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8-K - FORM 8-K - NAVIGANT CONSULTING INCd531328d8k.htm

Exhibit 99.1

 

LOGO     

FOR IMMEDIATE RELEASE

 

For more information, contact:   

Kyle Bland

Navigant Investor Relations

312.573.5624

kyle.bland@navigant.com

  

Belia Ortega

Navigant Corporate Communications 312.583.2640

belia.ortega@navigant.com

NAVIGANT REPORTS FOURTH QUARTER AND FULL YEAR 2017 FINANCIAL RESULTS; PROVIDES 2018 OUTLOOK

CHICAGO, Feb. 20, 2018 – Navigant (NYSE: NCI) today announced financial results for the quarter and full year ended Dec. 31, 2017.

Fourth quarter 2017 financial summary:

 

    Revenues and revenues before reimbursements (RBR) of $255.4 million and $230.7 million, respectively, were both down 4% compared to fourth quarter 2016

 

    Net income was $43.1 million, or $0.91 per share, compared to $13.5 million, or $0.28 per share, for fourth quarter 2016, reflecting a $29.7 million, or $0.63 per share, after-tax benefit from the 2017 Tax Cuts and Jobs Act (Tax Reform)

 

    Adjusted Earnings per Share (EPS) of $0.29 decreased $0.01 compared to fourth quarter 2016

 

    Repurchased $15.0 million of common stock compared to $6.3 million in the prior year period

Full year 2017 financial summary and 2018 Outlook:

 

    Revenues and RBR of $1,032.3 million and $939.6 million, respectively, were comparable to full year 2016

 

    Net income was up $16.9 million, or $0.36 per share, to $75.0 million, or $1.55 per share, reflecting the impact of Tax Reform

 

    Adjusted EPS of $1.09 decreased $0.18 from the prior year

 

    Repurchased $43.0 million of common stock in 2017, an increase of 72% compared to the prior year

 

    Management provides full year 2018 financial outlook including RBR guidance of between $940 million and $975 million and Adjusted EPS range of between $1.26 and $1.44. The company also anticipates allocating a minimum $50 million toward share repurchases in 2018.

“While we are disappointed by our 2017 financial results, which reflect a myriad of demand-side factors that impacted performance in each of our segments, we have taken actions to improve our operating performance by managing our cost structure and repositioning certain services to better align with emerging client needs,” said Julie Howard, Chairman and CEO of Navigant. “We continue to make progress in executing our long-term strategy while working to pivot our resources to address the short-term challenges impacting our business. With this backdrop, we expect moderate top-line growth in 2018, but anticipate that margin expansion and the benefit of Tax Reform will meaningfully improve our profitability and free cash flow. We continue to believe in the long-term growth prospects of our business and remain steadfast in our commitment to deliver value to our clients and to our shareholders.”


CONSOLIDATED RESULTS

 

     Three months ended December 31,     Year ended December 31,  

(Dollars in millions, excluding per share data)

   2017      2016      Increase /
(Decrease)
    2017      2016      Increase /
(Decrease)
 

Revenue

   $ 255.4      $ 266.1      $ (10.7   $ 1,032.3      $ 1,034.5      $ (2.2

RBR

   $ 230.7      $ 239.7      $ (9.0   $ 939.6      $ 938.7      $ 0.9  

Net Income

   $ 43.1      $ 13.5      $ 29.6     $ 75.0      $ 58.1      $ 16.9  

Adjusted EBITDA (1)

   $ 32.3      $ 34.8      $ (2.5   $ 125.8      $ 142.3      $ (16.5

Adjusted EPS (1)

   $ 0.29      $ 0.30      ($ 0.01   $ 1.09      $ 1.27      ($ 0.18

 

(1) See definition and reconciliation of non-GAAP measures elsewhere in this release.

Navigant reported fourth quarter 2017 revenues and RBR of $255.4 million and $230.7 million, respectively, down 4% compared to the fourth quarter 2016, reflecting lower revenue across each of our segments, including lower-than-anticipated results in our Healthcare segment. Adjusted EBITDA for the quarter was $32.3 million, down $2.5 million from the same prior year period as lower revenue was partially offset by lower incentive-based compensation and general and administrative expense.

