UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 Form 10-K
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2011
 Commission file number: 000-33283
 THE ADVISORY BOARD COMPANY
 (Exact name of registrant as specified in its charter)
 Delaware
    
    52-1468699(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)2445 M Street, N.W.Washington, D.C.
    
    20037(Address of principal executive offices)
    
    (Zip Code)
 202-266-5600  Registrants telephone number, including area code:
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $0.01
    
    The NASDAQ Stock Market LLC(NASDAQ Global Select Market)
 Securities registered pursuant to Section 12(g) of the Act: Not applicable
 
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Accelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
   
 DOCUMENTS INCORPORATED BY REFERENCE




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THE ADVISORY BOARD COMPANY
TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    11Item 1B.
    
    Unresolved Staff Comments
    
    
    19Item 2.
    
    Properties
    
    
    19Item 3.
    
    Legal Proceedings
    
    
    20Item 4.
    
    [Removed and Reserved]
    
    
    20PART IIItem 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    21Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 8.
    
    Financial Statements and Supplementary Data
    
    
    35Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    60Item 9A.
    
    Controls and Procedures
    
    
    60Item 9B.
    
    Other Information
    
    
    60PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    61Item 11.
    
    Executive Compensation
    
    
    61Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    61Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    61Item 14.
    
    Principal Accounting Fees and Services
    
    
    61PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    62SIGNATURES
    
    
    66Index to Exhibits
    
    
    67




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PART I
 We have derived some of the information contained in this report concerning the markets and
industry in which we operate and the customers we serve from publicly available information and
from industry sources. Although we believe that this publicly available information and the
information provided by these industry sources are reliable, we have not independently verified the
accuracy of any of this information.
 Our fiscal year is the 12-month period ending on March 31.
 Unless the context indicates otherwise, references in this Annual Report on Form 10-K to we,
our, and us mean The Advisory Board Company and its consolidated subsidiaries.
 Forward-looking Statements
   Item 1. Business.
 Overview
    1




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2010-2011 U.S. News and World Report
 Corporate Information
  www.advisoryboardcompany.com
 Business Strategy
  
    
    Capitalize on our membership-based business model.We believe our membership-based
business model is a key to our success. Our membership model enables us to target issues of
relevance to a broad audience of similar organizations and to draw on their experience to
identify proven and high value solutions. At the same time, our economic model and fixed-fee
pricing promote frequent use of our programs and services by our members, which we believe
increases value received and program loyalty.
    
    Deliver a superior value proposition.Our programs offer access to best practices and
software tools at a fraction of the cost that other business services firms charge to
provide a comparable customized analysis or solution. Members use our programs to improve
the effectiveness of their organizations by increasing productivity, reducing operating
costs, and increasing revenue. We believe that our program prices generally represent a
small percentage of the potential bottom-line improvement members can achieve through the
successful application of even a subset of the best practices and software tools that they
receive as members of a particular program. As evidence of the value we provide, our member institution renewal rate for each of
the last five fiscal years equaled or exceeded 88%.
    
    Focus on best practices research and tools.We focus on providing research, analysis,
services and tools based on demonstrated best practices within the health care and education
industries. Our focus on deep vertical markets has enabled us to develop a membership that
includes progressive and highly regarded institutions where many industry issues are first
identified and where many of the best practices originate. We believe that these
organizations will continue to demand access to proven best practices and solutions to
common industry problems on a cost-effective, industry-wide basis and that our reputation
and success to date has uniquely positioned us as a leading source for identifying,
evaluating, communicating, and providing solutions that respond to evolving market needs.
    
    Continue research, analysis, and technology excellence.The quality of our research,
analysis, and technology is a critical component of our success. Experienced program
directors are responsible for assuring that our research methodology is
 2




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applied to all studies and that quality is maintained across all deliverables, solutions,
software tools, and programs. We are highly selective in our hiring, recruiting the top
graduates of the leading universities and graduate schools. We emphasize continual training
of all employees in key areas, including industry analysis, economics, quantitative modeling,
root-cause analysis, data mapping, technology development, and presentation skills.
 
