EX-99.1 2 d536910dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

Contact: Michael Kirshbaum

               Chief Financial Officer

               202.266.5876

               jacobsg@advisory.com

  

The Advisory Board Company

2445 M Street, N.W.

Washington, D.C. 20037

www.advisory.com

THE ADVISORY BOARD COMPANY REPORTS

RESULTS FOR QUARTER AND FISCAL YEAR ENDED MARCH 31, 2013

Company Reports Quarterly Revenue Growth of 19%, Contract Value Growth of 17%, and Member Renewal

Rate of 90%; Announces New Program and $100M Increase to Share Repurchase Program

WASHINGTON, D.C. — (May 9, 2013) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the quarter ended March 31, 2013, which is the fourth quarter of its 2013 fiscal year. Revenue for the quarter increased 19.1% to $119.7 million, from $100.5 million for the quarter ended March 31, 2012. Contract value increased 17.1% to $466.3 million as of March 31, 2013, up from $398.3 million as of March 31, 2012. For the quarter ended March 31, 2013, net income attributable to common stockholders was $6.4 million, or $0.18 per diluted share, compared to net income attributable to common stockholders of $8.2 million, or $0.23 per diluted share, for the quarter ended March 31, 2012. For the quarter ended March 31, 2013, adjusted EBITDA was $22.7 million, up from $19.8 million for the quarter ended March 31, 2012. Adjusted net income for the quarter ended March 31, 2013 was $12.2 million, or $0.33 per diluted share, compared to $11.1 million, or $0.31 per diluted share, for the quarter ended March 31, 2012. Adjusted EBITDA, adjusted net income, and non-GAAP earnings per diluted share are all non-GAAP financial measures.

For the fiscal year ended March 31, 2013, revenue increased 21.7% to $450.8 million, from $370.3 million for the fiscal year ended March 31, 2012. Net income attributable to common stockholders was $22.2 million, or $0.61 per diluted share, for the fiscal year ended March 31, 2013, compared to net income attributable to common stockholders of $25.3 million, or $0.73 per diluted share, for the prior fiscal year. For the fiscal year ended March 31, 2013, adjusted EBITDA was $83.0 million, up from $70.3 million for the fiscal year ended March 31, 2012. Adjusted net income for the fiscal year ended March 31, 2013 was $44.8 million, or $1.23 per diluted share, compared to $39.4 million, or $1.13 per diluted share, for the fiscal year ended March 31, 2012.

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, “We closed the quarter and the fiscal year with strong performance, with 19% revenue growth for the quarter, 22% revenue growth for the fiscal year, and 17% contract value growth over last year at this time. These financial metrics, along with our 10% membership base expansion and 90% institutional renewal rate, illustrate that our business model remains robust and that our members derive measurable impact from their work with us. We continue to see a virtuous cycle as this tangible value means that members want to work with us in deeper and more comprehensive partnerships, driving ongoing company growth and expansion of our footprint and impact.”

Mr. Musslewhite continued, “I am also pleased to announce the launch of the ICD-10 Performance Program, which will help our members navigate the upcoming transition in our nation’s system for coding, reporting, and billing medical diagnoses and inpatient procedures. Hospitals must prepare effectively for the mandated switch from the current ICD-9 system to the new, radically more complex, ICD-10 code sets–or face the potential of millions of


dollars in revenue losses. The ICD-10 Performance Program provides members a software tool that uses hospitals’ individual patient accounting and claims data and a proprietary risk algorithm to provide a comprehensive picture of the ICD-10 inflection points for an individual hospital. The tool is complemented by an extensive best practice library which provides step-by-step instructions on training physicians and coders on the new documentation concepts and dashboards to monitor ongoing performance. The initiative is seeing strong traction in the market, and we are confident in the value that it will provide to members.”

