THE ADVISORY BOARD COMPANY REPORTS FISCAL YEAR 2009 FIRST QUARTER RESULTS
Company Reports Quarterly Revenue of $57.2 million, Earnings per Diluted Share of $0.36 and Contract Value of $232.3 million; Announces New Program Launch
WASHINGTON, D.C.— (August 5, 2008) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the first quarter of its fiscal year ending March 31, 2009. Revenue for the quarter increased 12.0% to $57.2 million, from $51.1 million in the first quarter of fiscal 2008. Net income was $6.3 million, or $0.36 per diluted share, compared to $7.1 million, or $0.38 per diluted share, for the same period a year ago. Contract value grew 10.3% to $232.3 million as of June 30, 2008, up from $210.6 million as of June 30, 2007.
Frank Williams, Chairman and Chief Executive Officer of The Advisory Board Company, commented, “We are pleased that we achieved our quarterly targets for revenue and EPS; however, we fell short of our objectives on contract value growth. While we continue to see robust member utilization of program services and ongoing strong renewal performance, we did see a decline in new business conversion rates across the quarter due largely to a more conservative spending posture across the membership. As a result, we have an aggressive plan in place to ensure that all our research agendas and program services are acutely on point, to drive optimal execution from a sales perspective and to continue to emphasize the strength of our value proposition in a more challenging macroeconomic environment. With our senior team and broader organization intensely focused on these priorities, we feel confident that we have the right strategy in place to address these challenges and set up the business for future growth.”
Mr. Williams added, “I am pleased to announce the launch of our newest membership program, the Physician Management Performance Program. Rooted in research feedback from member Chief Medical Officers, the program enhances hospitals’ ability to improve performance by providing unprecedented access to data and best practices on physician performance. In national surveys, nearly 90% of hospital administrators indicate that physicians are a critical driver of hospital performance on key cost and quality metrics, highlighting the importance of engaging this constituency in outcomes improvement, particularly given growing trends toward transparency and pay-for-performance. Through best practice research and a web-based analytical tool which leverages technology from Crimson, the Physician Management Performance Program enables Chief Medical Officers to engage physicians in order to meaningfully impact critical quality and cost indicators. As always, this program has benefited from the advice and guidance of a stellar group of charter members, including BJC Healthcare, Fairview Hospital, Monmouth Medical Center, Covenant Medical Center, PinnacleHealth System and Huntsville Memorial Hospital. We are very excited about its potential.”
Share Repurchase
During the three months ended June 30, 2008, the Company repurchased 179,621 shares of its common stock at a total cost of approximately $8.8 million. To date the Company has repurchased 5,313,928 shares of its common stock at a total cost of approximately $251.4 million.
Outlook for the Remainder of Calendar Year 2008
Based on performance during the quarter ended June 30, 2008, the Company is changing its annual revenue guidance for calendar year 2008 from $243 million to a range of approximately $232 million to $237 million. With the change in revenue guidance, the Company is also updating its guidance on earnings per diluted share for calendar year 2008 from $1.77 to a range of approximately $1.50 to $1.57. Included in the earnings per diluted share estimates is approximately $0.47 to $0.49 of share-based compensation and related expense for the full calendar year. The Company expects an effective income tax rate of approximately 32.3% for the remainder of fiscal year 2009. For the quarter ending September 30, 2008, the Company expects revenue in a range of approximately $57.5 million to $59.0 million, and earnings per diluted share in a range of approximately $0.30 to $0.33.
Web and Conference Call Information
The Company will hold an investor conference call to discuss its first quarter performance this evening, August 5, 2008, at 6:00 p.m. Eastern Standard Time. The conference call will be available via live web cast on the Company’s web site atwww.advisoryboardcompany.com in the section entitled “Investor Relations” found under the tab “The Firm.” To participate by telephone, the dial-in number is 866.271.0675 and the access code is 94676012. Investors 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. Tuesday, August 5, until 8:00 p.m. Tuesday, August 12, 2008.
About The Advisory Board Company
The Advisory Board Company provides best practices research, analysis, executive education and leadership development, decision support tools and installation support services primarily to the health care industry, focusing on business strategy, operations and general management issues. The Company provides best practices and research through discrete programs to a membership of more than 2,700 organizations, including leading hospitals, health systems, pharmaceutical and biotech companies, health care insurers, medical device companies and universities. Members of each program are typically charged a fixed annual fee and have access to an integrated set of services that may include best practice research studies, executive education seminars, customized research briefs, decision support tools, and web-based access to the program’s content database.
Forward Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on information available to the Company as of August 5, 2008, the date of this news release, as well as the Company’s current projections, forecasts and assumptions, and involve 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 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 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, possible volatility in the Company’s stock price, the impact on our financials associated with some of our newer programs that are more dependent upon technology, share-based compensation expense under SFAS No. 123R including the effect of the amount, type and timing of future stock-based compensation grants, and various factors related to income and other taxes, including whether the District of Columbia withdraws the Company’s status as a Qualified High-Tech Company, as well as those risks and uncertainties described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and also disclosed from time to time in its subsequent reports on Form 10-Q and Form 8-K, which are available on the Company’s website atwww.advisoryboardcompany.com in the “Investor Relations” section and at the SEC’s website at www.sec.gov. Additional information will also be set forth in the Company’s report on Form 10-Q for the fiscal quarter ended June 30, 2008, which will be filed with the SEC in August 2008.
