Market Overview

CTPartners Executive Search Inc. Announces Third Quarter and Nine-Month 2012 Financial Results

NEW YORK--(BUSINESS WIRE)--

CTPartners Executive Search Inc. (NYSE MKT:CTP), a leading global retained executive search firm, today announced its financial results for the third quarter and nine-months, ended September 30, 2012.

Revenue for the third quarter was $32.0 million, a 5.5% increase from $30.3 million reported in last year's third quarter. Revenues decreased sequentially from $33.8 million reported in the second quarter 2012. On a GAAP basis, the operating loss was $551,000, or fully diluted net loss per share of $0.04. Excluding the one-time reorganization charge announced on August 9, 2012, operating income was $413,289, or fully diluted earnings of $0.04 per share. The Company reported operating income of $98,000, or fully diluted earnings per share of $0.01, for the third quarter last year. Revenue and operating income per share excluding the reorganization charge were at the high end of the previously announced guidance for the third quarter 2012. A reconciliation of reported to adjusted results, excluding reorganization charges, is included in this press release.

“Our solid revenue growth of 5.5% to $32.0 million reflects our growing position in the global executive recruitment industry,” said Brian Sullivan, Chief Executive Officer. “During the quarter, we experienced strong contributions from our newer Industrial and Consumer practices which complemented the positive growth we saw in our Life Sciences industry practice. Financial Services revenue was up slightly over last year demonstrating our ability to move quickly into market segments where executive recruitment services were in demand. We reduced G&A expense in the quarter and began to realize the operational and financial benefits of our recent reorganization. We continue to operate in a challenging market and will continue to take the necessary steps to continue to deliver above market revenue growth and improved profitability when the global economy improves.”

Revenue Breakdown by Region

YEAR OVER YEAR   Q3 2012   Q3 2011        
By Region   Revenue  

%

    Revenue  

%

   

Increase /
(Decrease)

  %  
North America   $ 19,114,200   59.7 %   $ 20,331,600   67.0 %   $ (1,217,400 )   -6.0 %
EMEA     7,012,500   21.9 %     8,021,700   26.4 %     (1,009,200 )   -12.6 %
Latin America     3,865,300   12.1 %     -   0.0 %     3,865,300     100.0 %
Asia Pacific     2,013,400   6.3 %     1,984,000   6.6 %     29,400     1.5 %
TOTAL   $ 32,005,400   100 %   $ 30,337,300   100 %   $ 1,668,100     5.5 %
           

Revenue Breakdown by Practice

YEAR OVER YEAR   Q3 2012   Q3 2011        
By Practice   Revenue   %     Revenue   %    

Increase /
(Decrease)

  %  
Financial Services   $ 9,562,000   29.9 %   $ 9,548,700   31.5 %   $ 13,300     0.1 %
Life Sciences     6,639,100   20.7 %     5,232,300   17.3 %     1,406,800     26.9 %
TMT     4,881,400   15.3 %     5,334,300   17.6 %     (452,900 )   -8.5 %
Professional Services     4,164,700   13.0 %     5,566,100   18.3 %     (1,401,400 )   -25.2 %
Consumer/Retail     3,869,300   12.1 %     2,671,300   8.8 %     1,198,000     44.8 %
Industrial     2,888,900   9.0 %     1,984,600   6.5 %     904,300     45.6 %
TOTAL   $ 32,005,400   100 %   $ 30,337,300   100 %   $ 1,668,100     5.5 %
           

Performance Metrics

   

Three Month Period Ended
September 30

 

Increase /
(Decrease)

 

% Increase /
(Decrease)

      2012     2011        
# of new search assignments     318     269     49   18.2%
# of executive search consultants     102     94     8   8.5%
Productivity   $ 1,255,100   $ 1,291,000   $ (35,900)   -2.8%
Avg. revenue per executive search   $ 93,800   $ 100,100   $ (6,300)   -6.3%
Avg. revenue per executive search excl. Latin America   $ 113, 640   $ 100,000   $ 13,540   13.5%
       

Excluding Latin America, productivity and average revenue per executive search would have been $1,308,800 and $113,640, respectively, in the current quarter, compared to $1,291,000 and $100,100 in the third quarter of last year.

In the third quarter of 2012, the Company made 257 placements with a placement rate of 72%. The Company stated that this softened rate highlights the heightened scrutiny corporations have in adding to headcount in this difficult environment. Average days to placement remained low at 145, compared to 142 in the second quarter of 2012 and 139 in the year-ago period.

