WASHINGTON, May 4, 2017 /PRNewswire/ -- The Advisory Board
Company (NASDAQ: ABCO), a leading provider of research,
technology, and consulting to health care organizations and
educational institutions, today announced financial results for the
first quarter ended March 31,
2017.
First Quarter
Financial Review
|
|
|
|
|
(In millions, except
per share
amounts)
|
|
Q1-17
|
Q1-16
|
% Change
|
Revenue
|
|
$ 194.5
|
$
200.7
|
(3.1)%
|
Net income
|
|
19.7
|
10.3
|
90.1
|
Earnings per diluted
share (EPS)
|
|
0.48
|
0.25
|
92.0
|
|
|
|
|
|
Adjusted Revenue
(non-GAAP) a
|
|
194.1
|
195.5
|
(0.7)
|
Adjusted EBITDA
(non-GAAP) a
|
|
45.0
|
45.9
|
(1.9)
|
Adjusted EPS
(non-GAAP) a
|
|
$
0.47
|
$
0.44
|
6.8%
|
|
a) Excludes contribution from
exited programs and impact of restructuring and other charges for
current and prior year periods.
|
"We delivered solid overall performance to start the year, with
first quarter adjusted revenue and adjusted EBITDA both above our
guidance ranges," said Robert
Musslewhite, Chairman and Chief Executive Officer of The
Advisory Board Company. "These results reflect our strong
competitive position in two high-demand target markets, Health Care
and Education, as well as the efforts of our passionate, committed
team that leverages our distinct capabilities to help our
members address complex market challenges. I am confident
that our unique best practice-based portfolio, deep insight, and
exceptional member relationships set us up well to continue to have
tremendous impact in these important markets, both now and into the
future."
Revenue for the first quarter of 2017 was $194.5 million, compared to $200.7 million for the same quarter a year
ago. The Company reported net income for the first quarter of
2017 of $19.7 million, or
$0.48 per diluted share, compared to
net income of $10.3 million, or
$0.25 per diluted share, for the
first quarter of 2016. The first quarter of 2017 included
$11.2 million in
restructuring-related charges and a gain of $23.4 million from the sale of Evolent Health
stock in the period.
Contract value, excluding exited programs from current and prior
year periods, increased 1.5% to $756.2
million as of March 31, 2017,
compared to contract value of $744.9
million as of March 31,
2016.
Adjusted revenue for the first quarter of 2017 was $194.1 million, compared to adjusted revenue of
$195.5 million for the same quarter a
year ago. Adjusted EBITDA in the first quarter of 2017 was
$45.0 million, compared to
$45.9 million for the first quarter
of 2016. Adjusted EPS was $0.47 for
the first quarter of 2017, compared to $0.44 for the first quarter last year.
Balance Sheet and Capital Resources
At March 31, 2017, the Company had
$150.1 million in cash and cash
equivalents and $515.1 million in
total debt. The Company's leverage ratio at March 31, 2017 was approximately 2.8, compared to
3.0 at March 31, 2016. Net of cash,
the Company's net leverage ratio was 2.0 at March 31, 2017, compared to 2.7 at March 31, 2016.
Net cash provided by operating activities for the first quarter
of 2017 was $28.7 million, compared
to $27.2 million for the same quarter
a year ago. During the three months ended March 31, 2017, the Company sold approximately
23% of its equity holdings in Evolent Health for $41.4 million in cash proceeds.
