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The Advisory Board Company Reports Results for Quarter Ended September 30, 2011

Date : 11/02/2011 @ 4:10PM
Source : PR Newswire (US)
Stock : The Advisory Board Company (MM) (ABCO)
Quote : 41.33  -0.0001 (-0.00%) @ 8:10PM
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The Advisory Board Company Reports Results for Quarter Ended September 30, 2011

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WASHINGTON, Nov. 2, 2011 /PRNewswire/ -- The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the quarter ended September 30, 2011, the second quarter of its 2012 fiscal year.  Revenue for the quarter increased 30.7% to $92.9 million, from $71.1 million for the quarter ended September 30, 2010.  Contract value increased 29.7% to $369.1 million as of September 30, 2011, up from $284.7 million as of September 30, 2010.  For the quarter ended September 30, 2011, net income was $5.2 million, or $0.30 per diluted share, compared to net income of $4.9 million, or $0.30 per diluted share, for the quarter ended September 30, 2010.  For the quarter ended September 30, 2011, adjusted net income, non-GAAP earnings per diluted share, and adjusted EBITDA, all of which are non-GAAP financial measures, were $9.7 million, $0.56 per diluted share, and $17.2 million, respectively.  For the quarter ended September 30, 2010, adjusted net income, non-GAAP earnings per diluted share, and adjusted EBITDA were $7.1 million, $0.44 per diluted share, and $12.1 million, respectively.

(Logo:  http://photos.prnewswire.com/prnh/20110802/PH45999LOGO )

For the six months ended September 30, 2011, revenue increased 26.7% to $174.5 million, from $137.8 million for the six months ended September 30, 2010. Net income was $9.1 million, or $0.53 per diluted share, for the six months ended September 30, 2011, compared to net income of $9.5 million, or $0.59 per diluted share, for the same period of the prior fiscal year.  For the six months ended September 30, 2011, adjusted net income, non-GAAP earnings per diluted share, and adjusted EBITDA were $18.1 million, $1.06 per diluted share, and $31.7 million, respectively.  For the six months ended September 30, 2010, adjusted net income, non-GAAP earnings per diluted share, and adjusted EBITDA were $14.3 million, $0.89 per diluted share, and $24.4 million, respectively.

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, "In these times of unprecedented change in the health care industry, members consistently turn to the Advisory Board for help on their most pressing challenges.  It is extremely gratifying that our investments in expanding our capabilities to meet members' needs are yielding deeper, more impactful relationships.  With both revenue and contract value growth of 30%, our strong financial results for the quarter reflect the success of our strategy and position us well going into the fourth calendar quarter."

Mr. Musslewhite continued, "I am also pleased to announce today our launch of our Crimson Market Advantage program, which builds on our strong Crimson platform to provide hospitals and health systems actionable data to improve their physician outreach efforts with the aim of enhancing physician referrals.  In a market where competition for profitable procedures has increased, hospitals recognize that even minor volume declines can have a big impact on revenue; yet, most organizations have little visibility into the very referral patterns in their markets that determine growth.  Crimson Market Advantage provides technology, expertise, and staff to help hospitals develop efficient, targeted physician outreach efforts to identify and understand better the referring physicians in their markets and thereby identify potential sources of growth.  The program is off to a strong start, and we are confident in the value it will provide our members."

Investment in Evolent Health

The Company also announced an investment in a separate entity to support health systems and other providers in their migration toward value-based care models.  Formed as an independent company, Evolent Health is backed by capital, asset, and intellectual property contributions from Pittsburgh-based UPMC Health Plan and The Advisory Board Company.  Evolent Health offers an integrated population management technology platform, extensive operational care management support, back-office payer functions, and holistic change management support – all designed to support integrated delivery systems and other providers in their preparation to accept and manage all forms of value-based care reimbursement.

Mr. Musslewhite commented, "The health care system is facing transformative change—the value-based care movement is already redefining the ways hospitals, physicians, and payers work with one another.  Our analysis—and conversations with our thousands of hospital and health system members—reinforces the growing need for hospitals and health systems to develop new capabilities for managing under new payment incentives and delivering better care more efficiently."  

Mr. Musslewhite continued, "This imperative has been the guiding force behind our building out the most innovative and comprehensive set of new solutions for hospitals and health systems across the past four years, including our market-leading Crimson performance management platform, Southwind physician alignment and management services, and contract modeling capabilities through our acquisition of Concuity.  In that same spirit, we decided to invest in Evolent Health."

