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Executives

Richard S. Lindahl - Chief Financial Officer and Principal Accounting Officer

Thomas L. Monahan - Chairman and Chief Executive Officer

Analysts

Timothy McHugh - William Blair & Company L.L.C., Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Theresa Chen - Barclays Capital, Research Division

Ato Garrett - Deutsche Bank AG, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Toni Kaplan - Morgan Stanley, Research Division

Corporate Executive Board (EXBD) Q1 2012 Earnings Call May 3, 2012 9:00 AM ET

Operator

Good morning, and welcome to the Corporate Executive Board's First Quarter 2012 Conference Call. Today's call is being recorded and will be available for replay beginning today and through May 11 by dialing (719) 457-0820. The replay passcode is 5476246. The replay will also be available beginning later today and through May 11 at the company's website and at www.earnings.com.

To the extent any non-GAAP financial measure is 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 news 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 first quarter 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 also contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the Corporate Executive Board's expected quarterly and annual financial performance for fiscal 2012 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 forecasts, 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 the Corporate Executive Board's filings with the Securities and Exchange Commission and in its first 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'd like to turn the conference over to the company's Chief Financial Officer, Mr. Richard Lindahl. Please go ahead, sir.

Richard S. Lindahl

Thank you, Scott, and good morning, everyone. I'm Rich Lindahl, Chief Financial Officer of the Corporate Executive Board. Thank you for calling or logging into our first quarter 2012 earnings call. Here's a quick overview of our time together this morning. I'll start with a summary of highlights for the quarter and review our financial outlook for 2012. Tom Monahan, our Chief Executive Officer, will provide an update on our key strategic priorities, and then we will take your questions.

Please turn to Slide 3 of our presentation, which serves as a roadmap for our conversation this morning. Our overall theme is that we got off to a solid start against this year's objectives. On balance, our operating teams once again delivered very good results and positioned us for additional growth throughout the year. Our financial performance was steady, with double-digit gains and top line metrics, accompanied by strong growth in earnings and cash flow. We expect the financial pattern of the year to unfold as we have previously guided. And as a result, we are on track to deliver against the outlook we shared in February. And finally, we will update you on the progress we continue to make against our longer-term strategic objectives.

Please turn to Slide 4 for a discussion of our key growth drivers. Our teams made good overall progress securing important relationships and building pipelines for the rest of the year. Overall bookings grew even in comparison to last year's very strong first quarter, led by solid performance in North America and strong results by our Asia Pacific team. In EMEA, outcomes were mixed as our service-led strategies produced solid renewals, but obtaining new business continued to be harder to come by in the quarter. Lastly, there was little divergence from an industry perspective as bookings from all vertical markets were in line with firm average.

Moving on to our operating metrics. Wallet retention rate at March 31, 2012 was 99% compared to 104% last year. We continue to be satisfied that this is a healthy outcome consistent with our historical experience and in line with or favorable to other peer companies that report this metric. A few factors influenced the year-over-year change. First, the prior year's figure benefited from a onetime step-up due to the addition of Iconoculture, and pricing performance contributed less growth compared to last year. Consistent with our longer-term guidance, we still expect annual increases -- price increases to be in the roughly 3% to 5% range. However, after a strong performance in 2011, we are currently seeing price increases trend towards the lower end of that range. We remain confident that our focus on delivering business value will continue to support favorable renewal price increase and cross-sell outcomes over time.

Total institutions increased by 8.6% year-on-year in the first quarter, driven mostly by growth in middle market institutions but also due to an increase in a number of large corporate customers. As you know, obtaining new business remains an important component of our long-term growth strategy as a means of reinforcing the strength of our network and laying the foundation for future renewals in cross-sell activity. Because the number of middle market institutions grew faster than large corporate, on a blended basis, total Contract Value for institution increased 1.5% in the first quarter, even though the growth rates were stronger at the end market level.

Please turn to Slide 5. As you can see, our first quarter financial results produced double-digit gains in Contract Value, revenues and deferred revenues, reflecting a good balance of positive current returns and healthy future prospects. We also saw the benefits of our economic model, which continued to produce solid cash flow as the top line grew. These results reflect the general pattern for the year that we anticipated and are consistent with the outlook we shared with you on our last earnings call.

At March 31, 2012, Contract Value was $490.2 million, which is an increase of 10.3% from March 31, 2011. This figure includes approximately $4 million of Contract Value from Valtera and Baumgartner. Regarding this inorganic portion, note that due to differences and how these entities have historically contracted with customers, you will see a smaller portion of their annual revenues reflected in Contract Value that is typical for our subscription businesses. These items, thus, slightly increase our mix of repeatable non-subscription services, which will continue to influence the relationship of Contract Value to revenue over time.

