The Corporate Executive Board Company (“CEB” or the “Company”) (NYSE:
CEB) today announced financial results for the fourth quarter and year
ended December 31, 2013. Revenue increased 15.3% to $223.4 million in
the fourth quarter of 2013 from $193.7 million in the fourth quarter of
2012. Net income in the fourth quarter of 2013 was $12.6 million, or
$0.37 per diluted share, compared to $7.2 million, or $0.21 per diluted
share, in the same period of 2012. Adjusted net income was $28.8 million
and Non-GAAP diluted earnings per share were $0.84 in the fourth quarter
of 2013 compared to $23.6 million and $0.69 in the same period of 2012,
respectively.
In 2013, revenue was $820.1 million, a 31.7% increase from $622.7
million in 2012. Net income in 2013 was $32.0 million, or $0.94 per
diluted share, compared to $37.1 million, or $1.10 per diluted share, in
2012. Included in net income for 2013 is a $22.6 million goodwill
impairment loss for Personnel Decision Research Institutes, Inc.
(“PDRI”) and $6.7 million of pre-tax debt extinguishment costs
associated with the refinancing of the Company’s senior secured credit
facilities in August 2013. Adjusted net income was $105.4 million and
Non-GAAP diluted earnings per share were $3.10 in 2013 compared to $86.2
million and $2.55 in 2012, respectively.
“In 2013, CEB delivered strong results that reflect focused execution of
our long-term strategy,” said Tom Monahan, Chairman and CEO. “With solid
momentum across the business entering 2014, we look forward to
delivering expanded impact for our members and clients, engaging careers
for our employees, and continued progress against our multi-year organic
growth and margin objectives.
“We are also pleased to announce the acquisition of Talent Neuron in
January 2014, an innovative, early-stage platform that provides global
talent market intelligence data, software, and decision-support,”
Monahan continued. “This acquisition allows CEB to launch a powerful
suite of tools to help members with talent planning.”
OUTLOOK FOR 2014
The Company’s 2014 annual guidance is as follows: Adjusted revenue of
$895 to $915 million, revenue of $892 to $912 million, capital
expenditures of $30 to $34 million, Non-GAAP diluted earnings per share
of $3.15 to $3.40, an Adjusted EBITDA margin between 25.0% and 25.5%,
and depreciation and amortization expense of $65 to $67 million.
Adjusted revenue refers to revenue before the impact of the reduction of
SHL revenue recognized in the post-acquisition period to reflect the
adjustment of deferred revenue at the SHL acquisition date to fair
value. The estimated reduction in 2014 revenue to reflect the impact of
the deferred revenue fair value adjustment is approximately $3 million.
SEGMENT HIGHLIGHTS
Since the August 2012 acquisition of SHL Group Holdings 1 Limited and
its subsidiaries (“SHL”), the Company has had two operating segments,
CEB and SHL. The CEB segment includes the historical CEB products and
services provided to senior executives and their teams to drive
corporate performance. The SHL segment, now referred to as the “SHL
Talent Measurement” segment, includes the SHL products and services of
cloud-based solutions for talent assessment and talent mobility, as well
as professional services that support those solutions. PDRI, a
subsidiary acquired as part of the SHL acquisition, is included in the
CEB segment. PDRI provides customized personnel assessment tools and
services to various agencies of the US government. Our full year 2012
financial results only include the results of operations of SHL and PDRI
from August 2, 2012.
CEB Segment
Revenue increased 9.6% in the fourth quarter of 2013 to $170.6 million
from $155.7 million in the same period of 2012. There was $5.6 million
of PDRI revenue included in CEB segment revenue in the fourth quarter of
2013 and $7.5 million in the same period of 2012. Adjusted EBITDA in the
fourth quarter of 2013 was $48.7 million compared to $43.0 million in
the same period of 2012. Adjusted EBITDA margin in the fourth quarter of
2013 was 28.5% of segment Adjusted revenue compared to 27.6% in the
fourth quarter of 2012.
Revenue increased 12.5% in 2013 to $634.3 million from $564.1 million in
2012. There was $24.7 million of PDRI revenue included in CEB segment
revenue in 2013 and $12.6 million in 2012. Adjusted EBITDA was $173.5
million in 2013 compared to $154.6 million in 2012. Adjusted EBITDA
margin in 2013 and 2012 was 27.4% of segment Adjusted revenue.
Contract Value at December 31, 2013 increased 8.7% to $610.8 million
compared to $561.8 million at December 31, 2012. Wallet retention rate
at December 31, 2013 was 97% compared to 102% at December 31, 2012.
Contract Value per member institution increased 1.4% at December 31,
2013 to $93,542 from $92,252 at December 31, 2012.
In the third quarter of 2013, the Company performed interim impairment
testing of its PDRI reporting unit as a result of insights into the
impact of US Federal government sequestration and spending cuts. As a
result, the Company recorded an after-tax goodwill impairment loss of
$22.6 million. This loss had no impact on cash flows.
