CHICAGO--(BUSINESS WIRE)--Navigant (NYSE: NCI) today reported financial results for the quarter ended June 30, 2018.
Second quarter 2018 highlights:
- Combined revenues and revenues before reimbursements (RBR), which includes results from continuing and discontinued operations, were $275.7 and $252.4 million, respectively, both up 7% compared to second quarter 2017; revenues and RBR from continuing operations were $184.7 million and $165.2 million, respectively, up 4% and 3% compared to the prior year period
- Net income (Combined) was $28.8 million, or $0.62 per share, compared to $8.8 million, or $0.18 per share, for second quarter 2017; net income from continuing operations of $6.1 million, or $0.13 per share, was up $3.5 million from the prior year period
- Combined Adjusted Earnings per Share (EPS) of $0.49 increased $0.25 compared to second quarter 2017; Adjusted EPS from continuing operations was $0.17, up $0.09 compared to the prior year period
- Management provides 2018 financial guidance targets from continuing operations, as well as a preliminary view of 2019 performance, both of which reflect the pending divestiture of the Disputes, Forensics and Legal Technology (DFLT) segment and the Transaction Advisory Services (TAS) practice (collectively “SaleCo”, which comprises discontinued operations) to Ankura Consulting Group, LLC (Ankura)
“Our strong second quarter operating results reflect continued robust demand for consulting services across many areas of our business,” said Julie Howard, chairman and CEO of Navigant. “In the quarter, our Energy and FSAC segments produced solid year-over-year RBR improvements which more than offset continued softness in some parts of our Healthcare segment. The quarter also benefitted from positive results in our legacy DFLT and TAS practices, which, with the pending divestiture of these businesses, have been classified as discontinued operations in our results.”
Howard continued, “With a successful first half of 2018 behind us, including some significant strategic milestones, we look forward to moving into the second half of the year and 2019 with a sharp focus on continued execution of our key strategic initiatives. These include ensuring a smooth transition of SaleCo to Ankura, executing on our target of up to $175 million of capital return to shareholders over the next 12 months, rightsizing our G&A spend to better align with our new organizational footprint and continuing pursuit of organic and inorganic growth opportunities to augment our industry expertise and technological capabilities. We expect that continued successful execution will produce strong, long-term value for shareholders as we write the next chapter for Navigant.”
SECOND QUARTER 2018 FINANCIAL RESULTS |
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For the quarter ended June 30, | ||||||||||||||
Increase / | ||||||||||||||
(Dollars in millions, excluding per share data) | 2018 | 2017 | (Decrease) | |||||||||||
Combined Results (1)(2) | ||||||||||||||
Revenue | $ | 275.7 | $ | 256.8 | $ | 18.9 | ||||||||
RBR | $ | 252.4 | $ | 235.2 | $ | 17.2 | ||||||||
Net Income | $ | 28.8 | $ | 8.8 | $ | 20.0 | ||||||||
Adjusted EBITDA | $ | 39.7 | $ | 29.2 | $ | 10.5 | ||||||||
Adjusted Earnings per Share | $0.49 | $0.24 | $0.25 | |||||||||||
Continuing Operations | ||||||||||||||
Revenue | $ | 184.7 | $ | 177.7 | $ | 7.0 | ||||||||
RBR | $ | 165.2 | $ | 160.1 | $ | 5.1 | ||||||||
Net Income | $ | 6.1 | $ | 2.6 | $ | 3.5 | ||||||||
Adjusted EBITDA (2) | $ | 17.6 | $ | 14.6 | $ | 3.0 | ||||||||
Adjusted Earnings per Share (2) | $0.17 | $0.08 | $0.09 | |||||||||||
(1) Combined results include continuing and discontinued operations | ||||||||||||||
(2) See definition and reconciliation of non-GAAP measures elsewhere in this release | ||||||||||||||
Navigant reported second quarter 2018 Combined revenues and RBR of $275.7 million and $252.4 million, respectively, up 7% compared to the second quarter 2017, reflecting improved demand in two of the Company’s three continuing segments, as well as increased revenue from discontinued operations driven largely by higher mass-tort claims volumes. Revenues and RBR from continuing operations were $184.7 million and $165.2 million, respectively, up 4% and 3% compared to the prior year period.
