Navigant Consulting 8-K Navigant Reports Third Quarter 2014 Financial Results

NAVIGANT REPORTS THIRD QUARTER 2014 FINANCIAL RESULTS

CHICAGO, October 28, 2014 –Navigant (NYSE:NCI) today announced financial results for the third quarter ended September 30, 2014.

Financial Summary and Highlights:

• Third quarter 2014 revenues before reimbursements (RBR) of $205.5 million and total revenues of $230.1 million.

• Third quarter 2014 net income from continuing operations of $16.3 million or $0.33 per share.

• Third quarter 2014 adjusted earnings per share (EPS) of $0.32 and adjusted EBITDA of $36.3 million.

• Lowered debt during third quarter 2014 and repurchased 390,624 shares of common stock in third quarter 2014 at an average cost of $16.31 per share.

• Revised financial outlook for 2014.

Navigant reported third quarter 2014 RBR of $205.5 million, a 10% increase compared to $186.4 million for third quarter 2013, with year-over-year RBR growth in three segments. Total revenues for the Company were $230.1 million for third quarter 2014 compared to $211.6 million for third quarter 2013. Net income from continuing operations for third quarter 2014 increased 20% to $16.3 million, or $0.33 per share, compared to $13.5 million, or $0.27 per share in the prior year quarter. Contributing to profit margin improvement, third quarter 2014 general and administrative expenses were flat compared to prior year. The effective income tax rate was 42% for third quarter 2014 compared to 47% in the prior year quarter. Adjusted EPS was $0.32 for third quarter 2014 compared to $0.25 for third quarter 2013, an increase of 28%. Adjusted EBITDA was $36.3 million for third quarter 2014 compared to $30.8 million for third quarter 2013, an increase of 18%.

Julie Howard, Chairman and Chief Executive Officer, commented, “Despite mixed results in our Healthcare practice, we demonstrated progress against our organic growth objectives in the period with gains in our Disputes, Investigations & Economics and Energy segments. Additionally, the Financial, Risk & Compliance segment outperformed our expectations as regulatory compliance actions drove new assignments.”

Howard continued, “The Healthcare segment posted substantial revenue gains in the third quarter driven primarily by our enhanced revenue cycle management services which include the acquired Cymetrix operations. At the same time, we are experiencing softness and competitive challenges in our performance improvement practice within the Healthcare segment which has impacted organic growth at both the segment and company level. We believe we are taking the necessary actions to reaccelerate growth in this area, and we remain confident in our overall strategic direction. However, we have updated our outlook to reflect our recent performance and anticipated trends for the balance of the year.”

Segment Financial Summary

	For the quarter ended September 30,
	2014			2013			Change
RBR ($000)
Disputes, Investigations & Economics	$	79,862		$	75,366			6.0	%
Financial, Risk & Compliance		37,251			40,227			-7.4	%
Healthcare		62,964			48,088			30.9	%
Energy		25,457			22,763			11.8	%
Total Company	$	205,534		$	186,444			10.2	%
Total Revenues ($000)
Disputes, Investigations & Economics	$	85,518		$	81,144			5.4	%
Financial, Risk & Compliance		44,878			48,668			-7.8	%
Healthcare		69,035			53,721			28.5	%
Energy		30,708			28,074			9.4	%
Total Company	$	230,139		$	211,607			8.8	%
Segment Operating Profit ($000)
Disputes, Investigations & Economics	$	27,264		$	25,738			5.9	%
Financial, Risk & Compliance		17,246			16,959			1.7	%
Healthcare		18,726			17,967			4.2	%
Energy		8,766			6,968			25.8	%
Total Company	$	72,002		$	67,632			6.5	%
Segment Operating Margin (% of RBR)
Disputes, Investigations & Economics		34.1	%		34.2	%
Financial, Risk & Compliance		46.3	%		42.2	%
Healthcare		29.7	%		37.4	%
Energy		34.4	%		30.6	%
Total Company		35.0	%		36.3	%

RBR for the Healthcare segment increased 31% year-over-year for third quarter 2014 with a 2% decline in organic RBR growth for the period. Segment RBR growth in third quarter 2014 was driven primarily by revenue cycle management services, specifically the strong performance from the recently acquired Cymetrix operations and an increased contribution from our Alleviant business. Partially offsetting these gains was weaker demand for large implementation engagements within the Healthcare segment’s performance improvement area and lack of recovery in ICD-10 preparation services. Segment operating profit increased 4% compared to third quarter 2013 reflecting the contribution of the Cymetrix and Alleviant operations, albeit at a lower margin, partially offset by the effect of maintaining capabilities for a higher level of RBR in other areas of the segment.

