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The Corporate Executive Board Reports Fourth-Quarter Results, Provides 2010 Guidance, and Increases Quarterly Cash Dividend
ARLINGTON, Va., Feb 09, 2010 (BUSINESS WIRE) -- The Corporate Executive Board Company ("CEB" or the "Company") (NASDAQ: EXBD) today announces financial results for the fourth quarter and year ended December 31, 2009. Revenues decreased 21% to $108.0 million for the fourth quarter of 2009 from $136.7 million for the fourth quarter of 2008. Net income for the fourth quarter of 2009 was $13.4 million, or $0.39 per diluted share, compared to a net loss of $5.8 million, or $0.17 per diluted share, for the same period of 2008. Adjusted net income was $13.7 million and Non-GAAP diluted earnings per share was $0.40 for the fourth quarter of 2009, which excludes the after-tax effects of impairment loss, costs associated with exit activities, restructuring costs, and gain on acquisition. Adjusted net income was $15.4 million and Non-GAAP diluted earnings per share was $0.45 for the fourth quarter of 2008.

For 2009, revenues were $442.9 million, a 21% decrease from $558.4 million for 2008. Net income for 2009 increased to $45.6 million from $44.8 million for 2008. Diluted earnings per share for 2009 was $1.33, an increase from $1.30 for 2008. Adjusted net income was $57.7 million and Non-GAAP diluted earnings per share was $1.68 for 2009. Adjusted net income was $66.1 million and Non-GAAP diluted earnings per share was $1.92 for 2008.

Contract Value at December 31, 2009 decreased by 19% as compared to December 31, 2008 due to reduced memberships from some large corporate members, decreased new sales due to macro-economic conditions, and expected Contract Value losses from programs that the Company consolidated during 2009. The average cross-sell ratio was 2.87, reflecting cross-sell ratios of 3.30 in the Company's large corporate market and 1.79 for middle market customers.

"During the fourth quarter, we made continued operational progress and produced a solid year-end finish," said Thomas Monahan, Chairman and Chief Executive Officer. "Our teams are delivering great outcomes for our members and establishing a foundation for sustained growth and impact. We anticipate improving sales, cross sales, and renewal activity across the year, and into the future. Since essentially all of our revenues come from renewable subscriptions, our recovery in contract value will precede our recovery in revenues. This dynamic puts near term pressure on margins, but sets us up well for higher profitability down the road."

DIVIDEND INCREASE

CEB is increasing its quarterly dividend to $0.11 from $0.10 per share. The Company will fund its dividend payments with cash on hand and cash generated from operations. The dividend is payable on March 31, 2010 to stockholders of record at the close of business on March 15, 2010.

OUTLOOK FOR 2010

The Company announces 2010 annual guidance as follows: Revenues of $385 to $405 million; Non-GAAP diluted earnings per share of $0.85 to $1.10; Depreciation and amortization expense of $19.0 to $21.0 million; capital expenditures of approximately $8.0 million; and an Adjusted EBITDA margin of between 18.0% and 20.0%.

NON-GAAP FINANCIAL MEASURES

This press release and the accompanying tables include a discussion of EBITDA, 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 "EBITDA" refers to a financial measure that we define as earnings before interest income, net, depreciation and amortization, and income taxes. The term "Adjusted EBITDA" refers to a financial measure that we define as earnings before interest income, net, depreciation and amortization, income taxes, impairment loss, costs associated with exit activities, restructuring costs, and gain on acquisition. The term "Adjusted net income" refers to net income excluding the after tax effects of impairment loss, costs associated with exit activities, restructuring costs, and gain on acquisition. "Non-GAAP diluted earnings per share" refers to net income excluding the after tax per share effects of impairment loss, costs associated with exit activities, restructuring costs, and gain on acquisition.

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 these non-GAAP measures to GAAP results is provided below.

