Advisory Board Co.

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The Advisory Board Company Reports Results For Quarter Ended June 30, 2013

WASHINGTON, July 31, 2013 /PRNewswire/ -- The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the quarter ended June 30, 2013, which is the first quarter of its 2014 fiscal year.  Revenue for the quarter increased 18.3% to $123.2 million, from $104.1 million for the quarter ended June 30, 2012.  Contract value increased 15.6% to $475.8 million as of June 30, 2013, up from $411.6 million as of June 30, 2012.  For the quarter ended June 30, 2013, net income attributable to common stockholders was $3.7 million, or $0.10 per diluted share, compared to net income attributable to common stockholders of $3.8 million, or $0.11 per diluted share, for the quarter ended June 30, 2012.  For the quarter ended June 30, 2013, adjusted EBITDA was $22.5 million, up from $20.2 million for the quarter ended June 30, 2012.  Adjusted net income for the quarter ended June 30, 2013 was $11.4 million, or $0.31 per diluted share, compared to $11.1 million, or $0.31 per diluted share, for the quarter ended June 30, 2012.  Adjusted EBITDA, adjusted net income, and non-GAAP earnings per diluted share are all non-GAAP financial measures.

(Logo: http://photos.prnewswire.com/prnh/20110802/PH45999LOGO )

Robert Musslewhite, Chairman and Chief Executive Officer of The Advisory Board Company, commented, "Our continued strong performance this quarter is due to the superior value we provide to our members through our comprehensive portfolio of offerings, outstanding member service, and excellent product quality.  Our health care and higher education members face tremendous complexity due to demographic shifts, revenue pressure, a new value orientation, and business model transformations.  It is a testament to the work that we do that we are their partner of choice as they seek both to enhance performance in the current environment and to set strategy to succeed in the future."

Mr. Musslewhite continued, "I am also pleased to announce today the launch of the Student Success Performance Program, our first renewable software-based program for the higher education market.  With national five-year graduation rates barely above 50% and public and private funders demanding better performance, improving student success is a top priority for colleges and universities.  Leveraging the most innovative ideas from higher education and other industries, the Student Success Performance Program combines technology, research, and predictive analytics to help institutions positively inflect outcomes with at-risk and off-path students."

Mr. Musslewhite concluded, "The program is off to a good start, with a robust charter membership that includes Rutgers University, Indiana University, University of Missouri, University of North Florida, and Georgia State University.  We are excited about the growth potential of software-based memberships for the higher education market, and we view this launch as the first step in leveraging the platform that our research has created to build a business serving colleges and universities with our software and analytics."

Acquisition

The Company announced the acquisition as of July 8, 2013 of a technology firm to supplement its existing physician referral programs. Mr. Musslewhite commented, "We are always looking for new product offerings to supplement our portfolio of software-based tools and to contribute to our medium- and longer-term growth.  Physician referrals continues to be an important issue for our members, who seek solutions that are valuable not only under today's fee-for-service reimbursement structures but also under the integrated, risk-based models of care that are likely to become increasingly prevalent in the future.  We expect that this acquisition will complement and bolster our work with the large and growing Crimson Market Advantage membership and will support future new product launches in this space."

Outlook for Calendar Year 2013 

The Company is updating its revenue guidance for calendar year 2013 to a range of approximately $500 million to $505 million, from a previous range of $495 million to $505 million.  The Company is also updating its guidance for calendar year 2013 adjusted EBITDA and non-GAAP earnings per diluted share to reflect the impact of the recent acquisition.  The Company expects calendar year 2013 adjusted EBITDA to be in a range of approximately $87.5 million to $92.5 million, from a previous range of $90 million to $95 million, and non-GAAP earnings per diluted share to be in a range of approximately $1.15 to $1.25, from a previous range of $1.18 to $1.28.  For calendar year 2013, the Company expects share-based compensation expense to be approximately $17.5 million, and amortization of acquisition-related intangible assets to be in a range of $7 million to $8 million.  For fiscal year 2014, the Company expects an effective tax rate in a range of approximately 38% to 39%.  The Company's Annual Report on Form 10‑K for the fiscal year ended March 31, 2013 contains information on how we calculate adjusted EBITDA and non‑GAAP earnings per diluted share.

Non-GAAP Financial Measures 

This press release and the accompanying tables present information about the Company's adjusted EBITDA, adjusted net income, and non-GAAP earnings per diluted share, which are non-GAAP financial measures provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP").  The term "adjusted EBITDA" for the three months ended June 30, 2013 and 2012 refers to net income attributable to common stockholders before adjustment for the items set forth in the first table.  The term "adjusted net income" for the three months ended June 30, 2013 and 2012 refers to net income attributable to common stockholders excluding the net of tax effect of the items set forth in the second table below.  The term "non-GAAP earnings per diluted share" for the three months ended June 30, 2013 and 2012 refers to earnings per diluted share excluding the net of tax effect of the items set forth in the third table below. 

