WASHINGTON, Nov. 8, 2017 /PRNewswire/ -- The Advisory
Board Company (NASDAQ: ABCO) today announced financial results
for the third quarter and nine-month period ended September 30, 2017.
Third Quarter Financial Review
|
(In millions, except
per share amounts)
|
|
Q3-17
|
Q3-16
|
%
Change
|
|
Revenue
|
|
$ 183.1
|
$ 200.5
|
(8.6)%
|
|
Net income
|
|
0.7
|
37.5
|
nm
|
|
Earnings per diluted
share (EPS)
|
|
0.02
|
0.93
|
nm
|
|
Adjusted Revenue
(non-GAAP) a
|
|
182.8
|
196.8
|
(7.1)%
|
|
Adjusted EBITDA
(non-GAAP) a
|
|
34.5
|
40.4
|
(14.4)%
|
|
Adjusted EPS
(non-GAAP) a
|
|
$
0.27
|
$
0.29
|
(6.9) %
|
|
|
|
|
|
|
|
|
|
|
a)
|
Excluded contribution
from exited programs and impact of restructuring and other charges
for current and prior year periods.
|
Revenue for the third quarter of 2017 was $183.1 million, compared to $200.5 million for the same quarter a year
ago. The Company reported net income for the third quarter of
2017 of $0.7 million, or $0.02 per diluted share, compared to net income
of $37.5 million, or $0.93 per diluted share, for the third quarter of
2016. Results for the third quarter of 2017 included $12.8 million in restructuring and strategic
alternative-related charges. Results for the third quarter of 2016
included a net gain of $34.7 million
from the Company's investment in Evolent Health, Inc.
Adjusted revenue for the third quarter of 2017 was $182.8 million, compared to adjusted revenue of
$196.8 million for the same quarter a
year ago. Adjusted EBITDA for the third quarter of 2017 was
$34.5 million, compared to
$40.4 million for the third quarter
of 2016. Adjusted EPS was $0.27 for
the third quarter of 2017, compared to $0.29 for the third quarter last year.
Nine-Month Financial Review
|
(In millions, except
per share amounts)
|
|
First Nine
Months 2017
|
First Nine
Months 2016
|
% Change
|
|
Revenue
|
|
$
578.0
|
$
599.6
|
(3.6)%
|
|
Net income
|
|
35.1
|
55.4
|
(36.6)%
|
|
Earnings per diluted
share (EPS)
|
|
0.85
|
1.35
|
nm
|
|
Adjusted revenue
(non-GAAP) b
|
|
576.7
|
586.0
|
(1.6)%
|
|
Adjusted EBITDA
(non-GAAP) b
|
|
123.8
|
133.4
|
(7.2)%
|
|
Adjusted EPS
(non-GAAP)
b
|
|
$
1.11
|
$
1.19
|
(6.7)%
|
|
|
|
|
|
|
|
|
|
|
b)
|
Excluded contribution
from exited programs and impact of restructuring and other charges
for current and prior year periods.
|
Revenue for the nine-month period ended September 30, 2017 was $578.0 million, compared to $599.6 million for the nine-month period a year
ago. Net income was $35.1
million, or $0.85 per diluted
share, for the nine-month period ended September 30, 2017, compared to net income of
$55.4 million, or $1.35 per diluted share, for the nine-month
period ended September 30, 2016.
Results for the nine-month period ended September 30, 2017 included $39.0 million in restructuring and strategic
alternative-related charges and a net gain of $46.3 million from the Company's investment in
Evolent Health, Inc. Results for the nine-month period ended
September 30, 2016 included a net
gain of $34.3 million from the
Company's investment in Evolent Health, Inc.
Adjusted revenue for the nine-month period ended September 30, 2017 was $576.7 million, compared to adjusted revenue of
$586.0 million for the same period a
year ago. Adjusted EBITDA for the nine-month period of 2017 was
$123.8 million compared to
$133.4 million for the nine-month
period ended September 30, 2016.
Adjusted EPS was $1.11 for the
nine-month period ended September 30,
2017, compared to $1.19 for
the nine-month period last year.