Share Repurchase Authorization Increased by $100 Million

During the three months ended March 31, 2013, the Company repurchased approximately 98,000 shares of its common stock at a total cost of $5.0 million. To date, the Company has repurchased approximately 15.6 million shares of its common stock at a total cost of $341.0 million.

The Company also announced that its Board of Directors authorized an increase in its share repurchase program of up to an additional $100 million of the Company’s common stock, bringing the total amount authorized to be spent under the program to $450 million since its inception. Repurchases will continue to be made from time to time in the open market or in private transactions. The repurchase program does not obligate the Company to repurchase any specific number of shares and may be modified or discontinued at any time The Company will fund its share repurchases with cash on hand and cash generated from operations. As of March 31, 2013, the Company had approximately $214.7 million in cash and marketable securities and no debt.

Outlook for Calendar Year 2013

The Company reaffirmed its previously announced calendar year 2013 guidance for revenue, adjusted EBITDA, and non-GAAP earnings per diluted share. For calendar year 2013, the Company expects revenue to be in a range of approximately $495 million to $505 million, adjusted EBITDA to be in a range of approximately $90 million to $95 million, and non-GAAP earnings per diluted share to be in a range of approximately $1.18 to $1.28. For calendar year 2013, the Company expects share-based compensation expense to be approximately $17.5 million, and amortization of acquisition-related intangible assets to be approximately $7 million. For fiscal year 2014, the Company expects an effective tax rate in a range of approximately 38% to 39%.

Non-GAAP Financial Measures

This press release and the accompanying tables present information about the Company’s 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”). The term “adjusted EBITDA” refers to net income attributable to common stockholders before adjustment for the items set forth in the first table. The term “adjusted net income” refers to net income attributable to common stockholders excluding the net of tax effect of the items set forth in the second table below. The term “non-GAAP earnings per diluted share” refers to earnings per diluted share excluding the net of tax effect of the items set forth in the third table below.

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 or 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, including fair value adjustments to acquisition-related earn-out liabilities and gains and losses on investment in common stock warrants, cannot reasonably be estimated or predicted at this time.


                                                                   
     Three Months Ended     Fiscal Year Ended  
     March 31,     March 31,  
     2013     2012     2013     2012  

Net income attributable to common stockholders

   $ 6,399      $ 8,167      $ 22,163      $ 25,293   

Equity in loss of unconsolidated entity

     2,170        728        6,756        1,337   

Gain on sale of discontinued operations, net of tax

     —          (2,155     —          (2,155

Provision for income taxes from continuing operations

     4,695        4,266        17,259        15,203   

Discontinued operations, net of tax

     —          45        —          (286

Other income, net

     (602     (164     (2,604     (3,034

Depreciation and amortization

     6,146        3,996        19,885        14,656   

Acquisition and similar transaction charges

     —          —          851        648   

Fair value adjustments to acquisition-related earn-out liabilities

     400        1,378        4,759        6,678   

Share-based compensation expense

     3,530        3,525        13,913        11,987   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 22,738      $ 19,786      $ 82,982      $ 70,326   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                   
     Three Months Ended     Fiscal Year Ended  
     March 31,     March 31,  
     2013     2012     2013     2012  

Net income attributable to common stockholders

   $ 6,399      $ 8,167      $ 22,163      $ 25,293   

Equity in loss of unconsolidated entity

     2,170        728        6,756        1,337   

Gain on sale of discontinued operations, net of tax

     —          (2,155     —          (2,155

Discontinued operations, net of tax

     —          45        —          (286

Amortization of acquisition-related intangibles, net of tax

     1,193        858        3,804        3,502   

Acquisition and similar transaction charges, net of tax

     —          —          525        405   

Fair value adjustments to acquisition-related earn-out liabilities, net of tax

     258        846        2,948        4,163   

Gain/loss on investment in common stock warrants, net of tax

     (136     400        (68     (263

Share-based compensation expense, net of tax

     2,280        2,164        8,686        7,388   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 12,164      $ 11,053      $ 44,814      $ 39,384   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                   
     Three Months Ended     Fiscal Year Ended  
     March 31,     March 31,  
     2013      2012     2013     2012  