    
    Drive tangible results by incorporating data and analytics into web-based business
intelligence and software tools.Through our best practices research, we have identified the
need for business intelligence and software tools that consolidate, analyze, benchmark, and
report member data in order to gain visibility into areas of opportunity for operational or
financial improvement. To meet this member need, we have combined commercially available and
proprietary technology with our insight, industry expertise, and standardized data
definitions to offer web-based business intelligence and software tools. These tools provide
valuable insights by efficiently presenting regularly updated data extracted from what are
often numerous and disparate source systems, benchmarking our members performance against
the performance of other organizations, and allowing our members to drill down to
transaction-level detail. These sophisticated tools hardwire our existing best practices
research into the daily and weekly process flows at the member institutions, thereby
allowing a broad group of executives, managers, and front-line leaders to leverage the
insights and data in both their daily and strategic decisions. This integrated approach
allows our members to achieve ongoing, tangible cost and performance gains and a high return
on investment. We frequently update our business intelligence and software tools through new
features and functionality, research activities, and member input.
    
    Leverage our intellectual capital and relationships by providing best practices and
management services.We are able to efficiently leverage the substantial body of our best
practices research, case study experience, and relationships we have amassed to support
members in installing best practices solutions or to provide
standardized management support,
thereby generating additional revenue for a low incremental cost to us to serve. Our
research programs produce the best practices that we use to create the management tools and
executive education modules that comprise our best practices
management and advisory services engagements, which
are sold as discrete products for a separate fee. Our research and software programs also
provide a platform and source for identifying member organizations that seek additional
assistance in adopting the best practices profiled in our research, thereby enhancing our
ability to cross-sell our best practices management and advisory
services to existing members.
    
    Scale our economic model.Our economic model enables us to add new members to all of our
programs for a low incremental cost per member to us, thereby growing our revenue and
improving our operating income as we increase the membership base of our existing programs.
We actively cross-sell additional programs to our approximately 3,200 members through a
variety of avenues, including sales force visits, presentations at member meetings, and
announcements in our research publications and on our website. A significant portion of our
programs cost structure for delivering the programs standardized services is fixed and
therefore does not vary with the number of members who participate in a program. By
addressing issues that affect a broad range of members, we are able to spread the fixed
costs associated with our programs over a large number of members and potential members.
    
    Develop new programs.Over the last several years, we have added four to five new
programs per year, which we cross-sell to existing members and use to attract new member
institutions. Pulling from a large pipeline of potential program concepts, each year we
pursue a rigorous and templated research process, involving industry thought-leaders from
progressive and well-known organizations as advisors and conducting hundreds of member
interviews, through which we apply our defined new program development criteria to identify
our specific program launches. Prior to officially rolling out a program, we typically
convert a high percentage of our advisors to paying members, which gives us a recognizable
group of early partners to champion to others. In addition to our internal research and
development activities relating to new programs, we also intend to continue to expand our
portfolio of solutions through strategic partnerships with and acquisitions of companies
whose products and services complement our program offerings. Development of new products
and successful execution and integration of future partnerships and acquisitions are
integral to our overall strategy as we continue to expand our portfolio of services. We
currently plan to continue to launch four to five new programs each year.
    
    Target non-U.S. health care organizations, additional sectors of the health care
industry, and other markets with similar characteristics.We believe that our business model
and current memberships provide us significant assets that we can leverage to target health
care organizations across an expanded geographic terrain, additional sectors of the health
care industry, and vertical markets outside health care with similar relevant
characteristics. We currently serve approximately 240 non-U.S. health care organizations
through a Council of International Hospitals program, which includes several sub-programs,
that provides research and analysis derived from our work with U.S. health care
organizations, as well as through
 3




