Navigant Reports Fourth Quarter And Full Year 2012 Financial Results And Provides 2013 Business And Financial Outlook

Navigant (NYSE:NCI) today announced financial results for the fourth quarter and full year ended December 31, 2012, along with the Company’s business and financial outlook for 2013.

“Navigant had an exceptional finish to the year,” commented Julie Howard, Chief Executive Officer. “We delivered record quarterly revenues driven by organic growth and achieved improved EBITDA margin levels, despite challenging macroeconomic trends. Our 2012 financial results reflect execution against our strategy to Perform, Bank and Innovate. I commend our professionals for continuing to deliver preeminent client service and I am optimistic about our opportunities in 2013.”
 

Fourth Quarter and Full Year 2012 Results
 
Total Company Fourth Quarter and Full Year 2012 Financial Results (1)
    Q4 2012     Q4 2011     Change     2012     2011     Change
RBR ($000)   $ 194,346     $ 170,996     13.7%     $ 743,383     $ 695,714     6.9%
Total Revenues ($000) $ 225,357 $ 197,005 14.4% $ 844,641 $ 784,684 7.6%
EBITDA ($000) $ 30,280 $ 24,797 22.1% $ 105,611 $ 98,254 7.5%
Adjusted EBITDA ($000) $ 33,777 $ 25,644 31.7% $ 112,166 $ 101,177 10.9%
Net Income ($000)   $ 13,527     $ 11,056     22.3%     $ 46,169     $ 41,130     12.3%
Earnings Per Share $ 0.26 $ 0.21 23.8% $ 0.90 $ 0.80 12.5%
Adjusted Earnings Per Share   $ 0.31     $ 0.22     40.9%     $ 0.98     $ 0.84     16.7%
Average Client Service Full Time Equivalents (FTE) 1,994 1,889 5.6% 1,926 1,818 5.9%
End of Period Client Service FTE     2,013       1,882     7.0%       2,013       1,882     7.0%
Consultant Utilization (1,850 base) (2)     75%       74%     1.4%       75%       77%     -2.6%
Average Bill Rate (excluding performance based fees) (2)   $ 276     $ 283     -2.5%     $ 281     $ 282     -0.4%
Days Sales Outstanding (DSO)     72       76     -5.3%       72       76     -5.3%
 

1)
 

EBITDA, adjusted EBITDA and adjusted earnings per share are non GAAP financial measures. See the attached financial schedules for a reconciliation of EBITDA, adjusted EBITDA and adjusted earnings per share to the most directly comparable GAAP financial measures.

2)

Prior period utilization and bill rate figures have been restated to reflect consulting personnel only and do not include personnel who provide technology, data and process related client services.
 

Navigant reported fourth quarter 2012 RBR of $194 million, up 14% from fourth quarter 2011, on increased revenues across all four business segments, approximately two-thirds of which was due to organic growth. RBR increased 7% sequentially compared to third quarter 2012. Performance-based fees contributed only modestly to fourth quarter 2012 results, adding $2 million versus $4 million from 2011. Average client service FTE increased 6% for fourth quarter 2012 over the same period in 2011. Fourth quarter 2012 adjusted EBITDA increased 32% over the same period in 2011 to 17% of RBR, reflecting both higher revenues and the effects of the Company’s margin improvement programs. Strong fourth quarter 2012 cash collections brought December 31, 2012 long-term debt down $21 million, or 14%, compared to September 30, 2012, while up slightly from 2011 year-end balances. DSO continued a downward trend and declined to 72 days compared to 76 days at the end of 2011.

