Exhibit 99.1
FOR IMMEDIATE RELEASE
For more information, contact:
| |
Kyle Bland Navigant Investor Relations 312.573.5624 kyle.bland@navigant.com | Tim Blair Navigant Corporate Communications 303.383.7344 timothy.blair@navigant.com |
NAVIGANT REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS
CHICAGO, August 2, 2019 – Navigant (NYSE: NCI) today reported financial results for the quarter ended June 30, 2019.
Second quarter 2019 highlights:
| • | Revenues and revenues before reimbursements (RBR) were $223.1 and $196.6 million respectively, up 21% and 19% compared to second quarter 2018 |
| • | Adjusted EBITDA from continuing operations for the second quarter 2019 of $20.9 million was up $3.3 million, or 19%, compared to the prior year period |
| • | Net income from continuing operations attributable to Navigant Consulting, Inc. of $8.6 million, or $0.22 per share, was up $2.5 million or 40% compared to the second quarter 2018 |
| • | Adjusted Earnings per Share (EPS) from continuing operations of $0.29, which includes per share income attributable to non-controlling interest, net of tax, increased $0.11 compared to second quarter 2018 |
MERGER AGREEMENT
In a separate announcement, today, Guidehouse, a portfolio company of Veritas Capital, agreed to acquire Navigant in an all-cash transaction valued at $1.1 billion (“Proposed Merger”). Under the terms of the Proposed Merger, which is subject to shareholder and regulatory approval, as well as other customary closing conditions, Navigant shareholders will receive $28.00 per share in cash for each Navigant share owned upon closing of the transaction. Due to this announcement, the Company’s earnings conference call previously scheduled for August 8, 2019 has been canceled, and the Company does not intend to update its outstanding 2019 financial guidance. For further information on the Proposed Merger, please refer to the Company’s current report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 2, 2019.
SECOND QUARTER 2019 FINANCIAL RESULTS
| | | For the quarter ended June 30, | |
(Dollars in millions, excluding per share data) | | | 2019 | | | | 2018 | | | | Increase | |
Revenue | | $ | | 223.1 | | | $ | | 184.7 | | | $ | | 38.4 | |
RBR | | $ | | 196.6 | | | $ | | 165.2 | | | $ | | 31.4 | |
Net income from cont. ops. attrib. to Navigant Consulting, Inc. | | $ | | 8.6 | | | $ | | 6.1 | | | $ | | 2.5 | |
Adjusted EBITDA (1) | | $ | | 20.9 | | | $ | | 17.6 | | | $ | | 3.3 | |
Adjusted Earnings per Share (1) | | $ | | 0.29 | | | $ | | 0.18 | | | $ | | 0.11 | |
(1) From continuing operations, which includes results attributable to non-controlling interests. See definition and reconciliation of non-GAAP measures elsewhere in this release | |
Navigant reported second quarter 2019 revenues and RBR of $223.1 million and $196.6 million respectively, up 21% and 19% compared to the second quarter 2018. The quarter benefited from robust growth in managed services, including strong performance at the Health System Solutions (HSS) venture, which commenced operations in July of 2018, as well as continued strong growth in both Healthcare and Energy consulting. These items were partially offset by lower RBR within the Financial Services Advisory and Compliance (FSAC) segment.
Adjusted EBITDA from continuing operations in the second quarter 2019 was $20.9 million, up 19% from the prior year period primarily due to continued strong performance from HSS and solid margin flow through in Healthcare consulting.
Net income from continuing operations attributable to Navigant Consulting, Inc. of $8.6 million, or $0.22 per share, was up $2.5 million compared to the second quarter 2018 as the operating performance discussed above was further aided by favorable net interest costs, lower depreciation and amortization, as well as a lower share count in the current year period. These items were partially offset by higher income attributable to non-controlling interest, net of tax, in the current year period due to the first-year contributions from HSS. Net income attributable to Navigant Consulting, Inc., which includes results from discontinued operations, was down compared to the prior year period reflecting the divestiture of the Company’s former Disputes, Forensics and Legal Technology segment and transaction advisory services practice completed in the third quarter 2018.
Second quarter 2019 Adjusted EPS from continuing operations of $0.29, which includes $0.06 per share of income attributable to non-controlling interest, net of tax, increased $0.11 compared to the second quarter 2018 driven by the items discussed above.
