CTPartners Executive Search Inc. Announces Second Quarter And Six-Month 2012 Financial Results

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
           

Revenue Breakdown by Region
 
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 %
 
 

Revenue Breakdown by Practice
 
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 %
 
 

Performance Metrics
       
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 %
 

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)
       
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
 
 

         

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
 
 
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

 

$

-
 

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