2

The Financial, Risk & Compliance segment continued to respond to strong demand from large financial institutions for expertise to remediate and operationalize improvements related to their compliance and control environments. While we anticipated a year-over-year decline in third quarter 2014 RBR for this segment, the rate of decline was better-than-expected at 7% for the period. For third quarter 2014, segment operating profit increased 2% year-over-year, reflecting an improved mix of more profitable engagements.

The Energy segment achieved 12% organic and overall RBR growth in third quarter 2014 compared to third quarter 2013 reflecting broad improvement across the segment, including contributions from recent organic investments in senior hires and key market expansion. Third quarter 2014 results also benefited from long-term engagements beginning after an extended contracting process. Segment operating profit in third quarter 2014 increased 26% year-over-year due to increased RBR and improved alignment of resources.

The Disputes, Investigations & Economics segment contributed 4% organic RBR growth and 6% overall RBR growth for third quarter 2014 compared to third quarter 2013. Increased demand for general litigation assistance and improved positioning of resources to capitalize on demand within the global construction sector drove higher RBR in 2014. Legal technology solutions also contributed to the year-over-year RBR growth. Segment operating profit increased 6% compared to the same period of 2013, consistent with the increase in RBR.

Cash Flow

Net cash provided by operating activities was $39.4 million for third quarter 2014 compared to $35.1 million for the same period in 2013. Free cash flow was $24.0 million for third quarter 2014 compared to $17.3 million for the same period in 2013. The increase in free cash flow was primarily due to improved earnings in third quarter 2014 compared to 2013 partly offset by increased capital spending, primarily on technology investments. Days Sales Outstanding (DSO) improved to 77 days as of September 30, 2014 compared to 81 days at September 30, 2013.

The Company used $30.1 million of cash to pay down bank debt during third quarter 2014. Bank debt was $158.0 million at September 30, 2014 compared to $110.0 million at September 30, 2013. The year-over-year increase primarily reflects additional borrowings to fund the Cymetrix acquisition in the second quarter of 2014, net of debt repayments to banks. Leverage (bank debt divided by trailing twelve month adjusted EBITDA) was 1.36 at September 30, 2014 compared to 0.86 at September 30, 2013.

Navigant repurchased 390,624 shares of common stock during third quarter 2014 at an aggregate cost of $6.4 million and an average cost of $16.31 per share. As of September 30, 2014, $79.2 million remained on the Company’s share repurchase authorization.

3

Lucinda (Cindy) Baier, Executive Vice President and Chief Financial Officer, commented, “Following the acquisition of Cymetrix in the second quarter, we have reduced indebtedness quarter-over-quarter while continuing to return capital to shareholders through our ongoing share repurchase program. While it is still in the early stages of our investment with Cymetrix, we have completed the initial phase of integration and have been pleased with the contribution from these operations thus far. We expect to maintain our fiscal discipline which should enable us to consider additional opportunities to position Navigant for long-term, profitable growth through both internal investment and acquisition.”

2014 Outlook

Navigant is updating its outlook for 2014 to reflect recent performance as well as expectations for fourth quarter 2014. Full year 2014 RBR is now estimated in the range of $757 and $770 million with 2014 total revenues now estimated in the range of $846 and $859 million. Adjusted EBITDA is now expected to range between $109 and $114 million and adjusted EPS is now estimated to be between $0.92 and $0.97.

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.

Conference Call Details

Julie Howard and Cindy Baier will host a conference call to discuss the Company’s third quarter 2014 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Tuesday, October 28, 2014. The conference call may be accessed via the Navigant website (www.navigant.com/investor_relations) or by dialing 888.989.6515 (630.395.0130 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. Enhanced by senior level engagement with clients, Navigant professionals provide services that extend from expert and advisory work through implementation and outsourcing. 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 atwww.navigant.com.

4

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 revenue cycle management; 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 atwww.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.

