Financial Statement Trends of Navigant Consulting (NCI), a Publicly Traded Company
In May 2008, Navigant Consulting acquired Chicago Partners LLC for $73 million. Chicago Partners was a 90 person consultant firm focused on economic and financial analyses of legal and business issues principally for law firms, corporations and government agencies. As such, this acquisition led to the creation of Navigant’s fourth business segment, “Economic Consulting Services.”
In the 1st quarter of 2009, this new segment accounted for 8% of total revenues, even though it comprised only 5% of total staff. With an average billable rate of $343 per hour as compared to an average of $242 for Navigant's other three segments, the future for “Economic Consulting Services” appears to be filled with financial potential, continued growth opportunity, and bottom line results. Furthermore, this segment maintains a 96% billing utilization, as compared to an average of 76% for the other three segments. This newest segment is the only operation experiencing significant growth and as such, should positively impact Navigant’s financial statement trends.
In review of the financials between 2006 and 1st quarter 2009, a few prominent financial trends are worth noting:
1. Between 2006 and 2008, revenue increased almost 20%, yet net income decreased by nearly 25%. This is largely due in part to Navigant’s proactive acquisition strategy. With current economic conditions being less predictable and more challenging, Navigant will need to undertake cost savings initiatives in order to protect profitability. A few items presently being discussed include staff reductions, office space consolidations, and salary freezes.
2. Due to the current market situation associated with the world economy, Navigant’s total revenues, margins and profits are likely to be impacted by a significant decline. As the most recent 2009 10Q filing presents, significant challenges appear on the horizon. For instance, between 4th quarter 2008 and 1st quarter 2009; cash has decreased by 65%, while accounts payable has increased by 24%. As of March 31, 2009, Navigant had more accounts payable than cash on hand. Additionally, Navigant has now had 5 consecutive quarters of revenue decline.
3. Between 4th quarter 2008 and 1st quarter 2009, Navigant’s debt has increased by almost $30 million to $260 million. This 12% increase from the prior quarter presents significant risk to Navigant, as their present credit line is $275 million, with an option to increase to $375 million. As debt increases and revenue and cash decrease, management is obligated to make cost savings decisions.
In May 2008, Navigant Consulting acquired Chicago Partners LLC for $73 million. Chicago Partners was a 90 person consultant firm focused on economic and financial analyses of legal and business issues principally for law firms, corporations and government agencies. As such, this acquisition led to the creation of Navigant’s fourth business segment, “Economic Consulting Services.”
In the 1st quarter of 2009, this new segment accounted for 8% of total revenues, even though it comprised only 5% of total staff. With an average billable rate of $343 per hour as compared to an average of $242 for Navigant's other three segments, the future for “Economic Consulting Services” appears to be filled with financial potential, continued growth opportunity, and bottom line results. Furthermore, this segment maintains a 96% billing utilization, as compared to an average of 76% for the other three segments. This newest segment is the only operation experiencing significant growth and as such, should positively impact Navigant’s financial statement trends.
In review of the financials between 2006 and 1st quarter 2009, a few prominent financial trends are worth noting:
1. Between 2006 and 2008, revenue increased almost 20%, yet net income decreased by nearly 25%. This is largely due in part to Navigant’s proactive acquisition strategy. With current economic conditions being less predictable and more challenging, Navigant will need to undertake cost savings initiatives in order to protect profitability. A few items presently being discussed include staff reductions, office space consolidations, and salary freezes.
2. Due to the current market situation associated with the world economy, Navigant’s total revenues, margins and profits are likely to be impacted by a significant decline. As the most recent 2009 10Q filing presents, significant challenges appear on the horizon. For instance, between 4th quarter 2008 and 1st quarter 2009; cash has decreased by 65%, while accounts payable has increased by 24%. As of March 31, 2009, Navigant had more accounts payable than cash on hand. Additionally, Navigant has now had 5 consecutive quarters of revenue decline.
3. Between 4th quarter 2008 and 1st quarter 2009, Navigant’s debt has increased by almost $30 million to $260 million. This 12% increase from the prior quarter presents significant risk to Navigant, as their present credit line is $275 million, with an option to increase to $375 million. As debt increases and revenue and cash decrease, management is obligated to make cost savings decisions.
By: Mulham Shbeib
July 2009
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