Market Overview

Navigant Reports First Quarter 2017 Financial Results

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Navigant (NYSE:NCI) today announced financial results for the first
quarter ended March 31, 2017.

Financial Summary and Highlights:

  • First quarter 2017 revenues before reimbursements (RBR) of $236.2
    million increased 6%, with 4% organic growth, compared to first
    quarter 2016
  • First quarter 2017 total revenues of $257.8 million increased 5%
    compared to first quarter 2016
  • First quarter 2017 net income was $11.1 million, or $0.23 per share,
    compared to $12.6 million, or $0.26 per share, for first quarter 2016
  • First quarter 2017 adjusted earnings per share (EPS) of $0.27 was flat
    compared to first quarter 2016
  • Refinanced $400 million revolving credit facility extending maturity
    date to March 2022 under favorable terms
  • Extended share repurchase authorization through Dec. 31, 2019 with an
    approved limit of $100 million
  • Reiterated 2017 outlook

"During the quarter, Navigant continued to achieve organic growth
following a very strong 2016. As anticipated, contributions from our
segments varied specific to client and industry demands in the face of
an uncertain regulatory environment in some of our core industry
sectors," said Julie Howard, Navigant chairman and CEO. "Looking ahead,
we are focused on the consistent execution of our growth strategy. With
our diverse portfolio of service offerings and our disciplined
management approach, we remain confident in our ability to deliver on
our financial and operating goals for 2017."

Navigant reported first quarter 2017 RBR of $236.2 million, a 6%
increase (4% organic growth), compared to $223.5 million for first
quarter 2016. Total revenues increased 5% to $257.8 million for first
quarter 2017 compared to $245.3 million for first quarter 2016. Net
income for first quarter 2017 was $11.1 million, or $0.23 per share,
compared to $12.6 million, or $0.26 per share, in the prior year first
quarter. Adjusted EPS was $0.27 for first quarter 2017, flat compared to
first quarter 2016. First quarter 2017 adjusted EBITDA was $31.5
million, a 3% increase, compared to $30.6 million for the same period in
2016.

Segment Financial Summary

 

For the quarter ended

March 31,

 
    2017   2016   Change
RBR ($000)  
Healthcare $ 90,546 $ 81,667 10.9%
Energy 32,498 26,896 20.8%
Financial Services Advisory and Compliance 32,907 33,650 -2.2%
Disputes, Forensics & Legal Technology     80,260     81,262   -1.2%
Total Company   $ 236,211   $ 223,475   5.7%
Total Revenues ($000)
Healthcare $ 98,689 $ 90,102 9.5%
Energy 37,722 31,279 20.6%
Financial Services Advisory and Compliance 36,855 36,907 -0.1%
Disputes, Forensics & Legal Technology     84,571     86,999   -2.8%
Total Company   $ 257,837   $ 245,287   5.1%
Segment Operating Profit ($000)
Healthcare $ 27,613 $ 23,768 16.2%
Energy 8,879 6,714 32.2%
Financial Services Advisory and Compliance 11,614 13,506 -14.0%
Disputes, Forensics & Legal Technology     26,339     28,710   -8.3%
Total Company   $ 74,445   $ 72,698   2.4%
Segment Operating Margin (% of RBR)
Healthcare 30.5% 29.1%
Energy 27.3% 25.0%
Financial Services Advisory and Compliance 35.3% 40.1%
Disputes, Forensics & Legal Technology     32.8%     35.3%    
Total Company     31.5%     32.5%    

Healthcare segment RBR increased 11% for first quarter 2017 compared to
the respective period in 2016, mostly on an organic basis. Growth was
driven by continued demand from providers for large, strategy-led
transformation projects, in addition to demand from life sciences
companies for commercialization solutions. Segment operating profit was
up 16% in first quarter 2017 compared to the respective period of 2016.

Energy segment RBR increased 21% for first quarter 2017 on a
year-over-year basis, led by contributions from the Ecofys acquisition
announced in November 2016. Segment operating profit was up 32% in first
quarter 2017 compared to first quarter 2016.