A reconciliation of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measures is provided below for each of the periods indicated.  It is not practicable to provide a reconciliation of forecasted adjusted EBITDA or non-GAAP earnings per diluted share to the most directly comparable GAAP financial measures because certain items required for the forecast of such GAAP financial measures, including fair value adjustments to acquisition-related earn-out liabilities, equity in loss of unconsolidated entity, and gains and losses on investment in common stock warrants, cannot reasonably be estimated or predicted at this time.





Three Months Ended


June 30,


2013

2012




Net income attributable to common stockholders       

$        3,693

$        3,841

Equity in loss of unconsolidated entity          

3,233

2,124

Provision for income taxes               

4,335

3,702

Other income, net               

(523 )

(576 )

Depreciation and amortization        

6,354

4,086

Fair value adjustments to acquisition-related earn-out liabilities

700

3,500

Share-based compensation expense              

4,659

3,506




Adjusted EBITDA   

$      22,451

$      20,183








Three Months Ended


June 30,


2013

2012




Net income attributable to common stockholders       

$        3,693

$        3,841

Equity in loss of unconsolidated entity          

3,233

2,124

Amortization of acquisition-related intangibles, net of tax        

1,136

790

Fair value adjustments to acquisition-related earn-out liabilities, net of tax        

431

2,160

Share-based compensation expense, net of tax           

2,865

2,163




Adjusted net income               

$      11,358

$      11,078








Three Months Ended


June 30,


2013

2012




GAAP earnings per diluted share     

$      0.10

$       0.11

Equity in loss of unconsolidated entity          

0.09

0.06

Amortization of acquisition-related intangibles, net of tax        

0.03

0.02

Fair value adjustments to acquisition-related earn-out liabilities, net of tax

0.01

0.06

Share-based compensation expense, net of tax           

0.08

0.06




Non-GAAP earnings per diluted share 

$      0.31

$       0.31




 

Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its first quarter performance this evening, July 31, 2013, at 5:30 p.m. Eastern Time.  The conference call will be available via live webcast on the Company's website at www.advisory.com/IR.  To participate by telephone, the dial-in number is 888.317.6016.  Participants are advised to dial in at least five minutes prior to the call to register.  The webcast will be archived for seven days from 8:00 p.m. Eastern Time on Wednesday, July 31, until 11:00 p.m. Eastern Time on Wednesday, August 7, 2013.

About The Advisory Board Company

The Advisory Board Company is a global research, technology, and consulting firm partnering with 165,000 leaders in 4,100 organizations across health care and higher education.  Through its innovative membership model, the Company collaborates with executives and their teams to elevate performance and solve their most pressing challenges.  The Company provides strategic guidance, actionable insights, web-based software solutions, and comprehensive implementation and management services.  For more information, visit the firm's website, www.advisory.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements, including the Company's expectations regarding its revenue, adjusted EBITDA, non-GAAP earnings per diluted share, share-based compensation expense, amortization of acquisition-related intangibles, and effective tax rate for calendar year 2013 are based on information available to the Company as of July 31, 2013, the date of this news release, as well as the Company's current projections, forecasts, and assumptions, and are subject to risks and uncertainties.  You are hereby cautioned that these statements may be affected by certain factors, including those set forth below.  Consequently, actual operations and results may differ materially from the results discussed or implied in the forward-looking statements, and reported results should not be considered as an indication of future performance.  Factors that could cause actual results to differ materially from those indicated or implied by the forward-looking statements include, among others, changes in the financial condition of the health care industry, our dependence on renewal of membership-based services, the need to attract new business and retain current members and qualified personnel, new product development, competition, risks associated with the Company's software tools and management and advisory services, risks relating to privacy, information security, and other health care-related laws and standards, maintaining our third-party provider relationships and strategic alliances, our ability to license technology from third parties, impairment of goodwill, and various factors related to income and other taxes, as well as other risks and uncertainties described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2013, which is available for review on the Company's website at www.advisory.com/IR and at the Securities and Exchange Commission's website at www.sec.gov.  Additional information will also be set forth in the Company's Report on Form 10-Q for the quarter ended June 30, 2013, which will be filed with the Securities and Exchange Commission in August 2013. 

Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements made in this news release, which speak only as of the date of this news release. The Company does not undertake to update any of its forward-looking statements, whether as a result of circumstances or events that arise after the date they are made, new information, or otherwise.

 

 

THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND OTHER OPERATING STATISTICS

(In thousands, except per share data)

 













 Three Months Ended


 Selected





 June 30,


 Growth





2013


2012


 Rates


 Statements of Income







 Revenue


$    123,216


$    104,142


18.3%











 Cost of services, excluding depreciation and amortization (1) (2)

65,950


58,366




 Member relations and marketing (1)

22,188


19,120




 General and administrative (1)

17,986


13,479




 Depreciation and amortization

6,354


4,086





 Operating income

10,738


9,091




 Other income, net

523


576





 Income before provision for income taxes








   and equity in loss of unconsolidated entity

11,261


9,667




 Provision for income taxes

(4,335)


(3,702)




 Equity in loss of unconsolidated entity

(3,233)


(2,124)