Revenues were $128.5 million in the first quarter of 2012, a 13.1% increase compared to $113.6 million in the first quarter of 2011. Revenue growth was mostly a result of the solid bookings trends we just discussed and was further enhanced by approximately $2 million of inorganic revenue.

Moving on to operating expenses. Cost of services in the first quarter of 2012 increased by $3.9 million versus the first quarter of 2011, largely driven by acquired businesses, as well as increased headcount and related expenses in the product functions. Member relations and marketing expense increased by $3.2 million in the first quarter versus the prior-year period as a result of increased sales and marketing staff, as well as higher commissions due to the growth of bookings over the past year. The addition of Valtera and Baumgartner also contributed a portion of the increase.

General and administrative costs increased by $0.5 million in the first quarter of 2012 versus the first quarter of 2011. Nearly all of this net increase was from expenses that acquired entities. And as a reminder, included in Q1 2011 was $0.6 million of expense related to the Iconoculture earn-out, which also provides some favorability in the comparison. Other income was $1.4 million in the first quarter of 2012 compared to $1.5 million in the first quarter of 2011. This $100,000 decrease is largely due to lower net interest income as the changes in the fair value of deferred compensation plan assets and the foreign currency gain essentially offset each other.

Adjusted EBITDA margin in the first quarter of 2012 was 24.9% versus 21.2% in the first quarter of 2011. Adjusted margins in the quarter benefited from the normalization of revenue recognition deferrals, the removal of acquisition-related costs and effective cost management. As we discussed on our last call, we are now adjusting out acquisition-related costs, which were $0.5 million in the first quarter of 2012. I'd also remind you that we do not adjust out stock compensation expense, which was $2 million in the first quarter of 2012 when calculating adjusted EBITDA margin.

Depreciation and amortization in the first quarter of 2012 was $5 million, an increase of $1 million compared to the first quarter of 2011. Most of this change was from higher amortization due to the year-over-year increase in intangible assets. There was also a small increase in depreciation from the addition of Valtera. In the first quarter, our effective tax rate was 41.4%. We currently estimate that our full-year tax rate will be approximately 41% before the effect of foreign currency translation gains or losses.

Non-GAAP diluted earnings per share in the first quarter of 2012 was $0.47, an increase of 34.3% compared to $0.35 in the first quarter of 2011. The combination of strong revenue growth, effective cost management and the impact of onetime items delivered this strong outcome to start the year.

Turning to the balance sheet. Membership fees receivable were $95.6 million at March 31, 2012 as compared to $154.3 million at December 31, 2011. Average day sales outstanding were 88 days for the first quarter of 2012, consistent with historical seasonal ranges and a 2-day improvement versus the first quarter of 2011. Deferred revenues increased seasonally, and the current portion was $308.7 million at March 31, 2012. Note that due to the nature of Valtera contracts, we have not recorded any deferred revenue for Valtera. As compared to the prior year, deferred revenues increased by 9.6% due to improved year-over-year bookings. This outcome continues to bode well as a leading indicator of near-term revenue growth. Cash flows from operations were $102.1 million for the first quarter of 2012, an increase of 20.1% over the first quarter of 2011, driven primarily by year-over-year bookings growth.

Next, I'll discuss 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 6. Before I go through the details of our 2012 outlook, I'll comment briefly on Valtera, which Tom will discuss in more detail shortly. The integration is going as planned, and the financial impact on this year remains unchanged. As we previously told you, in terms of economics, the business currently generates annual bookings in the area of $15 million, due to both the upon completion nature of its invoicing and the fact that we did not acquire the business until February. We are still assuming the contribution of Valtera to our 2012 revenue will be lower than this annualized bookings figure.

In addition, as described on our last earnings call, given the complexity of the data and tools the business offers, producing great client impact often requires more intensive personal service than some of our subscription products. As a result, the business currently has a margin structure that is in the mid to high single-digit range, which, as you know, is below CEB average, and we have incorporated that factor into our overall margin guidance.

Based on our progress to date, we remain on track to achieve our 2012 outlook. We are anticipating full-year revenues of $535 million to $555 million. This range assumes a reasonably stable macroeconomic backdrop and the expectation that we will drive organic revenue growth in the high single- to low double-digit range. And as just discussed, there are some differences in how Valtera and Baumgartner have historically contracted with customers. So less annual revenue from these businesses flows through the Contract Value metric, and more revenue was invoiced and recognized upon the completion of work that you've come to expect in the rest of our business.

