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Press Release

The Corporate Executive Board Reports Second Quarter Results and Reaffirms 2011 Guidance

ARLINGTON, Va., Aug. 1, 2011 /PRNewswire via COMTEX/ --

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, 2011. Revenues increased 8.8% to $119.2 million for the second quarter of 2011 from $109.6 million for the second quarter of 2010. Net income for the second quarter of 2011 was $10.3 million, or $0.30 per diluted share, compared to $11.0 million, or $0.32 per diluted share, for the same period of 2010.

For the first six months of 2011, revenues were $234.1 million, an 11.6% increase from $209.8 million for the first six months of 2010. Net income for the first six months of 2011 was $21.7 million compared to $22.6 million for the same period in 2010. Diluted earnings per share for the first six months of 2011 was $0.62, a decrease from $0.66 for the same period in 2010.

Contract Value at June 30, 2011 increased 11.4% to $456.8 million, compared to $410.1 million at June 30, 2010, as a result of increased sales to new and existing members. Wallet retention rate at June 30, 2011 increased to 103% from 91% at June 30, 2010 as a result of improved pricing, renewals, and sales of additional products and services. Contract Value per member institution increased 4.0% at June 30, 2011 to $84,942 from $81,637 at June 30, 2010.

"Our contract value and bookings growth continued at a solid pace and keep us on track to deliver on our annual commitments," said Thomas Monahan, Chairman and Chief Executive Officer. "With our teams performing at high levels and our 2011 investment plan now largely complete, we anticipate improved revenues and earnings through the second half of the year."

OUTLOOK FOR 2011

The Company reaffirms its 2011 annual guidance of Revenues of $480 to $500 million; Non-GAAP diluted earnings per share of $1.50 to $1.65; Depreciation and amortization expense of approximately $17 to $18 million; capital expenditures of approximately $8 to $10 million; and an Adjusted EBITDA margin of between 22.0% and 23.0%.

NON-GAAP FINANCIAL MEASURES

This press release and the accompanying tables, as well as earnings discussions, may 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 provision for income taxes. The term "Adjusted EBITDA" refers to a financial measure that we define as earnings before interest income, net, depreciation and amortization, provision for 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 diluted earnings per share 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 Net income to EBITDA is provided below.


Three Months Ended


Six Months Ended


June 30,


June 30,


2011


2010


2011


2010

Net income

$

10,344


$

10,980


$

21,698


$

22,613

Interest income, net


(149)



(363)



(498)



(799)

Depreciation and amortization


4,588



5,639



8,846



10,774

Provision for income taxes


7,757



7,923



15,712



16,108

EBITDA

$

22,540


$

24,179


$

45,758


$

48,696

There were no adjustments that require a reconciliation of EBITDA to Adjusted EBITDA, Net income to Adjusted net income, or Diluted earnings per share to non-GAAP diluted earnings per share in the three and six months ended June 30, 2011 or 2010, respectively.

With respect to the Company's 2011 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 2011 are not provided because the Company 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 2011 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 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 2011 annual guidance, 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. 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 2010 Annual Report on Form 10-K. The forward-looking statements in this press release are made as of August 1, 2011, 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

By identifying and building on the proven best practices of the world's best companies, CEB helps senior executives and their teams drive corporate performance. CEB offers comprehensive data analysis, research and advisory services that align to executive leadership roles and key recurring decisions. CEB tools, insights, and analysis empower member companies to focus efforts, move quickly, and address emerging and enduring business challenges with confidence. CEB's client and member network includes 85 percent of the Fortune 500, 50 percent of the Dow Jones Asian Titans, and 70 percent of the FTSE 100. It spans more than 50 countries, 5,300 individual organizations, and 225,000 business professionals. For more information, visit www.exbd.com.

THE CORPORATE EXECUTIVE BOARD COMPANY

Financial Highlights and Other Operating Statistics

(Unaudited)









Selected

Three Months Ended

Selected

Six Months Ended



Percentage

June 30,

Percentage

June 30,



Changes

2011

2010

Changes

2011

2010

Financial Highlights











(GAAP, as reported, in thousands, except per share data):























Revenues

8.8%

$

119,215

$

109,577

11.6%

$

234,073

$

209,752

Net income

(5.8%)

$

10,344

$

10,980

(4.0%)

$

21,698

$

22,613

Basic earnings per share

(6.3%)

$

0.30

$

0.32

(4.5%)

$

0.63

$

0.66

Diluted earnings per share

(6.3%)

$

0.30

$

0.32

(6.1%)

$

0.62

$

0.66













Weighted average shares outstanding:












Basic



34,516


34,214



34,435


34,189


Diluted



34,851


34,469



34,805


34,458

























Other Operating Statistics:











Contract Value (in thousands)*






11.4%

$

456,814

$

410,117

Member institutions






7.0%


5,378


5,024

Contract Value per member institution






4.0%

$

84,942

$

81,637

Wallet retention rate**






13.2%


103%


91%













*

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)

(Unaudited)











Selected

Three Months Ended

Selected

Six Months Ended




Percentage

June 30,

Percentage

June 30,




Changes

2011

2010

Changes

2011

2010














Revenues

8.8%

$

119,215

$

109,577

11.6%

$

234,073

$

209,752














Cost and expenses:












