The Advisory Board Company Reports
Fiscal Year 2008 Fourth Quarter Results
Company Reports Revenue of $57.9 Million and Member Renewal Rate of
90%; Increases Share Repurchase Program by $100MM; Announces Executive
Promotions, Acquisition and Launch of New Research Program
WASHINGTON, May 8 /PRNewswire-FirstCall/ -- The Advisory Board Company
(
NASDAQ:ABCO
) today announced financial results for the fourth quarter of its fiscal
year ending March 31, 2008. Revenue for the quarter increased 15.2% to
$57.9 million, from $50.3 million in the fourth quarter of fiscal 2007.
Net income was $8.5 million, or $0.47 per diluted share, compared to $7.2
million, or $0.38 per diluted share, for the same period a year ago. For
the year ended March 31, 2008, revenue increased 15.3% to $219.0 million,
from $189.8 million for the year ended March 31, 2007. Net income for the
year was $32.1 million, or $1.72 per diluted share, compared to $27.4
million, or $1.41 per diluted share in the same period a year ago.
Contract value grew 15.3% to $230.8 million as of March 31, 2008, up from
$200.1 million as of March 31, 2007.
The Company's member renewal rate for fiscal 2008 was 90%
versus 89% last fiscal year. As of the end of the fiscal year, the
Company's membership base increased 4% to 2,761 institutions, with average
contract value per member institution growing to $83,595 from $75,166 at
the same time last year.
Frank Williams, Chairman and Chief Executive Officer of
The Advisory Board Company commented, "We are quite pleased with our
results for the quarter and for the fiscal year. In FY 2008, we grew
revenue by 15.3% and EPS by 22.0%, in line with our expectations. Our
growth has been driven by success in four key areas: the addition of new
member institutions, price increases, cross- selling, and new program
launches. We feel right on track with our long-term growth plan as our
recent new program launches have been consistently above expectations over
the last several quarters."
"We are also particularly proud of this year's member
renewal performance. For FY 2008, we had a renewal rate of 90%, one of the
highest in our history and a key indicator of product quality and member
satisfaction. This year's strong renewal performance stands as a critical
factor in solidifying our platform for the future and indicates that our
on-point research agendas, proven best practices, and continued commitment
to enhancing impact are creating strong demand for our programs in the
marketplace."
Mr. Williams added, "I am also pleased to announce
the launch of our newest membership program, the Emergency Department
Performance Program. Rooted in research feedback from member Emergency
Department Directors, the program offers a comprehensive approach to
improving the operational and financial performance of the emergency
department. This highly complex department plays a critical role in every
health system, accounting for over 40% of inpatient admissions and a
significant portion of direct hospital contribution profit. Our research
shows, however, that the typical hospital is losing over $1.6 million per
year due to operational issues in the ED that result in inefficient
patient throughput, poor charge capture, and lost revenue due to patients
leaving without being seen. Through best practice research and a robust,
web-based analytical tool, the Emergency Department Performance Program
aims to address these issues and hardwire optimum performance in ED
management by improving the ability of ED directors to surface problems
and make more strategic and informed decisions at the front- line. As
always, this program has benefited from the advice and guidance of a
stellar group of charter members, including Spectrum Health Hospitals,
Providence Hospital, O'Connor Hospital, Medical Center of Central Georgia
and West Jefferson Medical Center. We are very excited about its
potential."
Share Repurchase Authorization Increased by $100 Million
During the three months ended March 31, 2008, the Company
repurchased 821,680 shares of its common stock at a total cost of
approximately $46.7 million. To date, the Company has repurchased
5,134,307 shares of its common stock at a total cost of approximately
$242.5 million.
The Company also announced that its Board of Directors
authorized an increase in its share repurchase program of up to an
additional $100 million of the Company's common stock, bringing the total
amount authorized to be spent under the program to $350 million since its
inception. Repurchases will continue to be made from time to time in open
market and privately negotiated transactions subject to market and other
conditions. No minimum number of shares has been fixed, and the share
repurchase authorization does not have an expiration date. The Company
will fund its share repurchases with cash on hand and cash generated from
operations. At March 31, 2008, the Company had approximately $150.1
million in cash and marketable securities and no debt.
E xecutive Promotions: EVP Robert Musslewhite to Become CEO
and COO David Felsenthal to be Promoted to President on September 1, 2008;
Frank Williams to Remain as Executive Chairman
The Advisory Board Company also announced today that
Executive Vice President Robert W. Musslewhite will become Chief Executive
Officer, and Chief Operating Officer David L. Felsenthal will be promoted
to President, effective September 1, 2008. Frank J. Williams, currently
Chairman and CEO, will remain as Executive Chairman.
Now in his fifth year with the Advisory Board, Mr.
Musslewhite previously ran the Company's growth strategy and new product
development group before taking broad responsibility over program
operations, account management, and sales and marketing for a significant
portfolio of the Company's membership programs. Mr. Felsenthal previously
served as an Executive Vice President and the Company's Chief Financial
Officer for more than five years before becoming Chief Operating Officer
last year.