Financial Services Advisory and Compliance segment RBR for first quarter
2017 decreased 2% compared to the prior year quarter, primarily driven
by the conclusion of some engagements and lighter-than-normal volume in
compliance and controls services for some of our core financial
institution clients. Segment operating profit was down 14% in first
quarter 2017 compared to the respective period of 2016.

Disputes, Forensics & Legal Technology first quarter 2017 segment RBR
decreased 1% year-over-year (flat on a foreign currency neutral basis),
which is relatively stable compared to prior quarter results. The
segment experienced continued demand for our global expertise in complex
industrial, infrastructure and commercial project matters, an increase
in the volume of legal technology engagements, and an increase in
performance-based fees associated with mass tort claims. Segment
operating profit was down 8% in first quarter 2017 compared to the
respective period of 2016.

Cash Flow

Net cash used in operating activities for first quarter 2017 was $23.0
million compared to $26.6 million for first quarter 2016. Free cash flow
decreased to $13.3 million for first quarter 2017 compared to $21.0
million for the same period in 2016, primarily driven by increased
capital expenditures due to the relocation of our Chicago headquarters.
Days Sales Outstanding was 86 days as of March 31, 2017, up eight days
compared to March 31, 2016.

Bank debt was $178.3 million at March 31, 2017, compared to $211.5
million at March 31, 2016 and $135.0 million at Dec. 31, 2016. Leverage
(bank debt divided by trailing twelve month adjusted EBITDA) was 1.25 at
March 31, 2017, compared to 1.72 at March 31, 2016 and 0.95 at Dec. 31,
2016. The increase in the debt leverage as of March 31, 2017 compared to
the previous quarter was driven by 2016 annual incentive compensation
payments. Also, during the quarter, Navigant entered into a new credit
agreement, refinancing its $400-million revolving credit facility and
extending the maturity date of the facility to March 2022.

Navigant repurchased 207,298 shares of common stock during first quarter
2017 at an aggregate cost of $5.0 million and an average cost of $23.93
per share. Effective May 1, 2017, our board of directors increased the
amount available under the company's stock repurchase authorization to
$100 million and extended the authorization through Dec. 31, 2019.

2017 Outlook

Navigant reiterated its 2017 financial outlook. As previously disclosed,
full year 2017 RBR is expected to range between $975 million and $1.010
billion while 2017 total revenues are estimated to be between $1.075
billion and $1.115 billion. Adjusted EBITDA for the full year 2017 is
expected to range between $145 and $156 million and adjusted EPS for the
full year 2017 is estimated to be between $1.29 and $1.36.

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as
defined by the Securities and Exchange Commission. Reconciliations of
these non-GAAP financial measures to the most directly comparable
financial measure calculated and presented in accordance with generally
accepted accounting principles (GAAP) are included in the financial
schedules attached to this press release. This information should be
considered as supplemental in nature and not as a substitute for, or
superior to, any measure of performance prepared in accordance with GAAP.

No reconciliation of Navigant's 2017 adjusted EBITDA guidance and 2017
adjusted EPS guidance, both of which exclude the impact and tax-effected
impact of severance expense and other operating costs (benefit),
respectively, is included in the financial schedules attached to this
press release. Navigant is not able to accurately forecast the excluded
items at the level of precision that would be required to be included in
the most directly comparable GAAP financial measure without unreasonable
efforts.

Conference Call Details

Navigant will host a conference call to discuss the company's first
quarter 2017 results at 10 a.m. Eastern Time (9 a.m. Central Time) on
Wednesday, May 3, 2017. The conference call may be accessed via the
Navigant website (investors.navigant.com)
or by dialing 888.455.9733 (630.395.0358 for international callers) and
referencing pass code "NCI." An archived version of the webcast will
also be available via the Navigant website. A report of financial and
related supplemental information is also available via the Navigant
website.

About Navigant

Navigant Consulting, Inc. (NYSE:NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant's professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to help
clients build, manage, and/or protect their business interests. With a
focus on markets and clients facing transformational change and
significant regulatory or legal pressures, the firm primarily serves
clients in the healthcare, energy, and financial services industries.
Across a range of advisory, consulting, outsourcing, and
technology/analytics services, Navigant's practitioners bring sharp
insight that pinpoints opportunities and delivers powerful results. More
information about Navigant can be found at navigant.com.

