EX-99.1 2 w97010exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1

     (SEAL)

             
Contact:
    David Felsenthal     The Watergate
    Chief Financial Officer     600 New Hampshire Avenue, N.W.
    202.266.5876     Washington, D.C. 20037
    jacobsg@advisory.com     www.advisoryboardcompany.com

THE ADVISORY BOARD COMPANY REPORTS FISCAL 2004
FOURTH QUARTER AND YEAR-END RESULTS

Company Reports Quarterly Revenue Growth of 17% and Member Renewal Rate of 87%;
New Research Program Announced

WASHINGTON, D.C. — (May 5, 2004) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the fourth quarter and fiscal year ended March 31, 2004. For the quarter, revenues increased 17% to $32.2 million, from $27.4 million for the fourth quarter of fiscal 2003. Net income was $5.0 million, or $0.26 per diluted share, compared to $4.8 million, or $0.27 per diluted share, for the same period a year ago. Pro forma net income was $5.7 million, or $0.30 per diluted share, compared to $4.9 million, or $0.27 per diluted share, for the same period a year ago. Pro forma results exclude special compensation and stock option related expenses.

Revenues for the year ended March 31, 2004 increased 21% to $121.8 million, from $100.7 million in fiscal 2003. Net income for the period was $18.7 million, or $1.00 per diluted share, compared to $14.4 million, or $0.85 per diluted share, for the same period a year ago. Pro forma net income was $19.7 million, or $1.06 per diluted share, versus $15.1 million, or $0.89 per diluted share, in the prior year.

Contract value grew 17% to $124.9 million as of March 31, 2004, up from $106.7 million as of March 31, 2003. The Company’s member renewal rate for fiscal 2004 was 87%. At the end of the fiscal year, the Company served a membership of 2,347 institutions, as compared to a membership of 2,297 institutions at the end of the last fiscal year.

Frank Williams, chief executive officer of The Advisory Board Company, commented, “We are pleased with our financial results both for the fourth quarter and for the fiscal year. In a challenging healthcare environment we delivered fiscal year revenue growth of 21% with strong margins and continued growth in earnings per share. Our growth has been driven by four key sources: new program launches, the addition of new member institutions, cross-selling existing programs to our current members and price increases. Across fiscal year 2004, our average contract value per member institution grew to $53,229, up from $46,472 at the same time last year.”

He added, “We also achieved a member renewal rate of 87%, which is at the high end of our expected range of 84%-88%. This metric – one of the most important indicators of our overall business performance – demonstrates that our programs consistently provide our members with tangible best practice solutions to address their most important strategic and operational issues.

“I am also pleased to announce our latest launch, the Revenue Cycle Performance Program. This new membership program assists Chief Financial Officers in measuring, analyzing and comparing their performance across the revenue cycle.

 

 

Exhibit 99.1

The program provides members with continuous business intelligence on the drivers of revenue cycle performance, comparative benchmarks, and supporting best practices research. The combination of services enhances a member institution’s ability to surface problems, make faster decisions and drive financial accountability across the organization. As always, this program benefited from the advice and guidance of a stellar group of charter members, including Duke University Medical Center, Evanston Northwestern Healthcare, Ohio State University Medical Center and Cedars-Sinai Medical Center.”

Share Repurchase

During the three months ended March 31, 2004, the Company repurchased 349,320 shares of its common stock at a total cost of approximately $12.2 million.

Outlook for Remainder of Calendar Year 2004

The Company reiterated its previously announced guidance for the next calendar quarter of $32.6 million of revenue and pro forma earnings per diluted share of $0.28. Combined with results from the quarter ended March 31, 2004, the Company’s full calendar year revenue and pro forma earnings per diluted share guidance is $135.2 million and $1.19, respectively.

