Navigant (NYSE: NCI) today announced financial results for the
third quarter ended September 30, 2016.
Financial Summary and Highlights:
- Third quarter 2016 revenues before
reimbursements (RBR) increased 13%, with 10% organic growth, over
third quarter 2015
- Third quarter 2016 net income was $17.2
million, or $0.35 per share, compared to $14.2 million, or $0.29
per share, in third quarter 2015
- Third quarter 2016 adjusted earnings
per share (EPS) of $0.37, up 23% compared to third quarter
2015
- Third quarter 2016 adjusted EBITDA of
$39.8 million, up 26% over third quarter 2015
- Raises 2016 revenue and earnings
guidance
Navigant reported third quarter 2016 RBR of $237.1 million, a
13% increase (10% organic growth), compared to $209.6 million for
third quarter 2015. Total revenues increased 14% to $261.4 million
for third quarter 2016 compared to $230.3 million for third quarter
2015. Net income for third quarter 2016 was $17.2 million, or $0.35
per share, compared to $14.2 million, or $0.29 per share, in the
prior year third quarter. Adjusted EPS was $0.37 for third quarter
2016, up 23% compared to third quarter 2015. Third quarter 2016
adjusted EBITDA was $39.8 million, a 26% increase, compared to
$31.6 million for the same period in 2015. Adjusted EBITDA margin
(adjusted EBITDA as a percent of RBR) for third quarter 2016
increased to 16.8% compared to 15.1% in third quarter 2015.
“Our third quarter results reflect continued strong performance
delivering double-digit organic growth and improved profitability,”
commented Julie Howard, Chairman and Chief Executive Officer. “I am
truly pleased that the consistent execution of our strategy in
combination with a robust demand environment is bearing fruit for
our stakeholders. We currently are on track to meet or exceed our
expectations for the full year 2016. Looking ahead, we hope to
build on the momentum we have experienced to date in 2016 and enter
2017 on a strong note.”
Segment Financial
Summary
For the quarter ended September 30,
2016 2015 Change RBR
($000) Healthcare $ 91,046 $ 74,500 22.2 % Energy 28,436 26,733
6.4 % Financial Services Advisory and Compliance 40,265 28,302 42.3
% Disputes, Forensics & Legal Technology 77,368
80,099 -3.4 % Total Company
$ 237,115 $ 209,634 13.1 %
Total Revenues ($000) Healthcare $ 100,033 $ 80,821 23.8 %
Energy 32,076 31,542 1.7 % Financial Services Advisory and
Compliance 46,391 31,069 49.3 % Disputes, Forensics & Legal
Technology 82,909 86,826
-4.5 % Total Company $ 261,409 $
230,258 13.5 %
Segment Operating Profit ($000)
Healthcare $ 31,896 $ 24,091 32.4 % Energy 8,336 7,698 8.3 %
Financial Services Advisory and Compliance 17,682 10,383 70.3 %
Disputes, Forensics & Legal Technology 26,099
28,445 -8.2 % Total Company
$ 84,013 $ 70,617 19.0 %
Segment Operating Margin (% of RBR) Healthcare 35.0 % 32.3 %
Energy 29.3 % 28.8 % Financial Services Advisory and Compliance
43.9 % 36.7 % Disputes, Forensics & Legal Technology
33.7 % 35.5 % Total Company
35.4 % 33.7 %
Third quarter 2016 RBR for the Healthcare segment increased 22%
year-over-year, with more than half of that growth organic. The
performance continued to be driven by strong demand for large,
strategy-led transformation projects and revenue cycle consulting
engagements. Segment operating profit for third quarter 2016 was up
32% compared to the same period in 2015.
Energy segment RBR increased 6% for the third quarter 2016
compared to the equivalent period in 2015, all of which represented
organic growth. RBR growth for the quarter reflected contributions
across the segment’s portfolio of solutions, in addition to ongoing
penetration of key client accounts. Third quarter 2016 segment
operating profit was also up 8% compared to the same period in
2015.
Financial Services Advisory and Compliance segment RBR for third
quarter 2016 increased 42%, all on an organic basis, compared to
the prior year third quarter. Growth was driven primarily by
continued demand for financial crimes consulting expertise and an
increase in compliance and controls engagements for major financial
institutions, as compared to the prior year period which had
experienced relatively lower utilization due to the wind-down of
certain large engagements. RBR growth, better pricing and higher
consultant utilization led to a robust 70% increase in third
quarter 2016 segment operating profit year-over-year.
