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Navigant Reports Second Quarter 2018 Financial Results

CHICAGO--(BUSINESS WIRE)--Aug. 2, 2018-- Navigant (NYSE: NCI) today reported financial results for the quarter ended June 30, 2018.

Second quarter 2018 highlights:

  • Combined revenues and revenues before reimbursements (RBR), which includes results from continuing and discontinued operations, were $275.7 and $252.4 million, respectively, both up 7% compared to second quarter 2017; revenues and RBR from continuing operations were $184.7 million and $165.2 million, respectively, up 4% and 3% compared to the prior year period
  • Net income (Combined) was $28.8 million, or $0.62 per share, compared to $8.8 million, or $0.18 per share, for second quarter 2017; net income from continuing operations of $6.1 million, or $0.13 per share, was up $3.5 million from the prior year period
  • Combined Adjusted Earnings per Share (EPS) of $0.49 increased $0.25 compared to second quarter 2017; Adjusted EPS from continuing operations was $0.17, up $0.09 compared to the prior year period
  • Management provides 2018 financial guidance targets from continuing operations, as well as a preliminary view of 2019 performance, both of which reflect the pending divestiture of the Disputes, Forensics and Legal Technology (DFLT) segment and the Transaction Advisory Services (TAS) practice (collectively “SaleCo”, which comprises discontinued operations) to Ankura Consulting Group, LLC (Ankura)

“Our strong second quarter operating results reflect continued robust demand for consulting services across many areas of our business,” said Julie Howard, chairman and CEO of Navigant. “In the quarter, our Energy and FSAC segments produced solid year-over-year RBR improvements which more than offset continued softness in some parts of our Healthcare segment. The quarter also benefitted from positive results in our legacy DFLT and TAS practices, which, with the pending divestiture of these businesses, have been classified as discontinued operations in our results.”

Howard continued, “With a successful first half of 2018 behind us, including some significant strategic milestones, we look forward to moving into the second half of the year and 2019 with a sharp focus on continued execution of our key strategic initiatives. These include ensuring a smooth transition of SaleCo to Ankura, executing on our target of up to $175 million of capital return to shareholders over the next 12 months, rightsizing our G&A spend to better align with our new organizational footprint and continuing pursuit of organic and inorganic growth opportunities to augment our industry expertise and technological capabilities. We expect that continued successful execution will produce strong, long-term value for shareholders as we write the next chapter for Navigant.”

 

SECOND QUARTER 2018 FINANCIAL RESULTS

       
  For the quarter ended June 30,
        Increase /
(Dollars in millions, excluding per share data)   2018   2017   (Decrease)
Combined Results (1)(2)      
Revenue $ 275.7 $ 256.8 $ 18.9
RBR $ 252.4 $ 235.2 $ 17.2
Net Income $ 28.8 $ 8.8 $ 20.0
Adjusted EBITDA $ 39.7 $ 29.2 $ 10.5
Adjusted Earnings per Share $0.49 $0.24 $0.25
Continuing Operations
Revenue $ 184.7 $ 177.7 $ 7.0
RBR $ 165.2 $ 160.1 $ 5.1
Net Income $ 6.1 $ 2.6 $ 3.5
Adjusted EBITDA (2) $ 17.6 $ 14.6 $ 3.0
Adjusted Earnings per Share (2)       $0.17         $0.08         $0.09
(1) Combined results include continuing and discontinued operations
(2) See definition and reconciliation of non-GAAP measures elsewhere in this release
 

Navigant reported second quarter 2018 Combined revenues and RBR of $275.7 million and $252.4 million, respectively, up 7% compared to the second quarter 2017, reflecting improved demand in two of the Company’s three continuing segments, as well as increased revenue from discontinued operations driven largely by higher mass-tort claims volumes. Revenues and RBR from continuing operations were $184.7 million and $165.2 million, respectively, up 4% and 3% compared to the prior year period.

Second quarter 2018 Combined Adjusted EBITDA was $39.7 million, up 36% from the prior year period as higher revenue with improved margins drove increased performance for both continuing and discontinued operations. Second quarter 2018 Adjusted EBITDA from continuing operations of $17.6 million was up 21% compared to the prior year period and includes a disproportionate share of general and administrative (G&A) costs based on discontinued operations accounting rules. When excluding bad debt, G&A costs for continuing operations as a percent of RBR was 20.5%, a 110bps improvement compared to the second quarter 2017.