Fourth quarter 2017 net income of $43.1 million was up $29.6 million compared to fourth quarter 2016, largely due to the $29.7 million net impact of Tax Reform. This was primarily driven by the re-valuation of our deferred tax obligations to reflect the lower corporate tax rate, as well as other provisional adjustments resulting from Tax Reform. Adjusted EPS was $0.29 for fourth quarter 2017, $0.01 lower than the prior year period.

Full year 2017 revenues and RBR of $1,032.3 million and $939.6 million, respectively, were both comparable to the prior year period. Results reflect the full year contribution from the Ecofys acquisition and growth in the Healthcare segment, primarily due to increased life science and managed services engagements. These contributions were offset by lower revenue from U.S. Federal Government engagements in the Energy segment, as well as decreased activity from regulatory uncertainty in the Financial Services Advisory and Compliance and Disputes, Forensics and Legal Technology segments. Full year 2017 Adjusted EBITDA was $125.8, down $16.5 million from full year 2016 driven by higher cost of service including absorbed costs from the Ecofys acquisition.

Full year 2017 net income of $75.0 million was up $16.9 million compared to full year 2016 as the impact of Tax Reform more than offset higher operating costs. Adjusted EPS was $1.09 for full year 2017, $0.18 lower than the prior year.

CASH FLOW

Fourth quarter 2017 net cash provided by operating activities was $70.7 million compared to $54.4 million for fourth quarter 2016, driven by higher income, net of deferred taxes and lower working capital in the fourth quarter 2017. Free Cash Flow increased to $24.6 million for fourth quarter 2017 compared to $7.9 million for the same period in 2016, due to higher operating cash flow as discussed above, and lower capital expenditures.

Full year 2017 net cash provided by operating activities was $104.2 million compared to $110.0 million for full year 2016, driven primarily by increased working capital requirements in the current year period. Free Cash Flow decreased to $65.7 million for full year 2017 compared to $78.8 million for the same period in 2016, due to lower operating cash flow as discussed above, and higher capital expenditures.


Days Sales Outstanding on Dec. 31, 2017 was 85 days, a 9-day improvement compared to Sept. 30, 2017, but was 4 days higher compared to Dec. 31, 2016. Bank debt outstanding on Dec. 31, 2017 was $132.9 million, down slightly compared to $135.0 million at year end 2016. Leverage (bank debt divided by trailing twelve month Adjusted EBITDA) was 1.06 times at Dec. 31, 2017.

Navigant continued executing its share repurchase program with an additional 838 thousand shares of common stock repurchased during the fourth quarter 2017 at an aggregate cost of $15.0 million and an average price of $17.89 per share. For the full year 2017, Navigant repurchased over 2.3 million shares of common stock at an aggregate cost of $43.0 million and an average price of $18.52 per share. As of Dec. 31, 2017, the company had $63.6 million remaining under its stock repurchase authorization which expires on Dec. 31, 2019.

FOURTH QUARTER 2017 SEGMENT RESULTS

 

     Three months ended December 31,  

(Dollars in millions, numbers may not foot due to rounding)

   2017     2016     Increase /
(Decrease)
 

RBR

      

Healthcare

   $ 89.7     $ 91.7     $ (2.0

Energy

     30.7       31.3       (0.6

Financial Services Advisory and Compliance

     35.7       38.3       (2.6

Disputes, Forensics and Legal Technology

     74.6       78.4       (3.8
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 230.7     $ 239.7     $ (9.0
  

 

 

   

 

 

   

 

 

 

Total Revenues

      

Healthcare

   $ 98.2     $ 100.7     $ (2.5

Energy

     37.0       37.4       (0.4

Financial Services Advisory and Compliance

     40.7       44.7       (4.0

Disputes, Forensics and Legal Technology

     79.4       83.3       (3.9
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 255.4     $ 266.1     $ (10.7
  

 

 

   

 

 

   

 

 

 

