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The Advisory Board Company Reports Fiscal Year 2009 Second Quarter Results
Date:11/5/2008

Company Reports Quarterly Revenue of $57.6 million, Earnings per Diluted Share of $0.32 and Contract Value of $230.6 million; Announces New Program

Launch

WASHINGTON, Nov. 5 /PRNewswire-FirstCall/ -- The Advisory Board Company (Nasdaq: ABCO) today announced financial results for the second quarter of its fiscal year ending March 31, 2009. Revenue for the quarter increased 7% to $57.6 million, from $54.0 million in the second quarter of fiscal 2008. Net income was $5.4 million, or $0.32 per diluted share, compared to $8.5 million, or $0.45 per diluted share, for the same period a year ago. Contract value grew 6% to $230.6 million as of September 30, 2008, up from $217.5 million as of September 30, 2007.

For the six months ended September 30, 2008, revenue increased 9% to $114.8 million, from $105.1 million for the six months ended September 30, 2007. Net income for the six months ended September 30, 2008 was $11.7 million, or $0.68 per diluted share, compared to $15.6 million, or $0.83 per diluted share, for the same period a year ago.

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, "Our overall performance for the quarter was in line with our expectations given the current macroeconomic environment. While we are seeing strong performance in program utilization, research quality metrics and renewal rates, the new business environment continues to be challenging due to member uncertainty about the budget outlook for 2009. As a result, the team is working hard to emphasize the strong financial impact of our best practice research and to ensure superior sales execution and new program introductions to set up future growth."

Mr. Musslewhite added, "I am also pleased to announce our latest launch, the Patient Registration Performance Program. This program provides a comprehensive toolkit to assist health systems in improving their front-end revenue cycle performance through the proactive management of the patient registration process. Through best practice research, performance benchmarking data, and a robust, web-based analytical tool, the program assists members in creating an infrastructure to hardwire accountability for this critical point of the revenue cycle process. The membership allows the participating institutions to achieve measurable financial gains through enhanced cash acceleration and staff efficiency, as well as reduced avoidable denials, which vastly improve overall collections performance. We have already established a strong charter membership for the program, including Tri-City Medical Center, Cheyenne Regional Medical Center, Munroe Regional Medical Center, and West Jefferson Medical Center. The program is off to a good start, and we are very excited about its potential."

Share Repurchase

During the three months ended September 30, 2008, the Company repurchased 1,086,517 shares of its common stock at a total cost of approximately $34.5 million. To date, the Company has repurchased 6,400,445 shares of its common stock at a total cost of approximately $285.9 million.

Outlook for the Remainder of Calendar Year 2008

For the quarter ending December 31, 2008, the Company expects revenue in a range of approximately $59.2 million to $60.0 million, and earnings per diluted share in a range of approximately $0.36 to $0.39. Included in the earnings per diluted share estimates is approximately $0.14 to $0.15 of share-based compensation and related expense for the three months ending December 31, 2008.

Web and Conference Call Information

The Company will hold an investor conference call to discuss its second quarter performance this evening, November 5, 2008, at 6:00 p.m. Eastern Standard Time. The conference call will be available via live web cast on the Company's web site at http://www.advisoryboardcompany.com in the section titled "Investor Relations" found under the tab "The Firm." To participate by telephone, the dial-in number is 800.259.0251 and the access code is 76841343. Investors 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. Wednesday, November 5, until 8:00 p.m. Wednesday, November 12, 2008.