Second quarter 2018 Combined net income of $28.8 million was up $20.0 million or 228% compared to second quarter 2017 driven by the operating performance discussed above, as well as lower taxes due to the impact of the Tax Cuts and Jobs Act in the current year period. Additionally, due to our held-for-sale presentation, the Company recognized a $7.9 million tax benefit in the quarter related to the recognition of goodwill tax basis on a portion of the assets that were moved to discontinued operations. GAAP EPS and Adjusted EPS (Combined) were $0.62 and $0.49, respectively, for second quarter 2018, $0.44 and $0.25 higher, respectively, than the prior year period. On a continuing operations basis, GAAP EPS and Adjusted EPS were $0.13 and $0.17, respectively, for second quarter 2018, $0.08 and $0.09 higher, respectively, than the prior year period.

CASH FLOW AND BALANCE SHEET

Second quarter 2018 net cash provided by operating activities was $53.5 million compared to $19.6 million for second quarter 2017, driven primarily by improved operating performance and lower working capital in the current year period. Days Sales Outstanding on June 30, 2018, on a Combined and continuing operations basis, was 84 days and 72 days, respectively, both a 1-day improvement compared to December 31, 2017. Free Cash Flow, which as defined excludes working capital, increased to $29.1 million for second quarter 2018 compared to $13.5 million in second quarter 2017, primarily due to improved operating performance and lower capital expenditures in the current year period.

Bank debt outstanding on June 30, 2018 was $147.0 million, up $14.1 million compared to $132.9 million outstanding on December 31, 2017. Leverage (bank debt divided by trailing twelve months Combined Adjusted EBITDA) was 1.09 times at June 30, 2018.

Navigant continued executing its share repurchase program with an additional 342 thousand shares of common stock repurchased during the second quarter 2018 at an aggregate cost of $7.5 million and an average price of $21.92 per share. As of June 30, 2018, the Company had $172.0 million remaining under its stock repurchase authorization, which was refreshed on May 10, 2018 and expires on December 31, 2020.

 

SECOND QUARTER 2018 SEGMENT RESULTS

       
For the quarter ended June 30,  
    Increase /
(Dollars in millions, numbers may not foot due to rounding) 2018   2017   (Decrease)  
RBR
Healthcare $ 91.6 $ 98.0 $ (6.4 )
Energy 36.6 31.7 4.9
Financial Services Advisory and Compliance   37.0     30.3     6.7  
Continuing Operations $ 165.2   $ 160.1   $ 5.1  
Revenues
Healthcare $ 100.3 $ 107.3 $ (7.0 )
Energy 44.2 36.5 7.7
Financial Services Advisory and Compliance   40.3     33.8     6.5  
Continuing Operations $ 184.7   $ 177.7   $ 7.0  
Segment Operating Profit
Healthcare $ 27.4 $ 28.9 $ (1.5 )
Energy 12.7 8.5 4.2
Financial Services Advisory and Compliance   13.4     11.7     1.7  
Continuing Operations $ 53.4   $ 49.1   $ 4.3  
Segment Operating Margin (% of RBR)
Healthcare 29.9 % 29.5 % 0.4 %
Energy 34.6 % 26.8 % 7.8 %
Financial Services Advisory and Compliance   36.2 %   38.5 %   -2.3 %
Continuing Operations     32.3 %     30.7 %     1.6 %
 

Healthcare segment RBR of $91.6 million decreased 7% for the second quarter 2018 compared to the same prior year period. Consistent with the last several quarters, the demand environment for certain of our consulting services remained depressed and impacted revenue performance in the quarter. Segment operating profit of $27.4 million declined $1.5 million in second quarter 2018 compared to the second quarter 2017 due to lower revenue but improved $7.0 million, or 34%, compared to the first quarter 2018 as headcount and other costs actions taken in the first quarter 2018, in both consulting and managed services, contributed to improved margin performance.

Energy segment RBR for second quarter 2018 of $36.6 million increased 15% compared to second quarter 2017 and was up 9% sequentially. Continued strong demand in the U.S. and abroad for expertise around areas such as energy efficiency programs and grid modernization helped drive the revenue improvement. Segment operating profit of $12.7 million for the quarter was up 49% compared to the second quarter 2017 due to increased revenue and lower headcount driven by 2017 cost management actions.

