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