled receivables accounted for about $31 million of the quarter's $36.7 million cash-flow decline. The calculation compares the latest cash statement with July's report.

Other operating balances also absorbed more cash overall. Net income plus the statement's listed noncash adjustments increased, so the cash decline does not simply mirror weaker earnings.

Unbilled services include revenue already recognized for work performed. Some performance-based fees cannot be billed until a measurement period ends or a client approves the result. Huron's filing also cites higher salaries, overhead, bonuses and interest in explaining the nine-month cash decline. Cash collections increased over that period.

The quarter nevertheless generated enough operating cash to cover approximately $27 million of repurchase cash payments. Bank principal fell $19 million from June to $815 million, although it remained $304 million above year-end. Borrowing supported several cash uses across the year.

Growth supports the larger authorization

Quarterly revenue before expense reimbursements rose 11.6% to $482.5 million, including acquisitions. Huron put organic growth at 6.7%. Consulting and digital staff spent a larger share of available hours on billable work than a year earlier.

Adjusted EBITDA, which removes interest, taxes, depreciation, amortization and selected other items, rose 14.7% to $77.3 million. GAAP operating profit also increased, while net income slipped to $28.4 million from $30.4 million after a noncash loss on a convertible-debt investment.

Huron raised the midpoint of its annual adjusted earnings-per-share forecast to $9.30 from July's $9.20. Its revenue midpoint and adjusted EBITDA margin forecast stayed unchanged. The Huron company profile tracks whether growing fees become cash as the expanded buyback program develops.