GAAP earnings per diluted share

   $ 0.18       $ 0.23      $ 0.61      $ 0.73   

Equity in loss of unconsolidated entity

     0.06         0.02        0.19        0.04   

Gain on sale of discontinued operations, net of tax

     —           (0.06     —          (0.06

Discontinued operations, net of tax

     —           —          —          (0.01

Amortization of acquisition-related intangibles, net of tax

     0.03         0.03        0.10        0.10   

Acquisition and similar transaction charges, net of tax

     —           —          0.02        0.01   

Fair value adjustments to acquisition-related earn-out liabilities, net of tax

     —           0.02        0.08        0.12   

Gain/loss on investment in common stock warrants, net of tax

     —           0.01        (0.01     (0.01

Share-based compensation expense, net of tax

     0.06         0.06        0.24        0.21   
  

 

 

    

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per diluted share

   $ 0.33       $ 0.31      $ 1.23      $ 1.13   
  

 

 

    

 

 

   

 

 

   

 

 

 


Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its fourth quarter and fiscal year performance this evening, May 9, 2013, at 5:30 p.m. Eastern Time. The conference call will be available via live web cast on the Company’s website at www.advisory.com/IR. To participate by telephone, the dial-in number is 888.317.6016. 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 8:00 p.m. Eastern Time on Thursday, May 9, until 11:00 p.m. Eastern Time on Thursday, May 16, 2013.

About The Advisory Board Company

The Advisory Board Company is a global research, technology, and consulting firm partnering with 150,000 leaders in 4,100 organizations across health care and higher education. Through its innovative membership model, the Company collaborates with executives and their teams to elevate performance and solve their most pressing challenges. The Company provides strategic guidance, actionable insights, web-based software solutions, and comprehensive implementation and management services. For more information, visit the firm’s website, 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, non-GAAP earnings per diluted share, share-based compensation expense, amortization of acquisition-related intangibles, and effective tax rate for calendar year 2013 are based on information available to the Company as of May 9, 2013, the date of this news release, as well as the Company’s current projections, forecasts, and assumptions, and are subject to 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- the 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 the Company’s software tools and management and advisory services, risks relating to privacy, information security, and other health care-related laws and standards, maintaining our thirdparty provider relationships and strategic alliances, our ability to license technology from third parties, impairment of goodwill, and various factors related to income and other taxes, as well as other risks and uncertainties described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012, and subsequent reports filed with the Securities and Exchange Commission, all of which are available for review on the Company’s website at www.advisory.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-K for the fiscal year ended March 31, 2013, which will be filed with the Securities and Exchange Commission in May 2013.

Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements made in this news release, which speak only as of the date of this news release. The Company does not undertake to update any of its forward-looking 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     Twelve Months Ended     Selected  
    March 31     Growth     March 31     Growth  
    2013     2012     Rates     2013     2012     Rates  

Statements of Income

           

Revenue

  $ 119,706      $ 100,483        19.1   $ 450,837      $ 370,345        21.7
 

 

 

   

 

 

     

 

 

   

 

 

   

Cost of services, excluding depreciation and amortization (1) (2) (5)

    61,559        53,697          240,037        198,112     

Member relations and marketing (1)

    22,832        19,105          85,264        73,875     

General and administrative (1) (3)

    16,507        12,798          62,185        47,892     

Depreciation and amortization (5)

    6,146        3,996          19,885        14,108     
 

 

 

   

 

 

     

 

 

   

 

 

   

Operating income

    12,662        10,887          43,466        36,358     

Other income, net (4)

    602        164          2,604        3,034     
 

 

 

   

 

 

     

 

 

   

 

 

   

Income from continuing operations before provision for income taxes and equity in loss of unconsolidated entity

