Navigant Reports First Quarter 2015 Financial Results
Financial Summary and Highlights:
-
First quarter 2015 revenues before reimbursements (RBR) increased 15%
year-over-year to
$201.2 million , and total revenues increased 13% year-over-year to$223.2 million . - First quarter 2015 RBR results included organic growth of 5% year-over-year, with contribution from all segments.
-
Net income from continuing operations was
$25.1 million or$0.51 per share; adjusted earnings per share (EPS) increased 15% year-over-year to$0.23 , and adjusted EBITDA increased 27% year-over-year to$28.4 million . -
426,800 shares of common stock repurchased in first quarter 2015 at an
average cost of
$14.33 per share. - Reiterates financial outlook for 2015.
Navigant reported first quarter 2015 RBR of
Howard further commented, “As we continue to shift our business mix to reflect a more balanced combination of consulting, business process management services and technology solutions, we anticipate there may be margin compression. Our focus for this year is to invest in our long-term strategy, while managing our bottom line performance by closely aligning resources with revenue potential.”
Segment Financial Summary |
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For the quarter ended |
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March 31, |
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2015 |
2014 |
Change |
||||||
RBR ($000) | ||||||||
Disputes, Investigations & Economics | $ | 76,593 | $ | 76,032 | 0.7% | |||
Financial, Risk & Compliance | 34,943 | 31,411 | 11.2% | |||||
Healthcare | 63,994 | 44,735 | 43.1% | |||||
Energy | 25,626 | 22,878 | 12.0% | |||||
Total Company | $ | 201,156 | $ | 175,056 | 14.9% | |||
Total Revenues ($000) | ||||||||
Disputes, Investigations & Economics | $ | 81,211 | $ | 82,084 | -1.1% | |||
Financial, Risk & Compliance | 42,300 | 37,998 | 11.3% | |||||
Healthcare | 69,329 | 50,366 | 37.7% | |||||
Energy | 30,331 | 27,300 | 11.1% | |||||
Total Company | $ | 223,171 | $ | 197,748 | 12.9% | |||
Segment Operating Profit ($000) | ||||||||
Disputes, Investigations & Economics | $ | 24,269 | $ | 24,718 | -1.8% | |||
Financial, Risk & Compliance | 15,070 | 13,468 | 11.9% | |||||
Healthcare | 18,256 | 14,029 | 30.1% | |||||
Energy | 7,922 | 6,487 | 22.1% | |||||
Total Company | $ | 65,517 | $ | 58,702 | 11.6% | |||
Segment Operating Margin (% of RBR) | ||||||||
Disputes, Investigations & Economics | 31.7% | 32.5% | ||||||
Financial, Risk & Compliance | 43.1% | 42.9% | ||||||
Healthcare | 28.5% | 31.4% | ||||||
Energy | 30.9% | 28.4% | ||||||
Total Company | 32.6% | 33.5% | ||||||
RBR for the Healthcare segment increased 43% year-over-year for first quarter 2015 with 4% organic RBR growth for the period. RBR growth was driven primarily by business process management services. Navigant’s Life Sciences practice also contributed to a strong quarter, reflecting an increase in demand from clients to support their product commercialization efforts. Segment operating profit margin was 29% versus 31% in the same period last year, mainly due to lower margins generated by business process management services. As this business matures, the Company believes that the margin contribution will improve over time.
The Financial, Risk & Compliance segment RBR for first quarter 2015 increased 11%, all on an organic basis, compared to the prior year quarter. Growth was driven primarily by the ongoing strong demand for new compliance and control engagements for major financial institutions. The growth in RBR led to a 12% increase in first quarter 2015 segment operating profit year-over-year.
The Energy segment RBR for first quarter 2015 increased 12% compared to first quarter 2014, and increased 13% on an organic basis. The growth was driven by demand from both the public and private sector, as well as increased client penetration from the segment’s key client accounts program. First quarter 2015 segment operating profit increased 22% year-over-year.
The Disputes, Investigations & Economics segment RBR for first quarter 2015 increased 1% year-over-year, nearly all on an organic basis. The increase was driven primarily by increased demand for our global construction expertise and the segment’s legal technology solutions, partially offset by a lower contribution from economic consulting engagements. Segment operating profit decreased 2% in first quarter 2015 compared to the same period of 2014.
