CHICAGO--(BUSINESS WIRE)--Navigant (NYSE: NCI) today announced financial results for the fourth quarter and the full year ended December 31, 2016. The Company also introduced its business and financial outlook for 2017.
Financial Summary and Highlights:
- Full year 2016 total revenues surpassed the billion-dollar threshold for the first time in Navigant’s history at $1.03 billion
- Full year 2016 revenues before reimbursements (RBR) of $938.7 million increased 13%, with 9% organic growth, compared to full year 2015
- Full year 2016 net income was $58.1 million, or $1.19 per share, compared to $60.3 million, or $1.23 per share, for full year 2015
- Full year 2016 adjusted earnings per share (EPS) of $1.27 was up 19% over full year 2015
“Navigant delivered outstanding results in 2016, far exceeding our historical trends in top and bottom line growth, our original estimates for the year and general economic growth,” commented Julie Howard, Chairman and Chief Executive Officer. “Seamless execution on our strategic plans and the clear alignment of our professionals’ expertise to the transformational issues impacting our clients translated into strong business performance. We are very pleased to have delivered significant value to our shareholders as a result. Looking ahead, I view 2017 with measured optimism. We plan to remain nimble in aligning our resources and capabilities to address the potential changes that may occur for our clients as the regulatory environment evolves.”
Navigant reported fourth quarter 2016 RBR of $239.7 million, a 13% increase (9% organic growth), compared to $212.0 million for fourth quarter 2015. Total revenues increased 14% to $266.1 million for fourth quarter 2016 compared to $232.6 million for fourth quarter 2015. Net income for fourth quarter 2016 was $13.5 million, or $0.28 per share, compared to $13.2 million, or $0.27 per share, in the prior year fourth quarter. Adjusted EPS was $0.30 for fourth quarter 2016, up 7% compared to fourth quarter 2015. Fourth quarter 2016 adjusted EBITDA was $34.8 million, a 13% increase, compared to $30.9 million for the same period in 2015. Adjusted EBITDA margin (adjusted EBITDA as a percent of RBR) for fourth quarter 2016 was 14.5%, flat compared to fourth quarter 2015.
RBR for full year 2016 increased 13% (9% organic growth) on a year-over-year basis to $938.7 million compared to $833.8 million for full year 2015. Total revenues for full year 2016 increased 13% on a year-over-year basis to $1.03 billion compared to $919.5 million for full year 2015. Net income for full year 2016 was $58.1 million, or $1.19 per share, compared to $60.3 million, or $1.23 per share, in 2015. Adjusted EPS was $1.27 for full year 2016, up 19% compared to full year 2015. Full year 2016 adjusted EBITDA was $142.3 million, an 18% increase, compared to $120.9 million for full year 2015. Adjusted EBITDA margin for full year 2016 increased to 15.2% compared to 14.5% for full year 2015.
“We made significant progress on our growth strategy while strengthening our financial position during 2016,” said Stephen Lieberman, Executive Vice President and Chief Financial Officer. “We completed strategic acquisitions and made investments to complement and enhance our core businesses, while also remaining intensely focused on strong capital management. Going forward, our emphasis will be on operating more efficiently to advance our growth agenda and to meet the financial targets we set forth today.”
