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The Advisory Board Company Reports Results For Quarter Ended June 30, 2014

Companies mentioned in this article: The Advisory Board Company

WASHINGTON, July 31, 2014 /PRNewswire/ -- The Advisory Board Company (NASDAQ: ABCO), a global technology, research, and services company providing a leading cloud-based performance platform for the health care and higher education industries, today announced financial results for the quarter ended June 30, 2014, highlighted by 15% growth in contract value and quarterly revenue.

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Robert Musslewhite, Chairman and Chief Executive Officer of The Advisory Board Company, commented, "We are pleased with our solid performance for the quarter and our continued track record of growth. Our comprehensive portfolio and outstanding service drive tangible results for our members on the problems that are most important to them. In these times of great complexity in the industries we serve, our members can reliably turn to The Advisory Board Company for measurable, tangible results across a wide range of their operational and strategic issues. Our 4,500 members vote with their feet, and the 90% member renewal rate we earned this past year is a testament to the value they derive from their work with us."

Revenue for the quarter increased 15% to $141.8 million, from $123.2 million for the quarter ended June 30, 2013. Contract value increased 15% to $548.4 million as of June 30, 2014, up from $475.8 million as of June 30, 2013. For the quarter ended June 30, 2014, net loss attributable to common stockholders was $3.2 million, or $0.09 per diluted share, compared to net income attributable to common stockholders of $3.7 million, or $0.10 per diluted share, for the quarter ended June 30, 2013. For the quarter ended June 30, 2014, adjusted EBITDA was $24.0 million, up from $22.5 million for the quarter ended June 30, 2013. Adjusted net income for the quarter ended June 30, 2014 was $11.0 million, or $0.30 per diluted share, compared to $11.4 million, or $0.31 per diluted share, for the quarter ended June 30, 2013. Adjusted EBITDA, adjusted net income, and non-GAAP earnings per diluted share are all non-GAAP financial measures.

Mr. Musslewhite continued, "I am excited to announce our latest new product launch, Crimson Medical Referrals. For our members, the issue of physician network building and management has come to the fore as an important strategic issue because it serves organizations well today under fee-for-service reimbursements and also in the risk-based models likely to become prevalent in the future. Yet despite the current and future strategic importance of referrals, most providers conduct them using frustrating and inefficient manual processes that are prone to error.

Based on technology we acquired last year with Medical Referral Source, Crimson Medical Referrals is a renewable software program that streamlines referral execution, captures independent business, and enhances care coordination across the delivery network. The program complements our large and growing Crimson Market Advantage membership, and we are optimistic about its potential."

Outlook for Calendar Year 2014

The Company reaffirmed its previously announced calendar year 2014 guidance for revenue, adjusted EBITDA, and non-GAAP earnings per diluted share. For calendar year 2014, the Company expects revenue to be in a range of approximately $570 million to $580 million, adjusted EBITDA to be in a range of approximately $97 million to $103 million, and non-GAAP earnings per diluted share to be in a range of approximately $1.14 to $1.25. For calendar year 2014, the Company expects amortization from acquisition-related intangible assets to be approximately $11 million. For calendar year 2014, the Company expects an effective tax rate in a range of approximately 38.5% to 39.5%.

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" for the three months ended June 30, 2014 and 2013 refers to net income attributable to common stockholders before adjustment for the items set forth in the first table. The term "adjusted net income" for the three months ended June 30, 2014 and 2013 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" for the three months ended June 30, 2014 and 2013 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, equity in loss of unconsolidated entity, and gains and losses on investment in common stock warrants, cannot reasonably be estimated or predicted at this time.

