The Advisory Board Company (Form: 8-K)

Company Reports Quarterly Revenue Growth of 17% and Member Renewal Rate of 92%;
New Membership Program Announced

WASHINGTON, D.C. — (May 5, 2005) — The Advisory Board Company (NASDAQ: ABCO) today announced financial results for the fourth quarter and fiscal year ended March 31, 2005. For the quarter, revenues increased 17% to $37.7 million, from $32.2 million for the fourth quarter of fiscal 2004. Net income was $6.4 million, or $0.33 per diluted share, compared to $5.0 million, or $0.26 per diluted share, for the same period a year ago. Pro forma net income for the quarter, which excludes stock option related expense, increased 22% to $7.0 million, or $0.36 per diluted share, from $5.7 million, or $0.30 per diluted share last year.

Revenues for the year ended March 31, 2005 increased 16% to $141.6 million, from $121.8 million in fiscal 2004. Net income for the period was $23.3 million, or $1.22 per diluted share, compared to $18.7 million, or $1.00 per diluted share, for the same period a year ago. Pro forma net income for the fiscal year, which excludes stock option related expenses and includes income taxes at 41.0%, was $24.3 million versus $19.7 million in the prior year. Pro forma EPS per diluted share for fiscal 2005 increased 20% to $1.27 versus $1.06 for the prior year period.

Contract value grew 17% to $146.1 million as of March 31, 2005, up from $124.9 million as of March 31, 2004. The Company’s member renewal rate for fiscal 2004 was 92% versus 87% in the prior year. At the end of the fiscal year, the Company increased its membership base to 2,572 institutions, with average contract value per member institution growing to $56,819.

Frank Williams, Chairman and Chief Executive Officer of The Advisory Board Company, commented, “Overall, we are very pleased with our financial results both for the fourth quarter and for the fiscal year. We delivered quarterly revenue growth of 17% with pro forma EPS growth of 20% and continued operating margin expansion. Our growth continues to be driven by our success in four key areas: the addition of new member institutions, price increases, cross-selling existing programs to our current members, and new program launches.”

He added, “We also achieved a member renewal rate of 92%, well exceeding our historical range. This metric is a key indicator of product quality and member satisfaction and is a critical factor in establishing our platform for future growth. This year’s performance indicates that our strong research agendas, proven best practices, and ongoing commitment to enhancing the applicability and impact of our work, are helping our members to address their most important strategic and operational issues through a very cost-effective model.”

“I am also pleased to announce our latest launch, the Nursing Business Performance Program. This new membership provides a comprehensive program to assist Chief Nurse Executives in building and hardwiring optimal nursing productivity and business performance across the organization. Through best practice research, comparative benchmarks, and web-based software tools for productivity management, the Nursing Business Performance Program empowers the nursing organization to optimize staffing, reduce labor variances, and improve overall unit performance. The combination of services enhances a member institution’s ability to deliver high-quality patient care and satisfy a demanding workforce while improving staff productivity and overall cost-efficiency. As always, this program benefited from the advice and guidance of a stellar group of charter members, including MedCath, Inc., INTEGRIS Health, Mercy Hospital and Medical Center in Chicago, Tallahassee Memorial Health Care and Huron Valley-Sinai Hospital, part of Detroit Medical Center.”

During the three months ended March 31, 2005, the Company repurchased 249,876 shares of its common stock at a total cost of approximately $9.9 million.

The Company reiterated its previously announced guidance for the next calendar quarter of $38.0 million of revenue and pro forma earnings per diluted share of $0.33. Combined with results from the quarter ended March 31, 2005, the Company’s full calendar year revenue and pro forma earnings per diluted share guidance is $156.8 million and $1.40, respectively.

The Company also announced it has changed the date of its annual meeting of stockholders. The meeting, previously scheduled for August 24, 2005, will now be held on September 12, 2005.

The Company will hold an investor conference call to discuss its fourth quarter performance this evening, May 5, 2005, at 5:00 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 “Investor Information” found under the tab “About Us.” To participate by telephone, the dial-in number is 800-798-2864 and the access code is 45637548. Investors are advised to dial-in at least five minutes prior to the call to register. The web cast will be archived for seven days: from 7:00 p.m. Thursday, May 5, until 7:00 p.m. Thursday, May 12, 2005.

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 2,500 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 believes its calculations of pro forma income from operations, net income and diluted earnings per share provide additional information about the Company’s ongoing operating performance as well as additional information to compare to prior periods. Pro forma results exclude stock option related expenses and include income taxes at an effective rate of 41% for fiscal year 2005. 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 2005 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
STATEMENTS OF OPERATIONS
(In thousands, except per share data)


	Three Months Ending						Selected			Twelve Months Ending						Selected
	March 31,						Growth			March 31,						Growth
	2005			2004			Rates			2005			2004			Rates
Statements of Operations
Revenues	$	37,738		$	32,185			17.3	%	$	141,649		$	121,847			16.3	%

Cost of services		15,455			13,092						58,354			50,167
Member relations and marketing		7,604			6,447						28,347			24,599
General and administrative		3,608			3,604						15,965			15,445
Depreciation and loss on disposal of assets		428			303						1,820			1,415
Stock option related expense		937			1,230						1,253			1,673
Income from operations		9,706			7,509						35,910			28,548
Interest income		1,161			869						3,971			2,911
Income before provision for income taxes		10,867			8,378						39,881			31,459
Provision for income taxes		(4,455	)		(3,393	)					(16,534	)		(12,739	)
Net income	$	6,412		$	4,985					$	23,347		$	18,720