SECOND QUARTER 2019 SEGMENT RESULTS
| | For the quarter ended June 30, | |
(Dollars in millions, numbers may not foot due to rounding) | | 2019 | | | 2018 | | | Increase / (Decrease) | |
RBR | | | | | | | | | | | | |
Healthcare | | $ | 127.4 | | | $ | 91.6 | | | $ | 35.8 | |
Energy | | | 40.0 | | | | 36.6 | | | | 3.4 | |
Financial Services Advisory and Compliance | | | 29.1 | | | | 37.0 | | | | (7.9 | ) |
Total Company | | $ | 196.6 | | | $ | 165.2 | | | $ | 31.4 | |
Revenues | | | | | | | | | | | | |
Healthcare | | $ | 136.5 | | | $ | 100.3 | | | $ | 36.2 | |
Energy | | | 55.5 | | | | 44.2 | | | | 11.3 | |
Financial Services Advisory and Compliance | | | 31.1 | | | | 40.3 | | | | (9.2 | ) |
Total Company | | $ | 223.1 | | | $ | 184.7 | | | $ | 38.4 | |
Segment Operating Profit | | | | | | | | | | | | |
Healthcare | | $ | 40.1 | | | $ | 27.4 | | | $ | 12.8 | |
Energy | | | 13.1 | | | | 12.7 | | | | 0.5 | |
Financial Services Advisory and Compliance | | | 6.4 | | | | 13.4 | | | | (7.0 | ) |
Total Company | | $ | 59.7 | | | $ | 53.4 | | | $ | 6.3 | |
Segment Operating Margin (% of RBR) | | | | | | | | | | | | |
Healthcare | | | 31.5 | % | | | 29.9 | % | | | 1.6 | % |
Energy | | | 32.8 | % | | | 34.6 | % | | | -1.8 | % |
Financial Services Advisory and Compliance | | | 21.9 | % | | | 36.2 | % | | | -14.3 | % |
Total Company | | | 30.4 | % | | | 32.3 | % | | | -1.9 | % |
Healthcare segment RBR of $127.4 million increased 39% for second quarter 2019 compared to the same prior year period driven by improved demand for Healthcare consulting services and stronger-than-expected contributions from HSS. Segment operating profit of $40.1 million increased $12.8 million in second quarter 2019 compared to second quarter 2018 driven by the first-year contributions from HSS, as well as strong demand in Healthcare consulting supporting increased headcount and driving improved consulting utilization.
Energy segment RBR for second quarter 2019 of $40.0 million increased 9% compared to second quarter 2018, driven by continued robust demand for Energy expertise from both commercial and government clients, particularly in North America. Segment operating profit of $13.1 million for the quarter was up 3% compared to the second quarter 2018 as revenue growth in North America was offset by muted demand for research and subscription services, as well as softer demand for consulting services in Europe.
Financial Services Advisory and Compliance segment RBR for the second quarter 2019 finished at $29.1 million, down 21% compared to second quarter 2018 primarily due to the wind-down of a large monitorship engagement coupled with continued softness as segment leadership works to rebuild and convert the sales pipeline. Segment operating profit of $6.4 million decreased $7.0 million compared to the prior year period driven by the aforementioned top-line challenges.
CASH FLOW AND BALANCE SHEET
Second quarter 2019 net cash provided by operating activities, which includes results from discontinued operations, was $13.5 million compared to $53.5 million in the second quarter 2018 driven by lower net income in the current year period due to the contribution of discontinued operations in second quarter 2018, as well as unfavorable working capital in the current year period. Days Sales Outstanding for continuing operations was 72 days as of June 30, 2019, down 1 day compared to March 31, 2019. At the end of the second quarter 2019, the Company’s $350 million credit facility remained undrawn and cash and cash equivalents were $90.6 million.
Navigant continued executing its share buyback program by repurchasing 983 thousand shares of common stock during the second quarter of 2019 at an aggregate cost of $20.8 million and an average price of $21.11 per share.
BASIS OF PRESENTATION
In August 2018, the Company sold its former Disputes, Forensics and Legal Technology segment and its transaction advisory services practice within the FSAC segment and, as such, the results have been reclassified to discontinued operations to reflect this transaction for all periods presented in this release. In July 2018, the Company commenced operation of HSS with Baptist Health South Florida. Navigant has a 60% financial and controlling interest in the venture and as such fully consolidates its operations. As a result, the Company reports income attributable to non-controlling interests, net of tax in its consolidated statements of comprehensive income as well as non-controlling interest included in its balance sheet.
