WASHINGTON, Oct. 28 /PRNewswire-FirstCall/ -- The Advisory Board Company today announced financial results for the second quarter of its fiscal year ending March 31, 2005. For the quarter ending September 30, 2004, revenues increased 16% to $34.7 million, from $30.0 million for the second quarter of fiscal 2004. Net income was $5.9 million, or $0.31 per diluted share, compared to $4.7 million, or $0.25 per diluted share, for the same period a year ago.
Revenues for the six months ended September 30, 2004, increased 16% to $67.7 million, from $58.4 million in the six months ended September 30, 2003. Net income for the period was $11.5 million, or $0.60 per diluted share, compared to $9.1 million, or $0.49 per diluted share, for the same period a year ago. Pro forma net income for the six months ended September 30, 2004, was $11.5 million, or $0.60 per diluted share, versus $9.3 million, or $0.50 per diluted share, in the prior year. Pro forma results exclude special compensation and stock option related expenses. Contract value grew 16% to $136.9 million as of September 30, 2004, up from $118.4 million as of September 30, 2003.
Frank Williams, Chief Executive Officer of The Advisory Board Company, commented, “We are pleased with our financial results for the September quarter as we achieved revenue and contract value growth of 16%. Our revenue growth was accompanied by strong margin expansion with operating margins of 25.7% and EPS of $0.31, or 24% growth over the prior year period. We continue to see strong attachment across the membership to our best practice programs as members are utilizing the research to address a number of complex issues in a challenging health care environment.”
He added, “I am also pleased to announce the launch of our newest research program, the Frontline Nursing Program. This program is designed to impact hospital and health system performance by providing best practice research and fundamental management development to frontline nurses who are critical to hospital performance, but often lack business and operational skills commensurate with their clinical expertise. Rooted in feedback from member Chief Nursing Executives who have identified a skill gap in the ranks filling this critical role, the program is designed to elevate frontline nursing performance across the institution by offering best practices in effective management of patient care processes, tools for cross-departmental management and resource utilization, as well as skill building in such topics as decision-making, patient safety and service excellence. We have established a strong charter membership for the program including Children’s Hospital of Orange County, The Cleveland Clinic, Covenant Healthcare, UCLA Medical Center, and the University of Utah Health Sciences Center. The program is off to a strong start and we are very excited about its potential.”
Outlook for Remainder of Calendar Year 2004
The Company reiterated its previously announced guidance for the next calendar quarter of $35.9 million of revenue and pro forma earnings per diluted share of $0.31.
Share Repurchase
During the three months ended September 30, 2004, the Company repurchased 529,122 shares of its common stock at a total cost of approximately $16.7 million.
The Company also announced that its Board of Directors authorized an increase in its share repurchase program of up to an additional $50 million of the Company’s common stock, bringing the total amount authorized to be spent under the program to $100 million. Repurchases will continue to be made from time to time in open market and privately negotiated transactions subject to market conditions. No minimum number of shares has been fixed. The Company will fund its share repurchases with cash on hand and cash generated from operations. At September 30, 2004, the Company had approximately $118 million in cash and marketable securities and no debt.
The Company will hold an investor conference call to discuss its second quarter performance this evening, October 28, 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 800-599-9816 and the access code is 89787986. 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. Thursday, October 28th until 8:00 p.m. Thursday, November 4th.
