Press Release

Navigant Reports Second Quarter 2012 Results

July 26, 2012 at 7:00 AM EDT
  • Second quarter 2012 revenues before reimbursements (RBR) increased 5% over the prior year to $182 million and, on a year-to-date basis, increased 7% over the prior year to $368 million, primarily driven by organic revenue growth.
  • Second quarter 2012 GAAP earnings per share (EPS) totaled $0.18, down from $0.21 in the prior year period, while second quarter 2012 adjusted EPS of $0.21 remained flat compared to the prior year.
  • First half 2012 GAAP EPS of $0.41 and adjusted EPS of $0.44 increased 8% and 10%, respectively, from first half 2011.
  • Second quarter 2012 segment operating profit increased 3% from second quarter 2011 to $62 million. First half 2012 segment operating profit increased 9% over the prior year period to $129 million.
  • 331,900 shares of common stock were repurchased during second quarter 2012 at a weighted average price of $12.74 per share.
  • Navigant affirms financial outlook for full year 2012.

CHICAGO--(BUSINESS WIRE)--Jul. 26, 2012-- Navigant (NYSE:NCI) today announced financial results for the second quarter ended June 30, 2012.

“Navigant’s solid financial results for the first half of 2012 demonstrate the ongoing benefits of our diverse portfolio of services directed at highly regulated environments,” commented Julie Howard, Chief Executive Officer. “Strong market drivers in the areas of healthcare payment reform, financial services litigation and mortgage servicing regulatory issues, coupled with a growing need for technology solutions and data analytics to support that work, fueled second quarter outcomes. During the first half of 2012 we realized growth in revenues, EBITDA and earnings per share, all while generating strong free cash flow. I am pleased with our collective performance over the first half of the year and remain confident about our full year outlook for 2012.”

Second Quarter and First Half 2012 Results

 
Total Company Second Quarter and Year-To-Date 2012 Financial Results (1)
                YTD June     YTD June    
      Q2 2012     Q2 2011     Change     2012     2011     Change
RBR ($000)     $ 181,529       $ 173,293       4.8 %     $ 367,909       $ 342,897       7.3 %
Total Revenues ($000)     $ 204,600       $ 194,408       5.2 %     $ 411,221       $ 383,207       7.3 %
EBITDA ($000)     $ 22,818       $ 25,328       -9.9 %     $ 49,681       $ 47,708       4.1 %
Adjusted EBITDA ($000)     $ 24,422       $ 25,571       -4.5 %     $ 52,101       $ 49,187       5.9 %
Net Income ($000)     $ 9,556       $ 10,760       -11.2 %     $ 21,198       $ 19,538       8.5 %
Earnings Per Share     $ 0.18       $ 0.21       -14.3 %     $ 0.41       $ 0.38       7.9 %
Adjusted Earnings Per Share     $ 0.21       $ 0.21       0 %     $ 0.44       $ 0.40       10.0 %
Average Billable Full Time Equivalents (FTEs)       1,892         1,764       7.3 %       1,894         1,773       6.8 %
End of Period Billable FTEs       1,873         1,768       5.9 %       1,873         1,768       5.9 %
Consultant Utilization (1,850 base) (2)      

73%

 

     

80%

 

    -8.8 %      

75%

 

     

79%

 

    -5.1 %
Average Bill Rate (excluding performance based fees) (2)     $ 281       $ 283       -0.7 %     $ 285       $ 282       1.1 %
Days Sales Outstanding (DSO)       84         82       2.4 %       84         82       2.4 %
 

1) EBITDA, adjusted EBITDA and adjusted earnings per share are non GAAP financial measures. See the attached financial schedules for a reconciliation of EBITDA, adjusted EBITDA and adjusted earnings per share to the most directly comparable GAAP financial measures.

2) Prior period utilization and bill rate figures have been restated to reflect consulting personnel only and do not include technology personnel (i.e., those who provide client services but do not record time to specific client engagements). The definition of technology personnel was redefined as part of the Company’s segment realignment; those changes are reflected in all periods presented.

