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CTPartners Executive Search Inc. Announces First Quarter 2012 Financial Results

CTPartners Executive Search Inc. Announces First Quarter 2012 Financial Results

CTPartners Executive Search Inc. has announced its results for the quarter ended March 31, 2012.

“We are very pleased with our operating performance in Q1 2012 during this challenging global economic time. Our Partners around the world continue to operate as the quality leaders in the search business, and our Latin American acquisition was both accretive and added significantly to our geographic and practice diversification growth strategy,” said Brian Sullivan, CEO.

Q1 2012 Highlights

Revenue of $32.4 million and EPS of $.05 outperformed the upper end of our guidance of $31 million and $.02

Our Latin American acquisition added $3.0 million in revenue, 71 searches and $.6 million in operating contribution

Consultant headcount increased by 16 to 113

Our Consumer/Retail practice increased by 217% to $5.8 million, and Industrial grew by 27% to $2.8 million

While our revenue grew 6% year over year, financial services became 30% of our revenue, down from 35%

An 8% increase in North America, and $3 million in new revenue from Latin America was partially offset by weakness in EMEA and Asia Pacific.

On a sequential basis, we increased revenue by 19.2%, due to Latin America, and increases in North America of 13.2%, and Asia Pacific of 17%, partially offset by a decrease in EMEA of 6.4%.

We are very pleased that our diversification effort has shown great results with year over year growth in Consumer/Retail, Industrial, Life Sciences, and Professional Services offset by a decline in TMT and slight decline in Financial Services.

On a sequential basis, Financial Services showed a 36% increase. Both Consumer/Retail and Industrial showed gains. The weakness in the portfolio was primarily in TMT, mostly Asia.

There were 385 confirmed searches in the first quarter of 2012, a 28.3% increase year over year. Sequentially, searches increased 58%. Both increases reflect the addition of our Latin American acquisition. Productivity, defined as average annualized net revenue per executive search consultant, was $1,147,000 in the first quarter 2012 compared to $1,257,000 in the first quarter of 2011. The average revenue per executive search was $89,141 in the first quarter of 2012 compared to $97,970 in the corresponding period in 2011, down 9%, primarily due to the inclusion of the average fee for Latin America. Excluding Latin America, the average revenue per executive search would have improved to $101,305.

Compensation and Benefits

Compensation and employee benefits expense increased $1.6 million, or 6.8%, to $25.0 million for the quarter ending March 31, 2012 from $23.4 million in Q1 2011. As a percentage of net revenue, compensation and benefits increased slightly to 77.0% compared to 76.6% in Q1 2011.

There was a $1.7 million increase from Latin America due to two things, a $1.1 million increase in consultant compensation due to the revenues generated by our 16 new Latin America search consultants, and a $600,000 increase in non-consultant expense due to the addition of 65 support staff in Latin America. This increase was offset by a $100,000 decrease from all other locations.

A $325,000 increase in payroll taxes was partially due to a $4.5 million increase in accelerated consultant bonus payments during the three-month period ended March 31, 2012, which were made to minimize 2011 income taxes. The $354,000 increase in benefits expense was due to increases in both the rates incurred by the company to provide medical benefits to our employees and to an increase in the number of employees.

General and Administrative Expenses

General and administrative expenses increased to $6.8 million or 21.0% of net revenue for the quarter, from $6.1 million, or 19.9% of net revenue for Q1 of 2011. The increase was primarily the result of $600,000 of operating expenses in our Latin America offices, and a $130,000 increase in occupancy costs due to lease renewals in Hong Kong and Singapore and relocating Shanghai to permanent office space.

Operating Income

Our operating income was $659,833 with an operating margin of 2%. We reported income tax expense of $273,000, or 44% due to our profit mix in Latin America.

Earnings per fully diluted shares were $.05 for Q1 2012, versus $.08 in Q1 2011, and on a sequential basis moved from a loss position to a profit.


Our ending cash balance was $7.2 million, compared to $20.8 million in Q1 2011, primarily due to a $5.2 million payment for our Latin American acquisition, and due to the decreased accrued compensation of $8.2 million, most of which was pre-paid to minimize 2011 taxes.

Q2 Guidance

While March was a robust search initiation month , enabling us to outperform our guidance, April was moderate. This exemplifies the lack of conviction by global leaders on the growth plan of their companies.

Therefore, for Q2 2012, we are guiding to revenue of $31 million to $33 million and EPS of $.01 to $.06. Because of continuing improvement performance of recent consultants, additions to our consultant staff, the expected continued growth in Latin America, some planned geographic growth, offset by selective consultant and staff reductions, we maintain our full year guidance of $125 million - $140 million in revenue and a 4-6% operating margin.


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