Corporate Executive Board Co's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.12.14 | About: CEB Inc. (CEB)

Corporate Executive Board Co (NYSE:CEB)

Q4 2013 Results Earnings Conference Call

February 12, 2014 / 09:00 A. M. E.T.

Executives

Richard Lindahl – CFO

Tom Monahan – Chairman and CEO

Analysts

Shlomo Rosenbaum – Stifel Nicolaus

Gary Bisbee – RBC Capital Markets

David Ridley-Lane – BofA Merrill Lynch

Tim McHugh – William Blair & Company

Joseph Foresi – Janney Montgomery Scott

Tobey Summer – SunTrust Robinson Humphrey

Paul Ginocchio – Deutsche Bank

Operator

Good morning, and welcome to see CEB's fourth-quarter 2013 conference call. Today's call is being recorded, and will be available for replay beginning today and through February 24th by dialing 719-457-0820. The replay pass code is 2718919. The replay will also be available beginning later today and through February 24th at the Company's website.

To the extent any non-GAAP financial measures discussed in today's call, you will also find a reconciliation of that measure to the most directly comparable financial measure calculated according to GAAP by going to the Company's website, and following the Investors link to yesterday's press release. You will also find a PDF of the supporting materials that the Company will use in its prepared remarks this morning by going to the Investors page, and following the link to the fourth-quarter 2013 earnings conference call. Please review the second page of these materials, which includes important information about any forward-looking information included in the presentation.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding CEB's expected quarterly and annual financial performance for fiscal 2014 or beyond. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, discussions of forecast, estimates, targets, plans, beliefs, expectations and the like, are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors, among others, set forth in CEB's filings with the Securities and Exchange Commission, and in its fourth-quarter news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

At this time for opening remarks, I would like to turn the conference over to the Company's Chief Financial Officer, Mr. Richard Lindahl. Please go ahead, Sir.

Richard Lindahl

Thanks, Scott. And good morning, everyone. I'm Rich Lindahl, CFO of CEB. Thank you for calling or logging into our fourth-quarter 2013 earnings report. On today's call, I will review our fourth-quarter financial results and discuss our 2014 guidance. Tom Monahan, our CEO, will then take over to share additional insight on our operations in the quarter and review our 2014 priorities. Then we will take your questions.

Please turn to slide 3 of our presentation, where we lay out the key takeaways from today's report. Overall, we are pleased with how 2014 unfolded, as we posted strong results for the year on solid outcomes across the business. Looking ahead, our momentum as we enter 2014 sets us up well for the coming year, and we expect continued progress against our multiyear organic growth and margin targets.

Let's turn to slide 4 for a summary recap of our results. Revenue was $223.4 million in the fourth quarter of 2013, an increase of 15.3% on a year-over-year basis. Adjusted EBITDA margin was 25.7% in the fourth quarter compared to 27% in the fourth quarter of 2012. Diluted earnings per share was $0.37, and non-GAAP diluted earnings per share increased 21.7% to $0.84 in the fourth quarter of 2013. For the full-year, 2013 revenue was $820.1 million, an increase of 31.7% over 2012. Adjusted EBITDA margin was 24.8% for the full year of 2013 compared to 27.2% in 2012. Diluted earnings per share was $0.94, and non-GAAP diluted earnings per share was $3.10 or 21.6% higher than in 2012.

Now let's turn to slide 5, and I'll review our key operating metrics for the quarter. CEB segment Contract Value at December 31, 2013 was $610.8 million, up 8.7% versus December 31, 2012, reflecting continued solid bookings growth over the past year. For the SHL Talent Measurement segment, adjusted revenue was $53.9 million in the fourth quarter, an increase of 15.1% compared to the prior year. On a constant currency basis, SHL Talent Measurement adjusted revenue growth was 16.1%. CEB segment wallet retention rate was 97% at December 31, 2013, compared to 102% in the prior year. SHL Talent Measurement segment wallet retention rate was 101% at December 31, 2013 versus 97% in the prior year.

These outcomes reflect both solid customer loyalty in each segment, as well as fluctuations from FX and other factors that we expect will continue within a normal range over time. Total CEB segment member institutions grew 7.2% to 6,530 in the fourth quarter, as we continue to add institutions in both our middle-market and large corporate memberships. CEB segment Contract Value per member institution was $93,500 at December 31, a 1.4% increase from December 31, 2012. This outcome reflects both healthy growth in the business and a slightly higher mix of middle-market members. To illustrate this effect, note that at December 31, CEB segment Contract Value per institution was $142,400 for large enterprise members and $28,100 in middle-market, representing annual increases of 3.9% and 5.9%, respectively.

Please turn to slide 6, and I will review key segment highlights for the quarter. CEB segment revenue was $170.6 million in the fourth quarter, a 9.6% increase from $155.7 million in the fourth quarter of 2012. Excluding PDRI from the CEB segment in both years, growth was 11.4% in the quarter. The SHL Talent Measurement segment contributed $52.8 million of revenue in the fourth quarter, net of a $1.1 million reduction to reflect the deferred revenue fair value adjustment. Revenue in both segments was higher than previously expected, as a number of our members and clients accelerated project milestones or otherwise increased premium service consumption in the fourth quarter.

Moving on to consolidated operating expenses, cost of services in the fourth quarter increased by $6.1 million versus the fourth quarter of 2012. This growth was essentially split evenly across the segments, and reflects delivery costs associated with higher services revenue and seasonal increases in meetings, conferences and travel. Member relations and marketing expense increased by $11.2 million in the fourth quarter versus the prior year. The biggest driver was additional sales headcount, including some forward hiring in the CEB segment and the cumulative impact of investments in SHL Talent Measurement sales capacity.

Commissions also increased on higher cumulative bookings in the CEB segment and stronger sales momentum at SHL Talent Measurement. General and administrative costs in the fourth quarter were up $3.2 million compared to the prior year. The largest portion of this increase was due to personnel added in central functions to support growth in the business. Acquisition-related costs of $4.4 million in the fourth quarter were driven primarily by plant integration expenses, including various marketing costs to promote the CEB SHL Talent Measurement brand. Interest income and other was a net expense of $0.2 million in the fourth quarter of 2013 as compared to net expense of $0.7 million in the fourth quarter of 2012. And this decrease is primarily due to lower foreign currency losses.