SHL Talent Measurement Segment
Revenue increased in the fourth quarter of 2013 to $52.8 million from
$38.1 million in the same period of 2012. Adjusted revenue increased in
the fourth quarter of 2013 to $53.9 million from $46.8 million in the
same period of 2012. Adjusted EBITDA in the fourth quarter of 2013 was
$9.1 million compared to $11.6 million in the same period of 2012.
Adjusted EBITDA margin in the fourth quarter of 2013 was 16.8% of
segment Adjusted revenue compared to 24.8% in the fourth quarter of 2012.
Revenue was $185.8 in 2013 and $58.6 million in 2012. Adjusted revenue
was $195.7 million in 2013 and $75.7 million in 2012. Adjusted EBITDA
was $32.6 million in 2013 and $19.6 million in 2012. Adjusted EBITDA
margin in 2013 was 16.6% of segment Adjusted revenue and 25.9% in 2012.
Wallet retention rate at December 31, 2013 was 101% compared to 97% at
December 31, 2012. Unlike CEB members, a majority of SHL Talent
Measurement customers do not typically enter into contracts for fixed
periods, so Contract Value is not a relevant operating statistic for the
segment.
QUARTERLY DIVIDEND
The Company announces that its Board of Directors has approved a cash
dividend on its common stock for the first quarter of 2014 of $0.2625
per share, an increase of 16.7% compared to the dividend paid in the
fourth quarter of 2013. The Company will fund its dividend payments with
cash on hand and cash generated from operations. The dividend is payable
on March 31, 2014 to stockholders of record on March 14, 2014.
NON-GAAP FINANCIAL MEASURES
This press release and the accompanying tables, as well as earnings
discussions, include a discussion of Adjusted revenue, Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted net income, and Non-GAAP diluted
earnings per share, all of 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 “Adjusted revenue” refers to revenue before the impact of the
reduction of SHL revenue recognized in the post-acquisition period to
reflect the adjustment of deferred revenue at the SHL acquisition date
to fair value (the “deferred revenue fair value adjustment”).
The term “Adjusted EBITDA” refers to net income before loss from
discontinued operations, net of provision for income taxes; interest
expense, net; depreciation and amortization; provision for income taxes;
the impact of the deferred revenue fair value adjustment; acquisition
related costs; impairment loss; debt extinguishment costs; share-based
compensation; costs associated with exit activities; restructuring
costs; and gain on acquisition.
The term “Adjusted EBITDA margin” refers to Adjusted EBITDA as a
percentage of Adjusted revenue.
The term “Adjusted net income” refers to net income before loss from
discontinued operations, net of provision for income taxes and excludes
the after tax effects of the impact of the deferred revenue fair value
adjustment; acquisition related costs; share-based compensation;
impairment loss; debt extinguishment costs; amortization of acquisition
related intangibles; costs associated with exit activities;
restructuring costs; and gain on acquisition.
“Non-GAAP diluted earnings per share” refers to diluted earnings per
share before the per share effect of loss from discontinued operations,
net of provision for income taxes and excludes the after tax per share
effects of the impact of the deferred revenue fair value adjustment;
acquisition related costs; share-based compensation; impairment loss;
debt extinguishment costs; amortization of acquisition related
intangibles; costs associated with exit activities; restructuring costs;
and gain on acquisition.
We believe that these non-GAAP financial measures are relevant and
useful supplemental information for evaluating our results of operations
as compared from period to period and as compared to our competitors. We
use these non-GAAP financial measures for internal budgeting and other
managerial purposes, including comparison against our competitors, when
publicly providing our business outlook, and as a measurement for
potential acquisitions. These non-GAAP financial measures are not
defined in the same manner by all companies and therefore may not be
comparable to other similarly titled measures used by other companies.
In connection with the SHL acquisition, we changed the definitions of
our non-GAAP measures to adjust for the impact of the deferred revenue
fair value adjustment to the opening balance sheet resulting from
purchase accounting, amortization of related intangibles, acquisition
related costs, and share-based compensation. This change was made to
provide a more comprehensive understanding of our core operating results
by eliminating the effect of acquisition related items from our GAAP
operating results. The SHL acquisition was the first acquisition of
sufficient size to cause these items to be significant. We believe that
excluding these items is important in illustrating what our core
operating results would have been had we not incurred these acquisition
related items since the nature, size, and number of acquisitions can
vary from period to period.
Our non-GAAP financial measures reflect adjustments based on the
following items, as well as the related income tax effects:
-
Certain business combination accounting entries
and expenses related to acquisitions: We have adjusted for the
impact of the deferred revenue fair value adjustment, amortization of
acquisition related intangibles, and acquisition related costs. We
incurred significant expenses primarily in connection with our SHL
acquisition and also incurred certain other operating expenses, which
we generally would not have otherwise incurred in the periods
presented as a part of our continuing operations. We believe that
excluding these acquisition related items from our non-GAAP financial
measures provides useful supplemental information to our investors and
is important in illustrating what our core operating results would
have been had we not incurred these acquisition related items since
the nature, size, and number of acquisitions can vary from period to
period.