Disputes, Forensics & Legal Technology segment RBR was down
3% for third quarter 2016 compared the third quarter 2015. The
decrease was attributable to currency fluctuations as well as a
lower volume of engagements in financial services disputes and
international arbitration, both which experienced particularly high
demand in the prior-year period. This decline was partially offset
by strong demand for our global expertise in large infrastructure
claims and construction dispute matters. Segment operating profit
was down 8% in third quarter 2016 compared to the respective period
of 2015.
Cash Flow
Third quarter 2016 net cash provided by operating activities was
$48.0 million, compared to $38.9 million for third quarter 2015, as
a result of improved earnings. Free cash flow increased to $25.5
million for third quarter 2016 compared to $18.2 million for the
same period in 2015, primarily driven by a decrease in capital
investment spending. Days Sales Outstanding was 87 days as of
September 30, 2016, up six days compared to September 30, 2015.
Bank debt was $161.2 million at September 30, 2016, compared to
$146.8 million at September 30, 2015 and $189.8 million at June 30,
2016. Leverage (bank debt divided by trailing twelve month adjusted
EBITDA) was 1.17 at September 30, 2016, compared to 1.22 at
September 30, 2015 and 1.46 at June 30, 2016.
Navigant repurchased 309,233 shares of common stock during third
quarter 2016 at an aggregate cost of $5.8 million and an average
cost of $18.68 per share. As of September 30, 2016, approximately
$69.3 million remained available under the Company’s share
repurchase authorization.
2016 Outlook
Navigant raised its 2016 outlook. Full year 2016 RBR is now
expected to range between $920.0 and $940.0 million, which is the
upper half of the previously-issued guidance range. The range for
2016 total revenues was increased to $1.00 and $1.02 billion, up
from $960 million to $1.01 billion. Adjusted EBITDA for full year
2016 is now expected to range between $137.5 and $145.0 million,
which is the upper half of the previously-issued guidance range.
Adjusted EPS for full year 2016 is estimated to be between $1.15
and $1.25, an increase of $0.10 from the previous guidance
range.
Non-GAAP Financial
Information
This press release includes certain non-GAAP financial measures
as defined by the Securities and Exchange Commission.
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) are
included in the financial schedules attached to this press release.
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.
No reconciliation of Navigant’s 2016 adjusted EBITDA guidance
and 2016 adjusted EPS guidance, both of which exclude the impact
and tax-effected impact of severance expense and other operating
costs (benefit), respectively, is included in the financial
schedules attached to this press release. Navigant is not able to
accurately forecast the excluded items at the level of precision
that would be required to be included in the most directly
comparable GAAP financial measure without unreasonable efforts.
Conference Call Details
Navigant will host a conference call to discuss the Company’s
third quarter 2016 results at 10:00 a.m. Eastern Time (9:00 a.m.
Central Time) on Tuesday, October 25, 2016. The conference call may
be accessed via the Navigant website (investors.navigant.com) or by
dialing 888.455.9733 (630.395.0358 for international callers) and
referencing pass code “NCI.” An archived version of the webcast
will also be available via the Navigant website. A report of
financial and related supplemental information is also available
via the Navigant website.
About Navigant
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to
help clients build, manage and/or protect their business interests.
With a focus on industries and clients facing transformational
change and significant regulatory or legal pressures, the Firm
primarily serves clients in the healthcare, energy and financial
services markets. Across a range of advisory, consulting,
outsourcing, and technology/analytics services, Navigant’s
practitioners bring sharp insight that pinpoints opportunities and
delivers powerful results. More information about Navigant can be
found at navigant.com.
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
execution of the Company’s long-term growth objectives and margin
improvement initiatives; risks inherent in international
operations, including foreign currency fluctuations; ability to
make acquisitions and divestitures; pace, timing and integration of
acquisitions and separation of divestitures; operational risks
associated with new or expanded service areas, including business
process management services; impairments; changes in accounting
standards; management of professional staff, including dependence
on key personnel, recruiting, retention, attrition and the ability
to successfully integrate new consultants into the Company’s
practices; utilization rates; conflicts of interest; potential loss
of clients or large engagements and the Company’s ability to
attract new business; competition; accurate pricing of engagements,
particularly fixed fee and multi-year engagements; clients’
financial condition and their ability to make payments to the
Company; risks inherent with litigation; higher risk client
assignments; professional liability; information security controls;
potential legislative and regulatory changes; continued access to
capital; and market and general economic and political conditions.
