CTPartners Executive Search : Announces Fourth Quarter and Full Year 2014 Financial Results and Provides a Corporate Update

CTPartners Executive Search Inc. (NYSE MKT:CTP), a global retained executive search firm, today announced its financial results for the fourth quarter and full year ended on December 31, 2014. The results are consistent with the Company’s preliminary financial results announced on January 28, 2015. In addition, the Company provided an update on its corporate leadership, current financial position, and its first quarter 2015 operating performance and outlook.

Fourth Quarter 2014 Financial Results

Net revenue for the fourth quarter of 2014 increased 22.7% to $42.1 million over the $34.3 million reported in the prior year’s fourth quarter. Compared to last year’s fourth quarter, North America revenue increased 13.9% to $23.1 million over $20.3 million; EMEA was up 19.8% at $10.8 million compared to $9.0 million; Asia Pacific revenue grew 84.8% to $4.5 million compared to $2.4 million; and Latin America’s revenue of $3.7 million rose 42.5% compared to $2.6 million in last year’s fourth quarter. On a practice basis, year-over-year, Financial Services improved 41.5% to $14.4 million; Life Sciences increased 42.2% to $8.0 million; Industrial rose 32.4% to $4.7 million; Consumer/Retail revenue was up 25.4% to $5.0 million; and Technology Media & Telecom grew 15.9% to $4.7 million. Professional Services was lower compared to the year-ago fourth quarter, with revenue of $5.2 million.

Foreign currency exchange did not have a material impact on revenue in the fourth quarter or full year 2014, however, the Company believes that its impact on financial results in 2015 will be greater because of the Company’s anticipated 2015 revenue mix.

Compensation expense, excluding non-operating expenses, increased to $32.9 million, or 78.1% of revenue, compared to $25.4 million, or 73.9% of revenue, in the fourth quarter of 2013 due to higher sales volume. General and administrative expenses, excluding non-operating expenses, were $10.0 million, or 23.7% of revenue, compared with $7.3 million, or 21.3% of revenue, in the fourth quarter of 2013 due to costs related to recent acquisitions and business development activities.

GAAP net loss attributable to the Company for the fourth quarter was $1.3 million, or $0.17 per share, compared to net income of $0.1 million, or $0.02 per share, for last year’s fourth quarter. Excluding after-tax non-operating items of $0.7 million and $0.9 million for 2014 and 2013, respectively, 2014 fourth quarter adjusted net loss was $0.6 million, or $0.08 per share, compared to an adjusted net income of $0.9 million, or $0.12 per share, in the prior year’s fourth quarter. A reconciliation of non-GAAP measures is included in this news release.

Adjusted operating loss was $0.09 million in the fourth quarter compared to an adjusted operating income of $1.5 million in the year-ago fourth quarter. Adjusted operating margin was negative 2.0% in the fourth quarter compared to positive 4.4% in the 2013 fourth quarter. Adjusted EBITDA was a loss of $0.3 million in the 2014 fourth quarter compared to $2.1 million in the year-ago fourth quarter. Adjusted EBITDA margin was negative 0.6% and positive 6.0% in the fourth quarter of 2014 and 2013, respectively.

Full Year Financial Results

For the full year, net revenue grew to $172.5 million compared to net revenue of $130.3 million for the full year ended December 31, 2013. GAAP net income attributable to the Company in 2014 was $3.3 million, or $0.44 per share, compared to a net loss of $1.6 million, or $0.23 per share, for the full year ended December 31, 2013. Excluding after-tax non-operating items of $1.8 million and $3.4 million for 2014 and 2013, respectively, adjusted net income in 2014 was $5.2 million, or $0.70 per share compared to adjusted net income of $1.8 million, or $0.24 per share, in the prior year. Adjusted EBITDA more than doubled to $11.1 million for the full year compared to $5.1 million in the year-ago period. A reconciliation of non-GAAP measures is included in this news release.

Performance Metrics - Fourth Quarter and Full Year 2014

• The Company was engaged in 391 new search assignments in the 2014 fourth quarter, a 14.3% increase compared to 342 in the year-ago quarter. For the full year, new search assignments rose 24.9% to 1,742 compared to 1,395 for the 2013 full year.
• The number of placements was 370 in the fourth quarter of 2014 compared with 275 in last year’s comparable quarter. The placement rate for this year’s fourth quarter was 80%.
• CTPartners had 157 consultants at December 31, 2014 compared with 128 consultants at the end of last year’s comparable quarter. The net revenue per consultant was $1.1 million for the fourth quarter and $1.2 million for the full year representing an 18.2% improvement over the 2013 full year.
• Average revenue per search was $98,300 compared to $101,800 in the year-ago quarter. For the full year, average revenue per search grew 4.1% to $101,300.
• The number of clients representing repeat business was 77% in the fourth quarter and 86 new clients engaged CTPartners for the first time.