2017 Financial Guidance
The Company's financial guidance for calendar year 2017 remained
unchanged, as follows:
(In millions, except
per share
amounts)
|
|
CY-17
|
CY-16
|
Y-Y
|
|
|
Guidance
b
|
Actual
b
|
Change
|
Adjusted Revenue
(non-GAAP)
|
|
$ 780.0 -
840.0
|
$ 786.1
|
(0.6) -
7.9%
|
Adjusted EBITDA
(non-GAAP)
|
|
$ 190.0 -
215.0
|
$ 185.0
|
2.7 - 16.2%
|
Adjusted EBITDA
margin (non-GAAP)
|
|
24.4 -
25.6%
|
23.5%
|
90 - 210
bps
|
Adjusted EPS
(non-GAAP)
|
|
$ 1.80 -
2.10
|
$ 1.86
|
(3.2) -
12.9%
|
|
b) Excludes contribution from exited
programs and impact of restructuring and other charges for current
and prior year periods.
|
For the second quarter ending June 30,
2017, the Company expects adjusted revenue to be in a range
of $192 million to $197 million, and
adjusted EBITDA to be in a range of $44
million to $49 million.
Conference Call Information
As previously announced, The Advisory Board Company will hold a
conference call to discuss its financial and operating performance
today, May 4, 2017, at 5:30 p.m. Eastern Time. The Company invites all
interested parties to attend the conference call, including the
lenders under the Company's senior secured credit facilities. The
call will be available via live webcast on the Company's website at
investors.advisoryboardcompany.com. The webcast and accompanying
slide presentation will be archived on the Company's website for at
least 30 days.
To participate by telephone, please dial 888-336-7150 (or
412-902-4176 for international callers). Participants are advised
to dial in at least five minutes prior to the call to
register.
About The Advisory Board Company
The Advisory Board Company is a best practices firm that uses a
combination of research, technology, and consulting to improve the
performance of approximately 5,700 health care organizations and
educational institutions. Headquartered in Washington, D.C., with offices worldwide, The
Advisory Board Company forges and finds the best new ideas and
proven practices from its network of thousands of leaders, then
customizes and hardwires them into every level of member
organizations, creating enduring value. For more information, visit
www.advisoryboardcompany.com.
Non-GAAP Financial Measures
This news release presents information about the Company's
historical adjusted revenue, adjusted EBITDA, adjusted net income,
and adjusted EPS, 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"). A reconciliation of each
of the foregoing historical non-GAAP financial measures to the most
directly comparable historical GAAP financial measures is provided
in the accompanying tables found at the end of this release for
each of the fiscal periods indicated.
No reconciliation of the Company's adjusted revenue, adjusted
EBITDA, adjusted EBITDA margin and adjusted EPS guidance for
calendar year 2017 and the quarter ending June 30, 2017 to the most comparable GAAP
financial measures is included in the tables found at the end of
this release. All of these non-GAAP financial measures exclude the
impact and tax-effected impact of stock-based compensation expense,
exited programs, restructuring and other related charges, sale of
equity holdings in Evolent Health, Inc., and other fair value and
non-cash charges. The Company is not able, without unreasonable
efforts, to accurately forecast the excluded items at the level of
precision that would be required to be included in the
reconciliations.
Caution Regarding Forward-Looking Statements
Statements in this news release that relate to future results
and events are forward-looking statements and are based on the
Company's expectations as of the date of this news release. In some
cases, you can identify these statements by such forward-looking
words as "anticipate," "believe," "estimate," "expect," "guidance,"
"intend," "may," "outlook," "plan," "potential," "should," "will,"
"would," or similar words or expressions. Forward-looking
statements in this news release include the Company's expectations
regarding its performance and results for calendar 2017 or the
quarter ending June 30, 2017 with
respect to adjusted revenue, adjusted EBITDA, adjusted EBITDA
margin, adjusted EPS, stock-based compensation expense, interest
expense, depreciation and amortization expense, and capital
expenditures.