For additional information contact:

Paul Longhini

Investor Relations

312.583.5836

plonghini@navigant.com

# # #

5

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data (1))

(Unaudited)

	For the quarter ended September 30,						For the nine months ended September 30,
	2014			2013			2014			2013
Revenues:
Revenues before reimbursements	$	205,534		$	186,444		$	567,094		$	556,644
Reimbursements		24,605			25,163			68,890			74,117
Total revenues		230,139			211,607			635,984			630,761
Costs of services:
Cost of services before reimbursable expenses		135,859			122,165			382,779			367,577
Reimbursable expenses		24,605			25,163			68,890			74,117
Total costs of services		160,464			147,328			451,669			441,694
General and administrative expenses		34,067			33,914			101,406			99,036
Depreciation expense		5,116			4,122			14,378			11,952
Amortization expense		1,673			1,815			4,668			5,226
Other operating costs (benefit):
Contingent acquisition liability adjustments, net		(834	)		(2,000	)		(4,438	)		(2,000	)
Office consolidation, net		—			(150	)		—			348
Gain on disposition of assets		—			—			—			(1,715	)
Goodwill impairment		—			—			122,045			—
Other impairment		—			—			204			—
Operating income (loss)		29,653			26,578			(53,948	)		76,220
Interest expense		1,942			1,094			4,177			3,491
Interest income		(56	)		(96	)		(216	)		(371	)
Other (income) expense, net		(57	)		99			211			(43	)
Income (loss) from continuing operations before income tax (benefit) expense		27,824			25,481			(58,120	)		73,143
Income tax (benefit) expense		11,563			11,952			(8,892	)		32,250
Net income (loss) from continuing operations		16,261			13,529			(49,228	)		40,893
Income (loss) from discontinued operations, net of tax		—			(3,303	)		509			(2,919	)
Net income (loss)	$	16,261		$	10,226		$	(48,719	)	$	37,974
Basic per share data
Net income (loss) from continuing operations	$	0.33		$	0.27		$	(1.01	)	$	0.82
Income (loss) from discontinued operations, net of tax	$	—		$	(0.07	)	$	0.01		$	(0.06	)
Net income (loss) (1)	$	0.33		$	0.21		$	(1.00	)	$	0.76
Shares used in computing basic per share data		48,736			49,573			48,856			49,970
Diluted per share data
Net income (loss) from continuing operations	$	0.33		$	0.27		$	(1.01	)	$	0.80
Income (loss) from discontinued operations, net of tax	$	—		$	(0.07	)	$	0.01		$	(0.06	)
Net income (loss)	$	0.33		$	0.20		$	(1.00	)	$	0.74
Shares used in computing diluted per share data (2)		49,827			50,762			48,856			51,048

6

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AND SELECTED DATA

(In thousands, except DSO data)

	September 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,252		$	1,968
Accounts receivable, net		212,707			167,066
Prepaid expenses and other current assets		25,231			24,554
Deferred income tax assets		14,985			17,314
Total current assets		257,175			210,902
Non-current assets:
Property and equipment, net		56,184			44,338
Intangible assets, net		27,952			10,778
Goodwill		571,846			615,343
Other assets		21,492			22,836
Total assets	$	934,649		$	904,197
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,888		$	13,415
Accrued liabilities		11,536			12,691
Accrued compensation-related costs		69,611			78,610
Income tax payable		5,734			1,137
Other current liabilities		30,464			32,009
Total current liabilities		128,233			137,862
Non-current liabilities:
Deferred income tax liabilities		74,724			86,571
Other non-current liabilities		36,667			26,016
Bank debt non-current		158,017			56,673
Total non-current liabilities		269,408			169,260
Total liabilities		397,641			307,122
Stockholders’ equity:
Common stock		64			63
Additional paid-in capital		609,363			598,724
Treasury stock		(268,956	)		(247,106	)
Retained earnings		206,016			254,735
Accumulated other comprehensive loss		(9,479	)		(9,341	)
Total stockholders’ equity		537,008			597,075
Total liabilities and stockholders’ equity	$	934,649		$	904,197
Selected Data
Days sales outstanding, net (DSO)		77			65

