CTPartners Executive Search Inc. Announces Fourth Quarter And Full Year 2011 Financial Results

CTPartners Executive Search Inc. (AMEX: CTP), a leading global retained executive search firm, today announced results for the quarter and full year ended December 31, 2011.

“We are pleased with a number of elements of our 2011 performance,” said Brian Sullivan, CEO. “In looking ahead, we have identified key components to reduce our expense base which we believe will add to our profitability and create an operating profit in 2012, even in this challenging economic environment. We believe these adjustments will lead to the enhancement of our shareholder value as well as maintaining our excellent level of client quality.”

2011 Highlights
  • 2011 Revenue was $121.1 million, a company record, up 6.5% over 2010
  • Average fee per search increased to $104,950, up 2% over 2010
  • Number of consultants at year-end was 94, up 6.8% over 2010
  • The practice diversification recruitment effort has been successful with the revenues of all practices growing between 18-30% year over year, excluding financial services
  • As an indication of our quality orientation, CTPartners placement rate was 81%, and repeat business was 76%
  • While reporting a loss for 2011, guidance for 2012 is revenue of $125 million - $140 million and an operating margin of 4-6%.

“CTPartners is a growth company. 2011 was a foundation building year, and we are continuing to aggressively pursue strategic additions to our organization to expand and enhance our global presence,” said Sullivan.

Fourth Quarter 2011 Results

For the three-month period ended December 31, 2011, net revenue decreased 1.8% to $27.2 million compared to $27.7 million in the fourth quarter of 2010. The decrease in Asia Pacific and EMEA were partially offset by the increase in North America. The Financial Services Practice contributed to most of the decrease in both regions.

Revenue breakdown by region:

    Q4 2011     Q4 2010
      Revenue   % of Net Revenue     Revenue   % of Net Revenue    

Increase/ Decrease
 

% Increase/ Decrease
North America     $ 17,773,093   65.4%     $ 16,777,564   60.6%     $ 995,529   6%
EMEA     $ 7,184,489   26.4%     $ 7,814,768   28.2%     $ (630, 279)   -8%
Asia Pacific     $ 2,225,125   8.2%     $ 3,103,309   11.2%     $ (878,184)   -28%
Total     $ 27,182,707   100%     $ 27,695,641   100%     $ (512,934)   -1.9%
             

Revenue breakdown by practice:
    Q4 2011     Q4 2010
      Revenue  

% of Net Revenue
    Revenue  

% of Net Revenue
   

Increase/ Decrease
 

% Increase/ Decrease
Financial Services     $ 7,198,441   26.5%     $ 9,428,042   34.0%     $ (2,229,601)   -23.6%
TMT     $ 5,257,665   19.3%     $ 4,946,973   17.9%     $ 310,692   6.3%
Life Sciences     $ 5,944,215   21.9%     $ 5,347,884   19.3%     $ 596,331   11.2%
Professional Services     $ 5,508,792   20.3%     $ 5,174,719   18.7%     $ 334,073   6.5%
Consumer/Industrial     $ 3,273,594   12.0%     $ 2,798,023   10.1%     $ 475,571   17.0%
Total     $ 27,182,707   100%     $ 27,695,641   100%     $ (512,934)   -1.9%
             

There were 244 confirmed searches in the fourth quarter of 2011, a 19.2% decrease compared to the fourth quarter of 2010. Productivity, defined as average annualized net revenue per executive search consultant, was $1,156,711 in the fourth quarter 2011 compared to $1,258,893 in the fourth quarter of 2010, due to the lower number of searches and the increase in the number of consultants. However, the average revenue per executive search was $100,872 in the fourth quarter of 2011 compared to $94,858 in the corresponding period in 2010, up 6.3%.

Performance metrics:

   

Three Month Period Ended December 31,
   

Increase/ (Decrease)
 

%Increase/ (Decrease)
      2011   2010      
Number of new search assignments     244   302     (58)   (19.2%)
Number of executive search consultants (as of period end)     94   88     6   6.8%
Productivity, as measured by average annualized net revenue per executive search consultant     $ 1,156,711   $1,258,893     $ (102,182)   (8.1%)
Average revenue per executive search     $ 100,872   $ 94,858     $ 6,014   6.3%
 

2011 Results

For the twelve-month period ended December 31, 2011, net revenue increased 6.5% to $121.1 million compared to $113.7 million in 2010. An increase in North America and EMEA offset a slowdown in Asia Pacific, which was primarily reflective of the Financial Services sector.