Actual results and events in future periods may differ
materially from those expressed or implied by these forward-looking
statements because of a number of risks, uncertainties, and other
factors, including those relating to: factors that adversely
affect the financial condition of the health care and education
industries; federal and state law and regulations governing the
health care and education industries and the Company's members' and
subcontractors' respective compliance with those applicable laws
and regulations; effects of federal and state privacy and security
laws and cyberattacks, actual or attempted breaches of security,
unanticipated disclosures of information, and similar events;
liability for failure to provide accurate information or for
deficient submissions to third-party payors; compliance with
federal and state laws governing healthcare fraud and abuse or
reimbursement; the Company's ability to attract new members, obtain
renewals from existing members, and sell additional products and
services; maintaining the Company's reputation and expanding its
name recognition; the Company's ability to offer new and valuable
products and services; effects of competition; the Company's
ability to maintain a highly-skilled workforce; unsuccessful design
or implementation of software or delivery of the Company's
consulting, management and data-enabled services; delays in
generating revenue; disruptions in service or operational failures
at the Company's data centers or at other service provider
locations; ability to collect and maintain member and third-party
data and to obtain proper permissions and waivers for use and
disclosure of information received from members or on their behalf;
maintenance of third-party providers and strategic alliances and
entry into new alliances; ability to license, integrate, and access
third-party technologies and data; potential liability claims;
protection of the Company's intellectual property; claims of
infringement, misappropriation, or violation of proprietary rights
of third parties; limitations associated with use of open source
technology; estimates and assumptions used to prepare the Company's
consolidated financial statements and any changes made to those
estimates; any significant increase in bad debt in excess of
recorded estimates; the inability to integrate successfully the
operations of future acquisitions into the Company's business;
business and financial risks associated with the pursuit of
acquisition opportunities; any significant additional impairment of
the Company's goodwill; the Company's ability to realize a return
on its strategic investments; potential imposition of sales and use
taxes on sales of the Company's services; the Company's ability to
realize fully its deferred tax assets; the potential effects of
changes in, or interpretations of, tax rules on the Company's
effective tax rates; inherent limitations in, and the potential
impact of any failure to maintain, effective internal control and
procedures over financial reporting; limitations caused by the
Company's level of debt, interest payment obligations, and
covenants under its senior credit agreement; unanticipated risks
and costs regarding interest rates and hedging instruments; and
effects of issuance of additional capital stock; provisions in the
Company's charter and bylaws that could discourage takeover
attempts.
This list of risks, uncertainties, and other factors is not
complete. The Company discusses some of these matters more fully,
as well as certain risk factors that could affect the Company's
business, financial condition, results of operations, and
prospects, in its filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K for
the year ended December 31, 2016,