The presentation of Navigant’s second quarter 2012 results reflects the strategic realignment of the Company’s reporting segments and practice areas, as previously announced at Navigant’s Investor/Analyst Forum on June 14, 2012. Beginning with second quarter 2012, the Company’s financial results will be reported in four new business segments: Disputes, Investigations & Economics (comprised of the Disputes & Investigations, Economics, Construction, Claims Processing and Public Services practice areas), Financial, Risk & Compliance Advisory (comprised of the Financial Services, Restructuring, Valuation & Financial Risk Management and Global Investigations & Compliance practice areas), Healthcare (comprised solely of the Healthcare practice) and Energy (comprised solely of the Energy practice). Practices previously part of Navigant’s International Consulting Services segment are now aligned with their North American counterparts as part of the Company’s global delivery model. All prior year information contained in Navigant’s second quarter 2012 earnings release was recast to reflect the new segment reporting structure. Additionally, realigned segment data for 2010 and 2011 was released by the Company on July 24, 2012.

Navigant reported second quarter 2012 RBR of $182 million, up 5% from second quarter 2011 while down 3% from first quarter 2012. First half 2012 RBR increased 7% over the prior year period to $368 million. Segment operating profit increased 3% in second quarter 2012 and 9% in first half 2012 over the prior year periods as profit margins remained relatively stable on higher revenues. EBITDA declined in second quarter 2012 from the prior quarter and the prior year due to higher general and administrative costs related to growth, information technology investments, salary and benefit increases and employee and client development expenses. Second quarter 2012 interest expense was down from the prior year period due to lower debt levels and continued low interest rates. Quarter end debt balances declined $19 million, or 10%, from March 31, 2012 to $168 million at June 30, 2012.

Business Segment Highlights

 
Business Segment Second Quarter and Year-To-Date 2012 Financial Results (3)
                YTD June     YTD June    
      Q2 2012     Q2 2011     Change       2012       2011     Change
Business Segment RBR ($000)
Disputes, Investigations & Economics $ 81,350 $ 86,140 -5.6 % $ 172,569 $ 170,937 1.0 %
Financial, Risk & Compliance Advisory 42,800 33,134 29.2 % 80,030 63,969 25.1 %
Healthcare 36,022 32,041 12.4 % 72,564 65,597 10.6 %
Energy       21,357       21,978     -2.8 %       42,746       42,394     0.8 %
Total Company     $ 181,529     $ 173,293     4.8 %     $ 367,909     $ 342,897     7.3 %
Business Segment Revenues ($000)
Disputes, Investigations & Economics $ 86,894 $ 95,472 -9.0 % $ 183,983 $ 186,945 -1.6 %
Financial, Risk & Compliance Advisory 52,847 37,408 41.3 % 96,675 73,565 31.4 %
Healthcare 40,839 36,102 13.1 % 81,765 73,270 11.6 %
Energy       24,020       25,426     -5.5 %       48,798       49,427     -1.3 %
Total Company     $ 204,600     $ 194,408     5.2 %     $ 411,221     $ 383,207     7.3 %
Segment Operating Profit ($000)
Disputes, Investigations & Economics $ 27,995 $ 31,191 -10.2 % $ 62,163 $ 60,499 2.8 %
Financial, Risk & Compliance Advisory 15,402 11,136 38.3 % 29,157 21,378 36.4 %
Healthcare 11,463 9,659 18.7 % 22,933 20,373 12.6 %
Energy       7,475       8,324     -10.2 %       14,729       16,058     -8.3 %
Total Company     $ 62,335     $ 60,310     3.4 %     $ 128,982     $ 118,308     9.0 %
 

3) A metrics summary including data by segment is available at www.navigant.com/investor_relations.

Disputes, Investigations & Economics segment RBR declined 6% in second quarter 2012 from the prior year period, while first half 2012 segment RBR increased slightly over first half 2011. The second quarter 2012 sequential decline was primarily due to the wind down of a significant forensic accounting engagement and softness in certain areas related to general litigation. Credit crisis related engagements and continued strength in technology related services partially mitigated this decline.