We anticipate adjusted EBITDA margin to fall in the range of 23% to 24%. As we said on our last call, we expect that first half margins will be lower than second half margins due to the impacts of seasonality and our typical hiring patterns. Given our first quarter performance, you should expect that margins and earnings per share in the second quarter will decline meaningfully before recovering in the third and fourth quarters. We expect a sequential increase in revenues to be offset by growth in operating expenses already underway as we incorporate a full quarter of Valtera, increase headcount, experience annual merit and seasonal payroll tax increases, kick off our annual meeting series and ramp up product development and launch activities for the year.

In 2012, we also anticipate depreciation and amortization to range from $20 million to $22 million and effective tax rate of 41%, not including the effect of foreign currency translation, and capital expenditures of $12 million to $15 million. In accordance with these revenue and margin ranges, we expect 2012 non-GAAP diluted earnings per share of $1.75 to $2.

That's it for the financial summary. Please turn to Slide 7, and I'll turn the call over to Tom.

Thomas L. Monahan

Thank you, Rich. Good morning. As Rich made clear, we are pleased with our progress across the first quarter of 2012. We've delivered a solid but not flawless quarter that provides good foundation for continued growth during the year and puts us on track to achieve our annual objectives. As you know, Q1 is our big renewal quarter, and we saw our teams around the world doing a good job securing these relationships and strengthening our platform for growth. We saw solid renewals and generally strong cross-sells and new sales. As Rich mentioned, EMEA was the outlier here. While renewals in Europe were strong, we weren't able to grow as many of these relationships as we were in North America and APAC, so Europe was effectively flat year-on-year.

As we reflect on the quarter, I want to share with you what we're hearing from our members about how 2012 is shaping up for them. First, in general, the U.S. economy has stabilized, albeit at a less than robust level of economic growth. Europe continues to be a source of worry for our members, as austerity measures cramp growth prospects in key markets and the sovereign debt situation continues to bubble at or just beneath the surface. Key emerging markets have, of late, become a source of some worry, as both China and India have had minor stumbles that point to broader, more concerning risks on the horizon. Finally, a series of highly visible risk management and/or ethics issues at some of the world's most respected companies are commanding attention. Housing companies just seek to prevent or at worst, respond to issues in their own companies.

Net-net, our members face the world where they are: first, eager to drive productivity gains, share shifts and innovation through better management of their teams and talent and more effective attraction of must-have people in key labor markets like top sales talent; second, they're anxious about their current deployment of resources against markets with markedly different risk and growth profiles; and third, they're highly sensitive to the potential for game-changing risk events to severely impair their ability to operate. In short, our members are confronting a range of difficult issues, where our ability to bring data, insights and tools can help them set course and take action.

As I have shared in the past, our primary growth opportunities come from 3 sources. First, growing relationships with our existing customers. There are currently more than 5,700 companies in our global network, and this group represents our largest and most important growth opportunity as we work to connect more of our resources to more of their decisions and workflows. Second, adding new customers. There are currently more than 1,500 eligible companies around the globe who have yet to initiate a relationship with CEB. We are taking specific steps to bring more of these companies into the CEB membership for the first time. Third, by introducing relevant new products and services. By targeting uncovered or emerging needs in our key buying centers, we are able to invest in products and services that strengthen relationships with our customers, and those are platforms for new sales, renewals and cross-sells.

We focus on 4 core priorities, which are restated here on Slide 7 to address these opportunities. Let me spend a moment providing an update on each one beginning on Slide #8. First, we create uniquely valuable insights into corporate performance. As we've discussed before, authoritative and relevant content built from our deep research data and analysis is critically important to the growth of our business. Our objective here is to create must-have content that supports member performance and gives them the power to make smart, timely, well-informed decisions.

I'd like to share one example the key insight platform develop our technology practice. The emerging attention to big data, the increasingly overwhelming abundance of data about businesses, markets and customers is now shaping member strategy in our own business opportunity. This explosion in data availability have generated quite a bit of hype and plenty of discussion about vendors and G-Wiz case studies. Lost in the discussion of platforms, transmissions, storage and mining is the simple fact that most firms sorely lack the requisite skill sets to manage and interpret rich data.

