CTPartners Executive Search Inc. (NYSE MKT:CTP), a leading global retained executive search firm, today announced its financial results for the second quarter and six-months, ended June 30, 2012.
Revenue for the second quarter was $33.8 million, a 2.0% increase from $33.1 million reported in the same period last year and a 4.2% sequential increase from $32.4 million reported in the first quarter 2012. Operating income and operating margin were $1.1 million and 3.2%, respectively, flat with the results for the same period last year and above first quarter 2012 results of $660,000 in operating income and operating margin of 2.0%. Fully diluted EPS was $0.07 compared to $0.09 in the same period last year and $0.05 for the first quarter 2012. Financial results for the second quarter 2012 were consistent with the Company’s revised expectations issued on July 13, 2012.
“We are pleased to report second quarter revenue and earnings above our original expectations and consistent with our recently revised financial forecast. Despite operating in a challenging macro environment that has reduced demand for executive recruitment services, our positive year-over-year and sequential revenue growth reflects the value proposition we deliver to our clients. Our business fundamentals remained strong throughout the quarter as new search assignments increased 22% year-over-year. Our initiatives to diversify our practices and invest prudently in qualified and experienced consultants are paying off as we posted sequential revenue growth in five out of our six business practices. We appreciate the dedication of our consultants and the support of our shareholders and are confident that we are well positioned to increase shareholder value as current market conditions improve,” said Brian Sullivan, Chief Executive Officer.
Q2 2012 Highlights - New search assignments increased 22.0% to 350 compared to 287 for the second quarter 2011
- Consultant headcount increased by 10 to 109 from the second quarter 2011 and was down 4 on a net basis from the first quarter of 2012
- Revenue from the consumer/retail practice increased to 18.7% of revenue from 6.3%, compared to the same period last year
- Revenue from the financial services practice grew 14.7% on a sequential basis
- Compensation and employee benefits expense decreased 2.1% of net revenue to 75.1% compared to 77.2% in the same period last year
- EPS of $0.07 includes the Q2 2012 income tax rate increase to 47.7% from 38.7% in Q2 2011
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| Revenue Breakdown by Region |
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| YEAR OVER YEAR | | Q2 2012 | | Q2 2011 | | | | |
| By Region | | Revenue | | % of Revenue | | Revenue | | % of Revenue | | Increase / (Decrease) | | % Change | |
| North America | | $ | 21,365,726 | | 63.3 | % | | $ | 22,019,434 | | 66.6 | % | | $ | (653,708 | ) | | -3.0 | % |
| EMEA | | | 6,707,445 | | 19.9 | % | | | 8,378,655 | | 25.3 | % | | | (1,671,210 | ) | | -19.9 | % |
| Asia Pacific | | | 2,568,066 | | 7.6 | % | | | 2,686,580 | | 8.1 | % | | | (118,514 | ) | | -4.4 | % |
| Latin America | | | 3,113,029 | | 9.2 | % | | | - | | 0.0 | % | | | 3,113,029 | | | 100.0 | % |
| TOTAL | | $ | 33,754,266 | | 100 | % | | $ | 33,084,669 | | 100 | % | | $ | 669,597 | | | 2.0 | % |
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| Revenue Breakdown by Practice |
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| YEAR OVER YEAR | | Q2 2012 | | Q2 2011 | | | | |
| By Practice | | Revenue | | % of Revenue | | Revenue | | % of Revenue | | Increase / (Decrease) | | % Change | |
| Financial Services | | $ | 11,207,388 | | 33.2 | % | | $ | 12,346,523 | | 37.3 | % | | $ | (1,139,135 | ) | | -9.2 | % |
| Consumer/Retail | | | 6,309,166 | | 18.7 | % | | | 2,088,878 | | 6.3 | % | | | 4,220,288 | | | 202.0 | % |
| Life Sciences | | | 5,425,624 | | 16.1 | % | | | 6,073,531 | | 18.4 | % | | | (647,907 | ) | | -10.7 | % |
| Professional Services | | | 4,134,309 | | 12.2 | % | | | 5,629,088 | | 17.0 | % | | | (1,494,779 | ) | | -26.6 | % |
| TMT | | | 3,807,543 | | 11.3 | % | | | 4,782,053 | | 14.5 | % | | | (974,510 | ) | | -20.4 | % |
| Industrial | | | 2,870,236 | | 8.5 | % | | | 2,164,596 | | 6.5 | % | | | 705,640 | | | 32.6 | % |
| TOTAL | | $ | 33,754,266 | | 100 | % | | $ | 33,084,669 | | 100 | % | | $ | 669,597 | | | 2.0 | % |
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| Performance Metrics |
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| | | Q2 2012 | | Q2 2011 | | Increase / (Decrease) | | % Change | |
| New search assignments | | | 350 | | | 287 | | | 63 | | | 22.0 | % |
| Executive search consultants | | | 109 | | | 99 | | | 10 | | | 10.1 | % |
| Productivity | | $ | 1,238,689 | | $ | 1,336,754 | | $ | (98,065 | ) | | -7.3 | % |
| Average revenue per search | | $ | 94,373 | | $ | 111,950 | | $ | (17,577 | ) | | -15.7 | % |
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Productivity is measured as the average annualized net revenue per executive search consultant. Excluding Latin America, productivity and average revenue per executive search were $1.3 million and $110,600, respectively, in the second quarter.
