Navigant Consulting Management Discusses Q3 2013 Results - Earnings Call Transcript

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Navigant Consulting (NYSE:NCI)

Q3 2013 Earnings Call

October 29, 2013 10:00 am ET

Executives

Paul Longhini

Julie M. Howard - Chief Executive Officer, Director and Member of Executive Committee

Lucinda M. Baier - Chief Financial Officer and Executive Vice President

Monica M. Weed - Vice President, Secretary and General Counsel

Lee A. Spirer - Executive Vice President and Global Business Leader

Analysts

David Gold - Sidoti & Company, LLC

Randle G. Reece - Avondale Partners, LLC, Research Division

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Operator

Good morning, and welcome to Navigant's Third Quarter 2013 Earnings Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce Mr. Paul Longhini, Executive Director of Investor Relations for Navigant. Mr. Longhini, you may begin.

Paul Longhini

Good morning, and welcome to Navigant's Third Quarter 2013 Earnings Conference Call. We've posted our third quarter 2013 earnings release, as well as supplemental information about the quarter and an updated investor presentation on the Investor Relations section of our website.

Before I turn the call over to Julie Howard, Navigant's Chief Executive Officer, I would like to highlight the disclosure at the end of our earnings release for information about any forward-looking statements that may be made or discussed on this call. Please review this information, along with the company's SEC filings, for a disclosure of information that may impact subjects that we discuss this morning. We will be discussing one or more non-GAAP financial measures on today's call. Reconciliations to the most comparable GAAP financial measures are contained in the schedule to our earnings release.

I will now turn the call over to Julie Howard.

Julie M. Howard

Thank you, Paul. Good morning, everyone, and thank you for joining us. Cindy Baier, our Chief Financial Officer, is with me today in Chicago to present Navigant's quarterly results and discuss the company's financial outlook.

As you've seen in our earnings release this morning, Navigant made further progress against our stated objectives to perform, bank and innovate to deliver profitable, sustainable growth.

For the third quarter, on a continuing operations basis, RBR grew 6% over the prior year quarter, and adjusted EBITDA increased 19%. Adjusted EPS for the quarter increased 9% year-over-year. Our revenue performance in this period was in line with or above expectations in 3 of our 4 operating segments. In addition, our margin enhancement initiatives have taken root and are driving the improved bottom line performance that we have set as a key objective. This has allowed us to significantly reduce our debt levels year-over-year to $110 million at September 30, 2013. As Cindy will comment, absent acquisitions, that will be under 1x EBITDA at year end.

Cindy is also going to review our financial results in each of the segments in more detail, but let me just share some high-level perspectives on our businesses in the context of our key objectives. As we've maintained over the last several quarters, we are optimizing our business portfolio to focus on markets with clearly identifiable catalysts for growth. These include the healthcare, energy and financial services sectors.

Our Healthcare segment continues to grow at a very healthy pace, with third quarter year-over-year RBR growth of 31%, making its second consecutive quarter of 30% plus year-over-year growth, as well as its fourth consecutive quarter of double-digit growth. Strong market dynamics and favorable drivers from healthcare reform are driving the segment's performance. Health systems and physician groups are dealing with how to transition to the value-based business models required by healthcare reform and population health initiative. We believe that for the next several years, there will continue to be increased emphasis on achieving better quality health outcomes with reduced cost of service as the industry moves from service-based to outcome-based payments. During this transition, providers are faced with the need to make dramatic cost reductions to maintain their profitability. Here at Navigant, we are developing leading technology and data analytics to enable the hospitals, doctors and physician groups to deliver on these goals.

We believe that we're moving in the right direction in our Energy segment as well. Increased focus on improving energy efficiency and reducing energy consumption is an important driver for our Energy segment. We are also being asked by utilities to help with energy system infrastructure and planning. We've been really pleased with the collaborative approach that our lead energy practice professionals have taken in growing the business, which is representative of the deep bench that we maintain all across the practice.

