Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
CTP > SEC Filings for CTP > Form 10-Q on 9-Nov-2011All Recent SEC Filings

Show all filings for CTPARTNERS EXECUTIVE SEARCH INC.

Form 10-Q for CTPARTNERS EXECUTIVE SEARCH INC.


9-Nov-2011

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations as well as other sections of this quarterly report on Form 10-Q contain forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. The forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. Forward-looking statements may be identified by the use of words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects," "forecasts," and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, forecasted or implied in the forward-looking statements. Factors that may affect the outcome of the forward-looking statements include, among other things, 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; 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; the mix of profit and loss by country; and our ability to estimate accurately for purposes of preparing our consolidated financial statements. For more information on the factors that could affect the outcome of forward-looking statements, see Risk Factors in Item 1A of our annual report on Form 10-K which was filed with the Securities and Exchange Commission on March 24, 2011. We caution the reader that the list of factors may not be exhaustive. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

For the three month period ended September 30, 2011, we were engaged to perform 329 searches, including 269 performed directly by us and 60 performed by our associated offices in Latin America. For the three month period ended September 30, 2010, we were engaged to perform 338 searches, including 266 performed directly by us and 72 performed by our associated offices in Latin America. For the three month period ended September 30, 2011, we placed candidates in 114 U.S. searches and 112 non-U.S. searches. Our Latin America affiliate placed 65 candidates during the three month period ended September 30, 2011. For the three month period ended September 30, 2010, we placed candidates in 115 U.S. searches and 75 non-U.S. searches. Our Latin America affiliate placed 60 candidates during the three month period ended September 30, 2010.

Net revenue decreased slightly to $30.3 million for the three-month period ended September 30, 2011 compared to $30.4 million for the three-month period ended September 30, 2010.

For the nine-month period ended September 30, 2011, we were engaged to perform 1,112 searches, including 856 performed directly by us and 256 performed by our associated offices in Latin America. For the nine-month period ended September 30, 2010, we were engaged to perform 1,038 searches, including 801 performed directly by us and 237 performed by our associated offices in Latin America. For the nine-month period ended September 30, 2011, we placed candidates in 362 U.S. searches and 284 non-U.S. searches. Our Latin America affiliate placed 209 candidates during the nine-month period ended September 30, 2011. For the nine-month period ended September 30, 2010, we placed candidates in 330 U.S. searches and 200 non-U.S. searches. Our Latin America affiliate placed 167 candidates during the three month period ended September 30, 2010.

Net revenue increased $7.9 million, or 9.2%, to $93.9 million for the nine-month period ended September 30, 2011 compared to $86.0 million for the nine-month period ended September 30, 2010. The increase in net revenue was the result of an increase in the number of search assignments on which we were engaged and an increase in the number of executive search consultants employed by us.


Table of Contents

Relevant data is set forth below (this data excludes the operations of our associated offices in Latin America):

                                                     Three Months Ended                            Percentage             Nine Months Ended                            Percentage
                                                        September 30,             Increase/         Increase/               September 30,             Increase/        Increase/
Performance Metrics                                 2011            2010          (Decrease)       (Decrease)           2011            2010          (Decrease)       (Decrease)
Number of new search assignments                         269             266                3              1.1 %             856             801               55              6.9 %
Number of executive search consultants (as of
period end)                                               94              88                6              6.8 %              94              88                6              6.8 %
Productivity, as measured by average
annualized net revenue per executive search
consultant                                       $ 1,290,950     $ 1,383,235     $    (92,285 )           (6.7 )%    $ 1,331,960     $ 1,303,195     $     28,765              2.2 %
Average revenue per executive search             $   100,089     $    96,219     $      3,870              4.0 %     $   104,793     $   101,100     $      3,693              3.7 %

Operating income decreased $1.3 million to $98,000 for the three-month period ended September 30, 2011, compared to operating income of $1.5 million for the three-month period ended September 30, 2010. The decrease primarily reflects a decrease in net revenues of $94,000 offset by a $135,000 decrease in compensation and benefits expense and a $1.3 million increase in general and administrative expenses.

Operating income decreased $4.9 million to $2.1 million for the nine-month period ended September 30, 2011, compared to operating income of $7.0 million for the nine-month period ended September 30, 2010. The decrease primarily reflects an increase in net revenues of $7.9 million offset by a $9.5 million increase in compensation and benefits expense and a $3.3 million increase in general and administrative expenses.