Cash Flow
Free cash flow was
Bank debt was
Navigant repurchased 426,800 shares of common stock during first quarter
2015 at an aggregate cost of
2015 Outlook
Navigant reiterated its 2015 financial outlook. As previously disclosed,
full year 2015 RBR is expected to range between
Non-GAAP Financial Information and Key Operating Metrics
This press release includes certain non-GAAP financial measures as
defined by the
As used in this press release, organic growth represents RBR adjusted to include the impact of acquisitions as if the Company owned them from the beginning of each comparable period and adjusted to exclude the impact of foreign currency exchange rate fluctuations. Our definition of organic growth may not be comparable to similarly titled metrics at other companies. 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.
Conference Call Details
Navigant will host a conference call to discuss the Company’s first
quarter 2015 results at
About Navigant
Statements included in this press release which are not historical in
nature are forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may generally be identified by words such as “anticipate,”
“believe,” “intend,” “estimate,” “expect,” “plan,” “outlook” and similar
expressions. These statements are based upon management’s current
expectations and speak only as of the date of this press release. The
Company cautions readers that there may be events in the future that the
Company is not able to accurately predict or control and the information
contained in the forward-looking statements is inherently uncertain and
subject to a number of risks that could cause actual results to differ
materially from those contained in or implied by the forward-looking
statements including, without limitation: the success of the Company’s
organizational changes and margin improvement initiatives; risks
inherent in international operations, including foreign currency
fluctuations; ability to make acquisitions and divestitures; pace,
timing and integration of acquisitions and separation of divestitures;
operational risks associated with new or expanded service areas,
including business process management services; impairments; management
of professional staff, including dependence on key personnel,
recruiting, attrition and the ability to successfully integrate new
consultants into the Company’s practices; utilization rates; conflicts
of interest; potential loss of clients or large engagements; clients’
financial condition and their ability to make payments to the Company;
risks inherent with litigation; higher risk client assignments;
professional liability; potential legislative and regulatory changes;
continued access to capital; and market and general economic conditions.
Further information on these and other potential factors that could
affect the Company’s financial results are included under the “Risk
Factors” section and elsewhere in the Company’s filings with the
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(In thousands, except per share data (1)) |
||||||||
(Unaudited) | ||||||||
For the quarter ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Revenues: | ||||||||
Revenues before reimbursements | $ | 201,156 | $ | 175,056 | ||||
Reimbursements | 22,015 | 22,692 | ||||||
Total revenues | 223,171 | 197,748 | ||||||
Costs of services: | ||||||||
Cost of services before reimbursable expenses | 138,601 | 120,128 | ||||||
Reimbursable expenses | 22,015 | 22,692 | ||||||
Total costs of services | 160,616 | 142,820 | ||||||
General and administrative expenses | 35,665 | 33,102 | ||||||
Depreciation expense | 5,355 | 4,309 | ||||||
Amortization expense | 2,269 | 1,362 | ||||||
Other operating costs (benefit): | ||||||||
Contingent acquisition liability adjustments, net | (14,933 | ) | (1,160 | ) | ||||
Office consolidation, net | 936 | - | ||||||
Operating income | 33,263 | 17,315 | ||||||
Interest expense | 1,732 | 838 | ||||||
Interest income | (55 | ) | (89 | ) | ||||
Other (income) expense, net | (328 | ) | 82 | |||||
Income from continuing operations before income tax expense | 31,914 | 16,484 | ||||||
Income tax expense | 6,771 | 6,114 | ||||||
Net income from continuing operations | 25,143 | 10,370 | ||||||
Income from discontinued operations, net of tax | - | 509 | ||||||
Net income | $ | 25,143 | $ | 10,879 | ||||
Basic per share data | ||||||||
Net income from continuing operations | $ | 0.52 | $ | 0.21 | ||||
Income from discontinued operations, net of tax | $ | - | $ | 0.01 | ||||
Net income (1) | $ | 0.52 | $ | 0.22 | ||||
Shares used in computing basic per share data | 48,123 | 48,906 | ||||||
Diluted per share data | ||||||||