                                              Three Months Ended

                                                   June 30,
                                                   --------

                                                 2014                    2013
                                                 ----                    ----


    Net income attributable to common
     stockholders                            $(3,177)                 $3,693

    Equity in loss of unconsolidated
     entities                                   2,150                   3,233

    Accretion of non-controlling
     interest to redemption value               7,040                       -

    Provision for income taxes                  3,933                   4,335

    Other income, net                           (710)                  (523)

    Depreciation and amortization               9,078                   6,354

    Acquisition and similar transaction
     charges                                      268                       -

    Fair value adjustments to
     acquisition-related earn-out
     liabilities                                (100)                    700

    Stock-based compensation expense            5,541                   4,659
                                                -----                   -----

         Adjusted EBITDA                      $24,023                 $22,451
                                              -------                 -------


                                              Three Months Ended

                                                    June 30,
                                                    --------

                                                  2014              2013
                                                  ----              ----


    Net income attributable to common
     stockholders                             $(3,177)           $3,693

    Equity in loss of unconsolidated entities    2,150             3,233

    Accretion of non-controlling interest to
     redemption value                            7,040                 -

    Amortization of acquisition-related
     intangibles, net of tax                     1,452             1,136

    Acquisition and similar transaction
     charges, net of tax                           162                 -

    Fair value adjustments to acquisition-
     related earn-out liabilities, net of
     tax                                          (61)              431

    Loss on investment in common stock
     warrants, net of tax                          108                 -

    Stock-based compensation expense, net of
     tax                                         3,351             2,865
                                                 -----             -----

    Adjusted net income                        $11,025           $11,358
                                               -------           -------



                                           Three Months Ended

                                                 June 30,
                                                 --------

                                                          2014   2013
                                                          ----   ----


    GAAP earnings per diluted share                    $(0.09) $0.10

    Equity in loss of unconsolidated
     entities                                             0.06   0.09

    Accretion of non-controlling interest
     to redemption value                                  0.19      -

    Amortization of acquisition-related
     intangibles, net of tax                              0.04   0.03

    Acquisition and similar transaction
     charges, net of tax                                  0.01      -

    Fair value adjustments to acquisition-
     related earn-out liabilities, net of
     tax                                                     -  0.01

    Loss on investment in common stock
     warrants, net of tax                                    -     -

    Stock-based compensation expense, net
     of tax                                               0.09   0.08
                                                          ----   ----

    Non-GAAP earnings per diluted share                  $0.30  $0.31
                                                         -----  -----

Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss its first quarter performance this evening, July 31, 2014, at 5:30 p.m. Eastern Time. The conference call will be available via live webcast on the Company's website at www.advisory.com/IR. To participate by telephone, the dial-in number is 888.336.7150. Participants are advised to dial in at least five minutes prior to the call to register. The webcast will be archived for seven days from 8:00 p.m. Eastern Time on Thursday, July 31, 2014, until 11:00 p.m. Eastern Time on Thursday, August 7, 2014.

About The Advisory Board Company

The Advisory Board Company is a global research, technology, and consulting firm partnering with 4,500 organizations and more than 200,000 leaders 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, 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, stock-based compensation expense, amortization of acquisition-related intangibles, and effective tax rate for calendar year 2014 are based on information available to the Company as of July 31, 2014, 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 third-party 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, 2014, which is 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-Q for the quarter ended June 30, 2014, which will be filed with the Securities and Exchange Commission in August 2014.

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

                                                                                                                                                    June 30,                     Growth
                                                                                                                                                    --------

                                                                                                                                                     2014                   2013           Rates
                                                                                                                                                     ----                   ----           -----

    Statements of Income

    Revenue                                                                                                                                    $141,820               $123,216                   15.1%
                                                                                                                                               --------               --------


    Cost of services, excluding depreciation and amortization (1) (2)                                                                            74,218                 65,950

    Member relations and marketing (1)                                                                                                           26,576                 22,188

    General and administrative (1) (3)                                                                                                           22,712                 17,986

    Depreciation and amortization (4)                                                                                                             9,078                  6,354

         Operating income (5)                                                                                                                     9,236                 10,738

    Other income, net                                                                                                                               710                    523
                                                                                                                                                    ---                    ---

         Income before provision for income taxes

          and equity in loss of unconsolidated entities                                                                                           9,946                 11,261

    Provision for income taxes                                                                                                                  (3,933)               (4,335)