We have helped a set of member companies across industries assess the capabilities of their employees and found that only 40% of their employee base have the skills necessary to correctly manage and interpret the data at hand. The returns from diagnosing and remedying these gaps are real. Firms with a concentration of these people generate consistently higher levels of profitability and return. We have called this having strong insight IQ and have designed a diagnostic to help members assess and improve their own capabilities here. This strong work not only produced great outcomes in our technology practice but had important implications for key customer groups in HR and finance. And as you'd expect, it has also generated strong media coverage, including an HBR cover story.

Please turn to Slide 9 for our next priority. Driving loyalty, growth and brand strength through member impact. We believe that given our huge installed base of marquee customers, our strongest calling card is the great impact we have on our members. We continue to see significant gains in users, usage and most importantly, business value for those we support. To help our teams keep raising the bar, we are continuing to invest in new tools that help them diagnose specific member needs and align our service strategies accordingly. But as strong as our reputation is among those who know us, CEB has, for too long, been a well-kept secret because reach and value far exceeded its brand recognition.

We'd certainly never trade off direct customer impact for glitzy promotion, but we believe that raising awareness of our value will lead to stronger sales, retention and cross-sells over the long term. For this reason, we have steadily invested to expand our marketing presence and capabilities. We have overhauled and consolidated our web presence, invested in new SEO and lead-generation tools and worked to consistently document the great results member companies realize through our work. We are also sharpening our brand communications to more clearly convey the breadth, effect and value of our services. As our service mix has broadened in a range of ways in which we help members as diversified, we are making sure that we speak with one voice about mission and impact.

As part of this, we continue to leverage our rich data analysis to develop compelling thought leadership positions on key topics. These are regional and often counterintuitive insights to showcase the value of CEB's products and services, especially when their reach is magnified by profiles in key publications such as The Wall Street Journal, Fortune, Forbes and USA TODAY. In particular, we are proud to have had at least one article on the cover of the Harvard Business Review every year for the past 3 years. These are real investments. Even against the backdrop of our strong margins, we have more than quadrupled our marketing spend across the last several years. We are already showing returns by reaching new buyers within our existing customer base and attracting new customers through our powerful services. The ongoing coverage of our insights in the media, coupled with increasingly more sophisticated digital marketing capability, has resulted in a more than 15% increase in revenue generated from online leads.

Next, please turn to Slide 10. Investing globally in key markets. We continue to be underpenetrated in key global markets and have been investing to increase our presence in the largest non-U.S. corporate markets. Last year, we made step function enhancements in Germany by both the opening of a Frankfurt office, the acquisition of Baumgartner & Partner and by investing in our Singapore office. We continue to see good returns from both these investments and are particularly excited by the early success and broader promise of Baumgartner & Partner. Several of that team's measurement assets and products can be skilled more broadly, and we are working to do that right now.

More generally, the international story is one of different trajectories. Asia Pacific and LatAm are showing healthy rates of growth, albeit of lower basis, while EMEA is largely flat. While macroeconomic factors certainly contribute to this, we see much more we can do to engage the markets and drive member impact and growth. Accordingly, we have organized the teams around some important near-term objectives and are optimistic that we should see stronger growth as the year unfolds.

Please turn to Slide 11 for our final operating priority. Leveraging technology and service to deliver innovative products. There are 2 noteworthy updates in this area. First, I'll share an update on our Valtera acquisition, and second, I'll introduce the newest member product in our technology practice, the IT Roadmap Builder. In the last quarter, you saw us take a significant step forward with the acquisition of Valtera. Valtera brought us one of the world's most respected and influential providers of insight tools and solutions to help the world's largest companies drive productivity through great management of human capital. I am pleased to report that the important work of integrating the talented staff and technology of Valtera is off to a strong start. Working within a common management structure, the CEB Valtera teams are now using a coordinated assessment approach to help members compare their organizational performance to a much broader set of external benchmarks.

On the systems side, we have established a comprehensive plan to integrate the unique Valtera technology capabilities with the current CEB technology infrastructure. Also importantly, we're receiving very positive market reaction from our combined offerings. We have been able to renew our work with existing clients such SAP, Hewlett-Packard, Sprint and Sony. We're also welcoming clients who have joined since our merger such as NBCUniversal and the Gap. We aim to continue this strong start by leveraging our participation at 2 significant events, Engage Europe and CIOP. [ph] At CIOP, in particular, more than 10% of the content at this year's conference was developed and presented by CEB Valtera, an enormous share of the thought leadership at a conference that includes hundreds, if not thousands, of corporate buyers and key influencers from academia and beyond.

