Exhibit 99.1
Contact: | Timothy R. Yost | 2000 Pennsylvania Avenue, N.W. | ||
Chief Financial Officer | Suite 6000 | |||
(202) 777-5455 | Washington, D.C. 20006 | |||
heroldl@executiveboard.com | www.executiveboard.com |
THE CORPORATE EXECUTIVE BOARD REPORTS FOURTH-QUARTER EARNINGS OF $0.52
PER DILUTED SHARE ON 29% GROWTH IN REVENUES
PER DILUTED SHARE ON 29% GROWTH IN REVENUES
CEB TRIPLES QUARTERLY CASH DIVIDEND AND INCREASES SHARE REPURCHASE AUTHORIZATION
WASHINGTON, D.C. (February 7, 2006)— The Corporate Executive Board Company (CEB) (NASDAQ/NM: EXBD) today announced financial results for the fourth quarter and year ended December 31, 2005. For the quarter, revenues were $99.8 million up 29.4% from $77.1 million for the fourth quarter of 2004. Net income increased 25.2% to $21.3 million from $17.0 million. Earnings per diluted share for the fourth quarter increased 23.8% to $0.52 from $0.42 for the fourth quarter of 2004.
Revenues for 2005 increased 29.0% to $362.2 million from $280.7 million for 2004. Net income grew 39.9% to $75.1 million from $53.7 million for 2004. Earnings per diluted share for 2005 increased 36.6% to $1.83 from $1.34 for 2004.
In August 2004, the Company entered into a new lease agreement for office facilities in Rosslyn, Virginia beginning in 2008. Under the terms of the new lease, several of CEB’s prior leases have been assumed by the new lessor. With these lease transactions, the Company recorded a one time non-cash charge of $5.2 million in the three months ended September 30, 2004 related to the assumption of CEB’s existing leases by the new lessor. To present results on a comparable basis the Company is providing adjusted income and earnings per diluted share that exclude this non-cash charge.
Excluding this non-cash lease assumption charge of $5.2 million from the third quarter of 2004, net income for 2005 increased 31.4% to $75.1 million from an adjusted $57.1 million in 2004. Earnings per diluted share for 2005 increased 28.0% to $1.83 from an adjusted $1.43 in 2004. A reconciliation of CEB’s reported and adjusted results is set forth in the notes to the Financial Highlights section below.
Tom Monahan, CEO of the Corporate Executive Board commented, “We are very pleased with our performance in the fourth quarter and for the full year 2005. We achieved our stated goals for both top and bottom line growth, and experienced strong performance across our membership programs. Underpinning our strong revenue and contract value growth was success across our key growth metrics. The client renewal rate for the full-year 2005 was 92%, once again attesting to the fundamental strength of the CEB membership value proposition. Three of our other four growth drivers, cross sales, new client growth, and new programs continued to run at or above the high end of our annual target ranges. The fourth, price increases, came in below the target range due to a dampening effect on average pricing from the continued strength of our new products across the past two years. Across the year, CEB’s membership network grew to 2,831 companies, and in the fourth quarter of 2005, we added several impressive new client companies including: Atos Origin S.A., Cooper Tire & Rubber Company, Euronext N.V., Mutual of America Life Insurance Company, Veolia Environnement and XM Satellite Radio. Our cross-selling efforts into the existing client base drove the cross-sell ratio — the average number of subscriptions per member institution — to 3.82 from 3.46 the prior year and the average contract value per institution to $134,734.”
Mr. Monahan continued, “We are also pleased today to announce our first initiative to serve middle market companies, those companies with between $100 million and $750 million in annual revenue. This initiative, launched in Q4 of last year, targets human resource executives at 10,000 companies in North America and Europe. It also opens up a tremendous additional growth opportunity for CEB and paves the way for potential service to other functional heads at these companies. We are also happy to be well out of the gates in 2006 with the first of our planned five to six new program launches for this year: The Project Management Office Executive Council. This program serves the senior IT executives responsible for managing the large and growing portfolio of IT projects underway at large companies. These executives typically allocate financial and human resources across the IT project portfolio and monitor project performance. And, at many companies, they are being asked to extend their expertise across a broadening range of large scale projects underway at member companies. This launch brings our total number of programs to 37.”