I also wanted to make people aware that Bill Dickenson, our former Head of the Energy Practice, retired this past September, and we're in the process of recruiting a new leader. In the interim, Lee Spirer, our Global Business Leader, has taken on more direct responsibility within the operations of that business.

Within each of our individual business segments, we're also focused on the early identification of opportunities and development of new revenue streams to help clients respond to regulatory change. Specifically on our Financial, Risk & Compliance segment, we are continuing to realize growth in our anti-money laundering support for financial institutions. And as our mortgage servicing review work winds down, we have redeployed that talent to related areas that require similar skills, including student loan servicing reviews, fair lending and assisting financial services clients with compliance process improvement. We're also helping clients prepare to respond to the likely activity emanating from the Consumer Finance Protection Bureau.

Let me turn to our Disputes, Investigations & Economics business and to say that we are not satisfied with recent segment performance, which reflects, in large degree, the underperformance of the Economics business relative to their budget for 2013. We've taken steps to mitigate the margin impacts from weaker top line results and plan to continue to manage it tightly. On a broader basis, though, as the regulatory and enforcement environment develops, we have the appropriate talent and tools within our DI&E segment to capitalize on new opportunities.

We continue to emphasize areas of stronger growth, including healthcare and financial services disputes. In addition, we anticipate that the SEC is at a positive inflection point and that the Chairman's focus on enforcement will be a catalyst for growth in 2014 and beyond. We also believe that activity at the Office of the Whistleblower will continue to increase, given the magnitude of awards being issued to whistleblowers and the attention drawn to the program.

There is significant opportunity across all of our segments as well for technology, data and process solutions that our clients are increasingly relying upon Navigant to deliver, given our industry expertise. Data proliferation is a real challenge of businesses of all types, generating and analyzing more data than ever before. Navigant has strong capabilities in providing insightful analysis, often leveraging structured and unstructured data to yield results. We also see a number of opportunities in multiple industries for us to leverage our expertise to provide business process outsourcing services. As an example, we've recently built a successful revenue cycle outsourcing business within our Healthcare segment, which we market under the name Alleviant. While our offerings in these value-added spaces are still relatively new, we believe that the demand for technology, data and process solutions is still evolving, and we are well positioned to take advantage of these opportunities.

One of the strengths of Navigant and a sign of our sustainable health is our exceptional and long-standing client base. Last year, over 60% of our clients have worked with us for at least the past 5 years. At the same time, we enjoy great revenue breadth across our portfolio of services. In 2012, we had over 300 clients contributing annual revenues of at least $500,000 each. Our dedicated professionals consistently provide outstanding value to our clients, and that is reflected in our long-standing client relationships.

I'm also really pleased that we continue to be able to attract and retain world-class professionals. One of my top priorities continues to be attracting and maintaining the right talent throughout Navigant to ensure we have the right market expertise to meet our clients' needs now and beyond. In 2013, we have successfully recruited and integrated 42 managing directors and directors into our strategic growth areas, including payment transformation and managed care operation, technology and business strategy, anti-money laundering and life sciences regulatory consulting, as well as broad international infrastructure disputes expertise.

We are also focused on key positions of strategic leadership for the firm. Recently, we hired a Business Technology Leader, who will sharpen our focus on client value and accelerate our delivery of technology-enabled solutions to the market, as well as determine how we best organize and capitalize on opportunities across all of our businesses. As I mentioned earlier, we do have an internal and external search underway for a new Energy segment leader, and I'm also continuing to recruit a Chief Strategy and Innovation Officer to help us better define and achieve our long-term objectives.

We remain focused on growing the business by investing in professionals and our expertise to help us realize our long-term goals.

So I'm going to turn the call over to Cindy to review our financial results for the quarter, update you on our outlook, and then I'll say a few closing remarks. Cindy?

