Nov. 2, 2009 (PR Newswire) --

WASHINGTON, DC, Nov. 2, 2009 /PRNewswire-FirstCall/ -- The Advisory Board Company (Nasdaq: ABCO) today announced financial results for the second quarter of its fiscal year ending March 31, 2010. Revenue for the quarter increased 1.2% to $58.3 million, from $57.6 million in the second quarter of fiscal 2009. Contract value grew 3.0% to $237.6 million as of September 30, 2009, up from $230.6 million as of September 30, 2008. Net loss was $2.1 million, or $0.14 per diluted share, compared to net income of $5.4 million, or $0.32 per diluted share, for the same period a year ago. Included in net loss for the second quarter of fiscal 2010 are pre-tax one-time charges of $7.4 million for the write-off of capitalized developed software costs and $1.9 million in accelerated compensation costs resulting from the cancellation of certain stock options held by members of the Company's senior management and its directors. Excluding the effects, net of tax, of these one-time non-cash charges, adjusted net income was $4.0 million and adjusted earnings per diluted share was $0.26 for the second quarter of fiscal 2010. Adjusted EBITDA was $7.2 million for the quarter, compared to $8.4 million in the second quarter of fiscal 2009.

For the six months ended September 30, 2009, revenue increased 0.2% to $115.0 million, from $114.8 million for the six months ended September 30, 2008. Net income was $2.1 million, or $0.13 per diluted share, compared to net income of $11.7 million, or $0.68 per diluted share, for the same period a year ago. Excluding the effects, net of tax, of the one-time non-cash charges associated with the write-off of capitalized developed software costs and the cancellation of certain stock options, adjusted net income was $8.2 million and adjusted earnings per diluted share was $0.53 for the six months ending September 30, 2009. Adjusted EBITDA was $14.6 million for the six months ending September 30, 2009, compared to $17.7 million for the same period a year ago.

Robert Musslewhite, Chief Executive Officer of The Advisory Board Company, commented, "Overall, we were pleased with our performance for the quarter. Adjusted earnings were in line with our expectations, and we are encouraged that the period marked our return to positive year-over-year revenue growth. In addition, this quarter's growth in our contract value both illustrates our ability to address our members' most critical issues through programs that deliver tangible value and builds on the stability we have maintained across the year."

Mr. Musslewhite added, "During the quarter we also had two events that resulted in one-time non-cash charges. The write-off of capitalized developed software costs, associated primarily with our Nursing Performance Program, represents the successful culmination of our investment in improving the scalability of our web-based tools programs, as we have migrated members to a more effective platform and retired technology that is no longer in use. In addition, each member of both our senior management and our board of directors agreed to voluntarily cancel a number of older options with strike prices between $51 and $61."

Mr. Musslewhite continued, "I am also pleased to announce today two new program launches. The first, the Clinical Integration Initiative, offers hospitals a comprehensive approach to evaluating and implementing models of clinical integration that meet the key requirements for a sustained collaboration with physicians to impact cost and quality metrics. This is the second program built off of our Crimson platform and meets one of hospitals' most urgent needs: assistance in developing a strategy for physician collaboration in the face of converging internal and market forces that require more integrated clinical models in order to deliver higher-value health care. As part of this launch, we have been privileged to have input and support from our early Crimson partners, including Memorial Hermann Healthcare, as well as some newer Charter Members, including Eisenhower Medical Center, Palmetto Health, and Methodist Healthcare System of San Antonio."

Mr. Musslewhite concluded, "Our second launch, the Payment Navigation Performance Program, builds on our strong portfolio in the revenue cycle terrain, and addresses the intractable problem of accurately estimating a patient's financial responsibility prior to service, in order to maximize pre-registration and point-of-service collections. Through best practice research and a robust, web-based analytical tool featuring the industry's most comprehensive real-time link to payers, robust estimator logic, and links to hospital-specific contract and charge master data, the Payment Navigation Performance Program aids hospitals in reducing denials and bad debt. Early partners such as Blessing Hospital, Shields Healthcare, Dekalb Regional Medical Center and Betsy Johnson Regional Hospital have provided invaluable feedback on the analytical tool, as well as the design of the program."

Share Repurchase

During the three months ended September 30, 2009, the Company repurchased 3,872 shares of its common stock at a total cost of approximately $0.1 million. To date the Company has repurchased 7,224,416 shares of its common stock at a total cost of approximately $305.0 million.

Outlook for the Remainder of Calendar Year 2009

As previously announced, the Company expects calendar year 2009 revenue to be within a few percentage points of calendar year 2008 revenue. The Company expects adjusted EBITDA in a range of approximately $27 million to $33 million, and adjusted earnings per diluted share in a range of approximately $0.90 to $1.20.

Non-GAAP Financial Measures

This press release and the accompanying tables include a discussion of adjusted EBITDA, adjusted net income, and adjusted 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"). As used in this release, the term "Adjusted EBITDA" refers to a financial measure that we define as earnings before other income, net, which includes interest income and foreign currency losses and gain; income taxes; depreciation and amortization; and one-time non-cash charges associated with the write-off of capitalized software and the cancellation of certain stock options. The term "Adjusted net income" refers to net income excluding the net of tax effect of one-time non-cash charges associated with the write-off of capitalized software and the cancellation of certain stock options. "Adjusted earnings per diluted share" refers to net income per share excluding the per share effect, net of tax, of one-time non-cash charges associated with the write-off of capitalized software and the cancellation of certain stock options. These non-GAAP measures may be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP measures or results. Furthermore, we intend to continue to provide these non-GAAP financial measures as part of our future earnings discussions and, therefore, the inclusion of these non-GAAP financial measures will provide consistency in our financial reporting. We believe that adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are relevant and useful information for our investors. We use these non-GAAP financial measures for internal budgeting and other managerial purposes because it enables the Company's management to evaluate projected operating results on a basis that allows for comparability without regard to changes arising from applicable tax rates, variability in interest income and foreign currency exchange rates, periodic costs of certain capitalized tangible and intangible assets and one-time charges.

There are limitations associated with adjusted EBITDA, including that adjusted EBITDA does not reflect all changes in applicable tax rates, foreign currency exchange rates, or the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our business. Management compensates for these aspects and limitations of adjusted EBITDA by evaluating the costs of such tangible and intangible assets through other financial measures such as evaluating capital expenditures, and by also relying on the comparable GAAP financial measure of income from operations, which includes depreciation and amortization, and net income, which includes income taxes, interest income, foreign currency gains, and depreciation and amortization.