Full year 2012 RBR was $743 million, an increase of 7% over 2011, primarily due to organic growth. Total revenues for 2012 were $845 million, up 8% compared to the prior year. Year over year increases were driven by several large mortgage servicing review engagements, as well as demand for services in the Company’s Healthcare segment. Average client service FTE for 2012 increased 6% over the prior year with most of the increase relating to demand for Navigant’s Technology, Data & Process services. Adjusted EBITDA for full year 2012 improved to $112 million, up 11% over prior year, and adjusted EBITDA margin of 15% in 2012 was consistent with that of 2011. Interest expense for the full year 2012 declined 25% on lower effective interest rates and lower average outstanding borrowing when compared to the prior year. Full year 2012 adjusted EPS increased to $0.98, up 17% from 2011. Cash flow from operations totaled $76 million in 2012, funding Navigant’s capital spending program, growth investments and nearly $20 million of stock repurchases.

 

Business Segment Highlights
 
Business Segment Fourth Quarter and Full Year 2012 Financial Results (3)
    Q4 2012     Q4 2011     Change     2012     2011     Change
Business Segment RBR ($000)                      
Disputes, Investigations & Economics $ 85,142 $ 82,305 3.4% $ 340,036 $ 338,965 0.3%
Financial, Risk & Compliance Advisory 43,390 32,653 32.9% 162,614 136,472 19.2%
Healthcare 41,800 34,991 19.5% 151,065 134,611 12.2%
Energy     24,014       21,047     14.1%       89,668       85,666     4.7%
Total Company   $ 194,346     $ 170,996     13.7%     $ 743,383     $ 695,714     6.9%
Business Segment Revenues ($000)
Disputes, Investigations & Economics $ 91,459 $ 90,346 1.2% $ 364,426 $ 370,850 -1.7%
Financial, Risk & Compliance Advisory 57,196 40,651 40.7% 204,166 159,663 27.9%
Healthcare 47,428 39,915 18.8% 170,150 151,841 12.1%
Energy     29,274       26,093     12.2%       105,899       102,330     3.5%
Total Company   $ 225,357     $ 197,005     14.4%     $ 844,641     $ 784,684     7.6%
Segment Operating Profit ($000)
Disputes, Investigations & Economics $ 32,125 30,504 5.3% $ 123,288 $ 122,672 0.5%
Financial, Risk & Compliance Advisory 16,577 11,997 38.2% $ 58,564 $ 44,906 30.4%
Healthcare 15,711 11,756 33.6% $ 50,959 $ 42,739 19.2%
Energy     9,155       8,180     11.9%     $ 31,721     $ 32,882     -3.5%
Total Company   $ 73,568     $ 62,437     17.8%     $ 264,532     $ 243,199     8.8%
 

3)
 

A metrics summary including data by segment is available at www.navigant.com/investor_relations .
 

Fourth quarter 2012 RBR in the Disputes, Investigations & Economics segment increased 3% over both fourth quarter 2011 and third quarter 2012. The year over year increase reflects growth of the segment’s Legal Technology Solutions business and improved demand within the Economics business including revenue contributions from the December 2012 acquisition of AFE. Segment operating profit for fourth quarter 2012 improved 5% from the prior year and 11% from third quarter 2012. The year over year increase reflects higher utilization in the Economics business, improved results in the segment’s European disputes business, and margin improvement initiatives.

In the Financial, Risk & Compliance Advisory segment, fourth quarter 2012 RBR increased 33% over fourth quarter 2011 and 11% over third quarter 2012. Full year 2012 RBR increased 19% over 2011. The segment reported improved segment operating profit for the fourth quarter 2012, up 38% over the prior year fourth quarter. As has been the case throughout 2012, several large mortgage servicing review engagements drove higher revenues and operating profits when compared to 2011.

Navigant’s Healthcare segment reported fourth quarter RBR increases of 20% over fourth quarter 2011 and 14% over third quarter 2012. Full year 2012 RBR in the segment was up 12% over prior year. Segment operating profit for fourth quarter 2012 increased 34% compared to fourth quarter 2011 due to the combination of higher revenues and cost management initiatives. The segment has experienced growing demand for its broad line of services focused on the health-care industry including performance improvement and strategy expertise. The Life Sciences practice continues to contribute to segment growth aided by the successful integration of Easton Associates, acquired in October 2012.