Financial Services Advisory and Compliance segment RBR finished at $37.0 million, up 22% compared to second quarter 2017. Continued growth across the segment was driven by increased activity in financial crime, sanctions, and operational efficiency engagements across a number of our largest clients. Segment operating profit of $13.4 million increased 15% as revenue gains were achieved on slightly lower utilization.

2018 GUIDANCE – CONTINUING OPERATIONS

Management provides 2018 guidance for continuing operations:

  • Revenues estimated to be between $740 million and $765 million
  • RBR expected to range between $660 million and $685 million
  • Adjusted EBITDA expected to range between $52 million and $59 million
  • Adjusted EPS estimated to be between $0.40 and $0.50 per share

PRELIMINARY 2019 VIEW – CONTINUING OPERATIONS

Management provides a preliminary view of targeted organic 2019 financial performance for continuing operations:

  • RBR growth estimated to be approximately 9% to 12% (compared to full-year 2018)
  • Adjusted EBITDA expected to range between $85 million and $95 million
  • Adjusted EPS growth estimated to be approximately 120% (compared to full-year 2018)

This “Preliminary 2019 View” is a view of possible 2019 performance and is provided without the benefit of knowledge of the Company’s performance during the last six months of 2018 or the completion of management’s budgeting process for 2019.

CONFERENCE CALL DETAILS

Navigant will host a conference call to discuss the Company’s second quarter 2018 results at 9 a.m. Eastern Time (8 a.m. Central Time) later this morning, Thursday, Aug. 2, 2018. The conference call may be accessed via the Navigant website (investors.navigant.com) or by dialing 888.455.9733 (630.395.0358 for international callers) and referencing pass code “NCI.” Presentation materials for the webcast, as well as a report of financial and related supplemental information will available on the Navigant website, as will an archived replay of the earnings conference call.

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.

Navigant has provided guidance regarding Adjusted EBITDA and Adjusted Earnings Per Share both of which exclude the impact of severance expense and other operating costs (benefit), as applicable. Navigant is not able to accurately forecast the excluded items at the level of precision that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.

BASIS OF PRESENTATION

Due to the pending sale of the Disputes, Forensics and Legal Technology segment and, the Transaction Advisory Services practice, formerly part of Financial Services Advisory and Compliance segment, the Company has classified these businesses (collectively referred to as “SaleCo”) as discontinued operations with the assets and liabilities being presented as held-for-sale. Prior period comparisons have been adjusted to reflect this reporting change.

DEFINITIONS

  • Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Share (EPS) Adjusted EBITDA is EBITDA – earnings before interest, taxes, depreciation, and amortization – excluding the impact of severance expense and other operating costs (benefit), as applicable. Adjusted Net Income and Adjusted Earnings per Share exclude the net income and per share net income impact of severance expense, other operating costs (benefit), the benefit recognized in the fourth quarter 2017 related to the 2017 Tax Cuts and Jobs Act, and the benefit recognized in the second quarter 2018 related to the recognition of goodwill tax basis on a portion of the assets that were moved to discontinued operations (which impacted discontinued operations only), as applicable. While other operating costs (benefit) are generally non-recurring in nature, severance expense and certain other operating costs are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these non-GAAP financial measures provide investors with enhanced comparability of Navigant’s results of operations across periods. See non-GAAP reconciliations for more details.
  • Free Cash Flow is calculated as net cash provided by (used in) operations excluding the change in asset, liabilities and allowance for doubtful accounts less cash payment for property, equipment and deferred acquisition liabilities. Free Cash Flow does not represent cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that Free Cash Flow provides investors with an indicator of cash available for on-going business operations and long-term value creation. See non-GAAP reconciliations for more details.
  • Combined results include both continuing operations and discontinued operations. Management believes this information provides investors with a better indication of year-over-year comparability to the Company’s results before the classification of SaleCo as discontinued operations. See non-GAAP reconciliations for more details.