DIVIDEND INCREASE AND SHARE REPURCHASE AUTHORIZATION
CEB is increasing its quarterly dividend to $0.30 from $0.10 per share. The dividend is payable on March 31, 2006, to stockholders of record at the close of business on March 10, 2006. The Company also announced that its Board of Directors authorized additional share repurchases for up to $150.0 million, which when combined with the remaining balance of the existing share repurchase authorization, provides CEB the opportunity to repurchase up to approximately $218.2 million of its shares. The increase in the dividend and the share repurchase authorization reflect the Company’s continued strong performance and its commitment to returning excess capital to shareholders.
During the year ended December 31, 2005, the Company repurchased 855,705 shares of its common stock at a total cost of approximately $61.5 million. Repurchases will continue to be made in open market and privately negotiated transactions subject to market conditions. No minimum number of shares has been fixed. The Company is funding its share repurchases with cash on hand and cash generated from operations.
OUTLOOK FOR 2006
The following statements summarize the Company’s guidance for 2006.
The Company is comfortable with a target for annual growth in revenues of a minimum of 25%, or $454 million, and the following quarterly revenue distribution (in millions):
Q1 | Q2 | Q3 | Q4 | Total | ||||||||||||||||
Calendar 2006 | $ | 104.0 | $ | 110.0 | $ | 116.0 | $ | 124.0 | $ | 454.0 |
The Company’s guidance for GAAP annual diluted earnings per share in 2006 is $1.80-$1.84. Excluding share-based compensation expenses under FAS123(R), we expect adjusted annual diluted earnings per share of $2.22 with a distribution as follows:
Q1 | Q2 | Q3 | Q4 | Total | ||||||||||||||||
Calendar 2006 | $ | 0.49 | $ | 0.51 | $ | 0.57 | $ | 0.65 | $ | 2.22 |
The Company is also comfortable with continued modest adjusted operating margin expansion, excluding any share-based compensation expenses under FAS 123(R), within the annual target range of 25 — 30%. As in the past, the operating margin may fluctuate on a quarterly basis.
For 2006, the Company expects interest income of approximately $22.5 — $23.5 million, an effective income tax rate of approximately 38.5%, and diluted weighted shares outstanding of approximately 41.0 — 41.5 million.
EFFECT OF SHARE-BASED COMPENSATION
The Company’s adjusted diluted earnings per share presentations exclude the operating expense and tax effects of FAS 123(R). The Company’s management uses the adjusted presentations to evaluate projected operating results on a basis that is comparable to that used for periods prior to implementation of FAS 123(R) and provides such information publicly to assist in comparisons to prior periods. The Company is not yet able to provide a quantitative reconciliation to quarterly EPS determined under accounting principles generally accepted in the United States because the timing and expense associated with its 2006 share-based compensation arrangements is not currently determinable. Adjusted financial results are not measures of financial performance under accounting principles generally accepted in the United States and should not be viewed as a pro-forma presentation reflecting the elimination of the underlying share-based compensation programs, as those programs are an important element of the Company’s compensation structure and generally accepted accounting principles indicate that all forms of share-based payments should be valued and included as appropriate in results of operations. Management compensates for this aspect of the non-GAAP financial measures by evaluating the dilutive effect of the Company’s share-based compensation arrangements on the Company’s basic and diluted earnings per share calculations and by reviewing other quantitative and qualitative information regarding the Company’s share-based compensation arrangements. Because adjusted financial results are not measurements determined in accordance with accounting principles generally accepted in the United States and are thus susceptible to varying calculations, they may not be comparable as presented to other similarly titled measures of other companies.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth below and in CEB’s filings with the U.S. Securities and Exchange Commission, and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. Factors that could cause actual results to differ materially from those indicated by forward-looking statements include, among others, our dependence on renewals of our membership-based services, difficulties we may experience in anticipating market trends, our need to attract and retain a significant number of highly skilled employees, fluctuations in operating results, our potential inability to protect our intellectual property rights, our potential exposure to loss of revenue resulting from our unconditional service guarantee, various factors that could affect our estimated income tax rate or our ability to use our existing deferred tax assets, whether the Washington, D.C. Office of Tax and Revenue withdraws our QHTC status and possible volatility of our stock price. These and other factors are discussed more fully in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of CEB’s filings with the U.S. Securities and Exchange Commission, including, but not limited to, its 2004 Annual Report on Form 10-K. The forward-looking statements in this press release are made as of February 7, 2006 and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
The Corporate Executive Board Company is a leading provider of best practices research and analysis focusing on corporate strategy, operations and general management issues. CEB provides its integrated set of services currently to more than 2,300 of the world’s largest and most prestigious corporations, including over 80% of the Fortune 500. These services are provided primarily on an annual subscription basis and include best practices research studies, executive education seminars, customized research briefs and Web-based access to a library of over 275,000 corporate best practices.