Compensation and Benefits
Compensation and employee benefits expense for the second quarter 2012 decreased to $25.4 million from $25.6 million for the year-ago quarter. As a percentage of net revenue, compensation and benefits decreased to 75.1% from 77.2% of net revenue in the second quarter 2011.
General and Administrative Expenses General and administrative expenses were $7.1 million, comprising 21.2% of net revenue compared to $6.5 million, or 19.7% of net revenue for the second quarter 2011. The increase was the result of the inclusion of $500,000 of operating expenses from the recent acquisition of the Company’s Latin America affiliate and an increase in the allowance for doubtful accounts due to the increase in accounts receivable.
Income Tax Rate The effective income tax rate for the second quarter of 2012 was 47.7% compared to 38.7% for the second quarter of 2011. The increase is due to delays in the realization of foreign income tax payments as credits against the current U.S. tax obligation until foreign taxable income is generated. The Company is taking action in all non-U.S. markets to mitigate the impact of its tax rate going forward.
Cash The cash balance at June 30, 2012 was $13.8 million compared to $19.0 million in the second quarter 2011, reflecting the cash used in investing activities related to the purchase of the Company’s Latin America affiliate. The cash balance at March 31, 2012 was $7.2 million.
Six-Month Financial Results For the six months ended June 30, 2012, revenue totaled $66.2 million, a 4.1% increase over the $63.6 million reported for the six months ended June 30, 2011. Operating income for the six month period was $1.8 million compared with $2.0 million for the prior year period. For the six months to date, operating margin was 2.6% compared to 3.2% for the year-ago period.
Cost Savings Initiatives
In the third quarter of 2012, the Company initiated a plan to reorganize its operations resulting in certain organizational changes in its Canadian and EMEA locations. The plan consists of workforce reorganization and elimination of redundant or unneeded positions allowing the Company to combine business operations in certain geographic locations with the purpose of serving its clients more efficiently. In connection with this reorganization, CTPartners anticipates incurring severance and other employee-related costs in the range of $1.0 million to $1.2 million, or approximately $0.07, of which $700,000 is expected to be cash expenditures. The total charge will be recorded in the third quarter of 2012. The Company expects that these cost savings will result in annualized savings of $1.5 million.
Guidance For the third quarter 2012, the Company expects revenue to be in the range of $30 million to $32 million. Excluding the non-recurring charges related to the reorganization, earnings per share for the quarter are expected to be in the range of a net loss per share of $0.04 to earnings per share of $0.05 with an operating margin of -1.3% to 2.3%.
The Company reaffirmed its guidance for the full year 2012 of $128 million to $132 million in revenue, an operating margin of 2.0%-3.5% and diluted EPS of $0.15 to $0.30, excluding any non-recurring charges.
Conference Call and Webcast The Company will host a conference call and webcast for the investment community on Friday, August 10, at 9 AM ET. A replay of the event will be available for one week following the conclusion of the call.