Net income from continuing operations | $ | 0.51 | $ | 0.21 | ||||
Income from discontinued operations, net of tax | $ | - | $ | 0.01 | ||||
Net income (1) | $ | 0.51 | $ | 0.22 | ||||
Shares used in computing diluted per share data | 49,413 | 50,477 | ||||||
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA | ||||||||
(In thousands, except DSO data) | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,988 | $ | 2,648 | ||||
Accounts receivable, net | 211,879 | 187,652 | ||||||
Prepaid expenses and other current assets | 34,655 | 27,142 | ||||||
Deferred income tax assets | 11,601 | 13,455 | ||||||
Total current assets | 260,123 | 230,897 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 71,785 | 60,617 | ||||||
Intangible assets, net | 31,198 | 26,502 | ||||||
Goodwill | 579,331 | 568,091 | ||||||
Other assets | 14,455 | 17,386 | ||||||
Total assets | $ | 956,892 | $ | 903,493 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 12,864 | $ | 11,735 | ||||
Accrued liabilities | 17,236 | 11,311 | ||||||
Accrued compensation-related costs | 43,203 | 83,061 | ||||||
Income tax payable | 4,047 | 1,763 | ||||||
Other current liabilities | 40,127 | 52,526 | ||||||
Total current liabilities | 117,477 | 160,396 | ||||||
Non-current liabilities: | ||||||||
Deferred income tax liabilities | 77,736 | 76,329 | ||||||
Other non-current liabilities | 18,446 | 14,387 | ||||||
Bank debt non-current | 178,734 | 109,790 | ||||||
Total non-current liabilities | 274,916 | 200,506 | ||||||
Total liabilities | 392,393 | 360,902 | ||||||
Stockholders' equity: | ||||||||
Common stock | 64 | 64 | ||||||
Additional paid-in capital | 617,985 | 611,882 | ||||||
Treasury stock | (281,725 | ) | (275,608 | ) | ||||
Retained earnings | 243,480 | 218,337 | ||||||
Accumulated other comprehensive loss | (15,305 | ) | (12,084 | ) | ||||
Total stockholders' equity | 564,499 | 542,591 | ||||||
Total liabilities and stockholders' equity | $ | 956,892 | $ | 903,493 | ||||
Selected Data |
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Days sales outstanding, net (DSO) | 80 | 69 | ||||||
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
For the quarter ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 25,143 | $ | 10,879 | ||||
Adjustments to reconcile net income to net cash | ||||||||
used in operating activities: | ||||||||
Depreciation expense | 5,355 | 4,309 | ||||||
Amortization expense | 2,269 | 1,362 | ||||||
Amortization expense - client-facing software | 253 | 64 | ||||||
Share-based compensation expense | 2,104 | 2,714 | ||||||
Accretion of interest expense | 863 | 164 | ||||||
Deferred income taxes | 3,613 | 7,243 | ||||||
Allowance for doubtful accounts receivable | 190 | 880 | ||||||
Contingent acquisition liability adjustments, net | (14,933 | ) | (1,160 | ) | ||||
Gain on disposition of discontinued operations | - | (509 | ) | |||||
Changes in assets and liabilities (net of acquisitions and dispositions): | ||||||||
Accounts receivable | (24,434 | ) | (20,350 | ) | ||||
Prepaid expenses and other assets | (2,770 | ) | (2,723 | ) | ||||
Accounts payable | 1,105 | (2,451 | ) | |||||
Accrued liabilities | 3,967 | (1,223 | ) | |||||
Accrued compensation-related costs | (39,639 | ) | (41,322 | ) | ||||
Income taxes payable | 836 | (1,076 | ) | |||||
Other liabilities | 2,124 | (4,509 | ) | |||||
Net cash used in operating activities | (33,954 | ) | (47,708 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (12,913 | ) | (6,492 | ) | ||||
Acquisitions of businesses, net of cash acquired | (21,379 | ) | (1,500 | ) | ||||
Proceeds from dispositions, net of selling costs | - | 824 | ||||||
Capitalized client-facing software | (37 | ) | (828 | ) | ||||
Net cash used in investing activities | (34,329 | ) | (7,996 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuances of common stock | 4,258 | 1,019 | ||||||
Repurchase of common stock | (6,117 | ) | (7,391 | ) | ||||
Payments of contingent acquisition liabilities | - | (107 | ) | |||||
Repayments to banks | (71,584 | ) | (68,398 | ) | ||||
Borrowings from banks | 141,394 | 132,354 | ||||||
Other, net | (211 | ) | (1,009 | ) | ||||
Net cash provided by financing activities | 67,740 | 56,468 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (117 | ) | 6 | |||||
Net increase (decrease) in cash and cash equivalents | (660 | ) | 770 | |||||
Cash and cash equivalents at beginning of the period | 2,648 | 1,968 | ||||||
Cash and cash equivalents at end of the period | $ | 1,988 | $ | 2,738 | ||||
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (2) |
(In thousands, except per share data) |
(Unaudited) |