Interest expense in the fourth quarter of 2013 was $5 million compared to $6.7 million in the fourth quarter of 2012, reflecting the benefit of our August 2013 credit facility amendment. Total company adjusted EBITDA margin in the fourth quarter was 25.7% versus 27% in the fourth quarter of 2012, consistent with the seasonal pattern we highlighted on our last call. Adjusted EBITDA margin in the quarter was 28.5% for the CEB segment, reflecting both stronger-than-expected revenues and typical expense seasonality. Adjusted EBITDA margin in the SHL Talent Measurement segment was 16.8%, which includes a foreign currency loss of $0.4 million or 0.8% of SHL Talent Measurement segment adjusted revenue. SHL Talent Measurement segment margins reflected seasonally higher services revenues and associated costs, as well as the impact of higher run rate expenses from our investments in segment sales and product delivery capacity.

Depreciation and amortization in the fourth quarter was $15.3 million, a decrease of $0.3 million compared to the fourth quarter of 2012. For the full year, the effective tax rate was 47.1%, which is in line with the estimate we shared last quarter. You will recall that the impact of the PDRI goodwill impairment charge we incurred in the third quarter, which is not deductible for tax purposes, was spread across both the third and fourth quarters. Please refer to Footnote 2 of our – on page 12 of our earnings press release for more information.

Please turn now to slide 7 for select balance sheet and cash flow highlights. We remain in a healthy financial position, with $119.6 million of cash at December 31. Accounts Receivable was $271.3 million, which includes $64 million from SHL Talent Measurement and PDRI. The current portion of deferred revenue was $416.4 million, including $61.2 million from SHL Talent Measurement and PDRI. As compared to the prior year, CEB segment deferred revenue, excluding PDRI, increased by 9.5% to $355.2 million, a positive leading indicator for CEB segment revenue.

We ended the quarter with $515.8 million of total debt on the balance sheet, and our ratio of net debt to adjusted EBITDA was approximately 1.9 times at the end of the year. We also maintain access to additional liquidity via the $193 million of undrawn availability under our revolver. In 2013, the business continued to demonstrate the attractive working capital dynamics of our economic model. For the full-year, cash flows from operating activities grew 21.7% to $148.7 million, representing approximately a 1.4 times multiple of adjusted net income. Going forward, we expect continued cash flow generation at a healthy multiple of net income.

For the full year, we spent $27 million on capital expenditures, largely on application platform enhancements system infrastructure, office build-out costs, and integration items. We continue to focus primarily on dividends for cash distribution, given the attractive margin and cash flow characteristics of our business. In 2013, we paid $30.2 million of dividends for the year, and we are also pleased to announce that our Board of Directors has declared a first-quarter dividend of $0.2625, which is a 16.7% increase over the quarterly rate paid in 2013.

Finally, we did not repurchase any stock during the quarter. And as of December 31, 2013, we still have $47.2 million of availability under the share repurchase program approved by the Board last year. Management will determine the amount and timing of purchases, and the authorization will run through December 31, 2014.

Now let's move on to our outlook. The following comments are intended to fall under the Safe Harbor provisions outlined at the beginning of the call, and are based on preliminary assumptions, which are subject to change over time.

Please turn to slide 8. Overall, our strong results in 2013 and sustained momentum entering 2014 provide a solid backdrop for CEB to make further progress against our multiyear organic growth and margin objectives. We expect adjusted revenue of $895 million to $915 million, and that the reduction in revenue from the deferred revenue fair value adjustment will be approximately $3 million this year. So the GAAP revenue outlook is $892 million to $912 million.

Our current visibility leads us to expect CEB segment top line to grow in high-single digits, as a small headwind from PDRI offsets healthy growth in the legacy CEB business in 2014. We are excited about Talent Neuron, but should note that it is an early stage business, and contribution in 2014 is expected to be modest. We are also pleased with the current trends at SHL Talent Measurement, which we expect will support stronger growth in 2014 on a constant currency basis. However, it's also important to remember that the year-over-year growth comparisons to 2013 get tougher, especially in the back half of the year.

We expect adjusted EBITDA margin between 25% and 25.5%. In the CEB segment, we expected that full-year 2014 margin will be relatively flat compared to 2013, as we continue to reinvest in product development and undertake various technology implementation projects. We will also report Talent Neuron in the CEB segment, and we expect the economic impact in 2014 to resemble a particularly aggressive new product launch schedule. Accordingly, we expect modest revenue contribution in the range of $1 million to $2 million, and operating expenses of about two times revenue, given the interplay of subscription bookings and an aggressive plan to bring the tools to market quickly.

For the SHL Talent Measurement segment, on a constant currency basis, we are planning for further margin improvement, as that part of our business grows into the investments we made in 2013. It is important to note that current foreign exchange rates are sufficiently different from their averages across 2013 to produce a roughly 80 basis point headwind on 2014 total company margin improvement. While our margin guidance has incorporated this FX headwind, you can see that on a constant currency basis, we expect the business to generate meaningful margin expansion this year.

Let me provide a few data points on how FX affects our results. Our largest currency exposures are to the British pound, the euro, and the Australian dollar. Our 2014 guidance was developed based on where these FX rates ended in 2013, or approximately $1.65 for the British pound, $1.38 for the euro, and $0.89 for the Australian dollar. While we will continue to hedge a portion of our CEB UK cost exposure, we'd suggest you consider the following rules of thumb if you monitor changes in these rates. For every 1% increase in US dollars per British pound, our full-year adjusted EBITDA will be reduced by approximately $700,000. Conversely, for every 1% increase in US dollars per euro, or US dollars per Aussie dollar, full-year adjusted EBITDA will rise by approximately $300,000 and $400,000, respectively.

Depreciation and amortization in 2014 is expected to be between $65 million and $67 million. This anticipated increase over 2013 is driven by higher capital expenditures in 2014 and the completion of several multiyear projects, including implementation of a new content management system, a major upgrade to the SHL Talent Measurement client-facing platform, and a new HR information system to support our global employee base. We are also upgrading our data centers to provide additional capacity to support cost-effective growth in our business. As a result, capital expenditures in 2014 are anticipated to be approximately $30 million to $34 million, which is consistent with the 3% to 4% of revenue range that we expect to see going forward.

I'll comment now for a moment about our tax rate. We still expect an ongoing normalized effective tax rate in the range of 37% to 39% over time. For 2014, we have assumed a 39% effective tax rate. As always, the key determinant of the consolidated effective tax rate is the allocation of pretax income across jurisdictions. Due to the amortization of SHL acquisition-related intangibles in foreign jurisdictions, we have foreign pretax losses which are benefited at lower rates than our US pretax income, resulting in a higher overall effective tax rate.

