CTPartners Executive Search Inc. Announces First Quarter 2013 Financial Results
CTPartners Executive Search Inc. Announces First Quarter 2013 Financial Results
Revenue of $29.2 million in line with guidance
Reported net loss per share of $0.29; Adjusted net loss per share of $0.05, consistent with guidance
Second quarter 2013 revenue guidance between $31.5 to $33.5 million
Adjusted earnings per share in the range of $0.01 to $0.06
Company conference call at 5:00 PM ET today
NEW YORK--(BUSINESS WIRE)-- CTPartners Executive Search Inc. (NYSE MKT: CTP), a global retained executive search firm, today announced its financial results for the first quarter ended, March 31, 2013.
"While our first quarter results were consistent with our guidance, we continue to operate in a challenging economic environment for executive recruitment services. We successfully delivered quality results to our growing list of clients and improved our client coverage and enhanced our expertise. We took a significant step in that direction with the recent acquisition of Augmentum, a premier global executive recruitment firm based in London, with an outstanding reputation for producing excellent client results. Augmentum will increase our UK presence and significantly improve our global competitive position while making a positive contribution to our financial results immediately," said Brian Sullivan, Chief Executive Officer.
FIRST QUARTER RESULTS
Revenue for the first quarter was $29.2 million compared with revenue of $32.4 million in the prior year's first quarter. North American revenue decreased 13.4% to $17.4 million; EMEA was essentially flat at $6.7 million; and Asia Pacific revenue was $1.7 million compared to $2.6 million in the first quarter of 2012. Latin America partially offset these decreases as revenue increased 13.4% to $3.3 million. On a practice basis, Life Sciences grew 8.6% to $5.7 million and Industrial increased 28% to $3.6 million while Financial Services, Consumer/Retail, Technology Media & Telecom and Professional Services declined 29.8%, 20.1%, 6% and 3.2%, respectively, due to softer market conditions.
Excluding post-combination compensation expense mainly related to the Latin America acquisition in 2012, the Company decreased its compensation expense by $2.8 million to $22.2 million. Excluding non-operating expenses, this decrease in compensation expense was offset by a $0.7 million increase in general and administrative expenses to $7.4 million, primarily as a result of a global branding initiative and business development costs.
The net loss for the first quarter was $2.0 million, or $0.29 per share, compared to a net loss of $0.6 million, or $0.08 per share for last year's first quarter. Excluding non-operating charges of $1.7 million net of tax for the three months ended March 31, 2013, and $1.0 million for the three months ended March 31, 2012, the adjusted net loss was $0.4 million, or $0.05 per share compared to adjusted net income of $0.4 million, or $0.06 per share in last year's first quarter, as defined in the reconciliation of non-GAAP measures included in the press release.
The cash balance at March 31, 2013 was $6.5 million compared to $7.2 million for the quarter ended March 31, 2012 and $15.9 million at year end 2012.
PERFORMANCE METRICS
The Company was engaged in 348 new search assignments compared to 385 in the year-ago quarter, and up sequentially from 299 in the 2012 fourth quarter.
The number of placements was 231, a 78% placement rate compared to 234, or a 75% placement rate in last year's comparable quarter and 270 placements, or an 82% placement rate in the 2012 fourth quarter.
CTPartners had 107 consultants compared with 113 consultants in the year-ago quarter and up sequentially from 103 consultants, reflecting the Company's goal of continually replacing non-performers with high-caliber consultants.
Net revenue per consultant was $1.1 million, flat with last year's first quarter and down slightly from $1.2 million in the 2012 fourth quarter.
Average revenue per search increased to $90,300 compared to $89,100 in last year's first quarter and was slightly down from $91,400 in the 2012 fourth quarter.
The number of clients representing repeat business was 72% in the quarter compared with 76% in both last year's first quarter and 2012 fourth quarter.
Guidance
CTPartners growth strategy is to continue to deliver more searches to existing clients, add new clients, and diligently add new consultants through strategic acquisitions. The company also is focused on reducing costs as appropriate to meet its objective of expanding its operating margin in 2013. For the second quarter ending June 30, 2013, the Company expects to report revenue in the range of $31.5 to $33.5 million and adjusted earnings per share between $0.01 to $0.06, excluding the non-operating charges.
