News Column

CEB Posts Fourth Quarter Results and Provides 2014 Guidance

February 13, 2014

The Corporate Executive Board Company announced financial results for the fourth quarter and year ended December 31, 2013.

In a release on February 11, the Company noted that revenue increased 15.3 percent 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 percent 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 percent and 25.5 percent, 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 percent 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 percent of segment Adjusted revenue compared to 27.6 percent in the fourth quarter of 2012.

Revenue increased 12.5 percent 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 percent of segment Adjusted revenue.

Contract Value at December 31, 2013 increased 8.7 percent to $610.8 million compared to $561.8 million at December 31, 2012. Wallet retention rate at December 31, 2013 was 97 percent compared to 102 percent at December 31, 2012. Contract Value per member institution increased 1.4 percent 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 percent of segment Adjusted revenue compared to 24.8 percent 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 percent of segment Adjusted revenue and 25.9 percent in 2012.

Wallet retention rate at December 31, 2013 was 101 percent compared to 97 percent 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 announced 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 percent 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, to stockholders of record on March 14.

More information:

cebglobal.com

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