Segment Operating Profit

      

Healthcare

   $ 25.8     $ 30.1     $ (4.3

Energy

     8.3       9.2       (0.9

Financial Services Advisory and Compliance

     13.9       14.8       (0.9

Disputes, Forensics and Legal Technology

     25.3       24.9       0.4  
  

 

 

   

 

 

   

 

 

 

Total Company

   $ 73.3     $ 79.0     $ (5.7
  

 

 

   

 

 

   

 

 

 

Segment Operating Margin (% of RBR)

      

Healthcare

     28.8     32.8     -4.0

Energy

     27.0     29.4     -2.4

Financial Services Advisory and Compliance

     38.9     38.6     0.3

Disputes, Forensics and Legal Technology

     33.9     31.8     2.1
  

 

 

   

 

 

   

 

 

 

Total Company

     31.8     33.0     -1.2
  

 

 

   

 

 

   

 

 

 

Healthcare segment RBR of $89.7 million decreased 2%, or 3% on an organic basis, for fourth quarter 2017 compared to the same prior year period. Unanticipated delays in the timing of certain engagements and the smaller scope of new project work impacted results. Segment operating profit of $25.8 million declined 15% in fourth quarter 2017 compared to the same period in 2016, primarily due to lower revenue and increased headcount in revenue cycle managed services.


Energy segment RBR for fourth quarter 2017 was in line with expectations, but decreased 2% to $30.7 million compared to fourth quarter 2016. RBR was up 4% sequentially versus third quarter 2017. Contributions from the November 2016 Ecofys acquisition helped offset continued depressed demand from U.S. Federal Government engagements. Segment operating profit was down slightly compared to fourth quarter 2016 due to lower revenue.

Financial Services Advisory and Compliance segment RBR for fourth quarter 2017 was $35.7 million, a 7% decrease compared to fourth quarter 2016. RBR was driven by short-term delays with certain engagements which more than offset improving demand from financial services clients for non-regulatory related engagements. Segment operating profit was down $0.9 million as lower revenue was mostly offset by lower personnel costs.

Disputes, Forensics and Legal Technology segment RBR for fourth quarter 2017 was in line with expectations, but decreased $3.8 million to $74.6 million compared to the prior year period. Reduced processing activities in the legal technology solutions business and lower mass tort claims volume were only partially offset by strong performance in the global construction disputes practice. Segment operating profit was up $0.4 million in fourth quarter 2017 compared to fourth quarter 2016, as lower revenue was more than offset by lower personnel costs.

2018 OUTLOOK

Management provides its full year 2018 financial outlook:

 

    Total revenues estimated to be between $1.030 billion and $1.065 billion

 

    RBR expected to range between $940 million and $975 million

 

    Adjusted EBITDA expected to range between $125 million and $137 million

 

    Adjusted EPS estimated to be between $1.26 and $1.44

 

    Capital expenditures estimated to be approximately $25 million

 

    Free Cash Flow expected to range between $75 million and $90 million

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.

Navigant has provided guidance regarding Adjusted EBITDA and Adjusted Earnings Per Share, both of which exclude the impact of severance expense and other operating costs (benefit). 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 fourth quarter and full year 2017 results at 10 a.m. Eastern Time (9 a.m. Central Time) on Tuesday, Feb. 20, 2018. 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.


DEFINITIONS

 

    Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Share (EPS) Adjusted EBITDA is EBITDA – earnings from continuing operations before interest, taxes, depreciation, and amortization – excluding 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, other operating costs (benefit), and the benefit recognized in the fourth quarter 2017 related to the 2017 Tax Cuts and Jobs Act. Severance expense and other operating costs (benefit) are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these non-GAAP financial measures provide investors with enhanced comparability of Navigant’s results of operations across periods.

 

    Free Cash Flow is calculated as net cash provided by (used in) operations excluding the change in asset, liabilities and allowance for doubtful accounts less cash payment for property, equipment and deferred acquisition liabilities. Free Cash Flow does not represent cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that Free Cash Flow provides investors with an indicator of cash available for on-going business operations and long-term value creation.

