News Column

CTPartners Executive Search Inc. Announces Record Results for the 2014 Second Quarter

July 30, 2014

- Net Revenue Grew 32% to $45.1 Million Year over Year and 16% Sequentially

- Earnings Per Share of $0.27; Adjusted Earnings Per Share Increases to $0.30 Compared to $0.08 in Last Year’s Second Quarter

- Search Assignments Increased 28% Year over Year

- Third Quarter 2014 Guidance of Net Revenue of $41.0 Million to $43.0 Million and Adjusted EPS in the Range of $0.20 to $0.22

- Conference Call Tomorrow, Thursday, July 31, 2014 at 8:30am ET

NEW YORK--(BUSINESS WIRE)-- CTPartners Executive Search Inc. (NYSE MKT:CTP), a global retained executive search firm, today announced its financial results for the second quarter and first six months ended on June 30, 2014.

“Our second quarter revenue growth of 32% marks the fifth consecutive quarter of year over year revenue increases and establishes yet another record performance for CTPartners. Our success spanned across our entire organization as we experienced growth in all of our practice areas and geographic markets. This strong top line performance combined with solid expense control allowed us to deliver adjusted earnings of $0.30 cents per share, at the high end of our guidance, demonstrating the operating leverage in our business model,” said Brian Sullivan, Chief Executive Officer. “The increased productivity of our seasoned consultants and initial contributions of our more recent hires and acquisitions support our confidence that our strong financial performance will continue. We will continue to invest in building the CTPartners brand globally and seek out quality consultants in our existing practices to build shareholder value over the long term,” concluded Mr. Sullivan.

Second Quarter 2014 Results

Net revenue for the second quarter was $45.1 million, a record high for the Company, and represented a 32% increase compared to $34.2 million in the prior year’s second quarter. Compared to last year’s second quarter, North America revenue increased 27% to $27.6 million compared to $21.7 million in the prior year second quarter; EMEA was up 20% at $10.0 million compared to $8.3 million; Asia Pacific revenue grew 133% to $2.8 million compared to $1.2 million; and Latin America with revenue of $4.8 million grew 61% compared to $3.0 million. On a practice basis, year-over-year, Financial Services improved 62% to $13.1 million; Professional Services increased 35% to $7.8 million; Industrial grew 21% to $4.5 million; Technology Media & Telecom grew 33% to $6.0 million; Life Sciences increased 15% to $7.8 million; and Consumer/Retail revenue grew 10% to $5.9 million.

Compensation expense, excluding non-operating expenses, was $32.7 million, or 72.5% of revenue, compared to $25.9 million, or 75.7% of revenue, in the second quarter of 2013. General and administrative expenses, excluding non-operating expenses, were $8.4 million, or 18.7% of revenue compared with 7.2%, or 20.9% of revenue, in the second quarter of 2013.

GAAP net income attributable to the Company for the second quarter was $2.1 million, or $0.27 per share, compared to a net loss of $0.4 million, or $0.05 per share loss, for last year’s second quarter. Excluding after-tax non-operating items of $0.1 million and $0.9 million for 2014 and 2013, respectively, adjusted net income was $2.3 million, or $0.30 per share, compared to an adjusted net income of $0.6 million, or $0.08 per share, in the prior year’s second quarter. A reconciliation of non-GAAP measures is included in this news release.

Adjusted operating income was $3.8 million in the second quarter compared to an adjusted operating income of $1.0 million in the year-ago second quarter. Adjusted operating margin was 8.5% in the second quarter compared to 3.1% in the 2013 second quarter. Adjusted EBITDA was $4.4 million in the 2014 second quarter compared to $1.5 million in the year-ago second quarter. Adjusted EBITDA margin was 9.8% and 4.3% in the 2014 and 2013 second quarters, respectively.

Performance Metrics - Second Quarter 2014

  • The Company was engaged in a record 465 new search assignments, a 28% increase compared to 364 in the year-ago quarter.
  • The number of placements was 348 compared with 272 in last year’s comparable quarter. The placement rate for this year’s second quarter was 88%, a record quarterly performance.
  • CTPartners had 136 consultants at June 30, 2014, the end of the second quarter compared with 121 consultants at the end of last year’s comparable quarter. The net revenue per consultant was $1.3 million. As of July 30, 2014 the Company has 145 consultants.
  • Average revenue per search increased 4% to $106,800 compared to $103,100 in the year-ago quarter.
  • The Company’s voluntary turnover was 1 consultant, or less than one percent, in the second quarter of 2014, allowing CTPartners to maintain one of the lowest turnover rate in the executive search industry.
  • The number of clients representing repeat business was 74% in the second quarter compared with 71% in both last year’s second quarter and 2013 first quarter.