Lucinda M. Baier

Thank you, Julie. Hello, everyone. Before I discuss our financial results, I want to highlight that the operating results for our U.K. Financial Services Advisory business, including its historical results, were reported as discontinued operation due to the sale of the business in July.

All other operations of the company are considered to be continuing operations. Amounts previously reported have been reclassified for GAAP to conform to this presentation. Our metrics data sheet, which also reflects this presentation, is posted on our Investor Relations website.

We are please that Navigant was able to deliver 6% year-over-year RBR growth during the third quarter. Our performance was led by our Healthcare segment, which delivered 31% year-over-year growth for the quarter. We were also extremely pleased with the 17% year-over-year third quarter RBR growth in our Financial, Risk & Compliance segment. This performance exceeded our internal expectations for the period. Additionally, our Energy segment was able to deliver RBR that was consistent with last year despite the impact of the Moreland Commission report. Offsetting our progress was the mix performance in our Disputes, Investigations & Economics segment, which I'll discuss in a moment.

General and administrative expenses for the third quarter were $33.9 million, a 2% year-over-year increase, partially attributable to higher legal fees in connection with the Moreland Commission report. As a percentage of RBR, general and administrative expenses declined 18% for the third quarter this year compared to 19% for the same quarter of last year. Our adjusted EBITDA increased 19% from the same quarter last year to $30.8 million. On a year-over-year basis, our adjusted EBITDA margin grew 200 basis points to 17%. This was driven primarily by an improvement in our segment operating profit margin and a reduction in G&A as a percentage of RBR.

Margin improvement is a key part of Navigant's "perform, bank and innovate" strategy, and we are pleased that our adjusted EBITDA margin performance improved for the quarter.

Our effective tax rate was 47% in the third quarter compared to 41% in the same period of last year. During the quarter, we increased our valuation allowances related to deferred tax assets, associated with tax losses generated in foreign tax jurisdictions where we don't expect to receive a future benefit. We also earned a greater portion of our revenue in the U.S. This is a higher tax jurisdiction, and it increased our effective tax rate for the quarter.

Our net income from continuing operations increased 21% to $13.5 million in the third quarter. This compares to $11.2 million in the same period last year.

Our adjusted earnings per share increased 9% to $0.25 for the quarter compared to $0.23 in the same period of last year.

Navigant continued to generate strong free cash flow of $17.3 million during the third quarter of 2013. This is consistent with the same quarter of 2012.

We are continuing our disciplined approach to capital allocation by balancing share repurchases, debt repayments and investments in growth, both organic and through acquisitions. We continued our share repurchase program in the third quarter. We utilized $8.7 million of our cash flow to repurchase 627,000 shares of our stock at an average price of $13.84 per share. This represented approximately 8% more shares than in the second quarter. Future share repurchases depend on business performance and market conditions. We utilized $18.8 million of our cash flow to repay bank debt during the quarter. At the end of the quarter, we had $110 million of bank debt outstanding, and our leverage ratio was 0.86x compared to $156 million of bank debt and a leverage ratio of 1.55x a year ago.

Given the favorable credit markets during September, we decided to extend the maturity of our $400 million revolving credit facility until September of 2018. We believe that our extended credit facility is attractively priced, it reduces our risk profile and it's appropriately sized to support our growth strategy. As Julie mentioned, we see opportunities to expand our technology, data and process solutions for clients, and we continue to invest in that business and our technology infrastructure during the third quarter.

Our capital expenditures, which were primarily technology-related, were $3 million for the third quarter.

Let's discuss the performance of our segments. RBR in our Healthcare segment for the third quarter was $48.1 million. This represented 26% of total company RBR for the quarter compared to 21% of total company RBR for the third quarter of the prior year. Healthcare's organic RBR growth was 21%. Its segment operating profit was $18 million for the third quarter, an increase of 46% compared to the prior year period. We're especially pleased that Healthcare's profitability has grown even faster than its RBR. Healthcare segment operating margin for the quarter was 37%.