This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Below are the reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP). This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Management uses these non-GAAP financial measures in addition to GAAP financial measures to assess the Company's operations and financial results and believes they are useful indicators of operating performance and the Company's ability to generate cash flows from operations that are available for interest, debt service, taxes and capital expenditures. Investors should recognize that these non-GAAP financial measures may not be comparable to similarly-titled measures of other companies. |
|
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EBITDA, adjusted EBITDA, adjusted Net Income and |
For the quarter ended | |||||||
adjusted Earnings Per Share (3) |
March 31, | |||||||
2015 | 2014 | |||||||
Severance expense | $ | 1,503 | $ | 505 | ||||
Income tax benefit (4) | (520 | ) | (199 | ) | ||||
Tax-effected impact of severance expense | $ | 983 | $ | 306 | ||||
Other operating benefit - contingent acquisition liability adjustment, net | $ | (14,933 | ) | $ | (1,160 | ) | ||
Income tax (benefit) expense (4)(5) | (183 | ) | 468 | |||||
Tax-effected impact of other operating benefit - contingent acquisition liability adjustment, net | $ | (15,116 | ) | $ | (692 | ) | ||
Other operating costs - office consolidation | $ | 936 | $ | - | ||||
Income tax benefit (4) | (379 | ) | - | |||||
Tax-effected impact of other operating costs - office consolidation | $ | 557 | $ | - | ||||
EBITDA reconciliation: | ||||||||
Operating income | $ | 33,263 | $ | 17,315 | ||||
Depreciation expense | 5,355 | 4,309 | ||||||
Amortization expense | 2,269 | 1,362 | ||||||
EBITDA | $ | 40,887 | $ | 22,986 | ||||
Severance expense | 1,503 | 505 | ||||||
Other operating benefit - contingent acquisition liability adjustment, net | (14,933 | ) | (1,160 | ) | ||||
Other operating costs - office consolidation | 936 | - | ||||||
Adjusted EBITDA | $ | 28,393 | $ | 22,331 | ||||
Net income from continuing operations | $ | 25,143 | $ | 10,370 | ||||
Tax-effected impact of severance expense | 983 | 306 | ||||||
Tax-effected impact of other operating benefit - contingent acquisition liability adjustment, net | (15,116 | ) | (692 | ) | ||||
Tax-effected impact of other operating costs - office consolidation | 557 | - | ||||||
Adjusted net income | $ | 11,567 | $ | 9,984 | ||||
Shares used in computing adjusted per diluted share data | 49,413 | 50,477 | ||||||
Adjusted earnings per share | $ | 0.23 | $ | 0.20 | ||||
For the quarter ended | ||||||||
Free Cash Flow (6) |
March 31, | |||||||
2015 | 2014 | |||||||
Net cash used in operating activities | $ | (33,954 | ) | $ | (47,708 | ) | ||
Changes in assets and liabilities | 58,811 | 73,654 | ||||||
Allowance for doubtful accounts receivable | (190 | ) | (880 | ) | ||||
Purchases of property and equipment | (12,913 | ) | (6,492 | ) | ||||
Payments of contingent acquisition liabilities | - | (107 | ) | |||||
Free Cash Flow | $ | 11,754 | $ | 18,467 | ||||
At | ||||||||
Leverage Ratio (7) |
March 31, | |||||||
2015 | 2014 | |||||||
Adjusted EBITDA for prior twelve-month period | $ | 122,285 | $ | 117,454 | ||||
Bank debt | $ | 178,734 | $ | 120,835 | ||||
Leverage ratio | 1.46 | 1.03 | ||||||
Footnotes |
(1) Per share data may not sum due to rounding. |
(2) All non-GAAP financial measures are presented on a continuing operations basis unless otherwise noted. |
(3) EBITDA is earnings from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs (benefit). Adjusted net income and adjusted earnings per share exclude the net income (loss) and per share net income (loss) impact of discontinued operations, severance expense and other operating costs (benefit). Severance expense and other operating costs (benefit) are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these measures provide investors with enhanced comparability of the Company's results of operations across periods. |
(4) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction. |
(5) A portion of the deferred contingent acquisition liability adjustment for the quarter ended March 31, 2015 was non-taxable in nature. |
(6) 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. |
(7) Leverage ratio is calculated as bank debt at the end of the period divided by adjusted EBITDA for the prior twelve-month period. Management believes that leverage ratio provides investors with an indicator of the cash flows available to repay the Company's debt obligations. |
Source: Navigant
Navigant
Investor Relations
Aaron Miles, 312.583.5820
aaron.miles@navigant.com