Revenue breakdown by region:

    2011     2010
     

Revenue ($)
 

% of Net Revenue
   

Revenue ($)
 

% of Net Revenue
    Increase/ Decrease  

% Increase/ Decrease
North America     $ 78,766,405   65%     $ 72,781,428   63%     $ 5,984,977   8.2%
EMEA     $ 32,047,769   27%     $ 28,060,925   26%     $ 3,986,844   14.2%
Asia Pacific     $ 10,271,724   8%     $ 12,864,166   11%     $ (2,592,442)   -20.2%
Total     $ 121,085,898   100%     $ 113,706,519   100%     $ 7 ,379,379   6.5%
             

Other than Financial Services, all other practices were up 18% to 30%, year-over-year.

Revenue breakdown by practice:

    2011     2010
     

Revenue ($)
 

% of Net Revenue
   

Revenue ($)
 

% of Net Revenue
    Increase/ Decrease  

% Increase/ Decrease
Financial Services     $ 39,731,625   33%     $ 46,919,673   41%     $ (7,188,048)   -15.3%
TMT     $ 21,592,127   18%     $ 18,086159   16%     $ 3,505,968   19.4%
Life Sciences     $ 21,944,184   18%     $ 17,965815   16%     $ 3,978,369   22.1%
Professional Services     $ 21,580,967   18%     $ 18,227,155   16%     $ 3,353,812   18.4%
Consumer/Industrial     $ 16,236,995   13%     $ 12,507,717   11%     $ 3,729,278   29.8%
Total     $ 121,085,898   100%     $ 113,706,519   100%     $ 7,379,379   6.5%
             

There were 1,100 new searches confirmed in 2011, flat with last year. Productivity, defined as average annualized net revenue per executive search consultant, also stayed relatively flat at $1,288,000 in 2011 compared to $1,292,000 in 2010.

The average revenue per executive search was $104,950 for 2011 compared to $102,900 in 2010, up 2%.

Performance metrics:
   

Year Ended December 31,
   

Increase/ (Decrease)
 

%Increase/ (Decrease)
      2011   2010      
Number of new search assignments     1,100   1,103     (3)   —%
Number of executive search consultants (as of period end)     94   88     6   6.8%
Productivity, as measured by average annualized net revenue per executive search consultant     $ 1,288,000   $ 1,292,000     ($ 4,000)   —%
Average revenue per executive search     $ 104,950   $ 102,900     $ 2,050   2.0%
 

Compensation and Benefits Expenses. Compensation and employee benefits expense increased $10.1 million, or 11.4%, to $98.2 million in 2011 from $88.1 million in 2010. As a percentage of net revenue, compensation and benefits increased to 81% in 2011 from 77.5% in 2010. The increase in compensation and benefits expense was primarily due to (i) a $4.1 million increase in consultant acquisition costs; (ii) a $4.3 million increase due to the addition of 27 net new recruiting support staff, and accounting for a full year versus a partial year of compensation for employees hired in 2010; (iii) a $3.5 million increase in consultant compensation, which was the direct result of higher consolidated net revenue in 2011 as compared to 2010; (iv) a $2.5 million increase in employee benefits and payroll taxes related to the aforementioned increases; (v) offset by a $4.4 million one-time 2010 cost to terminate our performance unit plan.

General and Administrative Expenses. General and administrative expenses increased $4.5 million, or 20.2%, to $27.1 million in 2011 from $22.6 million in 2010. The increase was mainly due to (i) an increase in occupancy costs due to $1.2 million relating to new offices in Dallas, Chicago, Toronto, and Dubai, (ii) increased professional fees of $1.2 million, including one-time fees of $400,000 related to Sarbanes-Oxley compliance and other costs associated with being a public company, and one-time fees of $300,000 related to our acquisition of CTPartners Latin America, (iii) an increase of $600,000 in business development costs directly related to the increase in consolidated net revenue, and (iv) an increase of $400,000 due to one-time costs related to HR and IT consulting.

Operating Income. Operating income decreased $7.4 million, to a loss of $4.6 million in 2011 from an operating profit of $2.8 million in 2010. The decrease primarily reflects an increase in compensation and benefits and general administrative costs offset by an increase in net revenue.

Net Interest Expense. Net interest expense decreased $309,000, to ($2,000) in 2011 from $307,000 in 2010. The decrease in net interest expense reflects the elimination of our bank borrowings for all of 2011 compared to 2010.

Income Before Taxes and Income Tax Expense. In 2011, we reported a loss before taxes of $4.6 million and recorded an income tax benefit of $1.4 million, as compared to income before taxes of $2.4 million and income tax expense of $638,000 in 2010. The increase in income tax benefit of $1.8 million was primarily due to a $1.4 million increase in our current tax benefit and a $400,000 increase in deferred tax benefit.