ABOUT NAVIGANT

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

Statements included in this press release which are not historical in nature are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by words such as “anticipate,” “believe,” “may,” “could,” “intend,” “estimate,” “expect,” “plan,” “outlook,” “preliminary” 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 consummation of the divestiture transaction with Ankura Consulting Group, LLC; risk of unanticipated costs, liabilities and adverse impact on business operations arising from the Company’s provision of post-divestiture transition services and support in connection with the SaleCo transaction; the execution of the Company’s long-term growth objectives and margin improvement initiatives; risks inherent in international operations, including foreign currency fluctuations; ability to make acquisitions and divestitures; pace, timing and integration of acquisitions and separation of divestitures; operational risks associated with new or expanded service areas, including business process management services; impairments; changes in accounting standards or tax rates, laws or regulations; management of professional staff, including dependence on key personnel, recruiting, retention, attrition and the ability to successfully integrate new consultants into the Company’s practices; utilization rates; conflicts of interest; potential loss of clients or large engagements and the Company’s ability to attract new business; brand equity; competition; accurate pricing of engagements, particularly fixed fee and multi-year engagements; clients’ financial condition and their ability to make payments to the Company; risks inherent with litigation; higher risk client assignments; government contracting; professional liability; information security; the adequacy of our business, financial and information systems and technology; maintenance of effective internal controls; potential legislative and regulatory changes; continued and sufficient access to capital; compliance with covenants in our credit agreement; interest rate risk; and market and general economic and political conditions. Further information on these and other potential factors that could affect the Company’s financial results are included under the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and elsewhere in the Company’s filings with the Securities and Exchange Commission (SEC), which are available on the SEC’s website or at investors.navigant.com. In addition, with regard to the “Preliminary 2019 View” included in this press release, the Company cautions that this view of possible 2019 performance is provided without the benefit of knowledge of the Company’s performance during the last six months of 2018 or the completion of management’s budgeting process for 2019. 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 six months ended
June 30,   June 30,  
2018     2017   2018     2017  
Revenues:
Revenues before reimbursements $ 165,224 $ 160,076 $ 326,669 $ 315,784
Reimbursements   19,489     17,594     36,112     35,737  
Total revenues 184,713 177,670 362,781 351,521
Cost of services before reimbursable expenses 113,121 113,333 230,057 223,217
Reimbursable expenses   19,489     17,594     36,112     35,737  
Total cost of services 132,610 130,927 266,169 258,954
General and administrative expenses 34,912 34,663 71,991 71,035
Depreciation expense 4,943 5,530 9,940 10,815
Amortization expense 1,665 2,108 3,417 4,316
Other operating costs:
Contingent acquisition liability adjustments, net - - - 1,199
Other costs   2,295     -     3,278     107  
Operating income 8,288 4,442 7,986 5,095
Interest expense 911 783 1,739 1,431
Interest income (77 ) (80 ) (196 ) (111 )
Other (income) expense, net   (183 )   599     178     382  
Income from continuing operations before income tax expense 7,637 3,140 6,265 3,393
Income tax expense   1,509     577     1,734     243  
Net income from continuing operations 6,128 2,563 4,531 3,150
Income from discontinued operations, net of tax   22,698     6,234     36,148     16,743  
Net income $ 28,826   $ 8,797   $ 40,679   $ 19,893  
 
Basic net income per share data
Net income from continuing operations $ 0.14 $ 0.05 $ 0.10 $ 0.07
Income from discontinued operations, net of tax $ 0.50 $ 0.13 $ 0.80 $ 0.36
Net income $ 0.64 $ 0.19 $ 0.90 $ 0.42
Shares used in computing basic per share data 45,106 47,113 45,113 47,023
 
Diluted net income per share data
Net income from continuing operations $ 0.13 $ 0.05 $ 0.10 $ 0.06
Income from discontinued operations, net of tax $ 0.49 $ 0.13 $ 0.77 $ 0.34
Net income $ 0.62 $ 0.18 $ 0.87 $ 0.41
Shares used in computing diluted per share data 46,549 48,696 46,692 48,833
   
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
(Unaudited)
 