Financial Guidance and Conference Call
The Company is not updating financial guidance for 2017 and will
not host a conference call to discuss its financial results due to
its announcement on August 29, 2017
of its entry into a definitive merger agreement and a definitive
education purchase agreement to sell its health care and education
businesses to Optum and Vista Equity Partners, respectively.
About The Advisory Board Company
The Advisory Board Company is a best practices firm that uses a
combination of research, technology, and consulting to improve the
performance of approximately 5,700 health care organizations and
educational institutions. Headquartered in Washington, D.C., with offices worldwide, The
Advisory Board Company forges and finds the best new ideas and
proven practices from its network of thousands of leaders, then
customizes and hardwires them into every level of member
organizations, creating enduring value.
Advisory Board, the health care business of The Advisory Board
Company, is a best practices firm that uses a combination of
research, technology and consulting to improve the performance of
more than 4,400 health care organizations. For more information,
visit www.advisory.com.
EAB, the education business of The Advisory Board Company, is a
best practices firm that uses a combination of research, technology
and services to improve the performance of more than 1,200
educational institutions. For more information, visit
www.eab.com.
Non-GAAP Financial Measures
This news release presents information about the Company's
historical adjusted revenue, adjusted EBITDA, adjusted net income,
and adjusted EPS, 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"). A reconciliation of each
of the foregoing historical non-GAAP financial measures to the most
directly comparable historical GAAP financial measures is provided
in the accompanying tables found at the end of this release for
each of the fiscal periods indicated.
Cautionary Statement Regarding Forward-Looking
Statements
This communication includes "forward-looking statements" as
defined under U.S. federal securities laws, including statements
about the definitive agreements pursuant to which the Company will
sell its health care and education businesses to Optum and Vista
Equity Partners, respectively. Generally, the words "believe,"
"expect," "intend," "estimate," "anticipate," "plan," "project,"
"should," "will" and similar expressions identify forward-looking
statements, which generally are not historical in nature. These
statements are based on current plans, estimates and expectations
that are subject to risks and uncertainties. We caution that actual
results could differ materially from expected results, depending on
the outcome of certain factors, including (i) the failure to
satisfy the conditions to the completion of the foregoing
transactions, including the sale of The Advisory Board Company's
education business to Vista Equity Partners, approval of the
proposed merger by The Advisory Board Company's stockholders and
the receipt of regulatory approvals on the terms expected or on the
anticipated schedule; (ii) the occurrence of any event, change or
other circumstance that could give rise to the termination of the
merger agreement or the education purchase agreement; (iii) the
occurrence of a material adverse change regarding The Advisory
Board Company or its health care business or its education
business; (iv) the failure to complete the transactions; (v) the
incurrence of operating costs, customer loss and business
disruption (including, without limitation, difficulties in
maintaining relationships with employees, customers, clients or
suppliers) that may be greater than expected; (vi) the retention of
certain key employees at The Advisory Board Company; (vii) the
parties' ability to meet expectations regarding the timing,
completion and accounting and tax treatments of the transactions;
(viii) risks related to the diversion of management attention from
ongoing business operations; (ix) the outcome of any legal
proceedings that may be instituted against UnitedHealth Group,
Optum, The Advisory Board Company or Vista Equity Partners related
to the transactions; (x) changes in economic conditions, financial
markets, interest rates, political conditions or changes in federal
or state laws or regulations; (xi) changes in the market price of
Evolent Health, Inc.'s Class A common stock; and (xii) the other
factors relating to The Advisory Board Company discussed in "Risk
Factors" in its Annual Report on Form 10-K for the most recently
ended fiscal year, and in its other filings with the Securities and
Exchange Commission (SEC), all of which are available at
http://www.sec.gov. The Advisory Board Company does not assume any
obligation to update or revise this communication as a result of
new information, future events or otherwise, except as otherwise
required by applicable law. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date hereof.
