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Corporate Executive Board (EXBD)
Q2 2011 Earnings Call
August 02, 2011 9:00 am ET
Richard Lindahl - Chief Financial Officer and Principal Accounting Officer
Thomas Monahan - Chairman and Chief Executive Officer
Paul Ginocchio - Deutsche Bank AG
Toni Kaplan - Morgan Stanley
Daniel Leben - Robert W. Baird & Co. Incorporated
Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.
David Ridley-Lane - BofA Merrill Lynch
Gary Bisbee - Barclays Capital
Timothy McHugh - William Blair & Company L.L.C.
Previous Statements by EXBD
» Corporate Executive Board's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Corporate Executive Board CEO Discusses Q4 2010 - Earnings Call Transcript
» The Corporate Executive Board CEO Discusses Q3 2010 Results – Earnings Call Transcript
To the extent any non-GAAP financial measures discussed in today’s call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the company’s website and following the Investors link to yesterday’s news release. You will also find a PDF of the supporting materials that the Company will use in its prepared remarks this morning by going to the Investors page and clicking on the second quarter webcast. Please review the second page of these materials, which includes important information about forward-looking information included in the presentation.
This conference call may contain -- may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the Corporate Executive Board’s expected quarterly and annual financial performance for fiscal 2011. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing discussions of forecasts, estimates, targets, plans, beliefs, expectations and the like are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in the Corporate Executive Board’s filings with the Securities and Exchange Commission and in its second quarter news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
At this time, for opening remarks, I'd like to turn the conference over to the company’s Chief Financial Officer, Mr. Richard Lindahl. Please go ahead, sir.
Thank you, Scott, and good morning, everyone. I'm Rich Lindahl, Chief Financial Officer of the Corporate Executive Board, and I'd like to thank you for calling or logging in to our second quarter 2011 earnings call. Here's a quick overview of our time together this morning. I'll begin by giving you a financial perspective on the quarter, and we'll also review our 2011 outlook. Next, Tom Monahan, our Chief Executive Officer, will provide an update on our operational progress and the strategic priorities we are following to build long-term shareholder value. Then, we will take your questions.
Please turn to Slide 3 of our presentation for the key messages we'd like you to take away from today's discussion. First, our growth continues at a solid pace. Second, the operating trends of the business remain healthy. And finally, we are on track to deliver our annual commitments. Now I'll comment more on this last point shortly, as it is important to note that with our 2011 investment plan largely complete, we expect improved margins through the second half, with the most significant gains coming in the fourth quarter.
Please turn to Slide 4 for an overview of our financial results. At June 30, 2011, Contract Value was $456.8 million, which is an increase of 11.4% from June 30, 2010. Virtually all parts of our business contributed to the growth, with the strongest relative performance seen in North America and Asia Pacific. We did see some groups lag our firm average, most notably in the government sector, which remains challenged by the ongoing federal budget uncertainty and in Europe, where our teams are still completing the commercial transition begun last year and managing through still sluggish and uncertain macroeconomic conditions. Revenues were $119.2 million in the second quarter of 2011, an 8.8% increase compared to $109.6 million in the second quarter of 2010. As we have previously discussed, on January 1, we adopted the FASB's new guidance on revenue recognition. Under these new accounting rules, we deferred recognition of approximately $2.1 million of revenue in the second quarter that would have previously been recognized under the prior rules. This additional amount brings our total year-to-date deferral to $3.6 million. We expect another such net deferral of revenue to occur in the third quarter before recognizing a portion of the year-to-date deferrals in the fourth quarter, and the remainder of such revenue in early 2012. As a result, we currently estimate that the full year net deferral of revenue from 2011 into 2012, will be approximately $3.5 million. Revenues were also influenced by the timing of bookings through the quarter. April bookings were relatively slow, which tempered the second quarter revenue growth, even though the pace of bookings increased solidly in May and especially June. Moving on to operating expenses, cost of services in the second quarter of 2011, increased by $4.6 million versus the second quarter of 2010. Personnel and other compensation costs were again, the biggest component of this change, driven by the acquisition of Iconoculture, investments in product development and expansion of our advisory staff. We also saw increases in more variable costs linked to the size of our business space such as travel, member meetings and content delivery. Member relations and marketing expense increased by $5.9 million in the second quarter versus the prior-year period, as a result of higher staffing levels and increased sales commissions due to the cumulative growth in bookings. As a reminder, this line also reflects the bulk of our international staff investment, which has increased as we pursue growth opportunities in Asia and Europe.