The Corporate Executive Board Company (“CEB” or the “Company”)
(NYSE: EXBD) today announces financial results for the second
quarter and six months ended June 30, 2012. Revenues increased
15.5% to $135.7 million for the second quarter of 2012 from $117.5
million for the second quarter of 2011. Income from continuing
operations for the second quarter of 2012 was $14.8 million, or
$0.44 per diluted share, compared to $11.0 million, or $0.31 per
diluted share, for the same period of 2011. Adjusted net income was
$16.1 million and non-GAAP diluted earnings per share was $0.48 in
the second quarter of 2012 compared to $11.0 million and $0.31 for
the same period of 2011, respectively.
For the first six months of 2012, revenues were $264.2 million,
a 14.3% increase from $231.1 million for the first six months of
2011. Income from continuing operations for the first six months of
2012 was $30.3 million, or $0.90 per diluted share, compared to
$23.0 million, or $0.66 per diluted share, for the same period of
2011. Adjusted net income was $31.9 million and non-GAAP diluted
earnings per share was $0.95 in the second quarter of 2012 compared
to $23.0 million and $0.66 for the same period of 2011,
respectively.
Contract Value at June 30, 2012 increased 12.2% to $512.7
million compared to $456.8 million at June 30, 2011. Wallet
retention rate at June 30, 2012 was 100% compared to 103% at June
30, 2011. Contract Value per member institution increased 2.1% at
June 30, 2012 to $86,756 from $84,942 at June 30, 2011.
“Our solid second quarter results reflect our focus on
delivering value to members and put us on pace to exceed our prior
earnings outlook for 2012,” said Thomas Monahan, Chairman and Chief
Executive Officer. “This favorable momentum provides a helpful
backdrop as we move towards closing and integrating the SHL
acquisition. Looking forward, we continue to see tremendous
opportunities as organizations around the world seek to manage
human capital with the same rigor and analytic depth that they use
to manage other vital corporate assets. By linking CEB’s insight
into the drivers of corporate, functional, and individual
performance with SHL’s deep resources on people and talent, we will
be able to help the combined organization’s more than 10,000
customers unlock the full potential of their organizations.”
“We are also pleased to announce the changing of our stock
ticker symbol to CEB,” he said, “which supports our efforts to
drive greater brand awareness in the market place.”
OUTLOOK FOR 2012
The Company reaffirms its 2012 annual guidance of Revenues of
$535 to $555 million and capital expenditures of $12 to $15 million
and raises its 2012 annual guidance as follows: Non-GAAP diluted
earnings per share of $1.90 to $2.05; an Adjusted EBITDA margin of
between 24.0% and 25.0%; and Depreciation and amortization expense
of $21 to $23 million. The outlook does not include the impact of
the SHL acquisition which is expected to close on August 2, 2012.
The Company expects to update its outlook to reflect SHL
post-acquisition operating results in connection with its third
quarter 2012 earnings release.
NEW TICKER SYMBOL
The Company is scheduled to change its New York Stock Exchange
(“NYSE”) ticker symbol and begin trading under the ticker symbol
“CEB” effective August 13, 2012. The change is being made because
“CEB” more closely aligns with the Company’s brand recognition. The
Company’s common stock has traded on the NYSE under the ticker
symbol “EXBD” since August 2010. Prior to that, the Company’s
common stock was traded on the NASDAQ under the ticker symbol
“EXBD” since the Company’s initial public offering in February
1999.
NON-GAAP FINANCIAL MEASURES
This press release and the accompanying tables, as well as
earnings discussions, include a discussion of Adjusted EBITDA,
Adjusted net income, and Non-GAAP diluted earnings per share, which
are non-GAAP financial measures provided as a complement to the
results provided in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). The term
“Adjusted EBITDA” refers to a financial measure that we define as
net income before loss from discontinued operations, net of
provision for income taxes; interest income, net; depreciation and
amortization; provision for income taxes; acquisition related
costs; costs associated with exit activities; restructuring costs;
and gain on acquisition. The term “Adjusted net income” refers to
net income before loss from discontinued operations, net of
provision for income taxes and excludes the after tax effects of
acquisition related costs, costs associated with exit activities,
restructuring costs, and gain on acquisition. “Non-GAAP diluted
earnings per share” refers to diluted earnings per share before the
per share effect of loss from discontinued operations, net of
provision for income taxes and excludes the after tax per share
effects of acquisition related costs, costs associated with exit
activities, restructuring costs, and gain on acquisition.