The Company will hold an investor conference call to discuss its fourth quarter performance this evening, May 5, 2004, at 6:00 p.m. Eastern Daylight Time. The conference call will also be available via live web cast on the Company’s web site at www.advisoryboardcompany.com in the section entitled “Other Information” found under the tab “About Us.” Investors will also be able to listen to the call by dialing 800-299-9630, and entering the access code 51770523, shortly before the scheduled start time. The conference call replay will be archived on the Company’s web site for seven days: from 8:00 p.m. Wednesday, May 5th until 8:00 p.m. Wednesday, May 12th. To listen to the archived call by telephone: dial either 888-286-8010 or 617-801-6888, and enter reservation number 32841021.

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. 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 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

 

 

Exhibit 99.1

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
STATEMENTS OF OPERATIONS

(In thousands, except per share data)
                                                 
    Three Months Ending           Twelve Months Ending    
    March 31,
   Selected   March 31,
   Selected
                    Growth                   Growth
    2004
   2003
   Rates
   2004
   2003
   Rates
Statements of Operations
                                                
Revenues
   $ 32,185     $ 27,432       17.3 %   $ 121,847     $ 100,714       21.0 %
 
    
 		      
 		              
 		      
 		          
Cost of services
     13,092       10,555               50,167       41,598          
Member relations and marketing
     6,447       5,347               24,599       19,842          
General and administrative
     3,604       3,376               15,445       12,507          
Depreciation and loss on disposal of assets
     303       401               1,415       1,827          
Special compensation and stock option related expense
     1,230       83               1,673       1,147          
 
    
 		      
 		              
 		      
 		          
Income from operations
     7,509       7,670               28,548       23,793          
Interest income
     869       449               2,911       1,038          
 
    
 		      
 		              
 		      
 		          
Income before provision for income taxes
     8,378       8,119               31,459       24,831          
Provision for income taxes
     (3,393 )     (3,288 )             (12,739 )     (10,392 )        
 
    
 		      
 		              
 		      
 		          
Net income
   $ 4,985     $ 4,831             $ 18,720     $ 14,439          
 
    
 		      
 		              
 		      
 		          
Earnings per share
                                                
Basic
   $ 0.30     $ 0.33             $ 1.19     $ 1.10          
Diluted
   $ 0.26     $ 0.27       -3.7 %   $ 1.00     $ 0.85       17.6 %
Weighted average common shares outstanding
                                                
Basic
     16,709       14,750               15,745       13,139          
Diluted
     19,063       17,920               18,680       16,996          
Percentages of Revenues
                                                
Cost of services
     40.7 %     38.5 %             41.2 %     41.3 %        
Member relations and marketing
     20.0 %     19.5 %             20.2 %     19.7 %        
General and administrative
     11.2 %     12.3 %             12.7 %     12.4 %        
Depreciation and loss on disposal of assets
     0.9 %     1.5 %             1.2 %     1.8 %        
Income from operations
     23.3 %     28.0 %             23.4 %     23.6 %        
Net income
     15.5 %     17.6 %             15.4 %     14.3 %        
Contract Value (at end of period)
   $ 124,929     $ 106,745       17.0 %                        

RECONCILIATION OF PRO FORMA RESULTS
(In thousands, except per share data)
                                                 
Pro forma data (1):
                                                
Income from operations
   $ 7,509     $ 7,670             $ 28,548     $ 23,793          
Special compensation and stock option related expense
     1,230       83               1,673       1,147          
 
    
 		      
 		              
 		      
 		          
Pro forma income from operations
     8,739       7,753               30,221       24,940          
Interest income
     869       449               2,911       1,038          
 
    
 		      
 		              
 		      
 		          
Pro forma income before provision for income taxes
     9,608       8,202               33,132       25,978          
Pro forma provision for income taxes
     (3,891 )     (3,322 )             (13,418 )     (10,877 )        
 
    
 		      
 		              
 		      
 		          
Pro forma net income
   $ 5,717     $ 4,880             $ 19,714     $ 15,101          
 
    
 		      
 		              
 		      
 		          
Pro forma earnings per share
                                                
Basic
   $ 0.34     $ 0.33             $ 1.25     $ 1.15          
Diluted
   $ 0.30     $ 0.27       11.1 %   $ 1.06     $ 0.89       19.1 %
Percentages of Revenues
                                                
Pro forma income from operations (1)
     27.2 %     28.3 %             24.8 %     24.8 %        
Pro forma net income (1)
     17.8 %     17.8 %             16.2 %     15.0 %        

(1)   Excludes special compensation and stock option related expense.

