The Advisory Board Company Reports Results For Quarter Ended December 31, 2012

The Advisory Board Company Reports Results For Quarter Ended December 31, 2012

Company Reports Quarterly Revenue and Contract Value Growth of 18%; Issues
Guidance for Calendar Year 2013; and Announces Acquisition of 360Fresh and the
Launch of Two New Programs

PR Newswire

WASHINGTON, Feb. 6, 2013

WASHINGTON, Feb. 6, 2013 /PRNewswire/ --The Advisory Board Company (NASDAQ:
ABCO) today announced financial results for the quarter ended December 31,
2012, which is the third quarter of its 2013 fiscal year. Revenue for the
quarter increased 18.1% to $116.2 million, from $98.5 million for the quarter
ended December 31, 2011. Contract value increased 18.2% to $450.0 million as
of December 31, 2012, up from $380.7 million as of December 31, 2011. For the
quarter ended December 31, 2012, net income attributable to common
stockholders was $4.4 million, or $0.12 per diluted share, compared to net
income attributable to common stockholders of $8.1 million, or $0.23 per
diluted share, for the quarter ended December 31, 2011. For the quarter ended
December 31, 2012, adjusted EBITDA was $19.3 million, up from $18.9 million
for the quarter ended December 31, 2011. Adjusted net income for the quarter
ended December 31, 2012 was $10.2 million, or $0.28 per diluted share,
compared to $10.5 million, or $0.30 per diluted share, for the quarter ended
December 31, 2011. Adjusted EBITDA, adjusted net income, and non-GAAP EPS are
all non-GAAP financial measures.

(Logo: http://photos.prnewswire.com/prnh/20110802/PH45999LOGO )

For the nine months ended December 31, 2012, revenue increased 22.7% to $331.1
million, from $269.9 million for the nine months ended December 31, 2011. Net
income attributable to common stockholders was $15.8 million, or $0.44 per
diluted share, for the nine months ended December 31, 2012, compared to net
income attributable to common stockholders of $17.1 million, or $0.50 per
diluted share, for the same period of the prior fiscal year. For the nine
months ended December 31, 2012, adjusted net income, non-GAAP earnings per
diluted share, and adjusted EBITDA were $32.7 million, $0.91, and $60.2
million, respectively. For the nine months ended December 31, 2011, adjusted
net income, non-GAAP earnings per diluted share, and adjusted EBITDA were
$28.3 million, $0.83, and $50.0 million, respectively.

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company,
commented, "December 31^st marked the end of another year of strong revenue
and contract value growth with expanding margins. Our results last year were
once again driven by exceptional member attachment to the robust value that we
provide, and our 2012 performance sets us up well for 2013 where we will again
continue to execute our proven formula. With the tremendous visibility
inherent in our model, we are pleased to provide guidance for another year of
strong growth and solid bottom-line performance. We will also continue to
make a number of important investments in the business to set up future
revenue growth and sustain our rapid growth and expansion."

Mr. Musslewhite continued, "A key to our formula is our deep understanding of
the needs of our members, which allows us to make smart investments that pay
off in future growth, and I am excited to announce today two new program
launches that address critical member issues. The first, the Strategic
Sourcing Program, is a new software-based program that serves health system
supply chain executives by providing the tools and related support to deliver
significant cost savings on critical clinical supplies. The program combines
a best-of-breed e-sourcing technology with our intellectual property on supply
chain management and deep category expertise to help members consistently
maximize leverage, drive competition, and evaluate total cost savings
opportunities across the vast majority of their spend. In our early pilots of
this program, members have achieved outstanding savings, and we are confident
in the value we will deliver through a wider launch."

"Our second new program, the Patient Experience Program, is based on the
iRound™ technology we recently acquired and combines mobile collection of
behavioral and observational data with real-time, point-of-care service
recovery capabilities. This approach to managing patient experience addresses
the key shortcoming of traditional patient satisfaction survey methodologies
by empowering frontline staff to respond immediately to unmet patient needs,
improving care delivery. We are excited to be launching our first product off
the robust and flexible iRound technology and also about the broader
opportunity the iRound platform affords us in the quality, operations, and
patient experience space."