quarterly reports on Form 10-Q, and current reports on Form 8-K.
These filings are available for review through the Securities and
Exchange Commission's website at www.sec.gov. Any or all
forward-looking statements the Company makes may turn out to be
wrong, and can be affected by inaccurate assumptions the Company
might make or by known or unknown risks, uncertainties, and other
factors, including those identified in this news release.
Accordingly, you should not place undue reliance on the
forward-looking statements made in this news release, which speak
only as of its date. 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
Ended
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
|
2017
|
|
2016
|
|
%
Change
|
|
Statements
of Income
|
(unaudited)
|
|
(unaudited)
|
|
|
|
Revenue
(1)
|
$
194,539
|
|
$
200,735
|
|
-3.1%
|
|
|
|
|
|
|
|
|
|
|
Cost of
services, excluding depreciation and amortization (1) (2) (3) (4)
(5)
|
98,642
|
|
95,949
|
|
2.8%
|
|
Member
relations and marketing (2) (3) (4)
|
32,855
|
|
32,395
|
|
1.4%
|
|
General and
administrative (1) (2) (3) (4)
|
39,088
|
|
31,828
|
|
22.8%
|
|
Depreciation
and amortization (6)
|
22,334
|
|
19,767
|
|
13.0%
|
|
Operating
income
|
1,620
|
|
20,796
|
|
|
|
Other
expense
|
|
|
|
|
|
|
Interest
expense
|
(4,500)
|
|
(4,821)
|
|
-6.7%
|
|
Other expense,
net
|
233
|
|
61
|
|
|
|
|
|
Total other
expense, net
|
(4,267)
|
|
(4,760)
|
|
|
|
(Loss) income before
benefit (provision) for income taxes
|
|
|
|
|
|
|
and gain
(loss) from equity method investments
|
(2,647)
|
|
16,036
|
|
|
|
Benefit
(provision) for income taxes
|
724
|
|
(5,663)
|
|
|
|
Gain (loss)
from equity method investments
|
21,577
|
|
(34)
|
|
|
|
Net
income
|
$
19,654
|
|
$
10,339
|
|
90.1%
|
|
|
|
|
|
|
|
|
|
|
Net income per
share
|
|
|
|
|
|
|
|
Basic
|
$
0.49
|
|
$
0.25
|
|
|
|
|
Diluted
|
$
0.48
|
|
$
0.25
|
|
92.0%
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
40,253
|
|
41,492
|
|
|
|
|
Diluted
|
41,041
|
|
41,873
|
|
-2.0%
|
|
|
|
|
|
|
|
|
|
|
Contract
Value (at end of period, excluding exited
programs)
|
$
756,167
|
|
$
744,861
|
|
1.5%
|
|
|
|
|
|
|
|
|
|
|
Percentages
of Revenue
|
|
|
|
|
|
|
Cost of
services, excluding depreciation and amortization (1) (2) (3) (4)
(5)
|
50.7%
|
|
47.8%
|
|
|
|
Member
relations and marketing (2) (3) (4)
|
16.9%
|
|
16.1%
|
|
|
|
General and
administrative (1) (2) (3) (4)
|
20.1%
|
|
15.9%
|
|
|
|
Depreciation
and amortization (6)
|
11.5%
|
|
9.8%
|
|
|
|
Operating
income
|
0.8%
|
|
10.4%
|
|
|
|
Net
income
|
10.1%
|
|
5.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts include
exited programs, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
482
|
|
5,278
|
|
|
|
|
|
Cost of
services
|
3,291
|
|
3,821
|
|
|
|
|
|
General and
administrative
|
2
|
|
-
|
|
|
|
|
|
Depreciation
and amortization
|
1,238
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Amounts include
restructuring charges, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
2,295
|
|
-
|
|
|
|
|
|
Member
relations and marketing
|
311
|
|
-
|
|
|
|
|
|
General and
administrative
|
8,607
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Amounts include
stock-based compensation, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
1,258
|
|
2,187
|
|
|
|
|
|
Member
relations and marketing
|
1,146
|
|
1,114
|
|
|
|
|
|
General and
administrative
|
3,307
|
|
3,681
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
Amounts include
build-to-suit land rent, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
464
|
|
426
|
|
|
|
|
|
Member
relations and marketing
|
311
|
|
304
|
|
|
|
|
|
General and
administrative
|
156
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Amounts include fair
