Press Release

Navigant Consulting, Inc. Reports Fourth Quarter and Full Year 2008 Results

February 24, 2009 at 7:02 AM EST

CHICAGO--(BUSINESS WIRE)--Feb. 24, 2009-- Navigant Consulting, Inc. (NYSE:NCI):

  • 2008 revenues increased 6% year over year to a record $811 million; fourth quarter 2008 revenues decreased 5% year over year to $194 million.
  • 2008 earnings per share increased 26% year over year to $0.83 per share; fourth quarter 2008 earnings per share increased 77% year over year to $0.23 per share.
  • 2008 EBITDA increased 17% year over year to $125 million; fourth quarter 2008 EBITDA increased 27% year over year to $33 million.
  • Debt outstanding decreased by $24 million in 2008 to $232 million (39% of capitalization).
  • Earnings per share growth targeted for 2009.

Navigant Consulting, Inc. (NYSE:NCI), a global consulting firm providing dispute, investigative, operational, risk management and financial and regulatory advisory solutions, today announced financial results for the fourth quarter and full year ended December 31, 2008.

“We are pleased with our fourth quarter and full year 2008 performance,” stated William M. Goodyear, Chairman and Chief Executive Officer. “2008 revenue and earnings were up nicely and cash flow was strong. The Company’s liquidity improved and our balance sheet strengthened in what emerged as an increasingly challenging economic environment in the second half of 2008.”

Mr. Goodyear continued, “During 2008 we had a series of important accomplishments that will serve the Company well in 2009 and beyond. We carved out ‘domain excellence’ in the exploding credit crisis litigation space. Both our Healthcare and Energy teams had record years and are positioned to benefit from the recently passed Federal stimulus packages. We successfully integrated our 2007 U.K. investments and acquired the strategically important Chicago Partners economic consulting business. Overall, these achievements helped offset softness in the parts of our business impacted by the economic slowdown.”

Fourth Quarter and Full Year 2008 Results

The Company’s fourth quarter and full year 2008 financial results are summarized as follows:

 
Total Company Fourth Quarter and Full Year 2008 Financial Results (1)
    Q4 2008   Q4 2007   % Change   2008   2007   % Change
Total Revenues ($000)   $ 194,001     $ 203,288     -4.6 %   $ 810,640     $ 767,058     5.7 %
Adjusted EBITDA ($000)   $ 32,571     $ 32,946     -1.1 %   $ 127,649     $ 118,776     7.5 %
EBITDA ($000)   $ 32,503     $ 25,683     26.6 %   $ 124,976     $ 106,939     16.9 %
Earnings Per Share   $ 0.23     $ 0.13     76.9 %   $ 0.83     $ 0.66     25.8 %
Adjusted Earnings Per Share   $ 0.24     $ 0.22     9.1 %   $ 0.89     $ 0.80     11.3 %
Average Billable FTEs   1,940     1,985     -2.3 %   1,926     1,962     -1.8 %
End of Period Billable FTEs   1,931     1,944     -0.7 %   1,931     1,944     -0.7 %
Consultant Utilization (1,850 base)   77 %   78 %   -1.3 %   79 %   77 %   2.6 %
Average Bill Rate (excluding success fees)   257     240     7.1 %   260     236     10.2 %
DSO   73     77     -5.2 %   73     77     -5.2 %

(1) See the attached financial schedules for a reconciliation of Adjusted EBITDA and Adjusted Earnings per Share to the closest GAAP measure.

Navigant’s 2008 revenues increased 6% due to overall utilization and bill rate increases as well as the May 2008 acquisition of Chicago Partners. Although these positives were partially offset by currency exchange rate impacts, full year 2008 segment operating profits increased in every segment while EBITDA, operating income and net income as a percentage of revenues all increased over 2007 levels.

While fourth quarter 2008 earnings per share increased year over year, revenues decreased modestly as a result of significant adverse currency impacts, lower reimbursements, the weakening economy and the related impact on discretionary consulting spending. Fourth quarter utilization was 77%. DSO improved by four days year over year to 73 days as of December 31, 2008. Lastly, attrition declined in the fourth quarter of 2008 to 19%, down from 22% in the fourth quarter of 2007, marking the fourth consecutive quarter of improvement.