In the Financial, Risk & Compliance Advisory segment, Navigant’s expertise in the mortgage servicing area drove second quarter 2012 segment RBR up 29% over the prior year period. Strong demand in this area is expected to continue throughout the second half of the year. Segment operating profit also increased during the second quarter 2012 and was up 38% from the prior year.

The Healthcare segment’s strategic combination of provider, physician and payer expertise is creating strong demand, as evidenced by the 12% increase in second quarter 2012 Healthcare segment RBR over the prior year period. Segment operating profit also increased during the second quarter 2012 and was up 19% from the prior year. As the economics of the U.S. healthcare industry continue to drive change, Navigant is helping payers create and establish new infrastructure systems, while also assisting providers and physicians with significant changes to their business models. Additionally, the segment’s life sciences practice continues to gain traction in the marketplace and is experiencing an overall increase in general demand.

Second quarter 2012 Energy segment RBR declined 3% from the prior year period and was impacted by the delayed initiation of a few significant engagements. General demand across the segment remains strong, and Navigant has been particularly active in the evaluation, measurement and verification of energy efficiency programs. Subscription services from the Company’s recently announced Pike Research investment are expected to complement the Energy segment’s more traditional consulting business.

2012 Outlook

Navigant affirmed its full year 2012 outlook as originally discussed on February 2, 2012 and as confirmed on April 26, 2012. Total 2012 revenues are estimated to range from $800 to $860 million and RBR is estimated to be between $710 and $770 million. 2012 adjusted EBITDA is estimated to range from $103 to $117 million, while adjusted EPS is estimated to be between $0.88 and $0.98.

Conference Call Details

Howard will host a conference call to discuss the Company’s second quarter 2012 results at 10:00 a.m. Eastern Time on Thursday, July 26, 2012. The conference call may be accessed via the Navigant website (www.navigant.com/investor_relations) or by dialing 888.593.8430 (312.470.7390 for international callers) and referencing pass code “NCI.” A replay of the web cast will be available for approximately 90 days.

About Navigant

Navigant (NYSE: NCI) is a specialized, global expert services firm dedicated to assisting clients in creating and protecting value in the face of critical business risks and opportunities. Through senior level engagement with clients, Navigant professionals combine technical expertise in Disputes, Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in the highly regulated Construction, Energy, Financial Services and Healthcare industries. More information about Navigant can be found at www.navigant.com.

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 “outlook,” ”plans,” “goals,” “anticipates,” “believes,” “intends,” “estimates,” “expects” 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; 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 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 Securities and Exchange Commission (SEC), which are available on the SEC’s website or at www.navigant.com/investor_relations. 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)
(Unaudited)
           
For the quarters ended For the six months ended
June 30, June 30,
2012   2011 2012   2011
Revenues:
Revenues before reimbursements $ 181,529 $ 173,293 $ 367,909 $ 342,897
Reimbursements   23,071       21,115     43,312       40,310  
Total revenues 204,600 194,408 411,221 383,207
Costs of services:
Cost of services before reimbursable expenses 122,243 116,822 246,203 231,637
Reimbursable expenses   23,071       21,115     43,312       40,310  
Total costs of services 145,314 137,937 289,515 271,947
General and administrative expenses 35,848 31,143 71,405 63,552
Depreciation expense 3,740 3,206 7,256 6,583
Amortization expense 1,650 2,163 3,375 4,464
Other operating costs:
Contingent acquisition liability adjustments   620       -     620       -  
Operating income 17,428 19,959 39,050 36,661
Interest expense 1,426 1,911 2,889 3,751
Interest income (181 ) (429 ) (419 ) (796 )
Other expense (income), net   (144 )     72     (39 )     36  
Income before income tax expense 16,327 18,405 36,619 33,670
Income tax expense   6,771       7,645     15,421       14,132  
Net income $ 9,556     $ 10,760   $ 21,198     $ 19,538  
 