Accordingly, readers are cautioned not to place undue reliance on forward-looking statements made in this news release, which speak only as of the date of this news release, and the Company does not undertake to update these 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 OPERATIONS
AND OTHER OPERATING STATISTICS
(In thousands, except per share data)
Three Months Ended
Selected
June 30,
Growth
2008
2007
Rates
Statements of Operations
Revenue
$
57,217
$
51,104
12.00
%
Cost of services (1)
28,554
24,288
Member relations and marketing (1)
12,398
10,612
General and administrative (1)
6,895
6,353
Depreciation and amortization
1,083
767
Income from operations
8,287
9,084
-8.80
%
Interest income
1,204
1,537
Income before provision for income taxes
9,491
10,621
-10.60
%
Provision for income taxes
-3,161
-3,540
Net income
$
6,330
$
7,081
-10.60
%
Earnings per share
Basic
$
0.36
$
0.39
Diluted
$
0.36
$
0.38
-5.30
%
Weighted average common shares outstanding
Basic
17,366
18,110
Diluted
17,720
18,795
Contract Value (at end of period)
$
232,278
$
210,622
10.30
%
Percentages of Revenues
Cost of services (1)
49.90
%
47.50
%
Member relations and marketing (1)
21.70
%
20.80
%
General and administrative (1)
12.10
%
12.40
%
Depreciation and amortization
1.90
%
1.50
%
Income from operations
14.50
%
17.80
%
Net income
11.10
%
13.90
%
(1) Effective April 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123R, “Share-Based Payment” (SFAS No. 123R), which provides the
accounting rules for share-based compensation. During the three months ended June 30,
2008, the Company recognized approximately $1.0 million in cost of services,
approximately $0.6 million in member relations and marketing, and approximately $1.2
million in general and administrative expense for share-based compensation related to
the adoption of SFAS No. 123R and in employer taxes associated with the exercise of
employee stock options.
During the three months ended June 30, 2007, the Company
recognized approximately $1.2 million in cost of services, approximately $0.7 million
in member relations and marketing, and approximately $1.6 million in general and
administrative expense for share-based compensation related to the adoption of SFAS No.
123R and in employer taxes associated with the exercise of employee stock options. The
Company has recorded all these expenses in the same line items as other compensation
paid to the relevant categories of employees.
THE ADVISORY BOARD COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30,
March 31,
2008
2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
13,485
$
17,907
Marketable securities
7,078
8,085
Membership fees receivable, net
98,071
81,538
Prepaid expenses and other current assets
3,301
3,860
Deferred income taxes, net
9,237
12,730
Total current assets
131,172
124,120
Property and equipment, net
30,471
22,897
Intangible assets, net
4,429
1,248
Goodwill
25,721
5,426
Deferred incentive compensation and other
charges
22,927
22,208
Deferred income taxes, net of current portion
5,364
5,142
Marketable securities
94,351
124,073
Total assets
$
314,435
$
305,114
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Deferred revenues
$
135,309
$
134,465
Accounts payable and accrued liabilities
31,631
26,994
Accrued incentive compensation
4,329
10,032
Total current liabilities
171,269
171,491
Long-term deferred revenues
15,230
9,682
Other long-term liabilities
1,299
1,412
Total liabilities
187,798
182,585
Stockholders' equity:
Common stock
217
215
Additional paid-in capital
225,131
217,170
Retained earnings
119,354
113,024
Accumulated elements of comprehensive income
162
1,540
Treasury stock
-218,227
-209,420
Total stockholders’ equity
126,637
122,529
Total liabilities and stockholders’ equity
$
314,435
$
305,114
THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended June 30,
2008
2007
Cash flows from operating activities:
Net income
$
6,330
$
7,081
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation
1,083
767
Amortization of intangible assets
192
57
Deferred income taxes
288
3,018
Excess tax benefits from share-based payments
-291
-2,008
Share-based compensation expense
2,803
3,409
Amortization of marketable securities premiums
224
194
Changes in operating assets and liabilities:
Member fees receivable
-8,119
-9,958
Prepaid expenses and other current assets
576
-710
Deferred incentive compensation and other charges
-719
-2,546
Deferred revenues
2,471
2,730
Accounts payable and accrued liabilities
1,071
2,625
Accrued incentive compensation
-5,703
-5,026
Other long-term liabilities
-113
184
Net cash flows provided by (used in) operating activities
93
-183
Cash flows from investing activities:
Purchases of property and equipment
-5,768
-1,380
Capitalized software development costs
-173
-89
Cash paid for acquisition, net of cash acquired
-18,592
—
Redemption of marketable securities
33,969
13,500
Purchases of marketable securities
-5,579
-2,000
Net cash flows provided by investing activities
3,857
10,031
Cash flows from financing activities:
Proceeds on issuance of stock from exercise of stock options
421
4,329
Repurchase of shares to satisfy minimum employee tax withholding
-390
-266
Proceeds on issuance of stock under employee stock purchase plan
113
115
Excess tax benefits from share-based compensation arrangements
291
2,008
Purchases of treasury stock
-8,807
-14,344
Net cash flows used in financing activities
-8,372
-8,158
Net (decrease) increase in cash and cash equivalents
-4,422
1,690
Cash and cash equivalents, beginning of period
17,907
13,195
Cash and cash equivalents, end of period
$
13,485
$
14,885
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