Navigant Reports Third Quarter 2013 Results *Revenues before reimbursements increased 6% to $186.4 million for third quarter 2013 compared to the prior year quarter. Total revenues increased 5% to $211.6 million for third quarter 2013 compared to the prior year quarter. *Net income from continuing operations for third quarter 2013 increased 21% to $13.5 million or $0.27 per share compared to the prior year quarter. Adjusted EPS for third quarter 2013 increased 9% year over year to $0.25. *Adjusted EBITDA for third quarter 2013 increased 19% to $30.8 million compared to $26.0 million for the same period in 2012. Adjusted EBITDA margin improved 200 basis points to 17% for third quarter 2013 compared to the same period in 2012. *Reduced bank debt by 29% from the year earlier level to $110 million at September 30, 2013. *Repurchased 627,011 shares of common stock in third quarter 2013 at an average price of $13.84 per share. *Updates 2013 outlook to reflect solid third quarter performance and to reflect financial results reported on a continuing operations basis. Business Wire CHICAGO -- October 29, 2013 Navigant (NYSE:NCI) today announced financial results for the third quarter ended September 30, 2013. Unless otherwise indicated, all references are to results from continuing operations which exclude the results from the previously announced July 2013 sale of the United Kingdom portion of Navigant’s financial services advisory business which are presented as discontinued operations. Amounts previously reported have been reclassified to conform to the current presentation. Navigant reported third quarter 2013 revenues before reimbursements (RBR) of $186.4 million, compared to $176.4 million for third quarter 2012, a 6% increase. The growth in third quarter RBR was driven by a 31% increase in the Healthcare segment and 17% growth in the Financial, Risk & Compliance segment that was partially offset by lower RBR in the Disputes, Investigations & Economics segment. RBR performance in the Energy segment was relatively unchanged from the prior year quarter. Total revenues for the Company were $211.6 million for third quarter 2013, compared to $202.1 million for third quarter 2012, an increase of 5%. Adjusted EBITDA of $30.8 million for third quarter 2013 rose 19% compared to $26.0 million for third quarter 2012, with an Adjusted EBITDA margin (Adjusted EBITDA as a percentage of RBR) of 17% for third quarter 2013, compared to 15% for the same period in 2012. A 9% increase in segment operating profit and a 100 basis point improvement in general and administrative expenses as a percentage of RBR contributed to the year-over-year growth in margin for the quarter. Net income from continuing operations for third quarter 2013 was $13.5 million, compared to $11.2 million in the prior year quarter, an increase of 21%. The effective income tax rate was 47% for third quarter 2013 compared to 41% for third quarter 2012, due to a change in the mix of pre-tax income from lower tax rate jurisdictions to higher rate U.S. jurisdictions as well as increased valuation allowances related to losses generated in foreign jurisdictions for which Navigant does not anticipate realizing a benefit in future periods. Earnings per share (EPS) from continuing operations were $0.27 for third quarter 2013, compared to $0.22 for third quarter 2012, a 23% increase. Adjusted EPS was $0.25 for third quarter 2013, compared to $0.23 for third quarter 2012, a 9% increase. “Results for the third quarter reflect continued gains in revenue growth and profitability,” commented Julie Howard, Chief Executive Officer. “Our focus on high-growth areas with clearly identifiable catalysts is contributing to a more optimized business portfolio and improved financial performance. In the coming quarters, we expect to further develop existing practices while exploring new areas of growth as we help our clients solve complex issues in highly regulated industries undergoing fundamental change.” Segment Financial Highlights For the quarter ended September 30, 2013 2012 Change RBR ($000) Disputes, Investigations & Economics $ 75,366 $ 82,325 -8.5 % Financial, Risk & Compliance 40,227 34,431 16.8 % Healthcare 48,088 36,701 31.0 % Energy 22,763 22,908 -0.6 % Total Company $ 186,444 $ 176,365 5.7 % Total Revenues ($000) Disputes, Investigations & Economics $ 81,144 $ 88,984 -8.8 % Financial, Risk & Compliance 48,668 44,362 9.7 % Healthcare 53,721 40,957 31.2 % Energy 28,074 27,827 0.9 % Total Company $ 211,607 $ 202,130 4.7 % Segment Operating Profit ($000) Disputes, Investigations & Economics $ 25,738 $ 29,000 -11.2 % Financial, Risk & Compliance 16,959 12,716 33.4 % Healthcare 17,967 12,315 45.9 % Energy 6,968 7,837 -11.1 % Total Company $ 67,632 $ 61,868 9.3 % Segment Operating Margin (% of RBR) Disputes, Investigations & Economics 34.2 % 35.2 % -1.0 % Financial, Risk & Compliance 42.2 % 36.9 % 5.3 % Healthcare 37.4 % 33.6 % 3.8 % Energy 30.6 % 34.2 % -3.6 % Total Company 36.3 % 35.1 % 1.2 % Healthcare RBR increased 31% for third quarter 2013 compared to the same quarter of 2012. Healthcare’s organic year-over-year RBR growth rate was 21%. Healthcare reform and transformational changes in the healthcare industry continue to drive strong demand for Navigant’s services. Third quarter 2013 Healthcare segment operating profit increased 46% compared to third quarter 2012 driven by strong growth in RBR and improved operating leverage. Financial, Risk & Compliance RBR for third quarter 2013 increased 17% compared to the prior year quarter. The strong segment performance reflected growth due to a large compliance engagement related to anti-money laundering regulatory requirements which was partially offset by an anticipated, though smaller-than-expected, decline in RBR from mortgage servicing review engagements. Third quarter 2013 Financial, Risk & Compliance segment operating profit increased 33% compared to third quarter 2012 due to strong RBR growth and strong cost management. Energy RBR for third quarter 2013 was relatively unchanged when compared to third quarter 2012. Continued strength in energy efficiency and smart meter related engagements was offset by the short-term disruption to a portion of the Energy segment due to the report issued in June 2013 by the Moreland Commission in New York State. Third quarter 2013 Energy segment operating profit performance reflects the noted short-term RBR disruption. Disputes, Investigations & Economics RBR declined 9% for third quarter 2013 compared to the same period of 2012. The decrease was primarily attributable to the sale of a portion of the Economics practice earlier this year. Other areas of the segment did not perform at the higher levels needed to offset the decline. Third quarter 2013 Disputes, Investigations & Economics segment operating profit reflects the decline in RBR. Cash Flow Free cash flow was $17.3 million for third quarter 2013, consistent with third quarter 2012. The Company used $18.8 million of cash to pay down debt during third quarter 2013. Debt levels at September 30, 2013 were 29% lower than year earlier levels, reflecting continued strong operating cash flow. Leverage (debt divided by trailing twelve month Adjusted EBITDA) improved to 0.86 at September 30, 2013 compared to 1.55 at September 30, 2012. As of September 30, 2013, the Company had approximately $265 million in additional borrowing capacity under its credit facility. In September 2013, the maturity date of the credit facility was extended through September 2018. Navigant repurchased 627,011 shares of common stock during third quarter 2013, at an aggregate cost of $8.7 million and average cost of $13.84 per share. As of September 30, 2013, there was $56 million remaining on the Company’s share repurchase authorization. Lucinda (Cindy) Baier, Executive Vice President and Chief Financial Officer, commented, “We continue to focus on effective capital allocation which includes investment in growth, debt reduction and returning capital to our shareholders through our share repurchase program. Our free cash flows resulting from the growth of our overall business have provided us with the necessary resources to pursue our strategic objectives while still maintaining a strong balance sheet.” 2013 Outlook Navigant is updating and tightening its outlook for 2013 to reflect its solid third quarter performance and to reflect financial results reported on a continuing operations basis. Full year 2013 RBR is expected to range between $735 and $745 million, which does not include $7 million of RBR from discontinued operations. Total 2013 revenues are estimated to be between $825 and $840 million. Adjusted EBITDA is anticipated to range between $115 and $120 million and Adjusted EPS is estimated to be between $1.00 and $1.05. 