ABOUT NAVIGANT

Navigant Consulting, Inc. (NYSE: NCI) (“the Company”) 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 markets and clients facing transformational change and significant regulatory or legal pressures, the firm primarily serves clients in the healthcare, energy, and financial services industries. 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,” “may,” “could,” “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 or tax rates, laws or regulations; 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; brand equity; 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; government contracting; professional liability; information security; the adequacy of our business, financial and information systems and technology;


maintenance of effective internal controls; potential legislative and regulatory changes; continued and sufficient access to capital; compliance with covenants in our credit agreement; interest rate risk; 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, 2016, 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
December 31,
    For the year ended
December 31,
 
     2017     2016     2017     2016  

Revenues:

        

Revenues before reimbursements

   $ 230,685     $ 239,671     $ 939,639     $ 938,746  

Reimbursements

     24,683       26,430       92,688       95,734  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     255,368       266,101       1,032,327       1,034,480  

Cost of services:

        

Cost of services before reimbursable expenses

     159,216       163,968       654,586       631,935  

Reimbursable expenses

     24,683       26,430       92,688       95,734  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of services

     183,899       190,398       747,274       727,669  

General and administrative expenses

     39,532       42,490       166,922       168,954  

Depreciation expense

     6,785       7,197       28,826       27,742  

Amortization expense

     2,247       2,790       8,960       11,507  

Other operating costs (benefit):

        

Contingent acquisition liability adjustments, net

     —         —         2,213       1,330  

Office consolidation, net

     280       368       242       542  

Deferred debt issuance costs write off

     —         —         145       —    

Other costs

     —         —         1,620       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     22,625       22,858       76,125       96,736  

Interest expense

     1,254       1,236       4,970       5,235  

Interest income

     (109     (31     (345     (141

Other expense (income), net

     430       (635     919       (1,769
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

     21,050       22,288       70,581       93,411  

Income tax (benefit) expense

     (22,070     8,784       (4,371     35,313  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 43,120     $ 13,504     $ 74,952     $ 58,098  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic per share data

        

Net income

   $ 0.94     $ 0.29     $ 1.61     $ 1.23  

Shares used in computing basic per share data

     45,708       47,026       46,593       47,343  

Diluted per share data

        

Net income

   $ 0.91     $ 0.28     $ 1.55     $ 1.19  

Shares used in computing diluted per share data

     47,223       48,618       48,226       48,813  


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AND SELECTED DATA

(In thousands, except DSO data)

 

     December 31,
2017
    December 31,
2016
 
     (unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 8,449     $ 8,291  

Accounts receivable, net

     267,841       261,755  

Prepaid expenses and other current assets

     32,921       29,762  
  

 

 

   

 

 

 

Total current assets

     309,211       299,808  

Non-current assets:

    

Property and equipment, net

     89,169       82,953  

Intangible assets, net

     21,053       28,727  

Goodwill

     637,287       625,027  

Other assets

     23,544       18,282  
  

 

 

   

 

 

 

Total assets

   $ 1,080,264     $ 1,054,797  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 12,398     $ 11,871  

Accrued liabilities

     13,895       16,144  

Accrued compensation-related costs

     96,773       106,779  

Income tax payable

     4,720       1,564  

Other current liabilities

     38,895       38,616  
  

 

 

   

 

 

 

Total current liabilities

     166,681       174,974  

Non-current liabilities:

    

Deferred income tax liabilities

     61,131       77,737  

Other non-current liabilities

     32,174       32,579  

Bank debt non-current

     132,944       135,030  
  

 

 

   

 

 

 

Total non-current liabilities

     226,249       245,346  
  

 

 

   

 

 

 

Total liabilities

     392,930       420,320  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     58       57  

Additional paid-in capital

     659,825       644,519  

Treasury stock

     (224,366     (181,361

Retained earnings

     270,995       196,468  

Accumulated other comprehensive loss

     (19,178     (25,206
  

 

 

   

 

 

 

Total stockholders’ equity

     687,334       634,477  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,080,264     $ 1,054,797  
  