-
Share-based compensation: Although
share-based compensation is a key incentive offered to our employees,
we evaluate our operating results excluding such expense. Accordingly,
we exclude share-based compensation from our non-GAAP financial
measures because we believe it provides valuable supplemental
information that helps investors have a more complete understanding of
our operating results. In addition, we believe the exclusion of this
expense facilitates the ability of our investors to compare our
operating results with those of other peer companies, many of which
also exclude such expense in determining their non-GAAP measures,
given varying valuation methodologies, subjective assumptions, and the
variety and amount of award types that may be utilized.
-
Impairment loss and debt extinguishment costs:
We believe that excluding these items from our non-GAAP financial
measures provides useful supplemental information to our investors and
is important in illustrating what our core operating results would
have been had we not incurred these items. The Company excludes these
items because management does not believe they correlate to the
ongoing operating results of the business.
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 the most directly
comparable GAAP measure is included in the accompanying tables.
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, all statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to our 2014 annual
guidance. 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 US Securities and Exchange Commission
(“SEC”), 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 failure to develop and sell, or expand sales markets for our
SHL Talent Measurement tools and services, our potential inability to
attract and retain a significant number of highly skilled employees or
successfully manage succession planning issues, fluctuations in
operating results, our potential inability to protect our intellectual
property rights, our potential inability to adequately maintain and
protect our information technology infrastructure and our member and
client data, potential confusion about our rebranding, including our
integration of the SHL brand, 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, assumptions or revenue recognition
policies used to prepare our consolidated financial statements,
including those related to testing for potential goodwill impairment,
our potential inability to make, integrate and maintain acquisitions and
investments, the amount and timing of the benefits expected from
acquisitions and investments including our acquisition of SHL, the risk
that we will be required to recognize additional impairments to the
carrying value of the significant goodwill and amortizable intangible
asset amounts included in our balance sheet as a result of our
acquisitions, which would require us to record charges that would reduce
our reported results, our potential inability to effectively manage the
risks associated with the indebtedness we incurred and the senior
secured credit facilities we entered into in connection with our
acquisition of SHL or any additional indebtedness we may incur in the
future, our potential inability to effectively manage the risks
associated with our international operations, including the risk of
foreign currency exchange fluctuations, 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, the US economy (including sequestration under
the Budget Control Act of 2011), and possible volatility of our stock
price. Various important factors that could cause our actual results to
differ from our expected or historical results 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 SEC, including, but not limited to, our 2012 Annual Report on Form
10-K filed on March 1, 2013. The forward-looking statements in this
presentation are made as of February 11, 2014, and we undertake no
obligation to update any forward-looking statements, whether as a result
of new information, future events, or otherwise.
ABOUT CEB
CEB, the leading member-based advisory company, equips more than 10,000
organizations around the globe with insights, tools and actionable
solutions to transform enterprise performance. By combining advanced
research and analytics with best practices from member companies, CEB
helps leaders realize outsized returns by more effectively managing
talent, information, customers and risk. Member companies include
approximately 85% of the Fortune 500, half the Dow Jones Asian Titans,
and nearly 85% of the FTSE 100. More at cebglobal.com.
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THE CORPORATE EXECUTIVE BOARD COMPANY
Financial Highlights and Other Operating Statistics
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Selected Percentage Changes
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Three Months Ended
December 31,
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Selected Percentage Changes
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Year Ended
December 31,
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2013
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2012
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2013
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2012
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Financial Highlights:
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(In thousands, except per share data)
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Revenue
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15.3
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%
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$
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223,436
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$
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193,720
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31.7
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%
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$
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820,053
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$
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622,654
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Adjusted revenue
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10.9
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%
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$
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224,524
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$
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202,468
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29.7
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%
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$
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829,967
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$
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639,788
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Net income
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$
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12,578
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$
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7,181
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$
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31,971
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$
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37,051
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Adjusted net income
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$
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28,796
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$
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23,561
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$
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105,383
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$
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86,153
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Adjusted EBITDA
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$
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57,729
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$
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54,635
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$
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206,091
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$
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174,189
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Adjusted EBITDA margin
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25.7
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%
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27.0
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%
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24.8
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%
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27.2
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%
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Diluted earnings per share
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$
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0.37
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$
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0.21
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$
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0.94
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$
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1.10
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Non-GAAP diluted earnings per share
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$
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0.84
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$
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0.69
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$
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3.10
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$
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2.55
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Other Operating Statistics:
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CEB segment Contract Value (in thousands) (1)
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8.7
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%
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$
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610,830
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$
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561,823
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CEB segment Member institutions
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7.2
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%
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6,530
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6,090
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CEB segment Contract Value per member institution
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1.4
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%
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$
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93,542
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$
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92,252
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CEB segment Wallet retention rate (2)
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97
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%
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102
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%
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SHL Talent Measurement segment Wallet retention rate (3)
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101
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%
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97
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%
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(1)
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We define “CEB segment 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. CEB segment Contract Value does not include
the impact of PDRI.
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(2)
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We define “CEB segment Wallet retention rate,” at the end of the
quarter, as the total current year segment Contract Value from
prior year members as a percentage of the total prior year segment
Contract Value. The CEB segment Wallet retention rate does not
include the impact of PDRI.
