The Advisory Board (ABCO) to Restructure Health Care Business; Updates Guidance

The Advisory Board Company (NASDAQ: ABCO) today announced the details of a restructuring plan in its health care business that is designed to focus the company's health care technology and consulting capabilities on three key problem areas where hospitals and health systems require comprehensive and continuous support, especially during an era of change and complexity in the health care market:

• Driving Health System Growth: Acquiring, retaining, and engaging patients and identifying and providing care delivery needs for the communities health systems aspire to serve
• Reducing Care Variation: Improving care quality and reducing cost by eliminating unwarranted care variation
• Optimizing the Revenue Cycle: Ensuring members' financial viability by improving the efficiency and effectiveness of revenue management

The Advisory Board Company provides members best-practice industry research, context, and insights that they need to thrive in a dynamic market. The Company guides and supports members in the implementation of these best practices through proprietary, high-value technology and consulting capabilities.

In its continuing effort to better align its health care resources and business strategy to meet member needs and market demand, the Company is implementing a restructuring plan that is also intended to improve efficiency and future growth. As part of the restructuring plan, the Company will exit certain products and services which do not fully align with its long-term strategy, including care management workflow, nursing workforce and infection control analytics, and two niche consulting practices. The Company will also reduce its workforce by approximately 220 employees, or 5.7% of its total workforce, and close four office locations by year-end 2017. The education business will not be affected by the restructuring plan.

The Company expects to incur approximately $20 to $25 million of cash expenses and $25 to $30 million in non-cash charges in 2017 related to the restructuring. The workforce reduction and office closures are expected to result in over $25 million in reduced annualized operating expenses once the plan is fully implemented by year-end 2017.

"We are taking bold steps to position our health care business to seize the sizable longer-term opportunities in front of us. Certainly this involves difficult decisions, particularly having to say good-bye to colleagues and friends who have made many contributions to our firm and our members, and we are being as supportive as we can in this environment. However, we believe a tighter focus on the core, perennial industry challenges will make our organization stronger, enable us to deliver even more value to our members, allow us to invest in opportunities to enhance our capabilities and competitiveness, and position our Company for future growth," said Robert Musslewhite, Chairman and Chief Executive Officer, The Advisory Board Company. "The Advisory Board Company's market leadership in health care best-practice research, technology, and consulting is evidenced by the more than 4,400 health care organizations we serve, the record number of executives we have counseled even just since the election, and the over $2 billion in documented annual return on investment provided to members in 2016 alone."

"While we continue to see opportunities for growth across our businesses, we expect the combination of health care market challenges and our strategy and portfolio repositioning will cause us to fall short of our 2016 revenue growth expectations," Musslewhite added. "We typically provide 2016 year-end results and 2017 guidance in February, but we wanted to provide additional transparency given our announcement today. While 2016 performance was below our expectations, we do expect to deliver substantial adjusted EBITDA growth in 2017 with strong expense management and growth in our higher margin offerings."

Financial Update

The Company is providing preliminary estimates for 2016 results and 2017 expectations. For 2016, while contract renewal rates remained high – consistent with historical patterns – the Company experienced a difficult health care sales environment across the second half of the year, which was especially pronounced in November and December following the election, as members reassessed their strategy and path forward. Consulting and risk collection revenue was also lower than expected in the fourth quarter. These factors, in addition to the restructuring and program closure activity that commenced in the fourth quarter, contributed to lower-than-expected results in the Company's health care business for 2016, and led to both revenue and adjusted EBITDA coming in below the previous guidance ranges.

Full-year 2016 revenue is expected to be approximately $805 to $807 million, or approximately $10 to $12 million below the Company's previous guidance range, with adjusted EBITDA expected to be $187 to $188 million, or approximately $2 to $3 million below the Company's previous guidance range, exclusive of any restructuring charges.

As part of the restructuring, the to-be-exited programs are estimated to comprise approximately $18 million of 2016 revenue and approximately $14.5 million of 2016 expense. Excluding this revenue and expense, full-year 2016 non-GAAP revenue and adjusted EBITDA (both excluding to-be-exited programs) are expected to be $787 to $789 million and approximately $183.5 to $184.5 million, respectively. Since its fourth quarter and full-year tax provision has not been finalized, the Company has not calculated updated earnings per share guidance at this time.

On a preliminary basis, the Company expects 2017 non-GAAP revenue and adjusted EBITDA (both excluding to-be-exited programs) to be in the ranges of $780 to $840 million and $190 to $215 million, respectively, representing non-GAAP revenue growth of -1% to 6%, adjusted EBITDA growth of 3% to 17%, and adjusted EBITDA margin expansion of 100 to 200 basis points compared to comparable figures from the prior year. The Company will provide updated 2017 financial guidance at the time of its fourth quarter 2016 financial report in late February.

Conference Call

The Company's management team will host a conference call to discuss the restructuring plan at 8:00 am ET tomorrow, January 4, 2017. 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. The live webcast will be available on the home page of the Company's Investor Relations website. The webcast and accompanying slide presentation will be archived for at least 30 days.

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