THE CORPORATE EXECUTIVE BOARD COMPANY
Financial Highlights and Other Operating Statistics
(in thousands, except per share data)
Financial Highlights and Other Operating Statistics
(in thousands, except per share data)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
Financial Highlights | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Revenues | $ | 99,835 | $ | 77,123 | $ | 362,226 | $ | 280,724 | ||||||||
Net income | $ | 21,275 | $ | 16,989 | $ | 75,060 | $ | 53,656 | ||||||||
Basic earnings per share | $ | 0.54 | $ | 0.44 | $ | 1.90 | $ | 1.40 | ||||||||
Diluted earnings per share | $ | 0.52 | $ | 0.42 | $ | 1.83 | $ | 1.34 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 39,522 | 38,967 | 39,572 | 38,344 | ||||||||||||
Diluted | 41,169 | 40,582 | 41,092 | 39,925 | ||||||||||||
Adjusted income from operations(1) | $ | 28,810 | $ | 22,653 | $ | 100,022 | $ | 75,659 | ||||||||
Adjusted net income(1) | $ | 21,275 | $ | 16,989 | $ | 75,060 | $ | 57,134 | ||||||||
Adjusted diluted earnings per share(1) | $ | 0.52 | $ | 0.42 | $ | 1.83 | $ | 1.43 |
(1) | Reconciliation of GAAP to adjusted income from operations, adjusted net income and adjusted diluted earnings per share for the year ended December 31, 2004: |
Income from operations, as reported | $ | 70,449 | ||
Non-cash lease restructuring costs | 5,210 | |||
Adjusted income from operations | $ | 75,659 | ||
Net income, as reported | $ | 53,656 | ||
Non-cash lease restructuring costs, net of tax | 3,478 | |||
Adjusted net income | $ | 57,134 | ||
Diluted earnings per share, as reported | $ | 1.34 | ||
Non-cash lease restructuring costs, net of tax | 0.09 | |||
Adjusted diluted earnings per share | $ | 1.43 | ||
In August 2004, the Company entered into a new lease agreement for office facilities in Rosslyn, Virginia beginning in 2008. Under the terms of the new lease, several of the Company’s prior leases have been assumed by the new lessor. With these lease transactions, the Company recorded a charge of $5.2 million in the three months ended September 30, 2004 related to the assumption of the Company’s existing leases by the new lessor. The Company’s adjusted income from operations, net income and diluted earnings per share presentations exclude the effects of this charge so as to provide additional information about CEB’s ongoing operating performance and to assist in comparisons to prior periods. Adjusted financial results should not be considered as measures of financial performance under accounting principles generally accepted in the United States, and the item excluded is a significant component in understanding and assessing the Company’s financial condition. Because adjusted financial results are not measurements determined in accordance with accounting principles generally accepted in the United States and are thus susceptible to varying calculations, they may not be comparable as presented to other similarly titled measures of other companies.