value adjustments of acquisition-related earn-out liabilities, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
services
|
400
|
|
(1,070)
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Amounts include
amortization of acquisition-related intangibles, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
6,807
|
|
7,038
|
|
|
|
|
|
|
|
|
|
|
|
|
THE ADVISORY
BOARD COMPANY
|
CONSOLIDATED
BALANCE SHEETS
|
(In
thousands)
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
150,080
|
|
$
91,151
|
Membership fees
receivable, net
|
|
548,491
|
|
605,517
|
Prepaid
expenses and other current assets
|
|
22,375
|
|
18,965
|
Total current
assets
|
|
720,946
|
|
715,633
|
|
|
|
|
|
Property and
equipment, net
|
|
162,668
|
|
171,281
|
Construction in
progress
|
|
86,828
|
|
63,368
|
Intangible
assets, net
|
|
250,036
|
|
255,053
|
Deferred
incentive compensation and other charges
|
|
63,556
|
|
72,178
|
Goodwill
|
|
737,023
|
|
739,507
|
Investments in
unconsolidated entities
|
|
13,711
|
|
19,858
|
Total
assets
|
|
$
2,034,768
|
|
$
2,036,878
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Deferred
revenue, current
|
|
$
537,464
|
|
$
564,237
|
Accounts
payable and accrued liabilities
|
|
71,805
|
|
67,702
|
Accrued
incentive compensation
|
|
24,845
|
|
25,521
|
Debt,
current
|
|
56,554
|
|
49,347
|
Total current
liabilities
|
|
690,668
|
|
706,807
|
|
|
|
|
|
Deferred
revenue, net of current portion
|
|
145,236
|
|
170,357
|
Deferred income
taxes
|
|
87,630
|
|
89,013
|
Debt, net of
current portion
|
|
458,592
|
|
472,739
|
Financing
obligation
|
|
86,828
|
|
63,368
|
Other long-term
liabilities
|
|
17,398
|
|
17,550
|
Total
liabilities
|
|
1,486,352
|
|
1,519,834
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common
stock
|
|
404
|
|
402
|
Additional
paid-in capital
|
|
794,293
|
|
782,399
|
Accumulated
deficit
|
|
(247,310)
|
|
(266,218)
|
Accumulated
other comprehensive income
|
|
1,029
|
|
461
|
Total
stockholders' equity
|
|
548,416
|
|
517,044
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
2,034,768
|
|
$
2,036,878
|
THE ADVISORY
BOARD COMPANY
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
|
|
|
2017
|
|
2016
|
Cash flows
from operating activities:
|
|
|
|
|
Net
income
|
|
$
19,654
|
|
$
10,339
|
Adjustments to
reconcile net income to net cash provided
|
|
|
|
|
by operating
activities:
|
|
|
|
|
Depreciation
and amortization
|
|
22,334
|
|
19,767
|
Amortization of
debt issuance costs
|
|
341
|
|
340
|
Deferred income
taxes
|
|
2,359
|
|
(48)
|
Excess tax
benefits from stock-based awards
|
|
207
|
|
(1,269)
|
Stock-based
compensation expense
|
|
5,711
|
|
6,982
|
Equity in
losses of equity method investments
|
|
1,815
|
|
34
|
Gain on partial
sale of equity method investment
|
|
(23,392)
|
|
-
|
Changes in
operating assets and liabilities (net of the effect of
acquisition):
|
|
|
|
|
Membership fees
receivable
|
|
57,026
|
|
51,389
|
Prepaid
expenses and other current assets
|
|
(3,428)
|
|
4,414
|
Deferred
incentive compensation and other charges
|
|
9,423
|
|
8,214
|
Deferred
revenue
|
|
(51,894)
|
|
(57,794)
|
Accounts
payable and accrued liabilities
|
|
(10,067)
|
|
(11,596)
|
Acquisition-related earn-out
payments
|
|
(196)
|
|
(1,432)
|
Accrued
incentive compensation
|
|
(676)
|
|
(1,876)
|
Other long-term
liabilities
|
|
(550)
|
|
(260)
|
Net cash
provided by operating activities
|
|
28,667
|
|
27,204
|
|
|
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
Purchases of
property and equipment
|
|
(7,970)
|
|
(9,632)
|
Capitalized
external-use software development costs
|
|
(734)
|
|
(836)
|
Cash paid for
acquisitions, net of cash acquired
|
|
-
|
|
(1,900)
|
Cash received
from partial sale of equity method investment
|
|
41,366
|
|
-
|
Net cash
provided by (used in) investing activities