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Segment Financial Highlights |
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| For the quarter ended | For the year ended | |||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
| RBR ($000) | ||||||||||||||||||||||
| Healthcare | $ | 91,679 | $ | 76,059 | 20.5 | % | $ | 354,268 | $ | 288,798 | 22.7 | % | ||||||||||
| Energy | 31,313 | 27,511 | 13.8 | % | 115,940 | 106,023 | 9.4 | % | ||||||||||||||
| Financial Services Advisory and Compliance | 38,257 | 31,605 | 21.0 | % | 152,166 | 124,359 | 22.4 | % | ||||||||||||||
| Disputes, Forensics & Legal Technology | 78,422 | 76,820 | 2.1 | % | 316,372 | 314,628 | 0.6 | % | ||||||||||||||
| Total Company | $ | 239,671 | $ | 211,995 | 13.1 | % | $ | 938,746 | $ | 833,808 | 12.6 | % | ||||||||||
| Total Revenues ($000) | ||||||||||||||||||||||
| Healthcare | $ | 100,712 | $ | 83,082 | 21.2 | % | $ | 389,233 | $ | 313,884 | 24.0 | % | ||||||||||
| Energy | 37,402 | 31,785 | 17.7 | % | 133,612 | 124,491 | 7.3 | % | ||||||||||||||
| Financial Services Advisory and Compliance | 44,733 | 35,151 | 27.3 | % | 173,391 | 142,959 | 21.3 | % | ||||||||||||||
| Disputes, Forensics & Legal Technology | 83,254 | 82,600 | 0.8 | % | 338,244 | 338,152 | 0.0 | % | ||||||||||||||
| Total Company | $ | 266,101 | $ | 232,618 | 14.4 | % | $ | 1,034,480 | $ | 919,486 | 12.5 | % | ||||||||||
| Segment Operating Profit ($000) | ||||||||||||||||||||||
| Healthcare | $ | 30,137 | $ | 23,796 | 26.6 | % | $ | 115,163 | $ | 90,869 | 26.7 | % | ||||||||||
| Energy | 9,185 | 8,247 | 11.4 | % | 32,637 | 31,380 | 4.0 | % | ||||||||||||||
| Financial Services Advisory and Compliance | 14,765 | 12,476 | 18.3 | % | 63,464 | 49,130 | 29.2 | % | ||||||||||||||
| Disputes, Forensics & Legal Technology | 24,913 | 24,014 | 3.7 | % | 108,685 | 102,449 | 6.1 | % | ||||||||||||||
| Total Company | $ | 79,000 | $ | 68,533 | 15.3 | % | $ | 319,949 | $ | 273,828 | 16.8 | % | ||||||||||
| Segment Operating Margin (% of RBR) | ||||||||||||||||||||||
| Healthcare | 32.9 | % | 31.3 | % | 32.5 | % | 31.5 | % | ||||||||||||||
| Energy | 29.3 | % | 30.0 | % | 28.1 | % | 29.6 | % | ||||||||||||||
| Financial Services Advisory and Compliance | 38.6 | % | 39.5 | % | 41.7 | % | 39.5 | % | ||||||||||||||
| Disputes, Forensics & Legal Technology | 31.8 | % | 31.3 | % | 34.4 | % | 32.6 | % | ||||||||||||||
| Total Company | 33.0 | % | 32.3 | % | 34.1 | % | 32.8 | % | ||||||||||||||
Healthcare segment RBR increased 21% for fourth quarter 2016 and 23% for full year 2016 compared to the respective periods in 2015, with more than half of that growth organic. Strength in both fourth quarter 2016 and full year 2016 was driven by continued demand for large, strategy-led transformation projects and revenue cycle consulting engagements. Segment operating profit was up 27% in both fourth quarter 2016 and full year 2016, compared to the respective periods of 2015.
Energy segment RBR increased 14% for fourth quarter 2016 on a year-over-year basis, primarily driven by contributions from the Ecofys acquisition announced in November 2016. Full year 2016 RBR was up 9% from full year 2015, with more than half of that growth organic, reflecting an increase in demand for strategy and operations projects for utilities and energy efficiency evaluation and standards engagements driven largely by increased penetration of key client accounts. Segment operating profit was up 11% in fourth quarter 2016 and up 4% in full year 2016, compared to the respective periods in 2015.
The Financial Services Advisory and Compliance segment RBR for fourth quarter 2016 increased 21% compared to the prior year quarter and increased 22% for full year 2016 compared to full year 2015, all on an organic basis. Strength was driven primarily by continued demand for financial crimes consulting expertise and an increase in compliance and controls engagements for major financial institutions, as compared to the prior year periods. Segment operating profit was up 18% in fourth quarter 2016 and up 29% in full year 2016, compared to the respective periods of 2015, driven by RBR growth, better pricing and greater use of lower cost, flexible resources.
The Disputes, Forensics & Legal Technology segment RBR increased 2% for fourth quarter 2016 and 1% for full year 2016 compared to the respective periods in 2015, all on an organic basis. Growth in both fourth quarter 2016 and full year 2016 was primarily driven by the continued strong demand for our global expertise in complex industrial, infrastructure and commercial project matters and an increase in performance-based fees associated with mass tort claims work. Segment operating profit was up 4% in fourth quarter 2016 and up 6% in full year 2016 compared to the respective periods of 2015.