    Six-Month Financial Results

    For the six months ended June 30, 2014, net revenue totalled $85.0 million compared to net revenue $63.4 reported for the six months ended June, 30, 2013. GAAP net income attributable to the Company for the six months ended June 30, 2014 was $3.3 million, or $0.43 per share compared to net loss of $2.4 million or $0.34 per share for the six months ended June 30, 2013. Excluding after-tax non-operating charges of $0.6 million, adjusted net income was $3.9 million, or $0.51 per share compared to adjusted net income of $0.3 million, or $0.04 per share in the prior year’s six month period. Adjusted EBITDA was $7.6 million for the six months ended June 30, 2014 compared to $1.5 million in the year-ago six month period. A reconciliation of non-GAAP measures is included in this news release.

    Guidance

    For the third quarter ending September 30, 2014, the Company expects to report net revenue in the range of $41.0 million to $43.0 million and adjusted EPS between $0.20 to $0.22, excluding non-operating items.

    Conference Call

    The Company will host a conference call and webcast for the investment community on Thursday, July 31, 2014 at 8:30 AM ET. Investors within the United States interested in participating are invited to call 877-299-4454 and reference the Participant Passcode: 93188484. All other international participants can use the dial-in number 617-597-5447 using the same Participant Passcode. A replay of the event will be available for one week following the conclusion of the call. To access the replay, callers in the United States can call 888-286-8010 and reference the Replay Access Code: 39015638. International callers can dial 617-801-6888, using the same Replay Access Code. To access the webcast, please visit http://investor.ctnet.com.

    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 30 offices in 18 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; further 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 March 12, 2014. 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.

     
    CTPARTNERS EXECUTIVE SEARCH INC.
     
    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
     
    (in thousands, except share and per share amounts)
     

    June 30,

    2014

     

    December 31,

    2013

    Assets
    Current Assets
    Cash $ 6,620 $ 5,654
    Accounts receivable, net 38,271 26,381
    Other receivables 413 433
    Prepaid expenses 3,796 3,974
    Deferred income taxes 3,547 3,184
    Other 3,641   4,411  
    Total current assets 56,288 44,037
    Non-current assets
    Leasehold improvements and equipment, net 4,969 4,149
    Goodwill 10,317 5,811
    Intangibles, net 4,179 3,746
    Other assets 5,508 5,517
    Deferred income taxes 6,107   5,482  
    $ 87,368   $ 68,742  
    Liabilities and Stockholders’ Equity
    Current Liabilities
    Current portion of long-term debt $ 3,143 $ 4,762
    Line of credit 12,168
    Accounts payable 3,557 3,813
    Accrued compensation 28,879 25,201
    Accrued business taxes 2,136 2,079
    Income taxes payable 2,750 710
    Accrued expenses 3,047   5,571  
    Total current liabilities 55,680   42,136  
    Long-Term Liabilities
    Long-term debt, less current maturities 2,799 1,295
    Deferred rent, less current maturities 841   1,050  
    Total long-term liabilities 3,640   2,345  
    Redeemable noncontrolling interest 4,220 4,088
    Stockholders’ Equity
    Preferred stock
    Common stock 8 8
    Additional paid-in capital 38,075 37,778
    Accumulated deficit (10,980 ) (14,242 )
    Accumulated other comprehensive loss, net of tax (1,136 ) (1,275 )
    Treasury stock (2,139 ) (2,096 )
    Total stockholders' equity 23,828   20,173  
    $ 87,368   $ 68,742  
     
    CTPARTNERS EXECUTIVE SEARCH INC.
     