Second quarter 2018 Combined Adjusted EBITDA was $39.7 million, up 36% from the prior year period as higher revenue with improved margins drove increased performance for both continuing and discontinued operations. Second quarter 2018 Adjusted EBITDA from continuing operations of $17.6 million was up 21% compared to the prior year period and includes a disproportionate share of general and administrative (G&A) costs based on discontinued operations accounting rules. When excluding bad debt, G&A costs for continuing operations as a percent of RBR was 20.5%, a 110bps improvement compared to the second quarter 2017.
Second quarter 2018 Combined net income of $28.8 million was up $20.0 million or 228% compared to second quarter 2017 driven by the operating performance discussed above, as well as lower taxes due to the impact of the Tax Cuts and Jobs Act in the current year period. Additionally, due to our held-for-sale presentation, the Company recognized a $7.9 million tax benefit in the quarter related to the recognition of goodwill tax basis on a portion of the assets that were moved to discontinued operations. GAAP EPS and Adjusted EPS (Combined) were $0.62 and $0.49, respectively, for second quarter 2018, $0.44 and $0.25 higher, respectively, than the prior year period. On a continuing operations basis, GAAP EPS and Adjusted EPS were $0.13 and $0.17, respectively, for second quarter 2018, $0.08 and $0.09 higher, respectively, than the prior year period.
CASH FLOW AND BALANCE SHEET
Second quarter 2018 net cash provided by operating activities was $53.5 million compared to $19.6 million for second quarter 2017, driven primarily by improved operating performance and lower working capital in the current year period. Days Sales Outstanding on June 30, 2018, on a Combined and continuing operations basis, was 84 days and 72 days, respectively, both a 1-day improvement compared to December 31, 2017. Free Cash Flow, which as defined excludes working capital, increased to $29.1 million for second quarter 2018 compared to $13.5 million in second quarter 2017, primarily due to improved operating performance and lower capital expenditures in the current year period.
Bank debt outstanding on June 30, 2018 was $147.0 million, up $14.1 million compared to $132.9 million outstanding on December 31, 2017. Leverage (bank debt divided by trailing twelve months Combined Adjusted EBITDA) was 1.09 times at June 30, 2018.
Navigant continued executing its share repurchase program with an additional 342 thousand shares of common stock repurchased during the second quarter 2018 at an aggregate cost of $7.5 million and an average price of $21.92 per share. As of June 30, 2018, the Company had $172.0 million remaining under its stock repurchase authorization, which was refreshed on May 10, 2018 and expires on December 31, 2020.
SECOND QUARTER 2018 SEGMENT RESULTS |
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For the quarter ended June 30, | ||||||||||||
Increase / | ||||||||||||
(Dollars in millions, numbers may not foot due to rounding) | 2018 | 2017 | (Decrease) | |||||||||
RBR | ||||||||||||
Healthcare | $ | 91.6 | $ | 98.0 | $ | (6.4 | ) | |||||
Energy | 36.6 | 31.7 | 4.9 | |||||||||
Financial Services Advisory and Compliance | 37.0 | 30.3 | 6.7 | |||||||||
Continuing Operations | $ | 165.2 | $ | 160.1 | $ | 5.1 | ||||||
Revenues | ||||||||||||
Healthcare | $ | 100.3 | $ | 107.3 | $ | (7.0 | ) | |||||
Energy | 44.2 | 36.5 | 7.7 | |||||||||
Financial Services Advisory and Compliance | 40.3 | 33.8 | 6.5 | |||||||||
Continuing Operations | $ | 184.7 | $ | 177.7 | $ | 7.0 | ||||||
Segment Operating Profit | ||||||||||||
Healthcare | $ | 27.4 | $ | 28.9 | $ | (1.5 | ) | |||||
Energy | 12.7 | 8.5 | 4.2 | |||||||||
Financial Services Advisory and Compliance | 13.4 | 11.7 | 1.7 | |||||||||
Continuing Operations | $ | 53.4 | $ | 49.1 | $ | 4.3 | ||||||
Segment Operating Margin (% of RBR) | ||||||||||||
Healthcare | 29.9 | % | 29.5 | % | 0.4 | % | ||||||
Energy | 34.6 | % | 26.8 | % | 7.8 | % | ||||||
Financial Services Advisory and Compliance | 36.2 | % | 38.5 | % | -2.3 | % | ||||||
Continuing Operations | 32.3 | % | 30.7 | % | 1.6 | % | ||||||
Healthcare segment RBR of $91.6 million decreased 7% for the second quarter 2018 compared to the same prior year period. Consistent with the last several quarters, the demand environment for certain of our consulting services remained depressed and impacted revenue performance in the quarter. Segment operating profit of $27.4 million declined $1.5 million in second quarter 2018 compared to the second quarter 2017 due to lower revenue but improved $7.0 million, or 34%, compared to the first quarter 2018 as headcount and other costs actions taken in the first quarter 2018, in both consulting and managed services, contributed to improved margin performance.
