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Advisory Board Company Reports Operating Results (10-Q)

February 09, 2011 | About:
10qk

10qk

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Advisory Board Company (ABCO) filed Quarterly Report for the period ended 2010-12-31.

Advisory Board Company has a market cap of $783.5 million; its shares were traded at around $49.43 with a P/E ratio of 40.5 and P/S ratio of 3.3. Advisory Board Company had an annual average earning growth of 1.6% over the past 10 years.Hedge Fund Gurus that owns ABCO: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns ABCO: Chuck Royce of Royce& Associates, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Cost of services. Cost of services increased 28.5% from $32.1 million in the three months ended December 31, 2009 to $41.2 million in the three months ended December 31, 2010. The increase in cost of services during the three months ended December 31, 2010 was primarily due to increased costs associated with new programs and acquisitions, including a $0.8 million increase in amortization related to acquisitions and a $1.1 million fair value adjustment to an acquisition-related earn-out liability. Cost of services increased 21.4% from $93.2 million in the nine months ended December 31, 2009 to $113.1 million in the nine months ended December 31, 2010. The increase in cost of services during the nine months ended December 31, 2010 was primarily due to increased costs associated with new programs and acquisitions, including a $2.4 million increase in amortization related to acquisitions and a total of $1.5 million in fair value adjustments to an acquisition-related earn-out liability recognized during the nine months ended December 31, 2010. As a percentage of revenue, cost of services was 54.8% for the three months ended December 31, 2010 compared to 52.7% for the three months ended December 31, 2009 and was 53.1% for the nine months ended December 31, 2010 compared to 53.0% for the nine months ended December 31, 2009.

General and administrative. General and administrative expense increased 27.1% from $7.7 million in the three months ended December 31, 2009 to $9.7 million in the three months ended December 31, 2010. The increase in general and administrative expense during the three months ended December 31, 2010 was primarily due to an increase in investments in new product development of $0.8 million, as well as an increase in talent recruitment expenses of $0.4 million. General and administrative expense increased 18.7% from $23.3 million in the nine months ended December 31, 2009 to $27.6 million in the nine months ended December 31, 2010. The increase in general and administrative expense during the nine months ended December 31, 2010 was primarily due to an increase in talent recruitment expenses of $1.5 million, as well as an increase in investments in new product development of $1.0 million. As a percentage of revenue, general and administrative expense was 13.0% for the three months ended December 31, 2010 compared to 12.6% for the three months ended December 31, 2009, and was 13.0% for the nine months ended December 31, 2010 compared to 13.2% for the nine months ended December 31, 2009.

Other income, net. Other income, net decreased from $0.6 million in the three months ended December 31, 2009 to $0.5 million in the three months ended December 31, 2010. Other income, net decreased from $2.1 million in the nine months ended December 31, 2009 to $1.3 million in the nine months ended December 31, 2010. Other income, net consists of interest income and foreign exchange rate gains and losses. Interest income decreased from $0.6 million in the three months ended December 31, 2009 to $0.5 million in the three months ended December 31, 2010 and decreased from $1.8 million in the nine months ended December 31, 2009 to $1.2 million in the nine months ended December 31, 2010 due to lower average invested cash balances during the 2010 periods and a decrease in the average interest rate of the Companys marketable securities portfolio. We recognized foreign exchange gains of $11,000 and $0.1 million during the three and nine months ended December 31, 2010, respectively, due to the effect of fluctuating currency rates on our receivable balances denominated in foreign currencies. We recognized a foreign exchange loss of $22,000 in the three months ended December 31, 2009 and a foreign exchange gain of $0.3 million in the nine months ended December 31, 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 $64.4 million and $9.7 million in the nine months ended December 31, 2010 and 2009, respectively. Investing activities during the nine months ended December 31, 2010 consisted primarily of $35.0 million used in our acquisition of Concuity and related escrow, the net cash used for the purchases of marketable securities of $20.5 million, and capital expenditures of $8.8 million. Investing activities for the nine months ended December 31, 2009 used $9.7 million of cash, primarily consisting of $13.6 million related to the Southwind acquisition and related escrow and a $5.0 million investment and capital expenditures of $1.4 million, partially offset by the net proceeds on the redemption and sales of marketable securities of $10.4 million.

Cash flows from financing activities. We generated $6.8 million in cash from financing activities in the nine months ended December 31, 2010, compared to net cash flows used in financing activities of $2.7 million in the nine months ended December 31, 2009. Financing activities during the nine months ended December 31, 2010 primarily consisted of $11.9 million from the issuance of common stock from the exercise of stock options and $1.9 million of excess tax benefits generated in connection with these exercises, offset in part by share repurchase activity. We repurchased 152,957 shares of our common stock pursuant to our share repurchase program at a total cost of approximately $6.5 million in the nine months ended December 31, 2010. Also in the nine months ended December 31, 2010, we had $0.6 million in shares withheld to satisfy minimum employee tax withholding for vested restricted stock units. We repurchased 115,084 shares of our common stock at a total cost of approximately $3.0 million in the nine months ended December 31, 2009 pursuant to our share repurchase program.

In January 2004, our Board of Directors authorized the repurchase by us from time to time of up to $50 million of our common stock, which authorization was increased in cumulative 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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