Of course, the actual rate will be influenced by many factors, including foreign currency translation gains or losses, discrete items that are not currently recognizable under US GAAP, and tax planning strategies. And, as you will recall, we had a one-time benefit to our non-GAAP EPS in 2013 due to a one-time tax event in the UK, which creates some noise in the year-on-year comparison. Incorporating all these factors, our outlook for 2014 non-GAAP diluted earnings per share ranges from $3.15 to $3.40. This guidance reflects solid revenue growth, improved adjusted EBITDA margin, and lower interest costs, somewhat offset by expected increases in depreciation expense and an effective tax rate at the high end of our target range.

Finally, we expect to see strong cash generation again in 2014, and that the ratio of cash flows from operations to adjusted net income will remain at a healthy multiple consistent with historical patterns. While we don't provide quarterly guidance, I will share a few thoughts on what to expect as we progress through the year.

Overall, we expect similar seasonal trends in the CEB segment as we have seen in the past, which implies a lower sequential revenue trend in the first quarter, followed by sequential quarterly increases throughout the year. In the SHL segment, we expect broadly similar seasonal patterns as seen in 2013, albeit with a larger revenue decline in the first quarter of 2014. In both segments, based on customer demand, we saw some revenue accelerate into the fourth quarter, which requires us to rebuild pipelines coming into the year, and will likely lead to larger seasonal revenue declines in the first quarter.

On the expense side, in both segments, we are working hard to deploy many of our growth investments earlier in the year. In addition, we expect to see seasonal cost elements that drive expenses higher in the second and fourth quarters. All of these factors are again likely to drive margins lower in the first half of the year before they improve in the second half.

That's it for the financial summary. I will now turn the call over to Tom, who will share more color on our operations and growth strategy.

Tom Monahan

Terrific. Thanks, Rich, and welcome to everyone who has joined for today's call. I'm proud of our efforts in 2013 and we appreciate the opportunity to update you on the CEB story. In my remarks, I will provide additional insight into our operations in 2013, and lay out our priorities for delivering growth and impact in 2014.

Let me start my remarks on slide 9. As Rich shared, we are pleased with how 2013 unfolded. We delivered healthy organic revenue growth and margin performance in all of our markets. We achieved this result while also making important strategic investments that deepen value to members, and laid a platform for solid long-term growth.

Let me share some highlights from each of our markets. These headlines are laid out across slide 9. I'll start first with the CEB segment. Our oldest and largest market, the CEB segment in North America, continues to generate solid growth in both large enterprise and middle-market. We are obviously pleased to see this bellwether for overall firm performance consistently produce healthy results. We continue to see vast opportunity within large enterprise and middle-market to create new relationships and deepen them across time.

As we have discussed, the only sour note in North America was the lack of opportunity in the federal government sector. As you know, it's less than 5% of our total result, but it was challenged in 2013. You may recall that we began shifting people and solutions toward more immediately available private-sector opportunities late last year. While we do see government beginning to stabilize, we don't anticipate changing our current strategy in 2014.

Outside of North America, we are seeing our European and Asia-Pacific businesses begin to converge around our firm average growth rate. Our CEB segment in Europe produced solid results in 2013 and capitalized on momentum that has been building for several quarters. The team closed the year strong, and the regional growth rate is continuing to strengthen on a constant currency basis, though it has not yet caught up to the overall firm growth rate. While we are still mindful of some of the longer-term macro difficulties facing these markets, we do plan for consistent growth in 2014, and have been adding teams and resources to address underpenetrated markets.

Our Asia-Pacific business also continued healthy growth in the quarter. While we still see opportunity in the market and strength in the business, currency headwinds did temper our annual growth rate a bit. We remain excited about our efforts in the region. And as we mentioned in prior calls, this market is strategically important to building our global presence.

Our SHL Talent Measurement business also delivered a strong close to 2013, with all regions contributing to growth. Our European and UK teams performed well despite soft economic conditions for most of 2013, and the emerging markets team continued very steady performance across the year. Importantly, we also saw momentum continuing to build with our North America team, which we see as a major opportunity in the years ahead.

We are pleased with the progress in this business. You have seen us strengthening trajectory in the past three quarters, with growth rates at and beyond historical norms. This momentum will allow us to sustain a very healthy organic growth rate in that business across 2014. While we do continue to gather momentum, it's reasonable to expect that our 16% constant currency growth rate will be at the high-end of our near-term range for this business. The quarterly result benefited from some accelerating client usage of professional services and a weak 2012 comp. We also see near-term revenue growth numbers moderate a little bit as we convert more and more of this business to repeatable subscriptions. At a macro level, we believe our best work is still ahead, as we work to tap the significant market opportunity and generate returns on our investments in this business.

In summary, I am proud of what our teams accomplished in 2013. Our financial performance is clear evidence that we create real value for our members, as we unlock the potential of organizations and leaders by advancing the science and practice of management. As we entered 2014, our own business plans are rooted in the realities our members face. We annually benchmark the operating plans of the 6000 companies we serve, and see cautious optimism in the coming year. With rising expectations for revenue growth but moderate investment plans, there is real focus on precision in managing the levers of corporate performance.

We are excited about the opportunity to help our members navigate this environment with advice on key workflows, such as managing talent, shaping corporate IT, influencing customer behavior, and managing risk. We know that our unique insight and the powerful support we provide creates real and lasting economic value for our members and clients.

Please turn to slide 10 for a view on our priorities for 2014. We have four key areas of focus. First, continuing to reinvent the development and delivery of management insight. Second, leading the analytic transformation of talent management. Third, expanding the frontier of our brand and impact. And fourth, laying the foundation for future growth.

Let me share some detail on each of these priorities. Please turn to slide 11 for an update on our first priority – continuing to reinvent the development and delivery of management insight. The CEB business model remains a unique approach to providing executives with the advice and support they need to do their jobs effectively. We radically shift the cost and value curve for advice and deliver transformative outcomes for teams, functions and companies. But doing this well means that we must develop unique insights into the drivers of performance, and link them to member thinking, decisions and work.

You see our goals for the year articulated on the left-hand side of slide 11. In 2012, we'll sustain our focus on developing uniquely powerful insights into the drivers of corporate and functional performance. Our research initiatives and work to build world-class data sets produce powerful insights unavailable elsewhere. This is a perpetual area of focus in our business, and we will share highlights throughout the year.

