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8-K - FORM 8-K - NAVIGANT CONSULTING INCd526679d8k.htm

Exhibit 99.1

 

LOGO

NAVIGANT REPORTS FIRST QUARTER 2013 RESULTS

 

   

Revenues before reimbursements were $187.3 million compared to $186.4 million in first quarter 2012.

 

   

Adjusted EBITDA increased 8% to $29.9 million. Adjusted EBITDA margins improved 100 basis points to 15.9%.

 

   

23% year over year EPS increase to $0.27. Adjusted EPS of $0.27 increased 17%.

 

   

Repurchased 513,200 shares of common stock at an average price of $12.07 per share.

 

   

Navigant reaffirms 2013 outlook.

CHICAGO, April 25, 2013 – Navigant (NYSE:NCI) announced financial results for the first quarter ended March 31, 2013.

Navigant reported first quarter 2013 revenues before reimbursements (RBR) of $187.3 million, as double-digit segment RBR growth from Healthcare, Energy and Financial, Risk & Compliance Advisory (FRCA), offset a decrease from the Disputes, Investigations & Economics (DI&E) segment.

First quarter 2013 Adjusted EBITDA of $29.9 million was up 8% year-over-year due to increased segment operating profit from three segments and a 9% reduction in general and administrative expenses, offset by a decline in DI&E segment operating profit. Adjusted EBITDA Margin (Adjusted EBITDA as a percentage of RBR) increased to 15.9% for first quarter 2013, compared to 14.9% during first quarter 2012.

Net Income for first quarter 2013 was $13.8 million, compared to $11.6 million in the prior year first quarter, an increase of 18.5%. Effective income tax rate was 41.5% for first quarter 2013 compared to 42.6% for first quarter 2012.

Earnings per share (EPS) were $0.27 for first quarter 2013, compared to $0.22 for the same quarter last year, an increase of 23%. Adjusted EPS were $0.27 for the quarter, compared to $0.23 for first quarter last year, an increase of 17%. GAAP EPS and Adjusted EPS were the same for first quarter 2013 because the $0.02 per share effect of the gain from the sale of a portion of the Economics practice was fully offset by the costs of office consolidation and severance.

“Our market strategy continues to differentiate Navigant as our experts are sought after to simplify and solve critical challenges and address the transformational changes shaping the Energy, Financial Services and Healthcare sectors. As we continue to invest in and capitalize on these market opportunities, we deliver consistent cash flow to reduce debt, repurchase shares and grow the Company” commented Julie Howard, Chief Executive Officer. “Our first quarter


results reflect our strong market position and our increased efforts to deliver enhanced profit contribution. We modestly improved our RBR performance against a very strong first quarter last year, while markedly increasing Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS.”

Segment Financial Highlights

Business Segment First Quarter Financial Results

 

     Q1 2013     Q1 2012     Change  

RBR ($000)

      

Disputes, Investigations & Economics

   $ 76,975      $ 91,219        -15.6

Financial, Risk & Compliance Advisory

     41,764        37,230        12.2

Healthcare

     43,583        36,542        19.3

Energy

     24,935        21,389        16.6
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 187,257      $ 186,380        0.5
  

 

 

   

 

 

   

 

 

 

Total Revenues ($000)

      

Disputes, Investigations & Economics

   $ 83,458      $ 97,089        -14.0

Financial, Risk & Compliance Advisory

     52,603        43,828        20.0

Healthcare

     49,191        40,926        20.2

Energy

     29,521        24,778        19.1
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 214,773      $ 206,621        3.9
  

 

 

   

 

 

   

 

 

 

Segment Operating Profit ($000)

      

Disputes, Investigations & Economics

   $ 25,817      $ 34,168        -24.4

Financial, Risk & Compliance Advisory

     14,995        13,755        9.0

Healthcare

     15,804        11,470        37.8

Energy

     8,796        7,254        21.3
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 65,412      $ 66,647        -1.9
  

 

 

   

 

 