Energy segment RBR for second quarter 2018 of $36.6 million increased 15% compared to second quarter 2017 and was up 9% sequentially. Continued strong demand in the U.S. and abroad for expertise around areas such as energy efficiency programs and grid modernization helped drive the revenue improvement. Segment operating profit of $12.7 million for the quarter was up 49% compared to the second quarter 2017 due to increased revenue and lower headcount driven by 2017 cost management actions.
Financial Services Advisory and Compliance segment RBR finished at $37.0 million, up 22% compared to second quarter 2017. Continued growth across the segment was driven by increased activity in financial crime, sanctions, and operational efficiency engagements across a number of our largest clients. Segment operating profit of $13.4 million increased 15% as revenue gains were achieved on slightly lower utilization.
2018 GUIDANCE – CONTINUING OPERATIONS
Management provides 2018 guidance for continuing operations:
- Revenues estimated to be between $740 million and $765 million
- RBR expected to range between $660 million and $685 million
- Adjusted EBITDA expected to range between $52 million and $59 million
- Adjusted EPS estimated to be between $0.40 and $0.50 per share
PRELIMINARY 2019 VIEW – CONTINUING OPERATIONS
Management provides a preliminary view of targeted organic 2019 financial performance for continuing operations:
- RBR growth estimated to be approximately 9% to 12% (compared to full-year 2018)
- Adjusted EBITDA expected to range between $85 million and $95 million
- Adjusted EPS growth estimated to be approximately 120% (compared to full-year 2018)
This “Preliminary 2019 View” is a view of possible 2019 performance and is provided without the benefit of knowledge of the Company’s performance during the last six months of 2018 or the completion of management’s budgeting process for 2019.
CONFERENCE CALL DETAILS
Navigant will host a conference call to discuss the Company’s second quarter 2018 results at 9 a.m. Eastern Time (8 a.m. Central Time) later this morning, Thursday, Aug. 2, 2018. The conference call may be accessed via the Navigant website (investors.navigant.com) or by dialing 888.455.9733 (630.395.0358 for international callers) and referencing pass code “NCI.” Presentation materials for the webcast, as well as a report of financial and related supplemental information will available on the Navigant website, as will an archived replay of the earnings conference call.
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.
Navigant has provided guidance regarding Adjusted EBITDA and Adjusted Earnings Per Share both of which exclude the impact of severance expense and other operating costs (benefit), as applicable. 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.
BASIS OF PRESENTATION
Due to the pending sale of the Disputes, Forensics and Legal Technology segment and, the Transaction Advisory Services practice, formerly part of Financial Services Advisory and Compliance segment, the Company has classified these businesses (collectively referred to as “SaleCo”) as discontinued operations with the assets and liabilities being presented as held-for-sale. Prior period comparisons have been adjusted to reflect this reporting change.
DEFINITIONS
- Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Share (EPS) Adjusted EBITDA is EBITDA – earnings before interest, taxes, depreciation, and amortization – excluding the impact of severance expense and other operating costs (benefit), as applicable. Adjusted Net Income and Adjusted Earnings per Share exclude the net income and per share net income impact of severance expense, other operating costs (benefit), the benefit recognized in the fourth quarter 2017 related to the 2017 Tax Cuts and Jobs Act, and the benefit recognized in the second quarter 2018 related to the recognition of goodwill tax basis on a portion of the assets that were moved to discontinued operations (which impacted discontinued operations only), as applicable. While other operating costs (benefit) are generally non-recurring in nature, severance expense and certain other operating costs are not considered to be non-recurring, infrequent or unusual to our business. Management believes that these non-GAAP financial measures provide investors with enhanced comparability of Navigant’s results of operations across periods. See non-GAAP reconciliations for more details.
- Free Cash Flow is calculated as net cash provided by (used in) operations excluding the change in asset, liabilities and allowance for doubtful accounts less cash payment for property, equipment and deferred acquisition liabilities. Free Cash Flow does not represent cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that Free Cash Flow provides investors with an indicator of cash available for on-going business operations and long-term value creation. See non-GAAP reconciliations for more details.