    13,264        11,051          46,070        39,392     

Provision for income taxes

    (4,695     (4,266       (17,259     (15,203  

Equity in loss of unconsolidated entity

    (2,170     (728       (6,756     (1,337  
 

 

 

   

 

 

     

 

 

   

 

 

   

Net income from continuing operations

    6,399        6,057          22,055        22,852     

Discontinued operations:

           

Net income from discontinued operations

    —          (45       —          286     

Gain on sale of discontinued operations, net of tax

    —          2,155          —          2,155     
 

 

 

   

 

 

     

 

 

   

 

 

   

Net income before allocation to noncontrolling interest

    6,399        8,167          22,055        25,293     

Net loss attributable to noncontrolling interest

    —          —            108        —       
 

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to common stockholders

  $ 6,399      $ 8,167        $ 22,163      $ 25,293     
 

 

 

   

 

 

     

 

 

   

 

 

   

Earnings per share - Basic

           

Net income from continuing operations attributable to common stockholders

  $ 0.18      $ 0.18        $ 0.64      $ 0.70     

Net income from discontinued operations attributable to commons stockholders

  $ —        $ 0.06        $ —        $ 0.07     
 

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to common stockholders per share – Basic

  $ 0.18      $ 0.24        $ 0.64      $ 0.77     

Earnings per share - Diluted

           

Net income from continuing operations attributable to common stockholders

  $ 0.18      $ 0.17        $ 0.61      $ 0.66     

Net income from discontinued operations attributable to common stockholders

  $ —        $ 0.06        $ —        $ 0.07     
 

 

 

   

 

 

     

 

 

   

 

 

   

Net income attributable to common stockholders per share – Diluted

  $ 0.18      $ 0.23        $ 0.61      $ 0.73     

Weighted average common shares outstanding

           

Basic

    35,106        33,452          34,723        32,808     

Diluted

    36,534        35,542          36,306        34,660     

Contract Value (at end of period)

  $ 466,329      $ 398,313        17.1      

Percentages of Revenues

           

Cost of services, excluding depreciation and amortization (1) (2) (5)

    51.4     53.4       53.2     53.5  

Member relations and marketing (1)

    19.1     19.0       18.9     19.9  

General and administrative (1) (3)

    13.8     12.7       13.8     12.9  

Depreciation and amortization (5)

    5.1     4.0       4.4     3.8  

Operating income

    10.6     10.8       9.6     9.8  

Net income

    5.3     8.1       4.9     6.8  


 

(1) Amounts include share-based compensation, as follows:

 

                                                   

Cost of services

     973         866         3,975         3,440   

Member relations and marketing

     650         568         2,642         2,133   

General and administrative

     1,907         2,091         7,295         6,414   

 

(2) Amounts include fair value adjustments of acquisition related earn-out liabilities, as follows:

 

                                                   

Cost of services

        400         1,400         4,800         6,700   

 

(3) Amounts include acquisition and similar transaction charges, as follows:

 

                                                   

General and administrative

     —           —           900         600   

 

(4) Amounts include gain/(loss) on investment in common stock warrants, as follows:

 

                                                   

Other income

     210         (650     100         450   

 

(5) Prior period amounts include the following reclass from Cost of Services to Depreciation and amortization, as follows:

 

                                                   

Cost of services

     —           —           (1,266     (5,075

Depreciation and amortization

     —           —           1,266        5,075   


THE ADVISORY BOARD COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     March 31,     March 31,  
     2013     2012  
     (unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 57,829      $ 60,642   

Marketable securities, current

     16,611        4,823   

Membership fees receivable, net

     351,598        281,584   

Prepaid expenses and other current assets

     19,835        6,705   

Deferred income taxes, current

     7,664        7,255   
  

 

 

   

 

 

 