Results of Operations

The following table summarizes, for the periods indicated, our results of
operations as a percentage of net revenue:



                                    Three Months Ending           Nine Months Ending
                                       September 30,                 September 30,
                                     2011           2010          2011           2010

     Revenue:
     Net revenue                       100.0 %       100.0 %        100.0 %       100.0 %
     Reimbursable expenses               4.6           3.2            4.1           3.3

     Total revenue                     104.6         103.2          104.1         103.3

     Operating Expenses:
     Compensation and benefits          75.9          76.1           76.6          72.6
     General and administrative         23.5          19.0           21.0          19.1
     Reimbursable expenses               4.9           3.3            4.3           3.4

     Total operating expenses          104.3          98.4          101.9          95.1
     Operating income                    0.3           4.8            2.2           8.2
     Net interest expense                0.0          (0.2 )          0.0          (0.2 )

     Income before income taxes          0.3           4.6            2.2           8.0
     Income tax expense                  0.0           0.6           (0.8 )        (0.1 )

     Net income                          0.3 %         5.2 %          1.4 %         7.9 %

Three Month Period Ended September 30, 2011 Compared to Three Month Period Ended September 30, 2010

Net Revenue. Net revenue decreased $94,000, or 0.3% to $30.3 million for the three-month period ended September 30, 2011 compared to $30.4 million for the three-month period ended September 30, 2010. Included in net revenue for the three-month period ended September 30, 2011 and September 30, 2010, was $131,000 and $151,000 in license fees from our associated offices in Latin America.

Compensation and Benefits Expenses. Compensation and employee benefits expense decreased $135,000, or 0.6%, to $23.0 million for the three-month period ended September 30, 2011 from $23.2 million for the three-month period ended September 30, 2010. As a percentage of net revenue, compensation and benefits decreased to 75.9% for the three-month period ended September 30, 2011 compared to 76.1% for the three-month period ended September 30, 2010. The decrease in compensation and benefits expense was primarily the result of (i) a $2.1 million decrease in non-consultant compensation costs primarily related to a reduction of accrued discretionary bonuses; (ii) an increase of $900,000 related to the addition of 37 support staff in recruiting, research and administration;


Table of Contents

(iii) an increase in executive search consultant compensation of $300,000;
(iv) an increase of approximately $200,000 in connection with equity based grants, guaranteed compensation and signing bonuses made to newly hired executive search consultants; and (v) an increase of $500,000 in related employee benefits and payroll taxes.

General and Administrative Expenses. General and administrative expenses increased to $7.1 million, or 23.5% of net revenue for the three-month period ended September 30, 2011, from $5.8 million, or 19.0% of net revenue for the three-month period ended September 30, 2010. The increase in general and administrative expenses was primarily the result of (i) $330,000 of one-time accounting and tax fees related to being a public company; (ii) $230,000 of fees related principally to human resource, information technology and marketing outsourcing; (iii) $100,000 related to ongoing costs of being a public company
(iv) a $300,000 increase in our occupancy costs due to the addition of new offices in Dallas, Dubai and Toronto and expanded offices in Singapore, Paris and Chicago; (v) a $260,000 increase in foreign currency exchange transaction losses; and (vi) a $100,000 increase in business development expense which is a direct result of an increase in the number of executive search consultants and increased travel costs.

Operating Income. Operating income decreased $1.4 million to $98,000 for the three-month period ended September 30, 2011, compared to operating income of $1.5 million for the three-month period ended September 30, 2010. The decrease primarily reflects a decrease in net revenues of $94,000, a decrease in compensation and benefits expense of $135,000 offset by a $1.3 million increase in general and administrative expenses.

Net Interest Expense. Net interest expense decreased $59,000 to $1,000 of interest income for the three month period ended September 30, 2011 from $57,000 of net interest expense for the three month period ended September 30, 2010. The decrease in net interest expense is due to a $4.7 million reduction of interest bearing debt to $0.7 million at September 30, 2011 compared to $5.4 million at September 30, 2010.

Income Before Taxes and Income Tax Expense. For the three-month period ended September 30, 2011, we reported income before taxes of $99,000 and recorded income tax expense of $9,000, as compared to income before taxes of $1.4 million and an income tax benefit of $175,000 for the three-month period ended September 30, 2010. The increase in income tax expense was primarily due to a decrease in state and local income tax benefit in the three-month period ended September 30, 2011.