Our Financial, Risk & Compliance segment delivered 17% year-over-year RBR growth during the third quarter, earning $40.2 million of RBR. All of the growth was organic. Last year, we generated significant RBR from 4 large mortgage servicing review engagements. This created a very difficult benchmark for our year-over-year comparisons. This year, in the third quarter, the vast majority of our mortgage servicing review were related to a single engagement. The decline in mortgage servicing review RBR was offset by significant growth in our anti-money laundering work, which was primarily driven by one large engagement. As I mentioned earlier, the results of our U.K. financial services business has been excluded from these comparisons as they are reported as discontinued operation. The reclassification benefited our growth rate. Segment operating profit was $17 million, and our segment operating profit margin was 42%.

Our Energy segment had RBR of $22.8 million for the third quarter. This was consistent with the third quarter of 2012. As we noted last quarter, Long Island Power Authority and New York Power Authority suspended work with Navigant. The loss of RBR from these 2 clients, although not material to our overall company results, created a headwind for the second half of 2013 for our Energy team. Our energy efficiency practice demonstrated strong RBR growth during the third quarter as utilities have a continuing need to design and implement energy efficiency programs. The Energy segment had an operating profit of $7 million, and a segment operating margin of 31%.

RBR for the Disputes, Investigations & Economics segment was $75.4 million for the third quarter of 2013, down 8% on a year-over-year basis. Our segment operating profit was $25.7 million, and our segment operating profit margin was 34%. As we previously discussed, we sold a portion of our Economics business during the first quarter. Because we only sold a portion of that business, we did not treat it as discontinued operation, and our prior year results include all of the RBR from the disposed of business.

If you excluded last year's RBR from the disposed of portion of the Economics practice, the segment would essentially be flat for the quarter on a year-over-year basis. RBR from the AFE acquisition would offset the weakness in our European disputes business, along with the additional factors that have impeded our growth. RBR from the AFE acquisition was below our expectations. We reduced our contingent acquisition liability for the AFE acquisition by $2 million during the third quarter. While this improves our profitability, it has been excluded from our adjusted EBITDA calculation as it's not reflective of the operating performance of the business.

Performance-based fees for the third quarter were $1.2 million compared to $2.4 million for the same period of last year. Our performance-based fees in both periods were primarily attributable to the Healthcare segment.

Let's turn now to our outlook for 2013. As I discuss guidance, keep in mind that our prior guidance comparisons need to take into consideration the reclassification of discontinued operations. Our discontinued operations generated $8.7 million of revenue, $6.8 million of RBR and $0.5 million of adjusted EBITDA during the first 6 months of 2013. This was included in our prior guidance. Our revised 2013 outlook only includes results from continuing operations. It reflects a tightening in our expectations for RBR and profitability.

We believe that we are appropriately positioned in the markets we serve to grow RBR and profitability. We're very optimistic about our Healthcare segment and its ability to continue to grow aggressively. The healthcare industry continues to undergo transformational change, and there's strong demand for our services. We continue to expect our RBR growth in Healthcare for the second half of 2013 will be consistent with the first half. We also expect that our fourth quarter year-over-year RBR growth rate will be lower than our third quarter growth rate of 31% due to the natural completion of a large engagement, as well as the fact that we received a large performance-based fee in last year's fourth quarter.

We are seeing strengthening demand in our Energy segment. We are pleased that our current federal government work in the segment was not disrupted by the recent government shutdown. Looking forward, we are maintaining our high single-digit growth guidance for 2013.

Our expectations for the Financial, Risk & Compliance segment have improved. We currently have a strong pipeline, and we're raising our outlook for 2013 to growth in the high-single digits. Our improved outlook is due to strength in anti-money laundering work and higher-than-expected RBR from our mortgage servicing review work. Our total revenues from the segment are growing faster than segment RBR due to a greater use of flexible resources, especially contractors to staff large engagements.