You can see just one such example to the right of slide 11. Our members asked us, why succession planning efforts so often failed. You see just a few of the reasons to the right-hand side of this slide. I will double-click on just the first column. Our work uncovered the insight that many firms were building pipelines to nowhere, as 13% of leadership and CXO positions were eliminated in the past year, and 31% of leaders rising to that level were asked to take on roles that didn't previously exist. So leadership pipelines built around a stable executive team were likely to produce very disappointing results.

I won't walk across the rest of the findings, but you can safely assume we assembled a set of alternative succession management strategies, and immediately useful best practices and tools, to help members solve these problems. You can imagine how powerful these insights are in C suites and boardroom conversations, and how valuable it is for people to have tools that accelerate and increase the impact of their work.

We also continue to personalize the member experience through technology, advice and tools. As Rich mentioned, we have been working behind the scenes on a major overhaul of several of our important technology platforms. We are particularly excited about the launch of the new architecture supporting all of our member portals. With our build largely complete, we will be rolling out a new suite of tools that will offer more personal delivery of content and more direct links to critical workflows. We know that usage drives impact, renewal and cross-sell, and this will be a powerful resource for increasing usage of our great resources.

This year, we will also work on developing upgrade paths that make it easier for members to add additional levels of support and wider ranges of our products. With a broader array of solutions available to individual members and clients, we're working to make it easier to find and add the support they need. Over time, this will drive growth across the product sets and allow us to grow average Contract Value per subscription. We track our internal progress on these priorities in a variety of ways; but ultimately, our success here is measured in the depth and breadth of our member and client relationships.

Please turn to slide 12 for an update on our second priority, meeting the analytic transformation of talent management. Our work to understand the drivers of corporate and functional performance continually reveals talent as critical to corporate and key function success. However, most companies don't yet manage human capital with the same rigor as other important corporate assets. Our goal is to change that. We see the opportunity to apply intelligence to the talent management workflow by adding tools and solutions that make it easier and cost-effective to manage this essential asset.

We have been successful in building great offerings that provide this support, but we have more work to do. We will start by continuing to grow the impact of our SHL Talent Measurement business. As Rich and I have discussed, the trend line in this business is very positive. And we think we've put the right investments in place to support continued healthy growth and long-term margin expansion.

We have also undertaken a number of important initiatives to position CEB at the forefront of the talent management revolution. Our goals for the year are, again, laid out in the left-hand side of the slide. In 2014, we'll continue to wrap our uniquely predictive data and insights in technology that ties CEB to talent decisions. The most exciting initiative in this business this year is the rollout of our new Topaz selection and assessment platform. We have been investing in and developing this for more than a year now, and we are commencing rollout across the next several quarters.

The system promises great new functionality to both employees and candidates being assessed, and to HR departments looking to configure analytics and link them to core processes. Early customer feedback has been promising, and we look forward to introducing the platform more fully to our customer base and partners across the year.

We will also seek to combine our assets in unique ways to create innovative new solutions. Let me share just one quick example. Our CEB Corporate Leadership Council has great insights in how best to retain and manage high potential employees. And our SHL Talent Measurement business has unique tools for identifying and tracking them. Linking these insights, particularly in a strengthening economy where high potential employees will be highly sought after and recruited, will create a powerful new tool for member companies to identify and retain their most important future leaders.

Finally, we continue to seek additional portions of the talent management workflow that can benefit from our support. We spend significant time understanding the unique needs of our members and clients when it comes to talent management. These efforts have helped us produce a roadmap of opportunity for developing future offerings. And we seek to bring these to market either through organic development efforts and sometimes through selective acquisitions. You saw us do the latter with our acquisition of Talent Neuron, an innovative early-stage solution that provides global talent market intelligence data, software and decision support.

Members have been asking us for years for help in adding intelligence to the workforce planning process, which is the key link between strategic planning in the strategy group and operational HR. This solution helps in all facets of workforce planning and optimization, with real-time intelligence on job and skill-specific talent availability, demand, and total cost of ownership across 600 cities; job postings from 7500 companies, and 90 detailed roles and functions globally. You can see on the right-hand side of this slide a visualization of the data and resources that Talent Neuron aggregates to generate a variety of applied insights for users. The platform is currently used by a small set of 20 blue chip customers, the overwhelming majority of whom are currently served by CEB.

In reflecting on the HR function's use of talent analytics like this to provide comparative advantage, one early user remarked, it's necessary to have the timely accurate supply data that Talent Neuron provides. CEB Talent Neuron's capabilities will provide the foundation for a new suite of offerings in the planning and analytics category of our talent management business.

Please turn to slide 13 for an update on our third priority, expanding the frontier of our branded impact. Even with our track record of sustained organic growth, the size of our business does not come near to matching the impact we have on our members. There are two obvious gaps for us to close as we continue to grow the business – raising the overall profile of our business in all markets through a stronger brand, and targeting specific underpenetrated markets for focused investment in growth.

This recognition creates two areas of emphasis for us, which you can see on the left-hand side of the slide. First, raising global visibility and awareness of the CEB brand and our capabilities. We have been vocal in our desire to build a clear compelling story about CEB in all of our markets. Doing so creates demand for our products, but also supports our members as they bring our solutions into boardrooms.

Second, penetrating and growing key global markets. Our overarching goal is to combine global authority with local relevance as we bring our resources to market. Critical to both efforts is penetrating key global markets. Doing so ensures authority, as we access the best ideas wherever they exist, and relevance as we shape our offerings to resonate with local market needs. A great example of this has been the work we've done to strengthen our German presence across the past couple of years, beginning with our acquisition of Baumgartner & Partner, and supplemented by our SHL Talent Measurement team in the region.

We've continued to invest behind these strong teams on the ground and saw strong growth throughout 2013. The image on the right-hand side of the slide is the cover of the German edition of the Harvard Business Review. Our challenger work was featured last year, and helped raise the visibility of our offerings in this fast-growing and large market.

Finally, our fourth priority on slide 14 is continuing to lay the foundation for future growth. Our goal every year is not only to execute sharply against the current year's plan, but to make sure that we are setting up the subsequent years for continued impact on members and sustained growth. You see our two main goals listed on the left-hand side of the slide. The most important part of this is always continuing to build a world-class CEB team. 2013 year was a great year on the talent front. We enjoyed strong retention of our high performers, netted hundreds of top tier talents in key roles. As you can imagine, we are rigorous about measuring talent outcomes at this firm, and we performed at the high-end of our historical ranges on many.

