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Navigant (NCI) Q2 Earnings and Revenues Surpass Estimates

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Navigant Consulting, Inc. (NCI - Free Report) reported better-than-expected second-quarter 2018 results.

Combined adjusted EPS came in at 49 cents, which surpassed the Zacks Consensus Estimate by 17 cents and increased significantly from 24 cents in the year-ago quarter. Adjusted EPS from continuing operations was 17 cents, up from 8 cents in the year-ago quarter. The bottom line benefited from lower tax rates as a result of Tax Cuts and Jobs Act and improved operating performance.

Combined revenues of $275.7 million, were up 7.4% on a year-over-year basis. Combined revenues before reimbursements (RBR) were $252.4 million, ahead of the consensus mark by $16 million and were up 7.3% year over year. Revenues and RBR from continuing operations were $184.7 million and $165.2 million, respectively, up 4% and 3.2% compared to the prior year period.

Navigant Consulting, Inc. Revenue (TTM)

Revenue growth was driven by strength in Energy and Financial Services Advisory and Compliance (FSAC) segments, partially offset by continued softness in Healthcare. The sale of Disputes, Forensics and Legal Technology segment and Transaction Advisory Services (TAS) practice to Ankura Consulting Group, LLC is pending.

Navigant is currently riding on continued strong demand across most areas of business and disciplined cost management. The company is in the process of transformation from an expert-based organization to a more industry-focused management consulting and managed services firm. This transformation is aimed at achieving higher growth, more streamlined operations and significant capital flexibility.

In the quarter, the company launched a new joint venture, Health System Solutions, with its partner Baptist Health South Florida. This collaboration is expected to contribute significantly to RBR growth, going forward.

We observe that shares of Navigant have gained 28.9% year to date, outperforming the industry’s 11.6% rally.

Let’s delve deeper in to the numbers

RBR by Segment

Energy segment RBR increased 15.5% year over year to $36.6 million. The upside was driven by higher demand for expertise in energy efficiency programs and grid modernization in the United States and abroad.

FSAC RBR increased 22.1% year over year to $37 million. Revenues were driven by increased activity in financial crime, sanctions, and operational efficiency engagements across the company’s major clients.

Healthcare segment’s RBR decreased 6.5% year over year to $91.6 million. Demand environment for certain of the company’s consulting services has been weak for past several quarters.

EBITDA Performance

Adjusted EBITDA in the second quarter came in at $39.7 million compared with $29.2 million in the prior-year quarter. Adjusted EBITDA from continuing operations was $17.6 million compared with $14.6 million in the prior-year quarter.

Balance Sheet and Cash Flow

Navigant exited the quarter with cash and cash equivalents of $11.1 million compared with $6.6 million in the prior quarter. Bank debt at the end of the quarter was $147 million compared with $184.3 million at the end of the prior quarter. Leverage (bank debt divided by trailing 12-month adjusted EBITDA) was 1.09 times at the end of the second quarter.

The company generated $53.5 million of cash from operating activities and spent $1.7 million on Capex. Free cash flow was $29.1 million.

In the quarter, the company repurchased almost 342,000 shares at an aggregate cost of $7.5 million and an average price of $21.92 per share.As of Jun 30, 2018, Navigant had $172 million available under its share repurchase authorization.

2018 Outlook

Navigant provided 2018 guidance for continuing operations.It expects revenues to be in the range of $740-$765 million. RBR is expected to be between $660 million and $685 million.

Earnings per share are expected to be between 40 cents and 50 cents. Adjusted EBITDA is anticipated in the $52-$59 million band.

Zacks Rank & Upcoming Releases

Navigant currently has a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting second-quarter earnings reports from key players like Cardlytics (CDLX - Free Report) , Switch (SWCH - Free Report) and Worldpay (WP - Free Report) . Cardlytics and Switch will report their quarterly numbers on Aug 14 and Aug 13, respectively.  Worldpay will release results on Aug 9.

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