CEB Inc. (CEB)

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Corporate Executive Board (CEB)

Q2 2013 Earnings Call

July 30, 2013 9:00 am ET


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

Thomas L. Monahan - Chairman and Chief Executive Officer


Paul Ginocchio - Deutsche Bank AG, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

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

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

Steven Shui - Stifel, Nicolaus & Co., Inc., Research Division

Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division



Good morning, and welcome to CEB's Second Quarter 2013 Conference Call. Today's call is being recorded and will be available for replay beginning today and through August 10 by dialing (719) 457-0820. The replay passcode is 5553063. The replay will also be available beginning later today and through August 10 at the company's website. To the extent any non-GAAP financial measures are 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 via yesterday's news release. You'll also find a PDF of the supporting materials that the company will use in the prepared remarks this morning by going to the Investors page and following the link to the second quarter 2013 earnings conference call. Please review the second page of these materials, which includes important information about forward-looking information included in the presentation.

This conference call may also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding CEB's expected quarterly and annual financial performance for fiscal 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 CEB's filings with the Securities and Exchange Commission and in it's 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 with 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.

Richard S. Lindahl

Thank you, Scott, and good morning, everyone. I'm Rich Lindahl, CFO of CEB. Thank you for calling or logging into our second quarter 2013 earnings report.

On today's call, I'll review our second quarter financial results and discuss our 2013 guidance. Tom Monahan, our Chief Executive Officer, will then takeover to share additional insight on our operations in the quarter and our priorities for the year ahead. Then we'll take your questions.

Please turn to Slide 3 of our presentation and we'll start with a quick summary of today's report. We posted another solid quarter that validates the strategy we shared with you at the beginning of the year and discussed in more detail at our Investor Day in June. Our results were driven by double-digit organic revenue growth. We also were pleased to see the initial returns on the tactical investments we've made in the SHL segment, which posted high single-digit growth. We continued to deploy growth investments, which, as expected, led to sequential increases in operating expenses. And overall, we're pleased with our progress and reaffirming our current guidance with risks and opportunities still balanced toward the midpoint of our ranges.

Let's turn to Slide 4 for a summary recap of our results. Revenue was $204.6 million in the second quarter of 2013, an increase of 50.8% on a year-over-year basis. Adjusted EBITDA margin was 24.6% in the second quarter, compared to 25.9% in the second quarter of 2012. Diluted earnings per share were $0.40, and non-GAAP diluted earnings per share increased 32.7% to $0.73 for the second quarter of 2013.

Now let's turn to Slide 5 to review our key operating metrics, which were solid across-the-board. I'll share some of the numbers with you now and Tom will add more color at the market level in his remarks. CEB segment contract value at June 30, 2013 was $567.2 million, up 10.6% versus June 30, 2012 and reflecting solid bookings growth over the past year.

For the SHL segment, adjusted revenue was $50.7 million in the second quarter, an increase of 8.6%, compared to the second quarter of 2012. Growth was only modestly impacted by exchange rates during the quarter. As on a constant-currency basis, SHL adjusted revenue growth was 8.7%.

CEB segment Wallet retention rate was 99% at June 30, 2013, in the normal range and down slightly compared to 100% in the prior year. SHL segment Wallet retention rate was 96% at June 30, also in the normal range and continuing to reflect the strong recurring revenue in that part of our business.

Total CEB segment member institutions grew 4.7% to 6,189 in the second quarter, and we continue to add institutions in both our middle market and large corporate memberships.

Finally, CEB segment Contract Value per member institution was $91,600 at June 30, a 5.6% over the second quarter of 2012.

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