A second noteworthy example of our evolution in new products and technologies is the introduction of the IT Roadmap Builder product set. The IT Roadmap Builder is a web-based management application that enables organizations to effectively manage every aspect of their technology roadmapping process. Simply put, this innovative solution allows IT organizations to automate and standardize their IT planning processes to ensure technology decisions are made with confidence and to minimize business risk. In particular, CIOs and their teams can use the tool to help answer frequent strategic planning questions such as, how do we establish consistent proven criteria for assessing value and risk for every technology? How do we uncover costly redundancy across the organization? How do we assess risk associated with adopting technologies too early or too late? The development of the IT Roadmap Builder represents an organic build for us, stemming from strategic research in a proprietary data set that identified the critical need for technology leadership teams. This product has been in beta for the past year and has been one of the fastest to scale in CEB history. I'm excited not in a way about the success of this product but by the broader opportunity that this visual technology platform represents.

While the current product offering makes ITRB one of our more technology-rich products. At a macro level, the economics are broadly similar to our existing product set at a slightly higher and sometimes materially higher price point. At present, an array of leading companies have utilized the IT Roadmap Builder, including McDonald's, De Beers, Pitney Bowes, Honeywell, ABB, the FAA and JPMorgan, all tools representing more than 20 industries on 5 continents. And a shameless plug for our Investor Day, many of you will have the opportunity to see a test drive of the IT Roadmap Builder and our visual technology platform during a demo that we have planned during our upcoming Investor Day on May 17 in our headquarters here in Arlington. Both CEB Valtera and the IT Roadmap Builder represent continual focus on our core strategy of linking rich contents and data to critical decisions and workflows inside our target functions.

In Valtera, we identified a well-respected market leader in an area of great interest to our members, and we took the step to integrate it into our broader portfolio. And with IT Roadmap Builder, we identified an uncovered need in our member strategic IT planning processes and invest in the solution to drive some more effective technology decisions. I'm pleased with the strong start to both efforts and look forward to keeping you up-to-date as the year unfolds.

Finally, let me close with some comments about the people who have driven this progress against our core priorities. I am privileged to work inside incredibly talented colleagues who bring analytical rigor, generosity of spirit and a true passion for member impact to our work. On a daily basis, I'm reminded of how well these colleagues represent our values and our brand so consistently around the world. Talent has a critical importance to our business, and we invest heavily in ensuring that we are able to grow and retain the top people we've got. We're also attracting new talent globally. We are looking forward to welcoming the newest staff members to join CEB, and I'm excited by the possibility that they represent.

To sum up the quarter before we move to your questions, I'm pleased with the solid progress that we have made early in the year and believe we are focused on the right opportunities for growth and improvement in the months to come.

We'll take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll go first to Tim McHugh with William Blair & Company.

Timothy McHugh - William Blair & Company L.L.C., Research Division

Rich, first, I want to ask you -- your comment about the expenses increasing significantly in the second quarter, they did somewhat last year [indiscernible], but it sounds like you're describing a bigger than normal, even, seasonal increase if we compared it to what you saw going from Q1 to Q2 last year. So can you kind of explain what's different other than the Valtera acquisition?

Richard S. Lindahl

Yes, Tim. The -- certainly, the Valtera acquisition is a part of it. Another big component is going to be the impact of annual factors such as merit increases, renewals of our benefits plans, payroll tax, that kind of thing. Those are a little bit higher because we have more employees this year than we did last year, so the increase is bigger. We're also going to be adding more headcount, and then we have other seasonal things coming into play, as I mentioned earlier, about starting the annual meeting series, et cetera.

Timothy McHugh - William Blair & Company L.L.C., Research Division

Okay. And then the pricing being at the lower end of the spectrum, can you give us a little more color there? Is there any particular region or vertical? Or is it more on new sales versus renewals? Kind of what's causing it to be at the lower end of the range?

Thomas L. Monahan

Sure. Tim, yes, we were -- we've targeted 3% to 5% annual price increase as a core part of the plan, and we got very much the high end of that last year. And this year, I think, in general, we're being slightly less aggressive on that front, having done a major step-up across the last 12 to 18 months. Now, as to region, the big difference by our region was new sales and cross-sells. It's our big renewal quarter, so globally, we're working on renewals. But what we saw was that in APAC in North America, we're able still to keep cross-selling on our way in the new budgets. And we just -- it was just harder to accomplish that in EMEA.

Timothy McHugh - William Blair & Company L.L.C., Research Division

Okay. And then -- and the visualization platform here, can you talk about -- is the plan, over time, to probably develop that beyond the IT sector? And somewhat unrelated, is there any upfront implementation costs that we need to be aware of? If that starts growing a lot, that there will be an upfront investment required by you to implement this with lines?