During the first eleven months of 2010 we were not subject to United States federal income taxes because we were taxed as a partnership under federal tax law. Accordingly, no provision or liability for income taxes was recorded for federal income taxes for such period in our consolidated financial statements since any income or loss for such period was included in the tax returns of our members. The income tax expense recorded during the three months ended September 30, 2011 includes federal, state and local income taxes. The income tax expense recorded during the three month period ended September 30, 2010 represents state and local taxes in those jurisdictions that do not recognize entities taxed as a partnership. The Company's subsidiaries are subject to entity-level income taxes in their respective foreign jurisdictions.

Nine-Month Period Ended September 30, 2011 Compared to Nine-Month Period Ended September 30, 2010

Net Revenue. Net revenue increased $7.9 million, or 9.2%, to $93.9 million for the nine-month period ended September 30, 2011 compared to $86.0 million for the nine-month period ended September 30, 2010. Included in net revenue for the nine-month period ended September 30, 2011 and September 30, 2010, was $438,000 and $257,000 in license fees from our associated offices in Latin America. The increase in net revenue was the result of an increase in the number of search assignments on which we were engaged and an increase in the number of executive search consultants employed by us.

Compensation and Benefits Expenses. Compensation and employee benefits expense increased $9.5 million, or 15.2%, to $71.9 million for the nine-month period ended September 30, 2011 from $62.4 million for the nine-month period ended September 30, 2010. As a percentage of net revenue, compensation and benefits increased to 76.6% for the nine-month period ended September 30, 2011 compared to 72.6% for the nine-month period ended September 30, 2010. The increase in compensation and benefits expense was primarily the result of (i) approximately $4.2 million in additional non-consultant compensation costs primarily related to the addition of 37 support staff in recruiting, research and administration;
(ii) an increase of approximately $3.5 million in bonus compensation for executive search consultants for the nine-month period ended September 30, 2011, which was the direct result of higher consolidated net revenue for the nine-month period ended September 30, 2011 as compared to the nine-month period ended September 30, 2011; (iii) a reduction of approximately $3.1 million in discretionary bonus costs; (iv) an increase of approximately $2.5 million in connection with equity-based grants, guaranteed compensation and signing bonuses made to newly hired executive search consultants; and (v) a $2.4 million increase in related employee benefits and payroll taxes.


Table of Contents

General and Administrative Expenses. General and administrative expenses were $19.7 million, or 21.0% of net revenue for the nine-month period ended September 30, 2011 from $16.4 million, or 19.1% of net revenue for the nine-month period ended September 30, 2010. The increase in general and administrative expenses was primarily the result of (i) $660,000 of one-time accounting and tax fees related to being a public company; (ii) $250,000 of fees related principally to human resource, information technology and marketing outsourcing; (iii) $400,000 related to ongoing costs of being a public company;
(iv) an $800,000 increase in our occupancy costs due to the addition of new offices in Dallas, Dubai and Toronto and expanded offices in Singapore, Paris and Chicago; (v) a $750,000 increase in business development expense which is a direct result of an increase in the number of executive search consultants and increased travel costs; (vi) a $200,000 increase in foreign currency translation losses; (vii) a $200,000 increase in communication expenses; all partially offset by a $250,000 decrease in legal fees.

Operating Income. Operating income decreased $4.9 million to $2.1 million for the nine-month period ended September 30, 2011, compared to operating income of $7.0 million for the nine-month period ended September 30, 2010. The decrease primarily reflects an increase in net revenues of $7.9 million offset by a $9.5 million increase in compensation and benefits expense and a $3.3 million increase in general and administrative expenses.

Net Interest Expense. Net interest expense decreased $196,000, or 99.0%, to $2,000 for the nine-month period ended September 30, 2011 from $198,000 for the nine-month period ended September 30, 2010. The decrease in net interest expense is due to a $4.7 million reduction of interest bearing debt to $0.7 million at September 30, 2011 compared to $5.4 million at September 30, 2010.

Income Before Taxes and Income Tax Expense. For the nine-month period ended September 30, 2011, we reported income before taxes of $2.1 million and recorded income tax expense of $758,000, as compared to income before taxes of $6.8 million and income tax expense of $46,000 for the nine-month period ended September 30, 2010. The increase in income tax expense was primarily due to an increase in federal income taxes due in the nine-month period ended September 30, 2011. Federal income taxes, as described herein, were not applicable to the firm prior to December 1, 2010.