Cash Flow
Net cash provided by operating activities for fourth quarter 2016 was $54.4 million compared to $49.0 million for fourth quarter 2015, and was $110.0 for full year 2016 compared to $83.1 million for full year 2015, as a result of improved earnings. Free cash flow increased to $7.9 million for fourth quarter 2016 compared to $7.5 million for the same period in 2015, primarily driven by a decrease in deferred acquisition payments, partially offset by increased capital expenditures. Full year 2016 free cash flow was $78.8 million compared to $49.0 million for full year 2015, reflecting improved operating performance, decreased capital expenditures and a decrease in deferred acquisition payments. Days Sales Outstanding was 81 days as of December 31, 2016, up five days compared to December 31, 2015.
Bank debt was $135.0 million at December 31, 2016, compared to $173.7 million at December 31, 2015 and $161.2 million at September 30, 2016. Leverage (bank debt divided by trailing twelve month adjusted EBITDA) was 0.95 at December 31, 2016, compared to 1.44 at December 31, 2015 and 1.17 at September 30, 2016.
Navigant repurchased 291,495 shares of common stock during fourth quarter 2016 at an aggregate cost of $6.3 million and an average cost of $21.46 per share. For full year 2016, the Company repurchased approximately 1.4 million shares of common stock at an aggregate cost of $25.1 million and an average cost of $17.45 per share. As of December 31, 2016, approximately $63.0 million remained available under the Company’s share repurchase authorization.
2017 Outlook
Navigant is introducing its 2017 outlook. Full year 2017 RBR is expected to range between $975 million and $1.010 billion while 2017 total revenues are estimated to be between $1.075 billion and $1.115 billion. Adjusted EBITDA for the full year 2017 is expected to range between $145 and $156 million and adjusted EPS for the full year 2017 is estimated to be between $1.29 and $1.36.
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.
No reconciliation of Navigant’s 2017 adjusted EBITDA guidance and 2017 adjusted EPS guidance, both of which exclude the impact and tax-effected impact of severance expense and other operating costs (benefit), respectively, is included in the financial schedules attached to this press release. 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.
Conference Call Details
Navigant will host a conference call to discuss the Company’s fourth quarter and full year 2016 results at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, February 16, 2017. 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.” 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 Consulting, Inc. (NYSE: NCI) 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 industries and clients facing transformational change and significant regulatory or legal pressures, the Firm primarily serves clients in the healthcare, energy and financial services markets. 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” 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 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, 2015, 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 year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues: | ||||||||||||||||
| Revenues before reimbursements | $ | 239,671 | $ | 211,995 | $ | 938,746 | $ | 833,808 | ||||||||
| Reimbursements | 26,430 | 20,623 | 95,734 | 85,678 | ||||||||||||
| Total revenues | 266,101 | 232,618 | 1,034,480 | 919,486 | ||||||||||||
| Cost of services: | ||||||||||||||||
| Cost of services before reimbursable expenses | 163,968 | 146,195 | 631,935 | 571,894 | ||||||||||||
| Reimbursable expenses | 26,430 | 20,623 | 95,734 | 85,678 | ||||||||||||
| Total cost of services | 190,398 | 166,818 | 727,669 | 657,572 | ||||||||||||