Thomas L. Monahan

Sure. The answer, like all of our technologies, we look to ways to leverage them both within existing product sets and beyond. So assume that we're always looking for ways to leverage any of the CapEx we put against technology platforms into new areas. Right now, the opportunity in IT is so immediate and we have such momentum and that's our focus right now. Generally, there isn't a ton of implementation cost to upfront. There is an advisory layer in the product, like there is in a lot of other products. And helping clients think through how they're going to use it, et cetera, is something we spend time on. Over time, we expect the margin profile of this product to look very similar to our other product areas, and like others, it's an annual renewable subscription.

Operator

And we'll go next to Shlomo Rosenbaum with Stifel, Nicolaus.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

I just -- you always calculate the bookings that you guys have off the balance sheet, and I know there's some moving parts. I know you mentioned $2 million of revenue coming in the quarter from acquisitions that are not typical deferred revenue type things. Last quarter, you also mentioned in the accounting change that you expected $3.6 million to move out of deferred revenue into regular revenue just because of the accounting change and half of that to come in the first quarter. Can you talk about whether that actually happened?

Richard S. Lindahl

Yes, Shlomo, this is Rich. Yes, we did recover basically what we had indicated in the first quarter. There was an offset from other things as we've now moved to this being a more normal part of our revenue reporting. So the net impact was really more of a push, and again, we're not highlighting the revenue recognition impact separately anymore just because that's now just in the sauce, if you will.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

So, I mean, when I do the calculation and if I normalize for some of those items once you take out the accounting item, it looks like the bookings year-over-year are up a little over 6%. Is that fair?

Richard S. Lindahl

In that area, a little bit -- probably a little less than that, actually. Yes, I think that the important point being there, they came in line with what we were expecting, and the year is really unfolding according to what we would have expected when we talked to you last time.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

So is it in -- normally, you guys have -- had better bookings. Is that just coming off of a really tough comp? I think you had like 23% or something in the year before in the way that I calculated it.

Richard S. Lindahl

Yes, certainly, that is a major factor right there, that it -- we had exceptionally strong growth last year, and -- but we still were pleased with what we did in the first quarter, and again, it was right in line with what we would have expected.

Thomas L. Monahan

Yes. This is -- unlike last year, this is how we saw this year shaping up.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So this is kind of in line with the way you guys were thinking. What's the -- you talked about things that you saw internationally that you can address to be able to go after the market opportunity. I was wondering, when you were talking about that, did you mean everyone internationally or specifically Europe where things were particularly slow?

Thomas L. Monahan

It's -- I think the international story is 2 side of the story. One is Europe, one is everything else. Everything else is growing at a very healthy rate. [indiscernible] strong APAC franchise had a great start to the year. And we continue to make progress in new Latin American markets, that's good. Europe was basically flat. The team did a great job securing renewals, and we're obviously delivering a ton of business impact there. But earning our way into new budgets is proving more difficult, and that's on us. We got to get tighter in how we message, we got to be sharper on how we translate the business value we're creating into an expectation of business value in the part of new buyers. And we're working very hard on it. We have to use that strong track record to arm our people with messages and compelling examples and get to work. So in the big picture, I think the macro dislocation provides us with an opportunity, but we have to be on our A game every day.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then following up off of the IT Roadmap Builder, how many of these types of kind of IT-enabled tools or memberships do you guys have at this point in time?

Thomas L. Monahan

So every one of our products has some sort of tool at the center, but there are -- you've heard us talk a lot about what we've done in HR both with our own business, the Genesee acquisition, the Valtera acquisition, that's probably the most fully developed area of instrumentation that we've got. And now we've got a strong -- a very strong offering in IT. We see a number of other opportunities, but in this day and age, any information or any data that we provide has a pretty healthy technology wrapper around it anyway. So it's hard to peel apart what is technology and what isn't, but we certainly have gone the farthest in HR.

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Is the item that you have in HR, is that an IT-type sale or is it really a research-type sale that is IT-enabled?

Thomas L. Monahan

The CEB Valtera line is very much about collecting and manipulating information specifically for that company against the set of broader benchmarks. So it's a mix of technology, data and professional perspective, but it's very technology-rich.

Operator

We'll go next to Gary Bisbee with Barclays Capital.

