Corporate Executive Board's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Corporate Executive Board (EXBD)

Q1 2012 Earnings Call

May 03, 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

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

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

Theresa Chen - Barclays Capital, Research Division

Ato Garrett - Deutsche Bank AG, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division

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

Toni Kaplan - Morgan Stanley, Research Division

Presentation

Operator

Good morning, and welcome to the Corporate Executive Board's First Quarter 2012 Conference Call. Today's call is being recorded and will be available for replay beginning today and through May 11 by dialing (719) 457-0820. The replay passcode is 5476246. The replay will also be available beginning later today and through May 11 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 will 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 to the first 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 also 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, 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 first 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, Scott, and good morning, everyone. I'm Rich Lindahl, Chief Financial Officer of the Corporate Executive Board. Thank you for calling or logging into our first quarter 2012 earnings call. Here's a quick overview of our time together this morning. I'll start with a summary of highlights for the quarter and review our financial outlook for 2012. Tom Monahan, our Chief Executive Officer, will provide an update on our key strategic priorities, and then we will take your questions.

Please turn to Slide 3 of our presentation, which serves as a roadmap for our conversation this morning. Our overall theme is that we got off to a solid start against this year's objectives. On balance, our operating teams once again delivered very good results and positioned us for additional growth throughout the year. Our financial performance was steady, with double-digit gains and top line metrics, accompanied by strong growth in earnings and cash flow. We expect the financial pattern of the year to unfold as we have previously guided. And as a result, we are on track to deliver against the outlook we shared in February. And finally, we will update you on the progress we continue to make against our longer-term strategic objectives.

Please turn to Slide 4 for a discussion of our key growth drivers. Our teams made good overall progress securing important relationships and building pipelines for the rest of the year. Overall bookings grew even in comparison to last year's very strong first quarter, led by solid performance in North America and strong results by our Asia Pacific team. In EMEA, outcomes were mixed as our service-led strategies produced solid renewals, but obtaining new business continued to be harder to come by in the quarter. Lastly, there was little divergence from an industry perspective as bookings from all vertical markets were in line with firm average.

Moving on to our operating metrics. Wallet retention rate at March 31, 2012 was 99% compared to 104% last year. We continue to be satisfied that this is a healthy outcome consistent with our historical experience and in line with or favorable to other peer companies that report this metric. A few factors influenced the year-over-year change. First, the prior year's figure benefited from a onetime step-up due to the addition of Iconoculture, and pricing performance contributed less growth compared to last year. Consistent with our longer-term guidance, we still expect annual increases -- price increases to be in the roughly 3% to 5% range. However, after a strong performance in 2011, we are currently seeing price increases trend towards the lower end of that range. We remain confident that our focus on delivering business value will continue to support favorable renewal price increase and cross-sell outcomes over time.

Total institutions increased by 8.6% year-on-year in the first quarter, driven mostly by growth in middle market institutions but also due to an increase in a number of large corporate customers. As you know, obtaining new business remains an important component of our long-term growth strategy as a means of reinforcing the strength of our network and laying the foundation for future renewals in cross-sell activity. Because the number of middle market institutions grew faster than large corporate, on a blended basis, total Contract Value for institution increased 1.5% in the first quarter, even though the growth rates were stronger at the end market level.

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