THE CORPORATE EXECUTIVE BOARD COMPANY 
By ARLINGTON, Va., Nov. 1, 2010 /PRNewswire-FirstCall/ -- The Corporate Executive Board Company ("CEB" or the "Company") (NYSE: EXBD) today announces financial results for the third quarter and nine months ended September 30, 2010. Revenues increased 5.0% to $112.1 million for the third quarter of 2010 from $106.8 million for the third quarter of 2009. Net income for the third quarter of 2010 was $7.0 million, or $0.20 per diluted share, compared to $14.2 million, or $0.41 per diluted share, for the same period of 2009. Adjusted net income was $14.8 million and non-GAAP diluted earnings per share was $0.43 for the third quarter of 2010, excluding the after tax effect of the non-cash impairment loss relating primarily to a write-down of goodwill associated with our 2007 acquisition of Toolbox.com. Excluding the after tax effect of restructuring costs, adjusted net income was $15.6 million and non-GAAP diluted earnings per share was $0.45 for the third quarter of 2009.
For the first nine months of 2010, revenues were $321.9 million, a 3.9% decrease from $335.0 million for the first nine months of 2009. Net income for the first nine months of 2010 decreased to $29.6 million from $32.2 million for the same period in 2009. Diluted earnings per share for the first nine months of 2010 was $0.86, a decrease from $0.94 for the same period in 2009. Adjusted net income was $37.4 million and non-GAAP diluted earnings per share was $1.09 for the first nine months of 2010, excluding the after tax effect of the impairment loss. Excluding the after tax effect of restructuring costs and costs associated with exit activities, adjusted net income was $43.7 million and non-GAAP diluted earnings per share was $1.28 for the first nine months of 2009.
Contract Value at September 30, 2010 increased 8.9% as compared to September 30, 2009 as a result of an increase in the purchase of memberships by middle market clients, the acquisitions of Tower Group and Iconoculture, and improved cross-sales of large corporate memberships. As previously discussed, growth from these factors was offset to some degree by reductions in contract value as a result of discontinued programs. The average crosssell ratio was 2.92, reflecting cross-sell ratios of 3.33 for the traditional large corporate market and 1.93 for middle market customers.
"Our teams delivered another solid performance in the third quarter," said Thomas Monahan, Chairman and Chief Executive Officer. "Continued progress on renewals, cross-sales and new sales are driving growth in both our middle market and large corporate programs, while also creating the flexibility to invest in new product development, sales and service talent.
"In addition to strengthening revenue trends, our year-to-date results reflected a later spending ramp than we originally anticipated; as a result we are updating our guidance to incorporate both sustained momentum and additional investment through the remainder of 2010."
OUTLOOK FOR 2010
The Company's updated 2010 annual guidance, which includes an increase in non-GAAP diluted earnings per share and Adjusted EBITDA margin, is as follows: Revenues of $430 to $440 million; Non-GAAP diluted earnings per share of $1.35 to $1.50; Depreciation and amortization expense of $19.0 to $21.0 million; capital expenditures of approximately $6.0 to $8.0 million; and an Adjusted EBITDA margin of between 22.0% and 24.0%.
