2017 ANNUAL REPORT HURON | 2017 ANNUAL REPORT VISION To empower our clients, our people, and the communities we serve to OWN THEIR FUTURE. MISSION To enable organizations to improve fundamental performance, reinvent their business, generate new growth platforms, and lead their people through TRANSFORMATIONAL CHANGE. 2017 ANNUAL REPORT | HURON VALUES INTEGRITY COLLABORATION We value authenticity and honesty. We commit to working with respect We do the right thing regardless of and transparency, and recognize we the consequences. are better together than apart. IMPACT EXCELLENCE We are passionate about making a We strive to excel and continually exceed difference and take initiative to have the expectations of our clients and our a lasting impact on the organizations people, holding each other accountable and communities we serve. for our actions and outcomes. INTELLECTUAL CURIOSITY INCLUSION As lifelong learners, we explore and We embrace different encourage new ideas, and challenge perspectives and draw on the status quo. the strength of our diversity. HUMILITY While confident in our abilities, we realize that our current knowledge is but a fraction of what we have yet to learn, discover and create. HURON | 2017 ANNUAL REPORT A LETTER FROM THE CHIEF EXECUTIVE OFFICER AND PRESIDENT Largely driven by technology and globalization, the pace and breadth of change has never been more significant. I frequently hear clients speak of the disruption taking place in their industries and the need for transformation as they define their path to achieve long-term success in rapidly evolving markets. Huron is no exception. The changes taking place in our industry and in the industries we serve are acute. Our need for ongoing change does not negate our past success. Instead, it is the sign of a vibrant firm that recognizes the need for continual change as we aspire to achieve more – for ourselves and our shareholders. 2017 ANNUAL REPORT | HURON JAMES H. ROTH Chief Executive Officer and President Our 2017 Performance 2017 was a challenging year for Huron, driven The changes we made throughout 2017 to by further revenue declines in our healthcare accelerate the operational turnaround of segment. While we are disappointed in our our healthcare business have positioned overall financial performance in 2017, we us to be more responsive to changing made tremendous progress in repositioning market conditions. Among other initiatives, this company for a return to organic growth. this includes an enhanced level of collaboration across all of our service lines. Healthcare segment revenues in 2017 Our professionals are leveraging our core declined 16 percent from 2016. The competencies and deep expertise in new year-over-year decline was primarily and creative ways that are resonating with attributable to a reduction in revenue within our clients as they confront the challenges our performance improvement solution, of their own rapidly changing and highly stemming in part from the roll-off of some competitive environment. In addition, our larger engagements and, to a lesser extent, efforts have better equipped the healthcare softness in our Studer Group business. business to compete across a wider spectrum Revenue and utilization grew sequentially in of engagement sizes and durations as we have the fourth quarter, driven by strengthening developed more flexible delivery models. demand for our services due to the ongoing financial pressures impacting the industry. HURON | 2017 ANNUAL REPORT The education segment achieved organic and global operations, driving increased revenue growth of 12 percent in 2017 over collaboration across these businesses. 2016, driven by strong performance in our technology and strategy and operations The business advisory segment grew businesses. We remain well positioned for revenues 37 percent year-over-year, driven by growth in this segment as higher education inorganic growth from our acquisitions of Pope institutions are focused on responding Woodhead and Innosight and organic growth to changes in student expectations and led primarily by the ES&A business. increased public scrutiny. Our clients face challenges to increase their ability to respond Our acquisition of Pope Woodhead, a United to cost pressures in light of increased Kingdom-based market access firm, expanded competition, changing student demographics our global presence of strategy and market and reduced funding, which are driving access offerings, which enables us to meet the disruption across the education industry. demands of the complex, global and highly regulated life sciences industry. We are investing in and empowering our people to think and act in new ways to create their own future and shape the future of the institutions we serve. Ultimately, we will help build even stronger organizations, individuals and communities that can thrive in environments of rapid change. The business advisory segment now During the first quarter of 2017, we also comprises four businesses: our enterprise acquired Innosight, a leading strategy and solutions and analytics, or ES&A, business, innovation firm that was co-founded by Clayton our legacy business advisory business, our Christensen. Innosight’s strategy and innovation strategy and innovation business and our life expertise combined with Huron’s legacy sciences business. The realignment of these operational and industry competencies position businesses was driven by the commonalities us to help our clients transform as they strive to among our client base in this segment, which strengthen their business today while creating predominantly consists of for-profit clients, growth opportunities to drive future success. often in global markets, in contrast to our healthcare and education businesses, which Our Strategic Transformation primarily serve not-for-profit and domestic I recognize that the past few years have been clients. The business advisory segment challenging for Huron and our shareholders. also aligns our largest strategy capabilities We do not accept our recent performance 2017 ANNUAL REPORT | HURON as the new normal for our business. Since In addition, over the last several years, we the sale of our legal consulting practice in have removed the historical silos that existed 2015, we have been shaping this company across our organization to better enable into a more integrated, competitive operating collaboration and improve the execution of an business, and in 2017, we took the next step organic growth strategy. In 2017, the business in this evolution. advisory segment generated approximately 21 percent of its total revenues in the healthcare We have carefully defined the plan to achieve and education industries. our vision in a new, five-year enterprise-level strategy. We believe we have the portfolio DRIVE MARGIN EXPANSION of services and collaborative, competitive We are highly focused on improving our margins spirit we need to become the premier and believe 2018 will be a baseline from which transformation partner to our clients. Our we can sustainably grow margins consistent strategy sets out to further unlock the value with our long-term financial objectives. To that we believe exists across our company, achieve these objectives, we believe we can building on our competitive advantage of further leverage the corporate platform already deep cross-practice collaboration. Our team in place and manage our cost structure, has wholeheartedly embraced our new, consistent with our strategic priorities. unified sense of purpose and our well-defined strategic roadmap as we strive to drive long- Beyond leveraging corporate SG&A, we term shareholder value through sustainable believe we can also expand our margins organic growth and increased profitability. at the segment level. We are focused on managing our portfolio of offerings, investing Strategic Priorities to in areas that generate the highest return and Drive Shareholder Value enhancing the profitability of our more mature offerings. We are continuously innovating our ACHIEVE SUSTAINABLE ORGANIC GROWTH delivery models, driving increased flexibility We are committed to returning this company and efficiency in the way we operate. to sustainable growth over the long term. DEPLOY CAPITAL STRATEGICALLY Today, we believe we have all of the In the near term, we will deploy capital to foundational pieces in our portfolio that we pay down our outstanding debt. However, need to achieve our strategy and return to our strategy remains that we will continue to long-term growth. From strategy setting enhance long-term shareholder value through to execution, we can fulfill our mission strategic investment and capital deployment. of enabling organizations to improve fundamental performance, reinvent We will continue to make investments in our their business, generate new growth business to accelerate organic growth. For platforms and lead their people through example, in 2017, our cloud-based technology transformational change. services, where we have been investing for long-term growth in recent years, performed HURON | 2017 ANNUAL REPORT well, enabling us to establish a position of Opportunity Lies Ahead strength in our cloud offerings as market I view 2017 as an important transition year demand remains strong. where we redefined our strategic direction, INVEST IN OUR PEOPLE created a unified sense of purpose and secured the commitment of our employees Our new unifying strategic foundation begins through a new vision, mission, set of values with our vision –