|
THE ADVISORY
BOARD COMPANY
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
AND OTHER
OPERATING STATISTICS
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
September
30,
|
|
|
|
|
|
2017
|
|
2016
|
|
%
Change
|
|
2017
|
|
2016
|
|
%
Change
|
|
Statements
of Income
|
(unaudited)
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
Revenue
(1)
|
$
183,126
|
|
$
200,455
|
|
-8.6%
|
|
$
577,964
|
|
$
599,572
|
|
-3.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services, excluding depreciation and amortization (1) (2) (3) (4)
(5)
|
95,849
|
|
104,215
|
|
-8.0%
|
|
296,279
|
|
296,604
|
|
-0.1%
|
|
Member
relations and marketing (2) (3) (4)
|
31,359
|
|
32,706
|
|
-4.1%
|
|
97,455
|
|
97,819
|
|
-0.4%
|
|
General and
administrative (1) (2) (3) (4)
|
41,416
|
|
32,227
|
|
28.5%
|
|
124,979
|
|
96,274
|
|
29.8%
|
|
Depreciation
and amortization (1) (6)
|
20,479
|
|
19,173
|
|
6.8%
|
|
64,458
|
|
57,857
|
|
11.4%
|
|
Operating (loss)
income
|
(5,977)
|
|
12,134
|
|
|
|
(5,207)
|
|
51,018
|
|
|
|
Other
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(4,638)
|
|
(4,530)
|
|
2.4%
|
|
(13,868)
|
|
(13,738)
|
|
0.9%
|
|
Other (expense)
income, net
|
436
|
|
(1,516)
|
|
-128.8%
|
|
579
|
|
(2,380)
|
|
|
|
|
Total other
expense, net
|
(4,202)
|
|
(6,046)
|
|
|
|
(13,289)
|
|
(16,118)
|
|
|
|
(Loss) income before
benefit (provision) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
and gain
(loss) from equity method investments
|
(10,179)
|
|
6,088
|
|
|
|
(18,496)
|
|
34,900
|
|
|
|
Benefit
(provision) for income taxes
|
3,908
|
|
(3,279)
|
|
|
|
7,313
|
|
(13,812)
|
|
|
|
Gains from
equity method investments
|
6,956
|
|
34,729
|
|
|
|
46,269
|
|
34,284
|
|
|
|
Net
income
|
$
685
|
|
$
37,538
|
|
-98.2%
|
|
$
35,086
|
|
$
55,372
|
|
-36.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.02
|
|
$
0.94
|
|
-98.2%
|
|
$
0.87
|
|
$
1.36
|
|
-36.4%
|
|
Diluted
|
$
0.02
|
|
$
0.93
|
|
-98.2%
|
|
$
0.85
|
|
$
1.35
|
|
-37.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
40,706
|
|
40,102
|
|
1.5%
|
|
40,517
|
|
40,651
|
|
-0.3%
|
|
Diluted
|
41,634
|
|
40,492
|
|
2.8%
|
|
41,381
|
|
40,977
|
|
1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages
of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services, excluding depreciation and amortization (1) (2) (3) (4)
(5)
|
52.3%
|
|
52.0%
|
|
|
|
51.3%
|
|
49.5%
|
|
|
|
Member
relations and marketing (2) (3) (4)
|
17.1%
|
|
16.3%
|
|
|
|
16.9%
|
|
16.3%
|
|
|
|
General and
administrative (1) (2) (3) (4)
|
22.6%
|
|
16.1%
|
|
|
|
21.6%
|
|
16.1%
|
|
|
|
Depreciation
and amortization (1) (6)
|
11.2%
|
|
9.6%
|
|
|
|
11.2%
|
|
9.6%
|
|
|
|
Operating
income
|
-3.3%
|
|
6.1%
|
|
|
|
-0.9%
|
|
8.5%
|
|
|
|
Net
income
|
0.4%
|
|
18.7%
|
|
|
|
6.1%
|
|
9.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts include
exited programs, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
279
|
|
3,624
|
|
|
|
1,246
|
|
13,613
|
|
|
|
|
Cost of
services
|
1,018
|
|
2,991
|
|
|
|
6,755
|
|
10,969
|
|
|
|
|
General and
administrative
|
-
|
|
-
|
|
|
|
2
|
|
-
|
|
|
|
|
Depreciation
and amortization
|
1,554
|
|
531
|
|
|
|
4,666
|
|
1,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Amounts include
restructuring and strategic alternative charges, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