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certain of our existing U.S.-focused business intelligence and software tools programs. In
addition, we are seeking to leverage our existing Health Care Industry Strategy program to
expand our work with pharmaceutical, biotech, health insurance, and medical device companies,
as well as with other organizations with interest in U.S. hospital and health system
operations, performance, and data. We also plan to continue to expand and grow in our
education market by leveraging our proven new program development process in this vertical
market and applying relevant learning from our established health care business to serve as a
template for growth in this market.
 Our Markets
  Health Care Market
   
    
    Common and Complex Industry-Wide Issues.Health care organizations of all sizes face many
of the same complex strategic, operational, and management issues, including increasing
revenue, reducing costs, improving physician performance, overcoming labor shortages,
managing clinical innovation, improving productivity, reengineering business processes,
increasing clinical quality, improving manager effectiveness, and complying with new
government regulations. Because the delivery of health care services is based on very
complex, interrelated processes, there is widespread interest in and broad applicability of
standardized programs that address the major challenges facing the industry.
    
    Fragmented Industry.Our target market within the health care industry consists of over
5,000 current or potential members in the United States and internationally. This target
market includes many health care providers that deliver health care services primarily on a
local or regional basis. As a result of this fragmentation, best practices that are
pioneered in local or regional markets are rarely widely known throughout the industry.
    
    Willingness to Share Best Practices.We believe that health care organizations have a
relatively high propensity to share best practices. Many hospitals and health systems are
non-profit organizations or compete in a limited geographic market and do not consider
organizations outside their market to be their competitors. In addition, the health care
industry has a long tradition of disseminating information as part of ongoing medical
research and education activities.
    
    Value Orientation.A membership model that provides access to best practices and business
intelligence tools on a shared-cost basis appeals to many value focused health care
organizations that may otherwise be reluctant to make discretionary investments to
commission an exclusive, higher priced, customized engagement,  software development, or solution to address their
critical issues.
 Education Market
   4




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Our Membership
  U.S. News and World Report U.S. News and World Report
  March 31,2007
    
    2008
    
    2009
    
    2010
    
    2011Membership programs offered
    
    
    32
    
    
    
    37
    
    
    
    41
    
    
    
    45
    
    
    
    50Total members
    
    
    2,662
    
    
    
    2,761
    
    
    
    2,817
    
    
    
    2,985
    
    
    
    3,243Member renewal rate (1)
    
    
    89
    %
    
    
    90
    %
    
    
    88
    %
    
    
    89
    %
    
    
    91
    %Contract value (in thousands of dollars) (2)
    
    $
    200,094
    
    
    $
    230,806
    
    
    $
    230,769
    
    
    $
    261,110
    
    
    $
    310,051
 
 (1)
    
    For the fiscal year then ended. Shows the percentage of member institutions at the beginning
of a fiscal year that hold one or more memberships in any of our programs at the beginning of
the next fiscal year, adjusted to reflect mergers, acquisitions, or different affiliations of
members that result in changes of control over individual institutions.(2)
    
    The aggregate annualized revenue attributed to all agreements in effect at a given date,
without regard to the initial term or remaining duration of any such agreement. Programs and Services
  
    
    best practices research, which is focused on identifying best-demonstrated
management practices, critiquing widely-followed but ineffective practices, and analyzing
emerging trends;
    
    business intelligence and software tools, which allow members to pair their own
operational data with the best practices insights from our research; and
    
    management and advisory services, which assist member institutions efforts to
adopt and implement best practices to improve their own performance.
  
    
    revenue cycle management;
    
    health system cost reduction;
    
    clinical reform and models for physician collaboration to impact quality, revenue,
and cost;
    
    operational efficiency;
 5




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
    
    hospital and university department operations;
    
    pharmaceutical and medical device technology management;
    
    strategic approach to problem solving and innovation;
    
    elevating clinical quality;
    
    measuring and improving student learning outcomes;
    
    evidence based provision of care;
    
    nursing and academic faculty recruitment, retention, and productivity; and
    
    competing for scarce research funding.
    Program Attributes
  6




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Best Practices Research Programs
     Business Intelligence and Software Tool Programs
    7




