The Advisory Board Company Reports Fiscal Year 2009 First Quarter Results

Company Reports Quarterly Revenue of $57.2 million, Earnings per Diluted Share
of $0.36 and Contract Value of $232.3 million; Announces New Program Launch

WASHINGTON, Aug. 5 /PRNewswire-FirstCall/ -- The Advisory Board Company
(Nasdaq: ABCO) today announced financial results for the first quarter of its
fiscal year ending March 31, 2009. Revenue for the quarter increased 12.0% to
$57.2 million, from $51.1 million in the first quarter of fiscal 2008. Net
income was $6.3 million, or $0.36 per diluted share, compared to $7.1 million,
or $0.38 per diluted share, for the same period a year ago. Contract value
grew 10.3% to $232.3 million as of June 30, 2008, up from $210.6 million as of
June 30, 2007.
Frank Williams, Chairman and Chief Executive Officer of The Advisory Board
Company, commented, "We are pleased that we achieved our quarterly targets for
revenue and EPS; however, we fell short of our objectives on contract value
growth. While we continue to see robust member utilization of program services
and ongoing strong renewal performance, we did see a decline in new business
conversion rates across the quarter due largely to a more conservative
spending posture across the membership. As a result, we have an aggressive
plan in place to ensure that all our research agendas and program services are
acutely on point, to drive optimal execution from a sales perspective and to
continue to emphasize the strength of our value proposition in a more
challenging macroeconomic environment. With our senior team and broader
organization intensely focused on these priorities, we feel confident that we
have the right strategy in place to address these challenges and set up the
business for future growth."
Mr. Williams added, "I am pleased to announce the launch of our newest
membership program, the Physician Management Performance Program. Rooted in
research feedback from member Chief Medical Officers, the program enhances
hospitals' ability to improve performance by providing unprecedented access to
data and best practices on physician performance. In national surveys, nearly
90% of hospital administrators indicate that physicians are a critical driver
of hospital performance on key cost and quality metrics, highlighting the
importance of engaging this constituency in outcomes improvement, particularly
given growing trends toward transparency and pay-for-performance. Through best
practice research and a web-based analytical tool which leverages technology
from Crimson, the Physician Management Performance Program enables Chief
Medical Officers to engage physicians in order to meaningfully impact critical
quality and cost indicators. As always, this program has benefited from the
advice and guidance of a stellar group of charter members, including BJC
Healthcare, Fairview Hospital, Monmouth Medical Center, Covenant Medical
Center, PinnacleHealth System and Huntsville Memorial Hospital. We are very
excited about its potential."
Share Repurchase
During the three months ended June 30, 2008, the Company repurchased
179,621 shares of its common stock at a total cost of approximately $8.8
million. To date the Company has repurchased 5,313,928 shares of its common
stock at a total cost of approximately $251.4 million.
Outlook for the Remainder of Calendar Year 2008
Based on performance during the quarter ended June 30, 2008, the Company
is changing its annual revenue guidance for calendar year 2008 from
$243 million to a range of approximately $232 million to $237 million. With
the change in revenue guidance, the Company is also updating its guidance on
earnings per diluted share for calendar year 2008 from $1.77 to a range of
approximately $1.50 to $1.57. Included in the earnings per diluted share
estimates is approximately $0.47 to $0.49 of share-based compensation and
related expense for the full calendar year. The Company expects an effective
income tax rate of approximately 32.3% for the remainder of fiscal year 2009.
For the quarter ending September 30, 2008, the Company expects revenue in a
range of approximately $57.5 million to $59.0 million, and earnings per
diluted share in a range of approximately $0.30 to $0.33.
Web and Conference Call Information
The Company will hold an investor conference call to discuss its first
quarter performance this evening, August 5, 2008, at 6:00 p.m. Eastern
Standard Time. The conference call will be available via live web cast on the
Company's web site at www.advisoryboardcompany.com in the section entitled
"Investor Relations" found under the tab "The Firm." To participate by
telephone, the dial-in number is 866.271.0675 and the access code is 94676012.
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 8:00 p.m.
Tuesday, August 5, until 8:00 p.m. Tuesday, August 12, 2008.
About The Advisory Board Company
The Advisory Board Company provides best practices research, analysis,
executive education and leadership development, decision support tools and
installation support services 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 organizations, including leading hospitals, health systems,
pharmaceutical and biotech companies, health care insurers, medical device
companies and universities. Members of each program are typically charged a
fixed annual fee and have access to an integrated set of services that may
include best practice research studies, executive education seminars,
customized research briefs, decision support tools, and web-based access to
the program's content database.
Forward Looking Statements
This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on information available to the Company as of August 5, 2008, 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 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 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, possible volatility in the Company's stock price, the
impact on our financials associated with some of our newer programs that are
more dependent upon technology, share-based compensation expense under SFAS
No. 123R including the effect of the amount, type and timing of future stock-
based compensation grants, and various factors related to income and other
taxes, including whether the District of Columbia withdraws the Company's
status as a Qualified High-Tech Company, as well as those risks and
uncertainties described in the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 2008 and also disclosed from time to time in its
subsequent reports on Form 10-Q and Form 8-K, which are available on the
Company's website at www.advisoryboardcompany.com in the "Investor Relations"
section and at the SEC's website at www.sec.gov. Additional information will
also be set forth in the Company's report on Form 10-Q for the fiscal quarter
ended June 30, 2008, which will be filed with the SEC in August 2008.
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, and the Company does not undertake to update these
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 OPERATIONS
AND OTHER OPERATING STATISTICS
(In thousands, except per share data)