Second Quarter 2012 Financial Results Conference Call and WebcastDate: August 10, 2012Time: 9 AM ET
Audio Webcast:
http://investor.ctnet.comLive Dial-In (U.S.): 800-329-9097Live Dial-In (International): 617-614-4929Participant Passcode: 45545147
Replay Dial-In (U.S.): 888-286-8010Replay Dial-In (International): 617-801-6888Replay Access Code: 32558477
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 24 offices in 16 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 annual report on Form 10-K filed on March 22, 2012. 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. | |
| CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
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| | | | June 30, 2012 | | | December 31, 2011 | |
| Assets | | | | | | | | | |
| Current Assets | | | | | | | | | |
| Cash | | | $ | 13,792,597 | | | $ | 21,830,120 | |
| Accounts receivable, net | | | | 25,293,354 | | | | 19,612,236 | |
| Other receivables | | | | 196,833 | | | | 559,526 | |
| Prepaid expenses | | | | 2,912,287 | | | | 2,394,872 | |
| Deferred income taxes | | | | 611,765 | | | | 1,769,936 | |
| Income taxes receivable | | | | 2,029,254 | | | | 1,592,562 | |
| Other | | | | 1,616,831 | | | | 712,519 | |
| Total current assets | | | | 46,452,921 | | | | 48,471,771 | |
| Non-current Assets | | | | | | | | | |
| Leasehold Improvements and Equipment, net | | | | 3,901,146 | | | | 4,332,865 | |
| Goodwill | | | | 7,406,879 | | | | - | |
| Intangibles, net | | | | 2,565,000 | | | | - | |
| Other Assets | | | | 2,081,863 | | | | 2,056,931 | |
| Deferred Income Taxes | | | | 853,284 | | | | 678,554 | |
| | | | | | | | | | |
| | | | $ | 63,261,093 | | | $ | 55,540,121 | |
| | | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | | |
| Current Liabilities | | | | | | | | | |
| Current portion of long-term debt | | | $ | 2,650,301 | | | $ | 155,340 | |
| Accounts payable | | | | 1,383,232 | | | | 993,558 | |
| Accrued compensation | | | | 23,147,075 | | | | 23,660,070 | |
| Accrued business taxes | | | | 1,410,278 | | | | 741,141 | |
| Accrued expenses | | | | 4,054,947 | | | | 3,032,950 | |
| | | | | | | | | | |
| Total current liabilities | | | | 32,645,833 | | | | 28,583,059 | |
| | | | | | | | | | |
| Long-Term Liabilities | | | | | | | | | |
| Long-term debt, less current maturities | | | | 2,968,257 | | | | 470,109 | |
| Deferred rent, less current maturities | | | | 1,501,543 | | | | 1,649,070 | |
| | | | | | | | | | |
| Total long-term liabilities | | | | 4,469,800 | | | | 2,119,179 | |
| | | | | | | | | | |
| Stockholders’ Equity | | | | | | | | | |
| Preferred stock: 1,000,000 shares authorized, no shares issued and outstanding | | | | - | | | | - | |
| Common stock: $0.001 par value, 30,000,000 shares authorized, 7,363,101 shares issued; 7,163,195 and 7,110,360 shares outstanding at June 30, 2012 and December 31, 2011, respectively. | | | | 7,362 | | | | 7,287 | |
| Additional paid-in capital | | | | 36,670,769 | | | | 35,737,584 | |
| Accumulated deficit | | | | (8,126,966 | ) | | | (9,026,290 | ) |
| Accumulated other comprehensive loss | | | | (1,257,731 | ) | | | (881,997 | ) |
| Treasury stock, at cost 199,906 and 176,271 shares at June 30, 2012 and December 31, 2011, respectively. | | | | (1,147,974 | ) | | | (998,701 | ) |
| | | | | | | | | | |
| | | | | 26,145,460 | | | | 24,837,883 | |
| | | | | | | | | | |
| | | | $ | 63,261,093 | | | $ | 55,540,121 | |
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| CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
| | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, |
| | | 2012 | | 2011 | | | 2012 | | 2011 |
| Revenue | | | | | | | | | | | | | | | |
| Net revenue | | $ | 33,754,266 | | | $ | 33,084,669 | | | | $ | 66,157,011 | | | $ | 63,565,860 | |
| Reimbursable expenses | | | 1,169,007 | | | | 1,321,617 | | | | | 2,191,406 | | | | 2,436,323 | |
| Total Revenue | | | 34,923,273 | | | | 34,406,286 | | | | | 68,348,417 | | | | 66,002,183 | |
| Operating Expenses | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 25,364,399 | | | | 25,548,189 | | | | | 50,314,177 | | | | 48,906,941 | |
| General and administrative | | | 7,145,682 | | | | 6,514,538 | | | | | 13,934,480 | | | | 12,570,645 | |
