Segments and Geographic Areas

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segments and Geographic Areas

Note 20. 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. Since the acquisition of SHL, the Company has had two reportable segments, CEB and SHL Talent Measurement. 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. The CEB segment also includes the operations of PDRI, a service provider of customized personnel assessment tools and services to various agencies of the US government and also to commercial enterprises, and recently-acquired Metrics That Matter and Talent Neuron.

The SHL Talent Measurement segment, which includes the operations of SHL (other than PDRI) that the Company acquired on August 2, 2012, provides cloud-based solutions for talent assessment, talent development, talent strategy and analytics, 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 Talent Measurement segment provides assessments that assist customers in determining potential candidates for employment and career planning, consulting services that are customizations to the assessments, and training services related to use of assessments.

The Company evaluates the performance of its operating segments based on segment Adjusted revenue, segment Adjusted EBITDA, and segment Adjusted EBITDA margin. The Company defines segment Adjusted revenue as segment revenue before the impact of the reduction of SHL and Metrics That Matter revenue recognized in the post-acquisition period to reflect the adjustment of deferred revenue at the acquisition date to fair value (the “deferred revenue fair value adjustment”). The Company defines segment Adjusted EBITDA as segment net income (loss) before loss from discontinued operations, net of provision for income taxes; provision for income taxes; interest expense, net; gain on cost method investment; debt extinguishment costs; depreciation and amortization; the impact of the deferred revenue fair value adjustment; acquisition related costs; impairment loss; restructuring costs; share-based compensation; costs associated with exit activities; and gain on acquisition. Segment Adjusted EBITDA margin refers to segment Adjusted EBITDA as a percentage of segment Adjusted revenue.

Management uses these non-GAAP financial measures to evaluate and compare segment operating performance. These segment non-GAAP measures may be considered in addition to results prepared in accordance with GAAP, but they should not be considered a substitute for, or superior to, GAAP results.

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

	Year Ended December 31,
	2014			2013			2012
Revenue
CEB segment	$	701,573		$	634,302		$	564,062
SHL Talent Measurement segment		207,401			185,751			58,592
Total revenue	$	908,974		$	820,053		$	622,654
Adjusted revenue
CEB segment	$	705,110		$	634,302		$	564,062
SHL Talent Measurement segment		209,870			195,665			75,726
Total Adjusted revenue	$	914,980		$	829,967		$	639,788
Operating profit (loss)
CEB segment	$	98,108		$	103,322		$	97,013
SHL Talent Measurement segment		(4,463	)		(12,609	)		(12,345	)
Total operating profit	$	93,645		$	90,713		$	84,668
Adjusted EBITDA
CEB segment	$	199,464		$	173,537		$	154,600
SHL Talent Measurement segment		38,265			32,554			19,589
Total Adjusted EBITDA	$	237,729		$	206,091		$	174,189
Adjusted EBITDA margin
CEB segment		28.3	%		27.4	%		27.4	%
SHL Talent Measurement segment		18.2	%		16.6	%		25.9	%
Total Adjusted EBITDA margin		26.0	%		24.8	%		27.2	%
Depreciation and amortization
CEB segment	$	33,707		$	28,356		$	24,371
SHL Talent Measurement segment		34,579			31,731			13,487
Total depreciation and amortization	$	68,286		$	60,087		$	37,858

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

	Year Ended December 31,
	2014		2013		2012
Revenue	$	908,974	$	820,053	$	622,654
Impact of the deferred revenue fair value adjustment		6,006		9,914		17,134
Adjusted revenue	$	914,980	$	829,967	$	639,788

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

	Year Ended December 31,
	2014			2013			2012
Net income	$	51,172		$	31,971		$	37,051
Provision for income taxes		40,678			28,467			37,569
Interest expense, net		18,046			22,337			10,834
Gain on cost method investment		(6,585	)		—			—
Debt extinguishment costs		—			6,691			—
Depreciation and amortization		68,286			60,087			37,858
Impact of the deferred revenue fair value adjustment		6,006			9,914			17,134
Acquisition related costs		2,964			11,477			24,529
Impairment loss		39,700			22,600			—
Restructuring costs		1,830			—			—
Share-based compensation		15,632			12,547			9,214
Adjusted EBITDA	$	237,729		$	206,091		$	174,189
Adjusted EBITDA Margin		26.0	%		24.8	%		27.2	%

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

	December 31,
	2014		2013
Cash and cash equivalents
CEB segment	$	51,128	$	69,280
SHL Talent Measurement segment		63,806		50,274
Total cash and cash equivalents	$	114,934	$	119,554
Accounts receivable, net
CEB segment	$	221,365	$	212,008
SHL Talent Measurement segment		61,704		59,256
Total accounts receivable, net	$	283,069	$	271,264
Goodwill
CEB segment	$	93,223	$	71,119
SHL Talent Measurement segment		347,984		371,656
Total goodwill	$	441,207	$	442,775
Intangible assets, net
CEB segment	$	34,747	$	42,479
SHL Talent Measurement segment		225,636		267,213
Total intangible assets	$	260,383	$	309,692
Property and equipment, net
CEB segment	$	95,552	$	88,316
SHL Talent Measurement segment		16,972		18,538
Total property and equipment, net	$	112,524	$	106,854
Total assets
CEB segment	$	626,999	$	602,471
SHL Talent Measurement segment		730,385		781,204
Total assets	$	1,357,384	$	1,383,675

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		Europe		Other Countries		Total
2014
Revenue	$	559,030	$	187,274	$	162,670	$	908,974
Long-lived assets		210,367		594,316		9,431		814,114
2013
Revenue	$	498,682	$	173,060	$	148,311	$	820,053
Long-lived assets		190,253		661,517		7,550		859,320
2012
Revenue	$	408,022	$	104,825	$	109,807	$	622,654
Long-lived assets		201,455		693,445		8,552		903,452