The Advisory Board Company Reports Results For Quarter Ended June 30, 2014 - KFVS12 News & Weather Cape Girardeau, Carbondale, Poplar Bluff

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

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SOURCE The Advisory Board Company

Company Reports Quarterly Revenue of $142 Million, Contract Value Growth of 15%, and Announces New Program

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.

The Advisory Board Company.

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






          Basic

$ (0.09)


$ 0.10



          Diluted

$ (0.09)


$ 0.10











Weighted average common shares outstanding






          Basic

36,413


35,488



          Diluted

37,305


36,618











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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