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(3)
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We define “SHL Talent Measurement segment Wallet retention rate,”
at the end of the quarter on a constant currency basis, as the
last current 12 months of total segment Adjusted revenue from
prior year customers as a percentage of the prior 12 months of
total segment Adjusted revenue.
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THE CORPORATE EXECUTIVE BOARD COMPANY
Consolidated Statements of Operations
(In thousands, except per share data)
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Three Months Ended
December 31,
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Year Ended
December 31,
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2013
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2012
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2013
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2012
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Revenue (1)
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$
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223,436
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$
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193,720
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$
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820,053
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$
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622,654
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Costs and expenses:
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Cost of services
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78,676
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72,606
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297,851
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223,766
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Member relations and marketing
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65,675
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54,497
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240,052
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178,204
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General and administrative
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25,590
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22,403
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97,273
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73,629
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Acquisition related costs (2)
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4,433
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3,243
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11,477
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24,529
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Impairment loss
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-
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-
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22,600
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-
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Depreciation and amortization
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15,311
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15,597
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60,087
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37,858
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Total costs and expenses
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189,685
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168,346
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|
729,340
|
|
|
|
|
537,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
33,751
|
|
|
|
|
25,374
|
|
|
|
|
|
90,713
|
|
|
|
|
84,668
|
|
|
Other (expense) income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other (3)
|
|
|
|
(201
|
)
|
|
|
|
(715
|
)
|
|
|
|
|
(998
|
)
|
|
|
|
1,834
|
|
|
Interest expense
|
|
|
|
(4,990
|
)
|
|
|
|
(6,655
|
)
|
|
|
|
|
(22,586
|
)
|
|
|
|
(11,882
|
)
|
|
Debt extinguishment costs
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
(6,691
|
)
|
|
|
|
-
|
|
|
Other (expense) income, net
|
|
|
|
(5,191
|
)
|
|
|
|
(7,370
|
)
|
|
|
|
|
(30,275
|
)
|
|
|
|
(10,048
|
)
|
|
Income before provision for income taxes
|
|
|
|
28,560
|
|
|
|
|
18,004
|
|
|
|
|
|
60,438
|
|
|
|
|
74,620
|
|
|
Provision for income taxes
|
|
|
|
15,982
|
|
|
|
|
10,823
|
|
|
|
|
|
28,467
|
|
|
|
|
37,569
|
|
|
Net income
|
|
|
$
|
12,578
|
|
|
|
$
|
7,181
|
|
|
|
|
$
|
31,971
|
|
|
|
$
|
37,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
$
|
0.37
|
|
|
|
$
|
0.21
|
|
|
|
|
$
|
0.95
|
|
|
|
$
|
1.11
|
|
|
Diluted earnings per share
|
|
|
$
|
0.37
|
|
|
|
$
|
0.21
|
|
|
|
|
$
|
0.94
|
|
|
|
$
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
33,616
|
|
|
|
|
33,463
|
|
|
|
|
|
33,543
|
|
|
|
|
33,462
|
|
|
Diluted
|
|
|
|
34,018
|
|
|
|
|
33,802
|
|
|
|
|
|
33,943
|
|
|
|
|
33,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages of Adjusted Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
|
35.0
|
%
|
|
|
|
35.9
|
%
|
|
|
|
|
35.9
|
%
|
|
|
|
35.0
|
%
|
|
Member relations and marketing
|
|
|
|
29.3
|
%
|
|
|
|
26.9
|
%
|
|
|
|
|
28.9
|
%
|
|
|
|
27.9
|
%
|
|
General and administrative
|
|
|
|
11.4
|
%
|
|
|
|
11.1
|
%
|
|
|
|
|
11.7
|
%
|
|
|
|
11.5
|
%
|
|
Depreciation and amortization
|
|
|
|
6.8
|
%
|
|
|
|
7.7
|
%
|
|
|
|
|
7.2
|
%
|
|
|
|
5.9
|
%
|
|
Operating profit
|
|
|
|
15.0
|
%
|
|
|
|
12.5
|
%
|
|
|
|
|
10.9
|
%
|
|
|
|
13.2
|
%
|
|
Adjusted EBITDA (4)
|
|
|
|
25.7
|
%
|
|
|
|
27.0
|
%
|
|
|
|
|
24.8
|
%
|
|
|
|
27.2
|
%
|
|
|
(1)
|
Net of a $1.1 million and $9.9 million reduction to reflect the
impact of the SHL deferred revenue fair value adjustment in the
three months and year ended December 31, 2013, respectively, and
$8.7 million and $17.1 million reduction in the three months and
year ended December 31, 2012.
|
|
|
(2)
|
Acquisition related costs in the three months and year ended
December 31, 2013 primarily relate to the integration of SHL.