Fourth quarter 2012 Energy segment RBR increased 14% over fourth quarter 2011 and 5% over third quarter 2012. Segment operating profit was up 12% in fourth quarter 2012 compared to the same period in 2011. Demand for Navigant’s energy efficiency expertise and the expansion of market research and subscription offerings in 2012 continued to drive revenue growth .

2013 Outlook

“In 2013, we plan to build upon our strong 2012 performance,” said Howard. “We expect solid growth in our Healthcare and Energy segments as well as broadly across our Technology enabled businesses, which will help offset the impact from recent settlements of large mortgage servicing review matters. We also anticipate continued progress in the realization of our longer-term margin targets. Our balance sheet is in great shape and, with another year of strong cash flow, we plan to increase our share repurchases.”

Full year 2013 RBR is expected to range between $740 and $800 million while total 2013 revenues are estimated to be between $820 and $880 million. Adjusted EBITDA is expected to range between $115 and $125 million, and adjusted EPS is estimated to be between $0.95 and $1.10.

Conference Call Details

Julie Howard will host a conference call to discuss the Company’s fourth quarter and full year 2012 results at 10:00 a.m. Eastern Time on Thursday, February 14, 2013. The conference call may be accessed via the Navigant website ( www.navigant.com/investor_relations) or by dialing 888.593.8430 (312.470.7390 for international callers) and referencing pass code “NCI.” A replay of the web cast will be available for approximately 90 days.

About Navigant

Navigant (NYSE: NCI) is a specialized, global expert 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 combine technical expertise in Disputes, Investigations, Economics, Financial Advisory and Management Consulting, with business pragmatism in the highly regulated Construction, Energy, Financial Services and Healthcare industries. More information about Navigant can be found at www.navigant.com.

Statements included in this press release which are not historical in nature are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words including “outlook,” ”plans,” “goals,” “anticipates,” “believes,” “intends,” “estimates,” “expects” 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; risks inherent in international operations, including foreign currency fluctuations; ability to make acquisitions; pace, timing and integration of acquisitions; impairment charges; 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; 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)
(Unaudited)
       
For the quarter ended For the year ended
December 31, December 31,
2012   2011 2012   2011
Revenues:
Revenues before reimbursements $ 194,346 $ 170,996 $ 743,383 $ 695,714
Reimbursements   31,011       26,009     101,258       88,970  
Total revenues 225,357 197,005 844,641 784,684
Costs of services:
Cost of services before reimbursable expenses 126,377 112,199 494,972 467,045
Reimbursable expenses   31,011       26,009     101,258       88,970  
Total costs of services 157,388 138,208 596,230 556,015
General and administrative expenses 36,664 34,000 141,155 130,415
Depreciation expense 4,112 3,239 14,986 13,303
Amortization expense 1,888 1,960 6,767 8,658
Other operating costs:
Contingent acquisition liability adjustments, net 445 - 1,065 -
Office Consolidation   580       -       580       -  
Operating income 24,280 19,598 83,858 76,293
Interest expense 1,267 1,634 5,453 7,292
Interest income (286 ) (255 ) (872 ) (1,447 )
Other income, net   (134 )     (109 )   (78 )     (279 )
Income before income tax expense 23,433 18,328 79,355 70,727
Income tax expense   9,906       7,272     33,186       29,597  
Net income $ 13,527     $ 11,056   $ 46,169     $ 41,130  
 
Basic net income per share $ 0.27 $ 0.22 $ 0.91 $ 0.81
 
Shares used in computing net income per basic share 50,568 51,173 50,894 50,820
 
Diluted net income per share $ 0.26 $ 0.21 $ 0.90 $ 0.80
 
Shares used in computing net income per diluted share 51,340 51,692 51,572 51,371
   
