(Source: Business Wire)
The Corporate Executive Board Company ("CEB" or the "Company") (NASDAQ: EXBD) today announces financial results for the second quarter and six months ended June 30, 2009. Revenues decreased 21.6% to $110.7 million for the second quarter of 2009 from $141.2million for the second quarter of 2008. Net income for the second quarter of 2009 was $4.9 million, or $0.14 per diluted share, compared to $15.8 million, or $0.46 per diluted share, for the same period of 2008. Included in net income for the second quarter of 2009 are pre-tax charges of $11.5 million primarily for non-cash costs associated with exit activities and $4.2 million of restructuring costs primarily resulting from a voluntary separation program. Excluding the effects, net of tax, of costs associated with exit activities and restructuring costs, adjusted net income was $14.4 million and non-GAAP diluted earnings per share was $0.41 for the second quarter of 2009.
For the first six months of 2009, revenues were $228.1million, an 18.3% decrease from $279.2million for the first six months of 2008. Net income for the first six months of 2009 decreased to $18.0 million from $30.6 million for the same period in 2008. Diluted earnings per share for the first six months of 2009 was $0.53, a decrease from $0.89 for the same period in 2008. Excluding the effects, net of tax, of costs associated with exit activities and restructuring costs, adjusted net income was $28.0 million and non-GAAP diluted earnings per share was $0.82 for the first six months of 2009.
Costs associated with exit activities of $11.5 million primarily relate to the write-off of leasehold improvements and furniture, fixtures and equipment at the Company's headquarters in Arlington, Virginia. In June 2009, the Company entered into a sublease agreement for a portion of its headquarters. The Company expects these exit activities will reduce rent expense by approximately $4.0 million for the six months ended December31, 2009 and approximately $9.0million in 2010.
Contract Value decreased in the second quarter of 2009 by 24.1% compared with the same period in 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 is consolidating across 2009. The average cross-sell ratio was 2.78, reflecting cross-sell ratios of 3.23 in the Company's large corporate market and 1.62 for middle market customers.
The Finance and Strategy Practice launched a new membership program, the Government Finance Roundtable ("GFR"). Offering a canon of resources from the Company's corporate finance programs, GFR delivers government-specific practices and networking opportunities to finance leaders operating in complex environments. The group targets innovative and leading-edge strategies to develop agile and high performing government finance organizations.
Thomas Monahan, Chief Executive Officer, commented "During the second quarter we executed the important tasks of transitioning to a new account management model and migrating to a new technology platform. Our results reflect ongoing difficulty in the overall selling environment as well as some temporary disruption while we completed these changes. Nevertheless, we were encouraged by late-quarter momentum as the new model took hold, as well as by continued returns from our focused cost management."
OUTLOOK FOR 2009
The Company is reaffirming its 2009 guidance of revenues ranging from $410- $450 million, non-GAAP diluted earnings per share of $0.90 to $1.40, depreciation and amortization expense of $23.5-$24.5 million and Adjusted EBITDA margin of between 18.5% and 23.0%.
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 CEB defines as earnings before interest income, net, income taxes, and depreciation and amortization. The term "Adjusted EBITDA" refers to a financial measure that CEB defines as earnings before interest income, net, income taxes, depreciation and amortization, costs associated with exit activities and restructuring costs. The term "Adjusted net income" refers to net income excluding the net of tax effect of costs associated with exit activities and restructuring costs. "Non-GAAP diluted earnings per share" refers to net income excluding the per share effect, net of tax, of costs associated with exit activities and restructuring costs.
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. CEB intends to continue to provide these non-GAAP financial measures as part of the Company's future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in CEB's financial reporting. A reconciliation of these non-GAAP measures to GAAP results is provided below.
Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Net income $ 4,946 $ 15,811 $ 18,018 $ 30,641 Interest income, net (475 ) (1,082 ) (1,073 ) (2,698 ) Depreciation and amortization 6,263 5,183 12,236 10,745 Provision for income taxes 3,297 10,540 12,015 20,427 EBITDA $ 14,031 $ 30,452 $ 41,196 $ 59,115 Costs associated with exit activities 11,518 -- 11,518 -- Restructuring costs 4,244 -- 5,188 -- Adjusted EBITDA $ 29,793 $ 30,452 $ 57,902 $ 59,115 Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Net income $ 4,946 $ 15,811 $ 18,018 $ 30,641 Costs associated with exit activities, net of tax 6,911 -- 6,911 -- Restructuring costs, net of tax 2,546 -- 3,113 -- Adjusted net income $ 14,403 $ 15,811 $ 28,042 $ 30,641 Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 GAAP earnings per diluted share $ 0.14 $ 0.46 $ 0.53 $ 0.89 Adjustments, net of tax: Costs associated with exit activities 0.20 -- 0.20 -- Restructuring costs 0.07 -- 0.09 -- Non-GAAP earnings per diluted share $ 0.41 $ 0.46 $ 0.82 $ 0.89 -------------------------------------------------------------------------------
With respect to the Company's guidance for 2009, 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 the year ending December 31, 2009 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 2009 fiscal year with certainty at this time.