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, Adjusted EPS, both of which exclude the impact of severance expense and other operating costs (benefit), as applicable. Navigant has also provided guidance regarding Adjusted Free Cash Flow, which excludes changes in assets and liabilities and allowance for doubtful accounts receivable less cash payments for property and equipment and deferred acquisition related payments.
• | 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) and certain tax adjustments, 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 the 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. |
• | Adjusted Free Cash Flow is calculated as net cash provided by (used in) operations excluding the change in assets, liabilities and allowance for doubtful accounts less cash payment for property, equipment and deferred acquisition liabilities. Adjusted Free Cash Flow does not represent cash available for spending as it excludes certain contractual obligations such as debt repayment. However, management believes that Adjusted 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. |
CONFERENCE CALL DETAILS
Due to announcement of the Proposed Merger, the Company’s earnings conference call previously scheduled for August 8, 2019 has been canceled.
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 report 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,” “should,” “could,” “intend,” “estimate,” “expect,” “likely,” “continue,” “plan,” “projects,” “positioned,” “outlook” and similar expressions. These statements are based upon management’s current expectations and speak only as of the date of this report. 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 and uncertainties that could cause actual results to differ materially from those contained in or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to: the satisfaction of the conditions precedent to the consummation of the proposed merger, including, without limitation, the receipt of stockholder and regulatory approvals; unanticipated difficulties or expenditures relating to the proposed merger; legal proceedings, judgments or settlements, including those that may be instituted against the Company, the Company’s board of directors, executive officers and others following the announcement of the proposed merger; disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; potential difficulties in employee retention due to the announcement and pendency of the proposed merger; the response of customers, suppliers, business partners and regulators to the announcement of the proposed merger; the risk of unanticipated costs, liabilities or an adverse impact on the Company’s business operations arising from the Company’s provision of post-divestiture transition services and support in connection with the sale of the Company’s Disputes, Forensics and Legal Technology segment and the transaction advisory services practice within the Company’s Financial Services Advisory and Compliance segment; 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 and complete such acquisitions and divestitures in the time anticipated; pace, timing and integration of acquisitions; 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 business and financial condition and the results of operations are included in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,, and elsewhere in the Company’s filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website or at investors.navigant.com. The Company cannot guarantee any future results, levels of activity, performance or achievement and undertakes no obligation to update any of its forward-looking statements.
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, | |
| | 2019 | | | 2018 | | | 2019 | | | 2018 | |
Revenues: | | | | | | | | | | | | | | | | |
Revenues before reimbursements | | $ | 196,567 | | | $ | 165,224 | | | $ | 382,696 | | | $ | 326,669 | |
Reimbursements | | | 26,489 | | | | 19,489 | | | | 43,222 | | | | 36,112 | |
Total revenues | | | 223,056 | | | | 184,713 | | | | 425,918 | | | | 362,781 | |