Acquisition of 360Fresh, Inc.

The Company announced the acquisition as of November 15, 2012 of 360Fresh,
Inc., a leading provider of clinical data analytics. The transaction enhances
The Advisory Board Company's existing suite of physician performance
management solutions through the addition of unique technology that transforms
patient data from a variety of information systems into actionable insights to
improve care quality, reduce costs, and enhance productivity for health
systems.

Robert Musslewhite commented, "We are excited to add 360Fresh's outstanding
technology to our portfolio. As the health care market moves towards
value-based payment structures, there is increasing urgency for dynamic
clinical intelligence that not only alerts against known care rules but also
predicts the future impact of today's decisions. The 360Fresh technology
leverages text analytics and advanced statistical modeling to predict patient
outcomes and target interventions in real time.The powerful capabilities of
360Fresh are a strong match with our current technology programs and will
extend our work with our 1300 technology members, including the hundreds of
hospitals utilizing our Crimson platform."

360Fresh's CEO and President, Jakka Sairamesh (Ramesh), Ph.D., added, "The
360Fresh team and I look forward to leveraging the strengths and capabilities
of the 360Fresh tool in the ideal environment created by the Advisory Board's
Crimson platform, deep knowledge base of best practices, and expansive member
network. Joining forces with the Advisory Board will amplify our impact, and
we are energized by the large market opportunity ahead of us and the potential
to dramatically impact care quality across the country through our
collaboration."

Mr. Musslewhite concluded, "The acquisition of 360Fresh will greatly enhance
our ability to deliver previously difficult-to-discern insights about likely
patient paths and outcomes, as well as our ability to help members make
efficient use of scarce caregiver resources. We are confident that the new
capabilities will provide significant member value."

Outlook for Calendar Year 2013

The Company is providing financial guidance for calendar year 2013. For the
calendar year, the Company expects revenue to be in a range of approximately
$495 million to $505 million, adjusted EBITDA to be in a range of
approximately $90 million to $95 million, and non-GAAP earnings per diluted
share to be in a range of approximately $1.18 to $1.28. For calendar year
2013, the Company expects share-based compensation expense to be approximately
$17.5 million, and expects amortization from acquisition-related intangible
assets to be approximately $7 million. For calendar year 2013, the Company
expects an effective tax rate in a range of approximately 38% to 39%. This
guidance includes the dilutive effects of the acquisitions of ActiveStrategy
and 360Fresh of approximately $6 million to $8 million in adjusted EBITDA and
$0.11 to $0.16 in non-GAAP earnings per diluted share.

Non-GAAP Financial Measures

This press release and the accompanying tables present information about the
Company's adjusted EBITDA, adjusted net income, and non-GAAP earnings per
diluted share, which are non-GAAP financial measures provided as a complement
to the results provided in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). The Company defines its
non-GAAP financial measures as described below.

The term "adjusted EBITDA" refers to a financial measure that we define as net
income attributable to common stockholders before provision for income taxes
from continuing operations; other income, net, which includes interest income
and expense, gains and losses on investment in common stock warrants, and
foreign currency losses and gains; depreciation and amortization; equity in
loss of unconsolidated entity and related gains or losses associated with the
underlying investments; discontinued operations, net of tax; acquisition and
similar transaction charges; fair value adjustments to acquisition-related
earn out liabilities; and share-based compensation expense. The term
"adjusted net income" refers to net income attributable to common stockholders
excluding the net of tax effect of equity in loss of unconsolidated entity and
related gains or losses associated with the underlying investments;
discontinued operations; gains and losses on investment in common stock
warrants; amortization of acquisition-related intangibles; acquisition and
similar transaction charges; fair value adjustments to acquisition-related
earn-out liabilities; and share-based compensation expense. The term
"non-GAAP earnings per diluted share" refers to earnings per diluted share
excluding the net of tax effect of equity in loss of unconsolidated entity and
related gains or losses associated with the underlying investments;
discontinued operations; gains and losses on investment in common stock
warrants; amortization of acquisition-related intangibles; acquisition and
similar transaction charges; fair value adjustments to acquisition-related
earn-out liabilities; and share-based compensation expense.

