Navigant (NYSE: NCI) today announced financial results for the
first quarter ended March 31, 2015.
Financial Summary and Highlights:
- First quarter 2015 revenues before
reimbursements (RBR) increased 15% year-over-year to $201.2
million, and total revenues increased 13% year-over-year to $223.2
million.
- First quarter 2015 RBR results included
organic growth of 5% year-over-year, with contribution from all
segments.
- Net income from continuing operations
was $25.1 million or $0.51 per share; adjusted earnings per share
(EPS) increased 15% year-over-year to $0.23, and adjusted EBITDA
increased 27% year-over-year to $28.4 million.
- 426,800 shares of common stock
repurchased in first quarter 2015 at an average cost of $14.33 per
share.
- Reiterates financial outlook for
2015.
Navigant reported first quarter 2015 RBR of $201.2 million, a
15% increase compared to $175.1 million for first quarter 2014,
with year-over-year RBR organic growth in all four segments. Total
revenues increased 13% to $223.2 million for first quarter 2015
compared to $197.7 million for first quarter 2014. Net income from
continuing operations for first quarter 2015 was $25.1 million, or
$0.51 per share, compared to $10.4 million, or $0.21 per share, in
the prior year quarter. Adjusted EPS increased 15% to $0.23 for
first quarter 2015 compared to $0.20 for first quarter 2014.
Adjusted EBITDA increased 27% to $28.4 million for first quarter
2015 compared to $22.3 million for the same period in 2014.
Julie Howard, Chairman and Chief Executive
Officer, commented, “We are pleased with our results in the
first quarter, reflecting nice organic growth, with contributions
from all segments. Each of the primary industry sectors that we
serve - Financial Services, Energy and Healthcare - continue to
face significant regulatory scrutiny and market pressure to
transform their business models, a sweet spot for our skills and
capabilities. Our Financial Risk & Compliance segment and our
Energy segment contributed double digit growth, all organic, while
the Healthcare segment realized 43% RBR growth year over year,
primarily driven by investments in new business process management
service capabilities.”
Howard further commented, “As we continue to shift our business
mix to reflect a more balanced combination of consulting, business
process management services and technology solutions, we anticipate
there may be margin compression. Our focus for this year is to
invest in our long-term strategy, while managing our bottom line
performance by closely aligning resources with revenue
potential.”
Segment Financial
Summary
For the quarter ended
March 31,
2015
2014
Change
RBR ($000) Disputes, Investigations & Economics $
76,593 $ 76,032 0.7% Financial, Risk & Compliance 34,943 31,411
11.2% Healthcare 63,994 44,735 43.1% Energy 25,626
22,878 12.0% Total Company $ 201,156
$ 175,056 14.9%
Total Revenues ($000)
Disputes, Investigations & Economics $ 81,211 $ 82,084 -1.1%
Financial, Risk & Compliance 42,300 37,998 11.3% Healthcare
69,329 50,366 37.7% Energy 30,331
27,300 11.1% Total Company $ 223,171 $ 197,748
12.9%
Segment Operating Profit ($000) Disputes,
Investigations & Economics $ 24,269 $ 24,718 -1.8% Financial,
Risk & Compliance 15,070 13,468 11.9% Healthcare 18,256 14,029
30.1% Energy 7,922 6,487 22.1%
Total Company $ 65,517 $ 58,702 11.6%
Segment Operating Margin (% of RBR) Disputes, Investigations
& Economics 31.7% 32.5% Financial, Risk & Compliance 43.1%
42.9% Healthcare 28.5% 31.4% Energy 30.9%
28.4% Total Company 32.6%
33.5%
RBR for the Healthcare segment increased 43% year-over-year for
first quarter 2015 with 4% organic RBR growth for the period. RBR
growth was driven primarily by business process management
services. Navigant’s Life Sciences practice also contributed to a
strong quarter, reflecting an increase in demand from clients to
support their product commercialization efforts. Segment operating
profit margin was 29% versus 31% in the same period last year,
mainly due to lower margins generated by business process
management services. As this business matures, the Company believes
that the margin contribution will improve over time.
The Financial, Risk & Compliance segment RBR for first
quarter 2015 increased 11%, all on an organic basis, compared to
the prior year quarter. Growth was driven primarily by the ongoing
strong demand for new compliance and control engagements for major
financial institutions. The growth in RBR led to a 12% increase in
first quarter 2015 segment operating profit year-over-year.