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Management and Advisory Programs
    Pricing
  Sales and Marketing
  8




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Intellectual Property
  Competition
    Employees
  9




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Executive Officers
  Executive Officers
    
    Age
    
    PositionRobert W. Musslewhite
    
    
    41
    
    
    Chief Executive Officer and DirectorDavid L. Felsenthal
    
    
    40
    
    
    PresidentMichael T. Kirshbaum
    
    
    34
    
    
    Chief Financial Officer and TreasurerMartin D. Coulter
    
    
    45
    
    
    Executive DirectorEvan R. Farber
    
    
    38
    
    
    General Counsel and Corporate SecretaryCormac F. Miller
    
    
    37
    
    
    Executive DirectorScott A. Schirmeier
    
    
    42
    
    
    Executive Vice PresidentRichard A. Schwartz
    
    
    45
    
    
    Executive Vice PresidentMary D. VanHoose
    
    
    46
    
    
    Chief Talent Officer
  Robert Musslewhite
 David L. Felsenthal
 Michael T. Kirshbaum
 Martin D. Coulter
 Evan R. Farber
 Cormac F. Miller
 10




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Scott A. Schirmeier
 Richard A. Schwartz
 Mary D. VanHoose
 Item 1A. Risk Factors.
  Our business is principally focused on the health care industry, and factors that adversely affect
the financial condition of the health care industry could consequently affect our business.
    11




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If we are unable to sustain high renewal rates on our memberships, our revenue and results of
operations may suffer.
  If we are unable to maintain our reputation and expand our name recognition, we may have difficulty
attracting new business and retaining current members.
  If we are not able to offer new and valuable products and services, our revenue and results of
operations may suffer.
   Future competition may adversely affect our business.
   12




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We may not be able to hire, train, motivate, manage, and retain a significant number of highly
skilled employees.
  Unsuccessful design or implementation of our business intelligence and software tools may harm our
future financial success.
   We may experience significant delays in generating, or an inability to generate, revenue if
potential members take a long time to evaluate our products and services.
  Unsuccessful delivery of our management and advisory services may harm our future financial
success.
  13




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Federal and state privacy and security laws may increase the costs of operation and expose us to
civil and criminal sanctions.
   
    
    as to how we will use and disclose the protected health information;
    
    that we will implement reasonable administrative, physical, and technical
safeguards to protect such information from misuse;
    
    that we will enter into similar agreements with our agents and subcontractors that
have access to the information;
    
    that we will report security incidents and other inappropriate uses or disclosures
of the information; and
    
    that we will assist the covered entity with certain of its duties under the Privacy
Rule.
     14




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We may be liable to our members and may lose members if we are unable to collect and maintain
member data or lose member data.
  Failure by our members to obtain proper permissions and waivers may result in claims against us or
may limit or prevent our use of data, which could harm our business.
  Our sources of data might restrict our use of or refuse to license data, which could adversely
impact our ability to provide certain products or services.
  If our products or services fail to provide accurate information, or if our content or any other
element of our products or services is associated with incorrect,
inaccurate, or faulty coding,
billing, or claims submissions to Medicare or any other third party payor, we could be liable to
customers or the government which could adversely affect our business.
 qui tam
 15




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Factors, including those beyond our control, could cause interruptions in our operations and may
adversely affect our reputation in the marketplace and our financial condition and results of
operations.
    If we are unable to maintain our third party providers or strategic alliances, or enter into new
alliances, we may be unable to grow our current business.
  Our business could be harmed if we are no longer able to license or integrate third party
technologies and data.
  16




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Potential liability claims may adversely affect our business.
  If the protection of our intellectual property is inadequate, our competitors may gain access to
our intellectual property and we may lose our competitive advantage.
  If we are alleged to have infringed on the proprietary rights of third parties, we could incur
unanticipated costs and be prevented from providing our products and services.
  We may be exposed to loss of revenue resulting from our unconditional service guarantee.
  Any significant increase in bad debt in excess of recorded estimates would have a negative impact
on our business, financial condition, and results of operations.
  17