For the Disputes, Investigations & Economics segment, we're revising our outlook to an RBR decline in the low-double digits due to the lower-than-expected performance from AFE. We had previously anticipated that our DI&E segment would generate an RBR decline in the high-single digits for the year.

In total, we are tightening our full year guidance to an RBR in the range of $735 million to $745 million. We expect a range of $825 million to $840 million of total revenues. Our outlook for adjusted EBITDA is in the range of $115 million to $120 million, but increasing our adjusted EBITDA margin outlook to a range of 16% to 16.5%. These updated outlook ranges translate to a tightened outlook for adjusted earnings per share to a range of $1 to $1.05 per share.

We're expecting strong free cash flow in a range of $70 million to $80 million. We also continue to expect that we will end the year with less than $100 million of debt, which is expected to be less than 1x adjusted EBITDA. Our borrowing capacity under our credit facility is $400 million and would allow us to significantly increase our leverage.

In conclusion, I'm very pleased with our performance in the recent quarter. We've been very focused on creating an organic growth engine and capitalizing on robust, growth catalysts in our markets. We continue to demonstrate our capability to perform, bank and innovate simultaneously. Our focus on providing exceptional service to our clients makes Navigant a very attractive place for talented professionals to build their careers and to contribute to our efforts to drive shareholder value.

I look forward to updating you on our financial positions, as well as on the progress that we're making against our strategy.

Thank you for your time today, and I'll now turn the call back over to Julie.

Julie M. Howard

Thank you, Cindy. Perform, bank and innovate is the now-established platform that drives the operational, financial and strategic discipline necessary to grow our business. My longer-term vision for Navigant is of a growing business that builds on the strength of our creative, innovative, forward-looking thought leaders. I am confident in our ability to be opportunistic and respond to the future, whether it's through global expansion, new services, evolving technology and analytical solutions or embracing ideas for new and reoccurring revenue streams. We are very focused on building a more profitable and larger Navigant over the next several years and seek scale and critical mass in our chosen fields to provide diversity of expertise for our clients, diversity of experience for our employees and greater value for our shareholders. I look forward to continuing to be able to report out on positive results in that regard.

Now we'll open it up for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from David Gold with Sidoti.

David Gold - Sidoti & Company, LLC

Just a couple of points of follow-up. First, on the Disputes side, obviously, some progress a la SEC. Curious there, the thinking -- the time it takes for us to maybe see some benefit of some of the regulatory hires that have been done in Washington and what the thoughts are on that practice, say, headed into 2014?

Julie M. Howard

Our expectation, David, is that we hope to benefit in the next, maybe, 6 to 12 months as they kind of refocus on enforcement. And then that could take potentially 6 to 18 months for us to kind of see that roll into our results. So I would just say that we're really looking forward to getting our Economics practice back on its feet here in 2014. And we continue to have great opportunities with just general commercial disputes and in the international arbitration area. We've recently seen some CFPB investigations that we've been responding to. So there's a lot of good things going on in that business. And it would be wonderful then to continue to have kind of the regulatory enforcement action kick in.

David Gold - Sidoti & Company, LLC

Perfect. Okay. And then on the Energy side, any update and any other follow-up from the Moreland report?

Julie M. Howard

There isn't really anything different to say. As I've said previously, we believe the concerns raised in the report to be without merit, and we just kind of await our response on that.

David Gold - Sidoti & Company, LLC

Got you. I mean, I guess, as we came out of last quarter, there was some mention that you guys had been contacted by the federal prosecutor?

Julie M. Howard

We have. I've got Monica Weed, our General Counsel, here. I'll just let her kind of explain where we're at in that regard.

Monica M. Weed

We have been cooperating with the U.S. attorney’s investigation since they initiated it right after the Moreland report was issued. I believe that they're coming to a conclusion on the investigation, and we hope to hear some resolution any day. And we feel -- we continue to feel that there's no merit to any of the issues raised.