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
 
December 31, December 31,
2012   2011
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,052 $ 2,969
Accounts receivable, net 198,709 179,041
Prepaid expenses and other current assets 25,054 22,766
Deferred income tax assets   17,821       16,229  
Total current assets 242,636 221,005
Non-current assets:
Property and equipment, net 45,342 41,138
Intangible assets, net 16,123 16,825
Goodwill 619,932 570,280
Other assets   30,417       25,953  
Total assets $ 954,450     $ 875,201  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,042 $ 16,261
Accrued liabilities 11,557 8,432
Accrued compensation-related costs 84,813 95,451
Income tax payable 7,129 3,558
Other current liabilities   35,754       32,622  
Total current liabilities 157,295 156,324
Non-current liabilities:
Deferred income tax liabilities 67,623 52,964
Other non-current liabilities 35,606 20,445
Bank debt non-current   134,183       131,790  
Total non-current liabilities   237,412       205,199  
Total liabilities   394,707       361,523  
Stockholders' equity:
Common stock 62 61
Additional paid-in capital 582,363 567,627
Treasury stock (216,500 ) (197,602 )
Retained earnings 202,542 156,373
Accumulated other comprehensive loss   (8,724 )     (12,781 )
Total stockholders' equity   559,743       513,678  
Total liabilities and stockholders' equity $ 954,450     $ 875,201  
 

Selected Data
Days sales outstanding, net (DSO)     72       76  
 
NAVIGANT CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
       
For the quarter ended For the year ended
December 31,   December 31,
2012   2011   2012   2011
 
Cash flows from operating activities:
Net income $ 13,527 $ 11,056 $ 46,169 $ 41,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 4,112 3,239 14,986 13,303
Amortization expense 1,888 1,960 6,767 8,658
Share-based compensation expense 2,350 2,276 10,027 8,792
Accretion of interest expense 191 141 630 836
Deferred income taxes (1,932 ) 655 11,123 11,264
Allowance for doubtful accounts receivable 2,219 1,634 6,329 6,910
Contingent acquisition liability adjustments, net 445 - 1,065 -
Changes in assets and liabilities (net of acquisitions):
Accounts receivable, net 10,921 17,984 (22,821 ) (5,817 )
Prepaid expenses and other assets 4,126 255 (2,668 ) 208
Accounts payable (816 ) 1,634 1,754 5,353
Accrued liabilities (153 ) (141 ) 2,879 491
Accrued compensation-related costs 19,723 18,759 (10,794 ) 22,720
Income taxes payable 6,194 (1,079 ) 4,385 1,705
Other liabilities   4,726       (1,283 )     6,131       (4,186 )
 
Net cash provided by operating activities 67,521 57,090 75,962 111,367
 
Cash flows from investing activities:
Purchases of property and equipment (5,541 ) (4,903 ) (20,052 ) (10,375 )
Acquisitions of businesses, net of cash acquired (24,891 ) (1,900 ) (27,479 ) (9,246 )
Payments of acquisition liabilities (3,750 ) (4,750 ) (4,856 ) (14,967 )
Other, net   (633 )     -       (2,234 )     (225 )
 
Net cash used in investing activities (34,815 ) (11,553 ) (54,621 ) (34,813 )
 
Cash flows from financing activities:
Issuances of common stock 550 482 3,283 1,865
Repurchase of common stock (6,203 ) (2,558 ) (18,870 ) (2,558 )
Payments of contingent acquisition liabilities (5,779 ) - (8,580 ) -
Payment upon termination of credit agreement - - - (250,613 )
Proceeds from credit agreement - - - 250,613
Repayments to banks (138,873 ) (69,685 ) (347,877 ) (284,456 )
Borrowings from banks 117,503 28,022 349,729 218,078
Payments of term loan - - - (4,599 )
Payments of debt issuance costs - - - (2,814 )
Other, net   (101 )     (201 )     (1,071 )     (907 )
Net cash used in financing activities   (32,903 )     (43,940 )     (23,386 )     (75,391 )
 
Effect of exchange rate changes on cash and cash equivalents   10       (52 )     128       (175 )
Net increase (decrease) in cash and cash equivalents (187 ) 1,545 (1,917 ) 988
Cash and cash equivalents at beginning of the period   1,239       1,424       2,969       1,981  
Cash and cash equivalents at end of the period $ 1,052     $ 2,969     $ 1,052     $ 2,969  
 
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(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 measures in addition to GAAP 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 measures may not be comparable to similarly-titled measures of other companies.
 