Three Months Ended

Year Ended

December 31,

December 31,

2009

2008

2009

2008
Net income (loss)

$

13,434

$ (5,846 )

$

45,629

$ 44,797
Interest income, net

(389

)

(674 )

(1,787

)

(4,268 )
Depreciation and amortization

5,642

5,865

22,991

21,631
Provision for income taxes

7,405

964

27,989

33,291
EBITDA

$

26,092

$ 309

$

94,822

$ 95,451
Impairment loss

--

27,449

--

27,449
Costs associated with exit activities

--

--

11,518

--
Restructuring costs

1,053

8,006

8,568

8,006
Gain on acquisition

(680

)

--

(680

)

--
Adjusted EBITDA

$

26,465

$ 35,764

$

114,228

$ 130,906

Three Months Ended

Year Ended

December 31,

December 31,

2009

2008

2009

2008
Net income (loss)

$

13,434

$ (5,846 )

$

45,629

$ 44,797
Adjustments, net of tax:
Impairment loss

--

16,469

--

16,469
Costs associated with exit activities

--

--

7,141

--
Restructuring costs

653

4,804

5,312

4,804
Gain on acquisition

(422

)

--

(422

)

--
Adjusted net income

$

13,665

$ 15,427

$

57,660

$ 66,070

Three Months Ended

Year Ended

December 31,

December 31,

2009

2008

2009

2008
GAAP diluted earnings (loss) per share

$

0.39

$ (0.17 )

$

1.33

$ 1.30
Adjustments, net of tax:
Impairment loss

--

0.48

--

0.48
Costs associated with exit activities

--

--

0.20

--
Restructuring costs

0.02

0.14

0.16

0.14
Gain on acquisition

(0.01

)

--

(0.01

)

--
Non-GAAP diluted earnings per share

$

0.40

$ 0.45

$

1.68

$ 1.92

With respect to the Company's 2010 annual guidance, reconciliations of Non-GAAP diluted earnings per share to GAAP diluted earnings per share, Adjusted net income to net income and Adjusted EBITDA to net income as projected for 2010 are not provided because CEB cannot, without unreasonable effort, determine the components of GAAP diluted earnings per share and net income to provide reconciliations to Non-GAAP diluted earnings per share and Adjusted EBITDA for its 2010 fiscal year with certainty at this time.

We believe that EBITDA, 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 EBITDA and Adjusted EBITDA is that they do 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 income from operations, which includes depreciation and amortization.

FORWARD-LOOKING STATEMENTS

This news 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. 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. 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 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, and the amount and timing of the benefits expected from acquisitions and investments, 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 2008 Annual Report on Form 10-K/A. The forward-looking statements in this press release are made as of February 9, 2010, 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

The Corporate Executive Board drives faster, more effective decision making among the world's leading executives and business professionals. As the premier, network-based knowledge resource, The Corporate Executive Board provides customers with the authoritative and timely guidance needed to excel in their roles, take decisive action and improve company performance. Powered by an executive network that spans more than 50 countries and represents approximately 85% of the world's Fortune 500 companies, The Corporate Executive Board offers unique research insights along with an integrated suite of exclusive tools and resources that enable the world's most successful organizations to deliver superior business outcomes. For more information, visit www.exbd.com.

THE CORPORATE EXECUTIVE BOARD COMPANY

Financial Highlights and Other Operating Statistics

Selected

Three Months Ended

Selected

Year Ended

Percentage

December 31,

Percentage

December 31,

Changes

2009

2008

Changes

2009

2008

(Unaudited)

(Unaudited)

Financial Highlights

(In thousands, except percentages and per share data)

(GAAP, as reported):

Revenues (21.1 )%

$

107,952

$ 136,747 (20.7 )%

$

442,906

$ 558,352
Net income (loss)

$

13,434

$ (5,846 )

$

45,629

$ 44,797
Basic earnings (loss) per share

$

0.39

$ (0.17 )

$

1.34

$ 1.31
Diluted earnings (loss) per share

$

0.39

$ (0.17 )

$

1.33

$ 1.30
Weighted average shares outstanding:
Basic

34,145

34,037

34,111

34,205
Diluted

34,398

34,037

34,293

34,329

Other Operating Statistics:

Contract value (In thousands)

$

393,737

$ 487,107
Average subscription price

$

28,552

$ 30,714
Member institutions

4,812

5,114
Total membership subscriptions

13,790

15,747
Average subscriptions per member institution*

2.87

3.08
Client renewal rate**

78

%

84 %

* Also known as "cross-sell ratio," represents the average across all subscription memberships, including the traditional large company market average of 3.30 and 3.63 and the middle market average of 1.79 and 1.58 in 2009 and 2008, respectively.