The Energy segment RBR for first quarter 2015 increased 12%
compared to first quarter 2014, and increased 13% on an organic
basis. The growth was driven by demand from both the public and
private sector, as well as increased client penetration from the
segment’s key client accounts program. First quarter 2015 segment
operating profit increased 22% year-over-year.
The Disputes, Investigations & Economics segment RBR for
first quarter 2015 increased 1% year-over-year, nearly all on an
organic basis. The increase was driven primarily by increased
demand for our global construction expertise and the segment’s
legal technology solutions, partially offset by a lower
contribution from economic consulting engagements. Segment
operating profit decreased 2% in first quarter 2015 compared to the
same period of 2014.
Cash Flow
Free cash flow was $11.8 million for first quarter 2015 compared
to $18.5 million for the same period in 2014, reflecting increased
capital investment spending. Days Sales Outstanding (DSO) was 80
days as of March 31, 2015, up 2 days compared to March 31,
2014.
Bank debt was $178.7 million at March 31, 2015 compared to
$120.8 million at March 31, 2014. Leverage (bank debt divided by
trailing twelve month adjusted EBITDA) was 1.46 at March 31, 2015
compared to 1.03 at March 31, 2014. The increase in the 2015 first
quarter debt levels was mainly due to additional borrowings to fund
the Cymetrix acquisition in May 2014 and, to a lesser extent, the
RevenueMed acquisition in February 2015.
Navigant repurchased 426,800 shares of common stock during first
quarter 2015 at an aggregate cost of $6.1 million and an average
cost of $14.33 per share. As of March 31, 2015, $66.6 million
remained available under the Company’s share repurchase
authorization, which is set to expire on December 31, 2015.
2015 Outlook
Navigant reiterated its 2015 financial outlook. As previously
disclosed, full year 2015 RBR is expected to range between $815 and
$845 million while 2015 total revenues are estimated to be between
$900 and $930 million. Adjusted EBITDA for full year 2015 is
expected to range between $115 and $125 million and adjusted EPS
for full year 2015 is estimated to be between $0.90 and $1.00.
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.
As used in this press release, organic growth represents RBR
adjusted to include the impact of acquisitions as if the Company
owned them from the beginning of each comparable period and
adjusted to exclude the impact of foreign currency exchange rate
fluctuations. Our definition of organic growth may not be
comparable to similarly titled metrics at other companies.
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.
Conference Call Details
Navigant will host a conference call to discuss the Company’s
first quarter 2015 results at 10:00 a.m. Eastern Time (9:00 a.m.
Central Time) on Tuesday, April 28, 2015. 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 (NYSE: NCI) is a specialized, global professional
services firm dedicated to assisting clients in creating and
protecting value in the face of critical business risks and
opportunities. Through senior level engagement with clients,
Navigant professionals deliver expert and advisory work through
implementation and business process management services. The firm
combines deep technical expertise in Disputes and Investigations,
Economics, Financial Advisory and Management Consulting, with
business pragmatism to address clients’ needs in highly regulated
industries, including Construction, Energy, Financial Services and
Healthcare. 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
success of the Company’s organizational changes and margin
improvement initiatives; risks inherent in international
operations, including foreign currency fluctuations; ability to
make acquisitions and divestitures; pace, timing and integration of
acquisitions and separation of divestitures; operational risks
associated with new or expanded service areas, including business
process management services; impairments; management of
professional staff, including dependence on key personnel,
recruiting, attrition and the ability to successfully integrate new
consultants into the Company’s practices; utilization rates;
conflicts of interest; potential loss of clients or large
engagements; clients’ financial condition and their ability to make
payments to the Company; risks inherent with litigation; higher
risk client assignments; professional liability; potential
legislative and regulatory changes; continued access to capital;
and market and general economic conditions. Further information on
these and other potential factors that could affect the Company’s
financial results are included under the “Risk Factors” section and
elsewhere in the Company’s filings with the Securities and Exchange
Commission (SEC), which are available on the SEC’s website or at
www.navigant.com/investor_relations.
The Company cannot guarantee any future results, levels of
activity, performance or achievement and undertakes no obligation
to update any of its forward-looking statements.