Earnings per share
Basic	$	0.35		$	0.30					$	1.32		$	1.19
Diluted	$	0.33		$	0.26			26.9	%	$	1.22		$	1.00			22.0	%
Weighted average common shares outstanding
Basic		18,303			16,709						17,738			15,745
Diluted		19,428			19,063						19,161			18,680
Percentages of Revenues
Cost of services		41.0	%		40.7	%					41.2	%		41.2	%
Member relations and marketing		20.1	%		20.0	%					20.0	%		20.2	%
General and administrative		9.6	%		11.2	%					11.3	%		12.7	%
Depreciation and loss on disposal of assets		1.1	%		0.9	%					1.3	%		1.2	%
Income from operations		25.7	%		23.3	%					25.4	%		23.4	%
Net income		17.0	%		15.5	%					16.5	%		15.4	%
Contract Value (at end of period)	$	146,137		$	124,929			17.0	%


Pro forma data (1) (2):
Income from operations	$	9,706		$	7,509				$	35,910		$	28,548
Stock option related expense		937			1,230					1,253			1,673
Pro forma income from operations		10,643			8,739					37,163			30,221
Interest income		1,161			869					3,971			2,911
Pro forma income before
provision for income taxes		11,804			9,608					41,134			33,132
Pro forma provision for income taxes		(4,840	)		(3,891	)				(16,865	)		(13,418	)
Pro forma net income	$	6,964		$	5,717				$	24,269		$	19,714

Pro forma earnings per share
Basic	$	0.38		$	0.34				$	1.37		$	1.25
Diluted	$	0.36		$	0.30		20.0	%	$	1.27		$	1.06		19.8	%
Percentages of Revenues
Pro forma income from operations (1)		28.2	%		27.2	%				26.2	%		24.8	%
Pro forma net income (1) (2)		18.5	%		17.8	%				17.1	%		16.2	%

(1) Excludes stock option related expense.
(2) Includes income taxes of 41.0% for the fiscal year ending March 31, 2005.


	March 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	27,867		$	41,389
Marketable securities		3,003			3,737
Membership fees receivable, net		21,320			14,338
Prepaid expenses and other current assets		2,430			1,745
Deferred income taxes		19,774			17,123
Total current assets		74,394			78,332
Fixed assets, net		9,023			6,701
Deferred incentives and other charges		6,189			3,751
Deferred income taxes, net of current portion		33,489			20,532
Marketable securities		122,044			94,683
Total assets	$	245,139		$	203,999

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Deferred revenues	$	82,262		$	72,410
Accounts payable and accrued liabilities		8,733			8,262
Accrued incentive compensation		7,820			7,704
Total current liabilities		98,815			88,376
Long-term liabilities:
Other liabilities		1,011			—
Total liabilities		99,826			88,376
Stockholders’ equity:
Common stock		199			183
Additional paid-in capital		142,040			88,885
Retained earnings		27,924			37,694
Accumulated elements of comprehensive income		(1,273	)		1,031
Treasury stock		(23,577	)		(12,170	)
Total stockholders’ equity		145,313			115,623

Total liabilities and stockholders’ equity	$	245,139		$	203,999

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


	Fiscal Year Ended March 31,
	2005			2004
Cash flows from operating activities:
Net income	$	23,346		$	18,720
Adjustments to reconcile net income to net cash provided by
operating activities -
Depreciation		1,704			1,415
Loss on disposal of fixed assets		116			—
Deferred income taxes		16,867			12,644
Amortization of marketable securities premiums		724			755
Changes in operating assets and liabilities:
Membership fees receivable		(6,982	)		(5,104	)
Prepaid expenses and other current assets		(351	)		(145	)
Deferred incentives and other charges		(2,438	)		(1,492	)
Deferred revenues		9,852			8,757
Accounts payable and accrued liabilities		268			3,356
Accrued incentive compensation		116			805
Other liabilities		1,011			—

Net cash flows provided by operating activities		44,233			39,711

Cash flows from investing activities:
Purchases of property and equipment		(4,142	)		(5,225	)
Redemptions of marketable securities		20,713			13,350
Purchases of marketable securities		(51,940	)		(54,661	)
Net cash flows used in investing activities		(35,369	)		(46,536	)

Cash flows from financing activities:
Proceeds from issuance of stock from exercise of options		21,846			26,772
Reimbursement of offering costs		188			149
Payment of offering costs		(163	)		(169	)
Issuance of common stock under employee stock purchase plan		276			331
Purchase of treasury shares		(44,533	)		(12,170	)
Net cash flows (used in) provided by financing activities		(22,386	)		14,913

Net (decrease) increase in cash and cash equivalents		(13,522	)		8,088
Cash and cash equivalents, beginning of period		41,389			33,301
Cash and cash equivalents, end of period	$	27,867		$	41,389


Delaware	000-33283	52-1468699
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

2445 M Street, NW, Washington, District of Columbia		20037
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	The Advisory Board Company

May 5, 2005	By:	David L. Felsenthal

		Name: David L. Felsenthal
		Title: Chief Financial Officer, Secretary and Treasurer


Exhibit No.		Description

99.1		The Advisory Board Company's earnings release for the fourth quarter of the fiscal year ending March 31, 2005.


Contact:	David Felsenthal		The Advisory Board Company
	Chief Financial Officer		2445 M Street, N.W.
		202.266.5876	Washington, D.C. 20037
	jacobsg@advisory.com		www.advisoryboardcompany.com


Date of Report (Date of Earliest Event Reported):		May 5, 2005


Registrant’s telephone number, including area code:		202-266-5600