Conference Call
The Company will host a conference call and webcast for the investment community today at 5:00 PM ET. Investors within the United States interested in participating are invited to call (866) 202-3048 and reference the Participant Passcode: 21213467. All other international participants can use the dial-in number (617) 213-8843, using the same Participant Passcode. A replay of the event will be available for one week following the conclusion of the call. To access the replay, callers in the United States can call (866) 286-8010 and reference the Replay Access Code: 61717137. International callers can dial (617) 801-6888, using the same Replay Access Code. To access the webcast, please visit http://investor.ctnet.com.
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 15 countries.
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 ability to amend certain provisions of previously executed purchase agreements; 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 20, 2013 and 10-Q filed on May 9, 2013. 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) | ||||||||
March 31, | December 31, 2012 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash | $ | 6,509,588 | $ | 15,947,102 | ||||
Accounts receivable, net | 24,651,617 | 23,100,348 | ||||||
Other receivables | 91,628 | 90,524 | ||||||
Prepaid expenses | 2,689,298 | 2,948,694 | ||||||
Deferred income taxes | 2,529,082 | 1,931,988 | ||||||
Income taxes receivable | 532,593 | — | ||||||
Other | 1,938,900 | 3,684,677 | ||||||
Total current assets | 38,942,706 | 47,703,333 | ||||||
Non-current assets | ||||||||
Leasehold improvements and equipment, net | 3,187,735 | 3,472,645 | ||||||
Goodwill | 214,967 | 214,967 | ||||||
Intangibles, net | 3,117,906 | 3,195,480 | ||||||
Other assets | 2,959,644 | 1,867,334 | ||||||
Deferred income taxes | 4,194,820 | 4,020,800 | ||||||
$ | 52,617,778 | $ | 60,474,559 | |||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Current portion of long-term debt | $ | 3,246,228 | $ | 3,186,349 | ||||
Line of credit | 5,862,402 | — | ||||||
Accounts payable | 3,009,426 | 1,761,706 | ||||||
Accrued compensation | 15,228,362 | 24,400,563 | ||||||
Accrued business taxes | 1,243,342 | 1,464,538 | ||||||
Income taxes payable | — | 232,967 | ||||||
Accrued expenses | 2,992,484 | 3,762,231 | ||||||
Total current liabilities | 31,582,244 | 34,808,354 | ||||||
Long-Term Liabilities | ||||||||
Long-term debt, less current maturities | 784,817 | 3,488,439 | ||||||
Deferred rent, less current maturities | 1,230,579 | 1,366,506 | ||||||
Total long-term liabilities | 2,015,396 | 4,854,945 | ||||||
Stockholders' Equity | ||||||||
Preferred stock | — | — | ||||||
Common stock | 7,443 | 7,410 | ||||||
Additional paid-in capital | 37,018,677 | 36,846,114 | ||||||
Accumulated deficit | (14,641,755 | ) | (12,610,113 | ) | ||||
Accumulated other comprehensive (loss), net of tax | (1,288,862 | ) | (1,356,786 | ) | ||||
Treasury stock | (2,075,365 | ) | (2,075,365 | ) | ||||
Total stockholders' equity | 19,020,138 | 20,811,260 | ||||||
$ | 52,617,778 | $ | 60,474,559 | |||||
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Revenue | ||||||||
Net revenue | $ | 29,183,367 | $ | 32,402,745 | ||||
Reimbursable expenses | 800,043 | 1,022,399 | ||||||
Total revenue | 29,983,410 | 33,425,144 | ||||||
Operating expenses | ||||||||
Compensation and benefits | 24,067,140 | 26,474,958 | ||||||
General and administrative | 8,280,202 | 6,726,797 | ||||||
Reimbursable expenses | 836,942 | 1,026,736 | ||||||
Total operating expenses | 33,184,284 | 34,228,491 | ||||||
Operating loss | (3,200,874 | ) | (803,347 | ) | ||||
Interest expense, net | (54,048 | ) | (39,302 | ) | ||||
Loss before income taxes | (3,254,922 | ) | (842,649 | ) | ||||
Income tax benefit | 1,223,282 | 276,045 | ||||||
Net loss | $ | (2,031,640 | ) | $ | (566,604 | ) | ||
Basic and diluted loss per common share | $ | (0.29 | ) | $ | (0.08 | ) | ||
Basic and diluted weighted average common shares | 7,019,237 | 7,135,485 | ||||||
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
For the Three Months Ended March 31, | ||||||||
2013 | 2012 | |||||||
Cash Flows From Operating Activities | ||||||||