 

 

   

 

 

 

Selected Data (unaudited)

    

Days sales outstanding, net (DSO)

     85       81  


NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     For the quarter ended     For the year ended  
     December 31,     December 31,  
     2017     2016     2017     2016  

Cash flows from operating activities:

        

Net income

   $ 43,120     $ 13,504     $ 74,952     $ 58,098  

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation expense

     6,785       7,197       28,826       27,742  

Amortization expense

     2,247       2,790       8,960       11,507  

Share-based compensation expense

     2,623       3,626       13,037       13,071  

Deferred income taxes

     (23,517     (2,779     (16,463     (2,154

Allowance for doubtful accounts receivable

     1,411       1,809       7,755       8,815  

Contingent acquisition liability adjustments, net

     —         —         2,213       1,330  

Other, net

     1,286       (1,244     3,113       (159

Changes in assets and liabilities (net of acquisitions):

        

Accounts receivable

     28,160       13,945       (11,773     (49,972

Prepaid expenses and other assets

     (5,677     (1,126     (6,712     4,189  

Accounts payable

     152       671       1,058       1,630  

Accrued liabilities

     89       (210     1,158       874  

Accrued compensation-related costs

     7,354       14,151       (10,589     14,447  

Income taxes payable

     3,281       (11,167     3,248       5,773  

Other liabilities

     3,402       13,229       5,452       14,836  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     70,716       54,396       104,235       110,027  

Cash flows from investing activities:

        

Purchases of property and equipment

     (7,921     (15,201     (38,650     (28,665

Acquisitions of businesses, net of cash acquired

     (5,000     (7,431     (5,000     (15,426

Other acquisition payments

     —         —         —         (5,500

Payments of acquisition liabilities

     —         —         —         (1,165

Other, net

     (121     (311     (812     (770
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (13,042     (22,943     (44,462     (51,526

Cash flows from financing activities:

        

Issuances of common stock

     708       731       3,919       4,299  

Repurchases of common stock

     (14,993     (6,256     (43,005     (25,057

Payments of contingent acquisition liabilities

     —         —         (10,330     (828

Repayments to banks

     (108,036     (101,471     (457,200     (410,197

Borrowings from banks

     64,066       76,861       452,524       375,708  

Payments of debt issuance costs

     (5     —         (1,297     —    

Other, net

     (122     79       (5,009     (2,723
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (58,382     (30,056     (60,398     (58,798
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     152       (150     783       (307
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (556     1,247       158       (604

Cash and cash equivalents at beginning of the period

     9,005       7,044       8,291       8,895  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of the period

   $ 8,449     $ 8,291     $ 8,449     $ 8,291  
  

 

 

   

 

 

   

 

 

   

 

 

 


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 Adjusted Earnings Per Share (2)

 

     For the quarter ended      For the year ended  
     December 31,      December 31,  
     2017      2016      2017      2016  

Severance expense

   $ 380      $ 1,557      $ 7,707      $ 4,433  

Income tax benefit (3)

     (140      (594      (2,975      (1,622
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected impact of severance expense

   $ 240      $ 963      $ 4,732      $ 2,811  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other operating costs - contingent acquisition liability adjustment, net

   $ —        $ —        $ 2,213      $ 1,330  

Income tax benefit (3)

     —          —          (888      (534
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net

   $ —        $ —        $ 1,325      $ 796  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other operating cost (benefit) - office consolidation, net

   $ 280      $ 368      $ 242      $ 542  

Income tax (benefit) expense (3)

     (112      (147      (97      (217
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected impact of other operating cost (benefit) - office consolidation, net

   $ 168      $ 221      $ 145      $ 325  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other operating costs - deferred debt issuance costs write off

   $ —        $ —        $ 145      $ —    

Income tax benefit (3)

     —          —          (58      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected impact of other operating costs - deferred debt issuance costs write off

   $ —        $ —        $ 87      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Other operating costs - other costs

   $ —        $ —        $ 1,620      $ —    

Income tax benefit (3)

     —          —          (650      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected impact of other operating costs - other costs

