Navigant Reports First Quarter 2014 Financial Results

  Navigant Reports First Quarter 2014 Financial Results

Business Wire

CHICAGO -- April 29, 2014

Navigant (NYSE:NCI) today announced financial results for the first quarter
ended March 31, 2014.

Financial Summary and Highlights:

  *First quarter 2014 revenues before reimbursements (RBR) of $175.1 million
    and total revenues of $197.7 million.
  *Net income from continuing operations of $10.4 million or $0.21 per share;
    adjusted EPS of $0.20; adjusted EBITDA of $22.3 million.
  *Free cash flow of $18.5 million.
  *Repurchased 408,992 shares of common stock in first quarter 2014 at an
    average cost of $18.07 per share.
  *Reiterates financial outlook for 2014.

Navigant reported first quarter 2014 RBR of $175.1 million compared to $183.1
million for first quarter 2013. Total revenues for the Company were $197.7
million for first quarter 2014 compared to $209.5 million for first quarter
2013. Net income from continuing operations for first quarter 2014 was $10.4
million, or $0.21 per share, compared to $13.1 million, or $0.26 per share, in
the prior year quarter. Adjusted EPS was $0.20 for first quarter 2014 compared
to $0.26 for first quarter 2013. Adjusted EBITDA was $22.3 million for first
quarter 2014 compared to $29.0 million. Adjusted EBITDA margin (adjusted
EBITDA as a percentage of RBR) was 13% for first quarter 2014.

“Our first quarter results positioned us to deliver on our previously stated
financial objectives for the company for the 2014 full year. First quarter
2014 RBR was similar to fourth quarter 2013 RBR as we had anticipated, and our
profit margins reflected investments we made in expertise and capabilities in
both organic and external growth initiatives,” commented Julie Howard, Chief
Executive Officer. “While RBR was on target overall for the company, our
Energy segment experienced slower growth than expected. We believe the Energy
segment will regain its growth momentum with the addition of a new leader who
is focused on realigning certain offerings against demand.”

Segment Financial Summary

                                      For the quarter ended     
                                       March 31,
                                     2014         2013         Change
RBR ($000)                                                      
Disputes, Investigations & Economics   $ 76,032      $ 76,975      -1.2  %
Financial, Risk & Compliance             31,411        37,641      -16.6 %
Healthcare                               44,735        43,583      2.6   %
Energy                                 22,878     24,935    -8.2  %
Total Company                         $ 175,056   $ 183,134   -4.4  %
Total Revenues ($000)
Disputes, Investigations & Economics   $ 82,084      $ 83,458      -1.6  %
Financial, Risk & Compliance             37,998        47,329      -19.7 %
Healthcare                               50,366        49,191      2.4   %
Energy                                 27,300     29,521    -7.5  %
Total Company                         $ 197,748   $ 209,499   -5.6  %
Segment Operating Profit ($000)
Disputes, Investigations & Economics   $ 24,718      $ 25,817      -4.3  %
Financial, Risk & Compliance             13,468        14,147      -4.8  %
Healthcare                               14,029        15,804      -11.2 %
Energy                                 6,487      8,796     -26.3 %
Total Company                         $ 58,702    $ 64,564    -9.1  %
Segment Operating Margin (% of RBR)
Disputes, Investigations & Economics     32.5    %     33.5    %
Financial, Risk & Compliance             42.9    %     37.6    %
Healthcare                               31.4    %     36.3    %
Energy                                 28.4    %   35.3    %  
Total Company                          33.5    %   35.3    %  

Healthcare RBR increased 3% year-over-year for first quarter 2014, all of
which was organic. Segment operating profit was 11% lower compared to first
quarter 2013. The first quarter 2014 growth rate was impacted by two large
government engagements in the prior year period, which were completed in
fourth quarter 2013, while certain new engagements started later in the first
quarter than anticipated. In addition, severe weather in first quarter 2014
had a short-term impact on RBR and operating profit. Costs associated with
growth initiatives also impacted segment operating profit in the quarter.
Navigant expects the segment to ramp up throughout the year as the ongoing
transformation of the healthcare industry continues to drive demand for
consulting services from health systems, physician practice groups, payer
organizations, government, and life sciences companies.

