Corporate Executive Board Management Discusses Q2 2012 Results - Earnings Call Transcript

Corporate Executive Board (EXBD)

Q2 2012 Earnings Call

July 31, 2012 9:00 am ET


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

Thomas L. Monahan - Chairman and Chief Executive Officer


Paul Ginocchio - Deutsche Bank AG, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

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

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

David Ridley-Lane - BofA Merrill Lynch, Research Division

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



Good morning, and welcome to the Corporate Executive Board's Second Quarter 2012 Conference Call. Today's call is being recorded and will be available for replay beginning today and through August 9 by dialing (719) 457-0820. The replay passcode is 540-3939. A replay will also be available beginning later today and through August 9 at the company's website and at

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 second 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 second 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 CEB. Thank you for calling or logging into our second quarter 2012 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 review our revised financial outlook for 2012. Tom Monahan, our Chief Executive Officer, will provide an update on our key strategic priorities, then we'll take your questions.

Please turn to Slide 3 of our presentation, which serves as a roadmap for our conversation this morning. We are pleased with our second quarter results, which reflect ongoing focus on delivering business value to our members. We are entering the second half of the year with strong momentum. We experienced sequential improvements in all of our operating metrics, which led to solid growth in both revenues and earnings. As a result, we are on pace to exceed our prior non-GAAP EPS and adjusted EBITDA guidance and are raising the earnings outlook for CEB standalone. Tom will share additional detail on some important accomplishments in the quarter that keep us on course with our key priorities. And finally, we are poised to complete the SHL acquisition this week and are excited to begin a new chapter in CEB's history.

Please turn to Slide 4 for a discussion of our key growth drivers. As expected, our teams built on the foundation established earlier in the year to deliver solid returns in the second quarter. Consolidated bookings grew at a double-digit rate led by continued strong performance by our North American and Asia Pacific teams. These positive outcomes were slightly offset by tougher results in EMEA where we saw modest year-over-year declines in total bookings. From an industry perspective, we once again saw balanced activity across all vertical markets. These positive booking results were supported by sequential improvements in all of our operating metrics. Wallet retention rate increased to 100% at June 30, 2012, from 99% at March 31, 2012. The second quarter rate declined as compared to the prior year, however, it remains at a healthy level and we are confident that our focus on delivering business value will continue to support favorable renewal, price increases and cross sell outcomes that are reflected in Wallet retention.

Total member institutions increased by 9.9% compared to last year, again driven mostly by growth in middle market, but also due to an increase in a number of large corporate customers. These favorable trends support our long-term growth strategy by reinforcing the strength of our network and laying the foundation for future renewals in cross sell activity.

Once again, because the number of middle market institutions grew faster than large corporate, Contract Value per institution on a blended basis increased 2.1% in the second quarter, even though the growth rates in this metric were stronger at the end market level.

Please turn to Slide 5. As you can see, our second quarter financial results produced solid double-digit gains across all our key financial measures. These positive outcomes put us on pace to exceed the EPS and adjusted EBITDA margin outlook we shared at the beginning of the year and set us up well for continued progress in the second half of the year. At June 30, 2012, Contract Value was $512.7 million, which is an increase of 12.2% from June 30, 2011. This figure includes $6.4 million from Valtera and Baumgartner.

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