June 30, December 31,
2018   2017  
 
ASSETS
Current assets:
Cash and cash equivalents $ 11,140 $ 8,449
Accounts receivable, net and contract assets 164,741 165,838
Prepaid expenses and other current assets 19,988 21,006
Assets held for sale   366,892     361,030  
Total current assets 562,761 556,323
Non-current assets:
Property and equipment, net 68,554 71,432
Intangible assets, net 17,126 20,172
Goodwill 422,547 422,959
Other assets   7,115     9,378  
Total assets $ 1,078,103   $ 1,080,264  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,146 $ 8,404
Accrued liabilities 11,928 9,734
Accrued compensation-related costs 41,255 58,515
Income tax payable 4,158 3,199
Other current liabilities 23,170 30,550
Liabilities held for sale   69,065     86,384  
Total current liabilities 156,722 196,786
Non-current liabilities:
Deferred income tax liabilities 38,239 36,598
Other non-current liabilities 25,935 26,602
Bank debt non-current   147,005     132,944  
Total non-current liabilities   211,179     196,144  
Total liabilities   367,901     392,930  
Stockholders' equity:
Common stock 59 58
Additional paid-in capital 662,416 659,825
Treasury stock (243,213 ) (224,366 )
Retained earnings 311,825 270,995
Accumulated other comprehensive loss   (20,885 )   (19,178 )
Total stockholders' equity   710,202     687,334  
Total liabilities and stockholders' equity $ 1,078,103   $ 1,080,264  
 

Selected Data

Days sales outstanding, net (DSO) - continuing operations 72 73
Days sales outstanding, net (DSO) - Combined 84 85
     
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
For the quarter ended For the six months ended
June 30, June 30,
2018   2017 2018   2017
Cash flows from operating activities:  
Net income $ 28,826 $ 8,797 $ 40,679 $ 19,893
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation expense 6,768 7,826 13,613 15,299
Amortization expense 1,772 2,219 3,628 4,538
Share-based compensation expense 2,089 4,380 5,466 7,402
Deferred income taxes (6,601 ) 6,893 (5,633 ) 8,232
Allowance for doubtful accounts receivable 3,764 1,171 6,894 1,175
Payments of contingent acquisition liabilities in excess of initial fair value (1,062 ) (1,700 ) (1,186 ) (1,700 )
Contingent acquisition liability adjustments, net - - - 1,199
Other, net 94 826 1,225 1,477
Changes in assets and liabilities (net of acquisitions):
Accounts receivable, net and contract assets 5,423 (2,731 ) (18,192 ) (7,010 )
Prepaid expenses and other assets 3,088 (9,161 ) 2,372 (10,358 )
Accounts payable 593 (2,290 ) (1,507 ) (2,371 )
Accrued liabilities 1,886 799 4,086 1,383
Accrued compensation-related costs 9,334 7,386 (27,124 ) (41,870 )
Income taxes payable (602 ) (5,962 ) 2,324 (1,609 )
Other liabilities   (1,829 )   1,152   (7,949 )     964
Net cash provided by (used in) operating activities 53,543 19,605 18,696 (3,356 )
 
Cash flows from investing activities:
Purchases of property and equipment (1,705 ) (7,100 ) (7,455 ) (20,889 )
Other, net   (19 )   (42 )   (19 )     (158 )
Net cash used in investing activities (1,724 ) (7,142 ) (7,474 ) (21,047 )
 
Cash flows from financing activities:
Issuances of common stock 936 729 2,174 2,643
Repurchases of common stock (7,490 ) (8,993 ) (18,847 ) (13,954 )
Payments of contingent acquisition liabilities (1,090 ) (8,630 ) (1,170 ) (8,630 )
Repayments to banks (93,335 ) (95,669 ) (172,479 ) (246,469 )
Borrowings from banks 57,571 100,789 187,248 294,591
Payments of debt issuance costs - (35 ) - (1,201 )
Other, net   (3,532 )   (3,500 )   (5,048 )     (4,827 )
Net cash provided by (used in) financing activities (46,940 ) (15,309 ) (8,122 ) 22,153
 
Effect of exchange rate changes on cash and cash equivalents   (385 )   270   (409 )     515
Net increase (decrease) in cash and cash equivalents 4,494 (2,576 ) 2,691 (1,735 )
Cash and cash equivalents at beginning of the period   6,646   9,132   8,449     8,291
Cash and cash equivalents at end of the period $ 11,140 $ 6,556 $ 11,140   $ 6,556
     
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data and percentages (1))
(Unaudited)
 

Combined RBR, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share (2)