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
     
    (in thousands except share and per share amounts)
     
    Three months ended

    June 30,
      Six months ended

    June 30,
    2014   20132014   2013
    Revenue
    Net revenue $ 45,113 $ 34,223 $ 84,983 $ 63,406
    Reimbursable expenses 1,256   1,142   2,344   1,942  
    Total revenue 46,369 35,365 87,327 65,348
    Operating expenses
    Compensation and benefits 32,832 26,240 62,252 50,307
    General and administrative 8,421 8,349 17,032 16,630
    Reimbursable expenses 1,428   1,255   2,637   2,092  
    Total operating expenses 42,681   35,844   81,921   69,029  
    Operating income/(loss) 3,688 (479 ) 5,406 (3,681 )
    Interest expense, net (79 ) (65 ) (128 ) (119 )
    Income/(loss) before income taxes 3,609 (544 ) 5,278 (3,800 )
    Income tax (expense)/benefit (1,391 ) 220   (2,032 ) 1,443  
    Net income/(loss) 2,218 (324 ) 3,246 (2,357 )
    Net loss attributable to redeemable noncontrolling interest (116 ) (58 ) 16   (58 )
    Net income/(loss) attributable to the Company $ 2,102   $ (382 ) $ 3,262   $ (2,415 )
     
    Basic income/(loss) per common share $ 0.29 $ (0.05 ) $ 0.46 $ (0.34 )
    Diluted income/(loss) per common share $ 0.27 $ (0.05 ) $ 0.43 $ (0.34 )
    Basic weighted average common shares 7,197,341 7,035,919 7,168,072 7,027,120
    Diluted weighted average common shares 7,659,910 7,035,919 7,659,957 7,027,120
     
    CTPARTNERS EXECUTIVE SEARCH INC.
     
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
     
    (In thousands)
     
      For the Six Months Ended June 30
    2014   2013
    Cash Flows From Operating Activities
    Net income/(loss) $ 3,246 $ (2,357 )
    Adjustments to reconcile net income/(loss) to net cash used in operating activities
    Depreciation and amortization 1,174 846
    Share-based compensation 313 377
    Amortization of discount on seller notes 9 61
    Amortization of post-combination compensation 1,878
    Deferred income taxes (971 ) (522 )
    Changes in operating assets and liabilities, net of effect of acquired businesses:
    Accounts receivable, net (11,211 ) (5,938 )
    Prepaid expenses 687 208
    Income taxes receivable (1,555 )
    Other assets and receivables 314 (1,375 )
    Accounts payable (736 ) 470
    Accrued compensation 3,561 (2,771 )
    Accrued business taxes 33 148
    Income taxes payable 2,049 (395 )
    Accrued expenses (2,580 ) (191 )
    Deferred rent (173 ) (216 )
    Net cash used in operating activities (4,285 ) (11,299 )
    Cash Flows From Investing Activities
    Acquisition of businesses (2,712 ) (833 )
    Purchase of leasehold improvements and equipment (1,182 ) (242 )
    Notes receivable issued (1,051 )
    Repayment of notes receivable 1,000    
    Net cash used in investing activities (3,945 ) (1,075 )
    Cash Flows From Financing Activities
    Principal payments on long-term debt (2,779 ) (2,704 )
    Net proceeds from line of credit 12,168   4,568  
    Net cash provided by financing activities 9,389   1,864  
    Net decrease in cash 1,159 (10,510 )
    Effect of foreign currency on cash (193 ) 253
    Cash:
    Beginning 5,654   15,947  
    Ending $ 6,620   $ 5,690  


    Adjusted Performance Measure, Excluding Non-Operational Charges

    We calculate 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
  • Tax effect of the above adjustments

    Adjusted operating income is defined as Adjusted net income/(loss) plus interest and tax expense/benefit.

    We calculate Adjusted EBITDA as Adjusted Operating Income less depreciation and amortization expense.

    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. Adjusted operating margin is calculated as Adjusted operating income divided by net revenues for the period. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by net revenues for the period.

    The following table reconciles non-GAAP measures to net income:

      (in thousands, except per share amounts)

    Three Months Ended

    June 30

     

    Six Months Ended

    June 30

    2014   20132014   2013
    CALCULATION OF "AS ADJUSTED" AND "ADJUSTED EBITDA" PERFORMANCE MEASURE
    Net income/(loss) $ 2,218 $ (324 ) $ 3,246 $ (2,357 )
    Adjustments:
    Post-combination compensation and reorganization expense 426 2,304
    Foreign exchange loss/(gain) on funding of foreign subsidiaries (89 ) 230 29 907
    Costs incurred for restatement, acquisition and integration 224 874 1,003 1,086
    Tax effect of the adjustments (50 ) (589 ) (395 ) (1,677 )
    Adjusted net income $ 2,303   $ 617   $ 3,883   $ 263  
     
    Interest expense/(income) $ 79 $ 65 $ 128 $ 119
    Tax expense/(benefit) 1,441   368   2,427   233  
    Adjusted operating income 3,823 1,050 6,438 615
    Depreciation and amortization 611   432   1,174   846  
    Adjusted EBITDA $ 4,434   $ 1,482   $ 7,612   $ 1,461  
     
    Adjusted operating margin 8.5 % 3.1 % 7.6 % 1.0 %
     
    Adjusted EBITDA margin 9.8 % 4.3 % 9.0 % 2.3 %
     
    Earnings per common share, as adjusted $ 0.30 $ 0.08 $ 0.51 $ 0.04


    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”).