A reconciliation of the foregoing historical non-GAAP financial measures to
the most directly comparable historical GAAP financial measures is provided
below for each of the periods indicated. It is not practicable to provide a
reconciliation of forecasted non-GAAP earnings per diluted share or forecasted
adjusted EBITDA to the most directly comparable GAAP financial measures
because certain items required for the forecast of such GAAP financial
measures; including fair value adjustments to acquisition-related earn-out
liabilities and gains and losses on investment in common stock warrants,
cannot reasonably be estimated or predicted at this time.

                             Three Months Ended        Nine Months Ended
                             December 31,              December 31,
                             2012         2011         2012         2011
Net income attributable to
common                       $  4,442   $  8,052   $  15,764  $  17,126

stockholders
Equity in loss of            1,870        609          4,586        609
unconsolidated entity
Provision for income taxes
from continuing              3,918        5,612        12,565       10,939

operations
Discontinued operations, net —            (138)        —            (333)
of tax
Other income, net            (738)        (1,625)      (2,002)      (2,870)
Depreciation and             5,223        3,662        13,739       10,112
amortization
Acquisition and similar      252          —            851          648
transaction charges
Fair value adjustments to
acquisition-related          859          (200)        4,359        5,300

earn-out liabilities
Share-based compensation     3,471        2,947        10,382       8,462
expense
 Adjusted EBITDA         $  19,297  $  18,919  $  60,244  $ 
                                                                    49,993



                              Three Months Ended        Nine Months Ended
                              December 31,              December 31,
                              2012         2011         2012         2011
Net income attributable to
common                        $  4,442   $ 8,052     $  15,764  $ 
                                                                     17,126
stockholders
Equity in loss of             1,870        609          4,586        609
unconsolidated entity
Discontinued operations, net  —            (138)        —            (333)
of tax
Amortization of
acquisition-related
intangibles,                  1,030        946          2,611        2,644

net of tax
Acquisition and similar
transaction charges, net      155          —            525          405

of tax
Fair value adjustments to
acquisition-related
                              530          (121)        2,690        3,317
earn-out liabilities, net of
tax
Gain/loss on investment in
common stock                  —            (663)        68           (663)

warrants, net of tax
Share-based compensation      2,142        1,777        6,406        5,224
expense, net of tax
Adjusted net income           $  10,169  $  10,462  $  32,650   $ 
                                                                     28,329
                              Three Months Ended        Nine Months Ended
                              December 31,              December 31,
                              2012         2011         2012         2011
GAAP earnings per diluted     $  0.12    $  0.23     $  0.44    $  0.50
share
Equity in loss of             0.05         0.02         0.13         0.02
unconsolidated entity
Discontinued operations, net  —            —            —            (0.01)
of tax
Amortization of
acquisition-related
intangibles,                  0.03         0.03         0.07         0.08

net of tax
Acquisition and similar
transaction charges, net      0.01         —            0.01         0.01

of tax
Fair value adjustments to
acquisition-related
                              0.01         (0.01)       0.08         0.10
earn-out liabilities, net of
tax
Gain/loss on investment in
common stock                  —            (0.02)       —            (0.02)

warrants, net of tax
Share-based compensation      0.06         0.05         0.18         0.15
expense, net of tax
Non-GAAP earnings per diluted $  0.28    $  0.30    $  0.91    $  0.83
share

Web and Conference Call Information

As previously announced, the Company will hold a conference call to discuss
its third quarter performance this evening, February 6, 2013, at 5:30 p.m.
Eastern Time. The conference call will be available via live web cast on the
Company's website at www.advisory.com/IR. To participate by telephone, the
dial-in number is 888.317.6016. Participants 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 8:00 p.m. Eastern Time on Wednesday, February 6, until 11:00
p.m. Eastern Time on Wednesday, February 13, 2013.

