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Advisory Board Company Reports Operating Results (10-Q)

November 09, 2010 | About:

10qk

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Advisory Board Company (ABCO) filed Quarterly Report for the period ended 2010-09-30.

Advisory Board Company has a market cap of $779.8 million; its shares were traded at around $49.98 with a P/E ratio of 40.6 and P/S ratio of 3.3. Advisory Board Company had an annual average earning growth of 1.6% over the past 10 years.ABCO is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Overview. Net income increased to $4.9 million in the three months ended September 30, 2010 from a net loss of $2.1 million in the three months ended September 30, 2009. The increase was primarily due to revenue growth resulting from the introduction and expansion of new products and cross-selling existing programs to existing members, and two non-cash charges incurred during the three months ended September 30, 2009. One of the charges related to certain members of the Companys senior management and Board of Directors voluntarily surrendering a total of 830,025 options that had exercise prices between $51.56 per share and $60.60 per share. This cancellation led to a non-cash charge of $1.3 million, net of tax. Also during the three months ended September 30, 2009, we recognized a $4.9 million non-cash charge resulting from the write-off of capitalized software, net of tax.

Revenue. Total revenue increased 21.9% from $58.3 million in the three months ended September 30, 2009 to $71.1 million in the three months ended September 30, 2010, and contract value increased 19.8% to $284.7 million as of September 30, 2010 from $237.6 million as of September 30, 2009. Total revenue increased 19.8% from $115.0 million in the six months ended September 30, 2009 to $137.8 million in the six months ended September 30, 2010. The increases in revenue and contract value were primarily due to the introduction and expansion of new programs, including our recent acquisitions, cross-selling existing programs to existing members, and, to a lesser degree, price increases. We offered 48 membership programs as of September 30, 2010 and 43 membership programs as of September 30, 2009.

Other income, net. Other income, net was $0.6 million in the three months ended September 30, 2010 and 2009. Other income, net decreased from $1.6 million in the six months ended September 30, 2009 to $0.8 million in the six months ended September 30, 2010. Other income, net consists of interest income and foreign exchange rate gains. Interest income decreased from $0.6 million in the three months ended September 30, 2009 to $0.4 million in the three months ended September 30, 2010 and decreased from $1.2 million in the six months ended September 30, 2009 to $0.7 million in the six months ended September 30, 2010 due to a lower average invested cash balance during the periods. We recognized foreign exchange gains of $0.2 million and $0.1 million during the three and six months ended September 30, 2010, due to the effect of fluctuating currency rates on our receivable balances denominated in foreign currencies. We recognized foreign exchange loss of $20,000 in the three months ended September 30, 2009 and a foreign exchange gain of $0.4 million in the six months ended September 30, 2009.

Cash flows from investing activities. Our cash management and investment strategy and capital expenditure programs affect investing cash flows. Net cash flows used in investing activities were $41.8 million and $1.6 million in the six months ended September 30, 2010 and 2009, respectively. Investing activities during the six months ended September 30, 2010 consisted primarily of $36.0 million used in our acquisition of Concuity and resulting escrow, the net cash used for the purchases of marketable securities of $2.0 million, and capital expenditures of $3.8 million. Investing activities for the six months ended September 30, 2009 used $1.6 million of cash, consisting primarily of a $5.0 million investment and a $1.0 million loan to unrelated entities and $1.2 million in capital expenditures, offset by net proceeds on the redemption and sales of marketable securities of $5.5 million.

Cash flows from financing activities. We generated $4.3 million in cash from financing activities in the six months ended September 30, 2010, compared to net cash flows used in financing activities of $0.9 million in the six months ended September 30, 2009. Financing activities during the six months ended September 30, 2010 primarily consisted of $7.9 million from the issuance of commons stock from the exercise of stock options, netted by share repurchase activity. We repurchased 111,767 shares and 38,854 shares of our common stock at a total cost of approximately $4.5 million and $1.0 million in the six months ended September 30, 2010 and 2009, respectively, pursuant to our share repurchase program. Also in the six months ended September 30, 2010, we had $0.6 million in shares withheld to satisfy minimum employee tax withholding for vested restricted stock units.

In January 2004 the Companys Board of Directors authorized the repurchase of up to $50 million of the Companys common stock, which authorization was increased in amount to $100 million in October 2004, to $150 million in February 2006, to $200 million in January 2007, to $250 million in July 31, 2007, and to $350 million in April 2008. All repurchases have been made in the open market pursuant to this publicly announced repurchase program. No minimum number of shares has been fixed, and the share repurchase authorization has no expiration date.

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10qk
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