Statements included in this press release which are not historical in
nature are forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995.
Forward-looking
statements may generally be identified by words such as "anticipate,"
"believe," "may," "could," "intend," "estimate," "expect," "plan,"
"outlook" and similar expressions.
These statements are based
upon management's current expectations and speak only as of the date of
this press release.
The Company cautions readers that there may
be events in the future that the Company is not able to accurately
predict or control and the information contained in the forward-looking
statements is inherently uncertain and subject to a number of risks that
could cause actual results to differ materially from those contained in
or implied by the forward-looking statements including, without
limitation: the execution of the Company's long-term growth objectives
and margin improvement initiatives; risks inherent in international
operations, including foreign currency fluctuations; ability to make
acquisitions and divestitures; pace, timing and integration of
acquisitions and separation of divestitures; operational risks
associated with new or expanded service areas, including business
process management services; impairments; changes in accounting
standards or tax rates, laws or regulations; management of professional
staff, including dependence on key personnel, recruiting, retention,
attrition and the ability to successfully integrate new consultants into
the Company's practices; utilization rates; conflicts of interest;
potential loss of clients or large engagements and the Company's ability
to attract new business; brand equity; competition; accurate pricing of
engagements, particularly fixed fee and multi-year engagements; clients'
financial condition and their ability to make payments to the Company;
risks inherent with litigation; higher risk client assignments;
government contracting; professional liability; information security;
the adequacy of our business, financial and information systems and
technology; maintenance of effective internal controls; potential
legislative and regulatory changes; continued and sufficient access to
capital; compliance with covenants in our credit agreement; interest
rate risk; and market and general economic and political conditions.
Further
information on these and other potential factors that could affect the
Company's financial results are included under the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the year ended
December 31, 2016, and elsewhere in the Company's filings with the
Securities and Exchange Commission (SEC), which are available on the
SEC's website or at
investors.navigant.com.
The Company cannot guarantee any future results, levels of activity,
performance or achievement and undertakes no obligation to update any of
its forward-looking statements.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data(1))
(Unaudited)
   
For the quarter ended
March 31,
2017   2016
Revenues:
Revenues before reimbursements $ 236,211 $ 223,475
Reimbursements   21,626       21,812  
Total revenues 257,837 245,287
Cost of services:
Cost of services before reimbursable expenses 165,052 153,940
Reimbursable expenses   21,626       21,812  
Total cost of services 186,678 175,752
General and administrative expenses 41,484 39,831
Depreciation expense 7,473 6,522
Amortization expense 2,319 2,921
Other operating costs (benefit):
Contingent acquisition liability adjustments, net 1,199 -
Office consolidation, net (38 ) -
Deferred debt issuance costs write off   145       -  
Operating income 18,577 20,261
Interest expense 1,069 1,260
Interest income (31 ) (39 )
Other income, net   (217 )     (340 )
Income before income tax expense 17,756 19,380
Income tax expense   6,660       6,738  
Net income $ 11,096     $ 12,642  
 
 
Basic per share data
Net income $ 0.24 $ 0.27
Shares used in computing basic per share data 46,932 47,425
 
Diluted per share data
Net income $ 0.23 $ 0.26
Shares used in computing diluted per share data 48,969 49,031
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
   
