Behind the Advisory Board’s Revenue Growth in 2017

ABCO’s 1Q17 performance

In 1Q17, the Advisory Board (ABCO) reported revenues of ~$194.1 million, which was higher than its guidance of $185 million–$190 million but ~0.7% lower on a YoY (year-over-year) basis.

ABCO saw a YoY revenue decline of ~6.6% for its healthcare services business due to the reduced sales of its technology products. The company’s strong performance in 1Q16 and the exclusion of exited programs contributed to the drop in reported figures in 1Q17, but its education business reported 15% YoY revenue growth in 1Q17. This business contributed ~33% of ABCO’s total 1Q17 revenues.

Behind the Advisory Board’s Revenue Growth in 2017

Flat revenue growth

Wall Street analysts expect the Advisory Board to report revenues close to $809.2 million for 2017, which would mean a YoY growth of around 0.7%.

By comparison, peers Automatic Data Processing (ADP), Fidelity National Information Services (FIS), and Fiserv (FISV) are expected to report sales of around $12.3 billion, $9.5 billion, and $5.8 billion, respectively, for the year.

Contract value in 1Q17

In 1Q17, the Advisory Board’s contract value was $756.2 million, which was ~1.5% higher YoY, after adjustments made for exited programs in both quarters. A solid 14% growth in the contract value of its Education segment helped to offset the 3% drop in contract value in its Healthcare segment.

Contract value refers to the total revenue attributable to all of a company’s active contracts on a particular date. This does not consider the starting date or the ending date of the contract. This metric is important because ABCO generally collects fees before dispensing services.

Notably, the iShares Russell 2000 Growth ETF (IWO) has ~0.24% its total portfolio holdings in ABCO.

In the next part, we’ll discuss the Advisory Board’s 2017 margin projections.