2014

The Advisory Board Company Reports Results For Quarter Ended September 30, 2013 Company Reports Quarterly Revenue Growth of 16%, Contract Value of $491 Million, and Announces Acquisition of Care Team Connect, Inc.

WASHINGTON, Nov. 4, 2013 /PRNewswire/ -- The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the quarter ended September 30, 2013, which is the second quarter of its 2014 fiscal year.  Revenue for the quarter increased 16% to $128.3 million, from $110.8 million for the quarter ended September 30, 2012.  Contract value increased 13% to $491.3 million as of September 30, 2013, up from $435.1 million as of September 30, 2012.  For the quarter ended September 30, 2013, net income attributable to common stockholders was $9.0 million, or $0.24 per diluted share, compared to net income attributable to common stockholders of $7.5 million, or $0.21 per diluted share, for the quarter ended September 30, 2012.  For the quarter ended September 30, 2013, adjusted EBITDA was $22.3 million, up from $20.8 million for the quarter ended September 30, 2012.  Adjusted net income for the quarter ended September 30, 2013 was $11.4 million, or $0.31 per diluted share, compared to $11.4 million, or $0.31 per diluted share, for the quarter ended September 30, 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 six months ended September 30, 2013, revenue increased 17% to $251.6 million, from $214.9 million for the six months ended September 30, 2012. Net income attributable to common stockholders was $12.7 million, or $0.35 per diluted share, for the six months ended September 30, 2013, compared to net income attributable to common stockholders of $11.3 million, or $0.31 per diluted share, for the same period in the prior fiscal year.  For the six months ended September 30, 2013, adjusted EBITDA was $44.8 million, up from $40.9 million for the six months ended September 30, 2012.  Adjusted net income for the six months ended September 30, 2013 was $22.7 million, or $0.62 per diluted share, compared to $22.5 million, or $0.62 per diluted share, for the six months ended September 30, 2012. 

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, "We are pleased with our strong revenue and earnings growth for the quarter.  In markets experiencing tremendous change and transformation, our continuing growth indicates the impact we are having on our members' most important challenges.  As we progress through the important December quarter, across all areas of the business, everyone is fully focused on driving outstanding value for our members and flawless execution." 

Acquisition of Care Team Connect, Inc. and Launch of New Program

The Company announced the acquisition as of October 8, 2013 of Care Team Connect, Inc., a leading provider of comprehensive care management workflow solutions and analytics.  The transaction enhances The Advisory Board Company's existing suite of population health technologies and service offerings and affirms the Company's position as a leader in the care management market. 

Robert Musslewhite commented, "We are excited to add Care Team Connect's outstanding care management technology and exceptional talent to the Advisory Board's portfolio of solutions, particularly given our members' need for effective population health capabilities in the current health care environment.  These new tools will supplement our strong portfolio, and, in particular, are a great addition to our Crimson suite of clinical programs.  This provider-oriented workflow tool for care management allows the Advisory Board to offer a more comprehensive array of research, technology, and services to help members with all aspects of population health management." 

Mr. Musslewhite continued, "I am excited that we will be bringing this technology to the market without delay.  As such, I am pleased to announce today the launch of our newest program, Crimson Care Management, which leverages Care Team Connect's technology to serve hospitals and health systems seeking to implement a care management workflow tool to build their population health management capabilities.  We are optimistic about the impact that this new program will have for our members, particularly given Care Team Connect's strong relationships with its clients, which include MissionPoint Health Partners in Nashville, Tennessee; Michigan Pioneer ACO in Southfield, Michigan; MemorialCare in Fountain Valley, California; and Integrated Health Partners in Battle Creek, Michigan."

Care Team Connect's Chief Executive Officer and founder Ben Albert added, "All of us at Care Team Connect are thrilled to join forces with The Advisory Board Company to continue to build a powerful portfolio for population health management. Given the Advisory Board's deep knowledge base of best practices, powerful Crimson platform and outstanding member network, I am confident that being a part of this exceptional organization will permit Care Team Connect to have even greater impact on health care delivery in the United States."

Mr. Musslewhite concluded, "We are pleased to welcome Care Team Connect's talented staff to The Advisory Board Company.  They have exceptional experience and expertise, and the company's values, service ethic, and outstanding client relationships are a great fit with our own.  I am very excited about this infusion of talent and capabilities, and I look forward to our collective success."