    Equity in loss of unconsolidated entities                                                                                                   (2,150)               (3,233)
                                                                                                                                                 ------                 ------

         Net income before allocation to noncontrolling interest                                                                                  3,863                  3,693

    Net loss and accretion to redemption value attributable to noncontrolling interest (6)                                             (7,040)                      -

         Net (loss) income attributable to common stockholders                                                                                 $(3,177)                $3,693
                                                                                                                                                =======                 ======


    Net (loss) income attributable to common stockholders per share

                                                                                                                                                $(0.09)                 $0.10

              Basic

                                                                                                                                                $(0.09)                 $0.10

              Diluted


    Weighted average common shares outstanding

                                                                                                                                                 36,413                 35,488

              Basic

                                                                                                                                                 37,305                 36,618

              Diluted


    Contract Value (at end of period)                                                                                                          $548,379               $475,811                   15.3%


    Percentages of Revenue

    Cost of services, excluding depreciation and amortization (1) (2)                                                                             52.3%                 53.5%

    Member relations and marketing (1)                                                                                                            18.7%                 18.0%

    General and administrative (1) (3)                                                                                                            16.0%                 14.6%

    Depreciation and amortization (4)                                                                                                              6.4%                  5.2%

    Operating income                                                                                                                               6.5%                  8.7%

    Net income attributable to common stockholders                                                                                                -2.2%                  3.0%

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


                                                                                              Cost of services               2,089 1,405

                                                                                              Member relations and marketing 1,081   976

                                                                                              General and administrative     2,371 2,278


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


                                                                                              Cost of services               (100)  700


     (3) Amounts include acquisition and transaction related costs, as follows:


                                                                                              General and administrative       268     -


     (4) Amounts include amortization of acquisition-related intagibles, as follows:


                                                                                              Depreciation and amortization  2,401 1,847


     (5) Amounts include gain on investment in common stock warrants, as follows:


                                                                                              Other income, net              (180)    -


     (6)  Amount represents non-cash charge to accrete redeemable non-controlling interest to
           redemption value

                                                            THE ADVISORY BOARD COMPANY

                                                            CONSOLIDATED BALANCE SHEETS

                                                                   (In thousands)


                                                                                         June 30,              March 31,

                                                                                                          2014                 2014
                                                                                                          ----                 ----

                                                                                        (unaudited)

     ASSETS

     Current assets:

     Cash and cash equivalents                                                                         $41,057              $23,129

     Marketable securities, current                                                                      2,427                2,452

     Membership fees receivable, net                                                                   476,985              447,897

     Prepaid expenses and other current assets                                                          29,032               27,212

     Deferred income taxes, current                                                                     10,864                5,511

     Total current assets                                                                              560,365              506,201


     Property and equipment, net                                                                       108,869              102,457

     Intangible assets, net                                                                             34,220               33,755

     Deferred incentive compensation and other charges                                                  81,249               86,147

     Marketable securities, net of current portion                                                      88,883              161,944

     Goodwill                                                                                          152,748              129,424

     Investments in and advances to unconsolidated entities                                             13,707               15,857

     Other non-current assets                                                                            5,370                5,550

     Total assets                                                                                   $1,045,411           $1,041,335
                                                                                                    ==========           ==========


     LIABILITIES AND STOCKHOLDERS' EQUITY

     Current liabilities:

     Deferred revenue, current                                                                        $462,544             $459,827

     Accounts payable and accrued liabilities                                                           75,730               77,815

     Accrued incentive compensation                                                                     11,583               28,471

     Total current liabilities                                                                         549,857              566,113


     Deferred revenue, net of current portion                                                          147,705              127,532

     Deferred income taxes, net of current portion                                                       9,956                1,556

     Other long-term liabilities                                                                         9,514                8,975

     Total liabilities                                                                                 717,032              704,176
                                                                                                       -------              -------


     Redeemable noncontrolling interest                                                                  7,113                  100

     The Advisory Board Company's stockholders' equity:

     Common stock                                                                                          363                  363

