Advisory Board 8-K The Advisory Board Company Reports Fiscal 2004 Third Quarter Results

Exhibit 99.1

Contact:	David Felsenthal	The Watergate
	Chief Financial Officer	600 New Hampshire Avenue, N.W.
	202.266.5876	Washington, D.C. 20037
	jacobsg@advisory.com	www.advisoryboardcompany.com

THE ADVISORY BOARD COMPANY REPORTS FISCAL 2004 THIRD QUARTER RESULTS

Company Reports Quarterly Revenue Growth of 21% and Earnings per Diluted Share of $0.25;
Announces Guidance for 2004 Calendar Year and Share Repurchase

WASHINGTON, D.C.— (January 29, 2004) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the third quarter of its fiscal year ending March 31, 2004. For the quarter ending December 31, 2003, revenues increased 21% to $31.3 million, from $25.9 million for the third quarter of fiscal 2003. Net income was $4.6 million, or $0.25 per diluted share, compared to $3.3 million, or $0.19 per diluted share, for the same period a year ago. Pro forma net income, which excludes special compensation and stock option related expenses, was $4.7 million, or $0.25 per diluted share, compared to $3.8 million or $0.22 per diluted share for the same period last year.

Revenues for the nine months ended December 31, 2003, increased 22% to $89.7 million, from $73.3 million in the nine months ended December 31, 2002. Net income for the period was $13.7 million, or $0.74 per diluted share, compared to $9.6 million, or $0.58 per diluted share, for the same period a year ago. Pro forma net income for the nine months ended December 31, 2003, was $14.0 million, or $0.75 per diluted share, versus $10.2 million, or $0.61 per diluted share, in the prior year. Contract value grew 18% to $120.5 million as of December 31, 2003, up from $101.8 million as of December 31, 2002.

Frank Williams, chief executive officer of The Advisory Board Company, commented, “We are pleased with our financial results for the December quarter, achieving revenue growth of 21% and earnings per diluted share of $0.25. We are also happy with our overall performance for calendar year 2003, with strong revenue growth of 23% and pro forma operating margin expansion to 25%.”

He added, “I am also pleased to announce the launch of our newest best practice research program, the Physician Leadership Program. This program is designed to strengthen the partnership between physicians and hospitals as they work together in the areas of clinical quality, efficiency, innovation, and growth. We have established a strong charter membership for the program including Brigham and Women’s Hospital, California Pacific Medical Center, Children’s Hospital Medical Center of Cincinnati, Dana-Farber Cancer Institute, and Stanford Hospital and Clinics. The program is off to a strong start, and we are very excited about its potential.”

Outlook for Calendar Year 2004

Although the Company operates on a fiscal year ending March 31, 2004, the Company is providing guidance for the calendar year 2004. The following table summarizes the Company’s guidance for the twelve months ending December 31, 2004. Pro forma earnings per diluted share for each period presented excludes special compensation and stock option related expenses and includes income taxes at an effective rate of 40.5%.

Revenue and Pro Forma Earnings Per Diluted Share Targets

				Three Months Ending						Twelve Months
										Ending
		March 31,		June 30,		September 30,		December 31,		December 31,
		2004		2004		2004		2004		2004
Revenue (000’s)		$	31,800	$	32,600	$	34,500	$	35,900	$	134,800
Pro forma earnings per
	diluted share	$	0.29	$	0.28	$	0.30	$	0.31	$	1.18

In addition, the Company expects pro forma operating margins of approximately 25.5% for calendar year 2004.

Mr. Williams concluded, “The overall market environment continues to be challenging. However, our ability to consistently deliver demonstrable value across our program portfolio, and our contract value growth of 18%, provide a strong platform for 2004. As a result, I am confident in our ability to deliver on our strategic and financial objectives across the coming year.”

Share Repurchase

The Company also announces that its Board of Directors authorized a share repurchase of up to $50 million of the Company’s common stock. Repurchases will be made from time to time in open market and privately negotiated transactions subject to market conditions. No minimum number of shares has been fixed. The Company will fund its share repurchases with cash on hand and cash generated from operations. At December 31, 2003 the Company had $121.0 million in cash and marketable securities and no debt.