About The Advisory Board Company

The Advisory Board Company provides best practices research, analysis, executive education and leadership development, decision support tools and installation support services primarily to the health care industry, focusing on business strategy, operations and general management issues. The Company provides best practices and research through discrete programs to a membership of more than 2,700 organizations, including leading hospitals, health systems, pharmaceutical and biotech companies, health care insurers, medical device companies, universities and other education institutions. Members of each program are typically charged a fixed annual fee and have access to an integrated set of services that may include best practice research studies, executive education seminars, customized research briefs, decision support tools, and web-based access to the program's content database.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on information available to the Company as of November 5, 2008, the date of this news release, as well as the Company's current projections, forecasts and assumptions, and involve risks and uncertainties. You are hereby cautioned that these statements may be affected by certain factors, including those set forth below. Consequently, actual operations and results may differ materially from the results discussed 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 by forward-looking statements include, among others, the dependence on renewal of membership-based services, dependence on key personnel, the need to attract and retain qualified personnel, management of growth, new product development, competition, risks associated with anticipating market trends, industry consolidation, variability of quarterly operating results, possible volatility in the Company's stock price, the impact on our financials associated with some of our newer programs that are more dependent upon technology, share-based compensation expense under SFAS No. 123R including the effect of the amount, type and timing of future stock-based compensation grants, and various factors related to income and other taxes, including whether the District of Columbia withdraws the Company's status as a Qualified High-Tech Company, as well as those risks and uncertainties described in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and also disclosed from time to time in its subsequent reports on Form 10-Q and Form 8-K, which are available on the Company's website at http://www.advisoryboardcompany.com in the "Investor Relations" section and at the SEC's website at http://www.sec.gov. Additional information will also be set forth in the Company's report on Form 10-Q for the fiscal quarter ended September 30, 2008, which will be filed with the SEC in November 2008.

Accordingly, readers are cautioned not to place undue reliance on forward-looking statements made in this news release, which speak only as of the date of this news release, and the Company does not undertake to update these statements, whether as a result of circumstances or events that arise after the date they are made, new information, or otherwise.

THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND OTHER OPERATING STATISTICS

(In thousands, except per share data)

Three Months Ended Selected Six Months Ended Selected

September 30, Growth September 30, Growth

2008 2007 Rates 2008 2007 Rates

Statements of Income

Revenue $57,625 $54,029 6.7% $114,842 $105,133 9.2%

Cost of services (1) 28,993 24,380 57,547 48,668

Member relations

and marketing (1) 13,058 11,173 25,456 21,785

General and

administrative (1) 7,214 6,350 14,109 12,703

Depreciation and

amortization 1,327 883 2,410 1,650

Income from

operations 7,033 11,243 -37.4% 15,320 20,327 -24.6%

Interest income

and other 948 1,554 2,152 3,091

Income before

provision for

income taxes 7,981 12,797 17,472 23,418

Provision for

income taxes (2,578) (4,261) (5,739) (7,801)

Net income $5,403 $8,536 -36.7% $11,733 $15,617 -24.9%

Earnings per share

Basic $0.32 $0.47 $0.68 $0.86

Diluted $0.32 $0.45 -28.9% $0.68 $0.83 -18.1%

Weighted average

common shares

outstanding

Basic 16,922 18,090 17,143 18,100

Diluted 16,989 18,808 17,352 18,802

Contract Value

(at end of period) $230,636 $217,530 6.0%

Percentages of

Revenue

Cost of services (1) 50.3% 45.1% 50.1% 46.3%

Member relations

and marketing (1) 22.7% 20.7% 22.2% 20.7%

General and

administrative (1) 12.5% 11.8% 12.3% 12.1%

Depreciation and

amortization 2.3% 1.6% 2.1% 1.6%

Income from

operations 12.2% 20.8% 13.3% 19.3%

Net income 9.4% 15.8% 10.2% 14.9%

(1) Effective April 1, 2006, the Company adopted Statement of Financial

Accounting Standards No. 123R, "Share-Based Payment" (SFAS No. 123R),

which provides the accounting rules for share-based compensation.