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 $500 million to $505 million, adjusted EBITDA to be in a range of approximately $87.5 million to $92.5 million, and non-GAAP earnings per diluted share to be in a range of approximately $1.15 to $1.25. 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 the calculation of 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 and six months ended September 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 and six months ended September 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 and six months ended September 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


Six Months Ended


September 30,


September 30,


2013


2012


2013


2012









Net income attributable to common stockholders

$    9,002


$    7,481


$    12,695


$   11,322

Equity in loss of unconsolidated entity

(1,326)


592


1,907


2,716

Provision for income taxes from continuing operations

4,805


4,944


9,140


8,646

Other income, net

(1,091)


(688)


(1,614)


(1,264)

Depreciation and amortization

6,886


4,430


13,240


8,516

Acquisition and similar transaction charges

573


599


573


599

Fair value adjustments to acquisition-related earn-out liabilities

(950)



(250)


3,500

Share-based compensation expense

4,407


3,405


9,066


6,911

     Adjusted EBITDA

$    22,306


$    20,763


$    44,757


$    40,946

 

 

 


Three Months Ended


Six Months Ended


September 30,


September 30,


2013


2012


2013


2012









Net income attributable to common stockholders

$    9,002


$    7,481


$    12,695


$   11,322

Equity in loss of unconsolidated entity

(1,326)


592


1,907


2,716

Amortization of acquisition-related intangibles, net of tax

1,231


790


2,367


1,581

Acquisition and similar transaction charges, net of tax

352


370


352


370

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

(584)



(154)


2,160

Loss on investment in common stock warrants, net of tax


68



68

Share-based compensation expense, net of tax

2,710


2,101


5,576


4,264

Adjusted net income

$    11,385


$    11,402


$   22,743


$    22,481










Three Months Ended


Six Months Ended


September 30,


September 30,


2013


2012


2013


2012









GAAP earnings per diluted share

$    0.24


$   0.21


$    0.35


$    0.31

Equity in loss of unconsolidated entity

(0.03)


0.01


0.05


0.08

Amortization of acquisition-related intangibles, net of tax

0.03


0.02


0.06


0.04

Acquisition and similar transaction charges, net of tax

0.01


0.01


0.01


0.01

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

(0.02)




0.06

Loss on investment in common stock warrants, net of tax




Share-based compensation expense, net of tax

0.08


0.06


0.15


0.12

Non-GAAP earnings per diluted share

$    0.31


$    0.31


$    0.62


$    0.62












Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its second quarter performance this evening, November 4, 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 Monday, November 4, until 11:00 p.m. Eastern Time on Monday, November 11, 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 November 4, 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 September 30, 2013, which will be filed with the Securities and Exchange Commission in November 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


 Six Months Ended


 Selected





 September 30,


 Growth


 September 30,


 Growth





2013


2012


 Rates


2013


2012


 Rates


 Statements of Income














 Revenue


$    128,341


$    110,758


15.9%


$    251,557


$   214,900


17.1%

















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

69,857


56,989




135,807


115,355




 Member relations and marketing (1)

22,198


21,486




44,386


40,606




 General and administrative (1) (3)

18,010


15,632




35,996


29,111




 Depreciation and amortization (4)

6,886


4,430




13,240


8,516





 Operating income (5)

11,390


12,221




22,128


21,312




 Other income, net

1,091


688




1,614


1,264





 Income before provision for income taxes and equity in loss of














    unconsolidated entities

12,481


12,909




23,742


22,576




 Provision for income taxes

(4,805)


(4,944)




(9,140)


(8,646)




 Equity in loss of unconsolidated entities (6)

1,326


(592)




(1,907)


(2,716)





Net income before allocation to noncontrolling interest

9,002


7,373




12,695


11,214




 Net loss attributable to noncontrolling interest

-


108




-


108





Net income attributable to common stockholders

$        9,002


$        7,481


20.3%


$      12,695


$     11,322


12.1%

















 Net income attributable to common stockholders per share














 Basic

$          0.25


$          0.22




$          0.36


$         0.33





 Diluted

$          0.24


$          0.21


14.3%


$          0.35


$         0.31


12.9%

















 Weighted average common shares outstanding














 Basic

35,883


34,660




35,686


34,421





 Diluted

36,897


36,253




36,758


36,154



















 Contract Value (at end of period) 

$    491,338


$    435,084


12.9%























 Percentages of Revenue













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

54.4%


51.5%




54.0%


53.7%




 Member relations and marketing (1)

17.3%


19.4%




17.6%


18.9%




 General and administrative (1) (3)

14.0%


14.1%




14.3%


13.5%




 Depreciation and amortization (4)

5.4%


4.0%




5.3%


4.0%




 Operating income

8.9%


11.0%




8.8%


9.9%




 Net income attributable to common stockholders

7.0%


6.8%




5.0%


5.3%

















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














Cost of services

1,284


989




2,689


1,993





Member relations and marketing

925


658




1,901


1,336





General and administrative

2,198


1,758




4,476


3,582

















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














Cost of services

(950)


-




(250)


3,500

















    (3) Amounts include acquisition and transaction related costs, as follows:














General and administrative

573


599




573


599

















    (4) Amounts include amortization of acquisition-related intangibles, as follows:














Depreciation and amortization

2,001


1,281




3,848


2,562

















    (5) Amounts include loss on investment in common stock warrants, as follows:














Other income, net

-


(110)




-


(110)

















    (6) During the quarter ending September 30, 2013, one of the Company's investments, Evolent Health, completed a reorganization in conjunction with an additional round of equity financing.  The Company is working through the final accounting for the transaction and has included its preliminary results in this release.