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We may pursue acquisition opportunities, which could subject us to considerable business and
financial risk.
  
    
    suffer the diversion of financial and management resources from existing
operations;
    
    incur indebtedness and assume additional liabilities, known and unknown, including
liabilities relating to the use of intellectual property we acquire;
    
    incur significant additional capital expenditures, transaction and operating
expenses, and non-recurring acquisition-related charges;
    
    experience an adverse impact on our earnings from the amortization or impairment of
acquired goodwill and other intangible assets;
    
    fail to integrate successfully the operations and personnel of the acquired
businesses;
    
    enter new markets or market new products with which we are not entirely
familiar; and
    
    fail to retain key personnel of, vendors to, and clients of the acquired
businesses.
  Any significant impairment of our goodwill would lead to a decrease in our assets and a reduction
in our net operating performance.
  We may invest in companies for strategic reasons and may not realize a return on our investments.
  18




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If we are required to collect sales and use taxes on the programs we sell in certain
jurisdictions, we may be subject to tax liability for past sales and our future sales may decrease.
    We may not be able to fully realize our deferred tax assets.
  Item 1B. Unresolved Staff Comments.
  Item 2. Properties.
  19




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Item 3. Legal Proceedings.
  Item 4. [Removed and Reserved.]
 20




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PART II
 Item 5. Market For Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
 Market Information, Holders and Dividends
  High
    
    LowFiscal Year Ended March 31, 2010:First quarter
    
    $
    26.06
    
    
    $
    16.30Second quarter
    
    $
    27.53
    
    
    $
    22.80Third quarter
    
    $
    30.65
    
    
    $
    24.49Fourth quarter
    
    $
    33.37
    
    
    $
    31.50Fiscal Year Ended March 31, 2011:First quarter
    
    $
    44.15
    
    
    $
    31.65Second quarter
    
    $
    44.97
    
    
    $
    39.74Third quarter
    
    $
    50.68
    
    
    $
    44.16Fourth quarter
    
    $
    52.81
    
    
    $
    46.43
   Issuer Purchases of Equity Securities
  Total Number of
    
    ApproximateShares Purchased as
    
    Dollar Value ofPart of Publicly
    
    Shares That MayTotal Number of
    
    Average Price
    
    Announced Plans or
    
    Yet Be PurchasedShares Purchased
    
    Paid Per Share
    
    Programs
    
    Under The PlanJanuary 1 to January 31, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    35,469,638February 1 to February 28, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    35,469,638March 1 to March 31, 2011
    
    
    35,973
    
    
    $
    50.03
    
    
    
    35,973
    
    
    $
    33,669,935Total
    
    
    35,973
    
    
    $
    50.03
    
    
    
    35,973
  Item 6. Selected Financial Data.
  21




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Year Ended March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(In thousands except per share amounts)Statements of Income Data:Revenue
    
    $
    189,843
    
    
    $
    218,971
    
    
    $
    230,360
    
    
    $
    239,323
    
    
    $
    290,248Costs and expenses:Cost of services
    
    
    90,129
    
    
    
    102,291
    
    
    
    116,556
    
    
    
    124,412
    
    
    
    154,395Member relations and marketing
    
    
    40,204
    
    
    
    45,890
    
    
    
    52,292
    
    
    
    53,928
    
    
    
    65,069General and administrative
    
    
    22,815
    
    
    
    25,269
    
    
    
    26,725
    
    
    
    32,133
    
    
    
    38,225Depreciation and amortization of property and equipment
    
    
    2,070
    
    
    
    3,589
    
    
    
    5,647
    
    
    
    6,391
    
    
    
    5,971Write-off of capitalized software
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,397
    
    
    
    Total costs and expenses
    
    
    155,218
    
    
    
    177,039
    
    
    
    201,220
    
    
    
    224,261
    
    
    
    263,660Income from operations
    
    
    34,625
    
    
    
    41,932
    
    
    
