Navigant (NYSE: NCI) today announced financial results for the
second quarter ended June 30, 2016.
Financial Summary and Highlights:
- Second quarter 2016 revenues before
reimbursements (RBR) increased 13%, with 10% organic growth, over
second quarter 2015
- Second quarter 2016 net income was
$14.8 million, or $0.30 per share, compared to $7.8 million, or
$0.16 per share, in second quarter 2015
- Second quarter 2016 adjusted earnings
per share (EPS) of $0.33, up 27% compared to second quarter
2015
- Second quarter 2016 adjusted EBITDA of
$37.2 million, up 23% over second quarter 2015
- Affirms 2016 financial outlook
Navigant reported second quarter 2016 RBR of $238.5 million, a
13% increase (10% organic growth), compared to $211.0 million for
second quarter 2015. Total revenues increased 12% to $261.7 million
for second quarter 2016 compared to $233.4 million for second
quarter 2015. Net income for second quarter 2016 was $14.8 million,
or $0.30 per share, compared to $7.8 million, or $0.16 per share,
in the prior year second quarter. Adjusted EPS was $0.33 for second
quarter 2016, up 27% compared to second quarter 2015. Second
quarter 2016 adjusted EBITDA was $37.2 million, a 23% increase,
compared to $30.1 million for the same period in 2015. Adjusted
EBITDA margin (adjusted EBITDA as a percent of RBR) for second
quarter 2016 increased to 15.6% compared to 14.3% in second quarter
2015.
“Navigant’s 2016 second quarter results reflected continued
strong market demand for the breadth and depth of our expertise,”
commented Julie Howard, Chairman and Chief Executive Officer. “The
strength of our portfolio and our consistent execution drove
double-digit revenue and earnings per share growth. The alignment
of our professionals’ expertise to the issues facing the rapidly
transforming industries Navigant serves gives me great optimism
about the trajectory of our business results throughout the rest of
the year.”
Segment Financial
Summary
For the quarter ended June 30,
2016 2015
Change RBR ($000)
Healthcare $ 89,876 $ 74,245 21.1% Energy 29,295 26,153 12.0%
Financial Services Advisory and Compliance 39,994 29,509 35.5%
Disputes, Forensics & Legal Technology
79,320 81,116 -2.2% Total
Company $ 238,485 $ 211,023
13.0%
Total Revenues ($000) Healthcare $ 98,386 $
80,652 22.0% Energy 32,855 30,833 6.6% Financial Services Advisory
and Compliance 45,360 34,439 31.7% Disputes, Forensics & Legal
Technology 85,082 87,515
-2.8% Total Company $ 261,683
$ 233,439 12.1%
Segment Operating Profit
($000) Healthcare $ 29,362 $ 24,726 18.7% Energy 8,402 7,513
11.8% Financial Services Advisory and Compliance 17,511 11,201
56.3% Disputes, Forensics & Legal Technology
28,963 25,721 12.6% Total
Company $ 84,238 $ 69,161
21.8%
Segment Operating Margin (% of RBR) Healthcare 32.7%
33.3% Energy 28.7% 28.7% Financial Services Advisory and Compliance
43.8% 38.0% Disputes, Forensics & Legal Technology
36.5% 31.7%
Total Company 35.3% 32.8%
Second quarter 2016 RBR for the Healthcare segment increased 21%
year-over-year, with more than half of that growth organic. Segment
RBR for the quarter also increased 10% sequentially from first
quarter 2016. The performance was driven by strong demand for
large, strategy-led transformation projects and revenue cycle
consulting engagements. Segment operating profit for second quarter
2016 was up 19% compared to the same period in 2015.
Energy segment RBR increased 12% for the second quarter 2016
compared to the equivalent period in 2015, all of which represented
organic growth. RBR was also up 9% on a sequential basis from first
quarter 2016. RBR growth for the quarter reflected strength across
the segment’s portfolio of solutions, in addition to ongoing
penetration of key client accounts. Second quarter 2016 segment
operating profit was also up 12% compared to the same period in
2015.
Financial Services Advisory and Compliance segment RBR for
second quarter 2016 increased 36%, all on an organic basis,
compared to the prior year second quarter. In addition, RBR was up
19% compared to first quarter 2016. Growth was driven primarily by
continued demand for financial crimes expertise and an increase in
compliance and controls engagements for major financial
institutions. RBR growth and higher consultant utilization led to a
robust 56% increase in second quarter 2016 segment operating profit
year-over-year.