Business Segment Highlights

Fourth quarter and full year 2008 financial results for the Company’s four business segments are summarized as follows:

 
Business Segment Fourth Quarter and Full Year 2008 Financial Results
    Q4 2008   Q4 2007   % Change   2008   2007   % Change
Business Segment Revenues ($000)                        
North American Dispute and Investigative Services   $ 78,790   $ 85,620   -8.0 %   $ 338,230   $ 324,734   4.2 %
North American Business Consulting Services   $ 84,703   $ 98,330   -13.9 %   $ 355,991   $ 379,152   -6.1 %
International Consulting Operations   $ 15,804   $ 19,338   -18.3 %   $ 79,526   $ 63,172   25.9 %
Economics Consulting Services   $ 14,704   n/a   n/a     $ 36,893   n/a   n/a  
Total Company   $ 194,001   $ 203,288   -4.6 %   $ 810,640   $ 767,058   5.7 %
Segment Operating Profit ($000) (2)                        
North American Dispute and Investigative Services   $ 30,106   $ 32,666   -7.8 %   $ 131,440   $ 126,529   3.9 %
North American Business Consulting Services   $ 31,695   $ 33,030   -4.0 %   $ 127,065   $ 123,764   2.7 %
International Consulting Operations   $ 3,562   $ 5,878   -39.4 %   $ 23,251   $ 22,160   4.9 %
Economics Consulting Services   $ 5,219   n/a   n/a     $ 14,121   n/a   n/a  
Total Company   $ 70,582   $ 71,574   -1.4 %   $ 295,877   $ 272,453   8.6 %

(2) For further detail see the Q4 2008 Metrics Datasheet posted at www.navigantconsulting.com/investor_relations.

Demand in the Company’s North American Disputes and Investigative Services segment remained active throughout 2008, driven by traditional commercial litigation, white collar defense matters, anti money laundering investigations and, increasingly, financial litigation. Fourth quarter 2008 client engagement decisions were impacted by uncertainties in the legal, economic and regulatory environment. The segment’s Construction team performed very well during the fourth quarter 2008, reflecting demand for the Company’s dispute resolution and project risk management services. The environment for these services remains attractive as owners and contractors are under increasing pressure to manage their risks in a challenging global economy. We expect that the infrastructure development and modernization plans in the new stimulus package will create business opportunities in 2009 and beyond.

Within Navigant’s North American Business Consulting Services segment, operating profit improved 3% year over year but declined 4% in the fourth quarter of 2008 from the prior year due primarily to weakening discretionary spending in the financial services industry. The firm’s Healthcare team led the segment’s performance for the year and had a strong fourth quarter. While Navigant’s Healthcare provider clients are generally facing the same capital market and economic challenges impacting other sectors, demand for skills in mergers, performance improvement and physician integrations have been driving needs for Navigant’s expertise. The Corporate Finance team had an active year and fourth quarter 2008 with its Financial Institutions Restructuring Solutions Team (FIRST) being engaged on a number of hedge fund assignments which are expected to continue into 2009 as the credit market disruption continues. Lastly, the segment’s Energy group was also a strong performer throughout the year as well as in the fourth quarter.

The Company’s International Consulting Operations segment results were impacted significantly by a steep decline in sterling exchange rates. Additionally, as the financial and credit issues facing the U.S. economy continued to expand, Navigant’s European teams servicing the financial services market faced the same pressures and opportunities as the North American teams. Looking forward to 2009, it is expected that opportunities in the public sector and global disputes market will drive performance within the segment.

Navigant’s Economics Consulting Services segment (Chicago Partners) performed very well during its eight month tenure with the firm in 2008. The group posted solid results in the fourth quarter of 2008 and continued to lead company utilization figures with a 98% average for the period. The need for Navigant’s economic consulting services has been driven by increasing demand in the structured finance space and ongoing needs for commercial antitrust work. Additionally, requests for Navigant’s services on litigation stemming from terminated mergers and acquisitions have recently been growing.

A Company metrics summary including data by segment is available at www.navigantconsulting.com/investor_relations.

Board Renews Share Repurchase Authority

Navigant Consulting’s Board of Directors authorized the repurchase of up to $100 million of common stock over the next three years in open market or private transactions. Authority to repurchase up to $300 million of common stock was granted by the Board in April of 2007 and expired December 31, 2008. Under that authority, $219 million of common stock was repurchased in fiscal year 2007.

Mr. Goodyear commented, “We believe it is prudent to have the Board’s authority in place to repurchase shares given today’s economic climate and amidst ever changing market conditions. Any decision to repurchase shares will be based on factors such as the then current market conditions, investment opportunities, our liquidity position and cash flow outlook.”

2009 Outlook

“We are well positioned as we head into the unchartered waters of 2009,” stated Mr. Goodyear. “However, our practices are not immune to the severe challenges of the global marketplace and consequently management is taking a cautious approach to 2009 until there is stabilization in the capital markets and the economy.”

