Press Release

Navigant Consulting, Inc. Reports Second Quarter 2010 Results

July 29, 2010 at 7:03 AM EDT

CHICAGO, Jul 29, 2010 (BUSINESS WIRE) --Navigant Consulting, Inc. (NYSE:NCI):

  • Earnings per share of $0.16 on a GAAP basis, up from $0.13 in first quarter 2010 and $0.07 in second quarter 2009. Adjusted earnings per share (excluding the net income impact from office consolidation and severance expenses) of $0.17, up from $0.14 in both first quarter 2010 and second quarter 2009.
  • Revenue before reimbursements (RBR) of $155 million, up slightly from $154 million in first quarter 2010 and down slightly from $157 million in second quarter 2009.
  • Utilization of 73%, down from 77% in first quarter 2010 while consistent with second quarter 2009. Average bill rate of $266, up from $264 in first quarter 2010 and up from $250 in second quarter 2009.
  • Strong cash flow funded sizeable second quarter growth investments; debt outstanding totaled $203 million as of June 30, 2010 compared to $197 million as of March 31, 2010.
  • Previously discussed 2010 outlook affirmed.

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 second quarter ended June 30, 2010.

"Over the course of the second quarter we made significant progress toward advancing our strategic agenda, as evidenced by the acquisition of Daylight Forensic & Advisory and the addition of senior practitioner talent in several of our key growth areas," stated William M. Goodyear, Chairman and Chief Executive Officer. "Despite the continuing challenging business environment, our second quarter financial results improved over both first quarter and last year. Additionally, strong cash flow aided by outstanding working capital management enabled us to maintain comfortable debt levels during the quarter while at the same time adding significant new capabilities to the Company."

Second Quarter 2010 Results

The Company's second quarter 2010 results are summarized as follows:

Total Company Second Quarter Financial Results (1)
Q2 2010 Q2 2009 Change Q1 2010 Change
Revenue Before Reimbursements ($000) $ 154,617 $ 157,332 -1.7 % $ 153,870 0.5 %
Total Revenue ($000) $ 172,323 $ 173,556 -0.7 % $ 173,550 -0.7 %
Adjusted EBITDA excluding office consolidation and severance expenses ($000) $ 24,407 $ 23,192 5.2 % $ 22,016 10.9 %
EBITDA ($000) $ 23,400 $ 17,627 32.8 % $ 21,180 10.5 %
Net Income ($000) $ 7,828 $ 3,385 131.3 % $ 6,447 21.4 %
Earnings Per Share $ 0.16 $ 0.07 128.6 % $ 0.13 23.1 %
Adjusted Earnings Per Share excluding the net income impact from office consolidation and severance expenses $ 0.17 $ 0.14 21.4 % $ 0.14 21.4 %
Average Billable FTEs 1,660 1,832 -9.4 % 1,679 -1.1 %
End of Period Billable FTEs 1,668 1,778 -6.2 % 1,661 0.4 %
Consultant Utilization (1,850 base) 73 % 73 % 0.0 % 77 % -5.2 %
Average Bill Rate (excluding success fees) $ 266 $ 250 6.4 % $ 264 0.8 %
DSO 79 91 -13.2 % 83 -4.8 %

(1) See the attached financial schedules for a reconciliation of EBITDA, Adjusted EBITDA and Adjusted Earnings per Share, excluding the net income impact from office consolidation and severance expenses, to the closest GAAP measure.

Navigant's second quarter 2010 RBR was $155 million, up slightly from $154 million in first quarter 2010 and down slightly from $157 million in second quarter 2009. The Company's energy, healthcare and economics practices each achieved notable year over year growth, which was partially offset by the impact of previously discussed wind downs and practitioner departures. Continued softness in the disputes environment in the second quarter also adversely impacted year over year comparisons. Companywide utilization for second quarter 2010 was 73%, down from 77% in first quarter 2010 while consistent with second quarter 2009 utilization of 73%. Average bill rate was $266 for second quarter 2010 compared to $264 for first quarter 2010 and $250 for second quarter 2009. Second quarter 2010 bill rate improvements were driven by rate increases in certain markets as well as the engagement and consulting mix for the period. Period end companywide headcount was up slightly from first quarter 2010 and is expected to continue to increase modestly over the remaining two quarters of the year.