** Represents a client renewal rate of 83% and 88% for our traditional large company market and 70% and 71% for the middle market in 2009 and 2008, respectively.

THE CORPORATE EXECUTIVE BOARD COMPANY

Operating Statistic and Statements of Operations

(In thousands, except percentages and per share data)

Selected

Three Months Ended

Selected

Year Ended

Percentage

December 31,

Percentage

December 31,

Changes

2009

2008

Changes

2009

2008

(Unaudited)

(Unaudited)

Operating Statistic

Contract Value (1) (at period end)

(19.2

)%

$

393,737

$

487,107

Statements of Operations

Revenues (21.1

)%

$

107,952

$ 136,747 (20.7 )%

$

442,906

$ 558,352
Cost and expenses:

Cost of services (2)

36,407

42,636

147,019

179,950

Member relations and marketing (2)

30,095

38,252

126,023

161,670

General and administrative (2)

15,101

16,233

59,415

76,120
Depreciation and amortization

5,642

5,865

22,991

21,631
Impairment loss

--

27,449

--

27,449
Costs associated with exit activities

--

--

11,518

--
Restructuring costs

1,053

8,006

8,568

8,006
Total costs and expenses

88,298

138,441

375,534

474,826
Income (loss) from operations

19,654

(1,694 )

67,372

83,526

Other income (expense), net (3)

1,185

(3,188 )

6,246

(5,438 )
Income (loss) before provision for
income taxes

20,839

(4,882 )

73,618

78,088
Provision for income taxes

7,405

964

27,989

33,291
Net income (loss)

$

13,434

$ (5,846 )

$

45,629

$ 44,797
Basic earnings (loss) per share

$

0.39

$ (0.17 )

$

1.34

$ 1.31
Diluted earnings (loss) per share

$

0.39

$ (0.17 )

$

1.33

$ 1.30
Weighted average shares outstanding
Basic

34,145

34,037

34,111

34,205
Diluted

34,398

34,037

34,293

34,329

Percentages of Revenues

Cost of services

33.7

%

31.2 %

33.2

%

32.2 %
Member relations and marketing

27.9

%

28.0 %

28.5

%

29.0 %
General and administrative

14.0

%

11.9 %

13.4

%

13.6 %
Depreciation and amortization

5.2

%

4.3 %

5.2

%

3.9 %
Income from operations

18.2

%

(1.2 )%

15.2

%

15.0 %

EBITDA (4)

24.2

%

0.2 %

21.4

%

17.1 %

Adjusted EBITDA (4)

24.5

%

26.2 %

25.8

%

23.4 %

(1) We define "Contract Value" as of the quarter-end as the aggregate annualized revenue attributed to all agreements in effect on such date, without regard to the remaining duration of any such agreement.

(2) The following amounts relating to share-based compensation are included in the Statements of Operations above for the three months ended December 31, 2009 and 2008, respectively (in millions): Cost of services, $1.1 and $1.6, Member relations and marketing, $0.5 and $0.6 and General and administrative, $0.7 and $0.6. The following amounts relating to share-based compensation are included in the Statements of Operations above for the year ended December 31, 2009 and 2008, respectively (in millions): Cost of services, $4.7 and $6.0, Member relations and marketing, $1.3 and $1.4 and General and administrative, $4.7 and $5.1.