We will continue our efforts in 2014, focusing on building a world-class home for engaging work, compelling careers, and rich development opportunities for our people. At the same time, we look for opportunities to support and enable our great talent with investments in firm-level infrastructure. We continually roll out new investments in training and tools to help our people become more productive, and we have an ambitious agenda for this in 2014. You can see on the right-hand side of the slide that we now leverage the talents of nearly 4000 staff in 50 offices around the world to generate impact. And our job is to put in place the tools and resources that support every-day excellence.

So to summarize my remarks on slide 15, we are pleased with how 2013 unfolded as we achieved solid results across the business. We delivered healthy organic revenue growth and margin performance in all of our markets. We did this while also making important strategic investments that deepened our ability to provide surplus business value to our members, and build a platform for future growth. As we look forward in 2014, we have much work ahead, but we entered the year with momentum, opportunity, and the skilled team to capitalize on both.

Rich and I will now take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we’ll first go to Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum – Stifel Nicolaus

Hi. Thank you very much for taking my questions this morning. Tom and Rich, can you talk a little bit more about the professional services component of SHL? And is there a seasonal cycle to that? Can you explain exactly what you are doing, and what your efforts to convert some of the professional services type effort to kind of a recurring contract?

Tom Monahan

Shlomo, it's Tom. If you look at the SHL business, it breaks roughly into 70% subscription and/or highly recurring contracts that are usually on the core technology platform, and selection and assessment instruments; and 30% is services tied to and related to those tools and resources. And what you find is the professional services component of the business usually is at one of two levels, either at the front end of a new usage of a new tool, a new product, et cetera, where they need a little help configuring exactly what they want to get done. They know they want to use these technologies and tools to make better decisions; but which population, which region, which cut score, which thing do they want to influence? And that is a human interchange – a smart person sitting down with them and helping them think about that, really helps them get the better outcomes.

And then often, as they deploy the tools and resources, there's always room for interpretation. What exactly is this telling me? How can I make better decisions? How can I drive better outcomes? So there's a consistent engagement. Some of that does get bundled into the subscriptions, but a fair bit is actually consumed as people use the tools and services. We're – obviously, it's good revenue, so we're pleased with it.

Second, we think it's a good indicator when people are using more of it sooner, because it means they are deploying the tools more broadly, using it to apply to better and more frequent interactions with their labor markets, et cetera. So we think the acceleration usage we saw is a healthy indicator. Over time, as subscriptions grow in that business, some of that gets bundled in, it will be less visible as it moves between quarters. But right now, because it's built out as it's consumed, it shows up when they use it.

Shlomo Rosenbaum – Stifel Nicolaus

And was the usage that we are seeing right in the last quarter, the high usage – was it a – the front-end or the back-end? In other words, does this kind of illustrate that we have more demand coming up? Or is this, hey, we've already instituted stuff over the last year, and now we want to get more insight out of what we've got?

Tom Monahan

Yes. I think both is the answer. In this business always you're going to see a little more seasonal activity in the second and fourth quarter, just because that's when people tend to do stuff. Third is a little quiet – it's summer; people aren't making a lot of decisions about promotions inside their company or hiring outside it. So, you do tend to see a little bit more seasonal activity. And in Q4, we just saw an acceleration of that.

Shlomo Rosenbaum – Stifel Nicolaus

And then, could you – Rich, maybe you could talk about this. You had Contract Value growth of about 8.7%. But if you do the math, I'm coming up with bookings growth of 10.1%. And is there – could you kind of bridge that a little bit in why I'm not seeing a higher Contract Value growth reflective of those bookings?

Richard Lindahl

Sure. There's a couple factors at play. As an overview, you are seeing a little bit of a different trend in terms of how the business flows from bookings into Contract Value into revenue, due to the timing of some of the services revenue. And some of the projects, some of the premium service consumption has a shorter timeframe to be consumed than a typical contract itself. So it will move through Contract Value faster.

You also have some impacts from FX and also the impact of the historical impact of the government factors that we talked about earlier. So, Contract Value is a little bit more of a cumulative look-back type of metric, where the bookings are more kind of real-time in the quarter activity.

Shlomo Rosenbaum – Stifel Nicolaus

Okay. And then is there a way we should think – can you talk a little bit more just about SHL margin progression through the year? And then – from a seasonal perspective? And then just in general how we should think of the margin progression in a multiyear period.

Tom Monahan

Yes. I mean, I think you're going to – you're certainly going to see improvement in margins throughout the full year of 2014. That's what we would anticipate happening. You will see some seasonality in there as well, consistent with some of the revenue trends. So, as revenue declines into the first quarter, which is our expectation, you should see a lower margin relatively there as a result. That should pick up again in the second quarter on stronger revenue and such.

I think, over time, we still think that they should be able to – we should be able to move the margins back closer to where that company was performing on a margin basis at the time of acquisition. But that's still going to be a process over probably a couple-year period.

Shlomo Rosenbaum – Stifel Nicolaus

Okay, I'm just going to leave with a last question. Can you just talk more qualitatively on the progression in the cross-sell in the US, which seemed to be the most immediate opportunity for SHL?

Tom Monahan

I think, Shlomo, we're early days still. We saw North America continue to gather momentum in the SHL business, and we certainly have seen good, promising early indicators in terms of cross-selling across both businesses. But to be honest, the richer opportunity is still ahead of us. We see good indicators. We've got good processes in place. But we are not – I think it was a minor contributor to the great performance of that business in the quarter. I think more of the great performance of that business was just teams going out and executing incredibly well on the opportunities in front of them.

Shlomo Rosenbaum – Stifel Nicolaus

Okay, great. Thank you very much.

Operator

Next, we’ve got Gary Bisbee with RBC.

Gary Bisbee – RBC Capital Markets

Hey, guys. Good morning. Just – I wanted to ask about the revenues. And it sounds like FX is definitely one factor. But you said a quarter ago, midpoint of the guidance, now the adjusted revenue guidance implies 8 to 10, which is in the lower half of the range. So, PDRI is probably a little weaker. FX, it sounds like, is a bit of a headwind. Are those the two primary factors? Or is there anything else that's led to a bit more conservatism?

Richard Lindahl

No, I think those are certainly factors. I'd say the guidance certainly reflects our current visibility and plans for the year, and it's definitely inside the long-term range. I think you're – there is a little bit of noise when you're looking at the year-over-year comparison, based on the fact that we did accelerate some revenue into the fourth quarter of this year that we had otherwise expected to come in the first quarter. So, there's a little bit of a shift there that dampens those growth rates a little bit. And then, as you said, kind of FX is a headwind still, and PDRI is also a small headwind.

