The Advisory Board Company Reports Results for Quarter and Fiscal Year Ended March 31, 2013 Company Reports Quarterly Revenue Growth of 19%, Contract Value Growth of 17%, and Member Renewal Rate of 90%; Announces New Program and $100M Increase to Share Repurchase Program

WASHINGTON, May 9, 2013 /PRNewswire/ -- The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the quarter ended March 31, 2013, which is the fourth quarter of its 2013 fiscal year.  Revenue for the quarter increased 19.1% to $119.7 million, from $100.5 million for the quarter ended March 31, 2012.  Contract value increased 17.1% to $466.3 million as of March 31, 2013, up from $398.3 million as of March 31, 2012.  For the quarter ended March 31, 2013, net income attributable to common stockholders was $6.4 million, or $0.18 per diluted share, compared to net income attributable to common stockholders of $8.2 million, or $0.23 per diluted share, for the quarter ended March 31, 2012.  For the quarter ended March 31, 2013, adjusted EBITDA was $22.7 million, up from $19.8 million for the quarter ended March 31, 2012.  Adjusted net income for the quarter ended March 31, 2013 was $12.2 million, or $0.33 per diluted share, compared to $11.1 million, or $0.31 per diluted share, for the quarter ended March 31, 2012.  Adjusted EBITDA, adjusted net income, and non-GAAP earnings per diluted share are all non-GAAP financial measures.

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For the fiscal year ended March 31, 2013, revenue increased 21.7% to $450.8 million, from $370.3 million for the fiscal year ended March 31, 2012. Net income attributable to common stockholders was $22.2 million, or $0.61 per diluted share, for the fiscal year ended March 31, 2013, compared to net income attributable to common stockholders of $25.3 million, or $0.73 per diluted share, for the prior fiscal year.  For the fiscal year ended March 31, 2013, adjusted EBITDA was $83.0 million, up from $70.3 million for the fiscal year ended March 31, 2012.  Adjusted net income for the fiscal year ended March 31, 2013 was $44.8 million, or $1.23 per diluted share, compared to $39.4 million, or $1.13 per diluted share, for the fiscal year ended March 31, 2012. 

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, "We closed the quarter and the fiscal year with strong performance, with 19% revenue growth for the quarter, 22% revenue growth for the fiscal year, and 17% contract value growth over last year at this time.  These financial metrics, along with our 10% membership base expansion and 90% institutional renewal rate, illustrate that our business model remains robust and that our members derive measurable impact from their work with us.  We continue to see a virtuous cycle as this tangible value means that members want to work with us in deeper and more comprehensive partnerships, driving ongoing company growth and expansion of our footprint and impact."

Mr. Musslewhite continued, "I am also pleased to announce the launch of the ICD-10 Performance Program, which will help our members navigate the upcoming transition in our nation's system for coding, reporting, and billing medical diagnoses and inpatient procedures.  Hospitals must prepare effectively for the mandated switch from the current ICD-9 system to the new, radically more complex, ICD-10 code sets–or face the potential of millions of dollars in revenue losses.  The ICD-10 Performance Program provides members a software tool that uses hospitals' individual patient accounting and claims data and a proprietary risk algorithm to provide a comprehensive picture of the ICD-10 inflection points for an individual hospital.  The tool is complemented by an extensive best practice library which provides step-by-step instructions on training physicians and coders on the new documentation concepts and dashboards to monitor ongoing performance.  The initiative is seeing strong traction in the market, and we are confident in the value that it will provide to members."

Share Repurchase Authorization Increased by $100 Million

During the three months ended March 31, 2013, the Company repurchased approximately 98,000 shares of its common stock at a total cost of $5.0 million.  To date, the Company has repurchased approximately 15.6 million shares of its common stock at a total cost of $341.0 million

The Company also announced that its Board of Directors authorized an increase in its share repurchase program of up to an additional $100 million of the Company's common stock, bringing the total amount authorized to be spent under the program to $450 million since its inception. Repurchases will continue to be made from time to time in the open market or in private transactions.   The repurchase program does not obligate the Company to repurchase any specific number of shares and may be modified or discontinued at any time  The Company will fund its share repurchases with cash on hand and cash generated from operations.  As of March 31, 2013, the Company had approximately $214.7 million in cash and marketable securities and no debt.

