Navigant (NYSE: NCI) today announced financial results for the
first quarter ended March 31, 2016.
Financial Summary and Highlights:
- First quarter 2016 revenues before
reimbursements (RBR) increased 11%, with 8% organic growth, over
first quarter 2015
- First quarter 2016 GAAP earnings per
share (EPS) of $0.26
- First quarter 2016 adjusted EPS of
$0.27, up 17% compared to first quarter 2015
- First quarter 2016 adjusted EBITDA of
$30.6 million, up 8% from the prior year first quarter
- Affirms 2016 financial outlook,
estimates adjusted EPS toward higher end of previously communicated
range
Navigant reported first quarter 2016 RBR of $223.5 million, an
11% increase, with 8% organic growth, compared to $201.2 million
for first quarter 2015. Total revenues increased 10% to $245.3
million for first quarter 2016 compared to $223.2 million for first
quarter 2015. Net income for first quarter 2016 was $12.6 million,
or $0.26 per share, compared to $25.1 million, or $0.51 per share,
in the prior year first quarter, which benefited $0.31 per share
from an earn-out adjustment primarily related to a non-taxable
amount for the Cymetrix acquisition. Adjusted EPS was $0.27 for
first quarter 2016, up 17% compared to first quarter 2015. First
quarter 2016 adjusted EBITDA was $30.6 million compared to $28.4
million for the same period in 2015.
“Navigant delivered strong top and bottom line growth in the
first quarter 2016, and market demand for our service offerings is
robust,” commented Julie Howard, Chairman and Chief Executive
Officer. “The investments we made in 2015 to strengthen our go-to
market approach, ramp up senior hiring, deepen our capabilities and
align our brand to the evolved Navigant are yielding results and we
are very pleased with our positioning and performance trajectory.
Going forward, we expect to meet the financial objectives we have
set forth for the year, continuing our path of both organic revenue
and earnings growth.”
Segment Financial
Summary
For the quarter ended March 31,
2016 2015 Change RBR ($000)
Disputes, Forensics & Legal Technology $ 81,262 $ 76,593 6.1 %
Financial Services Advisory and Compliance 33,650 34,943 -3.7 %
Healthcare 81,667 63,994 27.6 % Energy 26,896
25,626 5.0 % Total Company $ 223,475 $ 201,156
11.1 %
Total Revenues ($000) Disputes, Forensics & Legal
Technology $ 86,999 $ 81,211 7.1 % Financial Services Advisory and
Compliance 36,907 42,300 -12.7 % Healthcare 90,102 69,329 30.0 %
Energy 31,279 30,331 3.1 % Total
Company $ 245,287 $ 223,171 9.9 %
Segment
Operating Profit ($000) Disputes, Forensics & Legal
Technology $ 28,710 $ 24,269 18.3 % Financial Services Advisory and
Compliance 13,506 15,070 -10.4 % Healthcare 23,768 18,256 30.2 %
Energy 6,714 7,922 -15.2 % Total
Company $ 72,698 $ 65,517 11.0 %
Segment Operating
Margin (% of RBR) Disputes, Forensics & Legal Technology
35.3 % 31.7 % Financial Services Advisory and Compliance 40.1 %
43.1 % Healthcare 29.1 % 28.5 % Energy 25.0 % 30.9 %
Total Company 32.5 % 32.6 %
First quarter 2016 RBR for the Healthcare segment increased 28%
year-over-year, with more than half of that growth organic.
Strength was driven by continued demand in consulting services
including provider performance improvement solutions, revenue cycle
consulting, which reflects the contribution from the McKinnis
Consulting Services acquisition, and life sciences
commercialization solutions. In addition, business process
management services revenue grew year-over-year. Segment operating
profit margin for first quarter 2016 was up slightly to 29%
compared to the same period in 2015.
Energy segment RBR increased 5% for the first quarter 2016
compared to the equivalent period in 2015, all of which represented
organic growth. RBR growth for the quarter reflects an increase in
strategy and operational improvement along with demand side
management services. First quarter 2016 segment operating profit
was down 15% compared to the same period of 2015, due to higher
compensation and benefits expenses associated with recent senior
hires, partially offset by higher RBR and lower incentive based
compensation.
The Disputes, Forensics & Legal Technology (previously known
as Disputes, Investigations & Economics) segment RBR increased
6% for first quarter 2016 compared to the same period in 2015, all
of which represented organic growth. Growth was driven by increased
demand for our premier dispute resolution offerings, with strong
performance in global construction and infrastructure claims
matters, in addition to continued demand aligned with our core
industry sectors of healthcare and life sciences, energy and
financial services. The segment also recognized performance-based
revenue associated with mass tort claims work. Strong organic
growth was partially offset by a decrease in legal technology
solutions revenue in the United States. Segment operating profit
was up 18% in first quarter 2016 compared to the respective period
of 2015, driven by higher RBR and ongoing cost management
actions.