Acquisition related costs in the three months and year ended
December 31, 2012 primarily relate to transaction and integration
costs associated with the SHL acquisition.
|
|
|
(3)
|
Interest income and other in the three months ended December 31,
2013 includes a $0.7 million increase in the fair value of
deferred compensation plan assets and interest income of $0.1
million offset by a $0.7 million foreign currency loss and $0.3
million of other expense. Interest income and other in the three
months ended December 31, 2012 includes a $0.3 million increase in
the fair value of deferred compensation plan assets and $0.1
million of interest income offset by $1.1 million in foreign
currency losses. Interest income and other in 2013 includes a $2.1
million increase in the fair value of deferred compensation plan
assets and $0.3 million of interest income offset by $0.1 million
of other expense and $3.3 million of foreign currency losses.
Interest income and other in 2012 includes a $1.7 million increase
in the fair value of deferred compensation plan assets, $1.1
million of interest income, and $0.3 million of other income
offset by $1.3 million in foreign currency losses.
|
|
|
(4)
|
See “Non-GAAP Financial Measures” for further explanation.
|
|
|
|
|
|
|
|
|
|
|
THE CORPORATE EXECUTIVE BOARD COMPANY
Segment Operating Results
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
2013
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Revenue (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEB segment
|
|
|
$
|
170,636
|
|
|
|
$
|
155,660
|
|
|
|
|
$
|
634,302
|
|
|
|
$
|
564,062
|
|
|
SHL Talent Measurement segment (2)
|
|
|
|
53,888
|
|
|
|
|
46,808
|
|
|
|
|
|
195,665
|
|
|
|
|
75,726
|
|
|
|
|
|
$
|
224,524
|
|
|
|
$
|
202,468
|
|
|
|
|
$
|
829,967
|
|
|
|
$
|
639,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEB segment
|
|
|
$
|
48,658
|
|
|
|
$
|
43,037
|
|
|
|
|
$
|
173,537
|
|
|
|
$
|
154,600
|
|
|
SHL Talent Measurement segment
|
|
|
|
9,071
|
|
|
|
|
11,598
|
|
|
|
|
|
32,554
|
|
|
|
|
19,589
|
|
|
|
|
|
$
|
57,729
|
|
|
|
$
|
54,635
|
|
|
|
|
$
|
206,091
|
|
|
|
$
|
174,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEB segment
|
|
|
|
28.5
|
%
|
|
|
|
27.6
|
%
|
|
|
|
|
27.4
|
%
|
|
|
|
27.4
|
%
|
|
SHL Talent Measurement segment
|
|
|
|
16.8
|
|
|
|
|
24.8
|
|
|
|
|
|
16.6
|
|
|
|
|
25.9
|
|
|
Consolidated
|
|
|
|
25.7
|
%
|
|
|
|
27.0
|
%
|
|
|
|
|
24.8
|
%
|
|
|
|
27.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
See “Non-GAAP Financial Measures” for further explanation.
|
|
|
(2)
|
Includes a $1.1 million and $9.9 million increase to revenue in
the three months and year ended December 31, 2013 and a $8.7
million and $17.1 million increase to revenue in the three months
and year ended December 31, 2012, respectively, to reflect the
impact of the SHL deferred revenue fair value adjustment.
|
|
|
|
|
|
|
THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
119,554
|
|
|
$
|
72,699
|
|
Accounts receivable, net (1)
|
|
|
|
271,264
|
|
|
|
239,599
|
|
Deferred income taxes, net
|
|
|
|
17,524
|
|
|
|
15,669
|
|
Deferred incentive compensation
|
|
|
|
24,472
|
|
|
|
19,984
|
|
Prepaid expenses and other current assets
|
|
|
|
29,355
|
|
|
|
19,068
|
|
Total current assets
|
|
|
|
462,169
|
|
|
|
367,019
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes, net
|
|
|
|
1,230
|
|
|
|
283
|
|
Property and equipment, net
|
|
|
|
106,854
|
|
|
|
96,962
|
|
Goodwill
|
|
|
|
442,775
|
|
|
|
471,299
|
|
Intangible assets, net
|
|
|
|
309,692
|
|
|
|
335,191
|
|
Other non-current assets
|
|
|
|
60,955
|
|
|
|
51,495
|
|
Total assets
|
|
|
$
|
1,383,675
|
|
|
$
|
1,322,249
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
$
|
85,294
|
|
|
$
|
84,363
|
|
Accrued incentive compensation
|
|
|
|
61,498
|
|
|
|
53,927
|
|
Deferred revenue (2)
|
|
|
|
416,367
|
|
|
|
365,747
|
|
Deferred income taxes, net
|
|
|
|
969
|
|
|
|
3,537
|
|
Debt – current portion
|
|
|
|
10,274
|
|
|
|
12,479
|
|
Total current liabilities
|
|
|
|
574,402
|
|
|
|
520,053
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
48,553
|
|
|
|
59,773
|
|
Other liabilities
|
|
|
|
115,424
|
|
|
|
98,641
|
|
Debt – long term
|
|
|
|
505,554
|
|
|
|
528,280
|
|
Total liabilities
|
|
|
|
1,243,933
|
|
|
|
1,206,747
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
|
139,742
|
|
|
|
115,502
|
|
Total liabilities and stockholders’ equity
|
|
|
$
|
1,383,675
|
|
|
$
|
1,322,249
|
|
|
(1)
|
Includes accounts receivable, net of $64.0 million and $52.2
million at December 31, 2013 and December 31, 2012, respectively,
related to the SHL Talent Measurement segment and PDRI.