The Company is also undertaking several cost control or reduction initiatives designed to protect profitability given the uncertain economy. Actions will include selective staffing reductions, holding base salaries constant and tighter control over discretionary spending. “With our cost reduction actions underway and with expected modest revenue growth, we believe we can grow earnings per share in 2009,” said Mr. Goodyear.

Fourth Quarter and Full Year 2008 Earnings Conference Call

William Goodyear will host a conference call to discuss the Company’s financial results at 10:00 a.m. Eastern Time on Tuesday, February 24, 2009. The web cast may be accessed at www.navigantconsulting.com/investor_relations. A replay of the web cast will be available for approximately 90 days.

About Navigant Consulting

Navigant Consulting, Inc. (NYSE: NCI) is a global consulting firm providing dispute, investigative, operational, risk management and financial and regulatory advisory solutions to government agencies, legal counsel and large companies facing the challenges of uncertainty, risk, distress and significant change. The Company focuses on industries undergoing substantial regulatory or structural change and on the issues driving these transformations. “Navigant” is a service mark of Navigant International, Inc.Navigant Consulting, Inc. (NCI) is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI’s use of “Navigant” is made under license from Navigant International, Inc. More information about Navigant Consulting can be found at www.navigantconsulting.com.

Except as set forth below, statements included in this press release which are not historical in nature are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words including “anticipates,” “believes,” “intends,” “estimates,” “expects” and similar expressions. These statements are based upon management’s current expectations 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 indicated in the forward-looking statements including, without limitation: the success of the Company’s organizational changes; risks inherent in international operations including foreign currency fluctuations; ability to make acquisitions; pace, timing and integration of acquisitions; 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; 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 general economic conditions. Further information on these and other potential factors that could affect the Company’s financial results is included in the Company’s filings with the SEC under the “Risk Factors” sections and elsewhere in those filings. 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 after the date of this press release.

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
   
For the quarter ended December 31, For the year ended December 31,
2008 2007 2008 2007
 
Revenues before reimbursements

$174,475

$179,693

$727,062

$681,238
Reimbursements 19,526   23,595 83,578   85,820  
Total revenues 194,001 203,288 810,640 767,058
 
Cost of services before reimbursable expenses 107,027 109,544 444,035 421,032
Reimbursable expenses 19,526   23,595 83,578   85,820  
Cost of services 126,553 133,139 527,613 506,852
General and administrative expenses 34,877 37,203 155,378 141,430
Depreciation 4,426 4,274 17,302 16,179
Amortization 3,607 4,696 16,386 17,494
Other operating costs
Separation and Severance costs - 2,663 - 7,288
Office consolidation 561 4,600 5,207 6,750
Gain on sale of property -   - -   (2,201 )
Operating income 23,977 16,713 88,754 73,266
Interest expense, net 4,451 5,741 18,964 14,771
Other income (92 ) 7 (62 ) (43 )
Income before income tax expense 19,618 10,965 69,852 58,538
Income tax expense 8,289   4,989 29,795   25,142  
Net income $11,329   $5,976 $40,057   $33,396  
 
Net income per basic share $0.24 $0.13 $0.86 $0.67
Net income per diluted share $0.23   $0.13 $0.83   $0.66  
 
Shares used in computing net income per basic share 47,084 45,810 46,601 49,511
Shares used in computing net income per diluted share 49,145 46,533 48,285 50,757
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
     
For the quarter ended December 31, 2008 For the quarter ended December 31, 2007
Adjusted   Adjustments   Reported Adjusted   Adjustments   Reported
 
Revenues before reimbursements $174,475

$174,475

$179,693 $179,693
Reimbursements 19,526         19,526   23,595         23,595  
Total revenues 194,001 - 194,001

203,288

-

203,288

 
Cost of services before reimbursable expenses 107,027 107,027 109,544 109,544
Reimbursable expenses 19,526         19,526   23,595         23,595  
Cost of services 126,553 - 126,553 133,139 - 133,139
General and administrative expenses 34,877 34,877 37,203 37,203
Depreciation 4,426 4,426 4,274 4,274
Amortization 3,607 3,607 4,696 4,696
Other operating costs
Separation and Severance costs - 2,663 2,663
Office consolidation -     561     561   -     4,600     4,600  
Operating income 24,538 (561 ) 23,977 23,976 (7,263 ) 16,713
Interest expense, net 4,451 4,451 5,741 5,741
Other income (92 )       (92 ) 7         7  
Income before income tax expense 20,179 (561 ) 19,618 18,228 (7,263 ) 10,965
Income tax expense 8,515     (226 )   8,289   7,918     (2,929 )   4,989  
Net income $11,664     ($335 )   $11,329   $10,310     ($4,334 )   $5,976  
 