 

 

THE ADVISORY BOARD COMPANY
BALANCE SHEETS
(In thousands)

                 
    March 31,
    2004
   2003
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 41,389     $ 33,301  
Marketable securities
     3,737       —  
Membership fees receivable, net
     14,338       9,234  
Prepaid expenses and other current assets
     3,121       1,600  
Deferred income taxes
     17,123       11,532  
Deferred incentive compensation
     2,375       2,259  
 
    
 		      
 		  
Total current assets
     82,083       57,926  
Fixed assets, net
     6,701       2,891  
Deferred income taxes, net of current portion
     21,202       —  
Marketable securities
     94,683       57,106  
 
    
 		      
 		  
Total assets
   $ 204,669     $ 117,923  
 
    
 		      
 		  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Deferred revenues
   $ 72,410     $ 63,653  
Accounts payable and accrued liabilities
     8,262       5,484  
Accrued incentive compensation
     7,704       6,899  
 
    
 		      
 		  
Total current liabilities
     88,376       76,036  
Long-term liabilities:
                
Deferred income taxes
     670       392  
 
    
 		      
 		  
Total liabilities
     89,046       76,428  
Stockholders’ equity:
                
Common stock
     183       148  
Additional paid-in capital
     88,885       21,821  
Accumulated elements of comprehensive income
     1,031       552  
Retained earnings
     37,694       18,974  
Treasury stock
     (12,170 )     —  
 
    
 		      
 		  
Total stockholders’ equity
     115,623       41,495  
 
    
 		      
 		  
Total liabilities and stockholders’ equity
   $ 204,669     $ 117,923  
 
    
 		      
 		  

 

 

THE ADVISORY BOARD COMPANY
STATEMENTS OF CASH FLOWS
(In thousands)

                 
    Fiscal Year Ended March 31,
    2004
   2003
Cash flows from operating activities:
                
Net income
   $ 18,720     $ 14,439  
Adjustments to reconcile net income to net cash provided by operating activities -
                
Depreciation
     1,415       1,722  
Loss on disposal of fixed assets
     —       105  
Special compensation arrangements
     —       (363 )
Deferred income taxes
     13,202       6,140  
Amortization of marketable securities premiums
     755       352  
Changes in operating assets and liabilities:
                
Membership fees receivable
     (5,104 )     4,865  
Prepaid expenses and other current assets
     (1,521 )     (657 )
Deferred incentive compensation
     (116 )     (365 )
Deferred revenues
     8,757       12,115  
Accounts payable and accrued liabilities
     2,798       4,955  
Accrued incentive compensation
     805       1,240  
 
    
 		      
 		  
Net cash flows provided by operating activities
     39,711       44,548  
 
    
 		      
 		  
Cash flows from investing activities:
                
Purchases of property and equipment
     (5,225 )     (531 )
Sales of marketable securities
     13,350       —  
Purchases of marketable securities
     (54,661 )     (56,515 )
 
    
 		      
 		  
Net cash flows used in investing activities
     (46,536 )     (57,046 )
 
    
 		      
 		  
Cash flows from financing activities:
                
Issuance of common stock from exercise of stock options
     26,772       21,453  
Reimbursement of offering costs
     149       992  
Payment of offering costs
     (169 )     (956 )
Purchase of treasury shares
     (12,170 )     —  
Issuance of common stock under employee stock purchase plan
     331       351  
 
    
 		      
 		  
Net cash flows provided by financing activities
     14,913       21,840  
 
    
 		      
 		  
Net increase in cash and cash equivalents
     8,088       9,342  
Cash and cash equivalents, beginning of period
     33,301       23,959  
 
    
 		      
 		  
Cash and cash equivalents, end of period
   $ 41,389     $ 33,301