Outlook for Calendar Year 2013 

The Company reaffirmed its previously announced calendar year 2013 guidance for revenue, adjusted EBITDA, and non-GAAP earnings per diluted share.   For calendar year 2013, the Company expects revenue to be in a range of approximately $495 million to $505 million, adjusted EBITDA to be in a range of approximately $90 million to $95 million, and non-GAAP earnings per diluted share to be in a range of approximately $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 approximately $7 million.  For fiscal year 2014, the Company expects an effective tax rate in a range of approximately 38% to 39%.

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" refers to  net income attributable to common stockholders before adjustment for the items set forth in the first table.  The term "adjusted net income" 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" 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 and gains and losses on investment in common stock warrants, cannot reasonably be estimated or predicted at this time.

 


Three Months Ended


Fiscal Year Ended


March 31,


March 31,


2013


2012


2013


2012









Net income attributable to common stockholders

$    6,399


$    8,167


$    22,163


$   25,293

Equity in loss of unconsolidated entity

2,170


728


6,756


1,337

Gain on sale of discontinued operations, net of tax


(2,155)



(2,155)

Provision for income taxes from continuing operations

4,695


4,266


17,259


15,203

Discontinued operations, net of tax


45



(286)

Other income, net

(602)


(164)


(2,604)


(3,034)

Depreciation and amortization

6,146


3,996


19,885


14,656

Acquisition and similar transaction charges



851


648

Fair value adjustments to acquisition-related earn-out liabilities

400


1,378


4,759


6,678

Share-based compensation expense

3,530


3,525


13,913


11,987

     Adjusted EBITDA

$    22,738


$    19,786


$    82,982


$    70,326

 


Three Months Ended


Fiscal Year Ended


March 31,


March 31,


2013


2012


2013


2012









Net income attributable to common stockholders

$    6,399


$  8,167


$    22,163


$    25,293

Equity in loss of unconsolidated entity

2,170


728


6,756


1,337

Gain on sale of discontinued operations, net of tax


(2,155)



(2,155)

Discontinued operations, net of tax


45



(286)

Amortization of acquisition-related intangibles, net of tax

1,193


858


3,804


3,502

Acquisition and similar transaction charges, net of tax



525


405

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

258


846


2,948


4,163

Gain/loss on investment in common stock warrants, net of tax

(136)


400


(68)


(263)

Share-based compensation expense, net of tax

2,280


2,164


8,686


7,388

Adjusted net income

$    12,164


$    11,053


$   44,814


$    39,384

 


Three Months Ended


Fiscal Year Ended


March 31,


March 31,


2013


2012


2013


2012









GAAP earnings per diluted share

$    0.18


$   0.23


$    0.61


$    0.73

Equity in loss of unconsolidated entity

0.06


0.02


0.19


0.04

Gain on sale of discontinued operations, net of tax


(0.06)



(0.06)

Discontinued operations, net of tax




(0.01)

Amortization of acquisition-related intangibles, net of tax

0.03


0.03


0.10


0.10

Acquisition and similar transaction charges, net of tax



0.02


0.01

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


0.02


0.08


0.12

Gain/loss on investment in common stock warrants, net of tax


0.01


(0.01)


(0.01)

Share-based compensation expense, net of tax

0.06


0.06


0.24


0.21

Non-GAAP earnings per diluted share

$    0.33


$    0.31


$    1.23


$    1.13

 

Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its fourth quarter and fiscal year performance this evening, May 9, 2013, at 5:30 p.m. Eastern Time.  The conference call will be available via live web cast 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 web cast will be archived for seven days from 8:00 p.m. Eastern Time on Thursday, May 9, until 11:00 p.m. Eastern Time on Thursday, May 16, 2013.

