Contact: | Michael Kirshbaum | The Advisory Board Company | ||||||
| Chief Financial Officer | 2445 M Street, N.W. | |||||||
| 202.266.5876 | Washington, D.C. 20037 | |||||||
| jacobsg@advisory.com | www.advisoryboardcompany.com | |||||||
THE ADVISORY BOARD COMPANY REPORTS
FISCAL YEAR 2009 SECOND QUARTER RESULTS
Company Reports Quarterly Revenue of $57.6 million, Earnings per Diluted Share of $0.32
and Contract Value of $230.6 million; Announces New Program Launch
WASHINGTON, D.C.— (November 5, 2008) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the second quarter of its fiscal year ending March 31, 2009. Revenue for the quarter increased 7% to $57.6 million, from $54.0 million in the second quarter of fiscal 2008. Net income was $5.4 million, or $0.32 per diluted share, compared to $8.5 million, or $0.45 per diluted share, for the same period a year ago. Contract value grew 6% to $230.6 million as of September 30, 2008, up from $217.5 million as of September 30, 2007.
For the six months ended September 30, 2008, revenue increased 9% to $114.8 million, from $105.1 million for the six months ended September 30, 2007. Net income for the six months ended September 30, 2008 was $11.7 million, or $0.68 per diluted share, compared to $15.6 million, or $0.83 per diluted share, for the same period a year ago.
Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, “Our overall performance for the quarter was in line with our expectations given the current macroeconomic environment. While we are seeing strong performance in program utilization, research quality metrics and renewal rates, the new business environment continues to be challenging due to member uncertainty about the budget outlook for 2009. As a result, the team is working hard to emphasize the strong financial impact of our best practice research and to ensure superior sales execution and new program introductions to set up future growth.”
Mr. Musslewhite added, “I am also pleased to announce our latest launch, the Patient Registration Performance Program. This program provides a comprehensive toolkit to assist health systems in improving their front-end revenue cycle performance through the proactive management of the patient registration process. Through best practice research, performance benchmarking data, and a robust, web-based analytical tool, the program assists members in creating an infrastructure to hardwire accountability for this critical point of the revenue cycle process. The membership allows the participating institutions to achieve measurable financial gains through enhanced cash acceleration and staff efficiency, as well as reduced avoidable denials, which vastly improve overall collections performance. We have already established a strong charter membership for the program, including Tri-City Medical Center, Cheyenne Regional Medical Center, Munroe Regional Medical Center, and West Jefferson Medical Center. The program is off to a good start, and we are very excited about its potential.”
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Share Repurchase
During the three months ended September 30, 2008, the Company repurchased 1,086,517 shares of its common stock at a total cost of approximately $34.5 million. To date, the Company has repurchased 6,400,445 shares of its common stock at a total cost of approximately $285.9 million.
Outlook for the Remainder of Calendar Year 2008
For the quarter ending December 31, 2008, the Company expects revenue in a range of approximately $59.2 million to $60.0 million, and earnings per diluted share in a range of approximately $0.36 to $0.39. Included in the earnings per diluted share estimates is approximately $0.14 to $0.15 of share-based compensation and related expense for the three months ending December 31, 2008.
Web and Conference Call Information
The Company will hold an investor conference call to discuss its second quarter performance this evening, November 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 titled “Investor Relations” found under the tab “The Firm.” To participate by telephone, the dial-in number is 800.259.0251 and the access code is 76841343. 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. Wednesday, November 5, until 8:00 p.m. Wednesday, November 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, universities and other education institutions. 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 November 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 September 30, 2008, which will be filed with the SEC in November 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.
