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

Company Reports Quarterly Revenue Growth of 18%, Contract Value Growth of 16%, and Announces New Program

31 Jul, 2013, 16:15 ET from The Advisory Board Company

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



RELATED LINKS

http://www.advisoryboardcompany.com