Three Months Ended Selected
June 30, Growth
2008 2007 Rates
Statements of Operations
Revenue $57,217 $51,104 12.0%

Cost of services (1) 28,554 24,288
Member relations and marketing (1) 12,398 10,612
General and administrative (1) 6,895 6,353
Depreciation and amortization 1,083 767
Income from operations 8,287 9,084 -8.8%
Interest income 1,204 1,537
Income before provision for
income taxes 9,491 10,621 -10.6%

Provision for income taxes (3,161) (3,540)
Net income $6,330 $7,081 -10.6%

Earnings per share
Basic $0.36 $0.39
Diluted $0.36 $0.38 -5.3%

Weighted average common shares
outstanding
Basic 17,366 18,110
Diluted 17,720 18,795

Contract Value (at end of period) $232,278 $210,622 10.3%

Percentages of Revenues
Cost of services (1) 49.9% 47.5%
Member relations and marketing (1) 21.7% 20.8%
General and administrative (1) 12.1% 12.4%
Depreciation and amortization 1.9% 1.5%
Income from operations 14.5% 17.8%
Net income 11.1% 13.9%

(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 months ended June 30, 2008, the Company recognized
approximately $1.0 million in cost of services, approximately $0.6
million in member relations and marketing, and approximately $1.2
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 months ended June 30, 2007, the Company recognized
approximately $1.2 million in cost of services, approximately $0.7
million in member relations and marketing, and approximately $1.6
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. 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
CONSOLIDATED BALANCE SHEETS
(In thousands)

June 30, March 31,
2008 2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $13,485 $17,907
Marketable securities 7,078 8,085
Membership fees receivable, net 98,071 81,538
Prepaid expenses and other
current assets 3,301 3,860
Deferred income taxes, net 9,237 12,730
Total current assets 131,172 124,120

Property and equipment, net 30,471 22,897
Intangible assets, net 4,429 1,248
Goodwill 25,721 5,426
Deferred incentive compensation
and other charges 22,927 22,208
Deferred income taxes, net of
current portion 5,364 5,142
Marketable securities 94,351 124,073
Total assets $314,435 $305,114

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Deferred revenues $135,309 $134,465
Accounts payable and accrued
liabilities 31,631 26,994
Accrued incentive
compensation 4,329 10,032
Total current liabilities 171,269 171,491

Long-term deferred revenues 15,230 9,682
Other long-term liabilities 1,299 1,412
Total liabilities 187,798 182,585

Stockholders' equity:
Common stock 217 215
Additional paid-in capital 225,131 217,170
Retained earnings 119,354 113,024
Accumulated elements of
comprehensive income 162 1,540
Treasury stock (218,227) (209,420)
Total stockholders' equity 126,637 122,529

Total liabilities and
stockholders' equity $314,435 $305,114

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

Three Months Ended June 30,
2008 2007
Cash flows from operating activities:
Net income $6,330 $7,081
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 1,083 767
Amortization of intangible assets 192 57
Deferred income taxes 288 3,018
Excess tax benefits from share-based
payments (291) (2,008)
Share-based compensation expense 2,803 3,409
Amortization of marketable securities
premiums 224 194
Changes in operating assets and liabilities:
Member fees receivable (8,119) (9,958)
Prepaid expenses and other current assets 576 (710)
Deferred incentive compensation and other
charges (719) (2,546)
Deferred revenues 2,471 2,730
Accounts payable and accrued liabilities 1,071 2,625
Accrued incentive compensation (5,703) (5,026)
Other long-term liabilities (113) 184
Net cash flows provided by (used in)
operating activities 93 (183)

Cash flows from investing activities:
Purchases of property and equipment (5,768) (1,380)
Capitalized software development costs (173) (89)
Cash paid for acquisition, net of cash
acquired (18,592) -
Redemption of marketable securities 33,969 13,500
Purchases of marketable securities (5,579) (2,000)
Net cash flows provided by investing
activities 3,857 10,031

Cash flows from financing activities:
Proceeds on issuance of stock from exercise
of stock options 421 4,329
Repurchase of shares to satisfy minimum
employee tax withholding (390) (266)
Proceeds on issuance of stock under
employee stock purchase plan 113 115
Excess tax benefits from share-based
compensation arrangements 291 2,008
Purchases of treasury stock (8,807) (14,344)
Net cash flows used in financing activities (8,372) (8,158)

Net (decrease) increase in cash and cash
equivalents (4,422) 1,690
Cash and cash equivalents, beginning of
period 17,907 13,195
Cash and cash equivalents, end of period $13,485 $14,885

SOURCE The Advisory Board Company

Michael Kirshbaum, Chief Financial Officer, +1-202-266-5876,
jacobsg@advisory.com