Navigant continued its ongoing focus on cost management as reflected by the Company's second quarter results. Cost of services (before reimbursements) was $102 million for second quarter 2010, on par with second quarter 2009. General and administrative expenses were $29 million for second quarter 2010, down 13% from $34 million for the same period in 2009. Continuing improvements in operating leverage were driven by lower facility, operations, compensation and bad debt costs. Days sales outstanding also improved year over year to 79 at June 30, 2010 from 91 at June 30, 2009.

Business Segment Highlights

Second quarter 2010 financial results for the Company's four business segments are summarized as follows:

Business Segment Second Quarter Financial Results (2)
Q2 2010 Q2 2009 Change Q1 2010 Change
Business Segment Revenues ($000)
Dispute and Investigative Services $ 63,867 $ 76,758 -16.8 % $ 67,894 -5.9 %
Business Consulting Services 71,756 63,393 13.2 % 66,250 8.3 %
International Consulting 18,078 19,250 -6.1 % 20,797 -13.1 %
Economic Consulting 18,622 14,155 31.6 % 18,609 0.1 %
Total Company $ 172,323 $ 173,556 -0.7 % $ 173,550 -0.7 %
Business Segment Revenues before Reimbursements ($000)
Dispute and Investigative Services $ 59,737 $ 70,124 -14.8 % $ 63,338 -5.7 %
Business Consulting Services 63,430 57,883 9.6 % 57,399 10.5 %
International Consulting 14,484 16,067 -9.9 % 16,145 -10.3 %
Economic Consulting 16,966 13,258 28.0 % 16,988 -0.1 %
Total Company $ 154,617 $ 157,332 -1.7 % $ 153,870 0.5 %
Segment Operating Profit ($000)
Dispute and Investigative Services $ 21,585 $ 28,369 -23.9 % $ 25,408 -15.0 %
Business Consulting Services 23,148 20,332 13.9 % 19,017 21.7 %
International Consulting 3,663 4,406 -16.9 % 3,740 -2.1 %
Economic Consulting 6,273 4,888 28.3 % 6,296 -0.4 %
Total Company $ 54,669 $ 57,995 -5.7 % $ 54,461 0.4 %

(2) In first quarter 2010 the Company repositioned certain service offerings within its four reporting segments.Prior year comparative segment data has been restated to be consistent with the current presentation.A company metrics summary including data by segment is available at www.navigantconsulting.com/investor_relations.

Navigant's Dispute and Investigative Services segment reported RBR of $60 million for second quarter 2010, down 6% from first quarter 2010 and down 15% from second quarter 2009. Attrition and headcount reductions impacted the segment during the first half of 2010 and, as a result, second quarter 2010 average billable FTEs declined 16% from the year ago period. Despite continued solid credit crisis related work, large scale investigations, construction disputes and general litigation continue to be slower than anticipated. The Company's recent acquisition of Daylight Forensic & Advisory, completed on May 14, 2010, has been integrated into the firm and is exceeding original expectations.

Navigant's Business Consulting Services segment delivered a strong performance in second quarter 2010 with RBR of $63 million, up 11% from first quarter 2010 and up 10% from second quarter 2009. Utilization was 81% for second quarter 2010 compared to 75% for the year ago period, while average bill rate was $217 for second quarter 2010 compared to $210 for second quarter 2009. The segment's healthcare and energy teams represented 72% of second quarter 2010 Business Consulting Services revenues, compared to 68% for second quarter 2009. Navigant's healthcare team experienced broad based demand for its services, fueled by concerns related to the impact of healthcare reform and providers seeking to improve cost structures. Navigant's energy expertise is also being sought as renewables, energy efficiency and Smart Grid related projects continue to increase in importance to the marketplace. Additionally, the Company's restructuring and valuations teams performed very well during the period.

Navigant's International Consulting segment reported RBR of $14 million for second quarter 2010, down 10% from both first quarter 2010 and second quarter 2009. While second quarter 2010 average bill rate improved to $259 from $239 one year ago, average billable FTEs declined to 200 in second quarter 2010 from 233 in second quarter 2009. Declines in segment results for second quarter 2010 generally resulted from the impacts of a weakened European economy combined with the wind down of certain large infrastructure engagements in the construction practice.