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. Conference Call Details Julie Howard and Cindy Baier will host a conference call to discuss the Company’s third quarter 2013 results at 10:00 a.m. Eastern Time on Tuesday, October 29, 2013. The conference call may be accessed via the Navigant website (www.navigant.com/investor_relations) or by dialing 888.593.8430 (312.470.7390 for international callers) and referencing pass code “NCI.” A replay of the web cast will be available for one year. A report of financial and related supplemental information is available at www.navigant.com/investor_relations. About Navigant Navigant (NYSE: NCI) is a specialized, global expert services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Through senior level engagement with clients, Navigant professionals combine technical expertise in Disputes and Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in the highly regulated Construction, Energy, Financial Services and Healthcare industries to support clients in addressing their most critical business needs. More information about Navigant can be found at www.navigant.com. Statements included in this press release which are not historical in nature are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “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 success of the Company’s organizational changes 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; impairment charges; management of professional staff, including dependence on key personnel, recruiting, 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; clients’ financial condition and their ability to make payments to the Company; risks inherent with litigation; higher risk client assignments; professional liability; potential legislative and regulatory changes; continued access to capital; and market and general economic conditions. Further information on these and other potential factors that could affect the Company’s financial results are included under the “Risk Factors” section and elsewhere in the Company’s filings with the Securities and Exchange Commission (SEC), which are available on the SEC’s website or at www.navigant.com/investor_relations. 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 For the nine months ended September 30, September 30, 2013 2012 2013 2012 Revenues: Revenues before $ 186,444 $ 176,365 $ 556,644 $ 532,864 reimbursements Reimbursements 25,163 25,765 74,117 66,421 Total revenues 211,607 202,130 630,761 599,285 Costs of services: Cost of services before reimbursable 122,165 117,910 367,577 354,477 expenses Reimbursable expenses 25,163 25,765 74,117 66,421 Total costs of 147,328 143,675 441,694 420,898 services General and administrative 33,914 33,100 99,036 104,534 expenses Depreciation expense 4,122 3,618 11,952 10,874 Amortization expense 1,815 1,504 5,226 4,879 Other operating costs (benefit): Contingent acquisition liability adjustments, (2,000 ) - (2,000 ) 620 net Office consolidation (150 ) - 348 - Gain on disposition of - - (1,715 ) - assets Operating income 26,578 20,233 76,220 57,480 Interest expense 1,094 1,297 3,491 4,186 Interest income (96 ) (167 ) (371 ) (586 ) Other (income) 99 95 (43 ) 56 expense, net Income from continuing operations before 25,481 19,008 73,143 53,824 income tax expense Income tax expense 11,952 7,797 32,250 22,744 Net income from 13,529 11,211 40,893 31,080 continuing operations (Loss) Income from discontinued (3,303 ) 233 (2,919 ) 1,562 operations, net of tax Net income $ 10,226 $ 11,444 $ 37,974 $ 32,642 Basic per share data Net income from $ 0.27 $ 0.22 $ 0.82 $ 0.61 continuing operations (Loss) Income from discontinued $ (0.07 ) $ - $ (0.06 ) $ 0.03 operations, net of tax Net income $ 0.21 $ 0.22 $ 0.76 $ 0.64 Shares used in computing per basic 49,573 50,863 49,970 51,002 share data Diluted per share data Net income from $ 0.27 $ 0.22 $ 0.80 $ 0.60 continuing operations (Loss) Income from discontinued $ (0.07 ) $ - $ (0.06 ) $ 0.03 operations, net of tax Net income $ 0.20 $ 0.22 $ 0.74 $ 0.63 Shares used in computing per diluted 50,762 51,460 51,048 51,647 share data NAVIGANT CONSULTING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND SELECTED DATA (In thousands, except DSO data) September 30, December 31, 2013 2012 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,519 $ 1,052 Accounts receivable, net 207,120 198,709 Prepaid expenses and other current assets 24,109 25,054 Deferred income tax assets 15,882 17,821 Total current assets 250,630 242,636 Non-current assets: Property and equipment, net 43,992 45,342 Intangible assets, net 12,383 16,123 Goodwill 614,362 619,932 Other assets 24,207 30,417 Total assets $ 945,574 $ 954,450 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,662 $ 18,042 Accrued liabilities 16,421 11,557 Accrued compensation-related costs 67,528 84,813 Income tax payable 6,473 7,129 Other current liabilities 33,567 35,754 Total current liabilities 138,651 157,295 Non-current liabilities: Deferred income tax liabilities 80,060 67,623 Other non-current liabilities 31,878 35,606 Bank debt non-current 110,006 134,183 Total non-current liabilities 221,944 237,412 Total liabilities 360,595 394,707 Stockholders' equity: Common stock 63 62 Additional paid-in capital 595,398 582,363 Treasury stock (241,003 ) (216,500 ) Retained earnings 240,516 202,542 Accumulated other comprehensive loss (9,995 ) (8,724 ) Total stockholders' equity 584,979 559,743 Total liabilities and stockholders' equity $ 945,574 $ 954,450 Selected Data Days sales outstanding, net (DSO) 81 72 NAVIGANT CONSULTING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the quarter ended For the nine months ended September 30, September 30, 2013 2012 2013 2012 Cash flows from operating activities: Net income $ 10,226 $ 11,444 $ 37,974 $ 32,642 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 4,122 3,618 11,952 10,874 Accelerated depreciation - - - 498 - office consolidation Amortization expense 1,815 1,504 5,226 4,879 Amortization expense - external use 86 - 237 - software Share-based 2,775 2,738 8,194 7,677 compensation expense Accretion of 223 165 676 439 interest expense Deferred income 777 1,571 12,750 13,055 taxes Allowance for doubtful accounts 690 1,057 1,917 4,110 receivable Contingent acquisition (2,000 ) - (2,000 ) 620 liability adjustments, net Gain on disposition - - (1,715 ) - of assets Loss on disposition of discontinued 3,675 - 3,675 - operations Changes in assets and liabilities (net of acquisitions and dispositions): Accounts receivable, (6,290 ) (4,608 ) (22,554 ) (33,742 ) net Prepaid expenses and 2,975 (1,598 ) 10,100 (6,794 ) other assets Accounts payable 2,185 2,121 (3,374 ) 2,570 Accrued liabilities 3,298 911 3,385 3,032 Accrued compensation-related 6,920 7,027 (14,508 ) (30,517 ) costs Income taxes payable 5,716 1,043 304 (1,809 ) Other liabilities (2,120 ) (1,887 ) (2,099 ) 1,405 Net cash provided by 35,073 25,106 50,638 8,441 operating activities Cash flows from investing activities: Purchases of property and (2,952 ) (3,532 ) (8,707 ) (14,511 ) equipment Acquisitions of businesses, net of (2,989 ) (2,588 ) (2,989 ) (2,588 ) cash acquired Proceeds from dispositions, net of 1,366 - 16,973 - selling costs Payments of acquisition (1,490 ) - (1,838 ) (1,106 ) liabilities Capitalized external (491 ) (390 ) (2,492 ) (1,301 ) use software Other, net - - - (300 ) Net cash (used in) provided by (6,556 ) (6,510 ) 947 (19,806 ) investing activities Cash flows from financing activities: Issuances of common 475 606 2,620 2,733 stock Repurchase of common (8,676 ) (5,407 ) (22,321 ) (12,667 ) stock Payments of contingent - - (3,287 ) (2,801 ) acquisition liabilities Repayments to banks (61,883 ) (68,976 ) (266,327 ) (209,004 ) Borrowings from 43,128 56,198 242,466 232,226 banks Payments of debt (669 ) - (669 ) - issuance costs Other, net (99 ) 69 (1,551 ) (970 ) Net cash (used in) provided by (27,724 ) (17,510 ) (49,069 ) 9,517 financing activities Effect of exchange rate changes on cash 138 153 (49 ) 118 and cash equivalents Net increase (decrease) in cash 931 1,239 2,467 (1,730 ) and cash equivalents Cash and cash equivalents at 2,588 - 1,052 2,969 beginning of the period Cash and cash equivalents at end $ 3,519 $ 1,239 $ 3,519 $ 1,239 of the period NAVIGANT