Theresa Chen - Barclays Capital, Research Division

This is actually Theresa Chen calling on behalf of Gary. I just had a couple of questions about deferred revenue trends, kind of a -- more of a follow-up. It seems that even if you strip out of the onetime factors, there's still underlying deceleration. And can you just help us think about if that's a thing we should be concerned about or even if that's the correct way to look at it?

Richard S. Lindahl

No, I mean, we're certainly not concerned. Again, I think the trends are playing out as we would have expected. You did see a little bit of higher growth in deferred revenue last year because -- largely because of this revenue recognition factor was an influence there. But I think, at this point, this it -- it's still very healthy and consistent with the 2012 outlook that we had provided.

Theresa Chen - Barclays Capital, Research Division

Okay. And then moving on to Wallet retention. So I understand that on a year-on-year basis, the decline was owed to Iconoculture. But even looking at the sequential trend, it seems to be kind of edging a little lower every quarter for the past couple of quarters. Is there a reason for this? Or how should we think about that?

Richard S. Lindahl

Yes, I mean, I think, first of all, if you look at our historical experience with Wallet retention, it's right in the zone of where a healthy outcome would be. Secondly, I think we're happy with where it is in terms of how it compares to peers who report this metric as well. And I think you're going to see that bounce around a little bit quarter-to-quarter, but we think that where we are right now provides us a good solid platform to continue to grow the business off of.

Theresa Chen - Barclays Capital, Research Division

Okay. And then just last one. We were particularly impressed with how much cash you were able to generate this quarter. And just in terms of the outlook for buyback and such, can you provide a little color on that, possibly why none of that happened this quarter?

Richard S. Lindahl

Yes. I think our priorities really are the same as they have been on capital allocation. We certainly want to maintain a strong financial position. We want to have the flexibility to pursue strategic investments and other opportunities, such as the acquisition of Valtera in the first quarter. And then we also want to distribute cash to shareholders. We have focused primarily on the dividend there. You saw that we put an annual increase in place in the first quarter, and we're continuing to move forward on that. And then opportunistically, as a means of maintaining a constant share count, we would intend to purchase some stock, but that's we're applying the same philosophy that we've had for quite some time now.

Operator

We'll go next to Ato Garrett with Deutsche Bank.

Ato Garrett - Deutsche Bank AG, Research Division

I want to get a little bit more detail on Valtera and Baumgartner acquisition impact. You said that in this quarter, it was about $4 million contribution to Contract Value. And given the difference in the invoice and programs of Valtera, can we think about the similar kind of contribution to Contract Value growth for the balance of the year from those acquisitions?

Richard S. Lindahl

That will depend. I think as we said, we have different contracts right now as we move through the year. Wherever we can, we're going to try to move them to a similar type of mechanism that we have in place for the rest of our business. So that could lead to somewhat higher percentage of the revenue coming into Contract Value. But all in all, it's not likely to follow the same kind of trend that the rest of our subscription businesses have followed.

Thomas L. Monahan

I think it's safe to say, you're going to see some revenue come through that doesn't sit in Contract Value before closed through. That's going to be certainly not the dominant feature of our business, by any stretch, the imagination, but the correct way to account for some of that revenue.

Operator

We'll go next to David Ridley-Lane with Merrill Lynch.

David Ridley-Lane - BofA Merrill Lynch, Research Division

You're -- are you still seeing double-digit growth in a number of mid-market members? Or is it getting harder to sign up new of those for that group?

Thomas L. Monahan

No, the only part of the business that was hard to go get new customers in was EMEA this quarter.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. And then following up on some of the Wallet retention numbers, if you adjust out the Iconoculture step-up sort of adjust for the lower pricing, Wallet retention was 102% in 2011. What would kind of the comparable figure be adjusted for those 2 items?

Richard S. Lindahl

That's not a number we've disclosed, but suffice to say, it will be slightly lower. But again, we're very comfortable that where we in -- where we are right now is a very healthy range.

Thomas L. Monahan

Yes, we're bouncing around in the high end of our historical range, and the underlying dynamics are good.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. All right, that makes sense. And then on pricing being at the low end, I think I heard you sort of say these prices you increased maybe sort of 3% to 4%, and maybe procurement and volume discounts are dragging as well. Or are you not seeing as much drag from kind of the involvement of procurement departments and volume discounting?

Thomas L. Monahan

We don't allow for a ton of discounting. We do have a strategic partners program out there for our largest customers that just rewards them for our business, but that's been in place for several years. In a network-oriented business, we've always believed the right business principle is to have absolutely minimal discounting. So when we talk about lower end of the price increase range, it tends to be a least phenomena, where after being aggressive on that for 18 months or so, the right thing to do in segments, the membership was to be at the lower end of our target range rather than the higher end.