    29,140
    
    
    
    15,062
    
    
    
    26,588Other income, net
    
    
    6,819
    
    
    
    6,142
    
    
    
    2,445
    
    
    
    2,340
    
    
    
    1,866Income before income taxes
    
    
    41,444
    
    
    
    48,074
    
    
    
    31,585
    
    
    
    17,402
    
    
    
    28,454Provision for income taxes
    
    
    (14,049
    )
    
    
    (16,012
    )
    
    
    (10,117
    )
    
    
    (5,969
    )
    
    
    (9,930
    )Net income
    
    $
    27,395
    
    
    $
    32,062
    
    
    $
    21,468
    
    
    $
    11,433
    
    
    $
    18,524Earnings per share:Net income per share  basic
    
    $
    1.46
    
    
    $
    1.78
    
    
    $
    1.31
    
    
    $
    0.74
    
    
    $
    1.18Net income per share  diluted
    
    $
    1.41
    
    
    $
    1.72
    
    
    $
    1.30
    
    
    $
    0.73
    
    
    $
    1.13Weighted average number of shares outstanding:Basic
    
    
    18,714
    
    
    
    17,999
    
    
    
    16,441
    
    
    
    15,515
    
    
    
    15,733Diluted
    
    
    19,448
    
    
    
    18,635
    
    
    
    16,560
    
    
    
    16,692
    
    
    
    16,415
 Year Ended March 31,2009
    
    
    2010
    
    
    2011(In thousands except per share amounts)(Unaudited)Stock-based compensation expense included in Statement of Income:Costs and expenses:Cost of services
    
    $
    4,273
    
    
    $
    3,930
    
    
    $
    2,764Member relations and marketing
    
    
    2,436
    
    
    
    2,248
    
    
    
    1,663General and administrative
    
    
    5,738
    
    
    
    5,974
    
    
    
    4,366Total costs and expenses
    
    
    12,447
    
    
    
    12,152
    
    
    
    8,793Income from operations
    
    
    (12,447
    )
    
    
    (12,152
    )
    
    
    (8,793
    )Net income
    
    $
    (8,464
    )
    
    $
    (7,984
    )
    
    $
    (5,725
    )Impact on earnings per share:Net income per share  diluted
    
    $
    (0.51
    )
    
    $
    (0.51
    )
    
    $
    (0.35
    )
 March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(In thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    13,195
    
    
    $
    17,907
    
    
    $
    23,746
    
    
    $
    61,238
    
    
    $
    30,378Marketable securities
    
    
    146,168
    
    
    
    132,158
    
    
    
    70,103
    
    
    
    51,682
    
    
    
    86,179Working capital (deficit)
    
    
    (35,018
    )
    
    
    (47,371
    )
    
    
    (36,640
    )
    
    
    (22,027
    )
    
    
    (66,939
    )Total assets
    
    
    286,174
    
    
    
    305,114
    
    
    
    316,258
    
    
    
    386,772
    
    
    
    491,188Deferred revenue
    
    
    116,994
    
    
    
    144,147
    
    
    
    170,478
    
    
    
    208,402
    
    
    
    266,015Total stockholders equity
    
    
    138,464
    
    
    
    122,529
    
    
    
    98,899
    
    
    
    111,815
    
    
    
    148,592
 March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(unaudited)Other Operating Data:Membership programs offered
    
    
    32
    
    
    
    37
    
    
    
    41
    
    
    
    45
    
    
    
    50Total members
    
    
    2,662
    
    
    
    2,761
    
    
    
    2,817
    
    
    
    2,985
    
    
    
    3,243Member institution renewal rate (1)
    
    
    89
    %
    
    
    90
    %
    
    
    88
    %
    
    
    89
    %
    
    
    91
    %
 22




---



##### 



March 31,2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(unaudited)Contract value (in thousands) (2)
    
    $
    200,094
    
    
    $
    230,806
    
    
    $
    230,769
    
    
    $
    261,110
    
    
    $
    310,051Contract value per member (3)
    
