WASHINGTON, July 26 /PRNewswire-FirstCall/ -- The Advisory Board Company today announced financial results for the first quarter of its fiscal year ending March 31, 2005. For the quarter, revenues increased 16% to $33.0 million, from $28.4 million for the first quarter of fiscal 2004. Net income was $5.6 million, or $0.29 per diluted share, compared to $4.4 million, or $0.24 per diluted share, for the same period a year ago. Pro forma net income for the quarter, which excludes special compensation and stock option related expenses, was also $5.6 million or $0.29 per diluted share, compared to $4.6 million, or $0.25 per diluted share for the same period a year ago. Contract value grew 16% to $130.7 million as of June 30, 2004, up from $113.1 million as of June 30, 2003.
Frank Williams, Chief Executive Officer of The Advisory Board Company, commented, “We are pleased with our financial results for the first quarter as we achieved 16% revenue growth and earnings per diluted share of $0.29, exceeding our targets in a challenging environment. Our network of over 2,300 members and our ability to align our research around our members’ most pressing concerns is the basis for our continued success. The Advisory Board remains the most cost effective alternative for senior healthcare executives seeking proven best practices to address their most important strategic and operational issues.”
Mr. Williams continued, “I am also pleased to announce the launch of our latest research membership initiative, the Human Resources Strategy Program. This new research program offers health care human resources executives the tools to link human resource investments to business strategy in order to enhance organizational performance. Through best practice research, sophisticated survey methodology, and topic-based collaboratives, the program offers an array of tools to facilitate more effective decision-making issues. We have already established a strong charter membership for the program, including the Johns Hopkins Health System, Emory Healthcare, Scripps Healthcare, Seton Healthcare Network in Texas and the University of Wisconsin Hospitals and Clinics. The program is off to a strong start and we are excited about its potential.”
Share Repurchase
During the three months ended June 30, 2004, the Company repurchased 291,166 shares of its common stock at a total cost of approximately $10.0 million.
Outlook for Remainder of Calendar Year 2004
The Company reiterated its previously announced guidance for the next calendar quarter of $34.5 million of revenue and pro forma earnings per diluted share of $0.30. Combined with results from the first half of calendar year 2004, the Company’s full calendar year revenue and pro forma earnings per diluted share guidance is $135.6 million and $1.20 respectively.
Board Developments
In other news, the Company announced today that its Board of Directors will be naming Mr. Williams to serve as Chairman of the Board, succeeding Jeffrey D. Zients, effective at the Company’s next annual meeting scheduled for November 15, 2004. Mr. Zients asked that he not be considered for re- nomination to the Board as he will be devoting more time to other responsibilities. Mr. Williams commented, “Jeff Zients has provided strong leadership and guidance to The Advisory Board throughout his tenure with the firm and I want to thank him for his tremendous contributions.” Mr. Williams will remain as the Company’s Chief Executive Officer. Kelt Kindick, one of the Company’s independent directors and Chair of the Board’s Governance Committee, will assume the newly created position of Lead Director in November.
The Company also announced that Michael A. D’Amato also asked that he not be considered for re-nomination to the Board and will be leaving the Board when his term expires. Mr. Williams added, “Mike has provided significant value to the firm over the last several years and we wish him the best in the future.”
The Company will hold an investor conference call to discuss its first quarter performance this evening, July 26, 2004, at 6:00 p.m. Eastern Daylight 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 entitled “Other Information” found under the tab “About Us.” To participate by telephone, the dial-in number is 800-599-9829 and the access code is 36816103. Investors are advised to log in or dial in at least five minutes prior to the web cast to register. The web cast will be archived on the Company’s web site for seven days, from 8:00 p.m. Monday, July 26th until 8:00 p.m. Monday, August 2nd.
About The Advisory Board Company
The Advisory Board Company provides best practices research and analysis to the health care industry, focusing on business strategy, operations and general management issues. The Company provides best practices and research through discrete annual programs to a membership of over 2,300 hospitals, health systems, pharmaceutical and biotech companies, health care insurers, and medical device companies in the United States. Each program typically charges a fixed annual fee and provides members with best practices, research reports, executive education and other supporting research services.