The Financial Services Advisory and Compliance (previously known
as Financial, Risk & Compliance) segment RBR for first quarter
2016 continued the sequential growth trend that began over the
second half of 2015, while down 4% compared to the prior year
quarter as was anticipated. The year-over-year comparison to first
quarter 2015 was impacted by a few large engagements that wound
down over the course of 2015. Segment operating profit was down 10%
in first quarter 2016 compared to first quarter 2015, mainly due to
lower RBR.
Other Results
First quarter 2016 general and administrative expenses of $39.8
million increased 12% compared to first quarter 2015, while
remaining essentially flat as a percentage of RBR at just under
18%. Depreciation and amortization expenses increased significantly
in first quarter 2016 over the same period in 2015, primarily due
to higher capital expenditures in the prior year and higher levels
of intangible assets resulting from recent acquisitions. Our first
quarter 2016 income tax expense was favorably impacted by the
reversal of $0.9 million of tax valuation allowances due to
improved earnings from our international subsidiaries. Our
estimated full year 2016 effective income tax rate is benefitting
from increased earnings in foreign jurisdictions with lower tax
rates.
Cash Flow
Free cash flow increased to $21.0 million for first quarter 2016
compared to $11.8 million for the same period in 2015, primarily
driven by a decrease in capital investment spending. Days Sales
Outstanding was 78 days as of March 31, 2016, down 2 days compared
to March 31, 2015.
Bank debt was $211.5 million at March 31, 2016 compared to
$178.7 million at March 31, 2015. Leverage (bank debt divided by
trailing twelve month adjusted EBITDA) was 1.72 at March 31, 2016
compared to 1.46 at March 31, 2015. The increase was mainly due to
additional borrowings to fund the McKinnis acquisition in December
2015.
Navigant repurchased 407,920 shares of common stock during first
quarter 2016 at an aggregate cost of $6.3 million and an average
cost of $15.36 per share. As of March 31, 2016, $81.8 million
remained available under the Company’s share repurchase
authorization.
2016 Outlook
Our 2016 outlook for RBR, total revenues and adjusted EBITDA
remains unchanged. Full year 2016 RBR is expected to range between
$900 and $940 million while 2016 total revenues are estimated to be
between $960 million and $1.01 billion. Adjusted EBITDA for full
year 2016 is expected to range between $132 and $145 million.
Adjusted EPS for full year 2016 is now projected to be at the
higher end of the range of $1.05 to $1.15 due to our business
outlook and a lower estimated 2016 effective income tax rate, as
discussed above.
Non-GAAP Financial Information and Key
Operating Metrics
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.
Conference Call Details
Navigant will host a conference call to discuss the Company’s
first quarter 2016 results at 10:00 a.m. Eastern Time (9:00 a.m.
Central Time) on Tuesday, April 26, 2016. The conference call may
be accessed via the Navigant website
(www.navigant.com/investor_relations) 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 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(1)) (Unaudited) For the quarter
ended March 31, 2016
2015 Revenues: Revenues before reimbursements $
223,475 $ 201,156 Reimbursements 21,812 22,015
Total revenues 245,287 223,171 Cost of services: Cost of
services before reimbursable expenses 153,940 138,601 Reimbursable
expenses 21,812 22,015 Total cost of
services 175,752 160,616 General and administrative expenses 39,831
35,665 Depreciation expense 6,522 5,355 Amortization expense 2,921
2,269 Other operating costs (benefit): Contingent acquisition
liability adjustments, net - (14,933 ) Office consolidation, net
- 936 Operating income 20,261 33,263
Interest expense 1,260 1,732 Interest (income) (39 ) (55 ) Other
(income), net (340 ) (328 ) Income before income tax
expense 19,380 31,914 Income tax expense 6,738
6,771 Net income $ 12,642 $ 25,143
Basic per share data Net income $ 0.27 $ 0.52 Shares used in
computing basic per share data 47,425 48,123 Diluted per
share data Net income $ 0.26 $ 0.51 Shares used in computing
diluted per share data 49,031 49,413
NAVIGANT CONSULTING,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND
SELECTED DATA (In thousands, except DSO data)
March 31, December 31, 2016 2015
(unaudited) ASSETS Current assets: Cash and cash equivalents
$ 3,406 $ 8,895 Accounts receivable, net 230,177 216,660 Prepaid
expenses and other current assets 33,147
29,729 Total current assets 266,730 255,284 Non-current
assets: Property and equipment, net 75,899 76,717 Intangible
assets, net 35,524 38,160 Goodwill 624,022 623,204 Other assets
21,043 22,531 Total assets $ 1,023,218
$ 1,015,896 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 9,975 $ 9,497
Accrued liabilities 11,569 10,719 Accrued compensation-related
costs 51,847 91,577 Income tax payable 1,189 - Other current