Net income per diluted share (EPS) $0.24         $0.23   $0.22         $0.13  
 

 

Shares used in computing net income per diluted share

49,145 49,145 46,533 46,533
 

Percentage of revenues before reimbursements :

Cost of services before reimbursable expenses 61 % 61 % 61 % 61 %
Reimbursable expenses 11 % 11 % 13 % 13 %
General and administrative expenses 20 % 20 % 21 % 21 %
 
EBITDA (3) 19 % 19 % 18 % 14 %
Operating income 14 % 14 % 13 % 9 %
Net income 7 % 6 % 6 % 3 %
 
 

EBITDA (3) reconciliation:

EBITDA (3) $32,571 ($68 ) $32,503 $32,946 ($7,263 ) (2 ) $25,683
Depreciation 4,426 4,426 4,274 4,274
Accelerated Depreciation - Office consolidation - (493 ) 493
Amortization 3,607         3,607   4,696         4,696  
Operating income $24,538     ($561 ) (1 ) $23,977   $23,976     ($7,263 )   $16,713  
 
 
(1) During the fourth quarter of 2008, the Company recorded $0.6 million for office consolidation costs including accelerated depreciation on certain leasehold improvements associated with real estate rationalization.
 
(2)

During the fourth quarter of 2007, the Company recorded $2.7 million associated with workforce reduction initiatives and $4.6 million associated with real estate rationalization, including lease termination costs and write downs of leasehold improvements.

 
(3) EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measure of financial performance under generally accepted accounting principles (GAAP). The Company believes EBITDA is useful supplemental information for investors to evaluate financial performance. This data is also used by the Company for assessment of its operating and financial results, in addition to operating income, net income and other GAAP measures. Management believes EBITDA is a useful indicator of the Company’s financial and operating performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
     
For the twelve months ended December 31, 2008   For the twelve months ended December 31, 2007
Adjusted   Adjustments   Reported   Adjusted   Adjustments   Reported
 
Revenues before reimbursements $727,062

$727,062

$681,238 $681,238
Reimbursements 83,578         83,578   85,820         85,820  
Total revenues

810,640

810,640

767,058

767,058

 
Cost of services before reimbursable expenses 444,035 444,035 421,032 421,032
Reimbursable expenses 83,578         83,578   85,820         85,820  
Cost of services 527,613 527,613 506,852 506,852
General and administrative expenses 155,378 155,378 141,430 141,430
Depreciation 17,302 17,302 16,179 16,179
Amortization 16,386 16,386 17,494 17,494
Other operating costs
Separation and Severance costs

-

-

- 7,288 7,288
Office consolidation - 5,207 5,207 - 6,750 6,750
Gain on sale of property

-

       

-

  -     (2,201 )   (2,201 )
Operating income 93,961 (5,207 ) 88,754 85,103 (11,837 ) 73,266
Interest expense, net 18,964 18,964 14,771 14,771
Other income (62 )       (62 ) (43 )       (43 )
Income before income tax expense 75,059 (5,207 ) 69,852 70,375 (11,837 ) 58,538
Income tax expense 31,895     (2,100 )   29,795   29,916     (4,774 )   25,142  
Net income $43,164     ($3,107 )   $40,057   $40,459     ($7,063 )   $33,396  
 
Net income per diluted share (EPS) $0.89         $0.83   $0.80         $0.66  
 
Shares used in computing net income per diluted share
48,285 48,285 50,757 50,757
 

Percentage of revenues before reimbursements :

Cost of services before reimbursable expenses 61 % 61 % 62 % 62 %
Reimbursable expenses 11 % 11 % 13 % 13 %
General and administrative expenses 21 % 21 % 21 % 21 %
 
EBITDA (3) 18 % 17 % 17 % 16 %
Operating income 13 % 12 % 12 % 11 %
Net income 6 % 6 % 6 % 5 %
 
 
EBITDA (3) reconciliation:
EBITDA (3) $127,649 ($2,673 ) (1) $124,976 $118,776 ($11,837 ) (2) $106,939
Depreciation 17,302 17,302 16,179 16,179
Accelerated Depreciation - Office consolidation - (2,534 ) (1) 2,534 - -
Amortization 16,386         16,386   17,494         17,494  
Operating income $93,961     ($5,207 )   $88,754   $85,103     ($11,837 )   $73,266  
 
 
(1) During the year ended 2008, the Company recorded office consolidation costs of $5.2 million associated with real estate rationalization, including lease termination costs and accelerated depreciation on certain leasehold improvements.
 