Net loss | $ | (2,031,640 | ) | $ | (566,604 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and amortization | 413,569 | 404,041 | ||||||
Reorganization charges | — | — | ||||||
Share-based compensation | 175,348 | 321,574 | ||||||
Amortization of discount on seller notes | 30,065 | 42,629 | ||||||
Amortization of post-combination compensation | 1,877,955 | 1,525,180 | ||||||
Deferred income taxes | (771,114 | ) | (261,931 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquired business: | ||||||||
Accounts receivable, net | (1,839,296 | ) | (5,179,037 | ) | ||||
Prepaid expenses | 215,166 | (190,877 | ) | |||||
Income taxes receivable | (532,593 | ) | 10,912 | |||||
Other assets and receivables | (1,263,438 | ) | (2,316,204 | ) | ||||
Accounts payable | 1,284,718 | 378,274 | ||||||
Accrued compensation | (8,860,939 | ) | (6,254,189 | ) | ||||
Accrued business taxes | (155,778 | ) | 273,875 | |||||
Income taxes payable | (232,967 | ) | — | |||||
Accrued expenses | (814,658 | ) | 523,033 | |||||
Deferred rent | (140,335 | ) | (25,314 | ) | ||||
Net cash used in operating activities | (12,645,937 | ) | (11,314,638 | ) | ||||
Cash Flows From Investing Activities | ||||||||
Acquisition of business | — | (3,046,563 | ) | |||||
Purchase of leasehold improvements and equipment | (94,000 | ) | (59,589 | ) | ||||
Net cash used in investing activities | (94,000 | ) | (3,106,152 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Principal payments on long-term debt | (2,664,528 | ) | (38,423 | ) | ||||
Net proceeds from revolving line of credit | 5,862,402 | — | ||||||
Repurchase of common stock | — | (78,599 | ) | |||||
Net cash provided by (used in) financing activities | 3,197,874 | (117,022 | ) | |||||
Net decrease in cash | (9,542,063 | ) | (14,537,812 | ) | ||||
Effect of foreign currency on cash | 104,549 | (109,364 | ) | |||||
Cash: | ||||||||
Beginning | 15,947,102 | 21,830,120 | ||||||
Ending | $ | 6,509,588 | $ | 7,182,944 | ||||
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
Adjusted Performance Measure, Excluding Non-Operational Charges
We utilize Adjusted Net Income/(Loss) and Adjusted Income/(Loss) per common share, non-GAAP financial measures, as a measure of our results of operations. We calculated Adjusted Net Income/(Loss) as Net Income/(Loss) excluding the following charges which we do not believe are reflective of our operational results:
Post-combination compensation expense
Restructuring charges
Gain or loss on foreign currency
Fees and expenses incurred by us in connection with the restatement of our 2012 interim financial statements
Fees and expenses incurred in connection with acquisitions
Tax effect of the above adjustments
We calculate Adjusted loss per common share using the weighted average shares outstanding amounts used in the calculation of diluted earnings per share in accordance with GAAP.
Management utilizes this information to measure performance, and believes it more appropriately reflects the results of ongoing operations.
Three Months Ended March 31 | |||||||||
2013 | 2012 | ||||||||
CALCULATION OF "AS ADJUSTED" PERFORMANCE MEASURE | |||||||||
Net loss | $ | (2,031,640 | ) | $ | (566,604 | ) | |||
Adjustments: | |||||||||
Post-combination compensation expense | 1,877,955 | 1,525,180 | |||||||
Foreign exchange loss/(gain) on funding of foreign subsidiaries | 677,000 | (213,181 | ) | ||||||
Costs incurred for restatement and acquisition | 211,556 | 255,950 | |||||||
Tax effect of the adjustments | (1,088,492 | ) | (586,433 | ) | |||||
Adjusted net income/ (loss) | $ | (353,621 | ) | $ | 414,912 | ||||
Loss per common share, as adjusted | $ | (0.05 | ) | $0.06 | |||||
Use of non-GAAP measures: The tables above contain selected financial information calculated other than in accordance with U.S. Generally Acceptable Accounting Principles ("GAAP").
CTPARTNERS EXECUTIVE SEARCH INC. AND SUBSIDIARIES SUPPLEMENTAL PERFORMANCE METRICS | |||||||||||||||||||
REVENUE BY REGION | |||||||||||||||||||
Q1 2013 | Q1 2012 | ||||||||||||||||||
By Region | Revenue | % of Net | Revenue | % of Net | Increase/ | % Increase/ | |||||||||||||
North America | $ | 17,432,900 | 59.7 | ||||||||||||||||