 

 

 

THE ADVISORY BOARD COMPANY

 CONSOLIDATED BALANCE SHEETS

 (In thousands)








September 30,


March 31,



2013


2013



 (unaudited)



 ASSETS





 Current assets:





 Cash and cash equivalents


$          73,383


$          57,829

 Marketable securities, current


4,501


16,611

 Membership fees receivable, net


387,805


370,321

 Prepaid expenses and other current assets


19,976


15,477

 Deferred income taxes, current


9,928


7,664

 Total current assets


495,593


467,902






 Property and equipment, net


86,928


71,174

 Intangible assets, net


31,391


32,381

 Deferred incentive compensation and other charges


79,460


73,502

 Deferred income taxes, net of current portion


4,427


3,888

 Marketable securities, net of current portion


122,309


140,228

 Goodwill


104,478


95,540

 Investments in unconsolidated entities


20,000


1,907

 Other non-current assets


5,550


9,908

 Total assets


$        950,136


$        896,430






 LIABILITIES AND STOCKHOLDERS' EQUITY





 Current liabilities:





 Deferred revenue, current


$        405,541


$        398,541

 Accounts payable and accrued liabilities


79,692


75,089

 Accrued incentive compensation


16,111


21,033

 Total current liabilities


501,344


494,663






 Deferred revenue, net of current portion


123,237


104,484

 Other long-term liabilities


16,182


15,866

 Total liabilities


640,763


615,013






 Redeemable noncontrolling interest


100


100

 The Advisory Board Company's stockholders' equity:





 Common stock


360


351

 Additional paid-in capital


405,483


375,622

 Accumulated deficit


(94,272)


(95,809)

 Accumulated other comprehensive (loss) income


(2,190)


1,261

 Total stockholders' equity controlling interest


309,381


281,425

 Equity attributable to noncontrolling interest


(108)


(108)

 Total stockholders' equity


309,273


281,317






 Total liabilities and stockholders' equity


$        950,136


$        896,430











 

 

 

THE ADVISORY BOARD COMPANY

 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands)








 Six Months Ended September 30,



2013


2012

 Cash flows from operating activities:





 Net income before allocation to noncontrolling interest


$            12,695


$            11,214

 Adjustments to reconcile net income before allocation to 





 noncontrolling interest to net cash provided by operating activities:



 Depreciation and amortization


13,240


8,516

 Deferred income taxes


(737)


(408)

 Excess tax benefits from stock-based awards


(12,839)


(9,721)

 Stock-based compensation expense


9,066


6,911

 Amortization of marketable securities premiums


1,358


958

 Loss on investment in common stock warrants


-


110

 Equity in loss of unconsolidated entity


1,907


2,716

 Changes in operating assets and liabilities:





 Membership fees receivable


(16,825)


(37,583)

 Prepaid expenses and other current assets


8,340


(6,252)

 Deferred incentive compensation and other charges


(5,958)


(3,958)

 Deferred revenue


25,459


57,614

 Accounts payable and accrued liabilities


6,281


22,456

 Acquisition-related earn-out payments


(1,812)


(1,182)

 Accrued incentive compensation


(4,922)


(6,524)

 Other long-term liabilities


316


(3,976)

 Net cash flows provided by operating activities


35,569


40,891






 Cash flows from investing activities:





 Purchases of property and equipment


(23,585)


(14,562)

 Capitalized external use software development costs


(2,309)


(1,723)

 Investments in and loans to unconsolidated entity


(15,641)


-

 Cash paid for acquisition, net cash acquired


(11,482)


-

 Redemptions of marketable securities


43,189


23,220

 Purchases of marketable securities


(19,824)


(42,889)

 Net cash flows used in investing activities


(29,652)


(35,954)






 Cash flows from financing activities:





 Proceeds from issuance of stock from exercise of stock options


13,497


16,205

 Withholding of shares to satisfy minimum employee tax withholding

(5,796)


(3,844)

 Proceeds from issuance of stock under employee stock purchase plan

256


165

 Excess tax benefits from stock-based awards


12,839


9,721

 Contributions from noncontrolling interest


-


100

 Purchases of treasury stock


(11,159)


(7,999)

 Net cash flows provided by financing activities


9,637


14,348






 Net increase in cash and cash equivalents


15,554


19,285

 Cash and cash equivalents, beginning of period


57,829


60,642

 Cash and cash equivalents, end of period


$            73,383


$            79,927











 

SOURCE The Advisory Board Company



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