- Combined results include both continuing operations and discontinued operations. Management believes this information provides investors with a better indication of year-over-year comparability to the Company’s results before the classification of SaleCo as discontinued operations. See non-GAAP reconciliations for more details.
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,” “preliminary” 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 consummation of the divestiture transaction with Ankura Consulting Group, LLC; risk of unanticipated costs, liabilities and adverse impact on business operations arising from the Company’s provision of post-divestiture transition services and support in connection with the SaleCo transaction; 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, 2017, 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. In addition, with regard to the “Preliminary 2019 View” included in this press release, the Company cautions that this view of possible 2019 performance is provided without the benefit of knowledge of the Company’s performance during the last six months of 2018 or the completion of management’s budgeting process for 2019. 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, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Revenues before reimbursements | $ | 165,224 | $ | 160,076 | $ | 326,669 | $ | 315,784 | ||||||||
Reimbursements | 19,489 | 17,594 | 36,112 | 35,737 | ||||||||||||
Total revenues | 184,713 | 177,670 | 362,781 | 351,521 | ||||||||||||
Cost of services before reimbursable expenses | 113,121 | 113,333 | 230,057 | 223,217 | ||||||||||||
Reimbursable expenses | 19,489 | 17,594 | 36,112 | 35,737 | ||||||||||||
Total cost of services | 132,610 | 130,927 | 266,169 | 258,954 | ||||||||||||
General and administrative expenses | 34,912 | 34,663 | 71,991 | 71,035 | ||||||||||||
Depreciation expense | 4,943 | 5,530 | 9,940 | 10,815 | ||||||||||||
Amortization expense | 1,665 | 2,108 | 3,417 | 4,316 | ||||||||||||
Other operating costs: | ||||||||||||||||
Contingent acquisition liability adjustments, net | - | - | - | 1,199 | ||||||||||||
Other costs | 2,295 | - | 3,278 | 107 | ||||||||||||
Operating income | 8,288 | 4,442 | 7,986 | 5,095 | ||||||||||||
Interest expense | 911 | 783 | 1,739 | 1,431 | ||||||||||||
Interest income | (77 | ) | (80 | ) | (196 | ) | (111 | ) | ||||||||
Other (income) expense, net | (183 | ) | 599 | 178 | 382 | |||||||||||
Income from continuing operations before income tax expense | 7,637 | 3,140 | 6,265 | 3,393 | ||||||||||||
Income tax expense | 1,509 | 577 | 1,734 | 243 | ||||||||||||
Net income from continuing operations | 6,128 | 2,563 | 4,531 | 3,150 | ||||||||||||
Income from discontinued operations, net of tax | 22,698 | 6,234 | 36,148 | 16,743 | ||||||||||||
Net income | $ | 28,826 | $ | 8,797 | $ | 40,679 | $ | 19,893 | ||||||||
Basic net income per share data | ||||||||||||||||
Net income from continuing operations | $ | 0.14 | $ | 0.05 | $ | 0.10 | $ | 0.07 | ||||||||
Income from discontinued operations, net of tax | $ | 0.50 | $ | 0.13 | $ | 0.80 | $ | 0.36 | ||||||||
Net income | $ | 0.64 | $ | 0.19 | $ | 0.90 | $ | 0.42 | ||||||||
Shares used in computing basic per share data | 45,106 | 47,113 | 45,113 | 47,023 | ||||||||||||
Diluted net income per share data | ||||||||||||||||
Net income from continuing operations | $ | 0.13 | $ | 0.05 | $ | 0.10 | $ | 0.06 | ||||||||
Income from discontinued operations, net of tax | $ | 0.49 | $ | 0.13 | $ | 0.77 | $ | 0.34 | ||||||||
Net income | $ | 0.62 | $ | 0.18 | $ | 0.87 | $ | 0.41 | ||||||||
Shares used in computing diluted per share data | 46,549 | 48,696 | 46,692 | 48,833 |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA | ||||||||
(In thousands, except DSO data) | ||||||||
(Unaudited) | ||||||||