Mr. Musslewhite concluded, "UPMC has 15 years of experience in successfully building integrated payer-provider models as the second-largest provider-owned health plan in the country after Kaiser.  Their innovative population management technology has proven to generate higher quality, lower cost care.  We are excited to participate in this new venture with them, and we are confident that Evolent Health will provide hospitals and health systems significant value through shared access to a uniquely effective set of population health management capabilities."

The Advisory Board Company is contributing $10 million and non-cash contributions, and will own a minority equity interest in Evolent Health.  The financial results of Evolent Health will not change the Company's non-GAAP earnings per share or adjusted EBITDA because the company will record any gain or loss from Evolent Health in the other income, net line on its income statement, commensurate with its equity interest.  Frank Williams, the former Chief Executive Officer of The Advisory Board Company, has joined Evolent Health as its Chief Executive Officer to drive it through its initial growth phase.  

Share Repurchase

During the three months ended September 30, 2011, the Company repurchased 39,604 shares of its common stock at a total cost of approximately $2.4 million.  As of September 30, 2011, the Company had repurchased since the program's inception 7,604,311 shares of its common stock at a total cost of approximately $321.0 million.

Revised Outlook for Calendar Year 2011  

The Company is increasing its revenue guidance for calendar year 2011 to a range of approximately $349 million to $352 million, from a range of $342 million to $349 million.  The Company is also increasing its guidance for calendar year 2011 adjusted EBITDA to a range of $61.5 million to $64.5 million, from a range of $60 million to $64 million.  For calendar year 2011, the Company is increasing its guidance for non-GAAP earnings per diluted share to a range of approximately $2.08 to $2.17, from a range of $2.00 to $2.13.  For calendar year 2011 the Company expects share-based compensation expense to be approximately $10 million, and amortization from acquisition-related intangible assets to be approximately $5 million. For the remainder of calendar year 2011, the Company expects an effective tax rate of approximately 37.5%. 

Non-GAAP Financial Measures  

This press release and the accompanying tables present information about 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").  We define our non-GAAP financial measures as described below.  

The term "adjusted EBITDA" refers to a financial measure that we define as earnings before other income, net, which includes interest income and foreign currency losses and gains; income taxes; depreciation and amortization; amortization of acquisition-related intangibles and capitalized software included in cost of services; costs associated with acquisitions and similar transactions; share-based compensation expense; and fair value adjustments made to the Company's acquisition-related earn out liabilities.  The term "adjusted net income" refers to net income excluding the net of tax effect share-based compensation expense; amortization of acquisition-related intangibles; costs associated with acquisitions and similar transactions; and fair value adjustments made to the Company's acquisition-related earn out liabilities.  The term "non-GAAP earnings per diluted share" refers to net income per share excluding the net of tax effect of share-based compensation expense; amortization of acquisition-related intangibles; costs associated with acquisitions and similar transactions; and fair value adjustments made to the Company's acquisition-related earn out liabilities.  

The foregoing non-GAAP measures may be calculated differently from similarly titled measures used by other companies, which limits their usefulness as comparative measures, and should be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP measures or results as indicators of performance.  We use these non-GAAP financial measures for internal budgeting and other managerial purposes because they enable the Company's management to evaluate projected operating results on a basis that allows for comparability without regard to changes arising from applicable tax rates, variability in interest income and foreign currency exchange rates, periodic costs of certain capitalized tangible and intangible assets, share-based compensation expense, and certain non-cash and special charges.

There are limitations associated with these non-GAAP financial measures as indicators of performance, including that they do not reflect all changes in applicable tax rates, foreign currency exchange rates, share-based compensation expense, or the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our business.  

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 and forecasted 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 cannot reasonably be estimated or predicted at this time.





