Navigant sees hope amidst brutal slide

by Vault Consulting Editors | February 03, 2011

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CEO William Goodyear had his work cut out for him this week, tasked with explaining an extremely difficult year to investors upon the release of fiscal year 2010's fourth-quarter results. "We are disappointed in 2010's financial results," the top man at Navigant Consulting accepted. There's no doubt about it—for Navigant, a public company, 2010 was a year of loss: revenue, stock valuation, and even headcount all declined dramatically firm-wide (more on headcount in a moment). Of course, this doesn't even consider the intangible damages dealt to the firm's reputation and global prestige; intangible, maybe, but very real indeed.

Reuters reports that the firm reaped a Q4 profit of approximately $559,000—or, just $.01 per share—compared to the $4.8 million ($.10 per share) haul the firm claimed in the same quarter last year. That decline was worse than both industry analysts and Navigant itself had expected. For a company that brings in hundreds of millions in revenue each year ($183 million in Q4 alone), a profit in the hundreds of thousands suggests either huge expenses or major losses; indeed, both have been the case.

For example, several 2010 acquisitions managed to boost numbers and revenue, but the high cost of each purchase offset any potential short-term gains. Even headcount gains were offset early in the year when scores of senior consultants left the ailing firm for greener pastures; others weren't so lucky, getting the axe and driving up Navigant's bill with their severance packages. Perhaps most importantly, several of Navigant's key practice areas experienced remarkable declines; the firm's International Consulting business, for example, posted a 27 percent revenue drop from Q4 2009 amidst low demand for its services and uncertainty in the euro-zone market. Many of these factors—and quite a few more—have attributed to Navigant's ongoing struggle, one which sees the firm end FY 2010 with more than $200 million worth of debt.

But CEO Goodyear sees hope amidst the brutal slide. "We do believe that the strategic actions implemented and capital invested over the past 18 months have materially strengthened the company and will contribute to delivering improved results in the months and years ahead," he said in a press release. The fourth-quarter did, in fact, show some signs of better times ahead. Navigant's Business Consulting unit managed considerable revenue gains from Q4 in 2009, as did Economic Consulting, buoyed by an influx of new practitioners. Though it fluctuated dramatically all year (the firm cites the "wind down of non strategic practice areas, attrition and general staffing alignment decisions" as causes), the October 2010 acquisition of EthosPartners actually puts Navigant's headcount just north of last year's. Further, Goodyear sees a global economic recovery as a vehicle of stability for advisory demand. "We are encouraged by continued signs of stabilization in the marketplace," he said, "and expect that these trends will be favorably reflected in our 2011 financial results."

Now, Navigant anticipates 5 to 10 percent top-line growth in 2011. Much remains to be seen, though: can the firm reinvigorate its international practice? Will recent acquisitions bear fruit, or simply add to ballooning debt? Can the firm afford to hire top talent anymore? Shareholders will be hoping for positive answers to each of these questions, and even more so for a positive return—you know, more than $.01—on their investments.

For more information:
Navigant Reports Preliminary Unaudited Fourth Quarter and Full Year 2010 Financial Results
Reuters: Navigant Sees Q4 Below Street, Forecasts Weak 2011

(Image from the Chicago Tribune)

Filed Under: Consulting

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