Total current assets

     453,537        361,009   

Property and equipment, net

     71,174        49,653   

Intangible assets, net

     32,381        19,384   

Deferred incentive compensation and other charges

     73,502        53,369   

Deferred income taxes, net of current portion

     3,888        7,655   

Marketable securities, net of current portion

     140,228        122,621   

Goodwill

     95,540        74,235   

Investment in unconsolidated entity

     1,907        8,662   

Other non-current assets

     5,550        9,000   
  

 

 

   

 

 

 

Total assets

   $ 877,707      $ 705,588   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Deferred revenues, current

   $ 386,739      $ 313,958   

Accounts payable and accrued liabilities

     75,089        57,529   

Accrued incentive compensation

     21,033        18,691   
  

 

 

   

 

 

 

Total current liabilities

     482,861        390,178   

Deferred revenues, net of current portion

     97,563        78,498   

Other long-term liabilities

     15,866        19,865   
  

 

 

   

 

 

 

Total liabilities

     596,290        488,541   
  

 

 

   

 

 

 

Redeemable noncontrolling interest

     100        —     

The Advisory Board Company’s stockholders’ equity:

    

Common stock

     351        235   

Additional paid-in capital

     375,622        315,648   

Retained (deficit) earnings

     (95,809     189,742   

Accumulated elements of other comprehensive income

     1,261        1,206   

Treasury stock

     —          (289,784
  

 

 

   

 

 

 

Total stockholders’ equity controlling interest

     281,425        217,047   

Equity attributable to noncontrolling interest

     (108     —     
  

 

 

   

 

 

 

Total stockholders’ equity

     281,417        217,047   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 877,707      $ 705,588   
  

 

 

   

 

 

 


THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Twelve Months Ended March 31,  
     2013     2012  

Cash flows from operating activities:

    

Net income before allocation to noncontrolling interest

   $ 22,055      $ 25,293   

Adjustments to reconcile net income before allocation to noncontrolling interest to net cash provided by operating activities:

    

Depreciation and amortization

     19,885        14,656   

Deferred income taxes

     261        (85

Excess tax benefits from stock-based awards

     (20,535     (7,593

Stock-based compensation expense

     13,913        11,986   

Amortization of marketable securities premiums

     2,031        1,295   

Gain on sale of discontinued operations

     —          (3,510

Gain on investment in common stock warrants

     (100     (450

Equity in loss of unconsolidated entity

     6,756        1,337   

Changes in operating assets and liabilities:

    

Membership fees receivable

     (68,413     (104,203

Prepaid expenses and other current assets

     (8,624     386   

Deferred incentive compensation and other charges

     (20,133     (7,143

Deferred revenues

     90,840        132,279   

Accounts payable and accrued liabilities

     50,290        17,564   

Acquisition-related earn-out payments

     (3,011     (112

Accrued incentive compensation

     2,342        5,082   

Other long-term liabilities

     (6,499     5,950   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     81,058        92,732   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (35,545     (29,194

Capitalized external use software development costs

     (3,393     (2,825

Cash paid for acquisitions, net of cash acquired

     (31,887     (12,829

Proceeds from sale of discontinued operations, net of selling costs

     1,050        7,803   

Investment in unconsolidated entity

     —          (10,000

Loan to unconsolidated entity

     (4,358     —     

Redemptions of marketable securities

     35,376        25,480   

Purchases of marketable securities

     (66,710     (65,990
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (105,467     (87,555
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of stock from exercise of stock options

     24,137        31,026   

Withholding of shares to satisfy minimum employee tax withholding

     (4,140     (2,421

Contributions from noncontrolling interest

     100        —     

Proceeds from issuance of stock under employee stock purchase plan

     363        222   

Excess tax benefits from stock-based awards

     20,535        7,593   

Acquisition-related earn-out payments

     (1,400     (4,753

Purchases of treasury stock

     (17,999     (6,580
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     21,596        25,087   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (2,813     30,264   

Cash and cash equivalents, beginning of period

     60,642        30,378   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 57,829      $ 60,642