     Additional paid-in capital                                                                        427,249              429,932

     Accumulated deficit                                                                             (105,615)            (91,468)

     Accumulated other comprehensive (loss) income                                                       (731)             (1,541)
                                                                                                          ----               ------

     Total stockholders' equity controlling interest                                                   321,266              337,286

     Equity attributable to noncontrolling interest                                                          -               (227)

     Total stockholders' equity                                                                        321,266              337,059
                                                                                                       -------              -------


     Total liabilities and stockholders' equity                                                     $1,045,411           $1,041,335
                                                                                                    ==========           ==========

                                                                                     THE ADVISORY BOARD COMPANY

                                                                           UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                           (In thousands)


                                                                                                                            Three Months Ended June 30,
                                                                                                                           ---------------------------

                                                                                                                                                     2014      2013
                                                                                                                                                     ----      ----

     Cash flows from operating activities:

     Net income before allocation to noncontrolling interest                                                                                       $3,863    $3,693

     Adjustments to reconcile net income before allocation to

     noncontrolling interest to net cash provided by operating activities:

     Depreciation and amortization                                                                                                                  9,078     6,354

     Deferred income taxes                                                                                                                          1,427     (907)

     Excess tax benefits from stock-based awards                                                                                                  (5,007)  (8,314)

     Stock-based compensation expense                                                                                                               5,541     4,659

     Amortization of marketable securities premiums                                                                                                   589       692

     Loss on investment in common stock warrants                                                                                                      180         -

     Equity in loss of unconsolidated entities                                                                                                      2,150     3,233

     Changes in operating assets and liabilities:

     Membership fees receivable                                                                                                                  (27,573) (16,896)

     Prepaid expenses and other current assets                                                                                                      3,187     3,894

     Deferred incentive compensation and other charges                                                                                              4,898   (3,957)

     Deferred revenue                                                                                                                              22,318    19,936

     Accounts payable and accrued liabilities                                                                                                         713   (4,766)

     Acquisition-related earn-out payments                                                                                                        (2,798)  (1,412)

     Accrued incentive compensation                                                                                                              (16,888) (11,412)

     Other long-term liabilities                                                                                                                      539     1,599
                                                                                                                                                      ---     -----

     Net cash flows provided by (used in) operating activities                                                                                      2,217   (3,604)
                                                                                                                                                    -----    ------


     Cash flows from investing activities:

     Purchases of property and equipment                                                                                                         (11,965) (10,718)

     Capitalized external use software development costs                                                                                          (1,340)    (955)

     Investments in and loans to unconsolidated entities                                                                                                -  (5,664)

     Cash paid for acquisitions, net of cash acquired                                                                                            (25,830)        -

     Redemptions of marketable securities                                                                                                          73,844     7,800

     Purchases of marketable securities                                                                                                                 - (19,824)

     Net cash flows provided by (used in) investing activities                                                                                     34,709  (29,361)
                                                                                                                                                   ------   -------


     Cash flows from financing activities:

     Proceeds from issuance of stock from exercise of stock options                                                                                 1,265     7,692

     Withholding of shares to satisfy minimum employee tax withholding                                                                            (7,611)  (5,786)

     Credit facility issuance costs                                                                                                                     -        -

     Proceeds from issuance of stock under employee stock purchase plan                                                                               155       126

     Excess tax benefits from stock-based awards                                                                                                    5,007     8,314

     Contributions from noncontrolling interest                                                                                                       200         -

     Acquisition-related earn-out payments                                                                                                              -        -

     Purchases of treasury stock                                                                                                                 (18,014)  (6,159)

     Net cash flows (used in) provided by financing activities                                                                                   (18,998)    4,187
                                                                                                                                                  -------     -----


     Net increase in cash and cash equivalents                                                                                                     17,928  (28,778)

     Cash and cash equivalents, beginning of period                                                                                                23,129    57,829

     Cash and cash equivalents, end of period                                                                                                     $41,057   $29,051
                                                                                                                                                  =======   =======

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SOURCE The Advisory Board Company