Navigant Acquires Cymetrix - Analyst Blog

Navigant Consulting Inc. NCI announced the acquisition of Cymetrix Corporation, an Irvine-based revenue cycle management firm specializing in providing outsourcing services to hospital healthcare networks.

Per the agreement, Navigant paid around $75 million in cash to acquire 100% of Cymetrix's stock. Navigant said it could pay additional milestone payments of up to $25 million, based on the acquiree's post-closing performance with respect to certain specific targets.

Synergies

Cymetrix manages revenue cycles and codes medical records, and is expected to add significant depth to Navigant's subsidiary Alleviant, LLC, which presently provides physician revenue cycle outsourcing services. The new entity, Navigant Healthcare Cymetrix, is well-poised to become a leading provider of end-to-end revenue cycle management services.

The deal is synchronized with Navigant's strategic plans of incorporating data analytics, technology-enabled solutions and operations outsourcing in its business portfolio. The two companies' adjacent and complementary capabilities will enable them to provide a complete range of solutions to clients, from strategy and advisory services to execution.

With a client base of over 200 hospitals and health networks nationwide, Cymetrix will add new, recurring and more predictable revenue streams to Navigant and thus act as a catalyst for driving revenue growth. The additional clientele will create new demand for Navigant's resources, solutions and delivery capabilities.

Earnings Outlook

A fortnight ago, Navigant reported its first-quarter 2014 results, with its continuing earnings of 21 cents per share, declining about 19% year over year and missing the Zacks Consensus estimate by a penny.

Total revenue was down 5.6% year over year to $197.7 million while revenues before reimbursements (RBR) decreased 4.4% to $175.1 million. Total reported revenue, however, exceeded the Zacks Consensus Estimate of $188 million.

Taking into account the expected impact of the present acquisition, Navigant updated its 2014 guidance. The integration of Cymetrix is expected to add $37 – $41 million to RBR in 2014, taking Navigant's expected RBR to a range of $772 − $816 million. Total revenues for 2014 are anticipated to be in the range of $848 and $892 million, including about $38 – $42 million from Cymetrix.

Adjusted earnings per share for 2014 are likely to lie between $0.94 and $1.06, with a dilution of $0.07 to $0.09 per share associated with the Cymetrix buyout.

Navigant currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the Consulting industry include Huron Consulting Group Inc. HURN, CoreLogic, Inc. CLGX and NV5 Holdings, Inc. (NVEE). Each of these stocks carry a Zacks Rank #2 (Buy).