1,056
|
|
-
|
|
|
|
5,395
|
|
-
|
|
|
|
|
Member
relations and marketing
|
178
|
|
-
|
|
|
|
568
|
|
-
|
|
|
|
|
General and
administrative
|
11,601
|
|
-
|
|
|
|
33,001
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Amounts include
stock-based compensation, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
1,743
|
|
2,443
|
|
|
|
4,830
|
|
7,123
|
|
|
|
|
Member
relations and marketing
|
1,122
|
|
1,342
|
|
|
|
3,403
|
|
3,843
|
|
|
|
|
General and
administrative
|
2,741
|
|
4,182
|
|
|
|
8,699
|
|
11,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
Amounts include
build-to-suit land rent, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
479
|
|
445
|
|
|
|
1,415
|
|
1,348
|
|
|
|
|
Member
relations and marketing
|
301
|
|
329
|
|
|
|
916
|
|
984
|
|
|
|
|
General and
administrative
|
151
|
|
157
|
|
|
|
462
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Amounts include
fair value adjustments of acquisition-related earn-out liabilities,
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
(73)
|
|
788
|
|
|
|
379
|
|
1,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Amounts include
amortization of acquisition-related intangibles, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
6,555
|
|
7,026
|
|
|
|
19,955
|
|
21,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ADVISORY
BOARD COMPANY
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(In
thousands)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
151,458
|
|
$
91,151
|
|
Membership fees
receivable, net
|
|
527,387
|
|
605,517
|
|
Prepaid
expenses and other current assets
|
|
27,525
|
|
18,965
|
|
Total current
assets
|
|
706,370
|
|
715,633
|
|
|
|
|
|
|
Property and
equipment, net
|
|
147,181
|
|
171,281
|
|
Construction in
progress
|
|
148,019
|
|
63,368
|
|
Intangible
assets, net
|
|
239,745
|
|
255,053
|
|
Deferred
incentive compensation and other charges
|
|
52,425
|
|
72,178
|
|
Goodwill
|
|
737,023
|
|
739,507
|
|
Equity method
investments
|
|
20,699
|
|
19,858
|
|
Total
assets
|
|
$
2,051,462
|
|
$
2,036,878
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Deferred
revenue, current
|
|
$
514,516
|
|
$
564,237
|
|
Accounts
payable and accrued liabilities
|
|
54,652
|
|
67,702
|
|
Accrued
incentive compensation
|
|
18,686
|
|
25,521
|
|
Debt,
current
|
|
70,978
|
|
49,347
|
|
Total current
liabilities
|
|
658,832
|
|
706,807
|
|
|
|
|
|
|
Deferred
revenue, net of current portion
|
|
139,021
|
|
170,357
|
|
Deferred income
taxes
|
|
91,352
|
|
89,013
|
|
Debt, net of
current portion
|
|
415,902
|
|
472,739
|
|
Financing
obligation
|
|
148,019
|
|
63,368
|
|
Other long-term
liabilities
|
|
22,825
|
|
17,550
|
|
Total
liabilities
|
|
1,475,951
|
|
1,519,834
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common
stock
|
|
408
|
|
402
|
|
Additional
paid-in capital
|
|
805,964
|
|
782,399
|
|
Accumulated
deficit
|
|
(231,878)
|
|
(266,218)
|
|
Accumulated
other comprehensive income
|
|
1,017
|
|
461
|
|
Total
stockholders' equity
|
|
575,511
|
|
517,044
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
2,051,462
|
|
$
2,036,878
|
|
|
|
|
|
|
THE ADVISORY
BOARD COMPANY
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In
thousands)
|
|
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
|
2017