| Reimbursable expenses | | | 1,318,366 | | | | 1,284,869 | | | | | 2,345,102 | | | | 2,512,832 | |
| Total Operating Expenses | | | 33,828,447 | | | | 33,347,596 | | | | | 66,593,759 | | | | 63,990,418 | |
| Operating income | | | 1,094,826 | | | | 1,058,690 | | | | | 1,754,658 | | | | 2,011,765 | |
| Interest (expense) income, net | | | (40,324 | ) | | | 6,919 | | | | | (79,626 | ) | | | (3,466 | ) |
| Income before income taxes | | | 1,054,502 | | | | 1,065,609 | | | | | 1,675,032 | | | | 2,008,299 | |
| Income tax expense | | | (503,109 | ) | | | (412,126 | ) | | | | (775,708 | ) | | | (749,312 | ) |
| Net income | | $ | 551,393 | | | $ | 653,483 | | | | $ | 899,324 | | | $ | 1,258,987 | |
| Basic income per common share | | $ | 0.08 | | | $ | 0.09 | | | | $ | 0.13 | | | $ | 0.18 | |
| Diluted income per common share | | $ | 0.07 | | | $ | 0.09 | | | | $ | 0.12 | | | $ | 0.17 | |
| Basic weighted-average common shares | | | 7,151,227 | | | | 7,183,163 | | | | | 7,143,380 | | | | 7,180,957 | |
| Diluted weighted-average common shares | | | 7,488,327 | | | | 7,551,020 | | | | | 7,479,365 | | | | 7,548,814 | |
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| CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES |
| |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
| |
| | | | For the Six Months |
| | | | Ended June 30, |
| | | | 2012 | | | 2011 |
| | | | | | | | | |
| Cash Flows From Operating Activities | | | | | | | | |
| Net income | | | $ | 899,324 | | | | $ | 1,258,987 | |
| Adjustments to reconcile net income to net cash used in operating activities | | | | | | | | |
| Depreciation and amortization | | | | 793,449 | | | | | 603,752 | |
| Share-based compensation | | | | 558,263 | | | | | 1,042,289 | |
| Amortization of discount on seller note | | | | 86,115 | | | | | - | |
| Deferred income taxes | | | | 983,441 | | | | | 527,101 | |
| Changes in operating assets and liabilities, net of effects of acquired business | | | | | | | | |
| Accounts receivable, net | | | | (5,701,917 | ) | | | | (5,841,145 | ) |
| Prepaid expenses | | | | (460,076 | ) | | | | (715,286 | ) |
| Income taxes receivable | | | | (436,692 | ) | | | | (1,172,649 | ) |
| Other assets and receivables | | | | (642,651 | ) | | | | (1,766,347 | ) |
| Accounts payable | | | | 396,431 | | | | | (780,957 | ) |
| Accrued compensation | | | | (151,840 | ) | | | | 4,706,041 | |
| Accrued business taxes | | | | 709,171 | | | | | (250,373 | ) |
| Accrued expenses | | | | 985,432 | | | | | (1,050,258 | ) |
| Deferred rent | | | | (56,618 | ) | | | | 159,343 | |
| Net cash used in operating activities | | | | (2,038,168 | ) | | | | (3,279,502 | ) |
| Cash Flows From Investing Activities | | | | | | | | |
| Acquisition of a business | | | | (5,250,000 | ) | | | | - | |
| Purchase of leasehold improvements and equipment | | | | (96,936 | ) | | | | (1,476,568 | ) |
| Net cash used in investing activities | | | | (5,346,936 | ) | | | | (1,476,568 | ) |
| Cash Flows From Financing Activities | | | | | | | | |
| Payments on long-term debt | | | | (79,703 | ) | | | | (105,866 | ) |
| Repurchase of common stock | | | | (137,516 | ) | | | | - | |
| Net cash used in financing activities | | | | (217,219 | ) | | | | (105,866 | ) |
| Net decrease in cash | | | | (7,602,323 | ) | | | | (4,861,936 | ) |
| Effect of foreign currency on cash | | | | (435,200 | ) | | | | (213,485 | ) |
| Cash: | | | | | | | | |
| Beginning | | | | 21,830,120 | | | | | 24,030,543 | |
| Ending | | | $ | 13,792,597 | | | | $ | 18,955,122 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental Disclosure of Noncash Financing Activities | | | | | | | | |
| Treasury stock (1,682 shares) acquired in lieu of shareholder receivable | | | $ | (11,757 | ) | | | $ | - | |
| Employee discount stock purchase award in lieu of cash compensation | | | $ | 375,000 | | | | $ | - | |
| | | | | | | | | |
| Supplemental Disclosure of Noncash Investing Activities | | | | | | | | |
| Acquisition of a business | | | | | | | | |
| Total identifiable assets acquired | | | $ | 2,829,818 | | | | $ | - | |
| Goodwill | | | | 7,406,879 | | | | | - | |
| | | | | | | | | |
| | | | $ | 10,236,697 | | | | $ | - | |
| Less: Due to seller | | | | (4,986,697 | ) | | | | - | |
| | | | $ | 5,250,000 | | | | $ | - | |