liabilities 32,331 32,147 Total current
liabilities 106,911 143,940 Non-current liabilities: Deferred
income tax liabilities 80,511 75,719 Other non-current liabilities
21,071 28,956 Bank debt non-current 211,521
173,743 Total non-current liabilities 313,103
278,418 Total liabilities 420,014
422,358 Stockholders' equity: Common stock 57 64
Additional paid-in capital 631,905 627,976 Treasury stock (162,570
) (296,624 ) Retained earnings 151,012 278,682 Accumulated other
comprehensive loss (17,200 ) (16,560 ) Total
stockholders' equity 603,204 593,538
Total liabilities and stockholders' equity $ 1,023,218 $
1,015,896
Selected
Data
Days sales outstanding, net (DSO) 78 76
NAVIGANT
CONSULTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
For the quarter ended March 31, 2016
2015 Cash flows from operating activities: Net
income $ 12,642 $ 25,143 Adjustments to reconcile net income to net
cash used in operating activities: Depreciation expense 6,522 5,355
Amortization expense 2,921 2,269 Share-based compensation expense
2,529 2,104 Accretion of interest expense 178 863 Deferred income
taxes 1,033 3,613 Allowance for doubtful accounts receivable 1,636
190 Contingent acquisition liability adjustments, net - (14,933 )
Other, net 179 253 Changes in assets and liabilities (net of
acquisitions): Accounts receivable (15,543 ) (24,434 ) Prepaid
expenses and other assets (2,174 ) (2,770 ) Accounts payable 478
1,105 Accrued liabilities 267 3,967 Accrued compensation-related
costs (39,666 ) (39,639 ) Income taxes payable 5,055 836 Other
liabilities (2,614 ) 2,124 Net
cash used in operating activities (26,557 ) (33,954 ) Cash
flows from investing activities: Purchases of property and
equipment (4,977 ) (12,950 ) Acquisitions of businesses, net of
cash acquired (1,995 ) (21,379 ) Other acquisition payments
(5,500 ) - Net cash used in investing
activities (12,472 ) (34,329 ) Cash flows from financing
activities: Issuances of common stock 2,056 4,258 Repurchases of
common stock (6,266 ) (6,117 ) Repayments to banks (96,392 )
(71,584 ) Borrowings from banks 134,757 141,394 Other, net
(658 ) (211 ) Net cash provided by financing
activities 33,497 67,740
Effect of exchange rate changes on cash and cash equivalents
43 (117 ) Net decrease in cash and cash
equivalents (5,489 ) (660 ) Cash and cash equivalents at beginning
of the period 8,895 2,648 Cash
and cash equivalents at end of the period $ 3,406 $
1,988
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
adjusted Earnings
Per Share (2)
March 31, 2016 2015 Severance expense $
857 $ 1,503 Income tax benefit (3) (310 ) (520 )
Tax-effected impact of severance expense $ 547 $ 983
Other operating benefit - contingent acquisition liability
adjustment, net $ - $ (14,933 ) Income tax benefit (3)(4) -
(183 ) Tax-effected impact of other operating benefit
- contingent acquisition liability adjustment, net $ - $
(15,116 ) Other operating costs - office consolidation, net
$ - $ 936 Income tax benefit (3) - (379 )
Tax-effected impact of other operating costs - office
consolidation, net $ - $ 557 EBITDA
reconciliation: Operating income $ 20,261 $ 33,263 Depreciation
expense 6,522 5,355 Amortization expense 2,921
2,269 EBITDA $ 29,704 $ 40,887 Severance expense 857 1,503
Other operating benefit - contingent acquisition liability
adjustment, net - (14,933 ) Other operating costs - office
consolidation, net - 936 Adjusted
EBITDA $ 30,561 $ 28,393 Net income $ 12,642 $
25,143 Tax-effected impact of severance expense 547 983
Tax-effected impact of other operating benefit - contingent
acquisition liability adjustment, net - (15,116 ) Tax-effected
impact of other operating costs - office consolidation, net
- 557 Adjusted net income $ 13,189 $
11,567 Shares used in computing adjusted per diluted share
data 49,031 49,413 Adjusted earnings per share $ 0.27 $ 0.23
For the quarter ended
Free Cash Flow
(5)
March 31, 2016 2015 Net cash used in
operating activities $ (26,557 ) $ (33,954 ) Changes in assets and
liabilities 54,197 58,811 Allowance for doubtful accounts
receivable (1,636 ) (190 ) Purchases of property and equipment
(4,959 ) (12,913 ) Payments of contingent acquisition liabilities
(49 ) - Free Cash Flow $ 20,996 $
11,754
Leverage Ratio
(6)
At March 31, 2016 2015 Adjusted EBITDA
for prior twelve-month period $ 123,110 $ 122,285 Bank debt $
211,521 $ 178,734 Leverage ratio 1.72 1.46
For the
quarter ended
Organic Growth
(7)
March 31, 2016
2015
Growth
Revenues before reimbursements $ 223,475 $
201,156
11.1
%
Pro forma acquisition adjustment - 7,626 Currency impact
1,026 Pro forma RBR $ 224,501 $ 208,782
7.5
%
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 (loss),
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
quarter ended March 31, 2015 was non-taxable in nature. (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426005246/en/
Aaron MilesNavigant Investor
Relations312.583.5820aaron.miles@navigant.comorMegan MaupinNavigant
Corporate Communications312.583.5703
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