   

 

 

 

Segment Operating Margin (% of RBR)

      

Disputes, Investigations & Economics

     33.5     37.5     -3.9

Financial, Risk & Compliance Advisory

     35.9     36.9     -1.0

Healthcare

     36.3     31.4     4.9

Energy

     35.3     33.9     1.4
  

 

 

   

 

 

   

 

 

 

Total Company

     34.9     35.8     -0.8
  

 

 

   

 

 

   

 

 

 

Healthcare delivered a 19.3% increase in RBR for first quarter 2013 compared to the same quarter of 2012. Approximately 50% of the increase was organically driven growth. These results continue to reflect the demand for Navigant’s expertise in this reform environment, delivered through the strategic combination of deep industry knowledge in the provider, payer, physician management and life sciences markets. First quarter 2013 segment operating profit increased 37.8% compared to first quarter 2012 due to a combination of RBR growth and effective cost controls.

 

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First quarter Energy RBR increased 16.6% over first quarter 2012 and segment operating profit increased 21.3% for the same period. A newly found abundance of economically recoverable domestic shale gas reserves, in combination with increased environmental pressures and uncertainty of regulatory outcomes, drives demand for Navigant’s expertise. The RBR increase was also associated with growth in subscription-based and research services.

FRCA first quarter 2013 RBR increased 12.2% over first quarter 2012 principally reflecting large mortgage servicing review engagements which ramped up during 2012. Three of these engagements were substantially completed late in first quarter 2013 while a fourth is expected to wind down during the second half of the year. Demand for restructuring services declined in first quarter 2013 compared to the same prior year period, reflecting a soft market generally for restructuring work as the economic environment continued to improve.

RBR in DI&E declined 15.6% for first quarter 2013 compared to the same period of 2012. Approximately 40% of the year-over-year decrease was associated with the portion of the Economics practice that was divested during the quarter. The decrease was also due to a large investigations engagement which peaked in first quarter 2012. There was no engagement of a comparable size in first quarter 2013. DI&E segment operating profit for first quarter 2013 decreased when compared to prior year, principally due to the lower RBR partly offset by lower compensation costs reflecting reduced headcount. The gain on disposition of $1.7 million did not impact segment operating profit but was included in other operating costs or benefits.

Debt and Cash Flow

Free cash flow was $21.8 million for first quarter 2013, an increase of 66% compared to first quarter 2012, and excluded $15.6 million which was received from the divesture of a portion of the Economics practice.

Debt at March 31, 2013 was down $22.4 million or 12% from year earlier levels, reflecting strong cash flow. Leverage (Bank Debt divided by annual Adjusted EBITDA) improved to 1.44 at March 31, 2013 compared to 1.78 a year ago. The Company had approximately $205 million in additional borrowings available under its credit facility.

Share Repurchase Activity

Navigant used $6.2 million to repurchase 513,200 shares of common stock during first quarter 2013, at an average cost of $12.07 per share. This compares to 232,006 shares of common stock repurchased during first quarter 2012.

 

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2013 Outlook

Navigant reaffirmed its 2013 outlook. Full year 2013 RBR is expected to range between $740 and $800 million while total 2013 revenues are estimated to be between $820 and $880 million. Adjusted EBITDA is anticipated to range between $115 and $125 million, and Adjusted EPS is estimated to be between $0.95 and $1.10.

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. 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.

Conference Call Details

Julie Howard will host a conference call to discuss the Company’s first quarter 2013 results at 10:00 a.m. Eastern Time on Thursday, April 25, 2013. 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. A report of financial and related supplemental information is available at www.navigant.com/investor_relations.

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 and 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

 

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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; 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 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 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.