|
|
32,662
|
|
(12,368)
|
|
|
|
|
|
Cash flows
from financing activities:
|
|
|
|
|
Pay down of
debt
|
|
(7,187)
|
|
(7,187)
|
Proceeds from
issuance of common stock from exercise of stock
options
|
|
5,686
|
|
3,019
|
Withholding of
shares to satisfy minimum employee tax withholding
|
|
(797)
|
|
(396)
|
Proceeds from
issuance of stock under employee stock purchase
plan
|
|
84
|
|
120
|
Acquisition-related earn-out
payments
|
|
(186)
|
|
(3,600)
|
Excess tax
benefits from stock-based awards
|
|
-
|
|
1,269
|
Purchases of
treasury stock
|
|
-
|
|
(27,449)
|
Net cash used
in financing activities
|
|
(2,400)
|
|
(34,224)
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
58,929
|
|
(19,388)
|
Cash and cash
equivalents, beginning of period
|
|
91,151
|
|
71,825
|
Cash and cash
equivalents, end of period
|
|
$
150,080
|
|
$
52,437
|
THE ADVISORY
BOARD COMPANY
|
FINANCIAL
HIGHLIGHTS AND RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Revenue
|
$
194,539
|
|
$
200,735
|
|
Less: Revenue
from exited programs
|
482
|
|
5,278
|
|
Adjusted revenue
|
$
194,057
|
|
$
195,457
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net income
|
$
19,654
|
|
$
10,339
|
|
(Gain) loss from
equity method investments
|
(21,577)
|
|
34
|
|
(Benefit) provision
for income taxes
|
(724)
|
|
5,663
|
|
Interest
expense
|
4,500
|
|
4,821
|
|
Other expense,
net
|
(233)
|
|
(61)
|
|
Depreciation and
amortization
|
22,334
|
|
19,767
|
|
Fair value adjustment
to acquisition-related earn-out liabilities
|
400
|
|
(1,070)
|
|
Build-to-suit land
rent
|
931
|
|
876
|
|
Stock-based
compensation expense
|
5,711
|
|
6,982
|
|
Loss (income) from
exited programs
|
4,049
|
|
(988)
|
|
Depreciation and
amortization from exited programs
|
(1,238)
|
|
(469)
|
|
Restructuring
charges
|
11,213
|
|
-
|
|
Adjusted EBITDA
|
$
45,020
|
|
$
45,894
|
|
THE ADVISORY
BOARD COMPANY
|
FINANCIAL
HIGHLIGHTS AND RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net income
|
$
19,654
|
|
$
10,339
|
|
(Gain) loss from
equity method investments
|
(21,577)
|
|
34
|
|
Amortization of
acquisition-related intangibles
|
6,807
|
|
7,038
|
|
Fair value adjustment
to acquisition-related earn-out liabilities
|
400
|
|
(1,070)
|
|
Build-to-suit land
rent
|
931
|
|
876
|
|
Stock-based
compensation expense
|
5,711
|
|
6,982
|
|
Loss (income) from
exited programs
|
4,049
|
|
(988)
|
|
Restructuring
charges
|
11,213
|
|
-
|
|
Income tax effects
and adjustments
|
(7,962)
|
|
(4,599)
|
|
Adjusted net
income
|
$
19,226
|
|
$
18,612
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net income per
share - diluted
|
$
0.48
|
|
$
0.25
|
|
(Gain) loss from
equity method investments
|
(0.53)
|
|
-
|
|
Amortization of
acquisition-related intangibles
|
0.17
|
|
0.17
|
|
Fair value adjustment
to acquisition-related earn-out liabilities
|
0.01
|
|
(0.03)
|
|
Build-to-suit land
rent
|
0.02
|
|
0.02
|
|
Stock-based
compensation expense
|
0.14
|
|
0.17
|
|
Loss (income) from
exited programs
|
0.10
|
|
(0.02)
|
|
Restructuring
charges
|
0.27
|
|
-
|
|
Income tax effects
and adjustments
|
(0.19)
|
|
(0.12)
|
|
Non-GAAP adjusted earnings
per share
|
$
0.47
|
|
$
0.44
|
|
Non-GAAP Financial Presentation
The non-GAAP financial reconciliation tables present
supplemental measures of the Company's performance which have been
derived from its consolidated financial information but which are
not presented in the Company's consolidated financial statements
prepared in accordance with accounting principles generally
accepted in the United States of
America, or "GAAP." The Company refers to these
financial measures, which are considered "non-GAAP financial
measures" under SEC rules as adjusted revenue, adjusted EBITDA,
adjusted net income, and non-GAAP earnings per diluted share.