We believe that Adjusted EBITDA, Adjusted net income, and
Non-GAAP diluted earnings per share are relevant and useful
supplemental information for our investors. We use these non-GAAP
financial measures for internal budgeting and other managerial
purposes, when publicly providing the Company’s business outlook
and as a measurement for potential acquisitions. A limitation
associated with Adjusted EBITDA is that it does not reflect the
periodic costs of certain capitalized tangible and intangible
assets used in generating revenues in our business. Management
evaluates the costs of such tangible and intangible assets through
other financial measures such as capital expenditures. Management
compensates for these limitations by also relying on the comparable
GAAP financial measure of Operating profit, which includes
depreciation and amortization.
These non-GAAP measures may be considered in addition to results
prepared in accordance with GAAP, but they should not be considered
a substitute for, or superior to, GAAP results. We intend to
continue to provide these non-GAAP financial measures as part of
our future earnings discussions and, therefore, the inclusion of
these non-GAAP financial measures will provide consistency in our
financial reporting.
A reconciliation of each of these non-GAAP measures to the most
directly comparable GAAP measure is provided below.
Three Months Ended
June 30,
Six Months Ended
June 30,
2012 2011 2012
2011 Net income
$14,765 $10,344
$30,326
$21,698 Loss from discontinued operations, net of provision
for income taxes
-
612
-
1,318
Income from continuing operations
14,765 10,956
30,326 23,016 Interest income, net
(58 ) (149
)
(135 ) (463 ) Depreciation and amortization
5,935 4,383
10,964 8,437 Provision for income taxes
9,993 8,075
20,987 16,397 Acquisition related costs
(1)
2,253 -
2,729
- Adjusted EBITDA
$32,888
$23,265
$64,871 $47,387
Three Months Ended
June 30,
Six Months Ended
June 30,
2012 2011 2012
2011 Net income
$14,765 $10,344
$30,326
$21,698 Loss from discontinued operations, net of provision for
income taxes
-
612
-
1,318
Income from continuing operations
14,765 10,956
30,326 23,016 Acquisition related costs (2)
1,343
-
1,622 -
Adjusted net income
$16,108 $10,956
$31,948 $23,016
Three
Months Ended
June 30,
Six Months Ended
June 30,
2012 2011 2012
2011 Earnings per diluted share
$0.44 $0.30
$0.90 $0.62 Loss from discontinued operations, net of
provision for income taxes
- 0.02
- 0.04 Earnings per diluted
share from continuing operations
0.44 0.31
0.90 0.66
Acquisition related costs (2)
0.04 -
0.05 - Non-GAAP earnings per
diluted share
$0.48 $0.31
$0.95 $0.66
(1)
Amounts represent costs incurred by the
Company in connection with its acquisitions, substantially all of
which relates to the pending acquisition of SHL.
(2)
Adjustment reflects the net amount of the
estimated tax effects based on the effective tax rate for income
from continuing operations for the applicable period.
With respect to the Company’s 2012 annual guidance,
reconciliations of GAAP diluted earnings per share to Non-GAAP
diluted earnings per share, net income to Adjusted net income, and
net income to Adjusted EBITDA as projected for 2012 are not
provided because the Company cannot, without unreasonable effort,
determine the components of net income and GAAP diluted earnings
per share to provide reconciliations for 2012 with certainty at
this time.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements using words such as “estimates,” “expects,”
“anticipates,” “projects,” “plans,” “intends,” “believes,”
“forecasts,” and variations of such words or similar expressions
are intended to identify forward-looking statements. In addition,
statements about anticipated future financial results, such as our
2012 annual guidance and the expected timing of the closing of the
SHL acquisition, are forward-looking statements. You are hereby
cautioned that these statements are based upon our expectations at
the time we make them and may be affected by important factors
including, among others, the factors set forth below and in our
filings with the U.S. Securities and Exchange Commission, and
consequently, actual operations and results may differ materially
from the results discussed in the forward-looking statements. Our
expectations, beliefs and projections are expressed in good faith
and we believe there is a reasonable basis for them. There can be
no assurance as to the timing of the closing of the transaction
with SHL, or whether the transaction will close at all or on the
terms described in our Current Report on Form 8-K filed on July 3,
2012. Factors that could cause actual results to differ materially
from those indicated by forward-looking statements include, among
others, our dependence on renewals of our membership-based
services, the sale of additional programs to existing members and
our ability to attract new members, our potential failure to adapt
to changing member needs and demands, our potential inability to
attract and retain a significant number of highly skilled
employees, risks associated with the results of restructuring
plans, fluctuations in operating results, our potential inability
to protect our intellectual property rights, our potential exposure
to loss of revenue resulting from our unconditional service
guarantee, exposure to litigation related to our content, various
factors that could affect our estimated income tax rate or our
ability to use our existing deferred tax assets, changes in
estimates or assumptions used to prepare our financial statements,
our potential inability to make, integrate and maintain
acquisitions and investments, the amount and timing of the benefits
expected from acquisitions and investments, and our potential
inability to effectively anticipate, plan for and respond to
changing economic and financial markets conditions, especially in
light of ongoing uncertainty in the worldwide economy and possible
volatility of our stock price. These and other factors are
discussed more fully in the “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and “Risk
Factors” sections of our filings with the U.S. Securities and
Exchange Commission, including, but not limited to, our 2011 Annual
Report on Form 10-K. The forward-looking statements in this press
release are made as of July 30, 2012, and we undertake no
obligation to update any forward-looking statements, whether as a
result of new information, future events, or otherwise.