For additional information contact:

Paul Longhini

Investor Relations

312.583.5836

plonghini@navigant.com

###

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

     For the quarter ended  
     March 31,  
     2013     2012  

Revenues:

    

Revenues before reimbursements

   $ 187,257      $ 186,380   

Reimbursements

     27,516        20,241   
  

 

 

   

 

 

 

Total revenues

     214,773        206,621   

Costs of services:

    

Cost of services before reimbursable expenses

     126,364        123,960   

Reimbursable expenses

     27,516        20,241   
  

 

 

   

 

 

 

Total costs of services

     153,880        144,201   

General and administrative expenses

     32,483        35,557   

Depreciation expense

     3,730        3,516   

Amortization expense

     1,698        1,725   

Other operating costs (benefit):

    

Office consolidation

     208        —      

Gain on disposition of assets

     (1,715     —      
  

 

 

   

 

 

 

Operating income

     24,489        21,622   

Interest expense

     1,225        1,463   

Interest income

     (163     (238

Other (income) expense, net

     (148     105   
  

 

 

   

 

 

 

Income before income tax expense

     23,575        20,292   

Income tax expense

     9,777        8,650   
  

 

 

   

 

 

 

Net income

   $ 13,798      $ 11,642   
  

 

 

   

 

 

 

Basic net income per share

   $ 0.27      $ 0.23   

Shares used in computing net income per basic share

     50,295        51,032   

Diluted net income per share

   $ 0.27      $ 0.22   

Shares used in computing net income per diluted share

     51,360        51,797   

 

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NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AND SELECTED DATA

(In thousands, except DSO data)

 

     March 31,     December 31,  
     2013     2012  
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 2,939      $ 1,052   

Accounts receivable, net

     205,827        198,709   

Prepaid expenses and other current assets

     25,685        25,054   

Deferred income tax assets

     12,533        17,821   
  

 

 

   

 

 

 

Total current assets

     246,984        242,636   

Non-current assets:

    

Property and equipment, net

     43,414        45,342   

Intangible assets, net

     14,252        16,123   

Goodwill

     607,143        619,932   

Other assets

     29,385        30,417   
  

 

 

   

 

 

 

Total assets

   $ 941,178      $ 954,450   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 18,019      $ 18,042   

Accrued liabilities

     10,980        11,557   

Accrued compensation-related costs

     39,958        84,813   

Income tax payable

     1,475        7,129   

Other current liabilities

     37,860        35,754   
  

 

 

   

 

 

 

Total current liabilities

     108,292        157,295   

Non-current liabilities:

    

Deferred income tax liabilities

     69,766        67,623   

Other non-current liabilities

     34,071        35,606   

Bank debt non-current

     164,656        134,183   
  

 

 

   

 

 

 

Total non-current liabilities

     268,493        237,412   
  

 

 

   

 

 

 

Total liabilities

     376,785        394,707   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     62        62   

Additional paid-in capital

     586,515        582,363   

Treasury stock

     (224,477     (216,500

Retained earnings

     216,340        202,542   

Accumulated other comprehensive loss

     (14,047     (8,724
  

 

 

   

 

 

 

Total stockholders’ equity

     564,393        559,743   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 941,178      $ 954,450   
  

 

 

   

 

 

 

Selected Data

    

Days sales outstanding, net (DSO)

     77        72   
  

 

 

   

 

 

 

 

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NAVIGANT CONSULTING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     For the quarter ended
March 31,
 
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 13,798      $ 11,642   

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation expense

     3,730        3,516   

Accelerated depreciation - office consolidation

     208        —     

Amortization expense

     1,698        1,725   

Share-based compensation expense

     2,545        2,331   

Accretion of interest expense

     219        140   

Deferred income taxes

     7,022        4,775   

Allowance for doubtful accounts receivable

     255        1,160   

Gain on disposition of assets

     (1,715     —     

Changes in assets and liabilities (net of acquisitions and dispositions):

    

Accounts receivable, net

     (16,944     (17,730

Prepaid expenses and other assets

     1,470        1,395   

Accounts payable

     70        (1,361

Accrued liabilities

     (1,373     1,098   

Accrued compensation-related costs

     (42,072     (50,826

Income taxes payable

     (5,544     (448

Other liabilities

     4,713        (507
  

 