Cost of services: | | | | | | | | | | | | | | | | |
Cost of services before reimbursable expenses | | | 140,405 | | | | 113,121 | | | | 275,761 | | | | 230,057 | |
Reimbursable expenses | | | 26,489 | | | | 19,489 | | | | 43,222 | | | | 36,112 | |
Total cost of services | | | 166,894 | | | | 132,610 | | | | 318,983 | | | | 266,169 | |
General and administrative expenses | | | 35,968 | | | | 34,912 | | | | 71,135 | | | | 71,991 | |
Depreciation expense | | | 4,262 | | | | 4,943 | | | | 8,848 | | | | 9,940 | |
Amortization expense | | | 1,393 | | | | 1,665 | | | | 2,765 | | | | 3,417 | |
Other operating costs | | | - | | | | 2,295 | | | | 32 | | | | 3,278 | |
Operating income | | | 14,539 | | | | 8,288 | | | | 24,155 | | | | 7,986 | |
Interest expense | | | 317 | | | | 911 | | | | 635 | | | | 1,739 | |
Interest income | | | (375 | ) | | | (77 | ) | | | (1,064 | ) | | | (196 | ) |
Other expense, net | | | (10 | ) | | | (183 | ) | | | 122 | | | | 178 | |
Income from continuing operations before income tax expense | | | 14,607 | | | | 7,637 | | | | 24,462 | | | | 6,265 | |
Income tax expense | | | 3,682 | | | | 1,509 | | | | 6,729 | | | | 1,734 | |
Net income from continuing operations | | | 10,925 | | | | 6,128 | | | | 17,733 | | | | 4,531 | |
Income from discontinued operations, net of tax | | | 523 | | | | 22,698 | | | | 34 | | | | 36,148 | |
Net income | | | 11,448 | | | | 28,826 | | | | 17,767 | | | | 40,679 | |
Income attributable to non-controlling interest, net of tax | | | (2,369 | ) | | | - | | | | (4,407 | ) | | | - | |
Net income attributable to Navigant Consulting, Inc. | | $ | 9,079 | | | $ | 28,826 | | | $ | 13,360 | | | $ | 40,679 | |
| | | | | | | | | | | | | | | | |
Basic net income per share data | | | | | | | | | | | | | | | | |
Income from continuing operations attributable to Navigant Consulting, Inc. | | $ | 0.22 | | | $ | 0.14 | | | $ | 0.34 | | | $ | 0.10 | |
Income from discontinued operations, net of tax | | $ | 0.01 | | | $ | 0.50 | | | $ | - | | | $ | 0.80 | |
Net income attributable to Navigant Consulting, Inc. | | $ | 0.23 | | | $ | 0.64 | | | $ | 0.34 | | | $ | 0.90 | |
Shares used in computing basic per share data | | | 38,654 | | | | 45,106 | | | | 39,436 | | | | 45,113 | |
| | | | | | | | | | | | | | | | |
Diluted net income per share data | | | | | | | | | | | | | | | | |
Income from continuing operations attributable to Navigant Consulting, Inc. | | $ | 0.22 | | | $ | 0.13 | | | $ | 0.33 | | | $ | 0.10 | |
Income from discontinued operations, net of tax | | $ | 0.01 | | | $ | 0.49 | | | $ | - | | | $ | 0.77 | |
Net income attributable to Navigant Consulting, Inc. | | $ | 0.23 | | | $ | 0.62 | | | $ | 0.33 | | | $ | 0.87 | |
Shares used in computing diluted per share data | | | 39,616 | | | | 46,549 | | | | 40,512 | | | | 46,692 | |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND SELECTED DATA
(In thousands, except DSO data)
(Unaudited)
| | June 30, | | | December 31, | |
| | 2019 | | | 2018 | |
| | | | | | | | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 90,626 | | | $ | 206,920 | |
Accounts receivable, net and contract assets | | | 200,820 | | | | 179,923 | |
Prepaid expenses and other current assets | | | 25,199 | | | | 22,512 | |
Total current assets | | | 316,645 | | | | 409,355 | |
Non-current assets: | | | | | | | | |
Property and equipment, net | | | 62,672 | | | | 63,025 | |
Operating lease right-of-use asset | | | 80,780 | | | | - | |
Intangible assets, net | | | 14,129 | | | | 14,166 | |
Goodwill | | | 426,060 | | | | 422,357 | |
Other assets | | | 7,945 | | | | 8,644 | |
Total assets | | $ | 908,231 | | | $ | 917,547 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 15,219 | | | $ | 13,302 | |
Accrued liabilities | | | 17,641 | | | | 15,558 | |
Accrued compensation-related costs | | | 46,316 | | | | 69,555 | |
Income tax payable | | | 3,362 | | | | 13,357 | |
Operating lease liabilities | | | 22,735 | | | | - | |
Other current liabilities | | | 23,879 | | | | 34,044 | |