David Gold - Sidoti & Company, LLC

Perfect, perfect. Just one other thing, Julie. In the release, you spoke about developing existing practices and exploring new areas of growth. Curious if that, coupled with the low leverage point that we're reaching, makes me think that eyes are wide open on the acquisition front. A, a comment on that; and B, thoughts on new areas of growth that you might want to explore or enter?

Julie M. Howard

Yes, David, our eyes are always wide open. We always have a very robust pipeline because we're scanning the marketplace for new opportunities for us, whether that be an extension or new capabilities for a current service line. We're also noodling with potential new service lines, maybe new sector. We're doing some evaluation. Lee has taken his team through a strategy light process, all of our practices over the course of the summer that we can share more about at the end of the year and into the new year. But we have some ideas. And of course, as I've talked about previously, we want to continue to invest in our analytics technology process capabilities as a good support platform for our expert consulting services. So all of the above, we certainly have the capacity to invest in our growth. And we'll do so, but with the right opportunity.

Operator

Our next question comes from Randle Reece with Avondale Partners.

Randle G. Reece - Avondale Partners, LLC, Research Division

I was looking just at where you ended the quarter in revenue-generating headcount versus where the averages were for the quarter. And I was wondering where the incremental additions were on the consulting side?

Julie M. Howard

Well, as I mentioned, we made a lot of investments this year in our senior revenue-generating professionals, 42 managing directors and directors spread out in our growth businesses. So we've seen some clearly, many in healthcare, as I mentioned, new people coming on board in payment transformation expertise, managed care operations, physicians and clinical effectiveness in our payor practice and our life sciences practice. We've also continued to add talent in -- just in our construction practice, we've added in infrastructure disputes arena outside of the U.S. a number of new professionals. What am I missing? Lee, anything else that I...

Lee A. Spirer

Yes, we've begun to hire in Energy as well at the end of the quarter. And then selectively, within the Disputes segment where we're refilling some of the attrition in the U.K., as well as some of the hotter areas of growth in the U.S.

Randle G. Reece - Avondale Partners, LLC, Research Division

All right. And looking at the transformed numbers of the Financial, Risk & Compliance segment, the trends look a lot different. It's a little hard to get used to, but you still see this migration down in billing rate. And does that represent a change in just the structure of your organization? Or is there also a change in what kind of business you're doing?

Julie M. Howard

It's a reflection, Randy, of the type of work that we're performing and the servicing that we're doing. And as we've said, we've had the mortgage servicing review work continued more than we had expected, but that'll continue to wind down. And in place of that, we've had significant opportunity in anti-money laundering. So that's staffed a little bit differently, so you're seeing a change in business mix in response to a service that we're providing.

Operator

Our next question comes from Joe Foresi with Janney Capital Markets.

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

I wonder if we could talk just real briefly about any pickup you're seeing in the demand environment on the regulatory front. It seems like litigation is getting a little bit easier, and it seems like maybe some of those trends are starting to pick up with the change at the SEC. So maybe you could talk a little bit about what you're seeing on that front?

Julie M. Howard

I think I asked and answered in one of the prior questions about our disputes business. I don't know that -- we certainly anticipate in the regulatory environment, particularly with the SEC, that we'll see some pickup in 2014, and we're prepared for that. There have been a number of task forces that have been put in place and new hires, enforcement heads into that group. So we would anticipate in 2014, beyond that, as I've mentioned, certainly the CFPB has been active and we've been the beneficiary of responding to that, not only from an investigative standpoint, but in helping businesses respond to compliance requests and prepare for reviews and investigations. So I would say that anti-money laundering is another example of it. Our DecisionPoint tool that has been continuing to win work related to a third-party tracking for foreign corrupt practices is continuing to be a growing area. So the enforcement and regulatory environment is very active, Joe, would be the way I would describe it.

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Okay. And then in the Economics business, I was wondering maybe you could give us an update on what took place in the acquisition that you just took in. And how you're going about rightsizing that business?