EBITDA, adjusted EBITDA, adjusted Net Income and adjusted Earnings per Share
EBITDA is earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of severance expense and other operating costs. Adjusted net income and adjusted earnings per share exclude the net income and per share net income impact of severance expense and other operating costs. Severance expense and other operating costs 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.
 

Free Cash Flow
Free cash flow is calculated as net cash provided from operations excluding changes in assets and liabilities and allowance for uncollectible accounts receivable less cash payments for property, plant 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 available for on-going business operations and long term value creation.
   

EBITDA, adjusted EBITDA, adjusted Net Income and
For the quarter ended For the year ended

adjusted Earnings Per Share
December 31, December 31,
2012   2011 2012   2011
Severance expense $ 2,472 $ 847 $ 4,910 $ 2,923
Income tax benefit (1)   (930 )     (302 )   (1,776 )     (1,037 )
Net income impact of severance expense $ 1,542     $ 545   $ 3,134     $ 1,886  
 
Other operating costs - contingent acquisition liability adjustment $ 445 $ - $ 1,065 $ -
Income tax benefit (1)   (180 )     -     (430 )     -  
Net income impact of other operating costs - contingent acquisition liability adjustment $ 265     $ -   $ 635     $ -  
 
Other operating costs - office consolidation $ 580 $ - $ 580 $ -
Income tax benefit (1)   (234 )     -     (234 )     -  
Net income impact of other operating costs - office consolidation $ 346     $ -   $ 346     $ -  
 
EBITDA reconciliation:
Operating income $ 24,280 $ 19,598 $ 83,858 $ 76,293
Depreciation expense 4,112 3,239 14,986 13,303
Amortization expense   1,888       1,960     6,767       8,658  
EBITDA $ 30,280 $ 24,797 $ 105,611 $ 98,254
Severance expense 2,472 847 4,910 2,923
Other operating costs - contingent acquisition liability adjustment 445 - 1,065 -
Other operating costs - office consolidation   580       -     580       -  
Adjusted EBITDA $ 33,777     $ 25,644   $ 112,166     $ 101,177  
 
Net income $ 13,527 $ 11,056 $ 46,169 $ 41,130
Net income impact of severance expense 1,542 545 3,134 1,886
Net income impact of other operating costs - contingent acquisition liability adjustment 265 - 635 -
Net income impact of other operating costs - office consolidation   346       -     346       -  
Adjusted net income $ 15,680     $ 11,601   $ 50,284     $ 43,016  
Shares used in computing net income per diluted share 51,340 51,692 51,572 51,371
Adjusted earnings per share $ 0.31     $ 0.22   $ 0.98     $ 0.84  
 
(1) Effective income tax (benefit) has been determined based on specific tax jurisdiction.
 
For the quarter ended For the year ended

Free Cash Flow
December 31, December 31,
2012   2011 2012   2011
Net cash provided by operating activities $ 67,521 $ 57,090 $ 75,962 $ 111,367
Changes in assets and liabilities (44,721 ) (36,129 ) 21,134 (20,474 )
Allowance for uncollectible accounts receivable (2,219 ) (1,634 ) (6,329 ) (6,910 )
Purchases of property and equipment (5,541 ) (4,903 ) (20,052 ) (10,375 )
Payments of acquisition liabilities (3,750 ) (4,750 ) (4,856 ) (14,967 )
Payments of contingent acquisition liabilities   (5,779 )     -     (8,580 )     -  
Free Cash Flow $ 5,511     $ 9,674   $ 57,279     $ 58,641  
 

Copyright Business Wire 2010

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