David Ridley-Lane - BofA Merrill Lynch, Research Division

Okay. All right. And just one final one. Cash on the balance sheet is up over $6.50 a share. Just to get a sense of what the excess cash is available to you here in the U.S., what's kind of the normal balance? And then what's that excess cash level in your view?

Richard S. Lindahl

I think we're comfortable with the liquidity position we're in. Again, we're going to stay true to the philosophy we've articulated in terms of how we deploy that. And a critical component of that is maintaining -- is ensuring that we maintain a strong financial position, independent of wherever the capital market winds are blowing at any point in time.

Operator

We'll go next to Dan Leben with Robert W. Baird.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

I apologize I had to miss the beginning of the call. Could you just walk me through again the impact on Wallet retention from Iconoculture?

Richard S. Lindahl

Yes. So there was an impact of the onetime step-up essentially. When we reported Wallet retention last year, we had the benefit of Contract Value from customers we had already have the year before that also were Iconoculture customers. So that helped the numerator but didn't impact the denominator.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Got you. And so why did that -- so I guess the underlying trend of kind of ramping up through first quarter of '11 and then to kind of down ever since, why didn't we see that spike when Iconoculture closed? Was that the other dynamics going on or...

Richard S. Lindahl

Yes, I mean, I think, again, we -- you didn't have the year-over-year comparison until you got to the first quarter.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then on the pricing side, help us just understand the thought process of moving to lower end. Just given kind of the profitability dynamics of price increases, why to make that decision this year.

Thomas L. Monahan

No question, there's nothing you can do that is as strong a driver of profitability as a price increase. We've been very aggressive for the past 18 months going after them. We do try to make sure within that 3% to 5% range, that we're making it easy for members to make a decision and renew with us. And as we looked at the product set and where we were, we thought after being aggressive for 6 quarters or so, it was time to aim a little bit more towards the lower end of that spectrum. We're still right in our target range, and we fully anticipate pricing will be a key growth driver going forward.

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then last one, just within Baumgartner and Valtera. The pieces that are not flowing Contract Value, help us understand the seasonality or at least what you think the seasonality will be for when those contributions are likely to hit.

Richard S. Lindahl

Yes, I mean, I think the overall -- the revenue is -- trend is fairly flat. You get a little bit more contribution from Valtera in the second and third quarters, but it's overall fairly flat.

Operator

We'll go next to Toni Kaplan with Morgan Stanley.

Toni Kaplan - Morgan Stanley, Research Division

Just wanted to ask a little bit about the sales force. Where are you adding people geographically? Are you a little bit lighter in Europe, but still -- well, aside from the acquisitions? But are you adding a lot in North America and Asia?

Thomas L. Monahan

Short answer, we're adding great salespeople wherever we can find them. We continue to make adds on a global basis. We do think -- we're going to have to work a little harder to generate growth in Europe, and therefore, on balance, sales productivity will be a little lower. But where we can find great salespeople, we're adding them in all of our market region and segments.

Toni Kaplan - Morgan Stanley, Research Division

Okay, great. And the reference to having a higher headcount in Q2, is that due to the acquisitions or is that because of the hiring of salespeople?

Richard S. Lindahl

Yes. I mean, it's both. I mean, certainly, the -- you get the full quarter impact of the acquisitions coming in, in the second quarter. And then as we're hiring folks, which we -- as I mentioned, those activities are very much underway, that comes into play in the second quarter.

Toni Kaplan - Morgan Stanley, Research Division

Okay, great. And then lastly, are you seeing any shortening in the selling cycle outside of Europe?

Thomas L. Monahan

Our sales cycle has traditionally been pretty straightforward. Our products are priced in a way and sold the principles in a way that we enjoy a pretty compressed sales cycle. Certainly, there are some situations where it moves faster, but I don't think we're seeing anything materially different off of historical trends.

Operator

And at this time, there are no further questions in the queue. I'd like to turn the call back over to Mr. Monahan for any additional or closing remarks.

Thomas L. Monahan

Thanks, everyone, for calling and/or logging in this morning. Rich and I will be on the road this quarter at the BofA Merrill Lynch Business Services Conference in May and the William Blair Growth Stock Conference in June. And we will host our Annual Investor Day for institutional investors and sell-side analysts at our offices in Arlington, Virginia on May 17. We look forward to keeping you up-to-date in this story and hopefully seeing a lot of you live at those events.

Operator

Again, that does conclude today's presentation. We thank you for your participation.

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