ABOUT THE CORPORATE EXECUTIVE BOARD COMPANY
CEB is the leading member-based advisory company. By
combining the best practices of thousands of member companies with
our advanced research methodologies and human capital analytics, we
equip senior leaders and their teams with insight and actionable
solutions to transform operations. This distinctive approach,
pioneered by CEB, enables executives to harness peer perspectives
and tap into breakthrough innovation without costly consulting or
reinvention. The CEB member network includes more than 16,000
executives and the majority of top companies globally. For more
information visit www.executiveboard.com.
THE CORPORATE EXECUTIVE BOARD
COMPANY Financial Highlights and Other Operating
Statistics
Selected
Percentage
Changes
Three Months Ended
June 30,
Selected
Percentage
Changes
Six Months Ended
June 30,
2012
2011
2012
2011
(Unaudited)
(Unaudited)
Financial Highlights:
(In thousands, except per share data) Revenues 15.5 %
$
135,718
$ 117,482 14.3 %
$
264,185
$ 231,105 Income from continuing operations 34.8 %
$
14,765
$ 10,956 31.8 %
$
30,326
$ 23,016 Net income 42.7 %
$
14,765
$ 10,344 39.8 %
$
30,326
$ 21,698 Adjusted net income 47.0 %
$
16,108
$ 10,956 38.8 %
$
31,948
$ 23,016
Earnings per diluted share from continuing
operations
41.9 %
$
0.44
$ 0.31 36.4 %
$
0.90
$ 0.66
Non-GAAP earnings per diluted share
54.8 %
$
0.48
$
0.31 43.9 %
$
0.95
$ 0.66
Other Operating Statistics:
Contract Value (in thousands)* 12.2 %
$
512,660
$ 456,814 Member institutions 9.9 %
5,909
5,378 Contract Value per member institution 2.1 %
$
86,756
$ 84,942 Wallet retention rate**
100
%
103 %
*
We define “Contract Value,” at the end of
the quarter, as the aggregate annualized revenue attributed to all
agreements in effect on such date, without regard to the remaining
duration of any such agreement.
**
We define “Wallet retention rate,” at the
end of the quarter, as the total current year Contract Value from
prior year members as a percentage of the total prior year Contract
Value.
THE CORPORATE EXECUTIVE BOARD COMPANY
Statements of Operations (In thousands, except per share
data)
Three Months Ended
Six Months Ended
June 30,
June 30,
2012
2011
2012
2011
(Unaudited)
(Unaudited)
Revenues
$
135,718
$ 117,482
$
264,185
$ 231,105 Cost and expenses: Cost of services
47,372
43,132
90,979
82,919 Member relations and marketing
38,615
35,281
76,741
70,225 General and administrative
16,040
15,978
32,124
31,939 Acquisition related costs
2,253
-
2,729
- Depreciation and amortization
5,935
4,383
10,964
8,437 Total costs and expenses
110,215
98,774
213,537
193,520 Operating profit
25,503
18,708
50,648
37,585
Other (expense) income, net (1)
(745
)
323
665
1,828
Income from continuing operations before
provision for income taxes
24,758
19,031
51,313
39,413 Provision for income taxes
9,993
8,075
20,987
16,397 Income from continuing operations
14,765
10,956
30,326
23,016
Loss from discontinued operations, net of
provision for income taxes
-
(612 )
-
(1,318 ) Net income
$
14,765
$ 10,344
$
30,326
$ 21,698 Basic earnings (loss) per share
$
0.44
$ 0.30
$
0.91
$ 0.63 Continuing operations
0.44
0.32
0.91
0.67 Discontinued operations
$
-
$ (0.02 )
$
-
$ (0.04 ) Diluted earnings (loss) per share
$
0.44
$ 0.30
$
0.90
$ 0.62 Continuing operations
0.44
0.31
0.90
0.66 Discontinued operations
$
-
$ (0.02 )
$
-
$ (0.04 ) Weighted average shares outstanding Basic
33,502
34,516
33,416
34,435 Diluted
33,718
34,851
33,713
34,805
Percentages of Revenues
Cost of services
34.9
%
36.7 %
34.4
%
35.9 % Member relations and marketing
28.5
%
30.0 %
29.0
%
30.4 % General and administrative
11.8
%
13.6 %
12.2
%
13.8 % Depreciation and amortization
4.4
%
3.7 %
4.2
%
3.7 % Operating profit
18.8
%
15.9 %
19.2
%
16.3 %
Adjusted EBITDA (2)
24.2
%
19.8 %
24.6
%
20.5 %
(1)
Other (expense) income, net for the three
months ended June 30, 2012 includes a $0.4 million foreign currency
loss and a $0.4 million decrease in the fair value of deferred
compensation plan assets offset by interest income of $0.1 million.