Year Ended December 31, | ||||||||
Other Operating Statistics | 2005 | 2004 | ||||||
Contract value (in thousands) | $ | 381,366 | $ | 294,949 | ||||
Average subscription price | $ | 35,229 | $ | 35,962 | ||||
Membership programs | 36 | 31 | ||||||
Member institutions | 2,831 | 2,368 | ||||||
Total membership subscriptions | 10,825 | 8,202 | ||||||
Average subscriptions per member institution | 3.82 | 3.46 | ||||||
Client renewal rate | 92 | % | 91 | % |
THE CORPORATE EXECUTIVE BOARD COMPANY
Operating Statistic and Financial Highlights
(in thousands, except per share data)
Operating Statistic and Financial Highlights
(in thousands, except per share data)
Selected | Three Months Ended | Selected | Year Ended | |||||||||||||||||||||
Growth | December 31, | Growth | December 31, | |||||||||||||||||||||
Rates | 2005 | 2004 | Rates | 2005 | 2004 | |||||||||||||||||||
Operating Statistic | ||||||||||||||||||||||||
Contract value(1) (at period end) | 29.3 | % | $ | 381,366 | $ | 294,949 | ||||||||||||||||||
Financial Highlights | ||||||||||||||||||||||||
Revenues | 29.4 | % | $ | 99,835 | $ | 77,123 | 29.0 | % | $ | 362,226 | $ | 280,724 | ||||||||||||
Cost of services | 33,387 | 25,801 | 120,607 | 91,285 | ||||||||||||||||||||
Gross profit | 66,448 | 51,322 | 241,619 | 189,439 | ||||||||||||||||||||
Member relations and marketing | 24,832 | 20,359 | 93,528 | 75,460 | ||||||||||||||||||||
General and administrative | 10,501 | 6,833 | 40,250 | 31,130 | ||||||||||||||||||||
Depreciation and amortization | 2,305 | 1,477 | 7,308 | 6,782 | ||||||||||||||||||||
Non-cash lease restructuring costs | — | — | — | 5,210 | ||||||||||||||||||||
Stock option and related expenses | — | — | 511 | 408 | ||||||||||||||||||||
Income from operations | 27.2 | % | 28,810 | 22,653 | 42.0 | % | 100,022 | 70,449 | ||||||||||||||||
Other income, net | 3,921 | 2,800 | 13,588 | 9,936 | ||||||||||||||||||||
Income before provision for income taxes | 32,731 | 25,453 | 113,610 | 80,385 | ||||||||||||||||||||
Provision for income taxes | 11,456 | 8,464 | 38,550 | 26,729 | ||||||||||||||||||||
Net income | 25.2 | % | $ | 21,275 | $ | 16,989 | 39.9 | % | $ | 75,060 | $ | 53,656 | ||||||||||||
Basic earnings per share | $ | 0.54 | $ | 0.44 | $ | 1.90 | $ | 1.40 | ||||||||||||||||
Diluted earnings per share | 23.8 | % | $ | 0.52 | $ | 0.42 | 36.6 | % | $ | 1.83 | $ | 1.34 | ||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||
Basic | 39,522 | 38,967 | 39,572 | 38,344 | ||||||||||||||||||||
Diluted | 41,169 | 40,582 | 41,092 | 39,925 | ||||||||||||||||||||
Adjusted income from operations | 27.2 | % | $ | 28,810 | $ | 22,653 | 32.2 | % | $ | 100,022 | $ | 75,659 | ||||||||||||
Adjusted net income | 25.2 | % | $ | 21,275 | $ | 16,989 | 31.4 | % | $ | 75,060 | $ | 57,134 | ||||||||||||
Adjusted diluted earnings per share | 23.8 | % | $ | 0.52 | $ | 0.42 | 28.0 | % | $ | 1.83 | $ | 1.43 | ||||||||||||
Percentages of Revenues | ||||||||||||||||||||||||
Gross profit | 66.6 | % | 66.5 | % | 66.7 | % | 67.5 | % | ||||||||||||||||
Member relations and marketing | 24.9 | % | 26.4 | % | 25.8 | % | 26.9 | % | ||||||||||||||||
General and administrative | 10.5 | % | 8.9 | % | 11.1 | % | 11.1 | % | ||||||||||||||||
Adjusted income from operations | 28.9 | % | 29.4 | % | 27.6 | % | 27.0 | % |
(1) | We define “Contract value” as of the quarter-end as the aggregate annualized revenue attributed to all agreements in effect on such date, without regard to the remaining duration of any such agreement. |
