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CTPartners Executive Search Inc. Announces Second Quarter and Six-Month 2012 Financial Results

CTPartners Executive Search Inc. Announces Second Quarter and Six-Month 2012 Financial Results

CTPartners Executive Search Inc has announced its financial results for the second quarter and six-months, ended June 30, 2012.

Revenue for the second quarter was $33.8 million, a 2.0% increase from $33.1 million reported in the same period last year and a 4.2% sequential increase from $32.4 million reported in the first quarter 2012. Operating income and operating margin were $1.1 million and 3.2%, respectively, flat with the results for the same period last year and above first quarter 2012 results of $660,000 in operating income and operating margin of 2.0%. Fully diluted EPS was $0.07 compared to $0.09 in the same period last year and $0.05 for the first quarter 2012. Financial results for the second quarter 2012 were consistent with the Company’s revised expectations issued on July 13, 2012.

“We are pleased to report second quarter revenue and earnings above our original expectations and consistent with our recently revised financial forecast. Despite operating in a challenging macro environment that has reduced demand for executive recruitment services, our positive year-over-year and sequential revenue growth reflects the value proposition we deliver to our clients. Our business fundamentals remained strong throughout the quarter as new search assignments increased 22% year-over-year. Our initiatives to diversify our practices and invest prudently in qualified and experienced consultants are paying off as we posted sequential revenue growth in five out of our six business practices. We appreciate the dedication of our consultants and the support of our shareholders and are confident that we are well positioned to increase shareholder value as current market conditions improve,” said Brian Sullivan, Chief Executive Officer.

Q2 2012 Highlights

New search assignments increased 22.0% to 350 compared to 287 for the second quarter 2011

Consultant headcount increased by 10 to 109 from the second quarter 2011 and was down 4 on a net basis from the first quarter of 2012

Revenue from the consumer/retail practice increased to 18.7% of revenue from 6.3%, compared to the same period last year

Revenue from the financial services practice grew 14.7% on a sequential basis

Compensation and employee benefits expense decreased 2.1% of net revenue to 75.1% compared to 77.2% in the same period last year

EPS of $0.07 includes the Q2 2012 income tax rate increase to 47.7% from 38.7% in Q2 2011

Productivity is measured as the average annualized net revenue per executive search consultant. Excluding Latin America, productivity and average revenue per executive search were $1.3 million and $110,600, respectively, in the second quarter.

Compensation and Benefits

Compensation and employee benefits expense for the second quarter 2012 decreased to $25.4 million from $25.6 million for the year-ago quarter. As a percentage of net revenue, compensation and benefits decreased to 75.1% from 77.2% of net revenue in the second quarter 2011.

General and Administrative Expenses

General and administrative expenses were $7.1 million, comprising 21.2% of net revenue compared to $6.5 million, or 19.7% of net revenue for the second quarter 2011. The increase was the result of the inclusion of $500,000 of operating expenses from the recent acquisition of the Company’s Latin America affiliate and an increase in the allowance for doubtful accounts due to the increase in accounts receivable.

Income Tax Rate

The effective income tax rate for the second quarter of 2012 was 47.7% compared to 38.7% for the second quarter of 2011. The increase is due to delays in the realization of foreign income tax payments as credits against the current U.S. tax obligation until foreign taxable income is generated. The Company is taking action in all non-U.S. markets to mitigate the impact of its tax rate going forward.


The cash balance at June 30, 2012 was $13.8 million compared to $19.0 million in the second quarter 2011, reflecting the cash used in investing activities related to the purchase of the Company’s Latin America affiliate. The cash balance at March 31, 2012 was $7.2 million.

Six-Month Financial Results

For the six months ended June 30, 2012, revenue totaled $66.2 million, a 4.1% increase over the $63.6 million reported for the six months ended June 30, 2011. Operating income for the six month period was $1.8 million compared with $2.0 million for the prior year period. For the six months to date, operating margin was 2.6% compared to 3.2% for the year-ago period.

Cost Savings Initiatives

In the third quarter of 2012, the Company initiated a plan to reorganize its operations resulting in certain organizational changes in its Canadian and EMEA locations. The plan consists of workforce reorganization and elimination of redundant or unneeded positions allowing the Company to combine business operations in certain geographic locations with the purpose of serving its clients more efficiently. In connection with this reorganization, CTPartners anticipates incurring severance and other employee-related costs in the range of $1.0 million to $1.2 million, or approximately $0.07, of which $700,000 is expected to be cash expenditures. The total charge will be recorded in the third quarter of 2012. The Company expects that these cost savings will result in annualized savings of $1.5 million.


For the third quarter 2012, the Company expects revenue to be in the range of $30 million to $32 million. Excluding the non-recurring charges related to the reorganization, earnings per share for the quarter are expected to be in the range of a net loss per share of $0.04 to earnings per share of $0.05 with an operating margin of -1.3% to 2.3%.

The Company reaffirmed its guidance for the full year 2012 of $128 million to $132 million in revenue, an operating margin of 2.0%-3.5% and diluted EPS of $0.15 to $0.30, excluding any non-recurring charges.


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