 

   

 

 

 

Net cash used in operating activities

     (31,920     (43,090

Cash flows from investing activities:

    

Purchases of property and equipment

     (3,680     (7,826

Proceeds from disposition, net of selling costs

     15,607        —     

Payments of acquisition liabilities

     —          (750

Other, net

     (1,368     (612
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     10,559        (9,188

Cash flows from financing activities:

    

Issuances of common stock

     1,071        1,066   

Repurchase of common stock

     (6,194     (3,032

Payments of contingent acquisition liabilities

     (2,000     (2,435

Repayments to banks

     (102,680     (53,998

Borrowings from banks

     134,114        108,823   

Other, net

     (945     (1,111
  

 

 

   

 

 

 

Net cash provided by financing activities

     23,366        49,313   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (118     70   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     1,887        (2,895

Cash and cash equivalents at beginning of the period

     1,052        2,969   
  

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 2,939      $ 74   
  

 

 

   

 

 

 

 

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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 (benefit). 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 (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.

Free Cash Flow

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.

Leverage Ratio

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.

 

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

   For the quarter ended
March 31,
 
   2013     2012  

Severance expense

   $ 1,442      $ 816   

Income tax benefit (1)

     (427     (298
  

 

 

   

 

 

 

Net income impact of severance expense

   $ 1,015      $ 518   
  

 

 

   

 

 

 

Other operating costs - accelerated depreciation - office consolidation

   $ 208      $ —     

Income tax benefit (1)

     (84     —     
  

 

 

   

 

 

 

Net income impact of other operating costs - accelerated depreciation - office consolidation

   $ 124      $ —     
  

 

 

   

 

 

 

Other operating benefit - gain on disposition of assets

   $ (1,715   $ —     

Income tax expense (1)

     692        —     
  

 

 

   

 

 

 

Net income impact of other operating benefit - gain on disposition of assets

   $ (1,023   $ —     
  

 

 

   

 

 

 

EBITDA reconciliation:

    

Operating income

   $ 24,489      $ 21,622   

Depreciation expense

     3,730        3,516   

Accelerated depreciation - office consolidation

     208        —     

Amortization expense

     1,698        1,725   
  

 

 

   

 

 

 

EBITDA

   $ 30,125      $ 26,863   

Severance expense

     1,442        816   

Other operating benefit - gain on disposition of assets

     (1,715     —     
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 29,852      $ 27,679   
  

 

 

   

 

 

 

Net income

   $ 13,798      $ 11,642   

Net income impact of severance expense

     1,015        518   

Net income impact of other operating costs - accelerated depreciation - office consolidation

     124        —     

Net income impact of other operating benefit - gain on disposition of assets

     (1,023     —     
  

 

 

   

 

 

 

Adjusted net income

   $ 13,914      $ 12,160   
  

 

 

   

 

 

 

Shares used in computing net income per diluted share

     51,360        51,797   

Adjusted earnings per share

   $ 0.27      $ 0.23   
  

 

 

   

 

 

 

(1)    Effective income tax expense (benefit) has been determined based on specific tax jurisdiction.

    

Free Cash Flow

   For the quarter ended
March 31,
 
   2013     2012  

Net cash used in operating activities

   $ (31,920   $ (43,090

Changes in assets and liabilities

     59,680        68,379   

Allowance for doubtful accounts receivable

     (255     (1,160

Purchases of property and equipment

     (3,680     (7,826

Payments of acquisition liabilities

     —          (750

Payments of contingent acquisition liabilities

     (2,000     (2,435
  

 

 

   

 

 

 

Free Cash Flow

   $ 21,825      $ 13,118   
  

 

 

   

 

 

 

Leverage Ratio

   March 31,  
   2013     2012  

Adjusted EBITDA for prior twelve-month period

   $ 114,339      $ 105,240   

Bank debt

   $ 164,656      $ 187,030   

Leverage ratio

     1.44        1.78   

 

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