Segments and Geographic Areas

12 Months Ended

Dec. 31, 2012

Segments and Geographic Areas

Note 19. Segments and Geographic Areas

Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker of an enterprise. With the acquisition of SHL, the Company now has two reportable segments, CEB and SHL. The CEB segment, which includes the Company’s historical business operations prior to the acquisition of SHL, provides comprehensive data analysis, research, and advisory services that align to executive leadership roles and key recurring decisions. CEB’s products and services focus on several key corporate functions across a wide range of industries. Beginning with the fourth quarter of 2012, PDRI is included in the CEB segment. The Company’s segment disclosures for 2012 have been recast for comparative purposes to include PDRI in the CEB segment from the acquisition date. PDRI provides customized personnel assessment tools and services to various agencies of the US Government and was acquired with SHL.

The SHL segment, which includes the operations of SHL that the Company acquired on August 2, 2012, provides cloud-based solutions for talent assessment and decision support as well as professional services that support those solutions, enabling client access to data analytics and insights for assessing and managing employees and applicants. SHL provides assessments that assist customers in determining potential candidates for employment and career planning as well as consulting services that are customizations to the assessments.

The Company evaluates the performance of its operating segments based on Adjusted segment revenue, Adjusted segment EBITDA, and Adjusted segment EBITDA Margin. The Company defines Adjusted segment revenue as segment revenue before the impact of the deferred revenue fair value adjustment resulting from acquisitions. The Company defines Adjusted segment EBITDA as segment net income (loss) before loss from discontinued operations, net of provision for income taxes; interest expense, net; depreciation and amortization; provision for income taxes; the impact of the deferred revenue fair value adjustment; acquisition related costs; share-based compensation; costs associated with exit activities; restructuring costs; and gain on acquisition. Adjusted segment EBITDA margin refers to Adjusted segment EBITDA as a percentage of Adjusted segment revenue.

Although Adjusted segment revenue, Adjusted segment EBITDA, and Adjusted segment EBITDA margin are not measures of financial condition or performance determined in accordance with GAAP, management uses these non-GAAP financial measures to evaluate and compare the operating performance of its segments.

Information for the Company’s reportable segments is as follows (in thousands):

	Year Ended December 31,
	2012			2011			2010
Revenue
CEB segment	$	564,062		$	484,663		$	432,431
SHL segment		58,592			—			—
Total revenue	$	622,654		$	484,663		$	432,431
Adjusted revenue
CEB segment	$	564,062		$	484,663		$	432,431
SHL segment		75,726			—			—
Total Adjusted revenue	$	639,788		$	484,663		$	432,431
Adjusted EBITDA
CEB segment	$	154,600		$	120,757		$	110,058
SHL segment		19,589			—			—
Total Adjusted EBITDA	$	174,189		$	120,757		$	110,058
Adjusted EBITDA margin
CEB segment		27.4	%		24.9	%		25.5	%
SHL segment		25.9	%		—			—
Total Adjusted EBITDA margin		27.2	%	$	24.9	%	$	25.5	%
Depreciation and amortization
CEB segment	$	24,371		$	16,928		$	18,039
SHL segment		13,487			—			—
Total depreciation and amortization	$	37,858		$	16,928		$	18,039

The table below reconciles total revenue to total Adjusted revenue (in thousands):

	Year Ended December 31,
	2012		2011		2010
Total revenue	$	622,654	$	484,663	$	432,431
Impact of the deferred revenue fair value adjustment		17,134		—		—
Total Adjusted revenue	$	639,788	$	484,663	$	432,431

The table below reconciles Net income to Adjusted EBITDA (in thousands):

	Year Ended December 31,
	2012			2011			2010
Net income	$	37,051		$	52,655		$	40,363
Loss from discontinued operations, net of provision for income taxes		—			4,792			11,736
Income from continuing operations		37,051			57,447			52,099
Interest expense (income), net		10,834			(596	)		(1,526	)
Depreciation and amortization		37,858			16,928			18,039
Provision for income taxes		37,569			38,860			34,015
Impact of the deferred revenue fair value adjustment		17,134			—			—
Acquisition related costs		24,529			—			—
Share-based compensation		9,214			8,118			7,431
Adjusted EBITDA	$	174,189		$	120,757		$	110,058
Adjusted EBITDA Margin		27.2	%		24.9	%		25.5	%

The following is a reconciliation of segment assets to total assets (in thousands):

	December 31,
	2012		2011
Cash and cash equivalents
CEB segment	$	37,715	$	133,429
SHL segment		34,984		—
Total cash and cash equivalents	$	72,699	$	133,429
Accounts receivable, net
CEB segment	$	194,276	$	154,255
SHL segment		45,323		—
Total accounts receivable, net	$	239,599	$	154,255
Goodwill
CEB segment	$	80,886	$	29,492
SHL segment		390,413		—
Total goodwill	$	471,299	$	29,492
Intangible assets, net
CEB segment	$	52,124	$	13,581
SHL segment		283,067		—
Total intangible assets	$	335,191	$	13,581
Property and equipment, net
CEB segment	$	84,360	$	80,981
SHL segment		12,602		—
Total property and equipment, net	$	96,962	$	80,981
Total assets
CEB segment	$	550,429	$	533,692
SHL segment		771,820		—
Total assets	$	1,322,249	$	533,692

The Company has revenue and long-lived assets, consisting of property, plant and equipment, goodwill and intangible assets, net of accumulated depreciation and amortization, in the following geographic areas (in thousands):

	United States (1)		Europe		Other Countries		Total
2012
Revenue	$	408,022	$	104,825	$	109,807	$	622,654
Long-lived assets		201,455		693,445		8,552		903,452
2011
Revenue	$	326,864	$	71,916	$	85,883	$	484,663
Long-lived assets		102,550		13,424		8,080		124,054
2010
Revenue	$	290,905	$	69,755	$	71,771	$	432,431
Long-lived assets		112,366		4,876		8,992		126,234

(1) Excludes Toolbox.com revenue of $5.3 million and $6.5 million in 2011 and 2010, respectively, classified as discontinued operations.