| General and administrative expenses | 42,490 | 36,100 | 168,954 | 147,462 | ||||||||||||
| Depreciation expense | 7,197 | 6,579 | 27,742 | 23,612 | ||||||||||||
| Amortization expense | 2,790 | 1,963 | 11,507 | 8,613 | ||||||||||||
| Other operating costs (benefit): | ||||||||||||||||
| Contingent acquisition liability adjustments, net | - | (422 | ) | 1,330 | (13,047 | ) | ||||||||||
| Office consolidation, net | 368 | 26 | 542 | 2,766 | ||||||||||||
| Loss on disposition of assets | - | - | - | 283 | ||||||||||||
| Other impairment | - | - | - | 98 | ||||||||||||
| Operating income | 22,858 | 21,554 | 96,736 | 92,127 | ||||||||||||
| Interest expense | 1,236 | 928 | 5,235 | 4,916 | ||||||||||||
| Interest income | (31 | ) | (72 | ) | (141 | ) | (250 | ) | ||||||||
| Other income, net | (635 | ) | (212 | ) | (1,769 | ) | (692 | ) | ||||||||
| Income before income tax expense | 22,288 | 20,910 | 93,411 | 88,153 | ||||||||||||
| Income tax expense | 8,784 | 7,711 | 35,313 | 27,808 | ||||||||||||
| Net income | $ | 13,504 | $ | 13,199 | $ | 58,098 | $ | 60,345 | ||||||||
| Basic per share data | ||||||||||||||||
| Net income | $ | 0.29 | $ | 0.28 | $ | 1.23 | $ | 1.26 | ||||||||
| Shares used in computing basic per share data | 47,026 | 47,516 | 47,343 | 47,906 | ||||||||||||
| Diluted per share data | ||||||||||||||||
| Net income | $ | 0.28 | $ | 0.27 | $ | 1.19 | $ | 1.23 | ||||||||
| Shares used in computing diluted per share data | 48,618 | 49,007 | 48,813 | 49,224 | ||||||||||||
| NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS AND SELECTED DATA | ||||||||
| (In thousands, except DSO data) | ||||||||
| December 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 8,291 | $ | 8,895 | ||||
| Accounts receivable, net | 261,755 | 216,660 | ||||||
| Prepaid expenses and other current assets | 29,762 | 29,729 | ||||||
| Total current assets | 299,808 | 255,284 | ||||||
| Non-current assets: | ||||||||
| Property and equipment, net | 82,953 | 76,717 | ||||||
| Intangible assets, net | 28,727 | 38,160 | ||||||
| Goodwill | 625,027 | 623,204 | ||||||
| Other assets | 18,282 | 22,531 | ||||||
| Total assets | $ | 1,054,797 | $ | 1,015,896 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 11,871 | $ | 9,497 | ||||
| Accrued liabilities | 16,144 | 10,719 | ||||||
| Accrued compensation-related costs | 106,779 | 91,577 | ||||||
| Income tax payable | 1,564 | - | ||||||
| Other current liabilities | 38,616 | 32,147 | ||||||
| Total current liabilities | 174,974 | 143,940 | ||||||
| Non-current liabilities: | ||||||||
| Deferred income tax liabilities | 77,737 | 75,719 | ||||||
| Other non-current liabilities | 32,579 | 28,956 | ||||||
| Bank debt non-current | 135,030 | 173,743 | ||||||
| Total non-current liabilities | 245,346 | 278,418 | ||||||
| Total liabilities | 420,320 | 422,358 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 57 | 64 | ||||||
| Additional paid-in capital | 644,519 | 627,976 | ||||||
| Treasury stock | (181,361 | ) | (296,624 | ) | ||||
| Retained earnings | 196,468 | 278,682 | ||||||
| Accumulated other comprehensive loss | (25,206 | ) | (16,560 | ) | ||||
| Total stockholders' equity | 634,477 | 593,538 | ||||||
| Total liabilities and stockholders' equity | $ | 1,054,797 | $ | 1,015,896 | ||||
|
Selected Data (unaudited) |
||||||||
| Days sales outstanding, net (DSO) | 81 | 76 | ||||||
| NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the quarter ended | For the year ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 13,504 | $ | 13,199 | $ | 58,098 | $ | 60,345 | ||||||||
| Adjustments to reconcile net income to net cash | ||||||||||||||||
| provided by operating activities: | ||||||||||||||||
| Depreciation expense | 7,197 | 6,579 | 27,742 | 23,612 | ||||||||||||