     
    CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
     
    SUPPLEMENTAL PERFORMANCE METRICS
     

    REVENUE BY REGION

               
        Q2 2014   Q2 2013    
    By Region   Revenue   %     Revenue   %    

    Increase /

    (Decrease)

      %  
               
    North America   $ 27,565   61.1 %   $ 21,726   63.5 %   $ 5,839     26.9 %
    EMEA     10,021   22.2 %     8,349   24.4 %     1,672     20.0 %
    Asia Pacific     2,769   6.1 %     1,187   3.5 %     1,582     133.4 %
    Latin America     4,758   10.6 %     2,962   8.6 %     1,796     60.6 %
    TOTAL   $45,113   100%   $34,223   100%   $10,890     31.8%
     

    REVENUE BY PRACTICE AREA

               
        Q2 2014   Q2 2013    
    By Practice Revenue %   Revenue %  

    Increase /

    (Decrease)

    %  
               
    Financial Services   $ 13,141   29.1 %   $ 8,112   23.7 %   $ 5,029     62.0 %
    TMT     6,046   13.4 %     4,535   13.2 %     1,511     33.3 %
    Life Sciences     7,788   17.3 %     6,778   19.8 %     1,010     14.9 %
    Professional Services     7,771   17.2 %     5,753   16.8 %     2,018     35.1 %
    Consumer/Retail     5,913   13.1 %     5,359   15.7 %     554     10.3 %
    Industrial     4,454   9.9 %     3,686   10.8 %     768     20.8 %
    TOTAL   $45,113   100%   $34,223   100%   $10,890     31.8%
     

    REVENUE BY REGION, SEQUENTIAL

               
        Q2 2014   Q1 2014    
    By Region Revenue %   Revenue %  

    Increase /

    (Decrease)

    %  
               
    North America   $ 27,565   61.1 %   $ 23,666   59.4 %   $ 3,899     16.5 %
    EMEA     10,021   22.2 %     10,585   26.5 %     (564 )   -5.3 %
    Asia Pacific     2,769   6.1 %     2,458   6.2 %     311     12.7 %
    Latin America     4,758   10.6 %     3,161   7.9 %     1,597     50.5 %
    TOTAL   $45,113   100%   $39,870   100%   $5,243     13.2%
     
    CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
     

    SUPPLEMENTAL PERFORMANCE METRICS (CONTINUED)

     
     

    REVENUE BY PRACTICE AREA, SEQUENTIAL

               
        Q2 2014   Q1 2014    
    By Practice   Revenue   %     Revenue   %    

    Increase /

    (Decrease)

     

    %

     
    Financial Services   $ 13,141   29.1 %   $ 12,216   30.6 %   $ 925     7.6%
    TMT     6,046   13.4 %     4,536   11.4 %     1,510     33.3%
    Life Sciences    

    7,788

      17.3 %     6,052   15.2 %     1,736     28.7%
    Professional Services     7,771   17.2 %     8,478   21.3 %     (707 )   -8.3%
    Consumer/Retail     5,913   13.1 %     3,771   9.5 %     2,142     56.8%
    Industrial     4,454   9.9 %     4,817   12.0 %     (363 )   -7.5%
    TOTAL  

    $

    45,113

      100%   $39,870   100%   $5,243     13.2%
         

    SUPPLEMENTAL INFORMATION

        Three Month Period Ended June 30  

    Increase /

    (Decrease)

     

    % Increase /

    (Decrease)

        2014   2013        
    # of new search assignments   465   364   101   27.7%
    # of executive search consultants   136   121   15   12.4%
    Productivity  

    $ 1,337,000

      $ 1,170,000   $167,000   14.3%
    Avg. revenue per executive search   $ 106,800   $ 103,100   $3,700   3.6%





    CTPartners

    William J. Keneally, 216-682-3103

    Chief Financial Officer

    wkeneally@ctnet.com

    or

    EVC Group

    Michael Polyviou/Robert Jones - Investor Relations

    212-850-6020

    mpolyviou@evcgroup.com


    Source: CTPartners Executive Search Inc.


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