Mr. Williams commented, "We're all excited for Robert
and David and for the opportunities for the Advisory Board under their
leadership. Across his tenure, Robert has been instrumental in developing
and driving our growth strategy, enhancing key product offerings, and
positioning us to leverage our unique role as trusted advisor to the
health care industry. Robert's natural leadership, deep knowledge of the
business, and keen understanding of our members' needs have earned him the
admiration and respect of our employees, members and shareholders. His
mastery of all aspects of the business, his vision for the future and his
commitment to our mission make him uniquely prepared to lead the firm
across our next phase of growth. In addition, we are very fortunate to
have David move into the President role. David's contributions as CFO and
COO have been tremendous, and this platform will provide him new
opportunities for building on his and the Company's exceptional track
record. For my part, I look forward to serving as Executive Chairman and
continuing a strong partnership forged with Robert, David, and the entire
management team to enhance our impact, continue our growth and serve our
key constituencies across the coming years."
Mr. Musslewhite commented, "I'm very excited by the
chance to step into the CEO role and by the firm's future prospects. With
the Advisory Board's critical industry relationships, $2 billion current
cross-sell opportunity, world-class leadership team, and established track
record, we are uniquely well-positioned to build value for our members,
our shareholders, and our employees. I have tremendous appreciation for
our extraordinary talent base, the strength of our business model, and the
power of our mission. It is an honor to lead an organization with this
unparalleled set of assets, and I look forward to working closely with
Frank, David, and the management team to build on this platform as the
Advisory Board enters its next phase of growth and success."
Acquisition of Crimson
The Company also announced that it has entered into an
agreement to acquire Crimson, a boutique provider of data, analytics and
business intelligence software to hospitals, health systems, and physician
clinics. Crimson's platform aggregates data and applies sophisticated
algorithms to help providers elevate performance on quality and cost of
care outcomes. Under the terms of the agreement, the initial purchase
price of approximately $23 million will be increased if certain financial
thresholds are achieved before March 31, 2010. Any additional payments
would be recorded as a purchase price adjustment.
Mr. Williams commented, "We are thrilled to join
forces with Crimson to help our members improve clinical resource
utilization and outcomes in a healthcare market that is increasingly
focused on value-based purchasing, pay- for-performance, and enhanced
physician management. Given the importance of these issues to our
membership, we are excited to have the opportunity to link our best
practice research and process insights to the Crimson analytics platform
in order to elevate physician performance. Further, the Crimson platform
stands as a strong complement to our existing portfolio of programs
anchored by analytical tools and also creates a powerful national dataset
for member benchmarking and future research endeavors. Crimson's base of
satisfied members includes Memorial Hermann Healthcare System, Baylor
Health Care System, Scott & White Hospital, Singing River Hospital
System and Mission Hospitals and is a testament to the exceptional quality
of their work."
Crimson's CEO and co-founder Michael Kadyan added, "I
look forward to working as part of the Advisory Board team to continue to
build a powerful program offering in the clinical terrain for hospitals
and physician organizations. I am enthusiastic about the large market
opportunity ahead of us and am confident that the Advisory Board's deep
knowledgebase of best practices and network of over 2,700 members will
enhance the impact of Crimson's proprietary tools and analytical
capabilities."
Mr. Williams concluded, "We are also looking forward
to welcoming a very strong Crimson team to our ranks, and are excited
about the deep expertise and unique skill-set they bring to the
Company."
The Company expects to close on the transaction within 30
days. A more detailed overview of Crimson can be found at
http://www.crimsonservices.com/
.
Outlook for the Remainder of Calendar Year 2008
The Company announced revenue guidance for the June
quarter of approximately $56.7 million to $57.7 million, and reiterated
its full year calendar year 2008 revenue guidance of approximately $243.0
million. The Company expects earnings per diluted share of $0.34 for the
June quarter. For calendar year 2008 the Company is revising its full year
earnings per diluted share guidance to $1.77, reflecting the near-term
dilution of the Crimson acquisition, offset slightly by stronger than
expected results in the March quarter. Included in the earnings per
diluted share estimates is approximately $0.45 to $0.48 of share-based
compensation and related expense for the full calendar year.
About The Advisory Board Company
The Advisory Board Company provides best practices
research and analysis 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 hospitals, health systems, pharmaceutical
and biotech companies, health care insurers, medical device companies, and
universities in the United States. Each program typically charges a fixed
annual fee and provides members with such services as best practice
research reports, executive education, on-line analytical tools, and other
supporting research services.
THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER OPERATING STATISTICS
(In thousands, except per share data)
Three Months Twelve Months
Ended Selected Ended Selected
March 31, Growth March 31, Growth
2008 2007 Rates 2008 2007 Rates
Statements of
Operations
Revenue $57,926 $50,300 15.2% $218,971 $189,843 15.3%
Cost of services (1) 27,516 24,305 102,291 90,129
Member relations and
marketing (1) 12,236 10,396 45,890 40,204
General and
administrative (1) 5,812 5,800 25,269 22,815
Depreciation 991 613 3,589 2,070
Income from
operations 11,371 9,186 23.8% 41,932 34,625 21.1%
Interest income 1,422 1,674 6,142 6,819
Income before
provision for
income taxes 12,793 10,860 17.8% 48,074 41,444 16.0%
Provision for income
taxes (4,260) (3,682) (16,012) (14,049)
Net income $8,533 $7,178 18.9% $32,062 $27,395 17.0%
Earnings per share
Basic $0.48 $0.39 $1.78 $1.46
Diluted $0.47 $0.38 23.7% $1.72 $1.41 22.0%
Weighted average
common shares
outstanding
Basic 17,704 18,399 17,999 18,714
Diluted 18,308 19,124 18,635 19,448
Contract Value (at
end of period) $230,806 $200,094 15.3%
Percentages of
Revenues
Cost of services (1) 47.5% 48.3% 46.7% 47.5%
Member relations and
marketing (1) 21.1% 20.7% 21.0% 21.2%
General and
administrative (1) 10.0% 11.5% 11.5% 12.0%
Depreciation and loss
on disposal of
assets 1.7% 1.2% 1.6% 1.1%
Income from
operations 19.6% 18.3% 19.1% 18.2%
Net income 14.7% 14.3% 14.6% 14.4%
(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 twelve months ended March 31, 2008, the Company
recognized approximately $0.9 million and $4.8 million in cost of
services, approximately $0.5 million and $2.7 million in member
relations and marketing, and approximately $0.9 million and $5.6
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. During
the three and twelve months ended March 31, 2007, the Company
recognized approximately $1.1 million and $4.3 million in cost of
services, approximately $0.7 million and $2.8 million in member
relations and marketing, and approximately $1.2 million and $5.3
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. 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
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31,
2008 2007
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $17,907 $13,195
Marketable securities 8,085 12,718
Membership fees receivable, net 81,538 57,671
Prepaid expenses and other current
assets 4,180 3,123
Deferred income taxes 17,872 21,673
Total current assets 129,582 108,380
Fixed assets, net 22,897 17,421
Intangible assets, net 1,248 1,011
Goodwill 5,426 5,426
Deferred incentive compensation and
other charges 21,888 13,857
Deferred income taxes, net of current
portion - 6,629
Marketable securities 124,073 133,450
Total assets $305,114 $286,174
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenues $134,465 $114,069
Accounts payable and accrued liabilities 26,994 18,721
Accrued incentive compensation 10,032 10,608
Total current liabilities 171,491 143,398
Long-term deferred revenues 9,682 2,925
Other long-term liabilities 1,412 1,387
Total liabilities 182,585 147,710
Stockholders' equity:
Common stock 215 208
Additional paid-in capital 217,170 181,380
Retained earnings 113,024 80,962
Accumulated elements of comprehensive
income 1,540 (1,156)
Treasury stock (209,420) (122,930)
Total stockholders' equity 122,529 138,464
Total liabilities and stockholders'
equity $305,114 $286,174
THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Twelve Months Ended
March 31,
2008 2007
Cash flows from operating activities:
Net income $32,062 $27,395
Adjustments to reconcile net income to net
cash provided by operating activities :
Depreciation 3,598 2,070
Amortization of intangible assets 254 200
Deferred income taxes 14,903 12,938
Excess tax benefits from share-based
payments (5,940) (6,937)
Share-based compensation expense 12,563 12,000
Amortization of marketable securities
premiums 957 938
Changes in operating assets and liabilities:
Member fees receivable (23,867) (20,849)
Prepaid expenses and other current
assets (1,057) (50)
Deferred incentive compensation and
other charges (8,031) (2,402)
Deferred revenues 27,153 17,725
Accounts payable and accrued liabilities 8,273 4,174
Accrued incentive compensation (576) 2,264
Other long-term liabilities 25 751
Net cash flows provided by operating
activities 60,317 50,217
Cash flows from investing activities:
Purchases of property and equipment (9,065) (9,816)
Capitalized software development costs (491) (431)
Cash paid for acquisition, net of cash
acquired - (895)
Redemption of marketable securities 91,805 20,000
Purchases of marketable securities (74,598) (18,000)
Net cash flows provided by (used in)
investing activities 7,651 (9,142)
Cash flows from financing activities:
Proceeds on issuance of stock from exercise
of stock options 16,847 9,925
Proceeds on issuance of stock under employee
stock purchase plan 447 442
Excess tax benefits from share-based
compensation arrangements 5,940 6,937
Purchases of treasury stock (86,490) (66,862)
Net cash flows used in financing activities (63,256) (49,558)
Net increase (decrease) in cash and cash
equivalents 4,712 (8,483)
Cash and cash equivalents, beginning of period 13,195 21,678
Cash and cash equivalents, end of period $17,907 $13,195
Source: The Advisory Board Company
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