THE CORPORATE EXECUTIVE BOARD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, | ||||||||
2005 | 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 424,276 | $ | 113,996 | ||||
Marketable securities | 2,264 | 50,292 | ||||||
Membership fees receivable, net | 120,242 | 97,106 | ||||||
Deferred income taxes, net | 11,880 | 26,121 | ||||||
Deferred incentive compensation | 11,489 | 9,277 | ||||||
Prepaid expenses and other current assets | 8,944 | 8,107 | ||||||
Total current assets | 579,095 | 304,899 | ||||||
Deferred income taxes, net | 2,958 | 3,466 | ||||||
Marketable securities | 118,096 | 252,689 | ||||||
Goodwill and other intangibles | 8,445 | — | ||||||
Property and equipment, net | 18,401 | 17,397 | ||||||
Total assets | $ | 726,995 | $ | 578,451 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 43,667 | $ | 17,450 | ||||
Accrued incentive compensation | 27,045 | 18,213 | ||||||
Deferred revenues | 261,300 | 205,494 | ||||||
Total current liabilities | 332,012 | 241,157 | ||||||
Other liabilities | 9,569 | 9,833 | ||||||
Total liabilities | 341,581 | 250,990 | ||||||
Total stockholders’ equity | 385,414 | 327,461 | ||||||
Total liabilities and stockholders’ equity | $ | 726,995 | $ | 578,451 | ||||
THE CORPORATE EXECUTIVE BOARD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 75,060 | $ | 53,656 | ||||
Adjustments to reconcile net income to net cash flows provided by operating activities: | ||||||||
Depreciation and amortization | 7,305 | 6,182 | ||||||
Loss (gain) on the sale of investments | 2,320 | (746 | ) | |||||
Loss on disposal of property and equipment | — | 1,162 | ||||||
Deferred income taxes | 30,801 | 24,373 | ||||||
Non-cash lease restructuring costs | — | 5,210 | ||||||
Amortization of marketable securities premiums, net | 1,865 | 2,777 | ||||||
Changes in operating assets and liabilities: | ||||||||
Membership fees receivable, net | (23,055 | ) | (33,946 | ) | ||||
Deferred incentive compensation | (2,212 | ) | (1,945 | ) | ||||
Prepaid expenses and other current assets | (1,179 | ) | (1,865 | ) | ||||
Accounts payable and accrued liabilities | 26,305 | 4,894 | ||||||
Accrued incentive compensation | 8,894 | 7,116 | ||||||
Deferred revenues | 55,252 | 50,650 | ||||||
Other liabilities | 113 | 1,178 | ||||||
Net cash flows provided by operating activities | 181,469 | 118,696 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment, net | (8,703 | ) | (9,002 | ) | ||||
Acquisitions, net of cash acquired | (8,136 | ) | — | |||||
Purchase of marketable securities | — | (197,049 | ) | |||||
Sales and maturities of marketable securities | 176,384 | 63,611 | ||||||
Net cash flows provided by (used in) investing activities | 159,545 | (142,440 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from the exercise of common stock options | 45,135 | 55,495 | ||||||
Proceeds from issuance of common stock under the employee stock purchase plan | 1,407 | 931 | ||||||
Purchase of treasury shares | (61,489 | ) | (25,687 | ) | ||||
Payment of dividends | (15,787 | ) | (11,567 | ) | ||||
Reimbursement of common stock offering costs | 35 | 225 | ||||||
Payment of common stock offering costs | (35 | ) | (225 | ) | ||||
Net cash flows (used in) provided by financing activities | (30,734 | ) | 19,172 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 310,280 | (4,572 | ) | |||||
Cash and cash equivalents, beginning of period | 113,996 | 118,568 | ||||||
Cash and cash equivalents, end of period | $ | 424,276 | $ | 113,996 | ||||