Three Months Ended



Six Months Ended



September 30,



September 30,



2011



2010



2011



2010

















Net income

$    5,203



$    4,884



$    9,074



$   9,477

Provision for income taxes

3,121



2,736



5,444



5,309

Other income, net (1)

(448)



(577)



(1,245)



(798)

Depreciation and amortization

2,143



1,433



4,068



2,810

     Amortization of  intangibles (incl. in CoS)

1,535



1,105



2,734



2,440

Acquisition and similar transaction charges

504





648



     Fair value adjustments to acquisition-related earn

      out liabilities

2,300





5,500



400

Share-based compensation expense

2,800



2,484



5,515



4,790

    Adjusted EBITDA

$    17,158



$    12,065



$    31,738



$    24,428











Three Months Ended



Six Months Ended



September 30,



September 30,



2011



2010



2011



2010

















 Net income

$    5,203



$  4,884



$    9,074



$    9,477

        Amortization of acquisition-related intangibles,    

         net of tax

949



664



1,699



1,484

Acquisition and similar transaction charges, net      

         of tax

315





405



        Fair value adjustments to acquisition-related

         earn out liabilities, net of tax

1,437





3,437



256

 Share-based compensation, net of tax

1,750



1,592



3,447



3,070

 Adjusted net income

$    9,654



$    7,140



$   18,062



$    14,287





















Three Months Ended



Six Months Ended



September 30,



September 30,



2011



2010



2011



2010

















GAAP earnings per diluted share

$    0.30



$   0.30



$    0.53



$    0.59

        Amortization of acquisition-related intangibles,

         net of tax

0.06



0.04



0.11



0.09

Acquisition and similar transaction charges, net    

         of tax

0.02





0.02



        Fair value adjustments to acquisition-related    

         earn out liabilities, net of tax

0.08





0.20



0.02

Share-based compensation, net of tax

0.10



0.10



0.20



0.19

Non-GAAP earnings per diluted share

$    0.56



$    0.44



$    1.06



$    0.89

































(1) Other income, net includes interest income of $0.6 million and $0.4 million for the three months ended September 30, 2011 and 2010, respectively, and $1.1 million and $0.7 million for the six months ended September 30, 2011 and 2010, respectively. Other income, net also includes a foreign currency loss of $0.1 million and foreign currency gain of $0.2 million for the three months ended September 30, 2011 and 2010, respectively.  Other income, net includes foreign currency gain of $0.2 million and $0.1 million for the six months ended September 30, 2011 and 2010, respectively.  







Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its second quarter performance this evening, November 2, 2011 at 5:30 p.m. Eastern Time.  The conference call will be available via live web cast on the Company's web site at www.advisoryboardcompany.com/IR.  To participate by telephone, the dial-in number is 866.277.1184 and the access code is 91030480.  Participants 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 8:30 p.m. Eastern Time on Wednesday, November 2, until 8:30 p.m. Eastern Time on Wednesday, November 9, 2011.

About The Advisory Board Company

The Advisory Board Company is a global research, consulting, and technology firm partnering with 125,000 leaders in 3,200 organizations across health care and higher education.  Through our innovative membership model, we collaborate with executives and their teams to elevate performance and solve their most pressing challenges.  We provide strategic guidance, actionable insights, web-based software solutions, and comprehensive implementation and management services.  For more information, visit http://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, and non-GAAP earnings per diluted share for calendar year 2011 and its effective tax rate for fiscal year 2012 are based on information available to the Company as of November 2, 2011, 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 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 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 our software tools and installation support tools, our ability to license technology from third parties, risks associated with anticipating market trends, industry consolidation, variability of quarterly operating results, possible volatility in the Company's stock price, 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, 2011, which is available on the Company's website at www.advisoryboardcompany.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, 2011, which will be filed with the Securities and Exchange Commission in November 2011.  

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 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





2011



2010



Rates



2011



2010



Rates

Statements of Income























Revenue

$      92,931



$      71,102



30.7%



$    174,546



$   137,790



26.7%



























Cost of services (1)

52,508



36,914







97,998



71,859





Member relations and marketing (1)

18,518



16,053







36,498



31,253





General and administrative (1)

11,886



9,659







22,709



17,880





Depreciation and amortization

2,143



1,433







4,068



2,810







Income from operations

7,876



7,043







13,273



13,988





Other income, net

448



577







1,245



798







Income before provision for income taxes

8,324



7,620







14,518



14,786





Provision for income taxes

(3,121)



(2,736)







(5,444)



(5,309)







Net income

$        5,203



$        4,884







$        9,074



$       9,477































Earnings per share

























Basic

$          0.32



$          0.31







$          0.56



$         0.61







Diluted

$          0.30



$          0.30







$          0.53



$         0.59































Weighted average common shares outstanding

























Basic

16,298



15,644







16,208



15,596







Diluted

17,183



16,317







17,041



16,154































Contract Value (at end of period)

$    369,102



$    284,689



29.7%







































Percentages of Revenues























Cost of services (1)

56.5%



51.9%







56.1%



52.2%





Member relations and marketing (1)