Financial, Risk & Compliance RBR decreased 17% year-over-year for first
quarter 2014 reflecting a significant decrease in contribution from mortgage
servicing review engagements in the prior year period and a planned reduced
contribution from restructuring services in 2014. Regulatory compliance work
increased in the 2014 first quarter compared to first quarter 2013
particularly in anti-money laundering consulting services. A robust regulatory
environment continues to create opportunities for Navigant as the financial
services industry seeks to implement required compliance measures. Segment
operating profit declined 5% year-over-year while segment operating margin
increased to 43% in first quarter 2014.

Energy RBR for first quarter 2014 declined 8% and segment operating profit
decreased 26% compared to first quarter 2013. While overall energy demand
remained strong, segment performance reflected a slower-than-anticipated
rebound in one service line. Under new leadership since January, the Energy
segment is expected to generate solid year-over-year growth in 2014, albeit at
lower levels than previously forecast.

Disputes, Investigations & Economics RBR for first quarter 2014 was largely
comparable with the prior year period, with a modest decrease of 1%. Segment
operating profit declined 4% compared to the same period of 2013. Positive
trends in RBR from areas such as international arbitration and improving
performance in legal technology services offset lower RBR from economics
engagements.

Cash Flow

Free cash flow was $18.5 million for first quarter 2014 compared to $21.9
million for the same period in 2013. The decrease was due largely to increased
capital spending, primarily on technology infrastructure investments. DSO was
78 days as of March 31, 2014 compared to 77 days at March 31, 2013.

Bank debt was $120.8 million at March 31, 2014, a 27% reduction compared to
March 31, 2013 debt. Leverage (bank debt divided by trailing twelve month
adjusted EBITDA) improved to 1.03 at March 31, 2014 compared to 1.48 at March
31, 2013. The Company increased bank debt during first quarter 2014 reflecting
the timing of annual incentive compensation payments and a normal seasonal
increase in accounts receivable.

Navigant repurchased 408,992 shares of common stock during first quarter 2014
at an aggregate cost of $7.4 million and an average cost of $18.07 per share.
As of March 31, 2014, $92.6 million remained on the Company’s share repurchase
authorization.

Lucinda (Cindy) Baier, Executive Vice President and Chief Financial Officer,
commented, “With a strong balance sheet and healthy cash flows, we continue to
demonstrate financial discipline which provides us with the financial
flexibility to invest in our businesses to drive organic growth and pursue
external opportunities.”

2014 Outlook

Navigant reiterated its full year 2014 outlook of RBR in the range of $735 and
$775 million with 2014 total revenues estimated in the range of $810 and $850
million. Adjusted EBITDA is expected to range between $120 and $130 million
and adjusted EPS is estimated to be between $1.03 and $1.13.

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 first quarter 2014 results at 10:00 a.m. Eastern Time on Tuesday,
April 29, 2014. The conference call may be accessed via the Navigant website
(www.navigant.com/investor_relations) or by dialing 888.790.1863 (312.470.7051
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 (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 in 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
                                                     March 31,
                                                     2014         2013
Revenues:
Revenues before reimbursements                       $ 175,056     $ 183,134
Reimbursements                                        22,692     26,365  
Total revenues                                         197,748       209,499
Costs of services:
Cost of services before reimbursable expenses          120,128       123,052
Reimbursable expenses                                 22,692     26,365  
Total costs of services                                142,820       149,417
General and administrative expenses                    33,102        32,566
Depreciation expense                                   4,309         3,730
Amortization expense                                   1,362         1,698
Other operating costs (benefit):
Contingent acquisition liability adjustments, net      (1,160  )     -
Office consolidation, net                              -             208
Gain on disposition of assets                         -          (1,715  )
Operating income                                       17,315        23,595
Interest expense                                       838           1,225
Interest income                                        (89     )     (163    )
Other (income) expense, net                           82         (148    )
Income from continuing operations before income        16,484        22,681
tax expense
Income tax expense                                    6,114      9,566   
Net income from continuing operations                  10,370        13,115
Income from discontinued operations, net of tax       509        683     
Net income                                           $ 10,879    $ 13,798  
                                                                   