CEB believes that EBITDA, Adjusted EBITDA, Adjusted net income and Non-GAAP diluted earnings per share are relevant and useful supplemental information for the Company's investors. CEB uses 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 CEB's 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 during the current turmoil 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 August 3, 2009, 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, it provides them with the authoritative and timely decision support needed to excel in their roles, take decisive action and improve company performance. Powered by a member network that spans over 50 countries and represents more than 80% of the world's Fortune 500 companies, The Corporate Executive Board offers the unique research insights along with an integrated suite of members-only tools and resources that enable the world's most successful organizations to deliver superior business outcomes. Based in Arlington, Virginia, the Company employs approximately 1,800 professionals in ten offices around the world. 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 Selected Six Months Ended Percentage June 30, Percentage June 30, Changes 2009 2008 Changes 2009 2008 Financial Highlights (GAAP, as reported): Revenues (21.6 )% $ 110,695 $ 141,173 (18.3 )% $ 228,135 $ 279,196 Net income $ 4,946 $ 15,811 $ 18,018 $ 30,641 Basic earnings per share $ 0.15 $ 0.46 $ 0.53 $ 0.89 Diluted earnings per share $ 0.14 $ 0.46 $ 0.53 $ 0.89 Weighted average shares outstanding: Basic 34,105 34,046 34,081 34,383 Diluted 34,276 34,170 34,190 34,516 -------------------------------------------------------------------------------
THE CORPORATE EXECUTIVE BOARD COMPANY Operating Statistic and 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 2009 2008 Changes 2009 2008 Operating Statistic Contract Value ((1)) (at period end) (24.1 )% $ 401,594 $ 528,951 Financial Highlights Revenues (21.6 )% $ 110,695 $ 141,173 (18.3 )% $ 228,135 $ 279,196 Cost and expenses: Cost of services ((2)) 37,951 46,391 76,228 92,484 Member relations and marketing ((2)) 31,729 41,106 66,539 83,446 General and administrative ((2)) 14,891 23,083 30,627 43,092 Depreciation and amortization 6,263 5,183 12,236 10,745 Costs associated with exit activities 11,518 -- 11,518 -- Restructuring costs 4,244 -- 5,188 -- Total costs and expenses 106,596 115,763 202,336 229,767 Income from operations 4,099 25,410 25,799 49,429 Other income, net ((3)) 4,144 941 4,234 1,639 Income before provision for income taxes 8,243 26,351 30,033 51,068 Provision for income taxes 3,297 10,540 12,015 20,427 Net income $ 4,946 $ 15,811 $ 18,018 $ 30,641 Basic earnings per share $ 0.15 $ 0.46 $ 0.53 $ 0.89 Diluted earnings per share $ 0.14 $ 0.46 $ 0.53 $ 0.89 Weighted average shares outstanding Basic 34,105 34,046 34,081 34,383 Diluted 34,276 34,170 34,190 34,516 Percentages of Revenues Cost of services 34.3 % 32.9 % 33.4 % 33.1 % Member relations and marketing 28.7 % 29.1 % 29.2 % 29.9 % General and administrative 13.5 % 16.4 % 13.4 % 15.4 % Depreciation and amortization 5.7 % 3.7 % 5.4 % 3.8 % Income from operations 3.7 % 18.0 % 11.3 % 17.7 % EBITDA ((4)) 12.7 % 21.6 % 18.1 % 21.2 % Adjusted EBITDA ((4)) 26.9 % 21.6 % 25.4 % 21.2 % ((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))The following amounts relating to share-based compensation are included in the Statements of Operations above for the three months ended June 30, 2009 and 2008, respectively (in millions):Cost of services, $1.1 and $1.8, Member relations and marketing, $0.5 and $0.5 and General and administrative, $0.9 and $1.3.The following amounts relating to share-based compensation are included in the Statements of Operations above for the six months ended June 30, 2009 and 2008, respectively (in millions):Cost of services, $2.6 and $2.7, Member relations and marketing, $0.4 and $0.2 and General and administrative, $3.3 and $3.2. ((3))Other income for the three months ended June 30, 2009 includes $.5 million of interest income, $2.2 million foreign currency gain, and a $1.4 million increase in the fair value of deferred compensation plan assets. Other income for the three months ended June 30, 2008 includes $1.0 million of interest income offset by a $0.1 million decrease in the fair value of deferred compensation plan assets. Other income for the six months ended June 30, 2009 includes $1.1 million of interest income, $0.8 million increase in the fair value of deferred compensation plan assets, $1.9 million foreign currency gain and $0.4 million of other income.Other income for the six months ended June 30, 2008 includes $2.6 million of interest income offset by a $1.0 million decrease in the fair value of deferred compensation plan assets. ((4))See "NON-GAAP FINANCIAL MEASURES" for further explanation. -------------------------------------------------------------------------------
THE CORPORATE EXECUTIVE BOARD COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, 2009 December 31, 2008 (Unaudited) Assets Current assets: Cash and cash equivalents $ 26,696 $ 16,214 Marketable securities 19,060 13,545 Membership fees receivable, net 67,519 127,007 Deferred income taxes, net 10,460 12,459 Deferred incentive compensation 9,831 12,621 Prepaid expenses and other current assets 9,407 9,140 Total current assets 142,973 190,986 Deferred income taxes, net 43,315 41,427 Marketable securities 27,611 46,344 Property and equipment, net 94,680 109,133 Goodwill 27,005 26,392 Intangible assets, net 14,732 17,266 Other non-current assets 15,518 14,644 Total assets $ 365,834 $ 446,192 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 37,694 $ 66,178 Accrued incentive compensation 13,538 25,145 Deferred revenues 215,909 264,253 Total current liabilities 267,141 355,576 Other liabilities 68,596 68,007 Total liabilities 335,737 423,583 Total stockholders' equity 30,097 22,609 Total liabilities and stockholders' equity $ 365,834 $ 446,192 -------------------------------------------------------------------------------
THE CORPORATE EXECUTIVE BOARD COMPANY A service of YellowBrix, Inc.