About The Advisory Board Company

The Advisory Board Company is a global research, technology, and consulting
firm partnering with 150,000 leaders in 3,700 organizations across health care
and higher education. Through its innovative membership model, the Company
collaborates with executives and their teams to elevate performance and solve
their most pressing challenges. The Company provides strategic guidance,
actionable insights, web-based software solutions, and comprehensive
implementation and management services. For more information, visit the
firm's website, http://www.advisory.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements,
including the Company's expectations regarding its revenue, non-GAAP earnings
per diluted share, adjusted EBITDA, share-based compensation expense,
amortization of acquisition-related intangibles, and effective tax rate for
calendar year 2013 are based on information available to the Company as of
February 6, 2013, the date of this news release, as well as the Company's
current projections, forecasts, and assumptions, and involve risks and
uncertainties. You are hereby cautioned that these statements may be affected
by certain factors, including those set forth below. Consequently, actual
operations and results may differ materially from the results discussed or
implied in the forward-looking statements, and reported results should not be
considered as an indication of future performance. Factors that could cause
actual results to differ materially from those indicated or implied by
forward-looking statements include, among others, changes in the financial
condition of the health care industry, our dependence on renewal of
membership-based services, the need to attract new business and retain current
members and qualified personnel, new product development, competition, risks
associated with the Company's software tools and management and advisory
services, risks relating to privacy, information security, and other health
care-related laws and standards, maintaining our third party provider
relationships and strategic alliances, our ability to license technology from
third parties, impairment of goodwill, and various factors related to income
and other taxes, as well as other risks and uncertainties described in the
Company's Annual Report on Form 10-K for the fiscal year ended March31, 2012,
and subsequent reports filed with the Securities and Exchange Commission, all
of which are available for review on the Company's website at
www.advisory.com/IR and at the Securities and Exchange Commission's website at
www.sec.gov. Additional information will also be set forth in the Company's
Report on Form 10-Q for the quarter ended December31, 2012, which will be
filed with the Securities and Exchange Commission in February2013.

Accordingly, readers are cautioned not to place undue reliance on
forward-looking statements made in this news release, which speak only as of
the date of this news release. The Company does not undertake to update any of
its forward-looking statements, whether as a result of circumstances or events
that arise after the date they are made, new information, or otherwise.

THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
AND OTHER OPERATING STATISTICS
(In thousands, except per share data)
               Three Months         Selected     Nine Months Ended   Selected
               Ended
                                                                      
               
               December 31          Growth       December 31         Growth
               2012      2011        Rates        2012       2011      Rates
Statements of
Income
Revenue       $        $         18.1%         $         $        22.7%
               116,231  98,458                   331,131   269,862
Cost of
services,
excluding
depreciation   63,123    51,501                    178,478    144,415
and

amortization
(1) (2) (4)
Member
relations and  21,826    18,400                    62,431     54,770
marketing (1)
General and
administrative 16,567    12,385                    45,678     35,094
(1) (3)
Depreciation
and            5,223     3,662                     13,739     10,112
amortization
(4)
Operating     9,492     12,510                    30,805     25,471
income
Other income, 738       1,625                     2,002      2,870
net
Income from
continuing
operations
before

provision for  10,230    14,135                    32,807     28,341
income taxes
and equity in

loss of
unconsolidated
entity
Provision for (3,918)   (5,612)                   (12,565)   (10,939)
income taxes
Equity in
loss of        (1,870)   (609)                     (4,586)    (609)
unconsolidated
entity
Net income
from           4,442     7,914                     15,656     16,793
continuing
operations
Discontinued
operations:
Net income
from           -         138                       -          333
discontinued
operations
Net income
before
allocation to  4,442     8,052                     15,656     17,126
noncontrolling

interest
Net loss
attributed to  -         -                         108        -
noncontrolling
interest
Net income
attributable   $      $                      $        $  
to common      4,442    8,052                    15,764    17,126

