- The Washington Times - Monday, May 2, 2005

Corporate Executive Board reported a 43 percent rise in profit in the first quarter of this year compared with a year earlier as it continues to capitalize on a unique niche in business-to-business services.

While other companies hire consultants for huge fees, Washington-based Corporate Executive Board helps customers solve their business problems by offering them subscriptions to an Internet site, research studies and meetings on best corporate practices.

The strategy has resulted in growth averaging about 25 percent a year that industry analysts say is expected to continue in 2005 and several more years.

Its approximately 2,300 customers, who pay an average of almost $35,000 a year for access to its Web site, strategic reports and related business education services, include 80 percent of Fortune 500 companies.

They tap into the network to learn best practices for problems involving human resources, sales, technology, marketing and legal issues.

Even at that price, Chief Executive Officer Jay McGonigle said the customers are getting a good deal compared with the “millions and millions of dollars” they might pay consultants for more individualized services.

“Everything we do is done on a subscription model,” Mr. McGonigle said.

Corporate Executive Board reported net income of $17.1 million in the first quarter of this year compared with $12 million in the like period a year earlier. Revenue for the quarter was $81.6 million, compared with $64 million in the first quarter of last year.

Last year, the company earned net income of $53.7 million, up from $35.7 million in 2003.

The company’s stock, EXBD on the Nasdaq Stock Market, closed at $65.26 yesterday, down 47 cents, or less than 1 percent, from Friday’s close.

Along with the earnings growth, Corporate Executive Board is expanding its staff and offices.

The company operates with 1,576 employees, about 1,200 of them in the Washington area. The rest are scattered throughout the United States and in the company’s London office.

Mr. McGonigle said hiring employees with the right background of business and analytical skills is one of the toughest challenges he faces.

The 22 percent growth per year in employees creates “a lot of upward mobility for young people,” Mr. McGonigle said.

The growth also forced Corporate Executive Board to seek offices bigger than its current headquarters at 2000 Pennsylvania Ave. NW.

The company recently signed a lease to become the biggest tenant in Rosslyn’s Waterview project, where it will occupy 625,000 square feet. The Waterview office complex is set to open 1 million square feet of commercial space beside the Potomac River in August 2007.

Industry analysts concede being impressed with Corporate Executive Board’s growth, but wonder whether the company can sustain it.

“The greatest challenge, in my opinion, comes simply from managing the growth rates,” said Brandt A. Sakakeeny, a research director for Deutsche Bank Securities.

He said recruiting an adequate number of researchers and sales people without diminishing the quality of business research would be not be easy for the company.

Greg Cappelli, senior analyst for Credit Suisse First Boston, said Corporate Executive Board’s best chances for growth lie in expanding its areas of expertise.

In one example, the company is introducing a new product called the Information Risk Executive Council intended to assist information security managers.

Mr. Cappelli said the company faces other challenges in trying to win new customers among large corporations when it already controls much of the market.

“Obviously as they get bigger, it’s harder to impact,” Mr. Cappelli said. “You need to sign bigger deals.”

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