For the quarter ended For the six months ended
June 30,   June 30,  
2018     2017   2018     2017  
Combined revenue reconciliation:  
Revenue from continuing operations $ 184,713 $ 177,670 $ 362,781 $ 351,521
Revenue from discontinued operations   91,013     79,176     177,465     163,162  
Revenue (Combined) $ 275,726   $ 256,846   $ 540,246   $ 514,683  
 
Combined revenues before reimbursements (RBR) reconciliation:
RBR from continuing operations $ 165,224 $ 160,076 $ 326,669 $ 315,784
RBR from discontinued operations   87,169     75,162     169,603     155,665  
RBR (Combined) $ 252,393   $ 235,238   $ 496,272   $ 471,449  
 
Severance expense $ 374 $ 2,509 $ 2,157 $ 3,643
Income tax benefit (3)   (99 )   (989 )   (574 )   (1,409 )
Tax-effected impact of severance expense $ 275   $ 1,520   $ 1,583   $ 2,234  
 
Other operating costs - contingent acquisition liability adjustment, net $ - $ - $ - $ 1,199
Income tax benefit (3)   -     -     -     (481 )
Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net $ -   $ -   $ -   $ 718  
 
Other operating costs - other costs (4) $ 2,295 $ - $ 3,278 $ 107
Income tax benefit (3)   (625 )   -     (893 )   (43 )
Tax-effected impact of other operating costs - other costs $ 1,670   $ -   $ 2,385   $ 64  
 
Adjusted EBITDA reconciliation:
Net income from continuing operations $ 6,128 $ 2,563 $ 4,531 $ 3,150
Interest expense 911 783 1,739 1,431
Interest income (77 ) (80 ) (196 ) (111 )
Other (income) expense, net (183 ) 599 178 382
Income tax expense 1,509 577 1,734 243
Depreciation expense 4,943 5,530 9,940 10,815
Amortization expense   1,665     2,108     3,417     4,316  
EBITDA $ 14,896 $ 12,080 $ 21,343 $ 20,226
Severance expense 374 2,509 2,157 3,643
Other operating costs - contingent acquisition liability adjustment, net - - - 1,199
Other operating costs - other costs   2,295     -     3,278     107  
Adjusted EBITDA from continuing operations $ 17,565   $ 14,589   $ 26,778   $ 25,175  
Adjusted EBITDA from discontinued operations   22,171     14,587     42,868     35,460  
Adjusted EBITDA (Combined) $ 39,736   $ 29,176   $ 69,646   $ 60,635  
 
Adjusted Net Income reconciliation:
Net income from continuing operations $ 6,128 $ 2,563 $ 4,531 $ 3,150
Tax-effected impact of severance expense 275 1,520 1,583 2,234
Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net - - - 718
Tax-effected impact of other operating costs - other costs   1,670     -     2,385     64  
Adjusted Net Income from continuing operations $ 8,073   $ 4,083   $ 8,499   $ 6,166  
Adjusted Net Income from discontinued operations   14,818     7,370     28,279     18,294  
Adjusted Net Income (Combined) $ 22,891   $ 11,453   $ 36,778   $ 24,460  
Shares used in computing adjusted per diluted share data 46,549 48,696 46,692 48,833
Adjusted Earnings per Share from continuing operations $ 0.17 $ 0.08 $ 0.18 $ 0.13
Adjusted Earnings per Share (Combined) $ 0.49 $ 0.24 $ 0.79 $ 0.50
                 
  For the quarter ended   For the six months ended

Discontinued operations (5)

June 30,   June 30,  
2018     2017   2018     2017  
Severance expense from discontinued operations $ 95 $ 1,877 $ 111   $ 2,528
Income tax benefit (3)   (25 )   (741 )   (30 )   (977 )
Tax-effected impact of severance expense from discontinued operations $ 70   $ 1,136   $ 81   $ 1,551  
 
Adjusted EBITDA from discontinued operations reconciliation:
Net income from discontinued operations $ 22,698 $ 6,234 $ 36,148 $ 16,743
Interest expense 600 497 1,088 919
Interest income (1 ) - (1 ) (1 )
Other (income) expense, net 29 - 58 -
Income tax expense (3,182 ) 3,572 1,580 10,565
Depreciation expense 1,825 2,296 3,673 4,484
Amortization expense   107     111     211     222  
EBITDA $ 22,076 $ 12,710 $ 42,757 $ 32,932
Severance expense   95     1,877     111     2,528  
Adjusted EBITDA from discontinued operations $ 22,171   $ 14,587   $ 42,868   $ 35,460  
 