stockholders
Earnings per
share - Basic
Net income
from
continuing
operations     $      $                      $       $   
                0.13    0.24                    0.46     0.52
attributable
to common
stockholders
Net income
from
discontinued
operations     $      $                      $       $   
                  -    0.00                      -     0.01
attributable
to common
stockholders
Net income
attributable
to common      $      $                      $       $   
                0.13    0.24                    0.46     0.53
stockholders
per share -
Basic
Earnings per
share -
Diluted
Net income
from
continuing
operations     $      $                      $       $   
                0.12    0.23                    0.44     0.49
attributable
to common
stockholders
Net loss from
discontinued
operations     $      $                      $       $   
                  -    0.00                      -     0.01
attributable
to common
stockholders
Net income
attributable
to common      $      $                      $       $   
                0.12    0.23                    0.44     0.50
stockholders
per share -
Diluted
Weighted
average common
shares
outstanding
Basic         34,949    32,952                    34,597     32,596
Diluted       36,385    34,938                    36,231     34,368
Contract      $        $ 
Value (at end  450,027  380,684    18.2%
of period) (5)
Percentages
of Revenues
Cost of
services,
excluding
depreciation   54.3%     52.3%                     53.9%      53.5%
and

amortization
(1) (2) (4)
Member
relations and  18.8%     18.7%                     18.9%      20.3%
marketing (1)
General and
administrative 14.3%     12.6%                     13.8%      13.0%
(1) (3)
Depreciation
and            4.5%      3.7%                      4.1%       3.7%
amortization
(4)
Operating     8.2%      12.7%                     9.3%       9.4%
income
Net income    3.8%      8.2%                      4.8%       6.3%

(1) During the three and nine months ended December 31, 2012, the Company
recognized approximately $1.0 million and $3.0 million in cost of services,
approximately $0.7 million and $2.0 million in member relations and marketing,
and approximately $1.8 million and $5.4 million in general and administrative
expense for share-based compensation. During the three and nine months ended
December 31, 2011, the Company recognized approximately $0.9 million and $2.6
million in cost of services, approximately $0.6 million and $1.6 million in
member relations and marketing, and approximately $1.5 million and $4.3
million in general and administrative expense for share-based compensation.
The Company has recorded all these expenses in the same line items as other
compensation paid to the relevant categories of employees.

(2) During the three and nine months ended December 31, 2012, the Company
recognized approximately $0.9 million and $4.4 million in cost of services
relating to fair value adjustments of acquisition-related earn-out
liabilities. During the three and nine months ended December 31, 2011, the
Company recognized approximately ($0.2) million and $5.3 million in cost of
services relating to fair value adjustments of acquisition-related earn-out
liabilities.

(3) During the three and nine months ended December 31, 2012, the Company
incurred approximately $0.3 million and $0.9 million of acquisition and
similar transactions charges in general and administrative expense. During
the nine months ended December 31, 2011, the Company incurred approximately
$0.6 million of acquisition and similar transactions charges in general and
administrative expense.

(4) Beginning in the quarter ended June 30, 2012, the Company began
classifying all depreciation and amortization in the income statement line
item "Depreciation and amortization." Prior to this, amortization from
intangibles was included in cost of services. Prior period amounts have been
reclassified for comparability. Cost of services therefore excludes $1.4
million and $3.8 million of amortization from intangible assets during the
three and nine months ended December 31, 2011, respectively, which is included
in depreciation and amortization.

(5) Contract value as of December 31, 2011 excludes $5.9 million from
discontinued operations.

