The Corporate Executive Board Company Reports Second Quarter Results And Raises 2012 Non-GAAP Diluted Earnings Per Share And Adjusted EBITDA Guidance

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  

Copyright Business Wire 2010

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