| Amortization expense | 2,790 | 1,963 | 11,507 | 8,613 | ||||||||||||
| Amortization expense - client-facing software | 199 | 191 | 725 | 867 | ||||||||||||
| Share-based compensation expense | 3,626 | 2,122 | 13,071 | 10,328 | ||||||||||||
| Accretion of interest expense | 262 | 21 | 788 | 1,185 | ||||||||||||
| Deferred income taxes | (2,779 | ) | 7,097 | (2,154 | ) | 13,807 | ||||||||||
| Allowance for doubtful accounts receivable | 1,809 | 886 | 8,815 | 2,578 | ||||||||||||
| Contingent acquisition liability adjustments, net | - | (422 | ) | 1,330 | (13,047 | ) | ||||||||||
| Other, net | (1,705 | ) | 26 | (1,672 | ) | 546 | ||||||||||
| Changes in assets and liabilities (net of acquisitions and dispositions): | ||||||||||||||||
| Accounts receivable | 13,945 | 7,812 | (49,972 | ) | (27,875 | ) | ||||||||||
| Prepaid expenses and other assets | (1,126 | ) | 2,142 | 4,189 | (5,575 | ) | ||||||||||
| Accounts payable | 671 | 414 | 1,630 | (2,271 | ) | |||||||||||
| Accrued liabilities | (210 | ) | (1,695 | ) | 874 | 476 | ||||||||||
| Accrued compensation-related costs | 14,151 | 10,623 | 14,447 | 6,875 | ||||||||||||
| Income taxes payable | (11,167 | ) | (5,060 | ) | 5,773 | (4,081 | ) | |||||||||
| Other liabilities | 13,229 | 3,078 | 14,836 | 6,696 | ||||||||||||
| Net cash provided by operating activities | 54,396 | 48,976 | 110,027 | 83,079 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchases of property and equipment | (15,201 | ) | (7,934 | ) | (28,665 | ) | (39,094 | ) | ||||||||
| Acquisitions of businesses, net of cash acquired | (7,431 | ) | (42,658 | ) | (15,426 | ) | (64,037 | ) | ||||||||
| Other acquisition payments | - | - | (5,500 | ) | - | |||||||||||
| Payments of acquisition liabilities | - | (11,350 | ) | (1,165 | ) | (13,546 | ) | |||||||||
| Capitalized client-facing software | (311 | ) | (124 | ) | (770 | ) | (735 | ) | ||||||||
| Net cash used in investing activities | (22,943 | ) | (62,066 | ) | (51,526 | ) | (117,412 | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Issuances of common stock | 731 | 486 | 4,299 | 5,974 | ||||||||||||
| Repurchases of common stock | (6,256 | ) | (5,814 | ) | (25,057 | ) | (24,021 | ) | ||||||||
| Payments of contingent acquisition liabilities | - | (4,000 | ) | (828 | ) | (4,592 | ) | |||||||||
| Repayments to banks | (101,471 | ) | (101,822 | ) | (410,197 | ) | (332,455 | ) | ||||||||
| Borrowings from banks | 76,861 | 129,306 | 375,708 | 397,320 | ||||||||||||
| Other, net | 79 | (116 | ) | (2,723 | ) | (1,415 | ) | |||||||||
| Net cash (used in) provided by financing activities | (30,056 | ) | 18,040 | (58,798 | ) | 40,811 | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (150 | ) | (72 | ) | (307 | ) | (231 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 1,247 | 4,878 | (604 | ) | 6,247 | |||||||||||
| Cash and cash equivalents at beginning of the period | 7,044 | 4,017 | 8,895 | 2,648 | ||||||||||||
| Cash and cash equivalents at end of the period | $ | 8,291 | $ | 8,895 | $ | 8,291 | $ | 8,895 | ||||||||
| NAVIGANT CONSULTING, INC. AND SUBSIDIARIES | ||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||
| (In thousands, except per share data and percentages) | ||
| (Unaudited) | ||
| This press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Below are the reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP). This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. Management uses these non-GAAP financial measures in addition to GAAP financial measures to assess the Company's operations and financial results and believes they are useful indicators of operating performance and the Company's ability to generate cash flows from operations that are available for interest, debt service, taxes and capital expenditures. Investors should recognize that these non-GAAP financial measures may not be comparable to similarly-titled measures of other companies. | ||