THE ADVISORY BOARD COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                       December 31,            March 31,
                                       2012                    2012
                                       (unaudited)
ASSETS
Current assets:
Cash and cash equivalents             $        81,743  $       
                                                               60,642
Marketable securities, current        16,792                  4,823
Membership fees receivable, net       367,880                 281,584
Prepaid expenses and other current    8,625                   6,705
assets
Deferred income taxes, current        8,888                   7,255
Total current assets                  483,928                 361,009
Property and equipment, net           65,344                  49,653
Intangible assets, net                33,353                  19,384
Goodwill                              95,427                  74,235
Deferred incentive compensation and   63,263                  53,369
other charges
Deferred income taxes, net of         3,908                   7,655
current portion
Investment in unconsolidated entity   4,076                   8,662
Other non-current assets              6,390                   9,000
Marketable securities, net of         117,980                 122,621
current portion
Total assets                          $       873,669   $      
                                                               705,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenues, current            $       396,000   $      
                                                               313,958
Accounts payable and accrued          61,122                  57,529
liabilities
Accrued incentive compensation        18,646                  18,691
Total current liabilities             475,768                 390,178
Deferred revenues, net of current     112,948                 78,498
portion
Other long-term liabilities           18,928                  19,865
Total liabilities                     607,644                 488,541
Redeemable noncontrolling interest    100                     -
The Advisory Board Company's
Stockholders' equity:
Common stock                          351                     235
Additional paid-in capital            360,943                 315,648
Retained (deficit) earnings           (97,208)                189,742
Accumulated elements of other         1,947                   1,206
comprehensive income
Treasury stock                        -                       (289,784)
Total stockholders' equity            266,033                 217,047
controlling interest
Equity attributable to                (108)                   -
noncontrolling interest
Total stockholders' equity            266,025                 217,047
Total liabilities and stockholders'   $       873,669   $      
equity                                                         705,588



THE ADVISORY BOARD COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                              Nine Months Ended December 31,
                                              2012              2011
Cash flows from operating activities:
Net income before allocation to              $           $      
noncontrolling interest                       15,656            17,126
Adjustments to reconcile net income before
allocation to
noncontrolling interest to net cash provided by operating
activities:
Depreciation and amortization                13,739            10,660
Deferred income taxes                        (1,335)           (1,914)
Excess tax benefits from stock-based         (11,755)          (2,796)
payments
Stock-based compensation expense             10,383            8,462
Amortization of marketable securities        1,472             850
premiums
Loss (gain) on investment in common stock    110               (1,100)
warrants
Equity in loss of unconsolidated entity      4,586             609
Changes in operating assets and
liabilities:
Membership fees receivable                   (84,582)          (85,777)
Prepaid expenses and other current assets    (1,772)           1,262
Deferred incentive compensation and other    (9,894)           (8,404)
charges
Deferred revenues                            115,486           105,312
Accounts payable and accrued liabilities     27,543            13,228
Acquisition-related earn-out payments        (3,011)           -
Accrued incentive compensation               (45)              3,250
Other long-term liabilities                  (3,437)           6,425
Net cash flows provided by operating         73,144            67,193
activities
Cash flows from investing activities:
Purchases of property and equipment          (25,379)          (22,650)
Capitalized external use software            (2,555)           (2,010)
development costs
Cash paid for acquisitions, net of cash      (31,887)          (16,829)
acquired
Investment in unconsolidated entity          -                 (10,000)
Redemptions of marketable securities         35,220            16,000
Purchases of marketable securities           (42,889)          (31,748)
Net cash flows used in investing             (67,490)          (67,237)
activities
Cash flows from financing activities:
Proceeds from issuance of stock from         21,580            22,980
exercise of stock options
Repurchase of shares to satisfy minimum      (3,844)           (1,266)
employee tax withholding
Contributions from noncontrolling interest   100               -
Proceeds from issuance of stock under        255               162
employee stock purchase plan
Excess tax benefits from stock-based         11,755            2,796
awards
Acquisition-related earn-out payments        (1,400)           -
Purchases of treasury stock                  (12,999)          (6,580)
Net cash flows provided by financing         15,447            18,092
activities
Net increase in cash and cash equivalents    21,101            18,048
Cash and cash equivalents, beginning of      60,642            30,378
period
Cash and cash equivalents, end of period     $           $      
                                              81,743            48,426



SOURCE The Advisory Board Company

Website: http://www.advisoryboardcompany.com
Website: http://www.advisory.com
Contact: Michael Kirshbaum, Chief Financial Officer, +1-202-266-5876,
jacobsg@advisory.com
 
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