EXBD Corporate Executive Board Company (The) Common Stock (MM)

The Corporate Executive Board Company (“CEB” or the “Company”) (NASDAQ: EXBD) today announces financial results for the first quarter ended March 31, 2010. Revenues for the first quarter of 2010 decreased 15% to $100.2 million from $117.4 million for the first quarter of 2009. Net income for the first quarter of 2010 was $11.6 million, or $0.34 per diluted share, compared to $13.1 million, or $0.38 per diluted share, for the same period of 2009. Adjusted net income was $11.6 million and Non-GAAP diluted earnings per share was $0.34 for the first quarter of 2010. Adjusted net income was $13.6 million and Non-GAAP diluted earnings per share was $0.40 for the first quarter of 2009, which excludes the after-tax effects of restructuring costs.

Contract Value at March 31, 2010 decreased 11% as compared to March 31, 2009 due to reduced memberships from some large corporate members, decreased new sales due to macro-economic conditions across the previous 12 months, and expected Contract Value losses from programs that the Company consolidated during 2009. The average cross-sell ratio was 2.79, reflecting cross-sell ratios of 3.17 in the Company’s large corporate market and 1.84 for middle market customers.

“We are off to a solid start in 2010,” said Thomas Monahan, Chairman and Chief Executive Officer. “Continued progress with our service-led account strategies is leading to great member impact and renewal rates that have exceeded our expectations. I am proud of our team’s continued commitment to great business outcomes for our member companies and of their work in positioning our own company for continued success.

“Even with this very solid performance, as expected both contract value and revenues declined sequentially in the first quarter due to factors we had previously discussed. With improved visibility on this year’s projected revenue performance, we are raising our 2010 revenues and earnings guidance.

“We are also pleased to announce the acquisition of Iconoculture,” he said. “This acquisition reflects our continued focus on adding mission-critical data, insights, and tools for members in our five target functions. Iconoculture’s unique, highly renewable model for supplying data and insights about consumer behavior – and their great team – will complement and enrich our already strong Sales and Marketing practice area.”

OUTLOOK FOR 2010

The Company updates its 2010 annual guidance as follows: Revenues of $405 to $415 million; Non-GAAP diluted earnings per share of $1.05 to $1.20; 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 19.5% and 21.0%.

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 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 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

March 31,

2010

  2009 Net income

$

11,633

$ 13,072 Interest income, net

(436

)

(598 ) Depreciation and amortization

5,135

5,973 Provision for income taxes  

8,185

    8,718   EBITDA

$

24,517

$ 27,165 Restructuring costs  

--

    944   Adjusted EBITDA

$

24,517

  $ 28,109    

Three Months Ended

March 31,

2010

2009 Net income

$

11,633

$ 13,072 Adjustments, net of tax: Restructuring costs  

--

    566   Adjusted net income

$

11,633

  $ 13,638    

Three Months Ended

March 31,

2010

2009 GAAP diluted earnings per share

$

0.34

$ 0.38 Adjustments, net of tax: Restructuring costs  

--

    0.02   Non-GAAP diluted earnings per share

$

0.34

  $ 0.40    

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 2009 Annual Report on Form 10-K. The forward-looking statements in this press release are made as of May 3, 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

(In thousands, except per share data)

(Unaudited)

   

Selected

 

 

Percentage

Three Months Ended

Changes

March 31,

Financial Highlights:

 

(GAAP, as reported):

2010

2009 Revenues (14.7 )%

$

100,175

$ 117,440 Net income (11.0 )%

$

11,633

$ 13,072 Basic earnings per share (10.5 )%

$

0.34

$ 0.38 Diluted earnings per share (10.5 )%

$

0.34

$ 0.38 Weighted average shares outstanding: Basic

34,155

34,050 Diluted

34,429

34,088  

THE CORPORATE EXECUTIVE BOARD COMPANY

Operating Statistic and Statements of Operations

(In thousands, except per share data)

(Unaudited)

       

Selected

Three Months Ended

Percentage

March 31,

Changes

2010

2009

Operating Statistic

Contract Value (1) (at period end)

(11.4 )%

$

382,147

$ 431,131  

Financial Highlights

Revenues (14.7 )%

$

100,175

$ 117,440   Costs and expenses: Cost of services

33,512

38,277 Member relations and marketing

25,780

34,810 General and administrative

15,472

15,736 Depreciation and amortization

5,135

5,973 Restructuring costs  

--

    944   Total costs and expenses  

79,899

    95,740     Income from operations (6.6 )%

20,276

21,700  

Other (expense) income, net (2)