March 31, December 31,
2017   2016
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,132 $ 8,291
Accounts receivable, net 264,874 261,755
Prepaid expenses and other current assets   30,646       29,762  
Total current assets 304,652 299,808
Non-current assets:
Property and equipment, net 85,935 82,953
Intangible assets, net 26,433 28,727
Goodwill 628,377 625,027
Other assets   19,643       18,282  
Total assets $ 1,065,040     $ 1,054,797  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,208 $ 11,871
Accrued liabilities 13,407 16,144
Accrued compensation-related costs 57,668 106,779
Income tax payable 5,967 1,564
Other current liabilities   37,679       38,616  
Total current liabilities 125,929 174,974
Non-current liabilities:
Deferred income tax liabilities 78,734 77,737
Other non-current liabilities 36,571 32,579
Bank debt non-current   178,336       135,030  
Total non-current liabilities   293,641       245,346  
Total liabilities   419,570       420,320  
Stockholders' equity:
Common stock 57 57
Additional paid-in capital 648,941 644,519
Treasury stock (186,322 ) (181,361 )
Retained earnings 207,139 196,468
Accumulated other comprehensive loss   (24,345 )     (25,206 )
Total stockholders' equity   645,470       634,477  
Total liabilities and stockholders' equity $ 1,065,040     $ 1,054,797  
 

Selected Data (unaudited)

Days sales outstanding, net (DSO) 86 81
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
   
 
For the quarter ended
March 31,
2017   2016
 
Cash flows from operating activities:
Net income $ 11,096 $ 12,642
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation expense 7,473 6,522
Amortization expense 2,319 2,921
Share-based compensation expense 3,022 2,529
Deferred income taxes 1,339 1,033
Allowance for doubtful accounts receivable 4 1,636
Contingent acquisition liability adjustments, net 1,199 -
Other, net 651 357
Changes in assets and liabilities (net of acquisitions):
Accounts receivable (4,279 ) (15,543 )
Prepaid expenses and other assets (1,197 ) (2,174 )
Accounts payable (81 ) 478
Accrued liabilities 584 267
Accrued compensation-related costs (49,256 ) (39,666 )
Income taxes payable 4,353 5,055
Other liabilities   (188 )     (2,614 )
 
Net cash used in operating activities (22,961 ) (26,557 )
 
Cash flows from investing activities:
Purchases of property and equipment (13,789 ) (4,959 )
Acquisitions of businesses, net of cash acquired - (1,995 )
Other acquisition payments - (5,500 )
Other, net   (116 )     (18 )
 
Net cash used in investing activities (13,905 ) (12,472 )
 
Cash flows from financing activities:
Issuances of common stock 1,914 2,056
Repurchases of common stock (4,961 ) (6,266 )
Repayments to banks (150,800 ) (96,392 )
Borrowings from banks 193,802 134,757
Payments of debt issuance costs (1,166 ) -
Other, net   (1,327 )     (658 )
Net cash provided by financing activities   37,462       33,497  
 
Effect of exchange rate changes on cash and cash equivalents   245       43  
Net increase (decrease) in cash and cash equivalents 841 (5,489 )
Cash and cash equivalents at beginning of the period   8,291       8,895  
Cash and cash equivalents at end of the period $ 9,132     $ 3,406  
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data and percentages)
(Unaudited)
 
This press release includes certain non-GAAP financial measures as
defined by the Securities and Exchange Commission. Below are the
reconciliations of these non-GAAP financial measures to the most
directly comparable financial measure calculated and presented in
accordance with generally accepted accounting principles (GAAP).
This information should be considered as supplemental in nature and
not as a substitute for, or superior to, any measure of performance
prepared in accordance with GAAP. Management uses these non-GAAP
financial measures in addition to GAAP financial measures to assess
the Company's operations and financial results and believes they are
useful indicators of operating performance and the Company's ability
to generate cash flows from operations that are available for
interest, debt service, taxes and capital expenditures. Investors
should recognize that these non-GAAP financial measures may not be
comparable to similarly-titled measures of other companies.

EBITDA, adjusted EBITDA, adjusted Net
Income and

adjusted Earnings Per Share (2)

 

For the quarter ended

March 31,

 
2017   2016
Severance expense $ 1,786   $ 857
Income tax benefit (3)   (656 )     (310 )
Tax-effected impact of severance expense $ 1,130     $ 547  
 
Other operating costs - contingent acquisition liability adjustment,
net
$ 1,199 $ -
Income tax benefit (3)   (481 )     -  
Tax-effected impact of other operating costs - contingent
acquisition liability adjustment, net
$ 718     $ -  
 