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data
(1))
(Unaudited) For the quarter ended
March 31, 2015 2014 Revenues: Revenues
before reimbursements $ 201,156 $ 175,056 Reimbursements
22,015 22,692 Total revenues 223,171
197,748 Costs of services: Cost of services before reimbursable
expenses 138,601 120,128 Reimbursable expenses 22,015
22,692 Total costs of services 160,616 142,820
General and administrative expenses 35,665 33,102 Depreciation
expense 5,355 4,309 Amortization expense 2,269 1,362 Other
operating costs (benefit): Contingent acquisition liability
adjustments, net (14,933 ) (1,160 ) Office consolidation, net
936 - Operating income 33,263
17,315 Interest expense 1,732 838 Interest income (55 ) (89 ) Other
(income) expense, net (328 ) 82 Income
from continuing operations before income tax expense 31,914 16,484
Income tax expense 6,771 6,114
Net income from continuing operations 25,143 10,370 Income from
discontinued operations, net of tax -
509 Net income $ 25,143 $ 10,879
Basic per share data Net income from continuing operations $
0.52 $ 0.21 Income from discontinued operations, net of tax $ -
$ 0.01 Net income (1) $ 0.52 $
0.22 Shares used in computing basic per share data 48,123
48,906 Diluted per share data Net income from continuing
operations $ 0.51 $ 0.21 Income from discontinued operations, net
of tax $ - $ 0.01 Net income (1) $ 0.51
$ 0.22 Shares used in computing diluted per share
data 49,413 50,477
NAVIGANT CONSULTING, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND SELECTED
DATA (In thousands, except DSO data)
March 31, December 31, 2015 2014
(Unaudited) ASSETS Current assets: Cash and cash equivalents
$ 1,988 $ 2,648 Accounts receivable, net 211,879 187,652 Prepaid
expenses and other current assets 34,655 27,142 Deferred income tax
assets 11,601 13,455 Total
current assets 260,123 230,897 Non-current assets: Property and
equipment, net 71,785 60,617 Intangible assets, net 31,198 26,502
Goodwill 579,331 568,091 Other assets 14,455
17,386 Total assets $ 956,892 $ 903,493
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 12,864 $ 11,735 Accrued liabilities
17,236 11,311 Accrued compensation-related costs 43,203 83,061
Income tax payable 4,047 1,763 Other current liabilities
40,127 52,526 Total current liabilities
117,477 160,396 Non-current liabilities: Deferred income tax
liabilities 77,736 76,329 Other non-current liabilities 18,446
14,387 Bank debt non-current 178,734
109,790 Total non-current liabilities 274,916
200,506 Total liabilities 392,393
360,902 Stockholders' equity: Common
stock 64 64 Additional paid-in capital 617,985 611,882 Treasury
stock (281,725 ) (275,608 ) Retained earnings 243,480 218,337
Accumulated other comprehensive loss (15,305 )
(12,084 ) Total stockholders' equity 564,499
542,591 Total liabilities and stockholders' equity $
956,892 $ 903,493
Selected
Data
Days sales outstanding, net (DSO) 80 69
NAVIGANT
CONSULTING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
For the quarter ended March 31, 2015
2014 Cash flows from operating activities: Net
income $ 25,143 $ 10,879 Adjustments to reconcile net income to net
cash used in operating activities: Depreciation expense 5,355 4,309
Amortization expense 2,269 1,362 Amortization expense -
client-facing software 253 64 Share-based compensation expense
2,104 2,714 Accretion of interest expense 863 164 Deferred income
taxes 3,613 7,243 Allowance for doubtful accounts receivable 190
880 Contingent acquisition liability adjustments, net (14,933 )
(1,160 ) Gain on disposition of discontinued operations - (509 )
Changes in assets and liabilities (net of acquisitions and
dispositions): Accounts receivable (24,434 ) (20,350 ) Prepaid
expenses and other assets (2,770 ) (2,723 ) Accounts payable 1,105
(2,451 ) Accrued liabilities 3,967 (1,223 ) Accrued
compensation-related costs (39,639 ) (41,322 ) Income taxes payable
836 (1,076 ) Other liabilities 2,124
(4,509 ) Net cash used in operating activities (33,954 )
(47,708 ) Cash flows from investing activities: Purchases of
property and equipment (12,913 ) (6,492 ) Acquisitions of
businesses, net of cash acquired (21,379 ) (1,500 ) Proceeds from
dispositions, net of selling costs - 824 Capitalized client-facing
software (37 ) (828 ) Net cash used in
investing activities (34,329 ) (7,996 ) Cash flows from