Adjusted Net Income from discontinued operations reconciliation:
Net income from discontinued operations $ 22,698 $ 6,234 $ 36,148 $ 16,743
Tax-effected impact of severance expense from discontinued operations 70 1,136 81 1,551
Deferred tax benefit related to recognition of goodwill tax basis (6)   (7,950 )   -     (7,950 )   -  
Adjusted Net Income from discontinued operations $ 14,818   $ 7,370   $ 28,279   $ 18,294  
 
For the quarter ended For the six months ended

Free Cash Flow (7)

June 30,   June 30,  
2018   2017   2018   2017  
Net cash provided by (used in) operating activities $ 53,543 $ 19,605 $ 18,696 $ (3,356 )
Changes in assets and liabilities (17,893 ) 10,807 45,990 60,871
Allowance for doubtful accounts receivable (3,764 ) (1,171 ) (6,894 ) (1,175 )
Purchases of property and equipment (1,705 ) (7,100 ) (7,455 ) (20,889 )
Payments of contingent acquisition liabilities   (1,090 )   (8,630 )   (1,170 )   (8,630 )
Free Cash Flow $ 29,091   $ 13,511   $ 49,167   $ 26,821  
 

Leverage Ratio (8)

At June 30,  
2018   2017  
Adjusted EBITDA (Combined) for prior twelve-month period $ 134,847 $ 135,214
Bank debt $ 147,005 $ 184,787
Leverage Ratio 1.09 1.37
 
For the quarter ended For the six months ended

Organic Growth (9)

June 30,   June 30,  
2018   2017   Growth   2018   2017   Growth  
Revenues before reimbursements $ 165,224 $ 160,076 3.2 % $ 326,669 $ 315,784 3.4 %
Pro forma acquisition adjustment - 1,421 - 2,841
Currency impact   (1,049 )   -           (1,757 )   -        
Organic RBR $ 164,175 $ 161,497 1.7 % $ 324,912 $ 318,625 2.0 %

Footnotes
(1) Per share data may not sum due to rounding.
(2) Combined results include both continuing operations and discontinued operations. EBITDA is earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs (benefit), as applicable. Adjusted Net Income and Adjusted Earnings per Share exclude net income and per share net income impact of severance expense and other operating costs (benefit), the benefit recognized in the fourth quarter 2017 related to the 2017 Tax Cuts and Jobs Act, and the benefit recognized in the second quarter 2018 related to the recognition of goodwill tax basis on a portion of SaleCo assets that were moved to assets held for sale (which impacted discontinued operations only), as applicable. While other operating costs (benefit) are generally non-recurring in nature, severance expense and certain other operating costs are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these non-GAAP financial measures provide investors with enhanced comparability of Navigant's results of operations across periods.
(3) Effective income tax expense has been determined based on specific tax jurisdiction.
(4) In 2018, the Company incurred non-recurring legal costs relating to a shareholder proxy contest, as well as non-recurring fees and expenses relating to the SaleCo transaction.
(5) On June 23, 2018, we entered into an agreement to sell all of the operations of the former Disputes, Forensics and Legal Technology segment and the Transaction Advisory Services group within the Financial Services Advisory and Compliance segment to Ankura Consulting Group, LLC. These businesses ("SaleCo”) have been classified as discontinued operations in our results.
(6) Due to held-for-sale presentation triggered by the SaleCo transaction, the Company recognized a $7.9 million tax benefit related to the recognition of goodwill tax basis on a portion of the assets that were moved to assets held for sale.
(7) 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.
(8) Leverage ratio is calculated as bank debt at the end of the period divided by Adjusted EBITDA (Combined) 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.
(9) Organic growth represents revenues before reimbursements from continuing operations adjusted to include the impact of our acquisitions as if we owned them from the beginning of each comparable period and adjusted to exclude the impact of foreign currency exchange rate fluctuations. Management believes that organic growth reflects the growth of our existing business and is, therefore, useful in analyzing the Company's financial condition and results of operations.

Source: Navigant

Navigant Investor Relations
Kyle Bland
312.573.5624
kyle.bland@navigant.com
or
Navigant Corporate Communications
Belia Ortega
312.583.2640
belia.ortega@navigant.com

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