The Advisory Board Company Reports Results For Quarter And Fiscal Year Ended March 31, 2014 - NEWS10 ABC: Albany, New York News, Weather, Sports

The Advisory Board Company Reports Results For Quarter And Fiscal Year Ended March 31, 2014

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SOURCE The Advisory Board Company

Company Reports Quarterly Revenue of $138 Million, Contract Value Growth of 16%, and Member Renewal Rate of 90%; Announces Launch of New Program

WASHINGTON, May 8, 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 March 31, 2014, highlighted by 16% growth in Contact Value, 15% growth in quarterly revenue, and a 90% member renewal rate.

Robert Musslewhite, Chairman and Chief Executive Officer of The Advisory Board Company, commented, "We are pleased with our performance for both the quarter and the fiscal year, as the business momentum we saw at the end of calendar 2013 continued through the March quarter.  All of the key metrics that gauge the health of the business-revenue growth, contract value growth, membership base expansion, renewal rate, margins, and future growth investment-illustrate our strong, scalable business model and a virtuous cycle where members, deriving measurable impact from their work with us, not only renew their memberships but also extend their work with us in deeper and more comprehensive ways.  These deeper relationships allow us to understand their needs even better and deliver even more impact, spurring greater loyalty and cross-sales which drive ongoing company growth as well as the expansion of our footprint and impact.  Our overall growth strategy is predicated on this cycle, and we are thrilled to see it continue this year."                                                                                                                               

Revenue for the quarter increased 15% to $138.0 million, from $119.7 million for the quarter ended March 31, 2013.  Contract value increased 16% to $541.9 million as of March 31, 2014, up from $466.3 million as of March 31, 2013.  For the quarter ended March 31, 2014, net income attributable to common stockholders was $8.3 million, or $0.22 per diluted share, compared to net income attributable to common stockholders of $6.5 million, or $0.18 per diluted share, for the quarter ended March 31, 2013.  For the quarter ended March 31, 2014, adjusted EBITDA was $26.0 million, up from $23.1 million for the quarter ended March 31, 2013.  Adjusted net income for the quarter ended March 31, 2014 was $12.6 million, or $0.34 per diluted share, compared to $12.3 million, or $0.34 per diluted share, for the quarter ended March 31, 2013.  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, 2014, revenue increased 16% to $520.6. million, from $450.8 million for the fiscal year ended March 31, 2013. Net income attributable to common stockholders was $24.8 million, or $0.67 per diluted share, for the fiscal year ended March 31, 2014, compared to net income attributable to common stockholders of $23.4 million, or $0.64 per diluted share, for the prior fiscal year.  For the fiscal year ended March 31, 2014, adjusted EBITDA was $92.2 million, up from $84.4 million for the fiscal year ended March 31, 2013.  Adjusted net income for the fiscal year ended March 31, 2014 was $44.9 million, or $1.22 per diluted share, compared to $45.4 million, or $1.25 per diluted share, for the fiscal year ended March 31, 2013. 

Mr. Musslewhite continued, "I am also excited to announce the launch of the Population Health Advisor Program, a renewable subscription-based research program for the executives and teams charged with executing the care transformation agenda.  It provides best practice research, peer networking, and customized assessments to help our members develop the competencies needed to manage patients profitably under value- and risk-based systems.  The program's resources and experts support members in prioritizing, executing, and monitoring progress of critical population health initiatives, including optimizing primary care and establishing the medical home model, segmenting patients for more effective care management, and developing post-acute care network strategy.  The initiative is a strong complement to our broader industry-leading, cloud-based performance analytics platform and set of capabilities to help providers with all aspects of population health.  It is seeing strong traction in the market, and we are confident in the value that it will provide to members."

Outlook for Calendar Year 2014 

The Company is reaffirming its revenue guidance range of approximately $570 million to $580 million for calendar year 2014.  The Company is revising its guidance for 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, based on projected dilution and integration expenses from an acquisition that closed on May 5th.  For calendar year 2014, the Company expects stock-based compensation expense to be approximately $22 million, and expects amortization from acquisition-related intangible assets to be approximately $11 million.  For calendar year 2014, the Company continues to expect 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 and twelve months ended March 31, 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 and twelve months ended March 31, 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 and twelve months ended March 31, 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


Twelve Months Ended


March 31,


March 31,


2014


2013


2014


2013









Net income attributable to common stockholders

$    8,287


$    6,542


$    24,752


$   23,408

Equity in loss of unconsolidated entities

2,731


2,170


6,051


6,756

Provision for income taxes

6,897


4,774


19,208


18,023

Other income, net

(732)


(602)


(2,706)


(2,604)

Depreciation and amortization

8,468


6,279


30,420


20,308

Acquisition and similar transaction charges

-


-


573


851

Fair value adjustments to acquisition-related  
     earn-out liabilities

(4,100)


400


(4,350)