 

(458

)

  90     Income before provision for income taxes

19,818

21,790 Provision for income taxes  

8,185

    8,718   Net income (11.0 )%

$

11,633

  $ 13,072     Basic earnings per share (10.5 )%

$

0.34

$ 0.38 Diluted earnings per share (10.5 )%

$

0.34

$ 0.38   Weighted average shares outstanding Basic

34,155

34,050 Diluted

34,429

34,088  

Percentages of Revenues

Cost of services

33.5

%

32.6 % Member relations and marketing

25.7

%

29.6 % General and administrative

15.4

%

13.4 % Depreciation and amortization

5.1

%

5.1 % Income from operations

20.2

%

18.5 %

EBITDA (3)

24.5

%

23.1 %

Adjusted EBITDA (3)

24.5

%

23.9 %                        

(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) Other income for the three months ended March 31, 2010 includes $0.4 million of interest income and a $0.5 million increase in the fair value of deferred compensation plan assets offset by a $0.8 million foreign currency loss and $0.6 million of other expense. Other income for the three months ended March 31, 2009 includes $0.6 million of interest income and $0.4 million of other income offset by a $0.3 million foreign currency loss, and a $0.6 million decrease in the fair value of deferred compensation plan assets.

(3) See “NON-GAAP FINANCIAL MEASURES” for further explanation.

 

THE CORPORATE EXECUTIVE BOARD COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

   

March 31, 2010

December 31, 2009

(Unaudited)

Assets

  Current assets: Cash and cash equivalents

$

111,938

$ 31,760 Marketable securities

5,995

18,666 Membership fees receivable, net

80,771

125,716 Deferred income taxes, net

7,793

7,989 Deferred incentive compensation

12,396

9,721 Prepaid expenses and other current assets  

8,149

  9,584 Total current assets

227,042

203,436   Deferred income taxes, net

39,870

39,744 Marketable securities

25,527

25,784 Property and equipment, net

86,029

89,462 Goodwill

27,248

27,129 Intangible assets, net

10,906

12,246 Other non-current assets  

25,547

  25,394 Total assets

$

442,169

$ 423,195  

Liabilities and stockholders’ equity

  Current liabilities: Accounts payable and accrued liabilities

$

35,133

$ 48,764 Accrued incentive compensation

32,271

27,975 Deferred revenues  

240,267

  222,053 Total current liabilities

307,671

298,792   Deferred tax liabilities

893

867 Other liabilities  

73,777

  73,259 Total liabilities

382,341

372,918   Total stockholders’ equity  

59,828

  50,277 Total liabilities and stockholders’ equity

$

442,169

$ 423,195  

THE CORPORATE EXECUTIVE BOARD COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

   

Three Months Ended

March 31,

2010

  2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net income

$

11,633

$ 13,072

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

Depreciation and amortization

5,135

5,973 Deferred income taxes

213

(965 ) Share-based compensation

1,438

3,868 Amortization of marketable securities premiums, net

134

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

44,945

50,368 Deferred incentive compensation

(2,675

)

839 Prepaid expenses and other current assets

1,435

(455 ) Other non-current assets

(153

)

339 Accounts payable and accrued liabilities

(13,351

)

(21,930 ) Accrued incentive compensation

4,296

2,532 Deferred revenues

18,214

(7,171 ) Other liabilities  

519

    (3,004 ) Net cash flows provided by operating activities  

71,783

    43,630     CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, net

(283

)

(1,545 ) Acquisition of businesses, net of cash acquired

--

(119 ) Maturities of marketable securities  

12,500

    12,805   Net cash flows provided by investing activities  

12,217

    11,141     CASH FLOWS FROM FINANCING ACTIVITIES:

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

114

266 Purchase of treasury shares

(183

)

(41 ) Payment of dividends  

(3,753

)

  (14,969 ) Net cash flows used in financing activities  

(3,822

)

  (14,744 )   NET INCREASE IN CASH AND CASH EQUIVALENTS

80,178

40,027   Cash and cash equivalents, beginning of period  

31,760

    16,214     Cash and cash equivalents, end of period

$

111,938

  $ 56,241