Cost of services



43,897


39,283



84,307


72,795


Member relations and marketing



36,042


30,155



71,588


55,935


General and administrative



16,910


14,808



33,750


30,280


Depreciation and amortization



4,588


5,639



8,846


10,774



Total costs and expenses



101,437


89,885



198,491


169,784














Income from operations



17,778


19,692



35,582


39,968














Other income (expense), net (1)



323


(789)



1,828


(1,247)














Income before provision for












income taxes



18,101


18,903



37,410


38,721

Provision for income taxes



7,757


7,923



15,712


16,108



Net income


$

10,344

$

10,980


$

21,698

$

22,613














Basic earnings per share


$

0.30

$

0.32


$

0.63

$

0.66

Diluted earnings per share


$

0.30

$

0.32


$

0.62

$

0.66














Weighted average shares outstanding












Basic



34,516


34,214



34,435


34,189


Diluted



34,851


34,469



34,805


34,458














Percentages of Revenues











Cost of services



36.8%


35.8%



36.0%


34.7%

Member relations and marketing



30.2%


27.5%



30.6%


26.7%

General and administrative



14.2%


13.5%



14.4%


14.4%

Depreciation and amortization



3.8%


5.1%



3.8%


5.1%

Income from operations



14.9%


18.0%



15.2%


19.1%

EBITDA (2)



18.9%


22.1%



19.5%


23.2%












(1)

Other income (expense), 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 income (expense), net for the three months ended June 30, 2010 includes $0.4 million of interest income and a $0.1 million foreign currency gain offset by a $0.9 million decrease in the fair value of deferred compensation plan assets and $0.4 million of other expense. Other income (expense), 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. Other income (expense), net for the six months ended June 30, 2010 includes $0.8 million of interest income, offset by a $0.3 million decrease in the fair value of deferred compensation plan assets, a $0.8 million foreign currency loss, and $0.9 million of other expense.

(2)

See "NON-GAAP FINANCIAL MEASURES" for further explanation.

THE CORPORATE EXECUTIVE BOARD COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)









June 30, 2011

December 31, 2010




(Unaudited)


Assets





Current assets:






Cash and cash equivalents

$

144,777

$

102,498


Marketable securities


5,351


10,114


Membership fees receivable, net


87,808


141,322


Deferred income taxes, net


17,175


18,727


Deferred incentive compensation


16,159


15,710


Prepaid expenses and other current assets


18,490


10,388



Total current assets


289,760


298,759








Deferred income taxes, net


40,880


43,524

Marketable securities


9,456


10,850

Property and equipment, net


81,798


83,140

Goodwill


29,406


29,266

Intangible assets, net


11,995


13,828

Other non-current assets


33,369


30,782



Total assets

$

496,664

$

510,149








Liabilities and stockholders' equity





Current liabilities:






Accounts payable and accrued liabilities

$

32,587

$

52,439


Accrued incentive compensation


21,955


40,719


Deferred revenues


260,180


251,200



Total current liabilities


314,722


344,358








Deferred income taxes


912


679

Other liabilities


85,254


82,296



Total liabilities


400,888


427,333








Total stockholders' equity


95,776


82,816



Total liabilities and stockholders' equity

$

496,664

$

510,149

THE CORPORATE EXECUTIVE BOARD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)












Six Months Ended






June 30,






2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES:






Net income

$

21,698

$

22,613


Adjustments to reconcile net income to net cash flows provided by







operating activities:







Depreciation and amortization


8,846


10,774



Deferred income taxes


3,176


(1,948)



Share-based compensation


4,159


3,174



Excess tax benefits from share-based compensation arrangements


(1,821)


-



Foreign currency translation gain


(746)


-



Amortization of marketable securities premiums, net


130


221



Changes in operating assets and liabilities:








Membership fees receivable, net


53,545


47,169




Deferred incentive compensation


(446)


(2,602)




Prepaid expenses and other current assets


(8,020)


846




Other non-current assets


(1,880)


(2,651)




Accounts payable and accrued liabilities


(17,219)


(18,111)




Accrued incentive compensation


(18,955)


(4,166)




Deferred revenues


8,934


(1,568)




Other liabilities


2,902


2,366





Net cash flows provided by operating activities


54,303


56,117






CASH FLOWS FROM INVESTING ACTIVITIES:






Purchases of property and equipment


(4,583)


(1,217)


Acquisition of businesses, net of cash acquired


-


(8,957)


Cost method investment


(150)


-


Maturities of marketable securities


5,780


20,284





Net cash flows provided by investing activities


1,047


10,110






CASH FLOWS FROM FINANCING ACTIVITIES:






Proceeds from the exercise of common stock options


1,587


-


Proceeds from the issuance of common stock under the







employee stock purchase plan


232


153


Acquisition of businesses, contingent consideration


(3,655)


-


Credit facility issuance costs


(542)


-


Excess tax benefits from share-based compensation arrangements


1,821


-


Purchases of treasury shares


(2,721)


(1,167)


Payment of dividends


(10,314)


(7,517)





Net cash flows used in financing activities


(13,592)


(8,531)






Effect of exchange rates on cash


521


-






NET INCREASE IN CASH AND CASH EQUIVALENTS


42,279


57,696






Cash and cash equivalents, beginning of period


102,498


31,760






Cash and cash equivalents, end of period

$

144,777

$

89,456

SOURCE The Corporate Executive Board Company