Julie M. Howard

So we acquired the business in, I think, it was December of last year of 2012, AFE, and we sold a portion of our Economics practice in January. Our anticipation is that one would -- not entirely, but that AFE would refill the hole from the sale of the other business, and we haven't realized that yet this year. And at this point, we're not making any significant changes to the business because the senior professionals there, Mukesh Bajaj, who is the key economist, and his team are aggressively in the marketplace and working to replace opportunities. One of the issues within our Economics Consulting practices, the timing of when things start, you're often at the whim of the lawyers and how the engagement is proceeding, and so he has opportunities. Some of them have not come to fruition.

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Okay. So I mean, I just -- to clarify that, was that -- did something drop out of the pipeline there? Or is that more of a delay thing?

Lucinda M. Baier

So, Joe, this is Cindy. What I would say is the business is ramping a little more slowly than we originally expected. And what you saw in the $2 million reduction of the contingent acquisition liability is we always have to forecast what we think the business will do. And because it's out of the gate, it's a little bit slower when we made that adjustment. That doesn't mean that we don't think it's the right acquisition or the future for the business. It's just a reflection that we're out of the gate slower.

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Okay. And then last question for me. I know you've talked about this in the past, but the Healthcare practice continues to perform very well. Maybe you could talk a little bit about what you think the organic growth rate of that business is long term, and how should we think about that on a normalized rate and margin profile going forward? Because it appears that -- at least, based on the last couple of quarters, that perhaps it could be a little bit stronger than what you've traditionally talked about.

Julie M. Howard

Well, as I said in my comments today, we anticipate that the opportunities that we're realizing from Healthcare Reform, broadly, will continue for the next several years, and that we would anticipate that, that business will continue to drive organic growth in the double-digit range -- low double-digit range. And then we have opportunities for services and technology tools that we can also add to that business to continue to accelerate its growth.

Operator

Our next question comes from Tobey Sommer with SunTrust.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

I'd like to ask if you could give a little bit more color about your data and analytics business. How big it is as a percentage of revenue? And if you see an opportunity perhaps to step up your pace of internal investments on technology to kind of meaningfully drive that higher? I think I heard you spend about $3 million in the quarter on technology investments, which is substantial, but maybe you could do even more.

Julie M. Howard

So our total data analytics technology process -- practice -- not even practice, but work that we're doing, is about 12% of our total revenue base, Tobey. And our investment in that will ebb and flow, depending upon our needs as to how we build out businesses. As I mentioned, we recently hired a new Business Technology Strategy Leader, Mark Kornbluth, who will be working closely with Lee in assessing and evaluating our technology solutions that we're in the process of developing, as well as other opportunities outside the firm. And I would imagine that perhaps -- and Lee maybe -- may want to talk further about this, but we'll see an acceleration of investment in those businesses once Mark gets his sea legs. He's only been with us for about a month.

Lee A. Spirer

So, yes, Tobey, I would say, as we've said before, it's a portfolio of businesses that are all at different stages of getting to scale. And so we're benefiting from some investments that we've already made in the past going back over the last couple of years in a few of these businesses and others were looking for areas where we could further invest to accelerate our progress. In addition, we're looking at other areas that are embedded in the business where we'll continue to invest in technology. But across this portfolio, we're growing very quickly in our healthcare process outsourcing business where there are opportunities to continue to invest, to drive more efficiency and scale. Our eDiscovery business has really begun to benefit from some of the investments we've made in infrastructure and processing and hosting. So you'll see this move forward in, in some ways, fits and starts with investment based upon when the business is needed. But we clearly believe this will be a growth area over time.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

In terms of -- what is the margin profile of the businesses that are slightly more mature? And have you seen, leaving behind analytics and data tools, a customer has allowed you to kind of get better wallet share and have a higher win rate when other episodic consulting engagements arise at that customer?