New Debt Financing

The Company recently announced that it has closed on the sale of $6.25 million of second-lien notes due April 2020, the first of two tranches of notes issuable pursuant to its note purchase agreement (the “Note Purchase Agreement”) with a publicly traded insurance company and an affiliate thereof. The second tranche of $6.25 million of second-lien notes is scheduled to close 90 days after the first funding, subject to certain conditions set forth in the Note Purchase Agreement. The proceeds of the sale of the notes will be used to reduce the amounts outstanding under the Company’s senior revolving credit facility.

CEO Transition

As previously announced, CTPartners’ Chief Operating Officer David Nocifora was appointed to the position of Chief Executive Officer effective April 16, 2015, replacing Brian M. Sullivan. Mr. Nocifora has also been elected to the Company’s Board of Directors. Through 2012, Mr. Nocifora was the Chief Financial Officer and has held executive level positions at the Company since 1994. Prior to being named CEO he was responsible for the firm’s entire operating organization including Administration, Human Resources, Information Technology, Research and Office Operations.

Special Committee of the Board of Directors Update

The Company said that the Special Committee of the Board of Directors is continuing to review all of CTPartners strategic alternatives with a view to maximize value for all of CTP’s shareholders, including a previously announced, unsolicited, non-binding proposal from DHR International, Inc.

First Quarter 2015 Operating Performance Update

The Company commented on its operating performance in the first quarter of 2015 based on data available on April 15, 2015. On a preliminary basis, search assignments have increased 11.5% sequentially to 436 in this year’s first quarter over the 391 search assignments for the fourth quarter of 2014. Also, the Company expects to report approximately $35 million in revenue during the first quarter 2015. The Company stated that it has withdrawn its full year 2015 revenue guidance that was provided on January 28^th, 2015.

CTPartners commented that its international operations, which contributed 40% of total revenue in 2014, remains strong and continued to experience solid demand for its services from existing and new clients. As of April 15, 2015, CTPartners had 149 partners. The US based business experienced softness because of reduced client demand as the Company’s reputation was compromised due to adverse and misleading media reports as well as the departure of fifteen senior level consultants.

About CTPartners

CTPartners is a leading global executive search firm that is designed to deliver in-depth expertise, creative strategies, and outstanding results to clients worldwide. Committed to a philosophy of partnering with its clients, CTPartners offers a proven track record in C-Suite, top executive, and board searches, as well as extensive experience in serving private equity and venture capital firms.

From its 44 offices in 24 countries, CTPartners serves clients with a global organization of more than 500 professionals and employees, offering expertise in board advisory services, key leadership functions, and executive recruiting services in the financial services, life sciences, industrial, professional services, retail and consumer, and technology, media and telecom industries.

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 successfully integrate new executive search consultants and acquired search firms into our operations; 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; declines in the global economy and our ability to execute successfully through business cycles; our anticipated cash needs; projected cost savings as a result of reorganization; 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 April 15, 2015. 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.

Adjusted Performance Measure, Excluding Non-Operational Charges

We utilize Adjusted Net Income/(Loss) and Adjusted Income/(Loss) per common share, non-GAAP financial measures, as measures of our results of operations. We calculated Adjusted Net Income/(Loss) as Net Income/(Loss) excluding the following charges which we do not believe are reflective of our operational results:

• Post-combination compensation expense
• Reorganization charges
• Gain or loss on foreign currency related to funding of foreign subsidiaries
• Fees and expenses incurred by us in connection with the restatement of our 2012 interim financial statements
• Fees and expenses incurred in connection with acquisitions, including non-recurring integration costs
• Impairment charges
• Tax effect of the above adjustments

We calculate Adjusted earnings/(loss) per common share using the weighted average shares outstanding amounts used in the calculation of diluted earnings per share in accordance with GAAP.

Management evaluates the Company’s performance based on Adjusted Net Income/(Loss), and Adjusted Net Income/(Loss) per share. These measures should not be viewed as substitutes for financial information determined in accordance with GAAP, nor are necessarily comparable to the non-GAAP performance measures that may be presented by other companies. We believe the presentation of these non-GAAP measures provides meaningful supplemental information regarding our performance, excluding certain charges that may not be indicative of our core operating results. We include these non-GAAP measures because we believe they are useful to investors in providing more transparency with respect to operational drivers of the business and the supplemental information used by management in evaluation of our ongoing operations.

Use of non-GAAP measures: The table above contains selected financial information calculated other than in accordance with U.S. Generally Acceptable Accounting Principles (“GAAP”).

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.