|
EBITDA, adjusted EBITDA, adjusted Net Income and |
For the quarter ended | For the year ended | ||||||||||||||||||||
|
adjusted Earnings Per Share (2) |
December 31, | December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
| Severance expense | $ | 1,557 | $ | 1,151 | $ | 4,433 | $ | 6,490 | ||||||||||||||
| Income tax benefit (3) | (594 | ) | (378 | ) | (1,622 | ) | (2,247 | ) | ||||||||||||||
| Tax-effected impact of severance expense | $ | 963 | $ | 773 | $ | 2,811 | $ | 4,243 | ||||||||||||||
| Other operating costs (benefit) - contingent acquisition liability adjustment, net | $ | - | $ | (422 | ) | $ | 1,330 | $ | (13,047 | ) | ||||||||||||
| Income tax expense (benefit) (3)(4)(5) | - | 166 | (534 | ) | (924 | ) | ||||||||||||||||
| Tax-effected impact of other operating costs (benefit) - contingent acquisition liability adjustment, net | $ | - | $ | (256 | ) | $ | 796 | $ | (13,971 | ) | ||||||||||||
| Other operating costs - office consolidation, net | $ | 368 | $ | 26 | $ | 542 | $ | 2,766 | ||||||||||||||
| Income tax benefit (3) | (147 | ) | (11 | ) | (217 | ) | (1,119 | ) | ||||||||||||||
| Tax-effected impact of other operating costs - office consolidation, net | $ | 221 | $ | 15 | $ | 325 | $ | 1,647 | ||||||||||||||
| Other operating costs - loss on disposition of assets | $ | - | $ | - | $ | - | $ | 283 | ||||||||||||||
| Income tax benefit (3)(6) | - | - | - | - | ||||||||||||||||||
| Tax-effected impact of other operating costs - loss on disposition of assets | $ | - | $ | - | $ | - | $ | 283 | ||||||||||||||
| Other operating costs - other impairment | $ | - | $ | - | $ | - | $ | 98 | ||||||||||||||
| Income tax benefit (3) | - | - | - | (40 | ) | |||||||||||||||||
| Tax-effected impact of other operating costs - other impairment | $ | - | $ | - | $ | - | $ | 58 | ||||||||||||||
| EBITDA reconciliation: | ||||||||||||||||||||||
| Net Income | $ | 13,504 | $ | 13,199 | $ | 58,098 | $ | 60,345 | ||||||||||||||
| Interest expense | 1,236 | 928 | 5,235 | 4,916 | ||||||||||||||||||
| Interest income | (31 | ) | (72 | ) | (141 | ) | (250 | ) | ||||||||||||||
| Other income, net | (635 | ) | (212 | ) | (1,769 | ) | (692 | ) | ||||||||||||||
| Income tax expense | 8,784 | 7,711 | 35,313 | 27,808 | ||||||||||||||||||
| Depreciation expense | 7,197 | 6,579 | 27,742 | 23,612 | ||||||||||||||||||
| Accelerated depreciation - office consolidation (included in other operating costs - office consolidation, net) | - | 26 | 33 | 165 | ||||||||||||||||||
| Amortization expense | 2,790 | 1,963 | 11,507 | 8,613 | ||||||||||||||||||
| EBITDA | $ | 32,845 | $ | 30,122 | $ | 136,018 | $ | 124,517 | ||||||||||||||
| Severance expense | 1,557 | 1,151 | 4,433 | 6,490 | ||||||||||||||||||
| Other operating costs (benefit) - contingent acquisition liability adjustment, net | - | (422 | ) | 1,330 | (13,047 | ) | ||||||||||||||||
| Other operating costs - office consolidation, net (excluding accelerated depreciation - office consolidation, above) | 368 | - | 509 | 2,601 | ||||||||||||||||||
| Other operating costs - loss on disposition of assets | - | - | - | 283 | ||||||||||||||||||
| Other operating costs - other impairment | - | - | - | 98 | ||||||||||||||||||
| Adjusted EBITDA | $ | 34,770 | $ | 30,851 | $ | 142,290 | $ | 120,942 | ||||||||||||||
| Net income | $ | 13,504 | $ | 13,199 | $ | 58,098 | $ | 60,345 | ||||||||||||||
| Tax-effected impact of severance expense | 963 | 773 | 2,811 | 4,243 | ||||||||||||||||||
| Tax-effected impact of other operating costs (benefit) - contingent acquisition liability adjustment, net | - | (256 | ) | 796 | (13,971 | ) | ||||||||||||||||
| Tax-effected impact of other operating costs - office consolidation, net | 221 | 15 | 325 | 1,647 | ||||||||||||||||||