 
Basic net income per share $ 0.19 $ 0.21 $ 0.42 $ 0.39
Shares used in computing net income per basic share 51,112 50,820 51,072 50,498
 
Diluted net income per share $ 0.18 $ 0.21 $ 0.41 $ 0.38
Shares used in computing net income per diluted share 51,685 51,270 51,741 51,153
 
         
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
 
June 30, December 31,
2012 2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ - $ 2,969
Accounts receivable, net 205,213 179,041
Prepaid expenses and other current assets 30,538 22,766
Deferred income tax assets   13,008     16,229  
Total current assets 248,759 221,005
Non-current assets:
Property and equipment, net 42,472 41,138
Intangible assets, net 13,490 16,825
Goodwill 570,872 570,280
Other assets   25,513     25,953  
Total assets $ 901,106   $ 875,201  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,719 $ 16,261
Accrued liabilities 10,555 8,432
Accrued compensation-related costs 57,889 95,451
Income tax payable - 3,558
Other current liabilities   34,130     32,622  
Total current liabilities 119,293 156,324
Non-current liabilities:
Deferred income tax liabilities 62,633 52,964
Other non-current liabilities 17,116 20,445
Bank debt non-current   167,656     131,790  
Total non-current liabilities   247,405     205,199  
Total liabilities   366,698     361,523  
Stockholders' equity:
Common stock 62 61
Additional paid-in capital 575,895 567,627
Treasury stock (207,112 ) (197,602 )
Retained earnings 177,571 156,373
Accumulated other comprehensive loss   (12,008 )   (12,781 )
Total stockholders' equity   534,408     513,678  
Total liabilities and stockholders' equity $ 901,106   $ 875,201  
 

Selected Data

Days sales outstanding, net (DSO)       84     76  
 
           
NAVIGANT CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 

For the quarters ended
June 30,

For the six months ended
June 30,

2012   2011 2012   2011
 
Cash flows from operating activities:
Net income $ 9,556 $ 10,760 $ 21,198 $ 19,538
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation expense 3,740 3,206 7,256 6,583
Amortization expense 1,650 2,163 3,375 4,464
Share-based compensation expense 2,608 2,433 4,939 4,133
Accretion of interest expense 134 221 274 529
Deferred income taxes 6,709 4,157 11,484 11,313
Allowance for uncollectible accounts receivable 1,893 1,003 3,053 3,028
Contingent acquisition liability adjustments, net 620 - 620 -
Changes in assets and liabilities (net of acquisitions):
Accounts receivable (11,404 ) (5,589 ) (29,134 ) (13,962 )
Prepaid expenses and other assets (6,591 ) 139 (5,196 ) (4,745 )
Accounts payable 1,810 73 449 889
Accrued liabilities 1,023 (26 ) 2,121 (217 )
Accrued compensation-related costs 13,282 19,512 (37,544 ) (11,751 )
Income taxes payable (2,404 ) 104 (2,852 ) (2,266 )
Other liabilities   3,799       (777 )   3,292       (3,577 )
 
Net cash provided by (used in) operating activities 26,425 37,379 (16,665 ) 13,959
 
Cash flows from investing activities:
Purchases of property and equipment (3,153 ) (1,677 ) (10,979 ) (3,401 )
Acquisitions of businesses, net of cash acquired - (1,046 ) - (1,046 )
Payments of acquisition liabilities (356 ) (10,000 ) (1,106 ) (10,217 )
Other, net   (599 )     -     (1,211 )     (225 )
 
Net cash used in investing activities (4,108 ) (12,723 ) (13,296 ) (14,889 )
 
Cash flows from financing activities:
Issuances of common stock 1,061 410 2,127 1,050
Repurchase of common stock (4,228 ) - (7,260 ) -
Payments of contingent acquisition liabilities (366 ) - (2,801 ) -
Payment upon termination of credit agreement - (250,613 ) - (250,613 )
Proceeds from new credit agreement - 250,613 - 250,613
Net borrowings from banks (18,825 ) (23,275 ) 36,000 6,432
Payments of term loan - - - (4,599 )
Payments of debt issuance costs - (2,814 ) - (2,814 )
Other, net   72       (163 )   (1,039 )     (839 )
Net cash (used in) provided by financing activities   (22,286 )     (25,842 )   27,027       (770 )
 