The Company's management team uses these non-GAAP financial
measures, together with financial measures prepared in accordance
with GAAP, to enhance understanding by investors of core operating
performance, as well as for internal forecasting purposes.
Management believes that providing information about these non-GAAP
financial measures facilitates an assessment by investors of the
Company's fundamental operating trends and addresses concerns of
investors that various non-cash and other effects included in GAAP
measures may obscure such underlying trends. The Company
believes that, by highlighting such trends relating to underlying
performance, its non-GAAP presentation helps investors to make
meaningful period-to-period comparisons of the Company's
results.
There are limitations to the Company's use of non-GAAP financial
measures. These non-GAAP financial measures may not be
comparable to similarly titled measures of other companies.
Other companies, including industry peer companies, may calculate
non-GAAP financial measures differently than the Company does,
limiting the usefulness of those measures for comparative
purposes.
The Company's non-GAAP financial measures exclude the items
discussed below. Because the excluded items have a material
impact on its financial results, the Company uses non-GAAP
financial measures to supplement financial information presented in
accordance with GAAP.
Reconciliations of each non-GAAP financial measure to its most
directly comparable GAAP financial measure are set forth
below. The Company encourages investors and other interested
parties to review the reconciliations in conjunction with the
presentation of the non-GAAP financial measures for each of the
periods presented. The discussion below presents information
about each of the non-GAAP financial measures and the Company's
reasons for excluding the enumerated items from our non-GAAP
results. In future fiscal periods, the Company may exclude
such items and may incur income and expenses similar to these
excluded items. Accordingly, the exclusion of these items and
other similar items in the Company's non-GAAP presentation should
not be interpreted as implying that these items are non-recurring,
infrequent or unusual.
Adjusted Net Income and Adjusted Earnings Per
Share-Diluted
The Company presents adjusted net income and adjusted earnings
per share-diluted to provide investors with a meaningful,
consistent comparison of the Company's operating results and trends
for the periods presented. Our management believes that these
measures are also useful to investors by allowing investors to
evaluate the Company's operations using the same tools that
management uses to evaluate the Company's past performance and
prospects for future performance. These two non-GAAP
financial measures reflect adjustments based on the exclusion of
the following items as well as adjustments for related income tax
effects:
- Gain (loss) from equity method investments: The Company has
excluded its proportional share of income (loss) and other gains
recorded in connection with its equity method investments.
Management believes that the exclusion of such amounts allows
investors to better understand the Company's core operating
results."
- Amortization of acquisition-related intangible assets:
Amortization of acquisition-related intangible assets consists of
amortization of customer relationships, developed technology, and
trade names. Amortization charges for acquired intangible assets
are significantly affected by the timing and magnitude of the
Company's acquisitions, and these charges may vary in amount from
period to period. The Company excludes these charges to facilitate
a more meaningful evaluation of its current operating performance
and comparisons to its past operating performance.
- Fair value adjustments to acquisition-related earn-out
liabilities: The Company has excluded the impact of
acquisition-related contingent consideration non-cash adjustments
due to the inherent uncertainty and volatility associated with such
amounts based on changes in assumptions with respect to fair value
estimates. The amount and frequency of such adjustments are not
consistent across transactions and are significantly affected by
the timing and size of our acquisitions, the future outlook of the
acquired business, the estimated discount rate, and the nature of
the transaction consideration.