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 11,140 | $ | 8,449 | ||||
Accounts receivable, net and contract assets | 164,741 | 165,838 | ||||||
Prepaid expenses and other current assets | 19,988 | 21,006 | ||||||
Assets held for sale | 366,892 | 361,030 | ||||||
Total current assets | 562,761 | 556,323 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 68,554 | 71,432 | ||||||
Intangible assets, net | 17,126 | 20,172 | ||||||
Goodwill | 422,547 | 422,959 | ||||||
Other assets | 7,115 | 9,378 | ||||||
Total assets | $ | 1,078,103 | $ | 1,080,264 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 7,146 | $ | 8,404 | ||||
Accrued liabilities | 11,928 | 9,734 | ||||||
Accrued compensation-related costs | 41,255 | 58,515 | ||||||
Income tax payable | 4,158 | 3,199 | ||||||
Other current liabilities | 23,170 | 30,550 | ||||||
Liabilities held for sale | 69,065 | 86,384 | ||||||
Total current liabilities | 156,722 | 196,786 | ||||||
Non-current liabilities: | ||||||||
Deferred income tax liabilities | 38,239 | 36,598 | ||||||
Other non-current liabilities | 25,935 | 26,602 | ||||||
Bank debt non-current | 147,005 | 132,944 | ||||||
Total non-current liabilities | 211,179 | 196,144 | ||||||
Total liabilities | 367,901 | 392,930 | ||||||
Stockholders' equity: | ||||||||
Common stock | 59 | 58 | ||||||
Additional paid-in capital | 662,416 | 659,825 | ||||||
Treasury stock | (243,213 | ) | (224,366 | ) | ||||
Retained earnings | 311,825 | 270,995 | ||||||
Accumulated other comprehensive loss | (20,885 | ) | (19,178 | ) | ||||
Total stockholders' equity | 710,202 | 687,334 | ||||||
Total liabilities and stockholders' equity | $ | 1,078,103 | $ | 1,080,264 | ||||
Selected Data |
||||||||
Days sales outstanding, net (DSO) - continuing operations | 72 | 73 | ||||||
Days sales outstanding, net (DSO) - Combined | 84 | 85 |
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, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Cash flows from operating activities: | |||||||||||||||||
Net income | $ | 28,826 | $ | 8,797 | $ | 40,679 | $ | 19,893 | |||||||||
Adjustments to reconcile net income to net cash provided by | |||||||||||||||||
(used in) operating activities: | |||||||||||||||||
Depreciation expense | 6,768 | 7,826 | 13,613 | 15,299 | |||||||||||||
Amortization expense | 1,772 | 2,219 | 3,628 | 4,538 | |||||||||||||
Share-based compensation expense | 2,089 | 4,380 | 5,466 | 7,402 | |||||||||||||
Deferred income taxes | (6,601 | ) | 6,893 | (5,633 | ) | 8,232 | |||||||||||
Allowance for doubtful accounts receivable | 3,764 | 1,171 | 6,894 | 1,175 | |||||||||||||
Payments of contingent acquisition liabilities in excess of initial fair value | (1,062 | ) | (1,700 | ) | (1,186 | ) | (1,700 | ) | |||||||||
Contingent acquisition liability adjustments, net | - | - | - | 1,199 | |||||||||||||
Other, net | 94 | 826 | 1,225 | 1,477 | |||||||||||||
Changes in assets and liabilities (net of acquisitions): | |||||||||||||||||
Accounts receivable, net and contract assets | 5,423 | (2,731 | ) | (18,192 | ) | (7,010 | ) | ||||||||||
Prepaid expenses and other assets | 3,088 | (9,161 | ) | 2,372 | (10,358 | ) | |||||||||||
Accounts payable | 593 | (2,290 | ) | (1,507 | ) | (2,371 | ) | ||||||||||
Accrued liabilities | 1,886 | 799 | 4,086 | 1,383 | |||||||||||||
Accrued compensation-related costs | 9,334 | 7,386 | (27,124 | ) | (41,870 | ) | |||||||||||
Income taxes payable | (602 | ) | (5,962 | ) | 2,324 | (1,609 | ) | ||||||||||
Other liabilities | (1,829 | ) | 1,152 | (7,949 | ) | 964 | |||||||||||
Net cash provided by (used in) operating activities | 53,543 | 19,605 | 18,696 | (3,356 | ) | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||
Purchases of property and equipment | (1,705 | ) | (7,100 | ) | (7,455 | ) | (20,889 | ) | |||||||||