About The Advisory Board Company

The Advisory Board Company is a global research, technology, and consulting firm partnering with 150,000 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, http://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 May 9, 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 thirdparty 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, 2012, and subsequent reports filed with the Securities and Exchange Commission, all of which are 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-K for the fiscal year ended March 31, 2013, which will be filed with the Securities and Exchange Commission in May 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


 Twelve Months Ended


 Selected




 March 31


 Growth


 March 31


 Growth




2013


2012


 Rates


2013


2012


 Rates

 Statements of Income












 Revenue


$    119,706


$    100,483


19.1%


$    450,837


$   370,345


21.7%















 Cost of services, excluding depreciation and

    amortization (1) (2) (5)

61,559


53,697




240,037


198,112



 Member relations and marketing (1)

22,832


19,105




85,264


73,875



 General and administrative (1) (3)

16,507


12,798




62,185


47,892



 Depreciation and amortization (5)

6,146


3,996




19,885


14,108



       Operating income

12,662


10,887




43,466


36,358



 Other income, net (4)

602


164




2,604


3,034



       Income from continuing operations before

         provision for income taxes  and equity












      in loss of unconsolidated entity

13,264


11,051




46,070


39,392



 Provision for income taxes

(4,695)


(4,266)




(17,259)


(15,203)



 Equity in loss of unconsolidated entity

(2,170)


(728)




(6,756)


(1,337)



       Net income from continuing operations

6,399


6,057




22,055


22,852



 Discontinued operations:












     Net income from discontinued operations

-


(45)




-


286



     Gain on sale of discontinued operations,

        net of tax

-


2,155




-


2,155



       Net income before allocation to

          noncontrolling interest

6,399


8,167




22,055


25,293



 Net loss attributable to noncontrolling interest

-


-




108


-



      Net income attributable to common

         stockholders

$        6,399


$        8,167




$      22,163


$     25,293

















 Earnings per share - Basic












       Net income from continuing operations

         attributable to common stockholders

$          0.18


$          0.18




$          0.64


$         0.70



       Net income from discontinued operations  

         attributable to commons stockholders

$                -


$          0.06




$                -


$         0.07



         Net income attributable to common

           stockholders per share - Basic

$          0.18


$          0.24




$          0.64


$         0.77

















 Earnings per share - Diluted












       Net income from continuing operations

         attributable to common stockholders

$          0.18


$          0.17




$          0.61


$         0.66



       Net income from discontinued operations  

         attributable to common stockholders

$                -


$          0.06




$                -


$         0.07



        Net income attributable to common

          stockholders per share – Diluted

$          0.18


$          0.23




$          0.61


$         0.73

















 Weighted average common shares outstanding












       Basic

35,106


33,452




34,723


32,808



       Diluted

36,534


35,542




36,306


34,660

















 Contract Value (at end of period) 

$    466,329


$    398,313


17.1%





















 

Percentages of Revenues












 Cost of services, excluding depreciation and

  amortization (1) (2) (5)

51.4%


53.4%




53.2%


53.5%



 Member relations and marketing (1)

19.1%


19.0%




18.9%


19.9%



 General and administrative (1) (3)

13.8%


12.7%




13.8%


12.9%



 Depreciation and amortization (5)

5.1%


4.0%




4.4%


3.8%



 Operating income

10.6%


10.8%




9.6%


9.8%



 Net income

5.3%


8.1%




4.9%


6.8%















 

 


 Three Months Ended 




 Twelve Months Ended 




 March 31 




 March 31 




2013


2012




2013


2012



(1) Amounts include share-based compensation, as follows: 















     Cost of services 

973


866




3,975


3,440



     Member relations and marketing 

650


568




2,642


2,133



     General and administrative 

1,907


2,091




7,295


6,414















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















     Cost of services 

400


1,400




4,800


6,700















(3) Amounts include acquisition and similar transaction charges, as follows: 















     General and administrative 

-


-




900


600

















(4) Amounts include gain/(loss) on investment in common stock warrants, as follows: 















     Other income 

210


(650)




100


450















(5) Prior period amounts include the following reclass from Cost of Services to Depreciation and amortization, as follows:













     Cost of services  

-


-




(1,266)


(5,075)





     Depreciation and amortization 

-


-




1,266


5,075

















 

 

THE ADVISORY BOARD COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)








March 31,


March 31,



2013


2012



 (unaudited)



 ASSETS





 Current assets:





 Cash and cash equivalents


$               57,829


$               60,642

 Marketable securities, current


16,611


4,823

 Membership fees receivable, net


351,598


281,584

 Prepaid expenses and other current assets


19,835


6,705

 Deferred income taxes, current


7,664


7,255

 Total current assets


453,537


361,009






 Property and equipment, net


71,174


49,653

 Intangible assets, net


32,381


19,384

 Deferred incentive compensation and other charges


73,502


53,369

 Deferred income taxes, net of current portion


3,888


7,655

 Marketable securities, net of current portion


140,228


122,621

 Goodwill


95,540


74,235

 Investment in unconsolidated entity


1,907


8,662

 Other non-current assets


5,550


9,000

 Total assets


$             877,707


$             705,588






 LIABILITIES AND STOCKHOLDERS' EQUITY





 Current liabilities:





 Deferred revenues, current


$             386,739


$             313,958

 Accounts payable and accrued liabilities


75,089


57,529

 Accrued incentive compensation


21,033


18,691

 Total current liabilities


482,861


390,178






 Deferred revenues, net of current portion


97,563


78,498

 Other long-term liabilities


15,866


19,865

 Total liabilities


596,290


488,541






 Redeemable noncontrolling interest


100


-

 The Advisory Board Company's stockholders' equity:





 Common stock


351


235

 Additional paid-in capital


375,622


315,648

 Retained (deficit) earnings


(95,809)


189,742

 Accumulated elements of other comprehensive income


1,261


1,206

 Treasury stock


-


(289,784)

 Total stockholders' equity controlling interest


281,425


217,047

 Equity attributable to noncontrolling interest


(108)


-

 Total stockholders' equity


281,417


217,047






 Total liabilities and stockholders' equity


$             877,707


$             705,588











 

 

THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)








 Twelve Months Ended March  31,



2013


2012

 Cash flows from operating activities:





 Net income before allocation to noncontrolling interest


$      22,055


$      25,293

 Adjustments to reconcile net income before allocation to 





 noncontrolling interest to net cash provided by operating activities:





 Depreciation and amortization


19,885


14,656

 Deferred income taxes


261


(85)

 Excess tax benefits from stock-based awards


(20,535)


(7,593)

 Stock-based compensation expense


13,913


11,986

 Amortization of marketable securities premiums


2,031


1,295

 Gain on sale of discontinued operations


-


(3,510)

 Gain on investment in common stock warrants


(100)


(450)

 Equity in loss of unconsolidated entity


6,756


1,337

 Changes in operating assets and liabilities:





 Membership fees receivable


(68,413)


(104,203)

 Prepaid expenses and other current assets


(8,624)


386

 Deferred incentive compensation and other charges


(20,133)


(7,143)

 Deferred revenues


90,840


132,279

 Accounts payable and accrued liabilities


50,290


17,564

 Acquisition-related earn-out payments


(3,011)


(112)

 Accrued incentive compensation


2,342


5,082

 Other long-term liabilities


(6,499)


5,950

 Net cash flows provided by operating activities


81,058


92,732






 Cash flows from investing activities:





 Purchases of property and equipment


(35,545)


(29,194)

 Capitalized external use software development costs


(3,393)


(2,825)

 Cash paid for acquisitions, net of cash acquired


(31,887)


(12,829)

 Proceeds from sale of discontinued operations, net of selling costs


1,050


7,803

 Investment in unconsolidated entity


-


(10,000)

 Loan to unconsolidated entity


(4,358)


-

 Redemptions of marketable securities


35,376


25,480

 Purchases of marketable securities


(66,710)


(65,990)

 Net cash flows used in investing activities


(105,467)


(87,555)






 Cash flows from financing activities:





 Proceeds from issuance of stock from exercise of stock options


24,137


31,026

 Withholding of shares to satisfy minimum employee tax withholding

(4,140)


(2,421)

 Contributions from noncontrolling interest


100


-

 Proceeds from issuance of stock under employee stock purchase plan

363


222

 Excess tax benefits from stock-based awards


20,535


7,593

 Acquisition-related earn-out payments


(1,400)


(4,753)

 Purchases of treasury stock


(17,999)


(6,580)

 Net cash flows provided by financing activities


21,596


25,087






 Net (decrease) increase in cash and cash equivalents


(2,813)


30,264

 Cash and cash equivalents, beginning of period


60,642


30,378

 Cash and cash equivalents, end of period


$      57,829


$      60,642






 

SOURCE The Advisory Board Company



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