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CTPartners Executive Search Inc. Announces Fourth Quarter and Full Year 2011 Financial Results

CTPartners Executive Search Inc. Announces Fourth Quarter and Full Year 2011 Financial Results

CTPartners Executive Search Inc. (AMEX: CTP), a leading global retained executive search firm, today announced results for the quarter and full year ended December 31, 2011.

“We are pleased with a number of elements of our 2011 performance,” said Brian Sullivan, CEO. “In looking ahead, we have identified key components to reduce our expense base which we believe will add to our profitability and create an operating profit in 2012, even in this challenging economic environment. We believe these adjustments will lead to the enhancement of our shareholder value as well as maintaining our excellent level of client quality.”

2011 Highlights

2011 Revenue was $121.1 million, a company record, up 6.5% over 2010

Average fee per search increased to $104,950, up 2% over 2010

Number of consultants at year-end was 94, up 6.8% over 2010

The practice diversification recruitment effort has been successful with the revenues of all practices growing between 18-30% year over year, excluding financial services

As an indication of our quality orientation, CTPartners placement rate was 81%, and repeat business was 76%

While reporting a loss for 2011, guidance for 2012 is revenue of $125 million - $140 million and an operating margin of 4-6%.

“CTPartners is a growth company. 2011 was a foundation building year, and we are continuing to aggressively pursue strategic additions to our organization to expand and enhance our global presence,” said Sullivan.

Fourth Quarter 2011 Results

For the three-month period ended December 31, 2011, net revenue decreased 1.8% to $27.2 million compared to $27.7 million in the fourth quarter of 2010. The decrease in Asia Pacific and EMEA were partially offset by the increase in North America. The Financial Services Practice contributed to most of the decrease in both regions.

Revenue breakdown by region:

Q4 2011

Q4 2010

Revenue

% of Net
Revenue

Revenue

% of Net
Revenue

Increase/
Decrease

% Increase/
Decrease

North America

$ 17,773,093

65.4%

$ 16,777,564

60.6%

$ 995,529

6%

EMEA

$ 7,184,489

26.4%

$ 7,814,768

28.2%

$ (630, 279)

-8%

Asia Pacific

$ 2,225,125

8.2%

$ 3,103,309

11.2%

$ (878,184)

-28%

Total

$ 27,182,707

100%

$ 27,695,641

100%

$ (512,934)

-1.9%

Revenue breakdown by practice:

Q4 2011

Q4 2010

Revenue

% of Net
Revenue

Revenue

% of Net
Revenue

Increase/
Decrease

% Increase/
Decrease

Financial Services

$ 7,198,441

26.5%

$ 9,428,042

34.0%

$ (2,229,601)

-23.6%

TMT

$ 5,257,665

19.3%

$ 4,946,973

17.9%

$ 310,692

6.3%

Life Sciences

$ 5,944,215

21.9%

$ 5,347,884

19.3%

$ 596,331

11.2%

Professional Services

$ 5,508,792

20.3%

$ 5,174,719

18.7%

$ 334,073

6.5%

Consumer/Industrial

$ 3,273,594

12.0%

$ 2,798,023

10.1%

$ 475,571

17.0%

Total

$ 27,182,707

100%

$ 27,695,641

100%

$ (512,934)

-1.9%

There were 244 confirmed searches in the fourth quarter of 2011, a 19.2% decrease compared to the fourth quarter of 2010. Productivity, defined as average annualized net revenue per executive search consultant, was $1,156,711 in the fourth quarter 2011 compared to $1,258,893 in the fourth quarter of 2010, due to the lower number of searches and the increase in the number of consultants. However, the average revenue per executive search was $100,872 in the fourth quarter of 2011 compared to $94,858 in the corresponding period in 2010, up 6.3%.

Performance metrics:

Three Month Period
Ended December 31,

Increase/
(Decrease)

%Increase/
(Decrease)

2011

2010

Number of new search assignments

244

302

(58)

(19.2%)

Number of executive search consultants (as of period end)

94

88

6

6.8%

Productivity, as measured by average annualized net revenue per executive search consultant

$ 1,156,711

$1,258,893

$ (102,182)

(8.1%)

Average revenue per executive search

$ 100,872

$ 94,858

$ 6,014

6.3%

2011 Results

For the twelve-month period ended December 31, 2011, net revenue increased 6.5% to $121.1 million compared to $113.7 million in 2010. An increase in North America and EMEA offset a slowdown in Asia Pacific, which was primarily reflective of the Financial Services sector.

Revenue breakdown by region:

2011

2010

Revenue
($)

% of Net
Revenue

Revenue
($)

% of Net
Revenue

Increase/
Decrease

% Increase/
Decrease

North America

$ 78,766,405

65%

$ 72,781,428

63%

$ 5,984,977

8.2%

EMEA

$ 32,047,769

27%

$ 28,060,925

26%

$ 3,986,844

14.2%

Asia Pacific

$ 10,271,724

8%

$ 12,864,166

11%

$ (2,592,442)

-20.2%

Total

$ 121,085,898

100%

$ 113,706,519

100%

$ 7 ,379,379

6.5%

Other than Financial Services, all other practices were up 18% to 30%, year-over-year.