An income statement for the fourth quarter and full year are below. The income statement reflects one-time adjustments for the quarter and the full year, followed by a brief explanation of each adjustment.
Revenue:         Q4 11   Q4 10     2011   2010
Net Revenue         $27,182,707   $27,695,641     $121,085,898   $113,706,519
Reimbursable Expenses 1,195,533 1,144,238 5,033,024 3,950,825
Total Revenue $28,378,240 $28,839,874 $126,118,922 $117,657,344
 
Operating Expenses:                        
Compensation and Benefits 26,290,667 25,694,351 98,224,549 88,134,877
General and Administrative 7,436,112 6,152,754 27,130,437 22,561,876
Reimbursable Expenses 1,403,720 1,277,641 5,406,685 4,204,188
Total Operating Expenses $35,130,499 $33,124,746 $130,761,671 $114,900,941
 
Operating Income         (6,752,259)   (4,284,876)     (4,642,749)   2,756,403
Net Interest Income (Expense) 4,170 (109,047) 2,150 ( 306,891)
Income Tax 2,164,306 ( 592,268) 1,406,037 ( 638,184)
Net Income $(4,583,782) $(4,986,183) $ (3,234,562) $ 1,811,328
 
One-time adjustments:                        
1) Closing of cash balance plan 660,000 810,052
2) Investment write-down 55,000 55,000

3) London rent review professional fees
75,000 75,000
4) Professional fee for acquisition 300,000 300,000
5) MF Global reserve 125,000 125,000
Total one-time adjustments 1,215,000 1,365,052
 
Adjusted Net Income         $(3,366,550)         $(1,869,510)    
 

Explanation of one-time adjustments:
     

1)
 

Closing of the cash balance deferred compensation plan that resulted in a one-time non-cash adjustment of $810,052.
 

2)

In 2009, we accepted equity from a client in lieu of cash for a portion of our fee. The company that issued the equity, filed for bankruptcy which resulted in a one-time non-cash write-off of $55,000.
 

3)

In London, our lease contains a provision for rent review by the landlord half way through the lease. While our rent was not increased, we incurred a one-time professional fee of approximately $75,000 defending our position.
 

4)

Professional fees associated with our Latin America acquisition totaled approximately $300,000.
 

5)

MF Global declared bankruptcy in late 2011. They made payments to us of about $400,000 in the 90 days prior to filing. We have reserved $125,000 in anticipation of possibly having to return a portion of those funds.
 

Conference Call and Webcast

The company will host a conference call March 22, 2012 at 9:00 AM (Eastern) / 6:00 AM (Pacific) to discuss these financial results. A live dial-in is available domestically at 800-299-7089 and internationally at 617-801-9714, passcode 63911041. A replay will be available until midnight (Eastern) on March 28, 2012, domestically at 888-286-8010 and internationally at 617-801-6888, passcode 18355537. A web broadcast of the event will be available live and for replay purposes on the CTPartners Investor Relations website at http://investor.ctnet.com.

CTPartners’ 10-K report is available online at http://investor.ctnet.com and www.sec.gov.

About CTPartners

CTPartners is a leading performance-driven executive search firm serving clients across the globe. Committed to a philosophy of partnering with its clients, CTPartners offers a proven record in C-Suite, senior executive, and board searches, as well as expertise serving private equity and venture capital firms.

With origins dating back to 1980, CTPartners serves clients with a global organization of more than 400 professionals and employees, offering expertise in board advisory services and executive recruiting services in the financial services, life sciences, industrial, professional services, retail and consumer, and technology, media and telecom industries. Headquartered in New York, CTPartners has 23 offices in 15 countries.

www.ctnet.com

Safe Harbor Statement

The following is a Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release includes forward-looking statements. As a general matter, forward-looking statements reflect our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be identified by the use of forward looking terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," or the negative version of those words or other comparable words, but the absence of these words does not necessarily mean that a statement is not forward-looking. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for the disclosure of forward-looking statements.

The forward-looking statements contained in this press release are based upon our historical performance, current plans, estimates, expectations and other factors we believe are appropriate under the circumstances. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved since these forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. Some of the key uncertainties and factors that could affect our future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements are: our expectations regarding our revenues, expenses and operations and our ability to sustain profitability; our ability to recruit and retain qualified executive search consultants to staff our operations appropriately; our ability to expand our customer base and relationships, especially given the off-limit arrangements we are required to enter into with certain of our clients; further declines in the global economy and our ability to execute successfully through business cycles; our anticipated cash needs; our anticipated growth strategies and sources of new revenues; unanticipated trends and challenges in our business and the markets in which we operate; social or political instability in markets where we operate; the impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; and the mix of profit and loss by country in which we operate.

The above list should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our Registration Statement on Form S-1. The forward looking statements included in this press release are made only as of the date hereof. We do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission.

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