financing activities: Issuances of common stock 4,258 1,019
Repurchase of common stock (6,117 ) (7,391 ) Payments of contingent
acquisition liabilities - (107 ) Repayments to banks (71,584 )
(68,398 ) Borrowings from banks 141,394 132,354 Other, net
(211 ) (1,009 ) Net cash provided by financing
activities 67,740 56,468
Effect of exchange rate changes on cash and cash equivalents
(117 ) 6 Net increase (decrease) in cash and
cash equivalents (660 ) 770 Cash and cash equivalents at beginning
of the period 2,648 1,968 Cash
and cash equivalents at end of the period $ 1,988 $
2,738
NAVIGANT CONSULTING, INC. AND
SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(2) (In thousands, except per share data)
(Unaudited) This press release includes certain
non-GAAP financial measures as defined by the Securities and
Exchange Commission. Below are the reconciliations of these
non-GAAP financial measures to the most directly comparable
financial measure calculated and presented in accordance with
generally accepted accounting principles (GAAP). This information
should be considered as supplemental in nature and not as a
substitute for, or superior to, any measure of performance prepared
in accordance with GAAP. Management uses these non-GAAP 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 (3)
March 31, 2015 2014 Severance expense $
1,503 $ 505 Income tax benefit (4) (520 )
(199 ) Tax-effected impact of severance expense $ 983
$ 306 Other operating benefit - contingent
acquisition liability adjustment, net $ (14,933 ) $ (1,160 ) Income
tax (benefit) expense (4)(5) (183 ) 468
Tax-effected impact of other operating benefit - contingent
acquisition liability adjustment, net $ (15,116 ) $ (692 )
Other operating costs - office consolidation $ 936 $ -
Income tax benefit (4) (379 ) -
Tax-effected impact of other operating costs - office consolidation
$ 557 $ - EBITDA reconciliation:
Operating income $ 33,263 $ 17,315 Depreciation expense 5,355 4,309
Amortization expense 2,269 1,362
EBITDA $ 40,887 $ 22,986 Severance expense 1,503 505 Other
operating benefit - contingent acquisition liability adjustment,
net (14,933 ) (1,160 ) Other operating costs - office consolidation
936 - Adjusted EBITDA $ 28,393
$ 22,331 Net income from continuing
operations $ 25,143 $ 10,370 Tax-effected impact of severance
expense 983 306 Tax-effected impact of other operating benefit -
contingent acquisition liability adjustment, net (15,116 ) (692 )
Tax-effected impact of other operating costs - office consolidation
557 - Adjusted net income $
11,567 $ 9,984 Shares used in computing
adjusted per diluted share data 49,413 50,477 Adjusted earnings per
share $ 0.23 $ 0.20
For the quarter
ended
Free Cash Flow
(6)
March 31, 2015 2014 Net cash used in
operating activities $ (33,954 ) $ (47,708 ) Changes in assets and
liabilities 58,811 73,654 Allowance for doubtful accounts
receivable (190 ) (880 ) Purchases of property and equipment
(12,913 ) (6,492 ) Payments of contingent acquisition liabilities
- (107 ) Free Cash Flow $ 11,754
$ 18,467
At
Leverage Ratio
(7)
March 31, 2015 2014 Adjusted EBITDA for
prior twelve-month period $ 122,285 $ 117,454 Bank debt $ 178,734 $
120,835 Leverage ratio 1.46 1.03 Footnotes (1) Per share
data may not sum due to rounding. (2) All non-GAAP financial
measures are presented on a continuing operations basis unless
otherwise noted. (3) EBITDA is earnings from continuing
operations before interest, taxes, depreciation and amortization.
Adjusted EBITDA excludes the impact of severance expense and other
operating costs (benefit). Adjusted net income and adjusted
earnings per share exclude the net income (loss) and per share net
income (loss) impact of discontinued operations, 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. (4)
Effective income tax expense (benefit) has been determined based on
specific tax jurisdiction. (5) A portion of the deferred
contingent acquisition liability adjustment for the quarter ended
March 31, 2015 was non-taxable in nature. (6) 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. (7) 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.
NavigantInvestor RelationsAaron Miles,
312.583.5820aaron.miles@navigant.com
Navigant Consulting (NYSE:NCI)
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