3,759

Stock-based compensation expense

4,423


3,530


18,217


13,913

     Adjusted EBITDA

$    25,974


$    23,093


$    92,165


$    84,414

 


Three Months Ended


Twelve Months Ended


March 31,


March 31,


2014


2013


2014


2013









Net income attributable to common stockholders

$    8,287


$    6,542


$    24,752


$   23,408

Equity in loss of unconsolidated entities

2,731


2,170


6,051


6,756

Amortization of acquisition-related intangibles,
     net of tax

1,431


1,193


5,221


3,804

Acquisition and similar transaction charges, net 
     of tax

-


-


352


525

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

(2,522)


258


(2,675)


2,331

Loss on investment in common stock warrants,
     net of tax

-


(136)


-


(68)

Stock-based compensation expense, net of tax

2,720


2,280


11,204


8,686

Adjusted net income

$    12,647


$    12,307


$   44,905


$    45,442


















Three Months Ended


Twelve Months Ended


March 31,


March 31,


2014


2013


2014


2013









GAAP earnings per diluted share

$    0.22


$   0.18


$    0.67


$    0.64

Equity in loss of unconsolidated entities

0.07


0.06


0.16


0.19

Amortization of acquisition-related intangibles,
     net of tax

0.04


0.03


0.14


0.11

Acquisition and similar transaction charges, net
     of tax

-


-


0.01


0.01

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

(0.07)


0.01


(0.07)


0.06

Loss on investment in common stock warrants,
     net of tax

-


-


-


-

Stock-based compensation expense, net of tax

0.08


0.06


0.31


0.24

Non-GAAP earnings per diluted share

$    0.34


$    0.34


$    1.22


$    1.25

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 8, 2014, at 5:00 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 888.317.6016.  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, May 8, until 11:00 p.m. Eastern Time on Thursday, May 15, 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 May 8, 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, 2013, 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-K for the fiscal year ended March 31, 2014, which will be filed with the Securities and Exchange Commission in May 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


Fiscal Year Ended


Selected





March 31,


Growth


March 31,


Growth





2014


2013


Rates


2014


2013


Rates


Statements of Income


























Revenue


$ 138,001


$ 119,706


15.3%


$ 520,596


$ 450,837


15.5%

















Cost of services, excluding depreciation and amortization

(1) (2) (6) (7)

67,195


61,204




272,523


237,605




Member relations and marketing (1)

26,412


22,832




96,298


85,264




General and administrative (1) (3)

18,743


16,507




74,169


62,185




Depreciation and amortization (4) (6)

8,468


6,279




30,420


20,308




Operating income (5)

17,183


12,884




47,186


45,475




Other income, net

732


602




2,706


2,604




Income before provision for income taxes













and equity in loss of unconsolidated entities

17,915


13,486




49,892


48,079




Provision for income taxes

(6,897)


(4,774)




(19,208)


(18,023)




Equity in loss of unconsolidated entities

(2,731)


(2,170)




(6,051)


(6,756)




Net income before allocation to noncontrolling interest

8,287


6,542




24,633


23,300




Net loss attributable to noncontrolling interest

-


-




119


108




Net income attributable to common stockholders (6) (7)

$ 8,287


$ 6,542




$ 24,752


$ 23,408



















Net income attributable to common stockholders per share














Basic

$ 0.23


$ 0.19




$ 0.69


$ 0.67





Diluted

$ 0.22


$ 0.18




$ 0.67


$ 0.64



















Weighted average common shares outstanding














Basic

36,205


35,106




35,909


34,723





Diluted

37,210


36,534




36,959


36,306



















Contract Value (at end of period)

$ 541,903


$ 466,329


16.2%























Percentages of Revenue













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

48.7%


51.1%




52.3%


52.7%




Member relations and marketing (1)

19.1%


19.1%




18.5%


18.9%




General and administrative (1) (3)

13.6%


13.8%




14.2%


13.8%




Depreciation and amortization (4)

6.1%


5.2%




5.8%


4.5%




Operating income

12.5%


10.8%




9.1%


10.1%




Net income attributable to common stockholders

6.0%


5.5%




4.8%


5.2%

















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























         Cost of services

1,382


973




5,527


3,975




         Member relations and marketing

843


650




3,688


2,643




         General and administrative

2,198


1,907




9,002


7,295













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






















         Cost of services

(4,100)


400




(4,350)


3,759














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























         General and administrative

-


-




573


851














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























         Depreciation and amortization

2,327


1,847




8,490


6,078














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























         Other income, net

-


210




-


100














(6) Prior period amounts have been revised to correct an immaterial error in the calculation of capitalized developed software, as follows:























         Cost of services

-


(355)




-


(1,432)




         Depreciation and amortization

-


133




-


423




         Net income attributable to common stockholders

-


143




-


626










(7) Prior periods amounts have been revised to correct an immaterial error in the timing of an acquisition-related earn-out fair value adjustment, as follows:



