The Company will hold an investor conference call to discuss its third quarter performance this evening, January 29, 2004, at 6:00 p.m. Eastern Standard Time. Investors will be able to listen to the call by dialing 800-477-2815 shortly before the scheduled start time. The conference call replay will be archived for seven days: from 8:00 p.m. Thursday, January 29th until 8:00 p.m. Thursday, February 5th. To listen to the archived call: dial either 800-633-8284 or 402-977-9140, and enter reservation number 21183331.

About The Advisory Board Company

The Advisory Board Company provides best practices research and analysis to the health care industry, focusing on business strategy, operations and general management issues. The Company provides best practices and research through discrete annual programs to a membership of over 2,300 hospitals, health systems, pharmaceutical and biotech companies, health care insurers, and medical device companies in the United States. Each program typically charges a fixed annual fee and provides members with best practices, research reports, executive education and other supporting research services.

The Company presents pro forma results to provide comparisons with prior periods in a manner it believes would be consistent if it had been a public company prior to fiscal 2002. Pro forma results exclude special compensation and stock option related expense. For historical results, a reconciliation between pro forma and GAAP is shown in the attached schedule. The Company is not able to reconcile its outlook for calendar year 2004 to GAAP as stock option related expense is dependent upon a number of unknown factors, including future stock price.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are hereby cautioned that these statements may be affected by certain factors, among others, set forth below and in the Company’s filings with the Securities and Exchange Commission, and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. Factors that could cause actual results to differ materially from those indicated by forward-looking statements include, among others, the dependence on renewal of membership based services, dependence on key personnel, the need to attract and retain qualified personnel, management of growth, new product development, competition, risks associated with anticipating market trends, industry consolidation, variability of quarterly operating results and various factors that could affect the estimated tax rate. These factors are discussed more fully in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

# # #

THE ADVISORY BOARD COMPANY
UNAUDITED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		Three Months Ending						Selected			Nine Months Ending						Selected
		December 31						Growth			December 31						Growth
		2003			2002			Rates			2003			2002			Rates
Statements of Operations
Revenues		$	31,262		$	25,865			20.9	%	$	89,662		$	73,282			22.4	%
Cost of services			13,167			10,726						37,075			31,043
Member relations and marketing			6,538			5,285						18,152			14,495
General and administrative			4,185			3,192						11,841			9,131
Depreciation and loss on disposal of assets			292			383						1,112			1,426
Special compensation and stock option related expense			122			865						443			1,064
	Income from operations		6,958			5,414						21,039			16,123
Interest income			781			269						2,042			589
	Income before provision for income taxes		7,739			5,683						23,081			16,712
Provision for income taxes			(3,134	)		(2,414	)					(9,346	)		(7,104	)
	Net income	$	4,605		$	3,269					$	13,735		$	9,608
Earnings per share
	Basic	$	0.29		$	0.24					$	0.89		$	0.76
	Diluted	$	0.25		$	0.19			31.6	%	$	0.74		$	0.58			27.6	%
Weighted average common shares outstanding Basic
	Basic		15,641			13,500						15,426			12,612
	Diluted		18,627			17,126						18,554			16,695
Percentages of Revenues
Cost of services			42.1	%		41.5	%					41.3	%		42.4	%
Member relations and marketing			20.9	%		20.4	%					20.2	%		19.8	%
General and administrative			13.4	%		12.3	%					13.2	%		12.5	%
Depreciation and loss on disposal of assets			0.9	%		1.5	%					1.2	%		1.9	%
Income from operations			22.3	%		20.9	%					23.5	%		22.0	%
Net income			14.7	%		12.6	%					15.3	%		13.1	%
Contract Value (at end of period)		$	120,504		$	101,823			18.3	%

RECONCILIATION OF PRO FORMA RESULTS
(In thousands, except per share data)