|
|
2016
|
|
Cash flows
from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
35,086
|
|
$
55,372
|
|
Adjustments to
reconcile net income to net cash provided
|
|
|
|
|
|
by operating
activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
64,458
|
|
57,857
|
|
Amortization of
debt issuance costs
|
|
835
|
|
864
|
|
Deferred income
taxes
|
|
5,847
|
|
(9,776)
|
|
Excess tax
benefit from stock-based awards
|
|
(518)
|
|
(3,925)
|
|
Stock-based
compensation expense
|
|
16,931
|
|
22,914
|
|
Loss on cost
method investment
|
|
-
|
|
1,800
|
|
Gains from
equity method investments
|
|
(3,957)
|
|
(4,605)
|
|
Gain on partial
sale of equity method investment
|
|
(42,312)
|
|
(29,679)
|
|
Changes in
operating assets and liabilities (net of the effect of
acquisition):
|
|
|
|
|
|
Membership fees
receivable
|
|
78,129
|
|
(16,460)
|
|
Prepaid
expenses and other current assets
|
|
(8,500)
|
|
12,098
|
|
Deferred
incentive compensation and other charges
|
|
20,396
|
|
14,495
|
|
Deferred
revenue
|
|
(81,057)
|
|
(17,382)
|
|
Accounts
payable and accrued liabilities
|
|
(36,989)
|
|
(9,898)
|
|
Acquisition-related earn-out
payments
|
|
(196)
|
|
(1,432)
|
|
Accrued
incentive compensation
|
|
(6,836)
|
|
(17,047)
|
|
Other long-term
liabilities
|
|
3,792
|
|
1,263
|
|
Net cash
provided by operating activities
|
|
45,109
|
|
56,459
|
|
|
|
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
Purchases of
property and equipment
|
|
(23,224)
|
|
(34,808)
|
|
Capitalized
external-use software development costs
|
|
(1,826)
|
|
(2,434)
|
|
Cash paid for
acquisitions
|
|
-
|
|
(1,900)
|
|
Cash received
from partial sale of equity method investment
|
|
71,871
|
|
48,565
|
|
Net cash
provided by investing activities
|
|
46,821
|
|
9,423
|
|
|
|
|
|
|
Cash flows
from financing activities:
|
|
|
|
|
|
Proceeds from
debt
|
|
-
|
|
17,000
|
|
Paydown of
debt
|
|
(35,937)
|
|
(38,562)
|
|
Proceeds from
issuance of common stock from exercise of stock
options
|
|
9,980
|
|
3,337
|
|
Withholding of
shares to satisfy minimum employee tax withholding
|
|
(5,752)
|
|
(3,473)
|
|
Proceeds from
issuance of stock under employee stock purchase
plan
|
|
272
|
|
370
|
|
Acquisition-related earn-out
payments
|
|
(186)
|
|
(3,600)
|
|
Excess tax
benefits from stock-based awards
|
|
-
|
|
3,925
|
|
Purchases of
treasury stock
|
|
-
|
|
(61,616)
|
|
Net cash used
in financing activities
|
|
(31,623)
|
|
(82,619)
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
60,307
|
|
(16,737)
|
|
Cash and cash
equivalents, beginning of period
|
|
91,151
|
|
71,825
|
|
Cash and cash
equivalents, end of period
|
|
$
151,458
|
|
$
55,088
|
|
THE ADVISORY
BOARD COMPANY
|
|
FINANCIAL
HIGHLIGHTS AND RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
183,126
|
|
$
200,455
|
|
$
577,964
|
|
$
599,572
|
|
Less: Revenue
from exited programs
|
279
|
|
3,624
|
|
1,246
|
|
13,613
|
|
Adjusted revenue
|
$
182,847
|
|
$
196,831
|
|
$
576,718
|
|
$
585,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net income
|
$
685
|
|
$
37,538
|
|
$
35,086
|
|
$
55,372
|
|
(Gains) from equity
method investments
|
(6,956)
|
|
(34,729)
|
|
(46,269)
|
|
(34,284)
|
|
(Benefit) provision
for income taxes
|
(3,908)
|
|
3,279
|
|
(7,313)
|
|
13,812
|
|
Interest
expense
|
4,638
|
|
4,530
|
|
13,868
|
|