Further information on these and other potential factors that could
affect the Company’s financial results are included under the “Risk
Factors” section of the Company’s Annual Report on Form 10-K for
the year ended December 31, 2015, and elsewhere in the Company’s
filings with the Securities and Exchange Commission (SEC), which
are available on the SEC’s website or at investors.navigant.com.
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(1)) (Unaudited)
For the quarter ended For the nine months ended
September 30, September 30, 2016
2015 2016 2015 Revenues: Revenues
before reimbursements $ 237,115 $ 209,634 $ 699,075 $ 621,813
Reimbursements 24,294 20,624
69,304 65,055 Total revenues
261,409 230,258 768,379 686,868 Cost of services: Cost of services
before reimbursable expenses 156,061 141,731 467,967 425,699
Reimbursable expenses 24,294 20,624
69,304 65,055 Total cost
of services 180,355 162,355 537,271 490,754 General and
administrative expenses 42,126 36,629 126,464 111,362 Depreciation
expense 7,008 5,954 20,545 17,033 Amortization expense 2,905 2,084
8,717 6,650 Other operating costs (benefit): Contingent acquisition
liability adjustments, net 480 - 1,330 (12,625 ) Office
consolidation, net - - 174 2,740 Loss on disposition of assets -
283 - 283 Other impairment - -
- 98 Operating income 28,535
22,953 73,878 70,573 Interest expense 1,310 1,018 3,999 3,988
Interest income (35 ) (77 ) (110 ) (178 ) Other income, net
(350 ) (328 ) (1,134 ) (480 )
Income before income tax expense 27,610 22,340 71,123 67,243 Income
tax expense 10,435 8,164
26,529 20,097 Net income $ 17,175
$ 14,176 $ 44,594 $ 47,146
Basic per share data Net income $ 0.36 $ 0.30
$ 0.94 $ 0.98 Shares used in computing basic per share data 47,369
47,835 47,448 48,036 Diluted per share data Net income $
0.35 $ 0.29 $ 0.91 $ 0.96 Shares used in computing diluted per
share data 48,763 49,155 48,878 49,297
NAVIGANT CONSULTING, INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND SELECTED
DATA (In thousands, except DSO data)
September 30, December 31, 2016
2015 (unaudited) ASSETS Current assets: Cash and cash
equivalents $ 7,044 $ 8,895 Accounts receivable, net 272,254
216,660 Prepaid expenses and other current assets 27,989
29,729 Total current assets 307,287
255,284 Non-current assets: Property and equipment, net 69,833
76,717 Intangible assets, net 30,502 38,160 Goodwill 624,454
623,204 Other assets 18,660 22,531
Total assets $ 1,050,736 $ 1,015,896
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 10,460 $ 9,497 Accrued liabilities 11,583 10,719
Accrued compensation-related costs 91,616 91,577 Income tax payable
12,772 - Other current liabilities 36,566
32,147 Total current liabilities 162,997 143,940
Non-current liabilities: Deferred income tax liabilities 80,189
75,719 Other non-current liabilities 20,649 28,956 Bank debt
non-current 161,208 173,743
Total non-current liabilities 262,046
278,418 Total liabilities 425,043
422,358 Stockholders' equity: Common stock 57 64
Additional paid-in capital 640,083 627,976 Treasury stock (175,105
) (296,624 ) Retained earnings 182,964 278,682 Accumulated other
comprehensive loss (22,306 ) (16,560 ) Total
stockholders' equity 625,693 593,538
Total liabilities and stockholders' equity $ 1,050,736
$ 1,015,896
Selected Data
(unaudited)
Days sales outstanding, net (DSO) 87 76
NAVIGANT CONSULTING,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands) (Unaudited)
For the quarter ended For the nine months
ended September 30, September 30, 2016
2015 2016 2015 Cash flows
from operating activities: Net income $ 17,175 $ 14,176 $ 44,594 $
47,146 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation expense 7,008 5,954 20,545
17,033 Amortization expense 2,905 2,084 8,717 6,650 Amortization
