Navigant Consulting Inc (NCI) reported second quarter 2011 adjusted earnings per share of 21 cents, outpacing the Zacks Consensus Estimate of 18 cents. The better-than-expected result was driven by increased demand across all the company’s key practice areas.
Adjusted earnings per share also beat the previous quarter and year-earlier quarter earnings of 19 cents and 17 cents, respectively. Adjusted earnings, however, exclude the impact of severance expense and non-recurring tax benefit.
GAAP net income was $10.8 million or 21 cents per share compared with $8.8 million or 17 cents per share in first quarter 2011. Net income in the reported quarter also compared favorably with $7.8 million or 16 cents per share delivered in the year-ago quarter.
Navigant’s total revenue climbed 12.8% year over year and 3.0% sequentially to $194.4 million. Quarterly revenue also surpassed the Zacks Consensus Estimate of $185.0 million.
Revenues before reimbursements jumped 12.1% year over year and 2.2% sequentially to $173.3 million. Moreover, consultant utilization rate in the quarter improved 1.3% sequentially and 8.2% on a year-over-year basis to 79%. Average bill rate rose 4.1% year over year and 1.1% sequentially to $277.
Inside The Headline Numbers
Segment wise, Business Consulting Services registered a solid year-over-year growth of 13.2% to $81.1 million, aided by strong performances at the healthcare and energy teams. Dispute and Investigative Services revenues also jumped 6.1% year over year to $73.1 million driven by strong demand in the field of credit crisis litigation, healthcare market for anti-corruption compliance and investigations as well as higher demand for services for construction- related disputes.
Moreover, International Consulting and Economic Consulting revenue also leaped 11.8% and 6.8% year over year to $20.2 million and $19.9 million, respectively. Economic Consulting revenue benefited from robust demand for antitrust and credit crisis related matters while International Consulting sales grew mainly based on improved demand for global construction and financial services.
Segment revenues also witnessed a sequential upside, with International Consulting revenue notching up the highest growth of 8.5%. Additionally, all the other three segments, Business Consulting Services, Dispute and Investigative Services and Economic Consulting, rose 2.0%, 1.5% and 7.3%, respectively.
Navigant’s total cost of services increased 15.1% from the prior-year quarter to $137.9 million. Navigant’s average billable full-time equivalent (FTE) headcount scaled 6.3% from the prior-year quarter to 1,764.
Financials
At quarter-end, Navigant’s cash and equivalents decreased to $0.4 million from $3.0 million reported in the second quarter of 2010. The company generated net operating cash flows of $37 million, up from $29 million in the year-ago quarter. As on June 30, 2011, total non-current liabilities were $276.7 million versus $244.4 million at June 30, 2010.
During the quarter, the company also completed a five-year, unsecured revolving credit facility worth $400 million.
Outlook
The company expects to achieve the higher-end of its earlier guidance based on strong first half 2011 results and improved outlook for the latter half of 2011. Navigant earlier expected revenue and adjusted EPS in the range of $715 million to $760 million and 70 cents to 77 cents, respectively.
Our Take
We expect estimates to move up in the coming days given the solid performance of the company in the second quarter and improving economic conditions leading to higher demand and customer growth. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 71 cents and 91 cents, respectively.
One of Navigant’s primary competitors, FTI Consulting Inc (FCN), will release its second quarter earnings on August 4, 2011; while another competitor CRA International Inc. (CRAI) reported second quarter 2011 pro forma earnings of 48 cents per share, handily beating the Zacks Consensus Estimate of 38 cents on the back of active pipelines for both litigation and management consulting businesses.