Total current liabilities | | | 129,152 | | | | 145,816 | |
Non-current liabilities: | | | | | | | | |
Deferred income tax liabilities | | | 39,258 | | | | 33,901 | |
Operating lease liabilities | | | 81,166 | | | | - | |
Other non-current liabilities | | | 2,818 | | | | 25,277 | |
Total non-current liabilities | | | 123,242 | | | | 59,178 | |
Total liabilities | | | 252,394 | | | | 204,994 | |
Stockholders' equity: | | | | | | | | |
Common stock | | | 50 | | | | 49 | |
Additional paid-in capital | | | 671,153 | | | | 664,473 | |
Treasury stock | | | (235,216 | ) | | | (160,972 | ) |
Retained earnings | | | 220,983 | | | | 211,543 | |
Accumulated other comprehensive loss | | | (5,929 | ) | | | (6,529 | ) |
Total Navigant Consulting Inc. stockholders' equity | | | 651,041 | | | | 708,564 | |
Non-controlling interest | | | 4,796 | | | | 3,989 | |
Total stockholders' equity | | | 655,837 | | | | 712,553 | |
Total liabilities and stockholders' equity | | $ | 908,231 | | | $ | 917,547 | |
| | | | | | | | |
Days sales outstanding, net (DSO) | | | 72 | | | | 70 | |
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, | |
| | | 2019 | | | 2018 | | | 2019 | | | 2018 | |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | |
Net income | | | $ | 11,448 | | | $ | 28,826 | | | $ | 17,767 | | | $ | 40,679 | |
Adjustments to reconcile net income to net cash used in | | | | | | | | | | | | | | | | | |
operating activities: | | | | | | | | | | | | | | | | | |
Depreciation expense | | | | 4,262 | | | | 6,768 | | | | 8,848 | | | | 13,613 | |
Amortization expense | | | | 1,393 | | | | 1,772 | | | | 2,765 | | | | 3,628 | |
Share-based compensation expense | | | | 4,212 | | | | 2,089 | | | | 6,981 | | | | 5,466 | |
Deferred income taxes | | | | (278 | ) | | | (6,601 | ) | | | 4,808 | | | | (5,633 | ) |
Allowance for doubtful accounts receivable | | | | 719 | | | | 3,764 | | | | 1,167 | | | | 6,894 | |
Loss from disposition of discontinued operations | | | | (721 | ) | | | - | | | | (49 | ) | | | - | |
Other, net | | | | 112 | | | | (968 | ) | | | 297 | | | | 39 | |
Changes in assets and liabilities (net of acquisitions): | | | | | | | | | | | | | | | | | |
Accounts receivable, net and contract assets | | | | (14,960 | ) | | | 5,423 | | | | (21,974 | ) | | | (18,192 | ) |
Prepaid expenses and other assets | | | | 1,874 | | | | 3,088 | | | | (2,431 | ) | | | 2,372 | |
Accounts payable | | | | 2,339 | | | | 593 | | | | 1,916 | | | | (1,507 | ) |
Accrued liabilities | | | | 2,264 | | | | 1,886 | | | | 2,145 | | | | 4,086 | |
Accrued compensation-related costs | | | | 5,502 | | | | 9,334 | | | | (23,270 | ) | | | (27,124 | ) |
Income taxes payable | | | | (6,120 | ) | | | (602 | ) | | | (9,476 | ) | | | 2,324 | |
Lease liabilities and right-of-use assets | | | | (585 | ) | | | | | | | (1,410 | ) | | | | |
Other liabilities | | | | 1,993 | | | | (1,829 | ) | | | (5,769 | ) | | | (7,949 | ) |
Net cash provided by (used in) operating activities | | | | 13,454 | | | | 53,543 | | | | (17,685 | ) | | | 18,696 | |
| | | | | | | | | | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | | |
Purchases of property and equipment | | | | (5,447 | ) | | | (1,705 | ) | | | (8,454 | ) | | | (7,455 | ) |
Acquisitions of businesses, net of cash acquired | | | | (120 | ) | | | - | | | | (6,120 | ) | | | - | |
Other, net | | | | | | | | (19 | ) | | | - | | | | (19 | ) |
Net cash used in investing activities | | | | (5,567 | ) | | | (1,724 | ) | | | (14,574 | ) | | | (7,474 | ) |
| | | | | | | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | |
Issuances of common stock | | | | 608 | | | | 936 | | | | 1,464 | | | | 2,174 | |
Repurchases of common stock | | | | (20,751 | ) | | | (7,490 | ) | | | (74,244 | ) | | | (18,847 | ) |
Dividend payments | | | | (1,926 | ) | | | - | | | | (3,920 | ) | | | - | |
Repayments to banks | | | | - | | | | (93,335 | ) | | | - | | | | (172,479 | ) |
Borrowings from banks | | | | - | | | | 57,571 | | | | - | | | | 187,248 | |
Distributions to non-controlling interest holder | | | | - | | | | - | | | | (3,600 | ) | | | - | |