Other, net | (19 | ) | (42 | ) | (19 | ) | (158 | ) | |||||||||
Net cash used in investing activities | (1,724 | ) | (7,142 | ) | (7,474 | ) | (21,047 | ) | |||||||||
Cash flows from financing activities: | |||||||||||||||||
Issuances of common stock | 936 | 729 | 2,174 | 2,643 | |||||||||||||
Repurchases of common stock | (7,490 | ) | (8,993 | ) | (18,847 | ) | (13,954 | ) | |||||||||
Payments of contingent acquisition liabilities | (1,090 | ) | (8,630 | ) | (1,170 | ) | (8,630 | ) | |||||||||
Repayments to banks | (93,335 | ) | (95,669 | ) | (172,479 | ) | (246,469 | ) | |||||||||
Borrowings from banks | 57,571 | 100,789 | 187,248 | 294,591 | |||||||||||||
Payments of debt issuance costs | - | (35 | ) | - | (1,201 | ) | |||||||||||
Other, net | (3,532 | ) | (3,500 | ) | (5,048 | ) | (4,827 | ) | |||||||||
Net cash provided by (used in) financing activities | (46,940 | ) | (15,309 | ) | (8,122 | ) | 22,153 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (385 | ) | 270 | (409 | ) | 515 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 4,494 | (2,576 | ) | 2,691 | (1,735 | ) | |||||||||||
Cash and cash equivalents at beginning of the period | 6,646 | 9,132 | 8,449 | 8,291 | |||||||||||||
Cash and cash equivalents at end of the period | $ | 11,140 | $ | 6,556 | $ | 11,140 | $ | 6,556 |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | |||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(In thousands, except per share data and percentages (1)) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Combined RBR, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share (2) |
For the quarter ended | For the six months ended | |||||||||||||||
June 30, | June 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Combined revenue reconciliation: | |||||||||||||||||
Revenue from continuing operations | $ | 184,713 | $ | 177,670 | $ | 362,781 | $ | 351,521 | |||||||||
Revenue from discontinued operations | 91,013 | 79,176 | 177,465 | 163,162 | |||||||||||||
Revenue (Combined) | $ | 275,726 | $ | 256,846 | $ | 540,246 | $ | 514,683 | |||||||||
Combined revenues before reimbursements (RBR) reconciliation: | |||||||||||||||||
RBR from continuing operations | $ | 165,224 | $ | 160,076 | $ | 326,669 | $ | 315,784 | |||||||||
RBR from discontinued operations | 87,169 | 75,162 | 169,603 | 155,665 | |||||||||||||
RBR (Combined) | $ | 252,393 | $ | 235,238 | $ | 496,272 | $ | 471,449 | |||||||||
Severance expense | $ | 374 | $ | 2,509 | $ | 2,157 | $ | 3,643 | |||||||||
Income tax benefit (3) | (99 | ) | (989 | ) | (574 | ) | (1,409 | ) | |||||||||
Tax-effected impact of severance expense | $ | 275 | $ | 1,520 | $ | 1,583 | $ | 2,234 | |||||||||
Other operating costs - contingent acquisition liability adjustment, net | $ | - | $ | - | $ | - | $ | 1,199 | |||||||||
Income tax benefit (3) | - | - | - | (481 | ) | ||||||||||||
Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net | $ | - | $ | - | $ | - | $ | 718 | |||||||||
Other operating costs - other costs (4) | $ | 2,295 | $ | - | $ | 3,278 | $ | 107 | |||||||||
Income tax benefit (3) | (625 | ) | - | (893 | ) | (43 | ) | ||||||||||
Tax-effected impact of other operating costs - other costs | $ | 1,670 | $ | - | $ | 2,385 | $ | 64 | |||||||||
Adjusted EBITDA reconciliation: | |||||||||||||||||
Net income from continuing operations | $ | 6,128 | $ | 2,563 | $ | 4,531 | $ | 3,150 | |||||||||
Interest expense | 911 | 783 | 1,739 | 1,431 | |||||||||||||
Interest income | (77 | ) | (80 | ) | (196 | ) | (111 | ) | |||||||||
Other (income) expense, net | (183 | ) | 599 | 178 | 382 | ||||||||||||
Income tax expense | 1,509 | 577 | 1,734 | 243 | |||||||||||||
Depreciation expense | 4,943 | 5,530 | 9,940 | 10,815 | |||||||||||||
Amortization expense | 1,665 | 2,108 | 3,417 | 4,316 | |||||||||||||