 Net income before allocation to noncontrolling interest

3,693


3,841




 Net loss attributable to noncontrolling interest

-


-





 Net income attributable to common stockholders

$        3,693


$        3,841













 Net income attributable to common stockholders per share








 Basic

$          0.10


$          0.11





 Diluted

$          0.10


$          0.11













 Weighted average common shares outstanding








 Basic

35,488


34,179





 Diluted

36,618


36,054













 Contract Value (at end of period) 

$    475,811


$    411,581


15.6%











 Percentages of Revenue







 Cost of services, excluding depreciation and amortization (1) (2)

53.5%


56.0%




 Member relations and marketing (1)

18.0%


18.4%




 General and administrative (1)

14.6%


12.9%




 Depreciation and amortization 

5.2%


3.9%




 Operating income

8.7%


8.7%




 Net income attributable to common stockholders

3.0%


3.7%

























(1)

 Amounts include share-based compensation expense, as follows:

















 Cost of services

1,405


1,004






 Member relations and marketing

976


678






 General and administrative

2,278


1,824













(2)

 Amounts include fair value adjustments of acquisition-related earn-out liabilities, as follows:















 Cost of services

700


3,500




































 

 

THE ADVISORY BOARD COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

 








June 30,


March 31,



2013


2013



 (unaudited)



 ASSETS





 Current assets:





 Cash and cash equivalents


$           29,051


$           57,829

 Marketable securities, current


11,130


16,611

 Membership fees receivable, net


387,217


370,321

 Prepaid expenses and other current assets


19,897


15,477

 Deferred income taxes, current


10,944


7,664

 Total current assets


458,239


467,902






 Property and equipment, net


77,377


71,174

 Intangible assets, net


31,497


32,381

 Deferred incentive compensation and other charges


77,459


73,502

 Deferred income taxes, net of current portion


3,316


3,888

 Marketable securities, net of current portion


151,913


140,228

 Goodwill


95,540


95,540

 Investment in unconsolidated entity


-


1,907

 Other non-current assets


14,246


9,908

 Total assets


$         909,587


$         896,430






 LIABILITIES AND STOCKHOLDERS' EQUITY





 Current liabilities:





 Deferred revenue, current


$         411,645


$         398,541

 Accounts payable and accrued liabilities


68,911


75,089

 Accrued incentive compensation


9,621


21,033

 Total current liabilities


490,177


494,663






 Deferred revenue, net of current portion


111,316


104,484

 Other long-term liabilities


17,465


15,866

 Total liabilities


618,958


615,013






 Redeemable noncontrolling interest


100


100

 The Advisory Board Company's stockholders' equity:





 Common stock


357


351

 Additional paid-in capital


390,627


375,622

 Accumulated deficit


(98,274)


(95,809)

 Accumulated elements of other comprehensive (loss) income


(2,073)


1,261

 Total stockholders' equity controlling interest


290,637


281,425

 Equity attributable to noncontrolling interest


(108)


(108)

 Total stockholders' equity


290,529


281,317






 Total liabilities and stockholders' equity


$         909,587


$         896,430











 

 

THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 








 Three Months Ended June 30,



2013


2012

 Cash flows from operating activities:





      Net income before allocation to noncontrolling interest


$               3,693


$               3,841

           Adjustments to reconcile net income before allocation to 





                noncontrolling interest to net cash provided by operating activities:



                Depreciation and amortization


6,354


4,086

                Deferred income taxes


(907)


(379)

                Excess tax benefits from stock-based awards


(8,314)


(7,875)

                Stock-based compensation expense


4,659


3,506

                Amortization of marketable securities premiums


692


455

                Equity in loss of unconsolidated entity


3,233


2,124

                Changes in operating assets and liabilities:





                     Membership fees receivable


(16,896)


(41,264)

                     Prepaid expenses and other current assets


3,894


(6,554)

                     Deferred incentive compensation and other charges


(3,957)


(7,861)

                     Deferred revenue


19,936


44,433

                     Accounts payable and accrued liabilities


(4,766)


10,414

                     Acquisition-related earn-out payments


(1,412)


(788)

                     Accrued incentive compensation


(11,412)


(12,042)

                     Other long-term liabilities


1,599


5,489

                          Net cash flows used in operating activities


(3,604)


(2,415)






 Cash flows from investing activities:





 Purchases of property and equipment


(10,718)


(7,694)

 Capitalized external use software development costs


(955)


(834)

 Loan to unconsolidated entity


(5,664)


-

 Redemptions of marketable securities


7,800


-

 Purchases of marketable securities


(19,824)


(26,614)

           Net cash flows used in investing activities


(29,361)


(35,142)






 Cash flows from financing activities:





 Proceeds from issuance of stock from exercise of stock options


7,692


10,692

 Withholding of shares to satisfy minimum employee tax withholding

(5,786)


(3,844)

 Proceeds from issuance of stock under employee stock purchase plan

126


77

 Excess tax benefits from stock-based awards


8,314


7,875

 Purchases of treasury stock


(6,159)


(2,999)

           Net cash flows provided by financing activities


4,187


11,801






 Net decrease in cash and cash equivalents


(28,778)


(25,756)

 Cash and cash equivalents, beginning of period


57,829


60,642

 Cash and cash equivalents, end of period


$             29,051


$             34,886






 

SOURCE The Advisory Board Company

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