    $
    75,167
    
    
    $
    83,595
    
    
    $
    81,920
    
    
    $
    87,474
    
    
    $
    95,606
 
 (1)
    
    The percentage of member institutions at the beginning of a fiscal year that hold one or more
memberships in any of our programs at the beginning of the next fiscal year, adjusted to
reflect mergers, acquisitions, or different affiliations of members that result in changes of
control over individual institutions.(2)
    
    The aggregate annualized revenue attributed to all agreements in effect at a given point in
time, without regard to the initial term or remaining duration of any such agreement.(3)
    
    Total contract value divided by the number of members. Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Overview
     23




---



##### 



Non-GAAP Financial Presentation
  Results of Operations
  Year Ended March 31,2009
    
    
    2010
    
    
    2011Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs and expenses:Cost of services
    
    
    50.6
    
    
    
    52.0
    
    
    
    53.2Member relations and marketing
    
    
    22.7
    
    
    
    22.5
    
    
    
    22.4General and administrative
    
    
    11.6
    
    
    
    13.4
    
    
    
    13.2Depreciation and amortization of property and equipment
    
    
    2.5
    
    
    
    2.7
    
    
    
    2.1Write-off of capitalized software
    
    
    
    
    
    
    3.1
    
    
    
    Total costs and expenses
    
    
    87.4
    
    
    
    93.7
    
    
    
    90.9Income from operations
    
    
    12.6
    
    
    
    6.3
    
    
    
    9.1Other income, net
    
    
    1.1
    
    
    
    1.0
    
    
    
    0.6Income before provision for income taxes
    
    
    13.7
    
    
    
    7.3
    
    
    
    9.7Provision for income taxes
    
    
    (4.4
    )
    
    
    (2.5
    )
    
    
    (3.3
    )Net income
    
    
    9.3
    %
    
    
    4.8
    %
    
    
    6.4
    %
 Year Ended March 31,2009
    
    
    2010
    
    
    2011Stock-based compensation expense included in:Costs and expenses:Cost of services
    
    
    1.9
    %
    
    
    1.6
    %
    
    
    1.0
    %Member relations and marketing
    
    
    1.1
    
    
    
    1.0
    
    
    
    0.6General and administrative
    
    
    2.5
    
    
    
    2.5
    
    
    
    1.5Depreciation
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    5.5
    
    
    
    5.1
    
    
    
    3.1Net income
    
    
    (3.7
    %)
    
    
    (3.3
    %)
    
    
    (2.0
    %)
 Fiscal years ended March 31, 2009, 2010, and 2011
 Overview.
 24




---



##### 



Adjusted EBITDA.
 Revenue.
   Cost of services.
 Member relations and marketing.
 General and administrative.
 Depreciation and amortization of property and equipment.
 25




---



##### 



Write-off of capitalized software
 Other income, net.
 Provision for income taxes.
 Stock-based compensation expense.
 Year Ended March 31,2009
    
    
    2010
    
    
    2011(unaudited)Stock-based compensation expense included in:Costs and expenses:Cost of services
    
    $
    4,273
    
    
    $
    3,930
    
    
    $
    2,763Member relations and marketing
    
    
    2,436
    
    
    
    2,248
    
    
    
    1,663General and administrative
    
    
    5,738
    
    
    
    5,974
    
    
    
    4,366Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    12,447
    
    
    
    12,152
    
    
    
    8,792Income from operations
    
    
    (12,447
    )
    
    
    (12,152
    )
    
    
    (8,792
    )Net income
    
    $
    (8,464
    )
    
    $
    (7,984
    )
    
    $
    (5,725
    )Impact on diluted earnings per share
    
    $
    (0.51
    )
    
    $
    (0.51
    )
    
    $
    (0.35
    )
   Year Ended March 31,2009
    
    
    2010
    
    
    2011(unaudited)Stock-based compensation by award type:Stock options
    
    $
    7,209
    
    
    $
    6,287
    
    
    $
    3,590Restricted stock units
    
    
    5,179
    
    
    