CONSULTING, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (2) (In thousands, except per share data) (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 For the nine months EBITDA, adjusted For the quarter ended ended Net Income and adjusted Earnings Per September 30, September 30, Share (3) 2013 2012 2013 2012 Severance $ 459 $ 638 $ 4,265 $ 1,895 expense Income tax (165 ) (238 ) (1,388 ) (714 ) benefit (4) Net income impact of $ 294 $ 400 $ 2,877 $ 1,181 severance expense Other operating (benefit) costs - contingent $ (2,000 ) $ - $ (2,000 ) $ 620 acquisition liability adjustment Income tax expense 807 - 807 (250 ) (benefit)(4) Net income impact of other operating (benefit) costs $ (1,193 ) $ - $ (1,193 ) $ 370 - contingent acquisition liability adjustment Other operating (benefit) costs $ (150 ) $ - $ 348 $ - - office consolidation Income tax expense 60 - (141 ) - (benefit)(4) Net income impact of other operating $ (90 ) $ - $ 207 $ - (benefit) costs - office consolidation Other operating benefit - gain $ - $ - $ (1,715 ) $ - on disposition of assets Income tax - - 692 - expense (4) Net income impact of other operating $ - $ - $ (1,023 ) $ - benefit - gain on disposition of assets EBITDA reconciliation: Operating income $ 26,578 $ 20,233 $ 76,220 $ 57,480 Depreciation 4,122 3,618 11,952 10,874 expense Accelerated depreciation - - - 498 office consolidation Amortization 1,815 1,504 5,226 4,879 expense EBITDA $ 32,515 $ 25,355 $ 93,896 $ 73,233 Severance 459 638 4,265 1,895 expense Other operating (benefit) costs - contingent (2,000 ) - (2,000 ) 620 acquisition liability adjustment Other operating benefit - office (150 ) - (150 ) - consolidation Other operating benefit - gain - - (1,715 ) - on disposition of assets Adjusted EBITDA $ 30,824 $ 25,993 $ 94,296 $ 75,748 Net income from continuing $ 13,529 $ 11,211 $ 40,893 $ 31,080 operations Net income impact of 294 400 2,877 1,181 severance expense Net income impact of other operating (benefit) costs (1,193 ) - (1,193 ) 370 - contingent acquisition liability adjustment Net income impact of other operating (90 ) - 207 - (benefit) costs - office consolidation Net income impact of other operating - - (1,023 ) - benefit - gain on disposition of assets Adjusted net $ 12,540 $ 11,611 $ 41,761 $ 32,631 income Shares used in computing per 50,762 51,460 51,048 51,647 diluted share data Adjusted earnings per $ 0.25 $ 0.23 $ 0.82 $ 0.63 share For the quarter ended For the nine months ended Free Cash Flow September 30, September 30, (5) 2013 2012 2013 2012 Net cash provided by $ 35,073 $ 25,106 $ 50,638 $ 8,441 operating activities Changes in assets and (12,684 ) (3,009 ) 28,746 65,855 liabilities Allowance for doubtful (690 ) (1,057 ) (1,917 ) (4,110 ) accounts receivable Purchases of property and (2,952 ) (3,532 ) (8,707 ) (14,511 ) equipment Payments of acquisition (1,490 ) - (1,838 ) (1,106 ) liabilities Payments of contingent - - (3,287 ) (2,801 ) acquisition liabilities Free Cash Flow $ 17,257 $ 17,508 $ 63,635 $ 51,768 At Leverage Ratio September 30, (6) 2013 2012 Adjusted EBITDA for prior $ 127,277 $ 100,108 twelve-month period Bank debt $ 110,006 $ 155,538 Leverage ratio 0.86 1.55 Footnotes (1) Per share data may not sum due to rounding. (2) During the quarter ended September 30, 2013, the United Kingdom financial services advisory business was sold. The results of operations from this business are presented as discontinued operations. Prior period information has been reclassified to reflect this change. All non-GAAP financial measures are presented on a continuing operations basis unless otherwise noted. (3) EBITDA is earnings from continuing operations 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 the net income and per share net income impact of discontinued operations, 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. (4) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction. (5) 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. (6) 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. Contact: For additional information contact: Navigant Paul Longhini Investor Relations 312.583.5836 firstname.lastname@example.org
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Navigant Reports Third Quarter 2013 Results
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