Disputes, Forensics & Legal Technology segment RBR decreased
2% for second quarter 2016 compared to both the second quarter 2015
and the first quarter 2016, primarily driven by declines in demand
and increased competition for legal technology solutions. This
decline was generally offset by strong demand for our global
expertise in large infrastructure and construction dispute matters
as well as increased regulatory, compliance and dispute demand
within the healthcare and life sciences sectors. Despite a decline
in RBR, segment operating profit was up 13% in second quarter 2016
compared to the respective period of 2015, reflecting actions to
better align resources and the recognition of performance-based
revenue associated with mass tort claims work.
Cash Flow
Second quarter 2016 net cash provided by operating activities
was $34.2 million, compared to $29.1 million for second quarter
2015, as a result of improved earnings. Free cash flow increased to
$24.4 million for second quarter 2016 compared to $11.6 million for
the same period in 2015, primarily driven by a decrease in capital
investment spending and acquisition-related payments. Days Sales
Outstanding was 81 days as of June 30, 2016, up one day compared to
June 30, 2015.
Bank debt was $189.8 million at June 30, 2016, compared to
$171.4 million at June 30, 2015 and $211.5 million at March 31,
2016. Leverage (bank debt divided by trailing twelve month adjusted
EBITDA) was 1.46 at June 30, 2016, compared to 1.37 at June 30,
2015 and 1.72 at March 31, 2016. The year-over-year increase was
mainly due to additional borrowings to fund the McKinnis
acquisition in December 2015.
Navigant repurchased 427,499 shares of common stock during
second quarter 2016 at an aggregate cost of $6.8 million and an
average cost of $15.81 per share. As of June 30, 2016,
approximately $75.0 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 projected to be at the higher
end of the range of $1.05 to $1.15.
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
second quarter 2016 results at 10:00 a.m. Eastern Time (9:00 a.m.
Central Time) on Tuesday, July 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 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 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 For the six
months ended June 30, June 30, 2016
2015 2016 2015 Revenues: Revenues
before reimbursements $ 238,485 $ 211,023 $ 461,960
$
412,179 Reimbursements 23,198 22,416
45,010 44,431 Total
revenues 261,683 233,439 506,970 456,610 Cost of services: Cost of
services before reimbursable expenses 157,966 145,367 311,906
283,968 Reimbursable expenses 23,198
22,416 45,010 44,431
Total cost of services 181,164 167,783 356,916 328,399 General and
administrative expenses 44,507 39,068 84,338 74,733 Depreciation
expense 7,015 5,724 13,537 11,079 Amortization expense 2,891 2,297
5,812 4,566 Other operating costs (benefit): Contingent acquisition
liability adjustments, net 850 2,308 850 (12,625 ) Office
consolidation, net 174 1,804 174 2,740 Other impairment -
98 - 98
Operating income 25,082 14,357 45,343 47,620 Interest
expense 1,429 1,238 2,689 2,970 Interest income (36 ) (46 ) (75 )
(101 ) Other (income) expense, net (444 ) 176
(784 ) (152 ) Income before income tax
expense 24,133 12,989 43,513 44,903 Income tax expense 9,356
5,162 16,094
11,933 Net income $ 14,777 $ 7,827
$ 27,419 $ 32,970 Basic
per share data Net income $ 0.31 $ 0.16 $ 0.58 $ 0.68 Shares used
in computing basic per share data 47,550 48,150 47,488 48,137
Diluted per share data Net income $ 0.30 $ 0.16 $ 0.56 $
0.67 Shares used in computing diluted per share data 48,841 49,310
48,936 49,369
NAVIGANT CONSULTING, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND SELECTED
DATA (In thousands, except DSO data)
June 30, December 31, 2016