|
|
|
(2)
|
Includes deferred revenue of $61.2 million and $41.6 million at
December 31, 2013 and December 31, 2012, respectively, related to
the SHL Talent Measurement segment and PDRI.
|
|
|
|
|
|
THE CORPORATE EXECUTIVE BOARD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
31,971
|
|
|
$
|
37,051
|
|
Adjustments to reconcile net income to net cash flows provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
Impairment loss
|
|
|
|
22,600
|
|
|
|
-
|
|
Debt extinguishment costs
|
|
|
|
6,691
|
|
|
|
-
|
|
Exit costs
|
|
|
|
1,007
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
|
60,087
|
|
|
|
37,858
|
|
Amortization of credit facility issuance costs
|
|
|
|
2,775
|
|
|
|
1,771
|
|
Deferred income taxes
|
|
|
|
(12,869
|
)
|
|
|
(8,457
|
)
|
Share-based compensation
|
|
|
|
12,547
|
|
|
|
9,214
|
|
Excess tax benefits from share-based compensation arrangements
|
|
|
|
(4,331
|
)
|
|
|
(2,101
|
)
|
Net foreign currency remeasurement and translation loss
|
|
|
|
1,474
|
|
|
|
229
|
|
Amortization of marketable securities premiums, net
|
|
|
|
-
|
|
|
|
68
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
(29,690
|
)
|
|
|
(39,714
|
)
|
Deferred incentive compensation
|
|
|
|
(4,343
|
)
|
|
|
(2,644
|
)
|
Prepaid expenses and other current assets
|
|
|
|
(8,173
|
)
|
|
|
18,481
|
|
Other non-current assets
|
|
|
|
(5,017
|
)
|
|
|
(7,444
|
)
|
Accounts payable and accrued liabilities
|
|
|
|
10,831
|
|
|
|
405
|
|
Accrued incentive compensation
|
|
|
|
7,252
|
|
|
|
10,742
|
|
Deferred revenue
|
|
|
|
48,488
|
|
|
|
58,871
|
|
Other liabilities
|
|
|
|
7,409
|
|
|
|
7,825
|
|
Net cash flows provided by operating activities
|
|
|
|
148,709
|
|
|
|
122,155
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
(27,026
|
)
|
|
|
(17,498
|
)
|
Cost method investments
|
|
|
|
(11,213
|
)
|
|
|
-
|
|
Acquisition of businesses, net of cash acquired
|
|
|
|
-
|
|
|
|
(669,086
|
)
|
Maturities of marketable securities
|
|
|
|
-
|
|
|
|
10,254
|
|
Net cash flows used in investing activities
|
|
|
|
(38,239
|
)
|
|
|
(676,330
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility
|
|
|
|
5,000
|
|
|
|
555,000
|
|
Payments of credit facility
|
|
|
|
(32,002
|
)
|
|
|
(10,000
|
)
|
Proceeds from the exercise of common stock options
|
|
|
|
1,098
|
|
|
|
1,423
|
|
Proceeds from the issuance of common stock under the employee stock
purchase plan
|
|
|
|
910
|
|
|
|
613
|
|
Excess tax benefits from share-based compensation arrangements
|
|
|
|
4,331
|
|
|
|
2,101
|
|
Credit facility issuance costs
|
|
|
|
(4,156
|
)
|
|
|
(19,176
|
)
|
Purchase of treasury shares
|
|
|
|
(2,751
|
)
|
|
|
(10,007
|
)
|
Withholding of shares to satisfy minimum employee tax withholding
for equity awards
|
|
|
|
(7,054
|
)
|
|
|
(3,767
|
)
|
Payment of dividends
|
|
|
|
(30,189
|
)
|
|
|
(23,403
|
)
|
Net cash flows (used in) provided by financing activities
|
|
|
|
(64,813
|
)
|
|
|
492,784
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash
|
|
|
|
1,198
|
|
|
|
661
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
46,855
|
|
|
|
(60,730
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
|
72,699
|
|
|
|
133,429
|
|
Cash and cash equivalents, end of year
|
|
|
$
|
119,554
|
|
|
$
|
72,699
|
|
|
|
|
|
|
|
|
|
|
|
THE CORPORATE EXECUTIVE BOARD COMPANY
Reconciliation of
Non-GAAP Financial Measures
(In thousands, except per share
data)
A reconciliation of each of the non-GAAP measures to the most directly
comparable GAAP measure is provided below.