Gary Bisbee – RBC Capital Markets

Can we get a little more color on that concept of pulling sales forward, and now you need a pipeline build, was how I think you said it? What exactly happened? And how quickly do you think that gets back on track?

Tom Monahan

Gary, if you think about the way this – when a customer, let's say in the CEB segment, buys a subscription, sometimes they will package in a little bit of a premium service. Think about a company that wants to use all our great sales data but also wants us to do two one-day kickoffs in each of its divisions, to share the key findings of what we've learned and how it applies to them. The bulk of the revenue comes in the form of a subscription that we recognize across the next 12 months. But we have to – as we talked about a couple years ago, we have to recognize those two one-day events when they occur.

And normally, it has a pretty standard set of distributions. We saw more people in Q4 saying, hey, I want that kickoff in December versus January, which moves revenue from one year into the other. So that was in Contract Value. It drops through revenue in the quarter. And obviously, we think it's great, because it means people are using our work more often and frequently sooner, which is fantastic. So we're – our answer is, sure, when they ask. But it means that when we open the doors on January 1, some things that would have been in CEB last year at this time have moved already through revenue, and puts us a little bit in a position where we need to rebuild that revenue profile. Does that make sense?

Gary Bisbee – RBC Capital Markets

That's great. Yes, it does. And then the member relations and marketing expense grew quite a bit sequentially. I think you said there was some pulling forward of sales hiring or sales hiring ahead of 2014 for the CEB segment. In light of that, how should we think about that in absolute dollar terms trending? Is it likely to be flattish in the next quarter or so? Or do we see a continued growth progression in that expense line?

Tom Monahan

You are saying, what's the sequential trend in member relations and marketing?

Gary Bisbee – RBC Capital Markets

Yes. I mean, it was up a little more than $5 million sequentially. And I think you said you did some hiring ahead. If you did the hiring ahead, does that mean it's sort of a flattish trend in the next quarter or two? I'm just trying to think through Q1.

Richard Lindahl

You know, it's flattish to potentially a little bit down, just based on some of the other activities that occur in the first quarter that are more variable, you know, things like travel and such like that. But certainly, the hiring, a large portion of the hiring was done as we came into the year. There's still going to be more hiring as we go through the year. But that was a big component.

Another component was, frankly, some additional incentive accruals based on performance in the fourth quarter, which was better than we had anticipated before. So that drove kind of a higher incentive rate in the fourth quarter. And obviously, performance in the first quarter will have an impact on where those land for first quarter. But that might normalize a bit as we go into this year.

Gary Bisbee – RBC Capital Markets

And then just one last one for me – are you willing – do you have the data or could you share with us – in the past, in the fourth quarter, you have given us the Contract Value growth in the year for your top 200 customers. Did that number continue to trend at a higher rate than the total Company growth? Thank you.

Richard Lindahl

Yes, it was a little bit higher than the total Company. The total Company Contract Value per institution was about 1.4%. That top 200 number went up by 2%, 3%.

Gary Bisbee – RBC Capital Markets

Okay. Thanks a lot, guys.

Operator

And next we’ve got a David Ridley-Lane with Bank of America Merrill Lynch.

David Ridley-Lane – BofA Merrill Lynch

Yes. Thank you. So the CEB segment wallet retention has been ticking down a little bit through the year. Any trends you've been seeing on renewal rates among clients or perhaps among membership programs?

Tom Monahan

Hey, David. We expect that number to bounce around a little bit within a healthy zone, and we certainly think we are in a healthy zone. A couple factors pushed it down versus last year's comp, just down marginally. One is – remember last year, we had a small one-time benefit from the inclusion of Alterra still flowing through that number. This is – if you think about this number – this is also where the currency and government headwinds flow through. Government was the place where, in essence, we had every customer in government. And on balance, they bought a little less from us. So that's going to flow right through.

Beyond that, though, I think we saw consistent strength across the business and across the regions – setting aside US government as a small sour note – consistent strength across the regions on a constant currency basis in renewal rate, in cross-sell, et cetera. So all the customer dynamics remained really healthy, and that's why that number is in a good zone to start with.

David Ridley-Lane – BofA Merrill Lynch

Okay. Maybe a quick one for Rich. Any range on the acquisition-related costs that you expect in 2014?

Richard Lindahl

You know, I think there will be a little bit coming through on Talent Neuron through the year, as we integrate that business. But certainly nowhere near what we saw in 2013. We are not going to be reporting any more acquisition-related costs related to SHL in 2014.

David Ridley-Lane – BofA Merrill Lynch

Got it. And then maybe one last one – can you give us – I know in the CEB segment, you've been focused on software tool add-ons and training, and other revenue sources outside the core membership revenue. Can you give us an update for, in the CEB segment, what percentage of revenue now comes from those non-membership sources?

Tom Monahan

David, about 10%, still. We are adding those things. We think the primary objective is to help people use the core membership programs more. And that's really what we are seeing. They drive great occasions for us to make the products stickier, and activate broader usage. And so, the percentage of overall CEB segment revenue hasn't moved much, even as the business has grown.

David Ridley-Lane – BofA Merrill Lynch

Okay. Thank you very much.

Tom Monahan

You're welcome.

Operator

Next, we’ll go to Tim McHugh with William Blair.

Tim McHugh – William Blair & Company

Yes. Excuse me just following up on some of the other questions about the headwind from foreign exchange, and I guess, the timing of some revenue movement forward. Can you quantify any of that at all for us? For – I think, foreign exchange, I guess you did, but how much revenue moved forward relative to what is normal – or how much Contract Value moved forward relative to what's normal? And then the drag – I guess, how much of a drag in Contract Value from the government?

Tom Monahan

As far as the – roughly $5 million of revenue was in the fourth quarter number that accelerated from where we otherwise would have thought it would have been in the first quarter. As far as the government drag on Contract Value, certainly, that business is showing signs of stabilization. And we have very modest expectations for that business for this year. So it's not going to be, certainly, a contributor to Contract Value growth in the year.

Richard Lindahl

Were you looking for a backward look at government or a forward look?

Tim McHugh – William Blair & Company

Yes, I guess what I'm trying to get at is kind of, if you strip out government and I guess this timing thing, is the underlying trend for North America faster or slower than before? Given – it sounds like Europe had a good close to the finish. And given the overall number is down, I'm trying to understand all those puts and takes, and understand if the core kind of North America business slowed a little or is kind of still trending in line?

Richard Lindahl

I think the core North American business in both large enterprise and middle-market corporate is a blessed sense of no news at all. It continues to make great progress, I think, very consistently across the quarters and across the years.