Navigant's Economic Consulting segment achieved RBR of $17 million for second quarter 2010, matching its record first quarter 2010 and up 28% from second quarter 2009. Average bill rate was $385 for second quarter 2010, an increase of 12% from the same period in 2009. Reflecting both the acquisition of Washington, D.C. based Empiris on January 20, 2010 and recent senior level recruiting efforts within the segment, average billable FTEs grew to 119 in second quarter 2010 from 100 in second quarter 2009 and are expected to grow further as the year progresses. Recent senior hires have enabled the segment to expand their expertise in areas such as intellectual property disputes, pharmaceuticals, telecommunications and technology. Ongoing strength in structured finance related litigation matters positively affected second quarter results.

2010 Outlook

Navigant affirmed its 2010 guidance ranges as originally issued on February, 18, 2010. Revenue is estimated to be between $700 and $750 million, and adjusted earnings per share (excluding the net income impact from office consolidation and severance expenses) is estimated to range between $0.75 and $0.85.

"Our outlook continues to assume a stronger second half of the year that reflects Navigant's existing momentum in its key practice areas, traction from first half senior hire investments and building contributions from our recent acquisitions," commented Mr. Goodyear. "Although we are not immune to choppy economic conditions, we feel confident that continued improvements are attainable for the firm over the balance of 2010 and into 2011."

Second Quarter 2010 Earnings Conference Call

Mr. Goodyear will host a conference call to discuss the Company's second quarter 2010 financial results and full year 2010 outlook at 10:00 a.m. Eastern Time on Thursday, July 29, 2010. The web cast may be accessed at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.navigantconsulting.com%2Finvestor_relations&esheet=6377291&lan=en-US&anchor=www.navigantconsulting.com%2Finvestor_relations&index=2&md5=9f87f901235842211b5a75912d3a2f46. 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 http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.navigantconsulting.com&esheet=6377291&lan=en-US&anchor=www.navigantconsulting.com&index=3&md5=772391e540330a53c4c0a26e5852b94c.