|
|
|
|
|
|
|
Adjusted Revenue
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2013
|
|
|
Three Months Ended December 31, 2012
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
Total
|
Revenue
|
|
$
|
170,636
|
|
|
$
|
52,800
|
|
|
$
|
223,436
|
|
|
$
|
155,660
|
|
|
$
|
38,060
|
|
|
$
|
193,720
|
Impact of the deferred revenue fair value adjustment
|
|
|
-
|
|
|
|
1,088
|
|
|
|
1,088
|
|
|
|
-
|
|
|
|
8,748
|
|
|
|
8,748
|
Adjusted revenue
|
|
$
|
170,636
|
|
|
$
|
53,888
|
|
|
$
|
224,524
|
|
|
$
|
155,660
|
|
|
$
|
46,808
|
|
|
$
|
202,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
Total
|
Revenue
|
|
$
|
634,302
|
|
|
$
|
185,751
|
|
|
$
|
820,053
|
|
|
$
|
564,062
|
|
|
$
|
58,592
|
|
|
$
|
622,654
|
Impact of the deferred revenue fair value adjustment
|
|
|
-
|
|
|
|
9,914
|
|
|
|
9,914
|
|
|
|
-
|
|
|
|
17,134
|
|
|
|
17,134
|
Adjusted revenue
|
|
$
|
634,302
|
|
|
$
|
195,665
|
|
|
$
|
829,967
|
|
|
$
|
564,062
|
|
|
$
|
75,726
|
|
|
$
|
639,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2013
|
|
|
|
Three Months Ended December 31, 2012
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
Net income (loss)
|
|
|
$
|
11,612
|
|
|
|
$
|
966
|
|
|
|
$
|
12,578
|
|
|
|
$
|
13,519
|
|
|
|
$
|
(6,338
|
)
|
|
|
$
|
7,181
|
|
Interest expense, net
|
|
|
|
4,913
|
|
|
|
|
-
|
|
|
|
|
4,913
|
|
|
|
|
6,546
|
|
|
|
|
-
|
|
|
|
|
6,546
|
|
Depreciation and amortization
|
|
|
|
7,100
|
|
|
|
|
8,211
|
|
|
|
|
15,311
|
|
|
|
|
7,351
|
|
|
|
|
8,246
|
|
|
|
|
15,597
|
|
Provision for income taxes
|
|
|
|
19,194
|
|
|
|
|
(3,212
|
)
|
|
|
|
15,982
|
|
|
|
|
11,577
|
|
|
|
|
(754
|
)
|
|
|
|
10,823
|
|
Impact of the deferred revenue fair value adjustment
|
|
|
|
-
|
|
|
|
|
1,088
|
|
|
|
|
1,088
|
|
|
|
|
-
|
|
|
|
|
8,748
|
|
|
|
|
8,748
|
|
Acquisition related costs
|
|
|
|
2,864
|
|
|
|
|
1,569
|
|
|
|
|
4,433
|
|
|
|
|
1,673
|
|
|
|
|
1,570
|
|
|
|
|
3,243
|
|
Share-based compensation
|
|
|
|
2,975
|
|
|
|
|
449
|
|
|
|
|
3,424
|
|
|
|
|
2,371
|
|
|
|
|
126
|
|
|
|
|
2,497
|
|
Adjusted EBITDA
|
|
|
$
|
48,658
|
|
|
|
$
|
9,071
|
|
|
|
$
|
57,729
|
|
|
|
$
|
43,037
|
|
|
|
$
|
11,598
|
|
|
|
$
|
54,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
|
|
|
28.5
|
%
|
|
|
|
16.8
|
%
|
|
|
|
25.7
|
%
|
|
|
|
27.6
|
%
|
|
|
|
24.8
|
%
|
|
|
|
27.0
|
%
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
|
|
CEB
|
|
|
|
SHL
|
|
|
|
Total
|
|
Net income (loss)
|
|
|
$
|
36,692
|
|
|
|
$
|
(4,721
|
)
|
|
|
$
|
31,971
|
|
|
|
$
|
46,440
|
|
|
|
$
|
(9,389
|
)
|
|
|
$
|
37,051
|
|
Interest expense, net
|
|
|
|
22,337
|
|
|
|
|
-
|
|
|
|
|
22,337
|
|
|
|
|
10,834
|
|
|
|
|
-
|
|
|
|
|
10,834
|
|
Depreciation and amortization
|
|
|
|
28,356
|
|
|
|
|
31,731
|
|
|
|
|
60,087
|
|
|
|
|
24,371
|
|
|
|
|
13,487
|
|
|
|
|
37,858
|
|
Provision for income taxes
|
|
|
|
38,033
|
|
|
|
|
(9,566
|
)
|
|
|
|
28,467
|
|
|
|
|
41,463
|
|
|
|
|
(3,894
|
)
|
|
|
|
37,569
|
|
Impact of the deferred revenue fair value adjustment
|
|
|
|
-
|
|
|
|
|
9,914
|
|
|
|
|
9,914
|
|
|
|
|
-
|
|
|
|
|
17,134
|
|
|
|
|
17,134
|
|
Acquisition related costs
|
|
|
|
7,691
|
|
|
|
|
3,786
|
|
|
|
|
11,477
|
|
|
|
|
22,430
|
|
|
|
|
2,099
|
|
|
|
|
24,529
|
|
Impairment loss
|
|
|
|
22,600
|
|
|
|
|
-
|
|
|
|
|
22,600
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Debt extinguishment costs
|
|
|
|
6,691
|
|
|
|
|
-
|
|
|
|
|
6,691
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Share-based compensation
|
|
|
|
11,137
|
|
|
|
|
1,410
|
|
|
|
|
12,547
|
|
|
|
|
9,062
|
|
|
|
|
152
|
|
|
|
|
9,214
|
|
Adjusted EBITDA
|
|
|
$
|
173,537
|
|
|
|
$
|
32,554
|
|
|
|
$
|
206,091
|
|
|
|
$
|
154,600
|
|
|
|
$
|
19,589
|
|
|
|
$
|
174,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
|
|
|
27.4
|
%
|
|
|
|
16.6
|
%
|
|
|
|
24.8
|
%
|
|
|
|
27.4
|
%
|
|
|
|
25.9
|
%
|
|
|
|
27.2
|
%