Other (expense) income, net for the three months ended June 30,
2011 includes $0.2 million of interest income, net and a $0.1
million foreign currency gain. Other (expense) income, net for the
six months ended June 30, 2012 includes a $0.8 million increase in
the fair value of deferred compensation plan assets and $0.1
million of interest income, net offset by a $0.2 million foreign
currency loss. Other (expense) income, net for the six
months ended June 30, 2011 includes a $0.7 million foreign currency
gain, a $0.6 million increase in the fair value of deferred
compensation plan assets, and $0.5 million of interest income,
net.
(2)
See “NON-GAAP Financial Measures” for
further explanation.
THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, 2012
Dec. 31, 2011
(Unaudited)
Assets
Current assets: Cash and cash equivalents
$
178,718
$ 133,429 Marketable securities
6,165
3,794 Membership fees receivable, net
111,514
154,255 Deferred income taxes, net
18,373
17,844 Deferred incentive compensation
20,170
17,330 Prepaid expenses and other current assets
15,990
21,624 Total current assets
350,930
348,276 Deferred income taxes, net
16,234
20,490 Marketable securities
2,940
6,722 Property and equipment, net
83,742
80,981 Goodwill
40,010
29,492 Intangible assets, net
19,451
13,581 Other non-current assets
36,630
34,150 Total assets
$
549,937
$ 533,692
Liabilities and stockholders’
equity
Current liabilities: Accounts payable and accrued liabilities
$
39,745
$ 46,067 Accrued incentive compensation
28,078
37,884 Deferred revenues
293,917
284,935 Total current liabilities
361,740
368,886 Deferred income taxes
1,306
1,436 Other liabilities
88,325
83,806 Total liabilities
451,371
454,128 Total stockholders’ equity
98,566
79,564 Total liabilities and stockholders’ equity
$
549,937
$ 533,692
THE CORPORATE EXECUTIVE BOARD
COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands)
Six Months Ended
June 30,
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
(Unaudited)
Net income
$
30,326
$ 21,698
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation and amortization
10,964
8,846 Deferred income taxes
2,032
3,176 Share-based compensation
4,236
4,159 Excess tax benefits from share-based compensation
arrangements
(1,938
)
(1,821 ) Foreign currency translation loss (gain)
216
(746 ) Amortization of marketable securities premiums
56
130 Changes in operating assets and liabilities: Membership fees
receivable, net
44,293
53,545 Deferred incentive compensation
(2,814
)
(446 ) Prepaid expenses and other current assets
6,051
(8,020 ) Other non-current assets
(2,286
)
(1,880 ) Accounts payable and accrued liabilities
(9,568
)
(17,219 ) Accrued incentive compensation
(9,855
)
(18,955 ) Deferred revenues
8,980
8,934 Other liabilities
2,818
2,902 Net cash flows provided by operating
activities
83,511
54,303 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
property and equipment
(6,161
)
(4,583 ) Acquisition of businesses, net of cash acquired
(20,982
)
- Cost method investment
-
(150 ) Maturities of marketable securities
1,200
5,780 Net cash flows (used in) provided by
investing activities
(25,943
)
1,047 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from
the exercise of common stock options
807
1,587
Proceeds from the issuance of common stock
under the employee stock purchase plan
293
232 Excess tax benefits from share-based compensation arrangements
1,938
1,821 Acquisition of a business, contingent consideration
-
(3,655 ) Credit facility issuance costs
(200
)
(542 )
Withholding of shares to satisfy minimum
employee tax withholding for restricted stock units
(3,334
)
(2,721 Payment of dividends
(11,696
)
(10,314 ) Net cash flows used in financing activities
(12,192
)
(13,592 Effect of exchange rates on cash
(87
)
521 NET INCREASE IN CASH AND CASH EQUIVALENTS
45,289
42,279 Cash and cash equivalents, beginning of period
133,429
102,498 Cash and cash equivalents, end
of period
$
178,718
$ 144,777
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