Other operating benefit - office consolidation, net $ (38 ) $ -
Income tax expense (3)   15       -  
Tax-effected impact of other operating benefit - office
consolidation, net
$ (23 )   $ -  
 
Other operating costs - deferred debt issuance costs write off $ 145 $ -
Income tax benefit (3)   (58 )     -  
Tax-effected impact of other operating costs - deferred debt
issuance costs write off
$ 87     $ -  
 
EBITDA reconciliation:
Net Income $ 11,096 $ 12,642
Interest expense 1,069 1,260
Interest income (31 ) (39 )
Other income, net (217 ) (340 )
Income tax expense 6,660 6,738
Depreciation expense 7,473 6,522
Amortization expense   2,319       2,921  
EBITDA $ 28,369 $ 29,704
Severance expense 1,786 857
Other operating costs - contingent acquisition liability adjustment,
net
1,199 -
Other operating benefit - office consolidation, net (38 ) -
Other operating costs - deferred debt issuance costs write off   145       -  
Adjusted EBITDA $ 31,461     $ 30,561  
 
Net income $ 11,096 $ 12,642
Tax-effected impact of severance expense 1,130 547
Tax-effected impact of other operating costs - contingent
acquisition liability adjustment, net
718 -
Tax-effected impact of other operating benefit - office
consolidation, net
(23 ) -
Tax-effected impact of other operating costs - deferred debt
issuance costs write off
  87       -  
Adjusted net income $ 13,008     $ 13,189  
Shares used in computing adjusted per diluted share data 48,969 49,031
Adjusted earnings per share $ 0.27     $ 0.27  
 
For the quarter ended

Free Cash Flow (4)

March 31,
2017   2016
Net cash used in operating activities $ (22,961 ) $ (26,557 )
Changes in assets and liabilities 50,064 54,197
Allowance for doubtful accounts receivable (4 ) (1,636 )
Purchases of property and equipment (13,789 ) (4,959 )
Payments of contingent acquisition liabilities   -       (49 )
Free Cash Flow $ 13,310     $ 20,996  
 

Leverage Ratio (5)

At March 31,
2017   2016
Adjusted EBITDA for prior twelve-month period $ 143,190 $ 123,110
Bank debt $ 178,336 $ 211,521
Leverage ratio 1.25 1.72
 
For the quarter ended

Organic Growth (6)

March 31,
2017   2016   Growth
Revenues before reimbursements $ 236,211 $ 223,475 5.7 %
Pro forma acquisition adjustment - 5,496
Currency impact   1,812       -      
Organic RBR $ 238,023 $ 228,971 4.0 %
Footnotes  
(1) Per share data may not sum due to rounding.
(2) EBITDA is earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA excludes the impact of severance
expense and other operating costs (benefit). Adjusted net income and
adjusted earnings per share exclude net income and per share net
income impact of severance expense and other operating costs
(benefit). Severance expense and other operating costs (benefit) are
not considered to be non-recurring, infrequent or unusual to our
business. Management believes that these measures provide investors
with enhanced comparability of the Company's results of operations
across periods.
(3) Effective income tax expense (benefit) has been determined based
on specific tax jurisdiction.
(4) Free cash flow is calculated as net cash provided from
operations excluding changes in assets and liabilities and allowance
for doubtful accounts receivable less cash payments for property and
equipment and deferred acquisition related payments. Free cash flow
does not represent discretionary cash available for spending as it
excludes certain contractual obligations such as debt repayment.
However, management believes that it provides investors with an
indicator of cash flows available for on-going business operations
and long term value creation.
(5) Leverage ratio is calculated as bank debt at the end of the
period divided by adjusted EBITDA for the prior twelve-month period.
Management believes that leverage ratio provides investors with an
indicator of the cash flows available to repay the Company's debt
obligations.
(6) Organic growth represents revenues before reimbursements
adjusted to include the impact of our acquisitions as if we owned
them from the beginning of each comparable period and adjusted to
exclude the impact of foreign currency exchange rate fluctuations.
Management believes that organic growth reflects the growth of our
existing business and is, therefore, useful in analyzing the
Company's financial condition and results of operations.

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