                                                                   
Basic per share data
Net income from continuing operations                $ 0.21        $ 0.26
Income from discontinued operations, net of tax      $ 0.01      $ 0.01    
Net income                                           $ 0.22      $ 0.27    
Shares used in computing basic per share data          48,906        50,295
                                                                   
Diluted per share data
Net income from continuing operations                $ 0.21        $ 0.26
Income from discontinued operations, net of tax      $ 0.01      $ 0.01    
Net income                                           $ 0.22      $ 0.27    
Shares used in computing diluted per share data        50,477        51,360

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
                                                         
                                             March 31,      December 31,
                                             2014          2013
                                             (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents                    $ 2,738        $ 1,968
Accounts receivable, net                       186,519        167,066
Prepaid expenses and other current assets      27,257         24,554
Deferred income tax assets                    12,799      17,314   
Total current assets                           229,313        210,902
Non-current assets:
Property and equipment, net                    44,182         44,338
Intangible assets, net                         9,402          10,778
Goodwill                                       615,358        615,343
Other assets                                  24,328      22,836   
Total assets                                 $ 922,583    $ 904,197  
                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                             $ 10,973       $ 13,415
Accrued liabilities                            10,978         12,691
Accrued compensation-related costs             37,301         78,610
Income tax payable                             -              1,137
Other current liabilities                     24,884      32,009   
Total current liabilities                      84,136         137,862
Non-current liabilities:
Deferred income tax liabilities                89,399         86,571
Other non-current liabilities                  25,115         26,016
Bank debt non-current                         120,835     56,673   
Total non-current liabilities                 235,349     169,260  
Total liabilities                             319,485     307,122  
Stockholders' equity:
Common stock                                   63             63
Additional paid-in capital                     602,106        598,724
Treasury stock                                 (255,268 )     (247,106 )
Retained earnings                              265,614        254,735
Accumulated other comprehensive loss          (9,417   )   (9,341   )
Total stockholders' equity                    603,098     597,075  
Total liabilities and stockholders' equity   $ 922,583    $ 904,197  
                                                            
Selected Data
Days sales outstanding, net (DSO)              78             65

                                                               
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                                  
                                                                  
                                                    For the quarter ended
                                                    March 31,
                                                    2014         2013
                                                                  
Cash flows from operating activities:
Net income                                          $ 10,879      $ 13,798
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation expense                                  4,309         3,730
Accelerated depreciation - office consolidation       -             208
Amortization expense                                  1,362         1,698
Amortization expense - client-facing software         64            73
Share-based compensation expense                      2,714         2,545
Accretion of interest expense                         164           219
Deferred income taxes                                 7,243         7,022
Allowance for doubtful accounts receivable            880           255
Contingent acquisition liability adjustments, net     (1,160  )     -
Gain on disposition of assets                         -             (1,715   )
Gain on disposition of discontinued operations        (509    )     -
Changes in assets and liabilities (net of
acquisitions and dispositions):
Accounts receivable                                   (20,350 )     (16,944  )
Prepaid expenses and other assets                     (2,723  )     1,397
Accounts payable                                      (2,451  )     70
Accrued liabilities                                   (1,223  )     (1,373   )
Accrued compensation-related costs                    (41,322 )     (42,072  )
Income taxes payable                                  (1,076  )     (5,544   )
Other liabilities                                    (4,509  )   4,713    
                                                                  
Net cash used in operating activities                 (47,708 )     (31,920  )
                                                                  
Cash flows from investing activities:
Purchases of property and equipment                   (6,492  )     (3,680   )
Acquisitions of businesses, net of cash acquired      (1,500  )     -
Proceeds from dispositions, net of selling costs      824           15,607
Capitalized client-facing software                   (828    )   (1,368   )
                                                                  