Tim McHugh – William Blair & Company

Okay. And then on SHO, where – so you're talking about, excluding foreign exchange, some pretty healthy margin lift, it sounds like. So, I am assuming you are not adding a ton of sales people at this point, but what would be your thought on continuing to invest in that sales force? Is there the potential that you start to see, as you start to see productivity of that sales force, you will make another round of significant investment? Or are we more in the harvesting phase of that investment for the next two years?

Tom Monahan

I think our view longer-term is we'll grow the sales force roughly in line with the revenue growth. It's served the other CEB segment pretty well. So, given the healthy growth in that business, and given the systems and processes we have put in place, we think we've built a great platform to continue adding salespeople at a rate consistent with the high levels of growth we see there.

Tim McHugh – William Blair & Company

Would that be true even this year? Or do you wait to see some productivity from the large amount you added last year?

Tom Monahan

Yes, we're certainly selectively finding some places to add capacity. But we did do a one-time step-up that we're still digesting a little bit. But you do see some impact on the – you do see some impact already from the investments we made last year.

Richard Lindahl

You're certainly not going to see anywhere near the same magnitude of investment that you saw in 2013.

Tim McHugh – William Blair & Company

Okay. And somewhat related to that, just a little bit more long-term, but now that you've had this business for 18 months or so, the margins obviously came down a lot last year, in big part, I think, because of the sales force investment. But is there any reason, as you see that sales force mature, that you want to get back to historical margins looking out three years or something like that?

Richard Lindahl

I think that's certainly our objective. And we don't see any reason why we shouldn't be able to get back to that level of margins. It's not going to happen this year. And it's going to depend on us getting the full leverage out of the investments we've made and continuing to progress on the path we're on. And we feel good about the direction that we're heading in.

Tim McHugh – William Blair & Company

I guess just – and one more follow-up. How is pricing for SHO relative to the trends? I don't think I've heard you say a lot about the pricing trends relative to where you've been. Are they flattish? Are they up or down a little?

Tom Monahan

Yes, I think there's a little noise as the conversion to subscription continues to unfold. Because, in some cases, when you convert to a subscription, you probably give up a little bit of the marginal pricing of a spot buy, but overall pricing trends are very healthy.

Tim McHugh – William Blair & Company

Okay. Thank you.

Operator

Now, we’ll go to Joseph Foresi with Janney Montgomery Scott.

Joseph Foresi – Janney Montgomery Scott

Hi. I was wondering just on – my first question here, the guidance seems to be at a very kind of wide range here. Maybe you can help us understand the differences between the top and bottom of those ranges as far as assumptions?

Richard Lindahl

In terms of just the revenue piece or the EPS?

Joseph Foresi – Janney Montgomery Scott

Well, I think – actually, I think you explained sort of the FX in the margin side, so more on the revenue side, yes.

Richard Lindahl

Yes. Well, certainly, just as always, there's going to be – a lot is going to depend on execution. There's going to be certainly some impact in terms of overall economic conditions. We feel like conditions are pretty stable right now. We've seen some improvement in Europe. We certainly, as Tom said, still see very solid conditions in North America. We're – but it's largely going to depend on execution of the entire team as we go through the year.

Joseph Foresi – Janney Montgomery Scott

Okay. So – okay, then. Maybe just ask it a different way. On the Contract Value, we spent a lot of different time there. How does that look as we go through the year? Obviously, we had FX and PDRI in the fourth quarter. It sounds like there was some pull forward of some business. You talked about rebuilding the pipeline. What's the progression of Contract Value as you look at the demand environment right now as we go through 2014?

Richard Lindahl

Yes, well, I think generally speaking, it should follow the same kinds of seasonal trends that you've typically seen. And typically, Contract Value will dip a bit in the first quarter and then grow as we go throughout the year. And it's going to grow over longer periods of time in line with bookings growth. And we are at a level right now that, generally speaking, bookings are in line with that – those long-term ranges, and Contract Value should be following along with that as well.

Joseph Foresi – Janney Montgomery Scott

Got it. So, step-down from this level in the first quarter and then build along with the rest of the revenues? Is that fair?

Richard Lindahl

Yes.

Joseph Foresi – Janney Montgomery Scott

Okay. And then, lastly, on the SHL growth profile, I don't know if I misheard this, but I think it's showed up at about, I don't know, 16%, that the growth rate has been pretty good in the business. I think you might have mentioned that that seems like a high water mark. Maybe you could just walk us through the growth profile for that business going forward and what your thoughts are there.

Tom Monahan

Sure. I think – we obviously are excited by the momentum that business has continued to show over the last three quarters. And we think as the business continues to grow, we see plenty of opportunity for healthy growth in our traditional 8% to 13% organic growth rate. This was a little bit beyond that because of some one-time client deliveries, et cetera. And there's probably not a major headwind but a minor headwind, as more and more of that business converts to subscription. When someone converts to a subscription in the first quarter, that probably moderates their revenue growth a little bit.

So when you take all those factors into account on one side – incredibly vast opportunities out in front of us, great execution by the team, and a little bit of a headwind from conversion to subscriptions – we think that, consistently, you will see that business in the 8% to 13% range. Obviously, this quarter, we got out ahead of that. And no one gets punished when that happens, but I think it's reasonable to expect it will be in that range more often than it's out of it.

Joseph Foresi – Janney Montgomery Scott

Yes, you can feel free to get out ahead of it more (laughs) but – the last question, just on SHL. Going forward, do you think that – is there the potential that you may receive some level of upside on your aggregate numbers as the margin profile improves, and as growth rates stay – moderate and/or stay strong? I'm just wondering if what you're building into the progression going forward that, on an aggregate basis, there's certainly the potential that SHL outperforms, particularly because it's technology-based?

Richard Lindahl

Yes. I mean, I think, certainly, there is some potential over time to get better leverage there, and that would be one of the things that should drive us back towards those historical margins over time. I think for this year, we definitely expect some improvement but not step function-level improvement.

Joseph Foresi – Janney Montgomery Scott

All right. Thank you.

Operator

Now we’ll go to Tobey Summer with SunTrust.

Tobey Summer – SunTrust Robinson Humphrey

Thank you. I was wondering if you think you're taking share in SHL?

Tom Monahan

You know, if you think of share as what percentage of talent decisions that people make using any resource other than their own judgment, absolutely. Yes, that's – the longer-term opportunity here is not really between other assets in the space. The longer opportunity is to convert more and more talent decisions to having rigor and quantitative analysis behind them. One of the statistics we came across recently is that your average fantasy football player consults four information sources before making a decision above 13. Your average corporate manager consults none.