expense - client-facing software 173 190 526 676 Share-based
compensation expense 2,921 2,682 9,445 8,206 Accretion of interest
expense 171 29 526 1,164 Deferred income taxes (506 ) 2,024 625
6,710 Allowance for doubtful accounts receivable 2,459 100 7,006
1,692 Contingent acquisition liability adjustments, net 480 - 1,330
(12,625 ) Other, net - 283 33 520 Changes in assets and liabilities
(net of acquisitions and dispositions): Accounts receivable (20,152
) 1,060 (63,917 ) (35,687 ) Prepaid expenses and other assets 6,340
(5,356 ) 5,315 (7,717 ) Accounts payable (1,519 ) (2,821 ) 959
(2,685 ) Accrued liabilities 612 727 1,084 2,171 Accrued
compensation-related costs 23,084 19,148 296 (3,748 ) Income taxes
payable 4,881 933 16,940 979 Other liabilities 1,944
(2,305 ) 1,607 3,618
Net cash provided by operating activities 47,976
38,908 55,631 34,103 Cash flows from investing activities:
Purchases of property and equipment (3,425 ) (7,963 ) (13,464 )
(31,160 ) Acquisitions of businesses, net of cash acquired (6,000 )
- (7,995 ) (21,379 ) Other acquisition payments - - (5,500 ) -
Payments of acquisition liabilities (667 ) (666 ) (1,165 ) (2,196 )
Capitalized client-facing software (332 ) (265
) (459 ) (611 ) Net cash used in
investing activities (10,424 ) (8,894 ) (28,583 ) (55,346 )
Cash flows from financing activities: Issuances of common stock 727
594 3,568 5,488 Repurchases of common stock (5,778 ) (6,126 )
(18,801 ) (18,207 ) Payments of contingent acquisition liabilities
(779 ) (592 ) (828 ) (592 ) Repayments to banks (99,481 ) (91,930 )
(308,726 ) (230,633 ) Borrowings from banks 71,608 68,371 298,847
268,014 Other, net (72 ) (52 ) (2,802 )
(1,299 ) Net cash (used in) provided by financing
activities (33,775 ) (29,735 ) (28,742
) 22,771 Effect of exchange rate
changes on cash and cash equivalents (43 )
(116 ) (157 ) (159 ) Net increase (decrease)
in cash and cash equivalents 3,734 163 (1,851 ) 1,369 Cash and cash
equivalents at beginning of the period 3,310
3,854 8,895 2,648
Cash and cash equivalents at end of the period $ 7,044
$ 4,017 $ 7,044 $ 4,017
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES (In thousands, except per
share data and percentages) (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.
EBITDA, adjusted
EBITDA, adjusted Net Income and
For the quarter ended For the nine
months ended
adjusted Earnings
Per Share (2)
September 30, September 30, 2016
2015 2016 2015 Severance expense $ 879
$ 283 $ 2,876 $ 5,339 Income tax benefit (3)
(288 ) (117 ) (1,028 ) (1,869 )
Tax-effected impact of severance expense $ 591 $ 166
$ 1,848 $ 3,470 Other operating
costs (benefit) - contingent acquisition liability adjustment, net
$ 480 $ - $ 1,330 $ (12,625 ) Income tax benefit (3)(4) (193
) - (534 ) (1,090 )
Tax-effected impact of other operating costs (benefit) - contingent
acquisition liability adjustment, net $ 287 $ -
$ 796 $ (13,715 ) Other operating costs
- office consolidation, net $ - $ - $ 174 $ 2,740 Income tax
benefit (3) - - (70 )
(1,108 ) Tax-effected impact of other operating costs
- office consolidation, net $ - $ - $ 104
$ 1,632 Other operating costs - loss on
disposition of assets $ - $ 283 $ - $ 283 Income tax benefit (3)(5)
- - -
- Tax-effected impact of other operating costs - loss
on disposition of assets $ - $ 283 $ -
$ 283 Other operating costs - other impairment
$ - $ - $ - $ 98 Income tax benefit (3) -
- - (40 ) Tax-effected
impact of other operating costs - other impairment $ -
$ - $ - $ 58 EBITDA
reconciliation: Net Income $ 17,175 $ 14,176 $ 44,594 $ 47,146
Interest expense 1,310 1,018 3,999 3,988 Interest income (35 ) (77
) (110 ) (178 ) Other income, net (350 ) (328 ) (1,134 ) (480 )
Income tax expense 10,435 8,164 26,529 20,097 Depreciation expense