EBITDA | $ | 14,896 | $ | 12,080 | $ | 21,343 | $ | 20,226 | |||||||||
Severance expense | 374 | 2,509 | 2,157 | 3,643 | |||||||||||||
Other operating costs - contingent acquisition liability adjustment, net | - | - | - | 1,199 | |||||||||||||
Other operating costs - other costs | 2,295 | - | 3,278 | 107 | |||||||||||||
Adjusted EBITDA from continuing operations | $ | 17,565 | $ | 14,589 | $ | 26,778 | $ | 25,175 | |||||||||
Adjusted EBITDA from discontinued operations | 22,171 | 14,587 | 42,868 | 35,460 | |||||||||||||
Adjusted EBITDA (Combined) | $ | 39,736 | $ | 29,176 | $ | 69,646 | $ | 60,635 | |||||||||
Adjusted Net Income reconciliation: | |||||||||||||||||
Net income from continuing operations | $ | 6,128 | $ | 2,563 | $ | 4,531 | $ | 3,150 | |||||||||
Tax-effected impact of severance expense | 275 | 1,520 | 1,583 | 2,234 | |||||||||||||
Tax-effected impact of other operating costs - contingent acquisition liability adjustment, net | - | - | - | 718 | |||||||||||||
Tax-effected impact of other operating costs - other costs | 1,670 | - | 2,385 | 64 | |||||||||||||
Adjusted Net Income from continuing operations | $ | 8,073 | $ | 4,083 | $ | 8,499 | $ | 6,166 | |||||||||
Adjusted Net Income from discontinued operations | 14,818 | 7,370 | 28,279 | 18,294 | |||||||||||||
Adjusted Net Income (Combined) | $ | 22,891 | $ | 11,453 | $ | 36,778 | $ | 24,460 | |||||||||
Shares used in computing adjusted per diluted share data | 46,549 | 48,696 | 46,692 | 48,833 | |||||||||||||
Adjusted Earnings per Share from continuing operations | $ | 0.17 | $ | 0.08 | $ | 0.18 | $ | 0.13 | |||||||||
Adjusted Earnings per Share (Combined) | $ | 0.49 | $ | 0.24 | $ | 0.79 | $ | 0.50 |
For the quarter ended | For the six months ended | |||||||||||||||||||||
Discontinued operations (5) |
June 30, | June 30, | ||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Severance expense from discontinued operations | $ | 95 | $ | 1,877 | $ | 111 | $ | 2,528 | ||||||||||||||
Income tax benefit (3) | (25 | ) | (741 | ) | (30 | ) | (977 | ) | ||||||||||||||
Tax-effected impact of severance expense from discontinued operations | $ | 70 | $ | 1,136 | $ | 81 | $ | 1,551 | ||||||||||||||
Adjusted EBITDA from discontinued operations reconciliation: | ||||||||||||||||||||||
Net income from discontinued operations | $ | 22,698 | $ | 6,234 | $ | 36,148 | $ | 16,743 | ||||||||||||||
Interest expense | 600 | 497 | 1,088 | 919 | ||||||||||||||||||
Interest income | (1 | ) | - | (1 | ) | (1 | ) | |||||||||||||||
Other (income) expense, net | 29 | - | 58 | - | ||||||||||||||||||
Income tax expense | (3,182 | ) | 3,572 | 1,580 | 10,565 | |||||||||||||||||
Depreciation expense | 1,825 | 2,296 | 3,673 | 4,484 | ||||||||||||||||||
Amortization expense | 107 | 111 | 211 | 222 | ||||||||||||||||||
EBITDA | $ | 22,076 | $ | 12,710 | $ | 42,757 | $ | 32,932 | ||||||||||||||
Severance expense | 95 | 1,877 | 111 | 2,528 | ||||||||||||||||||
Adjusted EBITDA from discontinued operations | $ | 22,171 | $ | 14,587 | $ | 42,868 | $ | 35,460 | ||||||||||||||
Adjusted Net Income from discontinued operations reconciliation: | ||||||||||||||||||||||
Net income from discontinued operations | $ | 22,698 | $ | 6,234 | $ | 36,148 | $ | 16,743 | ||||||||||||||
Tax-effected impact of severance expense from discontinued operations | 70 | 1,136 | 81 | 1,551 | ||||||||||||||||||
Deferred tax benefit related to recognition of goodwill tax basis (6) | (7,950 | ) | - | (7,950 | ) | - | ||||||||||||||||
Adjusted Net Income from discontinued operations | $ | 14,818 | $ | 7,370 | $ | 28,279 | $ | 18,294 | ||||||||||||||
For the quarter ended | For the six months ended | |||||||||||||||||||||
Free Cash Flow (7) |
June 30, | June 30, | ||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 53,543 | $ | 19,605 | $ | 18,696 | $ | (3,356 | ) | |||||||||||||