13,738
|
|
Other expense
(income), net
|
(436)
|
|
1,516
|
|
(579)
|
|
2,380
|
|
Depreciation and
amortization
|
20,479
|
|
19,173
|
|
64,458
|
|
57,857
|
|
Fair value adjustment
to acquisition-related earn-out liabilities
|
(73)
|
|
788
|
|
379
|
|
1,493
|
|
Build-to-suit land
rent
|
931
|
|
931
|
|
2,793
|
|
2,801
|
|
Stock-based
compensation expense
|
5,606
|
|
7,967
|
|
16,932
|
|
22,914
|
|
Loss (income) from
exited programs
|
2,293
|
|
(102)
|
|
10,177
|
|
(1,138)
|
|
Depreciation and
amortization from exited programs
|
(1,554)
|
|
(531)
|
|
(4,666)
|
|
(1,506)
|
|
Restructuring and
strategic alternative charges
|
12,835
|
|
-
|
|
38,964
|
|
-
|
|
Adjusted EBITDA
|
$
34,540
|
|
$
40,360
|
|
$
123,830
|
|
$
133,439
|
|
|
|
|
|
|
|
|
|
THE ADVISORY
BOARD COMPANY
|
|
FINANCIAL
HIGHLIGHTS AND RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net income
|
$
685
|
|
$
37,538
|
|
$
35,086
|
|
$
55,372
|
|
(Gains) from equity
method investments
|
(6,956)
|
|
(34,729)
|
|
(46,269)
|
|
(34,284)
|
|
Amortization of
acquisition-related intangibles
|
6,555
|
|
7,026
|
|
19,955
|
|
21,425
|
|
Fair value adjustment
to acquisition-related earn-out liabilities
|
(73)
|
|
788
|
|
379
|
|
1,493
|
|
Loss on cost method
investment
|
-
|
|
1,800
|
|
-
|
|
1,800
|
|
Build-to-suit land
rent
|
931
|
|
931
|
|
2,793
|
|
2,801
|
|
Stock-based
compensation expense
|
5,606
|
|
7,967
|
|
16,932
|
|
22,914
|
|
Loss (income) from
exited programs
|
2,293
|
|
(102)
|
|
10,177
|
|
(1,138)
|
|
Restructuring and
strategic alternative charges
|
12,835
|
|
-
|
|
38,964
|
|
-
|
|
Income tax effects
and adjustments
|
(10,806)
|
|
(9,916)
|
|
(32,402)
|
|
(21,247)
|
|
Adjusted net
income
|
$
11,070
|
|
$
11,303
|
|
$
45,615
|
|
$
49,136
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net income per
share - diluted
|
$
0.02
|
|
$
0.93
|
|
$
0.85
|
|
$
1.35
|
|
(Gains) from
equity method investments
|
(0.17)
|
|
(0.86)
|
|
(1.12)
|
|
(0.84)
|
|
Amortization
of acquisition-related intangibles
|
0.16
|
|
0.18
|
|
0.48
|
|
0.52
|
|
Fair value
adjustment to acquisition-related earn-out liabilities
|
-
|
|
0.02
|
|
0.01
|
|
0.04
|
|
Loss on cost
method investment
|
-
|
|
0.04
|
|
-
|
|
0.04
|
|
Build-to-suit
land rent
|
0.02
|
|
0.02
|
|
0.07
|
|
0.07
|
|
Stock-based
compensation expense
|
0.13
|
|
0.20
|
|
0.41
|
|
0.56
|
|
Loss (income)
from exited programs
|
0.06
|
|
-
|
|
0.25
|
|
(0.03)
|
|
Restructuring
and strategic alternative charges
|
0.31
|
|
-
|
|
0.94
|
|
-
|
|
Income tax
effects and adjustments
|
(0.26)
|
|
(0.24)
|
|
(0.78)
|
|
(0.52)
|
|
Non-GAAP adjusted earnings
per share
|
$
0.27
|
|
$
0.29
|
|
$
1.11
|
|
$
1.19
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Presentation
The non-GAAP financial reconciliation tables present
supplemental measures of the Company's performance which have been
derived from its consolidated financial information but which are
not presented in the Company's consolidated financial statements
prepared in accordance with accounting principles generally
accepted in the United States of
America, or "GAAP." The Company refers to these
financial measures, which are considered "non-GAAP financial
measures" under SEC rules as adjusted revenue, adjusted EBITDA,
adjusted net income, and non-GAAP earnings per diluted share.
