CTPartners Executive Search announces Q4 and full year 2014 results
The results are consistent with the company’s preliminary financial results announced onJanuary 28, 2015. In addition, the Company provided an update on its corporate leadership, current financial position, and its first quarter 2015 operating performance and outlook.
Fourth Quarter 2014 Financial Results
Net revenue for the fourth quarter of 2014 increased 22.7% to $42.1 million over the $34.3 million reported in the prior year’s fourth quarter. Compared to last year’s fourth quarter, North America revenue increased 13.9% to $23.1 million over $20.3 million EMEA was up 19.8% at $10.8 million compared to $9.0 million Asia Pacificrevenue grew 84.8% to $4.5 million compared to $2.4 million and Latin America’s revenue of $3.7 million rose 42.5% compared to $2.6 million in last year’s fourth quarter. On a practice basis, year-over-year, Financial Services improved 41.5% to $14.4 million Life Sciences increased 42.2% to $8.0 million Industrial rose 32.4% to$4.7 million Consumer/Retail revenue was up 25.4% to $5.0 million and Technology Media & Telecom grew 15.9% to $4.7 million. Professional Services was lower compared to the year-ago fourth quarter, with revenue of$5.2 million.
Foreign currency exchange did not have a material impact on revenue in the fourth quarter or full year 2014, however, the Company believes that its impact on financial results in 2015 will be greater because of the Company’s anticipated 2015 revenue mix.
Compensation expense, excluding non-operating expenses, increased to $32.9 million, or 78.1% of revenue, compared to $25.4 million, or 73.9% of revenue, in the fourth quarter of 2013 due to higher sales volume. General and administrative expenses, excluding non-operating expenses, were $10.0 million, or 23.7% of revenue, compared with $7.3 million, or 21.3% of revenue, in the fourth quarter of 2013 due to costs related to recent acquisitions and business development activities.
GAAP net loss attributable to the Company for the fourth quarter was $1.3 million, or $0.17 per share, compared to net income of $0.1 million, or $0.02 per share, for last year’s fourth quarter. Excluding after-tax non-operating items of $0.7 million and $0.9 million for 2014 and 2013, respectively, 2014 fourth quarter adjusted net loss was$0.6 million, or $0.08 per share, compared to an adjusted net income of $0.9 million, or $0.12 per share, in the prior year’s fourth quarter. A reconciliation of non-GAAP measures is included in this news release.
Adjusted operating loss was $0.09 million in the fourth quarter compared to an adjusted operating income of$1.5 million in the year-ago fourth quarter. Adjusted operating margin was negative 2.0% in the fourth quarter compared to positive 4.4% in the 2013 fourth quarter. Adjusted EBITDA was a loss of $0.3 million in the 2014 fourth quarter compared to $2.1 million in the year-ago fourth quarter. Adjusted EBITDA margin was negative 0.6% and positive 6.0% in the fourth quarter of 2014 and 2013, respectively.
Full Year Financial Results
For the full year, net revenue grew to $172.5 million compared to net revenue of $130.3 million for the full year ended December 31, 2013. GAAP net income attributable to the Company in 2014 was $3.3 million, or $0.44 per share, compared to a net loss of $1.6 million, or $0.23 per share, for the full year ended December 31, 2013. Excluding after-tax non-operating items of $1.8 million and $3.4 million for 2014 and 2013, respectively, adjusted net income in 2014 was $5.2 million, or $0.70 per share compared to adjusted net income of $1.8 million, or$0.24 per share, in the prior year. Adjusted EBITDA more than doubled to $11.1 million for the full year compared to $5.1 million in the year-ago period. A reconciliation of non-GAAP measures is included in this news release.
Performance Metrics - Fourth Quarter and Full Year 2014
• The Company was engaged in 391 new search assignments in the 2014 fourth quarter, a 14.3% increase compared to 342 in the year-ago quarter. For the full year, new search assignments rose 24.9% to 1,742 compared to 1,395 for the 2013 full year.
• The number of placements was 370 in the fourth quarter of 2014 compared with 275 in last year’s comparable quarter. The placement rate for this year’s fourth quarter was 80%.
• CTPartners had 157 consultants at December 31, 2014 compared with 128 consultants at the end of last year’s comparable quarter. The net revenue per consultant was $1.1 million for the fourth quarter and$1.2 million for the full year representing an 18.2% improvement over the 2013 full year.
• Average revenue per search was $98,300 compared to $101,800 in the year-ago quarter. For the full year, average revenue per search grew 4.1% to $101,300.
• The number of clients representing repeat business was 77% in the fourth quarter and 86 new clients engaged CTPartners for the first time.
New Debt Financing
The Company recently announced that it has closed on the sale of $6.25 million of second-lien notes due April 2020, the first of two tranches of notes issuable pursuant to its note purchase agreement (the “Note Purchase Agreement”) with a publicly traded insurance company and an affiliate thereof. The second tranche of $6.25 million of second-lien notes is scheduled to close 90 days after the first funding, subject to certain conditions set forth in the Note Purchase Agreement. The proceeds of the sale of the notes will be used to reduce the amounts outstanding under the Company’s senior revolving credit facility.
As previously announced, CTPartners’ Chief Operating Officer David Nocifora was appointed to the position of Chief Executive Officer effective April 16, 2015, replacing Brian M. Sullivan. Mr. Nocifora has also been elected to the Company’s Board of Directors. Through 2012, Mr. Nocifora was the Chief Financial Officer and has held executive level positions at the Company since 1994. Prior to being named CEO he was responsible for the firm’s entire operating organization including Administration, Human Resources, Information Technology, Research and Office Operations.
Special Committee of the Board of Directors Update
The Company said that the Special Committee of the Board of Directors is continuing to review all of CTPartners strategic alternatives with a view to maximize value for all of CTP’s shareholders, including a previously announced, unsolicited, non-binding proposal from DHR International, Inc.
First Quarter 2015 Operating Performance Update
The Company commented on its operating performance in the first quarter of 2015 based on data available onApril 15, 2015. On a preliminary basis, search assignments have increased 11.5% sequentially to 436 in this year’s first quarter over the 391 search assignments for the fourth quarter of 2014. Also, the Company expects to report approximately $35 million in revenue during the first quarter 2015. The Company stated that it has withdrawn its full year 2015 revenue guidance that was provided on January 28th, 2015.
CTPartners commented that its international operations, which contributed 40% of total revenue in 2014, remains strong and continued to experience solid demand for its services from existing and new clients. As ofApril 15, 2015, CTPartners had 149 partners. The US based business experienced softness because of reduced client demand as the Company’s reputation was compromised due to adverse and misleading media reports as well as the departure of fifteen senior level consultants.