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| 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 | |||||||||||||||||||||||||
| 2008 | 2007 | Rates | 2008 | 2007 | Rates | |||||||||||||||||||||||
| Statements of Income | ||||||||||||||||||||||||||||
| Revenue | $ | 57,625 | $ | 54,029 | 6.7 | % | $ | 114,842 | $ | 105,133 | 9.2 | % | ||||||||||||||||
| Cost of services (1) | 28,993 | 24,380 | 57,547 | 48,668 | ||||||||||||||||||||||||
| Member relations and marketing (1) | 13,058 | 11,173 | 25,456 | 21,785 | ||||||||||||||||||||||||
| General and administrative (1) | 7,214 | 6,350 | 14,109 | 12,703 | ||||||||||||||||||||||||
| Depreciation and amortization | 1,327 | 883 | 2,410 | 1,650 | ||||||||||||||||||||||||
| Income from operations | 7,033 | 11,243 | -37.4 | % | 15,320 | 20,327 | -24.6 | % | ||||||||||||||||||||
| Interest income and other | 948 | 1,554 | 2,152 | 3,091 | ||||||||||||||||||||||||
| Income before | ||||||||||||||||||||||||||||
| provision for income | ||||||||||||||||||||||||||||
| taxes | 7,981 | 12,797 | 17,472 | 23,418 | ||||||||||||||||||||||||
| Provision for income taxes | (2,578 | ) | (4,261 | ) | (5,739 | ) | (7,801 | ) | ||||||||||||||||||||
| Net income | $ | 5,403 | $ | 8,536 | -36.7 | % | $ | 11,733 | $ | 15,617 | -24.9 | % | ||||||||||||||||
| Earnings per share | ||||||||||||||||||||||||||||
| Basic | $ | 0.32 | $ | 0.47 | $ | 0.68 | $ | 0.86 | ||||||||||||||||||||
| Diluted | $ | 0.32 | $ | 0.45 | -28.9 | % | $ | 0.68 | $ | 0.83 | -18.1 | % | ||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||||
| Basic | 16,922 | 18,090 | 17,143 | 18,100 | ||||||||||||||||||||||||
| Diluted | 16,989 | 18,808 | 17,352 | 18,802 | ||||||||||||||||||||||||
| Contract Value (at end of period) | $ | 230,636 | $ | 217,530 | 6.0 | % | ||||||||||||||||||||||
| Percentages of Revenue | ||||||||||||||||||||||||||||
| Cost of services (1) | 50.3 | % | 45.1 | % | 50.1 | % | 46.3 | % | ||||||||||||||||||||
| Member relations and marketing (1) | 22.7 | % | 20.7 | % | 22.2 | % | 20.7 | % | ||||||||||||||||||||
| General and administrative (1) | 12.5 | % | 11.8 | % | 12.3 | % | 12.1 | % | ||||||||||||||||||||
| Depreciation and amortization | 2.3 | % | 1.6 | % | 2.1 | % | 1.6 | % | ||||||||||||||||||||
| Income from operations | 12.2 | % | 20.8 | % | 13.3 | % | 19.3 | % | ||||||||||||||||||||
| Net income | 9.4 | % | 15.8 | % | 10.2 | % | 14.9 | % | ||||||||||||||||||||
(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 and six months ended September 30, 2008, the Company recognized approximately $1.2 million and $2.2 million in cost of services, approximately $0.6 million and $1.2 million in member relations and marketing, and approximately $1.7 million and $3.0 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 and the vesting of restricted stock units. During the three and six months ended September 30, 2007, the Company recognized approximately $1.2 million and $2.4 million in cost of services, approximately $0.7 million and $1.5 million in member relations and marketing, and approximately $1.6 million and $3.2 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 and the vesting of restricted stock units. 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) | ||||||||
| September 30, | March 31, | |||||||
| 2008 | 2008 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 14,011 | $ | 17,907 | ||||
| Marketable securities | 7,123 | 8,085 | ||||||
| Membership fees receivable, net | 99,250 | 81,538 | ||||||
| Prepaid expenses and other current assets | 2,705 | 3,860 | ||||||
| Deferred income taxes, net | 8,056 | 12,730 | ||||||
| Total current assets | 131,145 | 124,120 | ||||||