2015 (unaudited) ASSETS Current assets:
Cash and cash equivalents $ 3,310 $ 8,895 Accounts receivable, net
254,395 216,660 Prepaid expenses and other current assets
31,745 29,729 Total current
assets 289,450 255,284 Non-current assets: Property and equipment,
net 73,816 76,717 Intangible assets, net 32,617 38,160 Goodwill
620,136 623,204 Other assets 21,098
22,531 Total assets $ 1,037,117
$ 1,015,896 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 11,984 $ 9,497 Accrued
liabilities 11,340 10,719 Accrued compensation-related costs 68,619
91,577 Income tax payable 8,300 - Other current liabilities
34,742 32,147 Total current
liabilities 134,985 143,940 Non-current liabilities: Deferred
income tax liabilities 80,308 75,719 Other non-current liabilities
19,706 28,956 Bank debt non-current 189,757
173,743 Total non-current liabilities
289,771 278,418 Total
liabilities 424,756 422,358
Stockholders' equity: Common stock 57 64 Additional paid-in
capital 636,506 627,976 Treasury stock (169,327 ) (296,624 )
Retained earnings 165,789 278,682 Accumulated other comprehensive
loss (20,664 ) (16,560 ) Total
stockholders' equity 612,361
593,538 Total liabilities and stockholders' equity $
1,037,117 $ 1,015,896
Selected Data
(unaudited)
Days sales outstanding, net (DSO) 81 76
NAVIGANT
CONSULTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
For the quarter
ended For the six months ended June 30, June
30, 2016 2015 2016
2015 Cash flows from operating activities: Net income
$ 14,777 $ 7,827 $ 27,419 $ 32,970 Adjustments to reconcile net
income to net cash provided by (used in) operating activities:
Depreciation expense 7,048 5,863 13,570 11,218 Amortization expense
2,891 2,297 5,812 4,566 Amortization expense - client-facing
software 174 233 353 486 Share-based compensation expense 3,995
3,420 6,524 5,524 Accretion of interest expense 177 272 355 1,135
Deferred income taxes 98 1,073 1,131 4,686 Allowance for doubtful
accounts receivable 2,911 1,402 4,547 1,592 Contingent acquisition
liability adjustments, net 850 2,308 850 (12,625 ) Other, net - 98
- 98 Changes in assets and liabilities (net of acquisitions):
Accounts receivable (28,222 ) (12,313 ) (43,765 ) (36,747 ) Prepaid
expenses and other assets 1,149 409 (1,025 ) (2,361 ) Accounts
payable 2,000 (969 ) 2,478 136 Accrued liabilities 205 (2,523 ) 472
1,444 Accrued compensation-related costs 16,878 16,743 (22,788 )
(22,896 ) Income taxes payable 7,004 (790 ) 12,059 46 Other
liabilities 2,277 3,799
(337 ) 5,923 Net cash provided by (used
in) operating activities 34,212 29,149 7,655 (4,805 ) Cash
flows from investing activities: Purchases of property and
equipment (5,080 ) (10,284 ) (10,039 ) (23,197 ) Acquisitions of
businesses, net of cash acquired - - (1,995 ) (21,379 ) Other
acquisition payments - - (5,500 ) - Payments of acquisition
liabilities (498 ) (1,530 ) (498 ) (1,530 ) Capitalized
client-facing software (109 ) (309 )
(127 ) (346 ) Net cash used in investing
activities (5,687 ) (12,123 ) (18,159 ) (46,452 ) Cash flows
from financing activities: Issuances of common stock 785 636 2,841
4,894 Repurchases of common stock (6,757 ) (5,964 ) (13,023 )
(12,081 ) Repayments to banks (112,853 ) (67,119 ) (209,245 )
(138,703 ) Borrowings from banks 92,482 58,249 227,239 199,643
Other, net (2,121 ) (1,036 ) (2,779 )
(1,247 ) Net cash (used in) provided by financing
activities (28,464 ) (15,234 ) 5,033
52,506 Effect of exchange rate
changes on cash and cash equivalents (157 ) 74
(114 ) (43 ) Net (decrease) increase in
cash and cash equivalents (96 ) 1,866 (5,585 ) 1,206 Cash and cash
equivalents at beginning of the period 3,406
1,988 8,895 2,648
Cash and cash equivalents at end of the period $ 3,310
$ 3,854 $ 3,310 $ 3,854
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 six months ended
adjusted Earnings
Per Share (2)
