The Corporate Executive Board Company (CEB)

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Corporate Executive Board (CEB)

Q4 2012 Earnings Call

February 07, 2013 9:00 am ET

Executives

Richard S. Lindahl - Chief Financial Officer and Principal Accounting Officer

Thomas L. Monahan - Chairman and Chief Executive Officer

Analysts

Gary E. Bisbee - Barclays Capital, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division

Presentation

Operator

Good morning, and welcome to the Corporate Executive Board's Fourth Quarter 2012 Conference Call. Today's call is being recorded and will be available for replay beginning today and through Friday, through February 17, by dialing (719) 457-0820. The replay passcode is 5487622. The replay will also be available beginning later today and through February 17 at the company's website and at www.earnings.com.

To the extent any non-GAAP financial measure is 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 Investor's link to yesterday's news release. You will also find a PDF of the supporting material that the company will use in its prepared remarks this morning by going to Investor's page and following the link to the Fourth Quarter 2012 Earnings Conference Call.

Please review the second page of these materials which includes important information about any forward-looking information included in the presentation.

This conference 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 year 2013 or beyond. 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 fourth 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 would like to turn the conference over to the company's Chief Financial Officer, Mr. Richard Lindahl. Please go ahead, sir.

Richard S. Lindahl

Thank you, Jessica, and good morning, everyone. My name is Rich Lindahl, I'm the Chief Financial Officer of CEB. Thank you, all, for calling or logging in to our fourth quarter and full year 2012 earnings report.

On today's call, I will review our 2012 financial results and guidance for the year ahead. Tom Monahan, our Chief Executive Officer, will then take over to share additional insight on our 2012 accomplishments and discuss our growth strategy and priorities for 2013. Then, we will take your questions.

Please turn to Slide 3 of our presentation and we'll start with a quick summary of key financial highlights.

Overall, we are pleased with our 2012 results, which reflect our success in the market and point to the strong value proposition we offer our customers.

We are seeing solid growth momentum across most of our business and are optimistic about the year ahead. Accordingly, we are planning for continued top line growth, attractive profitability and strong cash flows, which enable us to maintain our financial flexibility, invest in further growth opportunities and return capital to shareholders.

Let's turn to Slide 4 for a summary recap of our results. Revenue was $193.7 million in the fourth quarter and $622.7 million for the full year of 2012, reflecting year-over-year increases of 46.8% and 28.5%, respectively.

Adjusted EBITDA margin was 27% in the fourth quarter and 27.2% for all of 2012.

Earnings per diluted share were $0.21 in the fourth quarter and $1.10 for the full year of 2012, and reflect costs related to the SHL acquisition.

Non-GAAP diluted earnings per share increased 6.2% to $0.69 for the fourth quarter and 36.4% to $2.55 for the full year of 2012.

The business also continues to generate strong cash flows, which are augmented by the addition of SHL.

Cash flows from operating activities were $122.2 million in 2012, an increase of 21.8% over 2011.

So all in all, these results showed that our business gained financial momentum in the quarter.

Now let's turn to Slide 5 to review our key operating metrics. I'll touch on a few highlights here, and then Tom will provide more regional and segment color in his remarks.

CEB segment contract value at December 31 was $561.8 million, and was up 12.5% compared to the prior year. This year-over-year increase was mainly fueled by solid double-digit bookings growth, reflecting sustained momentum in North America and Asia Pacific, along with an uptick in EMEA.

Contract value also includes $9.6 million from Valtera, which, as we've said, is fully integrated with our legacy CEB employee analytics business.

For the SHL segment, adjusted revenue was $46.8 million in the fourth quarter, consistent with the expectations we shared on our last earnings call and a modest improvement in year-over-year growth versus the third quarter.

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