Navigant Comments on Letter from Engine Capital LP
January 24 2018 - 3:52PM
Business Wire
Navigant (NYSE: NCI) today commented on the letter released
by Engine Capital LP (“Engine”).
Navigant is disappointed Engine has chosen to express its
viewpoint in this manner and disagrees with certain assertions and
analysis presented in its letter. Navigant’s Board of Directors and
management team are aligned in their commitment to take continuous
actions to improve performance and create long-term shareholder
value.
Navigant’s Board of Directors regularly reviews and rigorously
evaluates the Company’s strategic direction and operating plans
against its primary objective of enhancing shareholder value. As
part of its ongoing responsibilities, the Board welcomes open
dialogue with shareholders and values constructive input. Over the
past few months, Navigant’s Chairman and CEO, lead independent
director and Chair of the Company’s Audit Committee, as well as
members of management, have engaged in extensive discussions with
representatives of Engine and listened carefully to their ideas.
Over the course of this dialogue, Engine has expressed its view
that the Company has a strong business, is “well managed” and is
undervalued – all points with which Navigant agrees.
In addition, consistent with its commitment to maintaining a
highly qualified, independent Board, Navigant has invited Engine on
multiple occasions to share its recommendations regarding potential
Board nominees. Despite Navigant’s repeated invitations, Engine has
yet to share its recommendations, other than its own founder,
Arnaud Ajdler.
Enhanced Return of Capital and Operating Performance
Over the past several years, Navigant has taken numerous and
clear actions to improve performance and create shareholder value,
while maintaining its focus on the Company’s long-term strategic
objectives. Those actions include:
- Return of Capital. Navigant
continues to employ a balanced capital allocation strategy which
includes returning significant cash to shareholders. In 2017,
Navigant increased its level of capital returned to shareholders,
repurchasing $43 million in shares which represented more than half
of its free cash flow generation. This is in addition to $49
million of share repurchases completed in 2016 and 2015 combined.
The Company increased its share repurchase authorization effective
May 1, 2017 and is currently targeting $50 million in share
repurchases in 2018.
- Operating Performance with Strong
Cost Management. Notwithstanding challenging market conditions
throughout 2017, Navigant has delivered top-line growth (primarily
organic) in excess of the median for public company professional
consulting peers over the past three-year period ending with the
third quarter 2017, while also achieving margins above the industry
peer group median over the same period. Additionally, the Company
has worked with an external consultant in evaluating its internal
processes to identify ways to leverage operating efficiencies to
further lower costs. As a result, Navigant’s general and
administrative costs as a percentage of revenue, are consistently
below the industry peer group median for the same three-year
period. Navigant is committed to continuous improvement, including
the pursuit of ongoing cost management and margin expansion in
2018.
- Capital Expenditure Normalization
and Working Capital Improvements. As the Company has indicated
previously, capital expenditures have been elevated in the last few
years, largely due to real estate investment and optimization. In
2018, capital expenditures are expected to return to historically
normalized levels. In addition, Navigant has implemented
improvements to increase cash flow generation in 2018, including:
- Implemented enterprise resource
planning billing system in 2017.
- Targeted contracting and collection
actions to improve Days of Sales Outstanding (DSO), with fourth
quarter 2017 DSO of 85 days as compared to 94 days at the end of
the third quarter 2017. The Company expects further improvements to
average DSO and working capital in 2018.
Strong Corporate Governance
Navigant has also demonstrated a commitment to strong corporate
governance:
- Navigant has consistently received top
governance scores as outlined by Institutional Shareholder Services
(ISS).
- Eight of nine directors are
independent.
- Of the Company’s current independent
directors, three have been appointed to the Board since 2014,
including the most recent appointment in October of 2017. Each of
the new directors was selected for his/her significant technical,
operating, and industry expertise in the three primary industry
segments Navigant serves (Energy, Financial Services, and
Healthcare).
Navigant’s focus has been, and will remain, on how best to
deliver maximum value for our clients which in turn will drive
long-term returns for our shareholders. The Company firmly believes
in its prospects and remains committed to balancing short- and
long-term decisions for the benefit of all shareholders, all within
the framework of strong corporate governance.
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20180124006264/en/
Navigant Investor RelationsKyle
Bland312.573.5624kyle.bland@navigant.comorNavigant Corporate
CommunicationsTim Blair303.383.7344timothy.blair@navigant.com
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