Julie M. Howard

So relative to the first part of your question, we don't really disclose that. And it's a business that is in a growth mode, and so different parts of the business produce at different levels of margin. And your second question, which I completely just drew a blank on, I'm sorry.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Sure. It's about whether leaving behind analytical tools has allowed you to gain wallet share.

Julie M. Howard

Yes, and that -- I'm sorry. And that was the intent of -- part of the development of a technology business is that we have a greater stickiness and awareness and visibility within our client base, and that has -- deepens our relationship with them. And so when we have episodic opportunities, we're more top of mind.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

And do you have some examples or evidence of success there?

Julie M. Howard

We do.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And I was wondering if you could give us an update on your financial goals for kind of exiting next year, and how you feel about achieving those here exiting the third quarter?

Julie M. Howard

It's a good question, but I'm going to punt that until we release our year-end results, so that'll be in February of 2014. I did talk a little bit about our longer-term perspective at the end of the call today. We'll plan to share our 2014 and maybe give a little more insights beyond that. And I guess, I would also say we plan to have an Investor Day in the spring this year where we'll talk much more -- in much more detail about our longer-term, 3- to 5-year plans for the company. So stay tuned.

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Okay. Well, my last question has to do with a lot of the high dollar-value settlements in the news over the last couple of weeks, primarily on the part of banks, but not exclusively. I was wondering how, if at all, that kind of news is reflected in your business with other projects ending, or kind of maybe those events have not been drivers of the business?

Julie M. Howard

Yes, at this point, we've had no impacts from any of those settlements. In the short term, we don't expect any impact. And like anybody else, we're all trying to figure out, particularly in this financial services arena, it's a constant changing landscape. And what, if anything, a settlement kind of environment would mean for our business. But right now, it's no change.

Operator

Our final question today comes from Tim McHugh with William Blair.

Timothy McHugh - William Blair & Company L.L.C., Research Division

First, just on the financial risk area, the large or historically large mortgage projects, I believe I heard you say you had one continue in the quarter. Did that company not settle? And can that project continue for a while? Or I guess, would you still expect that's winding down here?

Julie M. Howard

It's winding down, Tim. We're just responding to -- in the wind down, responding to the regulators to a greater level and degree than we had anticipated when we first did our budgeting and planning.

Timothy McHugh - William Blair & Company L.L.C., Research Division

Okay. And then I guess, I usually don't like to guide quarterly, but the fact that you're in -- there's only 1 quarter left, obviously, there's an implied Q4 number. It's down from where you ran in Q3. But your commentary didn't suggest a lot of change. So I guess, I'm trying to -- I guess, particularly at the EPS line, what you're seeing different for -- in Q4 versus, I guess, what we saw in Q3?

Julie M. Howard

I'll let Cindy will walk you through those details, Tim.

Lucinda M. Baier

So let me start off by saying we've had very strong first 3 quarters of the year. And as we've been talking about all year, we're continuing to see the wind down of our mortgage servicing review work, as well as being cautious about our outlook for the business overall. As we discussed last quarter, we do see some of the timing benefits in G&A that we saw in the first part of the year reversing in the fourth quarter. And while we expect our G&A in the fourth quarter to be better than last year, we do expect that it will be higher than the earlier portion of the year. We also expect to see some pressure on our income tax rate as a result of more of our income being earned in the U.S., which is a higher jurisdiction -- higher tax jurisdiction, I skipped a word.

Timothy McHugh - William Blair & Company L.L.C., Research Division

Okay. All right, that's fair. And the anti-money laundering project that you described, the large one, is that a long-term project, I guess? Is that something that can have legs for a while? Or what's the nature of that or the duration, to the extent you know?

Julie M. Howard

It's work that we have various milestones on, on behalf of this financial institution. And we continue to kind of extend that work in 3 to 6 months chunks. At this point, we anticipate the work will continue into 2014.

And I think that is all the questions that we have. Thank you very much for joining this morning. We look forward to talking with you at the close of the year.

Operator

This does conclude today's conference. You may disconnect at this time. Thank you.

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