Pro forma data (1):
Income from operations		$	6,958		$	5,414				$	21,039		$	16,123
Special compensation and stock option related expense			122			865					443			1,064
	Pro forma income from operations		7,080			6,279					21,482			17,187
Interest income			781			269					2,042			589
	Pro forma income before provision for income taxes		7,861			6,548					23,524			17,776
Pro forma provision for income taxes			(3,184	)		(2,783	)				(9,527	)		(7,555	)
	Pro forma net income	$	4,677		$	3,765				$	13,997		$	10,221
Pro forma earnings per share
	Basic	$	0.30		$	0.28				$	0.91		$	0.81
	Diluted	$	0.25		$	0.22		13.6	%	$	0.75		$	0.61	%	23.0	%
Percentages of Revenues
Pro forma income from operations (1)			22.6	%		24.3	%				24.0	%		23.5	%
Pro forma net income (1)			15.0	%		14.6	%				15.6	%		13.9	%

(1) Excludes special compensation and stock option related expense.

THE ADVISORY BOARD COMPANY
BALANCE SHEETS
(In thousands)

				December 31,		March 31,
				2003		2003
				(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	32,773	$	33,301
	Marketable securities				3,779		—
	Membership fees receivable, net				23,680		9,234
	Prepaid expenses and other current assets				2,703		1,600
	Deferred income taxes, net				13,789		11,532
	Deferred incentive compensation				2,796		2,259
		Total current assets			79,520		57,926
Fixed assets, net					2,914		2,891
Marketable securities					84,443		57,106
		Total assets		$	166,877	$	117,923
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Deferred revenues			$	78,276	$	63,653
	Accounts payable and accrued liabilities				7,665		5,484
	Accrued incentive compensation				7,411		6,899
		Total current liabilities			93,352		76,036
Long-term liabilities:
	Deferred income taxes				60		392
		Total liabilities			93,412		76,428
Stockholders’ equity:
	Common stock				158		148
	Additional paid-in capital				40,447		21,821
	Accumulated elements of comprehensive income				151		552
	Retained earnings				32,709		18,974
		Total stockholders’ equity			73,465		41,495
			Total liabilities and stockholders’ equity	$	166,877	$	117,923

THE ADVISORY BOARD COMPANY
UNAUDITED STATEMENTS OF CASH FLOWS
(In thousands)

					Nine Months Ended December 31,
					2003			2002
Cash flows from operating activities:
	Net income				$	13,735		$	9,608
		Adjustments to reconcile net income to net cash provided by (used in) operating activities -
			Depreciation			1,112			1,321
			Loss on disposal of fixed assets			—			105
			Special compensation arrangements			—			(46	)
			Deferred income taxes			9,963			2,876
			Amortization of marketable securities premiums			563			179
			Changes in operating assets and liabilities:
				Membership fees receivable		(14,446	)		(3,561	)
				Prepaid expenses and other current assets		(1,103	)		(552	)
				Deferred incentive compensation		(537	)		(647	)
				Deferred revenues		14,623			14,929
				Accounts payable and accrued liabilities		2,181			5,853
				Accrued incentive compensation		512			1,183
				Net cash flows provided by operating activities		26,603			31,248
Cash flows from investing activities:
	Purchases of property and equipment					(1,135	)		(447	)
	Sales of marketable securities					6,000			—
	Purchases of marketable securities					(38,411	)		(31,378	)
		Net cash flows used in investing activities				(33,546	)		(31,825	)
Cash flows from financing activities:
	Issuance of common stock from exercise of stock options					6,175			20,684
	Reimbursement of offering costs					—			992
	Payment of offering costs					—			(956	)
	Issuance of common stock under employee stock purchase plan					240			266
		Net cash flows provided by financing activities				6,415			20,986
Net (decrease) increase in cash and cash equivalents						(528	)		20,409
Cash and cash equivalents, beginning of period						33,301			23,959
Cash and cash equivalents, end of period					$	32,773		$	44,368