The Advisory Board Company (ABCO - Snapshot Report) reported first quarter fiscal 2014 operating earnings of 23 cents per share which missed the Zacks Consensus Estimate of 24 cents per share by 4.2%. Results were also lower than the year-ago quarter's earnings of 25 cents by 8%.
Including equity in loss of unconsolidated entity, amortization of acquisition related intangibles, fair value adjustments to acquisition related intangibles and share-based compensation expense, Advisory Board reported net income of 10 cents per share in the first quarter of fiscal 2014. The reported were 9.1% below the year-ago net income of 11 cents per share.
Quarterly Operational Update
Revenues in the first quarter escalated 18.3% year over year to $123.2 million. Results also surpassed the Zacks Consensus Estimate of $121 million. Contract value was $475.8 million at Jun 30, 2013, up 15.6% year over year.
Cost of services excluding depreciation and amortization in the quarter was $65.95 million, up 13% year over year. Higher expense for new and growing programs including acquisitions during the last fiscal year (ActiveStrategy and 360Fresh) and liabilities led to the increase.
Member relations and marketing expense increased 16% year over year to $22.2 million. General and administrative expenses increased 33.4% year over year to $17.99 million. Higher investment in the IT infrastructure of the company and in new product development and corporate development groups led to the increase.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) for the reported quarter were $22.5 million, up 11.4% year over year.
Share Repurchase Update
During the first quarter of fiscal 2014, Advisory Board repurchased approximately 0.12 million shares for $6.2 million. This amounts to a total repurchase of 15.7 million shares for $347 million since 2004. As of Jun 30, 2013, the company is left with shares worth $103 million under this program.
As of Jun 30, 2013, Advisory Board had cash and cash equivalents of $29.1 million, down 49.8% from $57.8 million as of Mar 31, 2013.
Total assets of Advisory Board as of Jun 30, 2013, were $909.6 million, up 1.5% from $896.4 million as of Mar 31, 2013.
Cash used in operating activities as of Jun 30, 2013, was $3.6 million, up 49.2% year over year.
On Jul 8, 2013, Advisory Board entered into an agreement to acquire MRS, an Ariz.-based technology firm for $11.5 million to strengthen its existing physician referral programs. The deal is expected to be accretive to company revenues in calendar year 2013. EBITDA dilution is expected to be around $2.5 million for the remainder of the year.
On Jul 31, 2013, Advisory Board introduced the Student Success Performance Program. This marks the launch of the company’s first renewable software-based program for the higher education market.
For calendar year 2013, Advisory Board revised up its revenue expectations in the range of $500–$505 million from the previous guidance of $495–$505 million based on the strong performance of the company.
Advisory Board expects adjusted EBITDA to be between $87.5 million and $92.5 million, down from the previous guidance of $90–$95 million. Operating earnings for calendar year 2013 is expected to be between $1.15 and $1.25, down from the previous guidance of $1.18–$1.28. The downward revision in adjusted EBITDA and operating earnings reflect the impact of the recent acquisition of MRS.
Management anticipates share-based compensation expense to be around $17.5 million. Amortization and acquisition-related intangible assets are expected to be in the range of $7–$8 million.
For fiscal year 2014, Advisory Board expects the effective tax rate to be in the range of 38%–39%.
Performance of Other Medical Care Industry Stocks
On Jul 30, 2013, Covance Inc. reported adjusted earnings per share of 78 cents in the second quarter of 2013. The results beat the year-ago figure by 19.9% and was ahead of the Zacks Consensus Estimate by a penny. The upside was driven by higher top line and margin expansion.
On Jul 24, 2013, provider of drugs to long-term care facilities and nursing homes, Omnicare Inc. , posted second quarter 2013 adjusted earnings per share of 90 cents. The result surpassed the Zacks Consensus Estimate of 87 cents as well as the year-ago earnings of 83 cents.
On Jul 31, 2013, Charles River Laboratories International Inc. (CRL - Snapshot Report) reported second quarter 2013 earnings of 73 cents per share, above the Zacks Consensus Estimate of 71 cents, but down 2.7% year over year.
Advisory Board currently carries a Zacks Rank #2 (Buy).