Other, net | | | | (2,541 | ) | | | (4,622 | ) | | | (3,847 | ) | | | (6,218 | ) |
Net cash used in financing activities | | | | (24,610 | ) | | | (46,940 | ) | | | (84,147 | ) | | | (8,122 | ) |
| | | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | | 132 | | | | (385 | ) | | | 112 | | | | (409 | ) |
Net (decrease) increase in cash and cash equivalents | | | | (16,591 | ) | | | 4,494 | | | | (116,294 | ) | | | 2,691 | |
Cash and cash equivalents at beginning of the period | | | | 107,217 | | | | 6,646 | | | | 206,920 | | | | 8,449 | |
Cash and cash equivalents at end of the period | | | $ | 90,626 | | | $ | 11,140 | | | $ | 90,626 | | | $ | 11,140 | |
NAVIGANT CONSULTING, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data and percentages (1))
(Unaudited)
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, | |
| | 2019 | | | 2018 | | | | 2019 | | | 2018 | |
Adjusted items: | | | | | | | | | | | | | | | | | |
Severance expense | | $ | 663 | | | $ | 374 | | | | $ | 1,340 | | | $ | 2,157 | |
Income tax benefit (3) | | | (168 | ) | | | (99 | ) | | | | (353 | ) | | | (574 | ) |
Tax-effected impact of severance expense | | $ | 495 | | | $ | 275 | | | | $ | 987 | | | $ | 1,583 | |
| | | | | | | | | | | | | | | | | |
Other operating costs -other costs (4) | | $ | - | | | $ | 2,295 | | | | $ | 32 | | | $ | 3,278 | |
Income tax benefit (3) | | | - | | | | (625 | ) | | | | (9 | ) | | | (893 | ) |
Tax-effected impact of other operating costs - other costs | | $ | - | | | $ | 1,670 | | | | $ | 23 | | | $ | 2,385 | |
| | | | | | | | | | | | | | | | | |
Adjusted EBITDA reconciliation: | | | | | | | | | | | | | | | | | |
Net income attributable to Navigant Consulting, Inc. | | $ | 9,079 | | | $ | 28,826 | | | | $ | 13,360 | | | $ | 40,679 | |
Income attributable to non-controlling interest, net of tax | | | 2,369 | | | | - | | | | | 4,407 | | | | - | |
Income from discontinued operations, net of tax | | | (523 | ) | | | (22,698 | ) | | | | (34 | ) | | | (36,148 | ) |
Net income from continuing operations | | $ | 10,925 | | | $ | 6,128 | | | | $ | 17,733 | | | $ | 4,531 | |
Interest expense | | | 317 | | | | 911 | | | | | 635 | | | | 1,739 | |
Interest income | | | (375 | ) | | | (77 | ) | | | | (1,064 | ) | | | (196 | ) |
Other expense, net | | | (10 | ) | | | (183 | ) | | | | 122 | | | | 178 | |
Income tax expense | | | 3,682 | | | | 1,509 | | | | | 6,729 | | | | 1,734 | |
Depreciation expense | | | 4,262 | | | | 4,943 | | | | | 8,848 | | | | 9,940 | |
Amortization expense | | | 1,393 | | | | 1,665 | | | | | 2,765 | | | | 3,417 | |
EBITDA | | $ | 20,194 | | | $ | 14,896 | | | | $ | 35,768 | | | $ | 21,343 | |
Adjusted items: | | | | | | | | | | | | | | | | | |
Severance expense | | | 663 | | | | 374 | | | | | 1,340 | | | | 2,157 | |
Other operating costs - other costs | | | - | | | | 2,295 | | | | | 32 | | | | 3,278 | |
Adjusted EBITDA from continuing operations | | $ | 20,857 | | | $ | 17,565 | | | | $ | 37,140 | | | $ | 26,778 | |
| | | | | | | | | | | | | | | | | |
Adjusted Net Income reconciliation: | | | | | | | | | | | | | | | | | |
Net income attributable to Navigant Consulting, Inc. | | $ | 9,079 | | | $ | 28,826 | | | | | 13,360 | | | | 40,679 | |
Income attributable to non-controlling interest, net of tax | | | 2,369 | | | | - | | | | | 4,407 | | | | - | |
Income from discontinued operations, net of tax | | | (523 | ) | | | (22,698 | ) | | | | (34 | ) | | | (36,148 | ) |
Net income from continuing operations | | $ | 10,925 | | | $ | 6,128 | | | | $ | 17,733 | | | $ | 4,531 | |
Adjusted items: | | | | | | | | | | | | | | | | | |
Tax-effected impact of severance expense | | | 495 | | | | 275 | | | | | 987 | | | | 1,583 | |
Tax-effected impact of other operating costs - other costs | | | - | | | | 1,670 | | | | | 23 | | | | 2,385 | |
Impact of certain income tax related items (5) | | | - | | | | 100 | | | | | - | | | | 1,200 | |
Tax-effected adjusted items | | | 495 | | | | 2,045 | | | | | 1,010 | | | | 5,168 | |
Adjusted Net Income from continuing operations | | $ | 11,420 | | | $ | 8,173 | | | | $ | 18,743 | | | $ | 9,699 | |