7

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	For the quarter ended September 30,						For the nine months ended September 30,
	2014			2013			2014			2013
Cash flows from operating activities:
Net income (loss)	$	16,261		$	10,226		$	(48,719	)	$	37,974
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense		5,116			4,122			14,378			11,952
Accelerated depreciation — office consolidation		—			—			—			498
Amortization expense		1,673			1,815			4,668			5,226
Amortization expense — client-facing software		583			86			825			237
Share-based compensation expense		1,930			2,775			7,166			8,194
Accretion of interest expense		911			223			1,565			676
Deferred income taxes		3,193			777			(21,202	)		12,750
Allowance for doubtful accounts receivable		1,525			690			4,309			1,917
Contingent acquisition liability adjustments, net		(834	)		(2,000	)		(4,438	)		(2,000	)
Gain on disposition of assets		—			—			—			(1,715	)
Gain (loss) on disposition of discontinued operations		—			3,675			(509	)		3,675
Goodwill impairment		—			—			122,045			—
Other impairment		—			—			204			—
Changes in assets and liabilities (net of acquisitions and dispositions):
Accounts receivable		(9,229	)		(6,290	)		(38,522	)		(22,554	)
Prepaid expenses and other assets		(919	)		2,975			(778	)		10,100
Accounts payable		1,195			2,185			(3,021	)		(3,374	)
Accrued liabilities		570			3,298			(1,125	)		3,385
Accrued compensation — related costs		10,710			6,920			(10,909	)		(14,508	)
Income taxes payable		6,950			5,716			6,113			304
Other liabilities		(278	)		(2,120	)		(5,157	)		(2,099	)
Net cash provided by operating activities		39,357			35,073			26,893			50,638
Cash flows from investing activities:
Purchases of property and equipment		(4,123	)		(2,952	)		(15,065	)		(8,707	)
Acquisitions of businesses, net of cash acquired		(4,346	)		(2,989	)		(89,180	)		(2,989	)
Proceeds from dispositions, net of selling costs		—			1,366			824			16,973
Payments of acquisition liabilities		(667	)		(1,490	)		(1,110	)		(1,838	)
Capitalized client — facing software		—			(491	)		(864	)		(2,492	)
Net cash (used in) provided by investing activities		(9,136	)		(6,556	)		(105,395	)		947
Cash flows from financing activities:
Issuances of common stock		896			475			2,431			2,620
Repurchase of common stock		(6,370	)		(8,676	)		(20,797	)		(22,321	)
Payments of contingent acquisition liabilities		—			—			(107	)		(3,287	)
Repayments to banks		(74,306	)		(61,883	)		(231,201	)		(266,327	)
Borrowings from banks		44,173			43,128			332,947			242,466
Payments of debt issuance costs		—			(669	)		—			(669	)
Other, net		(193	)		(99	)		(2,474	)		(1,551	)
Net cash (used in) provided by financing activities		(35,800	)		(27,724	)		80,799			(49,069	)
Effect of exchange rate changes on cash and cash equivalents		(21	)		138			(13	)		(49	)
Net increase in cash and cash equivalents		(5,600	)		931			2,284			2,467
Cash and cash equivalents at beginning of the period		9,852			2,588			1,968			1,052
Cash and cash equivalents at end of the period	$	4,252		$	3,519		$	4,252		$	3,519

8

NAVIGANT CONSULTING, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (3)