“In the third quarter, our performance metrics continued to exceed industry averages and reflect our ability to deliver superior results for our clients,” Brian Sullivan, CEO, added.

Cost Savings Initiatives

In the third quarter of 2012, the Company completed a plan to reorganize its operations resulting in certain organizational changes in its Canadian and EMEA locations. Workforce reorganization and elimination of redundant positions allowed the Company to continue servicing all existing markets more efficiently. In connection with this reorganization, CTPartners incurred pretax costs of $964,000, principally severance and other employee-related costs, or $0.08 per share, of which approximately $603,000 were or will become cash expenditures. The Company expects that these cost savings will result in annualized savings of $1.1 million.

Compensation and Benefits

Compensation and employee benefits expense for the third quarter 2012 increased to $25.8 million from $23.0 million for the year-ago quarter. As a percentage of net revenue, compensation and benefits increased to 80.5% from 75.9% of net revenue in the third quarter 2011. Excluding the reorganization charge, compensation and benefits expense was 77.0% of net revenue.

General and Administrative Expenses

General and administrative expenses decreased to $6.7 million, comprising 20.9% of net revenue compared to $7.1 million, or 23.5% of net revenue for the third quarter 2011. After the reorganization credit of $150,000, the decline in general and administrative expenses was due to decreases of $400,000 in foreign currency transactions, $250,000 in bad debt expense, $200,000 in consulting and professional fees, and $100,000 in IT infrastructure expense, offset by the inclusion of $700,000 of operating expenses from the Latin America offices.

Income Tax Rate

For the three-month period ended September 30, 2012, the Company reported a loss before taxes of $595,000 and recorded an income tax benefit of $320,000, compared to income before income taxes of $99,000 and income tax expense of $9,000 for the three month period ended September 30, 2011. Due principally to the recovery of tax credits not benefited in the prior two quarters of 2012 the Company realized an income tax benefit of $320,000 in the third quarter.

Cash

The cash balance at September 30, 2012 was $14.9 million compared to $23.0 million in the third quarter 2011, reflecting cash used in investing activities related to the purchase of the Company's Latin America affiliate and share repurchase program. The cash balance at June 30, 2012 was $13.8 million.

Share Repurchase

During the third quarter 2012, CTPartners repurchased 213,300 shares of its common stock at an average price per share of $4.03. As of September 30, 2012, 235,253 shares had been repurchased at an average price per share of $4.24, a cost of $998,169, which is the cumulative amount used to repurchase shares under the 2012 Share Repurchase Program.

Nine-Month Financial Results

For the nine months ended September 30, 2012, revenue totaled $98.2 million, a 4.5% increase over the $93.9 million reported for the nine months ended September 30, 2011. Operating income for the nine-month period was $1.2 million compared with $2.1 million for the prior year period. Excluding reorganization charge, operating income for the nine months ended September 30, 2012 was $2.2 million, compared to $2.1 million for the year-ago period.

Guidance

For the fourth quarter 2012, the Company expects revenue and EPS to be in the range of $30.5 million to $31.5 million and a net loss of $(0.01) to earnings per share of $0.02, respectively. Excluding the reorganization charges incurred in the third quarter of 2012, the Company expects fully diluted EPS for the full year 2012 to be in the range of $0.15 to $0.18.

Conference Call and Webcast

The Company will host a conference call and webcast on Tuesday, November 13, at 9:00 AM ET. A replay of the event will be available for one week following the conclusion of the live call.

Third Quarter 2012 Financial Results Conference Call and Webcast
Date: Tuesday, November 13, 2012
Time: 9:00 AM ET
 

Audio Webcast: http://investor.ctnet.com

Conference Line (U.S.): 800.901.5231
Conference Line (International): +1 617.786.2961
Participant Passcode: 59287051
 
Replay Conference Line (U.S.): 888.286.8010
Replay Conference Line (International): +1 617.801.6888
Replay Passcode: 91758044

About CTPartners

CTPartners is a leading performance-driven executive search firm serving clients across the globe. Committed to a philosophy of partnering with its clients, CTPartners offers a proven record in C-Suite, senior executive, and board searches, as well as expertise serving private equity and venture capital firms.