Shares used in computing adjusted per diluted share data | | | 39,616 | | | | 46,549 | | | | | 40,512 | | | | 46,692 | |
Earnings per share from continuing operations attributable to Navigant Consulting, Inc. | | $ | 0.22 | | | $ | 0.13 | | | | $ | 0.33 | | | $ | 0.10 | |
Earnings per Share attributable to non-controlling interest | | | 0.06 | | | | - | | | | | 0.11 | | | | - | |
Earnings per Share from adjusted items | | | 0.01 | | | | 0.04 | | | | | 0.02 | | | | 0.11 | |
Adjusted Earnings per Share from continuing operations (1) | | $ | 0.29 | | | $ | 0.18 | | | | $ | 0.46 | | | $ | 0.21 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | For the quarter ended | | | | For the six months ended | |
Adjusted Free Cash Flow (6) | | June 30, | | | | June 30, | |
| | 2019 | | | 2018 | | | | 2019 | | | 2018 | |
Net cash provided by (used in) operating activities | | $ | 13,454 | | | $ | 53,543 | | | | $ | (17,685 | ) | | $ | 18,696 | |
Changes in assets and liabilities | | | 7,693 | | | | (17,893 | ) | | | | 60,269 | | | | 45,990 | |
Allowance for doubtful accounts receivable | | | (719 | ) | | | (3,764 | ) | | | | (1,167 | ) | | | (6,894 | ) |
Purchases of property and equipment | | | (5,447 | ) | | | (1,705 | ) | | | | (8,454 | ) | | | (7,455 | ) |
Payments of contingent acquisition liabilities | | | - | | | | (1,090 | ) | | | | - | | | | (1,170 | ) |
Adjusted Free Cash Flow | | $ | 14,981 | | | $ | 29,091 | | | | $ | 32,963 | | | $ | 49,167 | |
Leverage Ratio (7) | | At June 30, | | | | | | | | | | | | | | | |
| | 2019 | | | 2018 | | | | | | | | | | | | | | | |
Adjusted EBITDA for prior twelve-month period (including disc. ops. prior to sale) | | $ | 78,020 | | | $ | 134,847 | | | | | | | | | | | | | | | |
Bank debt | | $ | - | | | $ | 147,005 | | | | | | | | | | | | | | | |
Leverage Ratio | | | - | | | | 1.09 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | For the quarter ended | | | | | | For the six months ended | | | | |
Organic Growth (8) | | June 30, | | | | | | June 30, | | | | |
| | 2019 | | | 2018 | | Growth | | | 2019 | | | 2018 | | Growth | |
Revenues before reimbursements | | $ | 196,567 | | | $ | 165,224 | | | 19.0 | % | | $ | 382,696 | | | $ | 326,669 | | | 17.2 | % |
Pro forma acquisition adjustment | | | - | | | | 520 | | | | | | | - | | | | 1,118 | | | | |
Currency impact | | | 798 | | | | - | | | | | | | 965 | | | | - | | | | |
FX Neutral Organic RBR | | $ | 197,365 | | | $ | 165,744 | | | 19.1 | % | | $ | 383,661 | | | $ | 327,787 | | | 17.0 | % |
Footnotes
(1) Per share data may not sum due to rounding.
(2) 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) and certain tax adjustments, 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) Income tax impact 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 divestiture of its former Disputes, Forensics and Legal Technology segment and transaction advisory services practice.
(5) In Q4 2018, the Company settled its 2014 income tax audit with the IRS. The settlement resulted in an incremental tax expense related to the timing of tax deductions on certain executive compensation awards that required employment beyond the year of deduction. Although tax expense also includes adjustments for the 2014-2017 tax years, the adjustment is primarily driven by the deductions taken on our 2014 income tax return. After reaching this settlement in Q4 2018, the Company restated the Q1-Q3 2018 Adjusted EPS figures to reflect amounts accrued in those periods for this settlement. The adjustment includes related interest cost.
(6) Adjusted 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. Adjusted 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 continuing and discontinued operations) 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.
(8) Organic growth represents revenues before reimbursements from continuing operations adjusted to include the impact of our 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. 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.