Changes in assets and liabilities | (17,893 | ) | 10,807 | 45,990 | 60,871 | |||||||||||||||||
Allowance for doubtful accounts receivable | (3,764 | ) | (1,171 | ) | (6,894 | ) | (1,175 | ) | ||||||||||||||
Purchases of property and equipment | (1,705 | ) | (7,100 | ) | (7,455 | ) | (20,889 | ) | ||||||||||||||
Payments of contingent acquisition liabilities | (1,090 | ) | (8,630 | ) | (1,170 | ) | (8,630 | ) | ||||||||||||||
Free Cash Flow | $ | 29,091 | $ | 13,511 | $ | 49,167 | $ | 26,821 | ||||||||||||||
Leverage Ratio (8) |
At June 30, | |||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||
Adjusted EBITDA (Combined) for prior twelve-month period | $ | 134,847 | $ | 135,214 | ||||||||||||||||||
Bank debt | $ | 147,005 | $ | 184,787 | ||||||||||||||||||
Leverage Ratio | 1.09 | 1.37 | ||||||||||||||||||||
For the quarter ended | For the six months ended | |||||||||||||||||||||
Organic Growth (9) |
June 30, | June 30, | ||||||||||||||||||||
2018 | 2017 | Growth | 2018 | 2017 | Growth | |||||||||||||||||
Revenues before reimbursements | $ | 165,224 | $ | 160,076 | 3.2 | % | $ | 326,669 | $ | 315,784 | 3.4 | % | ||||||||||
Pro forma acquisition adjustment | - | 1,421 | - | 2,841 | ||||||||||||||||||
Currency impact | (1,049 | ) | - | (1,757 | ) | - | ||||||||||||||||
Organic RBR | $ | 164,175 | $ | 161,497 | 1.7 | % | $ | 324,912 | $ | 318,625 | 2.0 | % |
Footnotes
(1) Per share data may not
sum due to rounding.
(2) Combined results include both continuing
operations and discontinued operations. EBITDA is earnings before
interest, taxes, depreciation and amortization. Adjusted EBITDA excludes
the impact of severance expense and other operating costs (benefit), as
applicable. Adjusted Net Income and Adjusted Earnings per Share exclude
net income and per share net income impact of severance expense and
other operating costs (benefit), the benefit recognized in the fourth
quarter 2017 related to the 2017 Tax Cuts and Jobs Act, and the benefit
recognized in the second quarter 2018 related to the recognition of
goodwill tax basis on a portion of SaleCo assets that were moved to
assets held for sale (which impacted discontinued operations only), as
applicable. While other operating costs (benefit) are generally
non-recurring in nature, severance expense and certain other operating
costs are not considered to be non-recurring, infrequent or unusual to
our business. Management believes that these non-GAAP financial measures
provide investors with enhanced comparability of Navigant's results of
operations across periods.
(3) Effective income tax expense has
been determined based on specific tax jurisdiction.
(4) In 2018,
the Company incurred non-recurring legal costs relating to a shareholder
proxy contest, as well as non-recurring fees and expenses relating to
the SaleCo transaction.
(5) On June 23, 2018, we entered into an
agreement to sell all of the operations of the former Disputes,
Forensics and Legal Technology segment and the Transaction Advisory
Services group within the Financial Services Advisory and Compliance
segment to Ankura Consulting Group, LLC. These businesses ("SaleCo”)
have been classified as discontinued operations in our results.
(6)
Due to held-for-sale presentation triggered by the SaleCo transaction,
the Company recognized a $7.9 million tax benefit related to the
recognition of goodwill tax basis on a portion of the assets that were
moved to assets held for sale.
(7) 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.
(8) Leverage ratio is calculated as
bank debt at the end of the period divided by Adjusted EBITDA (Combined)
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.
(9) Organic growth
represents revenues before reimbursements from continuing operations
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.