         Cost of services













         Net income attributable to common stockholders

-


-




-


(1,000)





-


-




-


619




THE ADVISORY BOARD COMPANY

 CONSOLIDATED BALANCE SHEETS

 (In thousands)








March 31,


March 31,



2014


2013



 (unaudited)



 ASSETS





 Current assets:





 Cash and cash equivalents


$               23,129


$               57,829

 Marketable securities, current


2,452


16,611

 Membership fees receivable, net


447,897


370,321

 Prepaid expenses and other current assets


27,212


15,477

 Deferred income taxes, current


5,511


7,664

 Total current assets


506,201


467,902






 Property and equipment, net


102,457


73,572

 Intangible assets, net


33,755


32,381

 Deferred incentive compensation and other charges


86,147


73,502

 Deferred income taxes, net of current portion


-


2,993

 Marketable securities, net of current portion


161,944


140,228

 Goodwill


129,424


95,540

 Investments in and advances to unconsolidated entities


15,857


6,265

 Other non-current assets


5,550


5,550

 Total assets


$          1,041,335


$             897,933






 LIABILITIES AND STOCKHOLDERS' EQUITY





 Current liabilities:





 Deferred revenue, current


$             459,827


$             398,541

 Accounts payable and accrued liabilities


77,815


75,089

 Accrued incentive compensation


28,471


21,033

 Total current liabilities


566,113


494,663






 Deferred revenue, net of current portion


127,532


104,484

 Deferred income taxes, net of current portion


1,556


-

 Other long-term liabilities


8,975


15,866

 Total liabilities


704,176


615,013






 Redeemable noncontrolling interest


100


100

 The Advisory Board Company's stockholders' equity:





 Common stock


363


351

 Additional paid-in capital


429,932


375,622

 Accumulated deficit


(91,468)


(94,306)

 Accumulated other comprehensive (loss) income


(1,541)


1,261

 Total stockholders' equity controlling interest


337,286


282,928

 Equity attributable to noncontrolling interest


(227)


(108)

 Total stockholders' equity


337,059


282,820






 Total liabilities and stockholders' equity


$          1,041,335


$             897,933











 

 

 

THE ADVISORY BOARD COMPANY

 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands)








 Twelve Months Ended March 31,



2014


2013

 Cash flows from operating activities:





 Net income before allocation to noncontrolling interest


$        24,633


$        23,300

 Adjustments to reconcile net income before allocation to 





 noncontrolling interest to net cash provided by operating activities:



 Depreciation and amortization


30,420


20,308

 Deferred income taxes


7,795


641

 Excess tax benefits from stock-based awards


(19,476)


(20,535)

 Stock-based compensation expense


18,217


13,913

 Amortization of marketable securities premiums


2,667


2,031

 Gain on investment in common stock warrants


-


(100)

 Equity in loss of unconsolidated entities


6,051


6,756

 Changes in operating assets and liabilities:





 Membership fees receivable


(63,077)


(87,672)

 Prepaid expenses and other current assets


7,741


(7,469)

 Deferred incentive compensation and other charges


(12,645)


(20,133)

 Deferred revenue


72,137


110,099

 Accounts payable and accrued liabilities


4,277


50,290

 Acquisition-related earn-out payments


(2,212)


(3,011)

 Accrued incentive compensation


7,065


2,342

 Other long-term liabilities


(6,891)


(7,499)

 Net cash flows provided by operating activities


76,702


83,261






 Cash flows from investing activities:





 Purchases of property and equipment


(44,058)


(36,979)

 Capitalized external use software development costs


(5,071)


(3,393)

 Investments in and loans to unconsolidated entities


(15,641)


(4,358)

 Cash paid for acquisitions, net of cash acquired


(46,036)


(31,887)

 Proceeds from sale of discontinued operations, net of selling costs


-


1,050

 Redemptions of marketable securities


56,647


35,376

 Purchases of marketable securities


(71,419)


(66,710)

 Net cash flows used in investing activities


(125,578)


(106,901)






 Cash flows from financing activities:





 Proceeds from issuance of stock from exercise of stock options


22,023


24,137

 Withholding of shares to satisfy minimum employee tax withholding

(5,920)


(4,140)

 Credit facility issuance costs


-


(769)

 Proceeds from issuance of stock under employee stock purchase plan

514


363

 Excess tax benefits from stock-based awards


19,476


20,535

 Contributions from noncontrolling interest


-


100

 Acquisition-related earn-out payments


-


(1,400)

 Purchases of treasury stock


(21,917)


(17,999)

 Net cash flows provided by financing activities


14,176


20,827






 Net increase in cash and cash equivalents


(34,700)


(2,813)

 Cash and cash equivalents, beginning of period


57,829


60,642

 Cash and cash equivalents, end of period


$        23,129


$        57,829











 

 

 

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