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 firstname.lastname@example.org
Navigant Reports First Quarter 2014 Financial Results
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