(3) Other income (expense), net for the three months ended December 31, 2009 includes $0.4 million of interest income, a $0.5 million increase in the fair value of deferred compensation plan assets, a gain on acquisition of $0.7 million and a $0.1 million foreign currency gain offset by other expenses of $0.5 million. Other income for the three months ended December 31, 2008 includes $0.7 million of interest income offset by a $1.8 million foreign currency loss and a $2.1 million decrease in the fair value of deferred compensation plan assets. Other income for the year ended December 31, 2009 includes $1.8 million of interest income, a $2.7 million increase in the fair value of deferred compensation plan assets, $1.1 million foreign currency gain and a $0.7 million gain on acquisition offset by $0.1 million of other expense. Other income for the year ended December 31, 2008 includes $4.3 million of interest income offset by a $4.5 million decrease in the fair value of deferred compensation plan assets, a $3.4 million foreign currency loss and a $1.8 million write down of a cost method investment.

(4) See "NON-GAAP FINANCIAL MEASURES" for further explanation.

THE CORPORATE EXECUTIVE BOARD COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31,

2009

2008

(Unaudited)

Assets

Current assets:
Cash and cash equivalents

$

31,760

$

16,214

Marketable securities

18,666

13,545
Membership fees receivable, net

125,716

127,007
Deferred income taxes, net

7,989

12,459
Deferred incentive compensation

9,721

12,621
Prepaid expenses and other current assets

9,584

9,140
Total current assets

203,436

190,986
Deferred income taxes, net

39,744

41,427
Marketable securities

25,784

46,344
Property and equipment, net

89,462

109,133
Goodwill

27,129

26,392
Intangible assets, net

12,246

17,266
Other non-current assets

25,394

14,644
Total assets

$

423,195

$ 446,192

Liabilities and stockholders' equity

Current liabilities:
Accounts payable and accrued liabilities

$

48,764

$ 66,178
Accrued incentive compensation

27,975

25,145
Deferred revenues

222,053

264,253
Total current liabilities

298,792

355,576
Deferred tax liabilities

867

--
Other liabilities

73,259

68,007
Total liabilities

372,918

423,583
Total stockholders' equity

50,277

22,609
Total liabilities and stockholders' equity

$

423,195

$ 446,192

THE CORPORATE EXECUTIVE BOARD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended

December 31,

2009

2008
CASH FLOWS FROM OPERATING ACTIVITIES:

(Unaudited)

Net income

$

45,629

$ 44,797

Adjustments to reconcile net income to net cash flows provided by operating activities:

Depreciation and amortization

22,991

21,631
Deferred income taxes

5,771

(22,064 )
Share-based compensation

10,751

12,525
Gain on acquisition

(680

)

--
Amortization of marketable securities premiums, net

691

695
Impairment loss

--

27,449
Costs associated with exit activities

11,518

--
Changes in operating assets and liabilities:
Membership fees receivable, net

3,622

36,112
Deferred incentive compensation

2,900

2,923
Prepaid expenses and other current assets

(91

)

2,283
Other non-current assets

(9,525

)

6,375
Accounts payable and accrued liabilities

(24,559

)

11,053
Accrued incentive compensation

2,387

(6,210 )
Deferred revenues

(47,512

)

(60,548 )
Other liabilities

4,681

8,211
Net cash flows provided by operating activities

28,574

85,232
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net

(7,052

)

(42,483 )
Cost method investment

(1,000

)

(386 )
Acquisition of businesses, net of cash acquired

5,173

(10,005 )
Sales and maturities of marketable securities, net

14,409

36,535
Net cash flows provided by (used in) investing activities

11,530

(16,339 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of common stock options

--

100

Proceeds from the issuance of common stock under the employee stock purchase plan

725

1,419
Purchase of treasury shares

(87

)

(41,842 )
Payment of dividends

(25,196

)

(59,941 )
Net cash flows used in financing activities

(24,558

)

(100,264 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

15,546

(31,371 )
Cash and cash equivalents, beginning of period

16,214

47,585
Cash and cash equivalents, end of period

$

31,760

$ 16,214

SOURCE: The Corporate Executive Board Company

The Corporate Executive Board Company
Richard S. Lindahl, Chief Financial Officer
571-303-4080
heroldl@executiveboard.com