- Build-to-suit land rent: The Company entered into a 16-year
lease for its new corporate headquarters in December 2015, which is currently being
constructed in Washington D.C. The
lease has an anticipated start date of mid-2019. The Company has
concluded that it is the deemed owner of the building (for
accounting purposes only) during the construction period and that
the lease qualifies for build-to-suit accounting. The Company
recognizes expense on a portion of future lease payments that are
estimated to represent the underlying land lease. The Company
excludes these costs for purposes of calculating non-GAAP measures
because the Company believes these costs do not reflect expected
future operating expenses and do not contribute to a meaningful
evaluation of the Company's current operating performance or
comparisons to the Company's operating performance in other
periods.
- Stock-based compensation expense: Although stock-based
compensation is a key incentive offered to our employees, the
Company evaluates its operating results excluding such expense
because the expense can vary significantly from period to period
based on the Company's share price, as well as the timing, size and
nature of equity awards granted. In addition, management believes
that the exclusion of this expense facilitates the ability of
investors to compare the Company's operating results with those of
other companies, many of which also exclude such expense in
determining their non-GAAP financial measures.
- Restructuring charges: The Company has excluded costs
associated with its formal restructuring plan announced on
January 3, 2017. These costs are
primarily related to employee termination costs and benefits and
costs to terminate leases. The Company excludes these restructuring
costs for purposes of calculating non-GAAP measures because the
Company believes that these historical costs do not reflect
expected future operating expenses and do not contribute to a
meaningful evaluation of the Company's current operating
performance or comparisons to the Company's operating performance
in other periods.
- Losses (income) from exited programs: The Company has excluded
income (loss) from disposed programs. These include revenue and
costs, including salary and benefits. The Company believes that the
exclusion of such amounts allows investors to better understand the
Company's core continuing operations.
- Other corporate expenses: The Company has excluded certain
other expenses that are the result of other, non-comparable events,
primarily charges associated with the fair valuing of certain
equity instruments. These events arise outside of the ordinary
course of the Company's continuing operations. The Company excludes
these charges to facilitate a more meaningful evaluation of our
current operating performance and comparisons to past operating
performance.
Adjusted Revenue
The Company adjusts revenue to exclude the impact of exited
programs. Management believes that the adjustments for these
items more closely correlate the reported financial measure with
the ordinary and ongoing course of the Company's operations.
Adjusted EBITDA
Adjusted EBITDA reflects the adjustments to net income prepared
on a GAAP basis, as discussed above, and, to the extent not already
subject to such adjustments, excludes expenses related to interest,
taxes, depreciation, amortization, gain or loss from exited
programs, and restructuring-related charges. Companies
exhibit significant variations with respect to capital structure
and cost of capital (which affect relative interest expense) and
differences in taxation and book depreciation of facilities and
equipment (which affect relative depreciation expense), including
significant differences in the depreciable lives of similar assets
among various companies. By eliminating some of these
variations and reflecting the other adjustments, discussed above,
management believes that this non-GAAP financial measure allows
investors to evaluate more effectively the Company's fundamental
operating performance relative to that of other companies.
There are various limitations associated with the non-GAAP
financial measures the Company uses, including:
- the non-GAAP financial measures generally do not reflect all
depreciation and amortization, and although the assets being
depreciated and amortized will in some cases have to be replaced in
the future, the measures do not reflect any cash requirements for
such replacements;
- the non-GAAP financial measures do not reflect the expense of
equity awards to employees; and
- the non-GAAP financial measures do not reflect the effect of
earnings or charges resulting from matters that our management
considers not indicative of the Company's ongoing operations, but
which may recur from year to year.
Because of their limitations, the Company's non-GAAP financial
measures are not meant to be considered as indicators of
performance in isolation from or as a substitute for revenue, net
income, earnings per diluted share, effective tax rate, and
weighted average common shares outstanding-diluted prepared in
accordance with GAAP, and should be read only in conjunction with
financial information presented on a GAAP basis.
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SOURCE The Advisory Board Company