The income tax expense recorded during the nine-month period ended September 30, 2011 includes federal, state and local income taxes. The income tax expense recorded during the nine-month period ended September 30, 2010 represents state and local taxes in those jurisdictions that do not recognize entities taxed as a partnership. The Company's subsidiaries are subject to entity-level income taxes in their respective foreign jurisdictions.

Liquidity and Capital Resources

General. Our primary sources of liquidity are cash, cash flow from operations and borrowing availability under our revolving credit facility. We continually evaluate our liquidity requirements, capital needs and availability of capital resources based on our operating needs. We believe that our existing cash balances together with the funds expected to be generated from operations and funds available under our committed revolving credit facility will be sufficient to finance our operations for the foreseeable future.

The following table summarizes our cash flow for the periods shown:

                                                Nine months Ended September 30,
                                                    2011                  2010
  Net cash provided by operating activities   $      1,996,536        $ 14,369,155
  Net cash (used in) investing activities           (2,284,012 )          (540,551 )
  Net cash (used in) financing activities             (579,840 )        (5,343,150 )


  Net (decrease)/increase in cash             $       (867,316 )      $  8,485,454

Cash. Cash at September 30, 2011 was $23.0 million, as compared to $13.6 million at September 30, 2010. The increase in cash reflects (i) the closing of our initial public offering in December 2010 as we received net proceeds of $24.4 million; (ii) a decrease in cash provided by operating activities of $12.4 million; (iii) a use of IPO proceeds of $10.0 million as described herein and
(iv) an increase of capital expenditures of $1.7 million.

Cash Flow from Operating Activities. Cash provided by operating activities was $2.0 million in the nine-month period ended September 30, 2011, compared to cash provided by operating activities of $14.4 million in the nine-month period ended September 30, 2010. The decrease in cash provided by operating activities is due to a decrease in net


Table of Contents

income of $5.4 million, a decrease in accrued compensation of $9.4 million, a decrease in accrued expenses of $2.9 million, a decrease in income taxes payable of $1.2 million and an increase in accounts receivable of $7.2 million.

Cash from Investing Activities. For the nine-month period ended September 30, 2011, cash used in investing activities was $2.3 million compared to $0.5 million for the nine-month period ended September 30, 2010. These cash outflows were mainly for capital expenditures.

Cash from Financing Activities. For the nine-month period ended September 30, 2011, cash used in financing activity was $600,000 consisting of $100,000 of payments made on long-term debt and $500,000 used to repurchase shares. Cash used in financing activities for the nine-month period ended September 30, 2010 was $5.3 million primarily resulting from payments made on our credit facility, and by payments made on long-term debt. We have had a committed revolving credit facility under which we may borrow U.S. dollars at LIBOR plus 3.25%. A facility fee is charged even if no portion of the credit facility is used. Our credit facility expires on April 30, 2012. There were no borrowings outstanding under our credit facility at September 30, 2011 and September 30, 2010, respectively. As of September 30, 2011, we had approximately $10.0 million available to borrow. The facility is secured principally by accounts receivable and equipment. Additionally, the Company is required to maintain specified leverage and fixed charge coverage ratios as defined in the Credit Agreement. The Credit Agreement also requires the Company to maintain a minimum net worth based on a formula in the Credit Agreement.

Off-Balance Sheet Arrangements. We do not have off-balance sheet arrangements, special purpose entities, trading activities or non-exchange traded contracts.

Application of Critical Accounting Policies and Estimates

In addition to the critical accounting policies contained in our annual report on Form 10-K, filed on March 24, 2011, the following accounting policy is critical with regard to the preparation of our unaudited quarterly condensed consolidated financial statements:

Annual Incentive Compensation. Each quarter, management records its best estimate of its annual incentive compensation, which on a quarterly basis requires management to project annual consultant productivity, as measured by engagement fees billed and collected by that consultant. At the end of each fiscal year, bonuses expensed reflect final individual consultant productivity. Changes in any of the assumptions underlying the quarterly bonus accrual may significantly impact the compensation liability on our balance sheet and related compensation cost on our statement of operations. Differences between the assumptions used each quarter to estimate annual incentive compensation and actual cash payments made could materially impact the carrying amount of the liability and our operating results.

Recently Adopted Financial Accounting Standards

None

  Add CTP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for CTP - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.