The Company's management team uses these non-GAAP financial
measures, together with financial measures prepared in accordance
with GAAP, to enhance understanding by investors of core operating
performance, as well as for internal forecasting purposes.
Management believes that providing information about these non-GAAP
financial measures facilitates an assessment by investors of the
Company's fundamental operating trends and addresses concerns of
investors that various non-cash and other effects included in GAAP
measures may obscure such underlying trends. The Company
believes that, by highlighting such trends relating to underlying
performance, its non-GAAP presentation helps investors to make
meaningful period-to-period comparisons of the Company's
results.
There are limitations to the Company's use of non-GAAP financial
measures. These non-GAAP financial measures may not be
comparable to similarly titled measures of other companies.
Other companies, including industry peer companies, may calculate
non-GAAP financial measures differently than the Company does,
limiting the usefulness of those measures for comparative
purposes.
The Company's non-GAAP financial measures exclude the items
discussed below. Because the excluded items have a material
impact on its financial results, the Company uses non-GAAP
financial measures to supplement financial information presented in
accordance with GAAP.
Reconciliations of each non-GAAP financial measure to its most
directly comparable GAAP financial measure are set forth
below. The Company encourages investors and other interested
parties to review the reconciliations in conjunction with the
presentation of the non-GAAP financial measures for each of the
periods presented. The discussion below presents information
about each of the non-GAAP financial measures and the Company's
reasons for excluding the enumerated items from its non-GAAP
results. In future fiscal periods, the Company may exclude
such items and may incur income and expenses similar to these
excluded items. Accordingly, the exclusion of these items and
other similar items in the Company's non-GAAP presentation should
not be interpreted as implying that these items are non-recurring,
infrequent or unusual.
The Company has not reconciled forward-looking non-GAAP measures
to forward-looking GAAP measures presented in this press release
because the Company is unable to predict, without unreasonable
effort, GAAP measures of (i) revenue and loss (income) from exited
programs, (ii) fair value adjustments to acquisition-related
earn-out liabilities, (iii) restructuring activities, and (iv)
gains (losses) from the Company's equity method investments. These
items, which could materially affect the computation of such
forward-looking GAAP measures, are inherently uncertain and depend
on various factors, many of which are outside the Company's
control.
Adjusted Net Income and Adjusted Earnings Per
Share-Diluted
The Company presents adjusted net income and adjusted earnings
per share-diluted to provide investors with a meaningful,
consistent comparison of the Company's operating results and trends
for the periods presented. Management believes that these
measures are also useful to investors by allowing investors to
evaluate the Company's operations using the same tools that
management uses to evaluate the Company's past performance and
prospects for future performance. These two non-GAAP
financial measures reflect adjustments based on the exclusion of
the following items as well as adjustments for related income tax
effects:
- Gain (loss) from equity method investments: The Company has
excluded its proportional share of income (loss) and other gains
recorded in connection with its equity method investments.
Management believes that the exclusion of such amounts allows
investors to better understand the Company's core operating
results.
- Amortization of acquisition-related intangible assets:
Amortization of acquisition-related intangible assets consists of
amortization of customer relationships, developed technology, and
trade names. Amortization charges for acquired intangible assets
are significantly affected by the timing and magnitude of the
Company's acquisitions, and these charges may vary in amount from
period to period. The Company excludes these charges to facilitate
a more meaningful evaluation of its current operating performance
and comparisons to its past operating performance.
- Fair value adjustments to acquisition-related earn-out
liabilities: The Company has excluded the impact of
acquisition-related contingent consideration non-cash adjustments
due to the inherent uncertainty and volatility associated with such
amounts based on changes in assumptions with respect to fair value
estimates. The amount and frequency of such adjustments are not
consistent across transactions and are significantly affected by
the timing and size of the Company's acquisitions, the future
outlook of the acquired business, the estimated discount rate, and
the nature of the transaction consideration.