Revenue breakdown by practice:

2011

2010

Revenue
($)

% of Net
Revenue

Revenue
($)

% of Net
Revenue

Increase/
Decrease

% Increase/
Decrease

Financial Services

$ 39,731,625

33%

$ 46,919,673

41%

$ (7,188,048)

-15.3%

TMT

$ 21,592,127

18%

$ 18,086159

16%

$ 3,505,968

19.4%

Life Sciences

$ 21,944,184

18%

$ 17,965815

16%

$ 3,978,369

22.1%

Professional Services

$ 21,580,967

18%

$ 18,227,155

16%

$ 3,353,812

18.4%

Consumer/Industrial

$ 16,236,995

13%

$ 12,507,717

11%

$ 3,729,278

29.8%

Total

$ 121,085,898

100%

$ 113,706,519

100%

$ 7,379,379

6.5%

There were 1,100 new searches confirmed in 2011, flat with last year. Productivity, defined as average annualized net revenue per executive search consultant, also stayed relatively flat at $1,288,000 in 2011 compared to $1,292,000 in 2010.

The average revenue per executive search was $104,950 for 2011 compared to $102,900 in 2010, up 2%.

Performance metrics:

Year Ended
December 31,

Increase/
(Decrease)

%Increase/
(Decrease)

2011

2010

Number of new search assignments

1,100

1,103

(3)

—%

Number of executive search consultants (as of period end)

94

88

6

6.8%

Productivity, as measured by average annualized net revenue per executive search consultant

$ 1,288,000

$ 1,292,000

($ 4,000)

—%

Average revenue per executive search

$ 104,950

$ 102,900

$ 2,050

2.0%

Compensation and Benefits Expenses. Compensation and employee benefits expense increased $10.1 million, or 11.4%, to $98.2 million in 2011 from $88.1 million in 2010. As a percentage of net revenue, compensation and benefits increased to 81% in 2011 from 77.5% in 2010. The increase in compensation and benefits expense was primarily due to (i) a $4.1 million increase in consultant acquisition costs (ii) a $4.3 million increase due to the addition of 27 net new recruiting support staff, and accounting for a full year versus a partial year of compensation for employees hired in 2010 (iii) a $3.5 million increase in consultant compensation, which was the direct result of higher consolidated net revenue in 2011 as compared to 2010 (iv) a $2.5 million increase in employee benefits and payroll taxes related to the aforementioned increases (v) offset by a $4.4 million one-time 2010 cost to terminate our performance unit plan.

General and Administrative Expenses. General and administrative expenses increased $4.5 million, or 20.2%, to $27.1 million in 2011 from $22.6 million in 2010. The increase was mainly due to (i) an increase in occupancy costs due to $1.2 million relating to new offices in Dallas, Chicago, Toronto, and Dubai, (ii) increased professional fees of $1.2 million, including one-time fees of $400,000 related to Sarbanes-Oxley compliance and other costs associated with being a public company, and one-time fees of $300,000 related to our acquisition of CTPartners Latin America, (iii) an increase of $600,000 in business development costs directly related to the increase in consolidated net revenue, and (iv) an increase of $400,000 due to one-time costs related to HR and IT consulting.

Operating Income. Operating income decreased $7.4 million, to a loss of $4.6 million in 2011 from an operating profit of $2.8 million in 2010. The decrease primarily reflects an increase in compensation and benefits and general administrative costs offset by an increase in net revenue.

Net Interest Expense. Net interest expense decreased $309,000, to ($2,000) in 2011 from $307,000 in 2010. The decrease in net interest expense reflects the elimination of our bank borrowings for all of 2011 compared to 2010.

Income Before Taxes and Income Tax Expense. In 2011, we reported a loss before taxes of $4.6 million and recorded an income tax benefit of $1.4 million, as compared to income before taxes of $2.4 million and income tax expense of $638,000 in 2010. The increase in income tax benefit of $1.8 million was primarily due to a $1.4 million increase in our current tax benefit and a $400,000 increase in deferred tax benefit.

An income statement for the fourth quarter and full year are below. The income statement reflects one-time adjustments for the quarter and the full year, followed by a brief explanation of each adjustment.

Revenue:

Q4 11

Q4 10

2011

2010

Net Revenue

$27,182,707

$27,695,641

$121,085,898

$113,706,519

Reimbursable Expenses

1,195,533

1,144,238

5,033,024

3,950,825

Total Revenue

$28,378,240

$28,839,874

$126,118,922

$117,657,344

Operating Expenses:

Compensation and Benefits

26,290,667

25,694,351

98,224,549

88,134,877

General and Administrative

7,436,112

6,152,754

27,130,437

22,561,876

Reimbursable Expenses

1,403,720

1,277,641

5,406,685

4,204,188

Total Operating Expenses

$35,130,499

$33,124,746

$130,761,671

$114,900,941

Operating Income

(6,752,259)

(4,284,876)

(4,642,749)

2,756,403

Net Interest Income (Expense)

4,170

(109,047)

2,150

( 306,891)

Income Tax

2,164,306

( 592,268)

1,406,037

( 638,184)

Net Income

$(4,583,782)

$(4,986,183)

$ (3,234,562)

$ 1,811,328

One-time adjustments:

1) Closing of cash balance plan

660,000

810,052

2) Investment write-down

55,000

55,000

3) London rent review professional fees

75,000

75,000

4) Professional fee for acquisition

300,000

300,000

5) MF Global reserve

125,000

125,000

Total one-time adjustments

1,215,000

1,365,052

Adjusted Net Income

$(3,366,550)

$(1,869,510)

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