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 more than 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. For historical results, a reconciliation between pro forma and GAAP 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 the extent (if any) to which employee stock options are exercised and 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 (In thousands, except per share data) Three Months Six Months Ending Selected Ending Selected September 30 Growth September 30 Growth 2004 2003 Rates 2004 2003 Rates Statements of Operations Revenues $34,680 $29,951 15.8% $67,705 $58,400 15.9% Cost of services 14,166 12,291 27,840 23,908 Member relations and marketing 6,773 6,062 13,289 11,614 General and administrative 4,216 3,964 8,143 7,656 Depreciation and loss on disposal of assets 600 416 992 820 Special compensation and stock option related expense - - - 321 Income from operations 8,925 7,218 17,441 14,081 Interest income 916 680 1,809 1,261 Income before provision for income taxes 9,841 7,898 19,250 15,342 Provision for income taxes (3,986) (3,198) (7,797) (6,212) Net income $5,855 $4,700 $11,453 $9,130 Earnings per share Basic $0.34 $0.30 $0.65 $0.60 Diluted $0.31 $0.25 24.0% $0.60 $0.49 22.4% Weighted average common shares outstanding Basic 17,409 15,518 17,604 15,317 Diluted 18,940 18,708 19,181 18,516 Percentages of Revenues Cost of services 40.8% 41.0% 41.1% 40.9% Member relations and marketing 19.5% 20.2% 19.6% 19.9% General and administrative 12.2% 13.2% 12.0% 13.1% Depreciation and loss on disposal of assets 1.7% 1.4% 1.5% 1.4% Income from operations 25.7% 24.1% 25.8% 24.1% Net income 16.9% 15.7% 16.9% 15.6% Contract Value (at end of period) $136,916 $118,378 15.7% RECONCILIATION OF PRO FORMA RESULTS (In thousands, except per share data) Pro forma data (1): Income from operations $8,925 $7,218 $17,441 $14,081 Special compensation and stock option related expense - - - 321 Pro forma income from operations 8,925 7,218 17,441 14,402 Interest income 916 680 1,809 1,261 Pro forma income before provision for income taxes 9,841 7,898 19,250 15,663 Pro forma provision for income taxes (3,986) (3,198) (7,797) (6,344) Pro forma net income $5,855 $4,700 $11,453 $9,319 Pro forma earnings per share Basic $0.34 $0.30 $0.65 $0.61 Diluted $0.31 $0.25 24.0% $0.60 $0.50 20.0% Percentages of Revenues Pro forma income from operations (1) 25.7% 24.1% 25.8% 24.7% Pro forma net income (1) 16.9% 15.7% 16.9% 16.0% (1) Excludes special compensation and stock option related expense. THE ADVISORY BOARD COMPANY CONSOLIDATED BALANCE SHEETS (In thousands) September 30, March 31, 2004 2004 (unaudited) ASSETS Current assets: Cash and cash equivalents $17,912 $41,389 Marketable securities 2,048 3,737 Membership fees receivable, net 19,778 14,338 Prepaid expenses and other current assets 3,026 3,121 Deferred income taxes 18,279 17,123 Deferred incentive compensation 2,456 2,375 Total current assets 63,499 82,083 Fixed assets, net 9,509 6,701 Deferred income taxes, net of current portion 12,296 20,532 Marketable securities 97,769 94,683 Total assets $183,073 $203,999 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Deferred revenues $67,572 $72,410 Accounts payable and accrued liabilities 7,951 8,262 Accrued incentive compensation 5,819 7,704 Total current liabilities 81,342 88,376 Long-term liabilities: Other liabilities 1,264 - Total liabilities 82,606 88,376 Stockholders’ equity: Common stock 184 183 Additional paid-in capital 89,714 88,885 Retained earnings 49,147 37,694 Accumulated elements of comprehensive income 213 1,031 Treasury stock (38,791) (12,170) Total stockholders’ equity 100,467 115,623 Total liabilities and stockholders’ equity $183,073 $203,999 THE ADVISORY BOARD COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended September 30, 2004 2003 Cash flows from operating activities: Net income $11,453 $9,130 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation 876 820 Loss on disposal of fixed assets 116 - Deferred income taxes and tax benefits resulting from the exercise of common stock options 7,771 6,182 Amortization of marketable securities premiums 362 371 Changes in operating assets and liabilities: Membership fees receivable (5,440) (3,315) Prepaid expenses and other current assets 95 259 Deferred incentive compensation (81) 14 Deferred revenues (4,838) (3,916) Accounts payable and accrued liabilities (311) 722 Accrued incentive compensation (1,885) (1,243) Other liabilities 1,264 - Net cash flows provided by operating activities 9,382 9,024 Cash flows from investing activities: Purchases of property and equipment (3,800) (406) Sales of marketable securities 10,713 6,000 Purchases of marketable securities (13,850) (31,740) Net cash flows used in investing activities (6,937) (26,146) Cash flows from financing activities: Proceeds on issuance of stock from exercise of options 551 3,558 Issuance of common stock under employee stock purchase plan 148 163 Purchase of treasury shares (26,621) - Net cash flows (used in) provided by financing activities (25,922) 3,721 Net decrease in cash and cash equivalents (23,477) (13,401) Cash and cash equivalents, beginning of period 41,389 33,301 Cash and cash equivalents, end of period $17,912 $19,900 Supplemental disclosure of cash flow information: Cash paid during the period for - Income taxes $33 $-
The Advisory Board Company
CONTACT: David Felsenthal, Chief Financial Officer of The Advisory BoardCompany, +1-202-266-5876, jacobsg@advisory.com
Web site: http://www.advisoryboardcompany.com/