During the three and six months ended September 30, 2008, the Company

recognized approximately $1.2 million and $2.2 million in cost of

services, approximately $0.6 million and $1.2 million in member

relations and marketing, and approximately $1.7 million and

$3.0 million in general and administrative expense for share-based

compensation related to the adoption of SFAS No. 123R and in employer

taxes associated with the exercise of employee stock options and the

vesting of restricted stock units. During the three and six months

ended September 30, 2007, the Company recognized approximately

$1.2 million and $2.4 million in cost of services, approximately

$0.7 million and $1.5 million in member relations and marketing, and

approximately $1.6 million and $3.2 million in general and

administrative expense for share-based compensation related to the

adoption of SFAS No. 123R and in employer taxes associated with the

exercise of employee stock options and the vesting of restricted stock

units. The Company has recorded all these expenses in the same line

items as other compensation paid to the relevant categories of

employees.

THE ADVISORY BOARD COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30, March 31,

2008 2008

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 14,011 $ 17,907

Marketable securities 7,123 8,085

Membership fees receivable, net 99,250 81,538

Prepaid expenses and other current assets 2,705 3,860

Deferred income taxes, net 8,056 12,730

Total current assets 131,145 124,120

Property and equipment, net 32,984 22,897

Intangible assets, net 4,500 1,248

Goodwill 25,721 5,426

Deferred incentive compensation and

other charges 21,626 22,208

Deferred income taxes, net of current portion 6,183 5,142

Marketable securities 66,852 124,073

Total assets $289,011 $305,114

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Deferred revenue $134,968 $134,465

Accounts payable and accrued liabilities 30,431 26,994

Accrued incentive compensation 6,177 10,032

Total current liabilities 171,576 171,491

Long-term deferred revenue 15,236 9,682

Other long-term liabilities 1,312 1,412

Total liabilities 188,124 182,585

Stockholders' equity:

Common stock 217 215

Additional paid-in capital 228,758 217,170

Retained earnings 124,757 113,024

Accumulated elements of comprehensive

income (118) 1,540

Treasury stock (252,727) (209,420)

Total stockholders' equity 100,887 122,529

Total liabilities and stockholders'

equity $289,011 $305,114

THE ADVISORY BOARD COMPANY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended

September 30,

2008 2007

Cash flows from operating activities:

Net income $11,733 $15,617

Adjustments to reconcile net income to

net cash provided by operating

activities:

Depreciation and amortization 2,410 1,650

Amortization of intangible assets 402 122

Deferred income taxes 797 7,316

Excess tax benefits from stock-based awards (291) (3,140)

Stock-based compensation expense 6,333 6,864

Amortization of marketable securities

premiums 410 388

Changes in operating assets and

liabilities:

Member fees receivable (9,298) (10,919)

Prepaid expenses and other

current assets 1,172 431

Deferred incentive compensation and

other charges 582 (3,650)

Deferred revenue 2,136 2,016

Accounts payable and accrued liabilities (128) 1,004

Accrued incentive compensation (3,855) (3,315)

Other long-term liabilities (100) 258

Net cash flows provided by

operating activities 12,303 14,642

Cash flows from investing activities:

Purchases of property and equipment (9,608) (4,132)

Capitalized external use software

development costs (455) (171)

Cash paid for acquisition, net of

cash acquired (18,592) -

Redemption of marketable securities 62,810 19,875

Purchases of marketable securities (7,579) (9,173)

Net cash flows provided by

investing activities 26,576 6,399

Cash flows from financing activities:

Proceeds from issuance of common stock

from exercise of stock options 421 9,634

Withholding of shares to satisfy minimum

employee tax withholding (390) (266)

Proceeds from issuance of common stock under

employee stock purchase plan 210 226

Excess tax benefits from stock-based awards 291 3,140

Purchases of treasury stock (43,307) (29,798)

Net cash flows used in financing activities (42,775) (17,064)

Net (decrease) increase in cash and cash

equivalents (3,896) 3,977

Cash and cash equivalents, beginning of period 17,907 13,195

Cash and cash equivalents, end of period $14,011 $17,172


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SOURCE The Advisory Board Company
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