19.9%



22.6%







20.9%



22.7%





General and administrative (1)

12.8%



13.6%







13.0%



13.0%





Depreciation and amortization

2.3%



2.0%







2.3%



2.0%





Income from operations

8.5%



9.9%







7.6%



10.2%





Net income

5.6%



6.9%







5.2%



6.9%

























































(1) During the three and six months ended September 30, 2011, the Company recognized approximately $0.8 million and $1.7 million in cost of services, approximately $0.5 million and $1.0 million in member relations and marketing, and approximately $1.4 million and $2.8 million in general and administrative expense for share-based compensation.  During the three and six months ended September 30, 2010, the Company recognized approximately $0.7 million and $1.4 million in cost of services, approximately $0.5 million and $0.9 million in member relations and marketing, and approximately $1.3 million and $2.5 million in general and administrative expense for share-based compensation.  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,





2011



2011





(unaudited)





ASSETS









Current assets:









Cash and cash equivalents



$               36,303



$               30,378

Marketable securities



2,767



-

Membership fees receivable, net



234,512



179,162

Prepaid expenses and other current assets



6,805



7,069

Deferred income taxes, net



6,269



5,894

Total current assets



286,656



222,503











Property and equipment, net



38,985



29,529

Intangible assets, net



26,832



18,450

Goodwill



76,261



67,155

Deferred incentive compensation and other charges



57,216



46,226

Deferred income taxes, net of current portion



8,357



9,646

Investment in unconsolidated entity



10,000



-

Other non-current assets



11,500



11,500

Marketable securities



82,625



86,179

Total assets



$             598,432



$             491,188











LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Deferred revenues



$             272,811



$             223,876

Accounts payable and accrued liabilities



68,770



51,957

Accrued incentive compensation



9,980



13,609

Total current liabilities



351,561



289,442











Long-term deferred revenues



56,703



42,139

Other long-term liabilities



17,455



11,015

Total liabilities



425,719



342,596











Stockholders' equity:









Common stock



230



225

Additional paid-in capital



285,281



267,242

Retained earnings



173,523



164,449

Accumulated elements of comprehensive income



1,556



(120)

Treasury stock



(287,877)



(283,204)

Total stockholders' equity



172,713



148,592











Total liabilities and stockholders' equity



$             598,432



$             491,188

















































THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)















Six Months Ended September  30,





2011



2010

Cash flows from operating activities:









Net income



$          9,074



$          9,477

Adjustments to reconcile net income to net cash provided by









operating activities:









Depreciation



4,068



2,810

Amortization of intangible assets



2,734



2,442

Deferred income taxes



10



(424)

Excess tax benefits from stock-based payments



(578)



(1,360)

Stock-based compensation expense



5,526



4,791

Amortization of marketable securities premiums



528



152

Changes in operating assets and liabilities:









Member fees receivable



(53,435)



(1,677)

Prepaid expenses and other current assets



863



(1,253)

Deferred incentive compensation and other charges



(10,990)



3,126

Deferred revenues



62,902



6,699

Accounts payable and accrued liabilities



16,348



(13,239)

Accrued incentive compensation



(3,629)



(6,293)

Other long-term liabilities



3,540



3,792

Net cash flows provided by operating activities



36,961



9,043











Cash flows from investing activities:









Purchases of property and equipment



(13,524)



(2,827)

Capitalized software development costs



(1,366)



(941)

Cash paid for acquisitions, net of cash acquired  



(16,829)



(36,012)

Redemption of marketable securities



11,000



16,751

Purchases of marketable securities



(8,157)



(18,757)

Other investing activities



(10,000)



-

Net cash flows used in investing activities



(38,876)



(41,786)











Cash flows from financing activities:









Proceeds on issuance of stock from exercise of stock options



13,091



7,930

Repurchase of shares to satisfy minimum employee tax withholding



(1,266)



(616)

Proceeds on issuance of stock under employee stock purchase plan

110



91

Excess tax benefits from share-based compensation arrangements



578



1,360

Purchases of treasury stock



(4,673)



(4,500)

Net cash flows provided by financing activities



7,840



4,265











Net increase (decrease) in cash and cash equivalents



5,925



(28,478)

Cash and cash equivalents, beginning of period



30,378



61,238

Cash and cash equivalents, end of period



$        36,303



$        32,760

















SOURCE The Advisory Board Company

Copyright 2011 PR Newswire



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