Corporate Executive Board's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Corporate Executive Board (EXBD)

Q4 2011 Earnings Call

February 08, 2012 9:00 am ET

Executives

Richard S. Lindahl - Chief Financial Officer and Principal Accounting Officer

Thomas L. Monahan - Chairman and Chief Executive Officer

Analysts

David Ridley-Lane - BofA Merrill Lynch, Research Division

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

Toni Kaplan - Morgan Stanley, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good morning and welcome to the Corporate Executive Board's Fourth Quarter 2011 Conference Call. Today's call is being recorded and will be available for replay beginning today and through February 16 by dialing (719) 457-0820. The confirmation code for the replay is 705334. The replay will also be available beginning later today and through February 16 at the company's website and at www.earnings.com.

To the extent any non-GAAP financial measure is discussed in today's call, you'll also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company's website and following the Investors link to yesterday's news release. You will also find a PDF of the supporting materials that the company will use in its prepared remarks this morning by going to the Investors page and following the link on the fourth quarter earnings conference call. Please review the second page of these materials, which includes important information about any forward-looking information included in the presentation.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the Corporate Executive Board's expected quarterly and annual financial performance for fiscal 2012 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the discussions of forecasts, estimates, targets, plans, beliefs, expectations and the like are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in the Corporate Executive Board's filings with the Securities and Exchange Commission and in its fourth quarter news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

At this time, for opening remarks, I'd like to turn the conference over to the company's Chief Financial Officer, Mr. Richard Lindahl. Please go ahead, sir.

Richard S. Lindahl

Thank you, and good morning, everyone. I'm Rich Lindahl, Chief Financial Officer of the Corporate Executive Board. Thank you for calling or logging into our fourth quarter 2011 earnings call. Here's a quick overview of our time together this morning. I'll start with a summary of highlights from the quarter and discuss our financial outlook for 2012. Then Tom Monahan, our Chief Executive Officer, will provide an update on our key strategic priorities and give some insight on our just completed acquisition of Valtera Corporation. Then we will take your questions.

Please turn to Slide 3 of our presentation, which serves as a roadmap for our conversation this morning. Overall, we were pleased with our results and the solid performance by the team against a backdrop of mixed market conditions. As expected, we saw a healthy top line growth drive improved operating leverage off of a stable cost base. We delivered on our guidance and exited the year with an improved platform of continuing operations. We maintained our strong financial profile and are well set-up to sustain our growth and progress in the year ahead. Our efforts remained guided by a focus on our 4 key priorities. And finally, we are excited by the opportunity presented by combining forces with the outstanding people, data and technology of Valtera.

Please turn to Slide 4 for a discussion of our key growth drivers. We continued to improve the top line and experienced double-digit organic gains for the year in total bookings, Contract Value and revenues. On a regional basis, we saw our 3 main geographies all converge toward similar annual growth rates. North America finished the year strong, while EMEA was not immune to the macro background noise and achieved a growth rate a bit lower than the overall corporate average. Asia Pacific put up solid numbers on the year, with annual growth slightly ahead of firm average.

On an industry basis, the business largely extended the trend lines discussed on our last earnings call with no real outliers. Our financial services customers continue to grow overall spend in line with other sectors, and they still represent about 20% of our business. The only sector with a different growth trajectory remains our government business, which continues to face the challenge of constrained federal budgets. As a reminder, while we see a large, unpenetrated opportunity in government, that part of our business represents less than 5% of our revenues. The year-over-year trends and other growth indicators reflect our seasonal emphasis on new business.

On the left side of the page, you can see we held Wallet retention essentially flat at 100% versus the prior year. This metric is defined as the total current year Contract Value from prior year members as a percentage of total prior year Contract Value. As such, it measures our success at driving institutional relationships through effective retention, cross-sell and price improvement efforts. Keeping this metric in the high 90s to low 100s provides a stable platform upon which to drive growth with new business.

In the center of the page, we showed that we expanded our customer base by 9% over the prior year as total member institutions increased from 5,271 to 5,738. This improvement reflects our success at reengaging former members, establishing new relationships with large domestic and international companies and further penetrating the middle market opportunity. The net result of all these efforts can be seen in the right-hand side of the page, which shows that Contract Value per member institution grew by approximately 3% from $84,800 in the fourth quarter 2010 to $87,000 in the fourth quarter of 2011.

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