| Tax-effected impact of other operating costs - loss on disposition of assets | - | - | - | 283 | ||||||||||||||||||
| Tax-effected impact of other operating costs - other impairment | - | - | - | 58 | ||||||||||||||||||
| Adjusted net income | $ | 14,688 | $ | 13,731 | $ | 62,030 | $ | 52,605 | ||||||||||||||
| Shares used in computing adjusted per diluted share data | 48,618 | 49,007 | 48,813 | 49,224 | ||||||||||||||||||
| Adjusted earnings per share | $ | 0.30 | $ | 0.28 | $ | 1.27 | $ | 1.07 | ||||||||||||||
| For the quarter ended | For the year ended | |||||||||||||||||||||
|
Free Cash Flow (7) |
December 31, | December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 54,396 | $ | 48,976 | $ | 110,027 | $ | 83,079 | ||||||||||||||
| Changes in assets and liabilities | (29,493 | ) | (17,314 | ) | 8,223 | 25,755 | ||||||||||||||||
| Allowance for doubtful accounts receivable | (1,809 | ) | (886 | ) | (8,815 | ) | (2,578 | ) | ||||||||||||||
| Purchases of property and equipment | (15,201 | ) | (7,934 | ) | (28,665 | ) | (39,094 | ) | ||||||||||||||
| Payments of acquisition liabilities | - | (11,350 | ) | (1,165 | ) | (13,546 | ) | |||||||||||||||
| Payments of contingent acquisition liabilities | - | (4,000 | ) | (828 | ) | (4,592 | ) | |||||||||||||||
| Free Cash Flow | $ | 7,893 | $ | 7,492 | $ | 78,777 | $ | 49,024 | ||||||||||||||
|
Leverage Ratio (8) |
At December 31, | |||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||
| Adjusted EBITDA for prior twelve-month period | $ | 142,290 | $ | 120,942 | ||||||||||||||||||
| Bank debt | $ | 135,030 | $ | 173,743 | ||||||||||||||||||
| Leverage ratio | 0.95 | 1.44 | ||||||||||||||||||||
| For the quarter ended | For the year ended | |||||||||||||||||||||
|
Organic Growth (9) |
December 31, | December 31, | ||||||||||||||||||||
| 2016 | 2016 | Growth | 2016 | 2015 | Growth | |||||||||||||||||
| Revenues before reimbursements | $ | 239,671 | $ | 211,995 | 13.1 | % | $ | 938,746 | $ | 833,808 | 12.6 | % | ||||||||||
| Pro forma acquisition adjustment | 1,782 | 12,219 | 20,367 | 50,502 | ||||||||||||||||||
| Currency impact | 2,226 | - | 6,157 | - | ||||||||||||||||||
| Organic RBR | $ | 243,679 | $ | 224,214 | 8.7 | % | $ | 965,270 | $ | 884,310 | 9.2 | % | ||||||||||
| 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). 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). 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. | |
| (3) Effective income tax expense (benefit) has been determined based on specific tax jurisdiction. | |
| (4) A portion of the deferred contingent acquisition liability adjustment for the year ended December 31, 2015 was non-taxable in nature. | |
| (5) On May 15, 2015, we executed an Amendment to Merger Agreement with the Cymetrix Sellers, establishing a definitive amount for the obligation and eliminating the contingent aspect of the Cymetrix acquisition liability. As a result of this agreement, the company will no longer record an interest expense for imputed interest resulting from the contingent aspect of the acquisition liability. Based on this change, the company re-evaluated the need for a deferred tax liability associated with expected non-deductible imputed interest and recorded an $826 thousand benefit to reverse the remaining tax impact during the year ended December 31, 2015. | |
| (6) The loss on dispositions recorded during the year ended December 31, 2015 is subject to capital loss treatment in Canada. The tax benefit associated with this capital loss is subject to a full valuation allowance. | |
| (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. | |
| (9) Organic growth represents revenues before reimbursements 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. | |