June 30, June 30, 2016
2015 2016
2015 Severance expense $ 1,140 $ 3,553 $ 1,997 $
5,056 Income tax benefit (3) (430 ) (1,232 )
(740 ) (1,752 ) Tax-effected impact of
severance expense $ 710 $ 2,321 $ 1,257
$ 3,304 Other operating costs (benefit) -
contingent acquisition liability adjustment, net $ 850 $ 2,308 $
850 $ (12,625 ) Income tax benefit (3)(4) (341 )
(907 ) (341 ) (1,090 ) Tax-effected
impact of other operating costs (benefit) - contingent acquisition
liability adjustment, net $ 509 $ 1,401 $ 509
$ (13,715 ) Other operating costs - office
consolidation, net $ 174 $ 1,804 $ 174 $ 2,740 Income tax benefit
(3) (70 ) (729 ) (70 )
(1,108 ) Tax-effected impact of other operating costs - office
consolidation, net $ 104 $ 1,075 $ 104
$ 1,632 Other operating costs - other
impairment $ - $ 98 $ - $ 98 Income tax benefit (5) -
(40 ) - (40 )
Tax-effected impact of other operating costs - other impairment $ -
$ 58 $ - $ 58
EBITDA reconciliation: Net Income $ 14,777 $ 7,827 $ 27,419 $
32,970 Interest expense 1,429 1,238 2,689 2,970 Interest income (36
) (46 ) (75 ) (101 ) Other (income) expense, net (444 ) 176 (784 )
(152 ) Income tax expense 9,356 5,162 16,094 11,933 Depreciation
expense 7,015 5,724 13,537 11,079 Accelerated depreciation - office
consolidation 33 139 33 139 Amortization expense 2,891
2,297 5,812
4,566 EBITDA $ 35,021 $ 22,517 $ 64,725 $ 63,404 Severance
expense 1,140 3,553 1,997 5,056 Other operating costs (benefit) -
contingent acquisition liability adjustment, net 850 2,308 850
(12,625 ) Other operating costs - office consolidation, net 141
1,665 141 2,601 Other operating costs - other impairment -
98 - 98
Adjusted EBITDA $ 37,152 $ 30,141 $
67,713 $ 58,534 Net income $ 14,777 $
7,827 $ 27,419 $ 32,970 Tax-effected impact of severance expense
710 2,321 1,257 3,304 Tax-effected impact of other operating costs
(benefit) - contingent acquisition liability adjustment, net 509
1,401 509 (13,715 ) Tax-effected impact of other operating costs -
office consolidation, net 104 1,075 104 1,632 Tax-effected impact
of other operating costs - other impairment -
58 - 58 Adjusted
net income $ 16,100 $ 12,682 $ 29,289
$ 24,249 Shares used in computing adjusted per
diluted share data 48,841 49,310 48,936 49,369 Adjusted earnings
per share $ 0.33 $ 0.26 $ 0.60 $
0.49
For the quarter ended For the six
months ended
Free Cash Flow
(5)
June 30, June 30, 2016
2015 2016
2015 Net cash provided by (used in) operating
activities $ 34,212 $ 29,149 $ 7,655 $ (4,805 ) Changes in assets
and liabilities (1,291 ) (4,356 ) 52,906 54,455 Allowance for
doubtful accounts receivable (2,911 ) (1,402 ) (4,547 ) (1,592 )
Purchases of property and equipment (5,080 ) (10,284 ) (10,039 )
(23,197 ) Payments of acquisition liabilities (498 ) (1,530 ) (498
) (1,530 ) Payments of contingent acquisition liabilities -
- (49 ) -
Free Cash Flow $ 24,432 $ 11,577 $ 45,428
$ 23,331
Leverage Ratio
(6)
At June 30, 2016
2015 Adjusted EBITDA for prior twelve-month period $
130,121 $ 124,979 Bank debt $ 189,757 $ 171,386 Leverage ratio 1.46
1.37
For the quarter ended For the six months
ended
Organic Growth
(7)
June 30, June 30, 2016
2015 Growth 2016
2015 Growth
Revenues before reimbursements $ 238,485 $ 211,023 13.0 % $ 461,960
$ 412,179 12.1 % Pro forma acquisition adjustment - 6,350 - 14,561
Currency impact 714 -
1,737 -
Organic RBR $ 239,199 $ 217,373 10.0 % $ 463,697 $ 426,740 8.7 %
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) and per share net income (loss) 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 six months
ended June 30, 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/20160726005275/en/
Aaron MilesNavigant Investor
Relations312.583.5820aaron.miles@navigant.comorMegan MaupinNavigant
Corporate Communications312.583.5703
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