Effect of exchange rate changes on cash and cash equivalents   (105 )     (62 )   (35 )     103  
Net decrease in cash and cash equivalents (74 ) (1,248 ) (2,969 ) (1,597 )
Cash and cash equivalents at beginning of the period   74       1,632     2,969       1,981  
Cash and cash equivalents at end of the period $ -     $ 384   $ -     $ 384  
 
 
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(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 measures in addition to GAAP 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 measures may not be comparable to similarly-titled measures of other companies.
 

EBITDA, adjusted EBITDA, adjusted Net Income and adjusted Earnings per Share

EBITDA is earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs. Adjusted net income and adjusted earnings per share exclude the net income and per share net income impact of severance expense and other operating costs. Severance expense and other operating costs 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.
 

Free Cash Flow

Free cash flow is calculated as net cash provided from operations excluding the change in assets and liabilities and allowance for doubtful accounts less cash payments for property, plant 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 available for on-going business operations and long term value creation.
 
 

EBITDA, adjusted EBITDA, adjusted Net Income and

For the quarters ended For the six months ended

adjusted Earnings Per Share

June 30, June 30,
2012   2011 2012   2011
Severance expense $ 984 $ 243 $ 1,800 $ 1,479
Income tax benefit (1)   (310 )     (96 )   (608 )     (536 )
Net income impact of severance expense $ 674     $ 147   $ 1,192     $ 943  
 
Other operating costs - contingent acquisition liability adjustment $ 620 $ - $ 620 $ -
Income tax benefit (1)   (250 )     -     (250 )     -  
Net income impact of other operating costs $ 370     $ -   $ 370     $ -  
 
EBITDA reconciliation:
Operating income $ 17,428 $ 19,959 $ 39,050 $ 36,661
Depreciation 3,740 3,206 7,256 6,583
Amortization   1,650       2,163     3,375       4,464  
EBITDA $ 22,818 $ 25,328 $ 49,681 $ 47,708
Severance expense 984 243 1,800 1,479
Other operating costs - contingent acquisition liability adjustment   620       -     620       -  
Adjusted EBITDA $ 24,422     $ 25,571   $ 52,101     $ 49,187  
 
 
 
Net income $ 9,556 $ 10,760 $ 21,198 $ 19,538
Net income impact of severance expense 674 147 1,192 943
Net income impact of other operating costs - contingent acquisition liability adjustment   370       -     370       -  
Adjusted net income $ 10,600     $ 10,907   $ 22,760     $ 20,481  
Shares used in computing net income per diluted share 51,685 51,270 51,741 51,153
Adjusted earnings per share $ 0.21     $ 0.21   $ 0.44     $ 0.40  
 
(1) Effective income tax (benefit) has been determined based on specific tax jurisdiction.
 
For the quarters ended For the six months ended

Free Cash Flow

June 30, June 30,
Net cash provided by (used in) operating activities $ 26,425 $ 37,379 $ (16,665 ) $ 13,959
Changes in assets and liabilities 485 (13,436 ) 68,864 35,629
Allowance for doubtful accounts (1,893 ) (1,003 ) (3,053 ) (3,028 )
Purchases of property and equipment (3,153 ) (1,677 ) (10,979 ) (3,401 )
Payments of acquisition liabilities (356 ) (10,000 ) (1,106 ) (10,217 )
Payments of contingent acquisition liabilities   (366 )     -     (2,801 )     -  
Free Cash Flow $ 21,142     $ 11,263   $ 34,260     $ 32,942  

Source: Navigant

Navigant
Jennifer Moreno Reddick
Executive Director, Investor Relations
312.573.5634
jennifer.morenoreddick@navigant.com

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