|
|
|
|
|
|
|
Adjusted Net Income
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
Net income
|
|
$
|
12,578
|
|
|
$
|
7,181
|
|
|
|
$
|
31,971
|
|
|
$
|
37,051
|
Impact of the deferred revenue fair value adjustment (1)
|
|
|
795
|
|
|
|
6,369
|
|
|
|
|
7,193
|
|
|
|
12,474
|
Acquisition related costs (1)
|
|
|
2,918
|
|
|
|
2,200
|
|
|
|
|
7,500
|
|
|
|
18,427
|
Share-based compensation (1)
|
|
|
2,145
|
|
|
|
1,523
|
|
|
|
|
7,765
|
|
|
|
5,587
|
Impairment loss (2)
|
|
|
4,199
|
|
|
|
-
|
|
|
|
|
22,600
|
|
|
|
-
|
Debt extinguishment costs (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
4,001
|
|
|
|
-
|
Amortization of acquisition related intangibles (1)
|
|
|
6,161
|
|
|
|
6,288
|
|
|
|
|
24,353
|
|
|
|
12,614
|
Adjusted net income
|
|
$
|
28,796
|
|
|
$
|
23,561
|
|
|
|
$
|
105,383
|
|
|
$
|
86,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Earnings per Diluted Share
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
Diluted earnings per share
|
|
|
$
|
0.37
|
|
|
$
|
0.21
|
|
|
|
$
|
0.94
|
|
|
$
|
1.10
|
Impact of the deferred revenue fair value adjustment (1)
|
|
|
|
0.02
|
|
|
|
0.19
|
|
|
|
|
0.21
|
|
|
|
0.37
|
Acquisition related costs (1)
|
|
|
|
0.09
|
|
|
|
0.06
|
|
|
|
|
0.22
|
|
|
|
0.54
|
Share-based compensation (1)
|
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
|
0.23
|
|
|
|
0.16
|
Impairment loss (2)
|
|
|
|
0.12
|
|
|
|
-
|
|
|
|
|
0.66
|
|
|
|
-
|
Debt extinguishment costs (1)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.12
|
|
|
|
-
|
Amortization of acquisition related intangibles (1)
|
|
|
|
0.18
|
|
|
|
0.19
|
|
|
|
|
0.72
|
|
|
|
0.38
|
Non-GAAP diluted earnings per share
|
|
|
$
|
0.84
|
|
|
$
|
0.69
|
|
|
|
$
|
3.10
|
|
|
$
|
2.55
|
|
|
(1)
|
Adjustments are net of the annual estimated income tax effect using
statutory rates based on the relative amounts allocated to each
jurisdiction. The following income tax rates were used: 27% in 2013
and 2012 for the deferred revenue fair value adjustment; 34% in 2013
and 25% in 2012 for acquisition related costs; 38% in 2013 and 39%
in 2012 for share-based compensation; 40% in 2013 for debt
extinguishment costs; and 30% in 2013 and 31% in 2012 for
amortization of acquisition related intangibles.
|
|
|
(2)
|
The $22.6 million impairment loss of non-deductible goodwill related
to PDRI recognized during the third quarter of 2013 was not treated
as a discrete event in the provision for income taxes; rather, it
was considered to be a component of the estimated annual effective
tax rate. As such, $4.2 million of the income tax effect associated
with the non-deductible goodwill impairment loss was reflected in
the income tax provision in the three months ended December 31, 2013
and has been added back to bring the full year adjustment to $22.6
million.
|
|
|
With respect to the Company’s 2014 annual guidance, reconciliations of
net income to Adjusted EBITDA, net income to Adjusted net income, and
GAAP diluted earnings per share to Non-GAAP diluted earnings per share
as projected for 2014 are not provided because the Company cannot,
without unreasonable effort, determine the components of net income and
GAAP diluted earnings per share to provide reconciliations with
certainty at this time.
INVESTOR DAY
CEB will hold its annual Investor Day for institutional investors and
sell-side analysts at its Waterview headquarters in Arlington, Virginia
on June 18, 2014. At the Investor Day, members of the Company’s senior
leadership team will review the Company’s business portfolio, strategy
for growth, and financial performance. The Investor Day is by invitation
only and registration is required. It will also be webcast live via the
Internet on the Company’s web site and a replay will be available
following the event.
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