Except as set forth below, statements included in this press release which are not historical in natureare forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995.Forward-looking statements may be identified by words including "plans," "goals," "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 Companycautions 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 and timing of the Company's strategy implementation of the Company's strategic business assessment; the success of the Company's organizational changes and cost reduction actions; 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 are included in the Company's filings with the SEC under the "Risk Factors" section 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 quarters ended June 30, For the six months ended June 30,
2010 2009 2010 2009
Revenues:
Revenues before reimbursements $ 154,617 $ 157,332 $ 308,487 $ 324,544
Reimbursements 17,706 16,224 37,386 31,374
Total revenues 172,323 173,556 345,873 355,918
Cost of Services:
Cost of services before reimbursable expenses 102,128 101,967 204,358 212,234
Reimbursable expenses 17,706 16,224 37,386 31,374
Total costs of services 119,834 118,191 241,744 243,608
General and administrative expenses 29,089 33,513 59,549 68,406
Depreciation expense 3,553 4,320 7,354 8,960
Amortization expense 2,962 3,392 5,758 7,012
Other operating costs:
Office consolidation - 4,612 - 5,520
Operating income 16,885 9,528 31,468 22,412
Interest expense 3,508 3,952 6,986 7,920
Interest income (311 ) (312 ) (624 ) (608 )
Other (income) expense, net (44 ) (87 ) 61 (408 )
Income before income tax expense 13,732 5,975 25,045 15,508
Income tax expense 5,904 2,590 10,770 6,690
Net income $ 7,828 $ 3,385 $ 14,275 $ 8,818
Basic net income per share $ 0.16 $ 0.07 $ 0.29 $ 0.18
Shares used in computing income per basic share 49,205 48,213 48,948 47,828
Diluted net income per share $ 0.16 $ 0.07 $ 0.28 $ 0.18
Shares used in computing income per diluted share 50,264 49,756 50,180 49,604
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
(Unaudited)
June 30, June 30, December 31,
2010 2009 2009
ASSETS
Current assets:
Cash and cash equivalents $ 3,000 $ 5,132 $ 49,144
Accounts receivable, net 162,227 187,201 163,608
Prepaid expenses and other current assets 19,243 15,617 16,374
Deferred income tax assets 13,130 19,367 19,052
Total current assets 197,600 227,317 248,178
Non-current assets:
Property and equipment, net 40,459 47,045 42,975
Intangible assets, net 29,851 33,956 30,352
Goodwill 521,859 475,777 485,101
Other assets 22,605 15,592 13,639
Total assets $ 812,374 $ 799,687 $ 820,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,640 $ 9,545 $ 8,203
Accrued liabilities 9,196 9,404 8,664
Accrued compensation-related costs 50,406 43,602 69,751
Income taxes payable - 557 -
Notes payable - 4,170 -
Term loan current 18,397 2,250 12,375
Other current liabilities 40,363 37,106 34,441
Total current liabilities 128,002 106,634 133,434
Non-current liabilities:
Deferred income taxes 40,809 30,121 37,096
Other non-current liabilities 19,461 25,022 23,923
Bank debt non-current 24,094 19,217 -
Term loan non-current 160,058 218,250 207,000
Total non-current liabilities 244,422 292,610 268,019
Total liabilities 372,424 399,244 401,453
Stockholders' equity:
Common stock 60 60 60
Additional paid-in capital 560,282 556,036 559,368
Treasury stock (209,936 ) (218,798 ) (218,798 )
Retained earnings 105,461 78,057 91,186
Accumulated other comprehensive loss (15,917 ) (14,912 ) (13,024 )
Total stockholders' equity 439,950 400,443 418,792
Total liabilities and stockholders' equity $ 812,374 $ 799,687 $ 820,245
Selected Data
Days sales outstanding, net (DSO) 79 91 78
NAVIGANT CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)
For the quarters ended For the six months ended
June 30, June 30,
2010 2009 2010 2009
Cash flows from operating activities:
Net income $ 7,828 $ 3,385 $ 14,275 $ 8,818
Adjustments to reconcile net income to net cash
provided by operating activities, net of acquisitions:
Depreciation expense 3,553 4,320 7,354 8,960
Depreciation expense- office consolidation - 387 - 995
Amortization expense 2,962 3,392 5,758 7,012
Share-based compensation expense 1,963 1,959 2,938 4,465
Accretion of interest expense 196 221 401 499
Deferred income taxes 2,495 (1,306 ) 7,814 1,472
Allowance for doubtful accounts receivable 2,354 4,356 3,938 8,110
- - - -
Changes in assets and liabilities:
Accounts receivable 10,069 1,294 (3,541 ) (21,358 )
Prepaid expenses and other assets (8,530 ) 2,196 (9,780 ) (74 )
Accounts payable 406 (1,223 ) 1,561 932
Accrued liabilities (943 ) (257 ) 1,203 (591 )
Accrued compensation-related costs 11,296 2,319 (19,120 ) (29,523 )
Income taxes payable (1,173 ) 2,723 (1,782 ) 902
Other liabilities (3,870 ) 3,611 (3,370 ) 2,147
Net cash provided by (used in) operating activities 28,606 27,377 7,649 (7,234 )
Cash flows from investing activities:
Purchases of property and equipment (2,423 ) (6,644 ) (5,479 ) (12,352 )
Acquisitions of businesses, net of cash acquired (29,870 ) - (33,870 ) (1,875 )
Payments of acquisition liabilities - - - (2,821 )
Other, net - (69 ) - (109 )
Net cash used in investing activities (32,293 ) (6,713 ) (39,349 ) (17,157 )
Cash flows from financing activities:
Issuances of common stock 872 645 1,533 2,317
Payments of notes payable - - - (355 )
Borrowings from banks, net of repayments 5,734 (22,689 ) 25,049 6,113
Payments of term loan (460 ) (563 ) (40,920 ) (1,125 )
Other, net 271 (108 ) (119 ) (814 )
Net cash (used in) provided by financing activities 6,417 (22,715 ) (14,457 ) 6,136
Effect of exchange rate changes on cash (91 ) 440 13 253
Net decrease in cash and cash equivalents 2,639 (1,611 ) (46,144 ) (18,002 )
Cash and cash equivalents at beginning of the period 361 6,743 49,144 23,134
Cash and cash equivalents at end of the period $ 3,000 $ 5,132 $ 3,000 $ 5,132
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)