| Property and equipment, net | 32,984 | 22,897 | ||||||
| Intangible assets, net | 4,500 | 1,248 | ||||||
| Goodwill | 25,721 | 5,426 | ||||||
| Deferred incentive compensation and other charges | 21,626 | 22,208 | ||||||
| Deferred income taxes, net of current portion | 6,183 | 5,142 | ||||||
| Marketable securities | 66,852 | 124,073 | ||||||
| Total assets | $ | 289,011 | $ | 305,114 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Deferred revenue | $ | 134,968 | $ | 134,465 | ||||
| Accounts payable and accrued liabilities | 30,431 | 26,994 | ||||||
| Accrued incentive compensation | 6,177 | 10,032 | ||||||
| Total current liabilities | 171,576 | 171,491 | ||||||
| Long-term deferred revenue | 15,236 | 9,682 | ||||||
| Other long-term liabilities | 1,312 | 1,412 | ||||||
| Total liabilities | 188,124 | 182,585 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 217 | 215 | ||||||
| Additional paid-in capital | 228,758 | 217,170 | ||||||
| Retained earnings | 124,757 | 113,024 | ||||||
| Accumulated elements of comprehensive income | (118 | ) | 1,540 | |||||
| Treasury stock | (252,727 | ) | (209,420 | ) | ||||
| Total stockholders’ equity | 100,887 | 122,529 | ||||||
| Total liabilities and stockholders’ equity | $ | 289,011 | $ | 305,114 | ||||
| THE ADVISORY BOARD COMPANY | ||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| Six Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
| Net income | $ | 11,733 | $ | 15,617 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities : | ||||||||
| Depreciation and amortization | 2,410 | 1,650 | ||||||
| Amortization of intangible assets | 402 | 122 | ||||||
| Deferred income taxes | 797 | 7,316 | ||||||
| Excess tax benefits from stock-based awards | (291 | ) | (3,140 | ) | ||||
| Stock-based compensation expense | 6,333 | 6,864 | ||||||
| Amortization of marketable securities premiums | 410 | 388 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Member fees receivable | (9,298 | ) | (10,919 | ) | ||||
| Prepaid expenses and other current assets | 1,172 | 431 | ||||||
| Deferred incentive compensation and other charges | 582 | (3,650 | ) | |||||
| Deferred revenue | 2,136 | 2,016 | ||||||
| Accounts payable and accrued liabilities | (128 | ) | 1,004 | |||||
| Accrued incentive compensation | (3,855 | ) | (3,315 | ) | ||||
| Other long-term liabilities | (100 | ) | 258 | |||||
| Net cash flows provided by operating activities | 12,303 | 14,642 | ||||||
Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (9,608 | ) | (4,132 | ) | ||||
| Capitalized external use software development costs | (455 | ) | (171 | ) | ||||
| Cash paid for acquisition, net of cash acquired | (18,592 | ) | — | |||||
| Redemption of marketable securities | 62,810 | 19,875 | ||||||
| Purchases of marketable securities | (7,579 | ) | (9,173 | ) | ||||
| Net cash flows provided by investing activities | 26,576 | 6,399 | ||||||
Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock from exercise of stock options | 421 | 9,634 | ||||||
| Withholding of shares to satisfy minimum employee tax withholding | (390 | ) | (266 | ) | ||||
| Proceeds from issuance of common stock under employee stock purchase plan | 210 | 226 | ||||||
| Excess tax benefits from stock-based awards | 291 | 3,140 | ||||||
| Purchases of treasury stock | (43,307 | ) | (29,798 | ) | ||||
| Net cash flows used in financing activities | (42,775 | ) | (17,064 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (3,896 | ) | 3,977 | |||||
| Cash and cash equivalents, beginning of period | 17,907 | 13,195 | ||||||
| Cash and cash equivalents, end of period | $ | 14,011 | $ | 17,172 | ||||
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