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 Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Net income $6,989 $14,177 $29,602 $32,195
Interest
income, net (317) (325) (1,116) (1,398)
Depreciation
and
amortization 4,517 5,113 15,291 17,349
Provision for
income taxes 4,460 8,569 20,568 20,584
----- ----- ------ ------
EBITDA $15,649 $27,534 $64,345 $68,730
Impairment
loss 12,645 -- 12,645 --
Costs
associated
with exit
activities -- -- -- 11,518
Restructuring
costs -- 2,327 -- 7,515
--- ----- --- -----
Adjusted
EBITDA $28,294 $29,861 $76,990 $87,763
======= ======= ======= =======
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Net income $6,989 $14,177 $29,602 $32,195
Adjustments,
net of tax:
Impairment
loss 7,789 -- 7,789 --
Costs
associated
with exit
activities -- -- -- 6,911
Restructuring
costs -- 1,471 -- 4,584
--- ----- --- -----
Adjusted net
income $14,778 $15,648 $37,391 $43,690
======= ======= ======= =======
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
GAAP diluted
earnings per
share $0.20 $0.41 $0.86 $0.94
Adjustments,
net of tax:
Impairment
loss 0.23 -- 0.23 --
Costs
associated
with exit
activities -- -- -- 0.20
Restructuring
costs -- 0.04 -- 0.14
--- ---- --- ----
Non-GAAP
diluted
earnings per
share $0.43 $0.45 $1.09 $1.28
===== ===== ===== =====
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, 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 November 1, 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 Company 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 over 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 Three Months Ended
Percentage September 30,
-------------
Changes 2010 2009
------- ---- ----
Financial
Highlights
(GAAP, as
reported):
Revenues 5.0% $112,113 $106,819
Net income $6,989 $14,177
Basic
earnings
per share $0.20 $0.42
Diluted
earnings
per share $0.20 $0.41
Weighted
average
shares
outstanding:
Basic 34,292 34,133
Diluted 34,532 34,356
Selected Nine Months Ended
Percentage September 30,
-------------
Changes 2010 2009
------- ---- ----
Financial
Highlights
(GAAP, as
reported):
Revenues (3.9)% $321,865 $334,954
Net income $29,602 $32,195
Basic
earnings
per share $0.87 $0.94
Diluted
earnings
per share $0.86 $0.94
Weighted
average
shares
outstanding:
Basic 34,211 34,099
Diluted 34,488 34,248
THE CORPORATE EXECUTIVE BOARD COMPANY
Operating Statistic and Statements of Operations
(In thousands, except per share data)
(Unaudited)
Selected Three Months Ended
Percentage September 30,
-------------
Changes 2010 2009
------- ---- ----
Operating
Statistic
Contract
Value (1)
(at period
end) 8.9% $421,646 $387,160
Financial
Highlights
Revenues 5.0% $112,113 $106,819
Cost and
expenses:
Cost of
services 40,071 34,384
Member
relations
and
marketing 32,222 29,389
General and
administrative 14,334 13,687
Depreciation
and
amortization 4,517 5,113
Impairment
loss 12,645 --
Costs
associated
with exit
activities -- --
Restructuring
costs -- 2,327
--- -----
Total costs
and
expenses 103,789 84,900
Income from
operations 8,324 21,919
Other
income, net
(2) 3,125 827
----- ---
Income
before
provision
for
income taxes 11,449 22,746
Provision
for income
taxes 4,460 8,569
----- -----
Net income $6,989 $14,177
====== =======
Basic
earnings
per share $0.20 $0.42
Diluted
earnings
per share $0.20 $0.41
Weighted
average
shares
outstanding
Basic 34,292 34,133
Diluted 34,532 34,356
Percentages
of Revenues
Cost of
services 35.7% 32.2%
Member
relations
and
marketing 28.7% 27.5%
General and
administrative 12.8% 12.8%
Depreciation
and
amortization 4.0% 4.8%
Income from
operations 7.4% 20.5%
EBITDA (3) 14.0% 25.8%
Adjusted
EBITDA (3) 25.2% 28.0%
Selected Nine Months Ended
Percentage September 30,
-------------
Changes 2010 2009
------- ---- ----
Operating
Statistic
Contract
Value (1)
(at period
end)
Financial
Highlights
Revenues (3.9)% $321,865 $334,954
Cost and
expenses:
Cost of
services 112,866 110,612
Member
relations
and
marketing 88,157 95,928
General and
administrative 44,614 44,314
Depreciation
and
amortization 15,291 17,349
Impairment
loss 12,645 --
Costs
associated
with exit
activities -- 11,518
Restructuring
costs -- 7,515
--- -----
Total costs
and
expenses 273,573 287,236
Income from
operations 48,292 47,718
Other
income, net
(2) 1,878 5,061
----- -----
Income
before
provision
for
income taxes 50,170 52,779
Provision
for income
taxes 20,568 20,584
------ ------
Net income $29,602 $32,195
======= =======
Basic
earnings
per share $0.87 $0.94
Diluted
earnings
per share $0.86 $0.94
Weighted
average
shares
outstanding
Basic 34,211 34,099
Diluted 34,488 34,248
Percentages
of Revenues
Cost of
services 35.1% 33.0%
Member
relations
and
marketing 27.4% 28.6%
General and
administrative 13.9% 13.2%
Depreciation
and
amortization 4.8% 5.2%
Income from
operations 15.0% 14.2%
EBITDA (3) 20.0% 20.5%
Adjusted
EBITDA (3) 23.9% 26.2%
(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, net for the three months ended September 30, 2010
includes $0.3 million of interest income, $0.8 million of foreign
currency gain, a $1.1 million increase in the fair value of deferred
compensation plan assets and $0.9 million of other income. Other
income for the three months ended September 30, 2009 includes $0.3
million of interest income and a $1.4 million increase in the fair
value of deferred compensation plan assets offset by a $0.9 million
foreign currency loss. Other income, net for the nine months ended
September 30, 2010 includes $1.1 million of interest income and a
$0.8 million increase in the fair value of deferred compensation
plan assets. Other income, net for the nine months ended September
30, 2009 includes $1.4 million of interest income, a $2.2 million
increase in the fair value of deferred compensation plan assets, a
$1.1 million foreign currency gain and $0.4 million of other income.