(2) During the year ended 2007, the Company recorded $7.3 million of costs associated with workforce reduction initiatives and $6.8 million associated with real estate rationalization, including lease termination costs and write downs of leasehold improvements and recorded a gain of $2.2 million associated with the sale of property.
 
(3) EBITDA (earnings before interest, taxes, depreciation and amortization) is not a measure of financial performance under generally accepted accounting principles (GAAP). The Company believes EBITDA is useful supplemental information for investors to evaluate financial performance. This data is also used by the Company for assessment of its operating and financial results, in addition to operating income, net income and other GAAP measures. Management believes EBITDA is a useful indicator of the Company’s financial and operating performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
(Unaudited)
     
 
December 31, September 30, December 31,

Assets

2008   2008   2007
Cash and cash equivalents $ 23,134 $ 10,530 $ 11,656
Trade accounts receivable, net 170,464 197,877 189,616
Prepaid and other assets 34,949   39,549   27,287
Total current assets 228,547 247,956 228,559
 
Property and equipment, net 45,151 45,391 54,687
Goodwill and intangible assets, net 501,166 521,261 488,523
Other non-current assets, net 17,529   19,444   6,928
Total Assets $ 792,393   $ 834,052   $ 778,697
 

Liabilities and Stockholders' Equity

 
Bank debt $ 2,250 $ 2,250 $ 2,250
Other current liabilities 128,309 131,252 124,269
Long term debt 230,229 270,729 254,366
Other liabilities 65,847 59,681 55,059
Stockholders' equity 365,758 370,140 342,753

 

         

Total Liabilities and stockholders' equity

$ 792,393   $ 834,052   $ 778,697
 
 
 
Selected Data
 

 

Days sales outstanding, net (DSO) 1

73   84   77
 
1) Net of deferred revenue.
NAVIGANT CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in 000s (except per share amounts)
     
For the three months ended For the twelve months ended
December 31, December 31,

2008

2007

2008

2007

 
Cash flows from operating activities:
Net income $ 11,329 $ 5,976 $ 40,057 $ 33,396
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 4,426 4,274 17,302 16,179
Depreciation expense - office consolidation 493 - 2,534 -
Amortization expense 3,607 4,696 16,386 17,494
Stock-based compensation expense 2,207 2,032 11,839 15,410
Deferred income taxes 1,369 (3,026 ) (4,461 ) (982 )
Gain on sale of property - - - (2,201 )

Allowance for doubtful accounts receivable

3,091 1,437 20,292 9,518
Other, net 565 426 996 1,728
Changes in assets and liabilities 26,063 34,009 (13,242 ) 1,301
           
Net cash provided by operating activities 53,150     49,824   91,703     91,843  
 
Cash flows from investing activities:
Purchases of property and equipment (2,343 ) (5,432 ) (7,398 ) (24,080 )
Proceeds from sale of property - 60 - 4,088
Acquisitions of businesses (4,222 ) - (54,222 ) (65,250 )
Payments of acquisition liabilities - (53 ) (3,154 ) (4,518 )
Other, net (2 ) (1,766 ) (865 ) (3,682 )
           
Net cash used in investing activities (6,567 )   (7,191 ) (65,639 )   (93,442 )
 
Cash flows from financing activities:
Issuances of common stock 1,352 717 6,650 7,512
Repurchase of common stock/treasury stock - - - (218,429 )
Payments of notes payable (1,000 ) (1,011 ) (5,976 ) (6,978 )
Proceeds from (Payments of) term loan (563 ) (562 ) (2,250 ) 223,875
Payment of borrowings from bank, net (32,451 ) (51,281 ) (11,456 ) (4,525 )
Other, net (46 ) (223 ) (283 ) (179 )
           
Net cash provided by (used in) provided by financing activities (32,708 )   (52,360 ) (13,315 )   1,276  
 
Effect of exchange rate changes on cash (1,271 ) 234   (1,271 ) 234  
Net increase (decrease) in cash and cash equivalents 12,604 (9,493 ) 11,478 (89 )
Cash and cash equivalents at beginning of the period 10,530     21,149   11,656     11,745  
Cash and cash equivalents at end of the period $ 23,134     $ 11,656   $ 23,134     $ 11,656  

Source: Navigant Consulting, Inc.

Navigant Consulting, Inc.
Jennifer Moreno
Executive Director, Investor Relations
312.573.5634
jmoreno@navigantconsulting.com

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