Non-GAAP Financial Information

This press release includes certain non-GAAP financial information as defined by Securities and Exchange Commission Regulation G. Pursuant to the requirements of this regulation, reconciliations of this non-GAAP financial information to the Company's financial statements as prepared under generally accepted accounting principles (GAAP) are included in this press release. During 2009, the Company incurred significant severance expense as staffing levels were adjusted to market demand and Navigant executed its strategic refresh initiative involving the redeployment of certain resources. The Company also continues to be impacted by office consolidation expense due to its real estate initiatives including the impact of closing certain offices and changes in market conditions associated with expected sublease proceeds. Adjusted EBITDA and adjusted operating income excludes the impact of severance and office consolidation expense and adjusted earnings per share excludes the net income impact of severance and office consolidation expense in all periods presented. Severance and office consolidation expense are not considered to be non-recurring, infrequent or unusual to our business, however, management believes providing investors with this information gives additional insights into Navigant's operating performance. While management believes that these non-GAAP financial measures are useful in evaluating Navigant's operations, this information should be considered as supplemental in nature and not as a substitute for or superior to, any measure prepared in accordance with GAAP.

EBITDA, Adjusted EBITDA, Adjusted operating income

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 provides 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 interest, debt service, taxes and capital expenditures. Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies. Adjusted EBITDA and adjusted operating income excludes the impact of severance and office consolidation expense as discussed above. This measure 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.

For the quarters ended June 30, For the six months ended June 30,
2010 2009 2010 2009
EBITDA reconciliation:
Operating income $ 16,885 $ 9,528 $ 31,468 $ 22,412
Depreciation 3,553 4,320 7,354 8,960
Accelerated depreciation - office consolidation - 387 - 995
Amortization 2,962 3,392 5,758 7,012
EBITDA $ 23,400 $ 17,627 $ 44,580 $ 39,379
Adjusted EBITDA and operating income to exclude office consolidation and severance expense reconciliation to operating income:
Operating income $ 16,885 $ 9,528 $ 31,468 $ 22,412
Other operating costs - office consolidation - 4,612 - 5,520
Severance expense 1,007 1,340 1,843 4,347
Adjusted operating income to exclude office consolidation and severance expense $ 17,892 $ 15,480 $ 33,311 $ 32,279
Depreciation 3,553 4,320 7,354 8,960
Amortization 2,962 3,392 5,758 7,012
Adjusted EBITDA, excluding office consolidation and severance expense $ 24,407 $ 23,192 $ 46,423 $ 48,251

Adjusted earnings per share (adjusted to exclude the net income impact from office consolidation and severance expense)

The Company discloses adjusted earnings per share to exclude the net income impact from severance and office consolidation expense as discussed above. Management believes the adjusted earnings per share information provides additional insights into Navigant's ongoing operating performance. This measure 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.
For the quarters ended June 30, For the six months ended June 30,
2010 2009 2010 2009
Office consolidation expense $ - $ 4,612 $ - $ 5,520
Tax benefit (1) - (1,860 ) - (2,226 )
Net income impact of office consolidation expense $ - $ 2,752 $ - $ 3,294
Shares used in computing income per diluted share 50,264 49,756 50,180 49,604
Diluted income per share impact of office consolidation expense $ - $ 0.06 $ - $ 0.07
Severance expense $ 1,007 $ 1,340 $ 1,843 $ 4,347
Tax benefit (1) (371 ) (497 ) (693 ) (1,667 )
Net income impact of severance expense $ 636 $ 843 $ 1,150 $ 2,680
Shares used in computing income per diluted share 50,264 49,756 50,180 49,604
Diluted income per share impact of severance expense $ 0.01 $ 0.02 $ 0.02 $ 0.05
Net income $ 7,828 $ 3,385 $ 14,275 $ 8,818
Net income impact of office consolidation expense - 2,752 - 3,294
Net income impact of severance expense 636 843 1,150 2,680
Adjusted net income, excluding the net income impact of office consolidation and severance expense $ 8,464 $ 6,980 $ 15,425 $ 14,792
Shares used in computing income per diluted share 50,264 49,756 50,180 49,604
Adjusted earnings per share, excluding the net income impact of office consolidation and severance expense $ 0.17 $ 0.14 $ 0.31 $ 0.30
(1) Effective tax benefit has been determined based on specific tax jurisdiction.

SOURCE: Navigant Consulting, Inc.

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

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