So we see a major opportunity to just keep getting more rigor, more analysis, and better decision-making into how people think about talent in their organization. So, that's a long-term trend that we think benefits – and the growth in the business indicates we are doing that every day.

Tobey Summer – SunTrust Robinson Humphrey

Sure. But relative to players that are in the space selling different services to help effect the same broader change in the way managers behave, how do you feel the growth is in SHL? How does it compare?

Tom Monahan

Yes. I think we've got such a strong resource base that we can put – someone who is really serious about improving the quality of their decisions would have a very hard time looking elsewhere for help. And I think our teams feel that we are very well positioned. And I think the data seems – or the data we can gather seems to indicate that we show pretty well in putting the value of our tools in front of people, and displacing other tools, or making sure that people use more of our tools versus taking other resources into their organization. We feel good about the quality of the resources and the conversation that allows us to have, as people automate and instrument more of these decisions.

So we feel good about the trend line on that front. I do think the larger opportunity is still gathering more decisions, even as we continue to compete for and win the ones that people have an intention of using help on.

Tobey Summer – SunTrust Robinson Humphrey

Thank you. And the people that were involved in the government customer base that were kind of repositioned and repurposed last year, is there a ramp time for them to be productive with commercial customers? Or is that transition relatively quick?

Tom Monahan

The answer is kind of all the above, with a couple of the senior – we still have a great team in place in government. The government business isn't going away. So the CEB.gov and the PDRI businesses are strong. We just can't ask them to grow as fast as the rest of the Company this year. We do have very strong teams in place against those. We did selectively move a few high performers out and gave them commercial opportunities. And since they're high performers, you would guess that the speed at which they are able to have some impact is pretty fast. And we're – we've got them in place early this year, and you can assume they will see a pretty quick ramp across the year.

Some of the stuff that will be slower is where the PDRI resources, which are highly relevant to some commercial sector problems that we don't have great resources in place for right now, are being repositioned. And that's going to take a couple quarters for the messaging, the positioning, and the impact of those to be where they need to be. But I think you'll see that flow-in across the year. So, separating people from solutions, people probably have faster impact than the repositioning of some of these solutions.

Tobey Summer – SunTrust Robinson Humphrey

Thank you very much.

Operator

Now, we’ll go to Paul Ginocchio with Deutsche Bank.

Paul Ginocchio – Deutsche Bank

Thanks for taking my question. Just two quick ones on the SHL North American sales force. Just where are they on their sort of seasoning or getting up to productivity? And can you – besides the pull forward of demand – and there was some, I think you said, in SHL as well – how much is that bigger sales force contributing to that 16% constant currency growth?

And then, second, just – Rich, I just want to make sure I'm doing my calcs right – 80 basis points of margin headwind sounds like about $0.13 to EPS versus what it would have been without the FX for 2014 guidance. Does that sound right to you? Thanks.

Tom Monahan

Yes. If you look at the sales force, I think at a very macro level, we are certainly very pleased with the investments we made, really at two levels. One is putting additional support in for the great sales people that were already in the business, making sure they were supported from a process perspective, and a support staff booking meetings perspective. And some of those benefits flow through more quickly. If you just give a top sales performer more help and get them in front of more customers more often, you are going to see better outcomes. So those investments probably pay off a little more quickly.

The brand-new quota-bearing FTEs are staying right with what we have seen our historical ramp to productivity is. So, in a first year, their contribution is marginal; the second year, they start to pick up some momentum. Usually in the third year they start to arrive at average sales force productivity. So, I think we will continue to see their productivity ramps across this year. As with all things, a few are already having tremendous impact. The rest will, I'm sure, come online across this year and be full contributors by next year.

Richard Lindahl

And Paul, yes, you're in the right ballpark there with that calculation.

Paul Ginocchio – Deutsche Bank

Great. And Tom, I'd like to just come back to it – so it sounds like we are still early innings on the – that sort of bulk hiring you did ramp to productivity?

Tom Monahan

Yes. I think we're at third and fourth inning. And it's progressing – the question we ask is, does it look like they are progressing at a very healthy rate vis-a-vis past sales classes that we've brought in? And the answer is yes. I think the – some of the work we did to put in place good strong process, good strong support mechanisms, is leading to good healthy progression through the normal ramp.

Paul Ginocchio – Deutsche Bank

If I could sneak one more in. Tom, you hired all these people through the SHL database for system, correct? – using that SHL analytics?

Tom Monahan

We've been very active consumers of assessment and predictive technologies in all of our sales activities. And you can imagine the SHL tools are at the very heart of that, yes.

Paul Ginocchio – Deutsche Bank

Thank you.

Operator

We'll take our last question from Tim McHugh with William Blair.

Tim McHugh – William Blair & Company

Yes, sorry, just two quick numbers questions follow-up. Rich, how much of the depreciation and amortization is intangible amortization that gets added back when we do adjusted earnings?

Richard Lindahl

For this quarter?

Tim McHugh – William Blair & Company

For the year – the 63 to – or 64 to 66 or whatever the D&A guidance you gave.

Richard Lindahl

It's going to be very similar to the number we had this year, which was in, if I remember well, in the low 30s. I'd have to pick that number up specifically.

Tim McHugh – William Blair & Company

Okay. And then just…

Richard Lindahl

It's not going to be meaningfully different from – it will go up a little bit on the Talent Neuron acquisition but not a lot.

Tim McHugh – William Blair & Company

Okay. And then I was looking back. I thought I had it, but did you give what the exact currency impact on Contract Value growth was for the quarter? What it would have been on a constant currency basis?

Richard Lindahl

It held back Contract Value growth by about 50 basis points in the quarter.

Tim McHugh – William Blair & Company

Okay, thank you.

Operator

There are no further questions at this time, so I would like to turn it back over to Mr. Monahan for any additional or closing remarks.

Tom Monahan

Thanks, everyone, for calling in or logging in. We always appreciate the opportunity to bring you up to speed on the CEB story and the great work our teams are doing around the world. We look forward to seeing many of you on our travels across the next couple months. Rich and I will be at the Baird event in late February, and on the road a couple of times during the quarter. For those of you who have your calendars out and are looking further ahead, we really do hope to see many of you at our Annual Investor Day on June 18th in our Arlington, Virginia offices. We look forward to keeping you updated on the CEB story as the year progresses.

Operator

And that does conclude today's call. We thank everyone again for their participation.

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