(3) See "NON-GAAP FINANCIAL MEASURES" for further explanation.
THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, 2010 Dec. 31, 2009
-------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash
equivalents $71,924 $31,760
Marketable
securities 10,253 18,666
Membership fees
receivable, net 88,754 125,716
Deferred income
taxes, net 7,751 7,989
Deferred
incentive
compensation 11,376 9,721
Prepaid expenses
and other
current assets 10,594 9,584
------ -----
Total current
assets 200,652 203,436
Deferred income
taxes, net 46,228 39,744
Marketable
securities 11,017 25,784
Property and
equipment, net 83,224 89,462
Goodwill 28,664 27,129
Intangible
assets, net 13,522 12,246
Other non-
current assets 29,395 25,394
------ ------
Total assets $412,702 $423,195
======== ========
Liabilities and
stockholders'
equity
Current
liabilities:
Accounts payable
and accrued
liabilities $29,860 $48,764
Accrued incentive
compensation 29,327 27,975
Deferred revenues 199,323 222,053
------- -------
Total current
liabilities 258,510 298,792
Deferred tax
liabilities 1,027 867
Other liabilities 79,680 73,259
------ ------
Total liabilities 339,217 372,918
Total
stockholders'
equity 73,485 50,277
------ ------
Total liabilities
and
stockholders'
equity $412,702 $423,195
======== ========
THE CORPORATE EXECUTIVE BOARD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $29,602 $32,195
Adjustments to reconcile net income to net
cash flows provided by
operating activities:
Impairment loss 12,645 --
Costs associated with exit activities -- 11,518
Depreciation and amortization 15,291 17,349
Deferred income taxes (6,039) 1,583
Share-based compensation 5,301 8,406
Amortization of marketable securities
premiums, net 288 518
Changes in operating assets and liabilities:
Membership fees receivable, net 39,337 58,233
Deferred incentive compensation (1,655) 3,956
Prepaid expenses and other current assets (652) (1,221)
Other non-current assets (4,001) (6,840)
Accounts payable and accrued liabilities (21,287) (27,235)
Accrued incentive compensation 1,352 (5,162)
Deferred revenues (29,464) (83,829)
Other liabilities 6,421 2,022
----- -----
Net cash flows provided by operating
activities 47,139 11,493
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,225) (4,864)
Acquisition of businesses, net of cash
acquired (12,957) (168)
Maturities of marketable securities 22,382 13,303
------ ------
Net cash flows provided by investing
activities 5,200 8,271
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock
under the
employee stock purchase plan 333 602
Purchases of treasury shares (1,225) (81)
Payment of dividends (11,283) (21,786)
------- -------
Net cash flows used in financing activities (12,175) (21,265)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 40,164 (1,501)
Cash and cash equivalents, beginning of period 31,760 16,214
------ ------
Cash and cash equivalents, end of period $71,924 $14,713
======= =======
SOURCE Corporate Executive Board Company