- Build-to-suit land rent: The Company entered into a 16-year
lease for its new corporate headquarters in December 2015, which is currently being
constructed in Washington, D.C.
The lease has an anticipated start date of mid-2019. The Company
has concluded that it is the deemed owner of the building (for
accounting purposes only) during the construction period and that
the lease qualifies for build-to-suit accounting. The Company
recognizes expense on a portion of future lease payments that are
estimated to represent the underlying land lease. The Company
excludes these costs for purposes of calculating non-GAAP measures
because the Company believes these costs do not reflect expected
future operating expenses and do not contribute to a meaningful
evaluation of the Company's current operating performance or
comparisons to the Company's operating performance in other
periods.
- Stock-based compensation expense: Although stock-based
compensation is a key incentive offered to its employees, the
Company evaluates its operating results excluding such expense
because the expense can vary significantly from period to period
based on the Company's share price, as well as the timing, size and
nature of equity awards granted. In addition, management believes
that the exclusion of this expense facilitates the ability of
investors to compare the Company's operating results with those of
other companies, many of which also exclude such expense in
determining their non-GAAP financial measures.
- Restructuring and strategic alternative charges: The Company
has excluded costs associated with its previously announced
restructuring plan and its work on strategic alternatives. These
costs of its restructuring and strategic alternatives plan are
primarily related to employee termination costs and lease exit
costs, as well as legal, consulting, and financial advisory fees.
The Company excludes these restructuring and strategic alternative
costs for purposes of calculating non-GAAP measures because the
Company believes that these costs do not reflect expected future
operating expenses and do not contribute to a meaningful evaluation
of the Company's current operating performance or comparisons to
the Company's operating performance in other periods.
- Income (loss) from exited programs: The Company has excluded
income (loss) from programs it has exited or intends to exit in
connection with its restructuring and strategic alternatives plan.
The excluded items encompass revenue and costs, including salary
and benefits. The Company believes that the exclusion of such
amounts allows investors to better understand the Company's core
continuing operations.
- Other corporate expenses: The Company has excluded certain
other expenses that are the result of other, non-comparable events,
primarily charges associated with the fair valuing of certain
equity instruments. These events arise outside of the ordinary
course of the Company's continuing operations. The Company excludes
these charges to facilitate a more meaningful evaluation of current
operating performance and comparisons to past operating
performance.
Adjusted Revenue
The Company adjusts revenue to exclude the impact of exited
programs. Management believes that the adjustments for these
items more closely correlate the reported financial measure with
the ordinary and ongoing course of the Company's operations.
Adjusted EBITDA
Adjusted EBITDA reflects the adjustments to net income prepared
on a GAAP basis, as discussed above, and, to the extent not already
subject to such adjustments, excludes expenses related to interest,
taxes, depreciation, amortization, gain or loss from exited
programs, and restructuring-related charges. Companies
exhibit significant variations with respect to capital structure
and cost of capital (which affect relative interest expense) and
differences in taxation and book depreciation of facilities and
equipment (which affect relative depreciation expense), including
significant differences in the depreciable lives of similar assets
among various companies. By eliminating some of these
variations and reflecting the other adjustments, discussed above,
management believes that this non-GAAP financial measure allows
investors to evaluate more effectively the Company's fundamental
operating performance relative to that of other companies.
There are various limitations associated with the non-GAAP
financial measures the Company uses, including:
- the non-GAAP financial measures generally do not reflect all
depreciation and amortization, and although the assets being
depreciated and amortized will in some cases have to be replaced in
the future, the measures do not reflect any cash requirements for
such replacements;
- the non-GAAP financial measures do not reflect the expense of
equity awards to employees; and
- the non-GAAP financial measures do not reflect the effect of
earnings or charges resulting from matters that management
considers not indicative of the Company's ongoing operations, but
which may recur from year to year.
Because of their limitations, the Company's non-GAAP financial
measures are not meant to be considered as indicators of
performance in isolation from or as a substitute for revenue, net
income, or earnings per diluted share prepared in accordance with
GAAP, and should be read only in conjunction with financial
information presented on a GAAP basis.
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SOURCE The Advisory Board Company