7,008 5,954 20,545 17,033 Accelerated depreciation - office
consolidation (included in other operating costs - office
consolidation, net) - - 33 139 Amortization expense 2,905
2,084 8,717
6,650 EBITDA $ 38,448 $ 30,991 $ 103,173 $ 94,395 Severance
expense 879 283 2,876 5,339 Other operating costs (benefit) -
contingent acquisition liability adjustment, net 480 - 1,330
(12,625 ) Other operating costs - office consolidation, net
(excluding accelerated depreciation - office consolidation, above)
- - 141 2,601 Other operating costs - loss on disposition of assets
- 283 - 283 Other operating costs - other impairment -
- - 98
Adjusted EBITDA $ 39,807 $ 31,557 $
107,520 $ 90,091 Net income $ 17,175 $
14,176 $ 44,594 $ 47,146 Tax-effected impact of severance expense
591 166 1,848 3,470 Tax-effected impact of other operating costs
(benefit) - contingent acquisition liability adjustment, net 287 -
796 (13,715 ) Tax-effected impact of other operating costs - office
consolidation, net - - 104 1,632 Tax-effected impact of other
operating costs - loss on disposition of assets - 283 - 283
Tax-effected impact of other operating costs - other impairment
- - -
58 Adjusted net income $ 18,053 $
14,625 $ 47,342 $ 38,874 Shares used in
computing adjusted per diluted share data 48,763 49,155 48,878
49,297 Adjusted earnings per share $ 0.37 $ 0.30
$ 0.97 $ 0.79
For the quarter
ended For the nine months ended
Free Cash Flow
(6)
September 30, September 30, 2016
2015 2016 2015 Net cash provided by
operating activities $ 47,976 $ 38,908 $ 55,631 $ 34,103 Changes in
assets and liabilities (15,190 ) (11,386 ) 37,716 43,069 Allowance
for doubtful accounts receivable (2,459 ) (100 ) (7,006 ) (1,692 )
Purchases of property and equipment (3,425 ) (7,963 ) (13,464 )
(31,160 ) Payments of acquisition liabilities (667 ) (666 ) (1,165
) (2,196 ) Payments of contingent acquisition liabilities
(779 ) (592 ) (828 ) (592 ) Free
Cash Flow $ 25,456 $ 18,201 $ 70,884
$ 41,532
Leverage Ratio
(7)
At September 30, 2016 2015 Adjusted
EBITDA for prior twelve-month period $ 138,371 $ 120,253 Bank debt
$ 161,208 $ 146,814 Leverage ratio 1.17 1.22
For the
quarter ended For the nine months ended
Organic Growth
(8)
September 30, September 30, 2016
2015 Growth 2016 2015
Growth Revenues before reimbursements $ 237,115 $
209,634 13.1 % $ 699,075 $ 621,813 12.4 % Pro forma acquisition
adjustment 473 7,077 1,893 23,074 Currency impact 1,794
- 3,688
- Organic RBR $ 239,382 $
216,711 10.5 % $ 704,656 $ 644,887 9.3 % Footnotes (1) Per share
data may not sum due to rounding. (2) EBITDA is earnings
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 net income and per share net income impact of
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. (3) Effective income tax expense (benefit) has been
determined based on specific tax jurisdiction. (4) A portion
of the deferred contingent acquisition liability adjustment for the
nine months ended September 30, 2015 was non-taxable in nature.
(5) The loss on dispositions recorded during the three and
nine months ended September 30, 2015 is subject to capital loss
treatment in Canada. The tax benefit associated with this capital
loss is subject to a full valuation allowance. (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. (8) Organic growth
represents revenues before reimbursements adjusted to include the
impact of our acquisitions as if we owned them from the beginning
of each comparable period and adjusted to exclude the impact of
foreign currency exchange rate fluctuations. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161025005207/en/
Aaron MilesNavigant Investor
Relations312.583.5820aaron.miles@navigant.comorMegan MaupinNavigant
Corporate Communications312.583.5703
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