Net cash (used in) provided by investing              (7,996  )     10,559
activities
                                                                  
Cash flows from financing activities:
Issuances of common stock                             1,019         1,071
Repurchase of common stock                            (7,391  )     (6,194   )
Payments of contingent acquisition liabilities        (107    )     (2,000   )
Repayments to banks                                   (68,398 )     (102,680 )
Borrowings from banks                                 132,354       134,114
Other, net                                           (1,009  )   (945     )
Net cash provided by financing activities            56,468     23,366   
                                                                  
Effect of exchange rate changes on cash and cash     6          (118     )
equivalents
Net increase in cash and cash equivalents             770           1,887
Cash and cash equivalents at beginning of the        1,968      1,052    
period
Cash and cash equivalents at end of the period      $ 2,738     $ 2,939    

                  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 EBITDA, adjusted Net Income and    For the quarter ended
adjusted Earnings Per Share (3)                      March 31,
                                                     2014         2013
Severance expense                                    $ 505        $ 1,434
Income tax benefit (4)                                (199    )   (425    )
Net income impact of severance expense               $ 306       $ 1,009   
                                                                   
Other operating benefit - contingent acquisition     $ (1,160  )   $ -
liability adjustment
Income tax expense (4)                                468        -       
Net income impact of other operating benefit -       $ (692    )  $ -       
contingent acquisition liability adjustment
                                                                   
Other operating costs - office consolidation         $ -           $ 208
Income tax benefit (4)                                -          (84     )
Net income impact of other operating costs -         $ -         $ 124     
office consolidation
                                                                   
Other operating benefit - gain on disposition of     $ -           $ (1,715  )
assets
Income tax expense (4)                                -          692     
Net income impact of other operating benefit -       $ -         $ (1,023  )
gain on disposition of assets
                                                                   
EBITDA reconciliation:
Operating income                                     $ 17,315      $ 23,595
Depreciation expense                                   4,309         3,730
Accelerated depreciation - office consolidation        -             208
Amortization expense                                  1,362      1,698   
EBITDA                                               $ 22,986      $ 29,231
Severance expense                                      505           1,434
Other operating benefit - contingent acquisition       (1,160  )     -
liability adjustment
Other operating benefit - gain on disposition of      -          (1,715  )
assets
Adjusted EBITDA                                      $ 22,331    $ 28,950  
                                                                   
Net income from continuing operations                $ 10,370      $ 13,115
Net income impact of severance expense                 306           1,009
Net income impact of other operating benefit -         (692    )     -
contingent acquisition liability adjustment
Net income impact of other operating costs -           -             124
office consolidation
Net income impact of other operating benefit -        -          (1,023  )
gain on disposition of assets
Adjusted net income                                  $ 9,984     $ 13,225  
Shares used in computing diluted per share data        50,477        51,360
Adjusted earnings per share                          $ 0.20      $ 0.26    
                                                                   
                                                     For the quarter ended
Free Cash Flow (5)                                   March 31,
                                                     2014         2013
Net cash used in operating activities                $ (47,708 )   $ (31,920 )
Changes in assets and liabilities                      73,654        59,753
Allowance for doubtful accounts receivable             (880    )     (255    )
Purchases of property and equipment                    (6,492  )     (3,680  )
Payments of contingent acquisition liabilities        (107    )   (2,000  )
Free Cash Flow                                       $ 18,467    $ 21,898  
                                                                   
                                                     At
Leverage Ratio (6)                                   March 31,
                                                     2014         2013
Adjusted EBITDA for prior twelve-month period        $ 117,454     $ 111,333
Bank debt                                            $ 120,835     $ 164,656
Leverage ratio                                         1.03          1.48

Footnotes

(1) Per share data may not sum due to rounding.

(2) During the year ended December 31, 2013, the United Kingdom financial
services advisory business was sold. The results of operations from this
business are presented as discontinued operations. 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:

Navigant
Paul Longhini, 312.583.5836
Investor Relations
plonghini@navigant.com
 
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