Navigant Comments on Letter from Engine Capital LP
Navigant is disappointed Engine has chosen to express its viewpoint in this manner and disagrees with certain assertions and analysis presented in its letter. Navigant’s Board of Directors and management team are aligned in their commitment to take continuous actions to improve performance and create long-term shareholder value.
Navigant’s Board of Directors regularly reviews and rigorously evaluates the Company’s strategic direction and operating plans against its primary objective of enhancing shareholder value. As part of its ongoing responsibilities, the Board welcomes open dialogue with shareholders and values constructive input. Over the past few months, Navigant’s Chairman and CEO, lead independent director and Chair of the Company’s Audit Committee, as well as members of management, have engaged in extensive discussions with representatives of Engine and listened carefully to their ideas. Over the course of this dialogue, Engine has expressed its view that the Company has a strong business, is “well managed” and is undervalued – all points with which Navigant agrees.
In addition, consistent with its commitment to maintaining a highly qualified, independent Board, Navigant has invited Engine on multiple occasions to share its recommendations regarding potential Board nominees. Despite Navigant’s repeated invitations, Engine has yet to share its recommendations, other than its own founder, Arnaud Ajdler.
Enhanced Return of Capital and Operating Performance
Over the past several years, Navigant has taken numerous and clear actions to improve performance and create shareholder value, while maintaining its focus on the Company’s long-term strategic objectives. Those actions include:
- Return of Capital. Navigant continues to employ a balanced
capital allocation strategy which includes returning significant cash
to shareholders. In 2017, Navigant increased its level of capital
returned to shareholders, repurchasing
$43 millionin shares which represented more than half of its free cash flow generation. This is in addition to $49 millionof share repurchases completed in 2016 and 2015 combined. The Company increased its share repurchase authorization effective May 1, 2017and is currently targeting $50 millionin share repurchases in 2018.
- Operating Performance with Strong Cost Management. Notwithstanding challenging market conditions throughout 2017, Navigant has delivered top-line growth (primarily organic) in excess of the median for public company professional consulting peers over the past three-year period ending with the third quarter 2017, while also achieving margins above the industry peer group median over the same period. Additionally, the Company has worked with an external consultant in evaluating its internal processes to identify ways to leverage operating efficiencies to further lower costs. As a result, Navigant’s general and administrative costs as a percentage of revenue, are consistently below the industry peer group median for the same three-year period. Navigant is committed to continuous improvement, including the pursuit of ongoing cost management and margin expansion in 2018.
- Capital Expenditure Normalization and Working Capital Improvements. As
the Company has indicated previously, capital expenditures have been
elevated in the last few years, largely due to real estate investment
and optimization. In 2018, capital expenditures are expected to return
to historically normalized levels. In addition, Navigant has
implemented improvements to increase cash flow generation in 2018,
- Implemented enterprise resource planning billing system in 2017.
- Targeted contracting and collection actions to improve Days of Sales Outstanding (DSO), with fourth quarter 2017 DSO of 85 days as compared to 94 days at the end of the third quarter 2017. The Company expects further improvements to average DSO and working capital in 2018.
Strong Corporate Governance
Navigant has also demonstrated a commitment to strong corporate governance:
- Navigant has consistently received top governance scores as outlined by Institutional Shareholder Services (ISS).
- Eight of nine directors are independent.
- Of the Company’s current independent directors, three have been appointed to the Board since 2014, including the most recent appointment in October of 2017. Each of the new directors was selected for his/her significant technical, operating, and industry expertise in the three primary industry segments Navigant serves (Energy, Financial Services, and Healthcare).
Navigant’s focus has been, and will remain, on how best to deliver maximum value for our clients which in turn will drive long-term returns for our shareholders. The Company firmly believes in its prospects and remains committed to balancing short- and long-term decisions for the benefit of all shareholders, all within the framework of strong corporate governance.
Statements included in this press release which are not historical in
natureare 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” 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 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