With origins dating back to 1980, CTPartners serves clients with a global organization of more than 400 professionals and employees, offering expertise in board advisory services and executive recruiting services in the financial services, life sciences, industrial, professional services, retail and consumer, and technology, media and telecom industries. Headquartered in New York, CTPartners has 22 offices in 14 countries.

www.ctnet.com

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 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 22, 2012. 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. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

   

September 30,
2012

December 31,
2011

Assets
Current Assets
Cash $ 14,903,138 $ 21,830,120
Accounts receivable, net 24,555,670 19,612,236
Other receivables 120,688 559,526
Prepaid expenses 2,619,917 2,394,872
Deferred income taxes 637,697 1,769,936
Income taxes receivable 1,761,601 1,592,562
Other 1,702,508 712,519
Total current assets 46,301,219 48,471,771
Non-current Assets
Leasehold Improvements and Equipment, net 3,685,417 4,332,865
Goodwill 7,406,879 0
Intangibles, net 2,497,500 0
Other Assets 2,485,767 2,056,931
Deferred Income Taxes 1,466,962 678,554
$ 63,843,744 $ 55,540,121
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of long-term debt $ 2,676,094 $ 155,340
Accounts payable 1,014,918 993,558
Accrued compensation 26,138,153 23,660,070
Accrued business taxes 1,449,218 741,141
Accrued expenses 3,138,453 3,032,950
Total current liabilities 34,416,836 28,583,059
Long-Term Liabilities
Long-term debt, less current maturities 2,950,431 470,109
Deferred rent, less current maturities 1,452,997 1,649,070
Total long-term liabilities 4,403,428 2,119,179

Stockholders' Equity

Preferred stock: 1,000,000 shares authorized, no shares issued and outstanding 0 0
Common stock: $0.001 par value, 15,000,000 shares authorized, 7,409,247 shares issued; 6,983,561 and 7,110,360 shares outstanding at September 30, 2012 and December 31, 2011, respectively. 7,407 7,287
Additional paid-in capital 36,703,092 35,737,584
Accumulated deficit (8,402,275 ) (9,026,290 )
Accumulated other comprehensive loss (1,234,932 ) (881,997 )
Treasury stock, at cost 425,686 and 176,271 shares at September 30, 2012 and December 31, 2011, respectively. (2,049,812 ) (998,701 )
25,023,480 24,837,883
$ 63,843,744 $ 55,540,121
 

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

       
Three Months Ended

September 30,

Nine Months Ended

September 30,

2012 2011 2012 2011
 
Revenue
Net revenue $ 32,005,389 $ 30,337,331 $ 98,162,399 $ 93,903,191
Reimbursable expenses 1,151,349 1,401,167 3,342,755 3,837,491
Total Revenue 33,156,738 31,738,498 101,505,154 97,740,682
Operating Expenses
Compensation and benefits 25,761,870 23,026,941 76,076,047 71,933,882
General and administrative 6,682,084 7,123,679 20,616,564 19,694,325
Reimbursable expenses 1,263,675 1,490,133 3,608,776 4,002,965
Total Operating Expenses 33,707,629 31,640,753 100,301,387 95,631,172
Operating income (loss) (550,891 ) 97,745 1,203,767 2,109,510
Interest (expense) income, net (44,214 ) 1,445 (123,840 ) (2,021 )
Income (loss) before income taxes (595,105 ) 99,190 1,079,927 2,107,489
Income tax benefit (expense) 319,796 (8,958 ) (455,912 ) (758,269 )
Net income (loss) $ (275,309 ) $ 90,232 $ 624,015 $ 1,349,220
 
Basic income (loss) per common share $ (0.04 ) $ 0.01 $ 0.09 $ 0.19
Diluted income (loss) per common share $ (0.04 ) $ 0.01 $ 0.09 $ 0.18
Basic weighted-average common shares 7,081,963 7,226,466 7,122,758 7,196,293
Diluted weighted-average common shares 7,081,963 7,498,137 7,215,356 7,467,964
 

CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

   
For the Nine Months Ended
September 30,
2012 2011
 
Cash Flows From Operating Activities
Net income $ 624,015 $ 1,349,220
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 1,175,226 941,482
Loss on leasehold improvements and equipment disposal 1,019 37,430
Share-based compensation 590,630 1,563,005
Reorganization charge 882,088 0
Amortization of discount on seller note 130,470 0
Deferred income taxes 343,831 405,161
Changes in operating assets and liabilities, net of effects of acquired business
Accounts receivable, net (4,789,476 ) (1,788,191 )
Prepaid expenses (336,064 ) (261,990 )
Income taxes receivable (169,039 ) (1,172,649 )
Other assets and receivables (1,436,979 ) (2,386,095 )
Accounts payable 18,180 (1,097,936 )
Accrued compensation 2,615,748 5,356,561
Accrued business taxes 722,983 (391,390 )
Accrued expenses (199,749 ) (757,057 )
Deferred rent   (113,659 )   198,985  
Net cash provided by operating activities   59,224   1,996,536
Cash Flows From Investing Activities
Acquisition of a business (5,250,000 ) 0
Purchase of leasehold improvements and equipment   (177,903 )   (2,284,012 )
Net cash used in investing activities   (5,427,903 )   (2,284,012 )
Cash Flows From Financing Activities
Payments on long-term debt (116,091 ) (143,779 )
Repurchase of common stock   (998,169 )   (436,061 )
Net cash used in financing activities   (1,114,260 )   (579,840 )
Net decrease in cash (6,482,939 ) (867,316 )
Effect of foreign currency on cash (444,043 ) (165,608 )
Cash:
Beginning   21,830,120     24,030,543  
Ending $ 14,903,138   $ 22,997,619  
 
Supplemental Disclosure of Noncash Financing Activities
Treasury stock (9,395 shares) acquired in lieu of shareholder receivable $ (52,942 ) $ 0
Employee discount stock purchase award in lieu of cash compensation $ 375,000 $ 0
 
Supplemental Disclosure of Noncash Investing Activities
Acquisition of a business
Total identifiable assets acquired $ 2,829,818 $ 0
Goodwill   7,406,879   0  
$ 10,236,697 $ 0
Less: Due to seller   (4,986,697 )   0  
$ 5,250,000 $ 0  
 
SELECTED FINANCIAL DATA EXCLUDING REORGANIZATION CHARGE OF $964,000
           

Selected Financial Data and Reconciliation of Non-GAAP Financial Measures for the Three Months Ended

September 30, 2012

September 30, 2011

Results of
Operations

Effect of
Reorganization
Charge

Adjusted
Results of
Operations
(1)

Results of
Operations

Effect of
Reorganization
Charge

 

Adjusted
Results of
Operations
(1)

Revenue

Net revenue $ 32,005,389 $

0

$ 32,005,389 $ 30,337,331

$

0

$ 30,337,331
Reimbursable expenses   1,151,349    

0

    1,151,349   1,401,167

 

0

  1,401,167
Total revenue   33,156,738    

0

    33,156,738   31,738,498  

0

  31,738,498

 

Operating expenses

Compensation and benefits 25,761,870 1,110,694 24,651,176 23,026,941

0

23,026,941
General and administrative 6,682,084 (146,514 ) 6,828,598 7,123,679

0

7,123,679
Reimbursable expenses   1,263,675    

0

    1,263,675   1,490,133

 

0

  1,490,133
Total Operating Expenses   33,707,629     964,180     32,743,449   31,640,753  

0

  31,640,753
 

Operating income (loss)

(550,891 ) (964,180 ) 413,289 97,745

0

97,745
 

Net income (loss)

$ (275,309 ) $

(575,615

)

$ 300,306 $ 90,232 $

0

$ 90,232
 
 

Basic income per common share

$ (0.04 ) $

(0.08

)

$ 0.04 $ 0.01 $

0

$ 0.01
 
Diluted income per common share $ (0.04 ) $

(0.08

)

$ 0.04 $ 0.01

$

0

$ 0.01

(1) Adjusted results are non-GAAP financial measures that exclude reorganization charges of $964,000 (or $575,615, net of tax effect), for the three and nine-month period ended September 30, 2012. No reorganization costs were incurred during the three and nine-month period ended September 30, 2011.

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”). We define adjusted results of operations as:

  • Adjusted operating income is defined as operating income adjusted to exclude reorganization charges, net.
  • Adjusted net income is defined as net income adjusted to exclude reorganization charges, net of tax effect.
  • Adjusted basic and diluted earnings per share are calculated by adjusting the numerator by reorganization charges net of tax effect.

CTPartners
Jennifer Silver, 617-316-5527
jsilver@ctnet.com
or
Investor Relations
EVC Group
Aimee Gordon, 646-445-4800
agordon@evcgroup.com
Robert Jones, 646-201-5447
bjones@evcgroup.com

 

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