(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 adjusted Earnings Per Share (4)	For the quarter ended September 30,						For the nine months ended September 30,
	2014			2013			2014			2013
Severance expense	$	675		$	459		$	3,152		$	4,265
Income tax benefit (5)		(247	)		(165	)		(1,204	)		(1,388	)
Impact of severance expense, net of tax	$	428		$	294		$	1,948		$	2,877
Other operating benefit — contingent acquisition liability adjustment	$	(834	)	$	(2,000	)	$	(4,438	)	$	(2,000	)
Income tax expense (5)		337			807			1,790			807
Impact of other operating benefit — contingent acquisition liability adjustment, net of tax	$	(497	)	$	(1,193	)	$	(2,648	)	$	(1,193	)
Other operating (benefit) costs — office consolidation	$	—		$	(150	)	$	—		$	348
Income tax expense (benefit) (5)		—			60			—			(141	)
Impact of other operating (benefit) costs — office consolidation, net of tax	$	—		$	(90	)	$	—		$	207
Other operating benefit — gain on disposition of assets	$	—		$	—		$	—		$	(1,715	)
Income tax expense (5)		—			—			—			692
Impact of other operating benefit — gain on disposition of assets, net of tax	$	—		$	—		$	—		$	(1,023	)
Other operating costs — goodwill impairment	$	—		$	—		$	122,045		$	—
Income tax benefit (5)		—			—			(35,111	)		—
Impact of other operating costs — goodwill impairment, net of tax	$	—		$	—		$	86,934		$	—
Other operating costs — other impairment	$	—		$	—		$	204		$	—
Income tax benefit (5)		—			—			(82	)		—
Impact of other operating costs — other impairment, net of tax	$	—		$	—		$	122		$	—
EBITDA reconciliation:
Operating income (loss)	$	29,653		$	26,578		$	(53,948	)	$	76,220
Depreciation expense		5,116			4,122			14,378			11,952
Accelerated depreciation — office consolidation		—			—			—			498
Amortization expense		1,673			1,815			4,668			5,226
EBITDA	$	36,442		$	32,515		$	(34,902	)	$	93,896
Severance expense		675			459			3,152			4,265
Other operating benefit — contingent acquisition liability adjustment		(834	)		(2,000	)		(4,438	)		(2,000	)
Other operating benefit — office consolidation		—			(150	)		—			(150	)
Other operating benefit — gain on disposition of assets		—			—			—			(1,715	)
Other operating costs — goodwill impairment		—			—			122,045			—
Other operating costs — other impairment		—			—			204			—
Adjusted EBITDA	$	36,283		$	30,824		$	86,061		$	94,296
Net income (loss) from continuing operations	$	16,261		$	13,529		$	(49,228	)	$	40,893
Impact of severance expense, net of tax		428			294			1,948			2,877
Impact of other operating benefit — contingent acquisition liability adjustment, net of tax		(497	)		(1,193	)		(2,648	)		(1,193	)
Impact of other operating (benefit) costs — office consolidation, net of tax		—			(90	)		—			207
Impact of other operating benefit — gain on disposition of assets, net of tax		—			—			—			(1,023	)
Impact of other operating costs — goodwill impairment, net of tax		—			—			86,934			—
Impact of other operating costs — other impairment, net of tax		—			—			122			—
Adjusted net income	$	16,192		$	12,540		$	37,128		$	41,761
Shares used in computing adjusted per diluted share data (6)		49,827			50,762			50,112			51,048
Adjusted earnings per share	$	0.32		$	0.25		$	0.74		$	0.82
Free Cash Flow (7)	For the quarter ended September 30,						For the nine months ended September 30,
	2014			2013			2014			2013
Net cash provided by operating activities	$	39,357		$	35,073		$	26,893		$	50,638
Changes in assets and liabilities		(8,999	)		(12,684	)		53,399			28,746
Allowance for doubtful accounts receivable		(1,525	)		(690	)		(4,309	)		(1,917	)
Purchases of property and equipment		(4,123	)		(2,952	)		(15,065	)		(8,707	)
Payments of acquisition liabilities		(667	)		(1,490	)		(1,110	)		(1,838	)
Payments of contingent acquisition liabilities		—			—			(107	)		(3,287	)
Free Cash Flow	$	24,043		$	17,257		$	59,701		$	63,635
Leverage Ratio (8)	At September 30,
	2014			2013
Adjusted EBITDA for prior twelve-month period	$	115,838		$	127,277
Bank debt	$	158,017		$	110,006
Leverage ratio		1.36			0.86

9

Footnotes

(1) Per share data may not sum due to rounding.

(2) For the nine months ended September 30, 2014, the Company reported a net loss. For that period, the basic weighted average common shares outstanding equals the diluted weighted average common shares outstanding for purposes of calculating U.S. GAAP earnings per share because potentially dilutive securities would be antidilutive.

(3) During the year ended December 31, 2013, the United Kingdom financial services advisory business was sold. The results of operations from this business are presented as discontinued operations. All non-GAAP financial measures are presented on a continuing operations basis unless otherwise noted.

(4) 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.

(5) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction.

(6) For the nine months ended September 30, 2014, the Company reported a net loss. For non-GAAP purposes, the per share and share amounts presented here reflect the inclusion of potentially dilutive shares based on the impact of the add backs included in Adjusted Net Income.

(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 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.

10