   $ —        $ —        $ 970      $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA reconciliation:

           

Net Income

   $ 43,120      $ 13,504      $ 74,952      $ 58,098  

Interest expense

     1,254        1,236        4,970        5,235  

Interest income

     (109      (31      (345      (141

Other expense (income), net

     430        (635      919        (1,769

Income tax expense

     (22,070      8,784        (4,371      35,313  

Depreciation expense

     6,785        7,197        28,826        27,742  

Accelerated depreciation - office consolidation (included in other operating costs - office consolidation, net)

     101        —          101        33  

Amortization expense

     2,247        2,790        8,960        11,507  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 31,758      $ 32,845      $ 114,012      $ 136,018  

Severance expense

     380        1,557        7,707        4,433  

Other operating costs - contingent acquisition liability adjustment, net

     —          —          2,213        1,330  

Other operating cost (benefit) - office consolidation, net

     179        368        141        509  

Other operating costs - deferred debt issuance costs write off

     —          —          145        —    

Other operating costs - other costs

     —          —          1,620        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 32,317      $ 34,770      $ 125,838      $ 142,290  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 43,120      $ 13,504      $ 74,952      $ 58,098  

Tax-effected impact of severance expense

     240        963        4,732        2,811  

Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net

     —          —          1,325        796  

Tax-effected impact of other operating cost (benefit) - office consolidation, net

     168        221        145        325  

Tax-effected impact of other operating costs - deferred debt issuance costs write off

     —          —          87        —    

Tax-effected impact of other operating costs - other costs

     —          —          970        —    

Impact of 2017 Tax Cuts and Jobs Act (“Tax Reform”) (4)

     (29,691      —          (29,691      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 13,837      $ 14,688      $ 52,520      $ 62,030  
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used in computing adjusted per diluted share data

     47,223        48,618        48,226        48,813  

Adjusted earnings per share

   $ 0.29      $ 0.30      $ 1.09      $ 1.27  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For the quarter ended      For the year ended  

Free Cash Flow (5)

   December 31,      December 31,  
     2017      2016      2017      2016  

Net cash provided by operating activities

   $ 70,716      $ 54,396      $ 104,235      $ 110,027  

Changes in assets and liabilities

     (36,761      (29,493      18,158        8,223  

Allowance for doubtful accounts receivable

     (1,411      (1,809      (7,755      (8,815

Purchases of property and equipment

     (7,921      (15,201      (38,650      (28,665

Payments of acquisition liabilities

     —          —          —          (1,165

Payments of contingent acquisition liabilities

     —          —          (10,330      (828
  

 

 

    

 

 

    

 

 

    

 

 

 

Free Cash Flow

   $ 24,623      $ 7,893      $ 65,658      $ 78,777  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Leverage Ratio (6)

   At December 31,  
     2017      2016  

Adjusted EBITDA for prior twelve-month period

   $ 125,838      $ 142,290  

Bank debt

   $ 132,944      $ 135,030  

Leverage ratio

     1.06        0.95  

 

     For the quarter ended            For the year ended         

Organic Growth (7)

   December 31,            December 31,         
     2017     2016      Growth     2017      2016      Growth  

Revenues before reimbursements

   $ 230,685     $ 239,671        -3.7   $ 939,639      $ 938,746        0.1

Pro forma acquisition adjustment

     474       3,172          4,752        23,382     

Currency impact

     (664     —            3,184        —       
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Organic RBR

   $ 230,495     $ 242,843        -5.1   $ 947,575      $ 962,128        -1.5


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, other operating costs (benefit), and the benefit recognized in the fourth quarter 2017 related to the 2017 Tax Cuts and Jobs Act. Severance expense and other operating costs (benefit) are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these non-GAAP financial measures provide investors with enhanced comparability of Navigant’s results of operations across periods. (3) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction.
(4) In Q4 2017, we recorded adjustments to our deferred income tax liabilities related to the impact of 2017 Tax Cuts and Jobs Act that resulted in an income tax benefit.
(5) 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.
(6) 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.
(7) 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.