The Company presents pro forma results to provide comparisons with prior periods in a manner it believes would be consistent if it had been a public company prior to fiscal 2002. Pro forma results exclude special compensation and stock option related expense. A reconciliation between pro forma and GAAP results is shown in the attached schedule. The Company is not able to reconcile its outlook for the remainder of calendar year 2004 to GAAP as stock option related expense is dependent upon a number of unknown factors, including future stock price.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are hereby cautioned that these statements may be affected by certain factors, among others, set forth below and in the Company’s filings with the Securities and Exchange Commission, and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. 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 and various factors that could affect the estimated tax rate. These factors are discussed more fully in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
THE ADVISORY BOARD COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER OPERATING STATISTICS (In thousands, except per share data) Three Months Ending Selected June 30, Growth 2004 2003 Rates Statements of Operations Revenues $ 33,025 $ 28,449 16.1% Cost of services 13,674 11,617 Member relations and marketing 6,516 5,552 General and administrative 3,927 3,692 Depreciation and loss on disposal of assets 392 404 Special compensation and stock option related expense - 321 Income from operations 8,516 6,863 Interest income 893 581 Income before provision for income taxes 9,409 7,444 Provision for income taxes (3,811) (3,014) Net income $ 5,598 $ 4,430 Earnings per share Basic $ 0.31 $ 0.29 Diluted $ 0.29 $ 0.24 20.8% Weighted average common shares outstanding Basic 17,802 15,116 Diluted 19,425 18,325 Percentages of Revenues Cost of services 41.4% 40.8% Member relations and marketing 19.7% 19.5% General and administrative 11.9% 13.0% Depreciation and loss on disposal of assets 1.2% 1.4% Income from operations 25.8% 24.1% Net income 17.0% 15.6% Contract Value (at end of period) $ 130,710 $ 113,075 15.6% RECONCILIATION OF PRO FORMA RESULTS (In thousands, except per share data) Pro forma data (1): Income from operations $ 8,516 $ 6,863 Special compensation and stock option related expense - 321 Pro forma income from operations 8,516 7,184 Interest income 893 581 Pro forma income before provision for income taxes 9,409 7,765 Pro forma provision for income taxes (3,811) (3,145) Pro forma net income $ 5,598 $ 4,620 Pro forma earnings per share Basic $ 0.31 $ 0.31 Diluted $ 0.29 $ 0.25 16.0% Percentages of Revenues Pro forma income from operations(1) 25.8% 25.3% Pro forma net income(1) 17.0% 16.2% (1) Excludes special compensation and stock option related expense. THE ADVISORY BOARD COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) June 30, March 31, 2004 2004 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 23,095 $ 41,389 Marketable securities - 3,737 Membership fees receivable, net 20,513 14,338 Prepaid expenses and other current assets 3,341 3,121 Deferred income taxes 17,312 17,123 Deferred incentive compensation 2,602 2,375 Total current assets 66,863 82,083 Fixed assets, net 9,797 6,701 Deferred income taxes, net of current portion 17,955 20,532 Marketable securities 101,670 94,683 Total assets $ 196,285 $ 203,999 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Deferred revenues $ 71,555 $ 72,410 Accounts payable and accrued liabilities 8,292 8,262 Accrued incentive compensation 5,677 7,704 Total current liabilities 85,524 88,376 Long-term liabilities: Other liabilities 1,390 - Total liabilities 86,914 88,376 Stockholders’ equity: Common stock 183 183 Additional paid-in capital 88,986 88,885 Retained earnings 43,292 37,694 Accumulated elements of comprehensive income (952) 1,031 Treasury stock (22,138) (12,170) Total stockholders’ equity 109,371 115,623 Total liabilities and stockholders’ equity $ 196,285 $ 203,999 THE ADVISORY BOARD COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended June 30, 2004 2003 Cash flows from operating activities: Net income $ 5,598 $ 4,430 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation 392 404 Deferred income taxes 3,736 3,003 Amortization of marketable securities premiums 209 185 Changes in operating assets and liabilities: Member fees receivable (6,175) (3,136) Prepaid expenses and other current assets (220) 324 Deferred incentive compensation (227) (27) Deferred revenues (855) (143) Accounts payable and accrued liabilities 30 522 Accrued incentive compensation (2,027) (2,110) Other liabilities 1,390 - Net cash flows provided by operating activities 1,851 3,452 Cash flows from investing activities: Purchases of property and equipment (3,488) (137) Redemption of marketable securities 5,713 6,000 Purchase of marketable securities (12,500) (11,059) Net cash flows used in investing activities (10,275) (5,196) Cash flows from financing activities: Proceeds on issuance of stock from exercise of stock options 17 3,515 Purchases of treasury stock (9,968) - Proceeds on issuance of stock under ESPP 81 79 Net cash flows (used in) provided by financing activities (9,870) 3,594 Net (decrease) increase in cash and cash equivalents (18,294) 1,850 Cash and cash equivalents, beginning of period 41,389 33,301 Cash and cash equivalents, end of period $ 23,095 $ 35,151
The Advisory Board Company
CONTACT: David Felsenthal, Chief Financial Officer of The Advisory BoardCompany, +1-202-266-5876 or jacobsg@advisory.com
Web site: http://www.advisory.com/