    5,857
    
    
    
    5,202Employee stock purchase rights
    
    
    59
    
    
    
    8
    
    
    
    Total stock-based compensation
    
    $
    12,447
    
    
    $
    12,152
    
    
    $
    8,792
   26




---



##### 



Non-GAAP Financial Measures
      27




---



##### 




    
    the non-GAAP financial measures do not reflect capital expenditures and future
requirements for capital expenditures;
    
    the non-GAAP financial measures generally do not reflect depreciation and amortization,
which are non-cash charges, although the assets being depreciated and amortized will in
some cases have to be replaced in the future, nor do the measures reflect any cash
requirements for such replacements;
    
    the non-GAAP financial measures do not reflect the expense of equity awards to employees;
    
    the non-GAAP financial measures do not reflect the effect of earnings or charges
resulting from matters that management considers not indicative of our ongoing operations,
but which may recur; and
    
    to the extent that we change our accounting for certain transactions or other items from
period to period, our non-GAAP financial measures may not be directly comparable from
period to period.
    Year Ended March 31,2009
    
    
    2010
    
    
    2011(unaudited)Net income
    
    $
    21,468
    
    
    $
    11,433
    
    
    $
    18,524Provision for income taxes
    
    
    10,117
    
    
    
    5,969
    
    
    
    9,930Other income, net
    
    
    (2,637
    )
    
    
    (2,340
    )
    
    
    (1,866
    )Depreciation and amortization
    
    
    5,647
    
    
    
    6,391
    
    
    
    5,971Amortization of intangibles (1)
    
    
    976
    
    
    
    1,644
    
    
    
    4,721Acquisition charges
    
    
    
    
    
    
    1,123
    
    
    
    408Fair value adjustments to acquisition-related earn out liabilities
    
    
    
    
    
    
    
    
    
    
    1,500Write-off of capitalized software
    
    
    
    
    
    
    7,397
    
    
    
    Option cancellation charge
    
    
    
    
    
    
    1,937
    
    
    
    Share-based compensation expense
    
    
    12,448
    
    
    
    10,216
    
    
    
    8,792Adjusted EBITDA
    
    $
    48,019
    
    
    $
    43,770
    
    
    $
    47,980
 
 (1)
    
    Consists of those amounts included in cost of services on our consolidated statements
of income. Year Ended March 31,2009
    
    
    2010
    
    
    2011(unaudited)Net income
    
    $
    21,468
    
    
    $
    11,433
    
    
    $
    18,524Amortization of acquisition-related intangibles, net of tax
    
    
    783
    
    
    
    1,079
    
    
    
    2,896Acquisition charges, net of tax
    
    
    
    
    
    
    738
    
    
    
    266Fair value adjustments to acquisition-related earn out liabilities, net of tax
    
    
    
    
    
    
    
    
    
    
    977Write-off of capitalized software, net of tax
    
    
    
    
    
    
    4,860
    
    
    
    Option cancellation charge, net of tax
    
    
    
    
    
    
    1,273
    
    
    
    Share-based compensation, net of tax
    
    
    8,464
    
    
    
    6,712
    
    
    
    5,724Adjusted net income
    
    $
    30,715
    
    
    $
    26,095
    
    
    $
    28,387
 28




---



##### 



Year Ended March 31,2009
    
    
    2010
    
    
    2011(unaudited)GAAP earnings per diluted share
    
    $
    1.30
    
    
    $
    0.73
    
    
    $
    1.13Amortization of acquisition-related intangibles, net of tax
    
    
    0.05
    
    
    
    0.07
    
    
    
    0.17Acquisition charges, net of tax
    
    
    
    
    
    
    0.04
    
    
    
    0.02Fair value adjustments to acquisition-related earn out liabilities, net of tax
    
    
    
    
    
    
    
    
    
    
    0.06Write-off of capitalized software, net of tax
    
    
    
    
    
    
    0.31
    
    
    
    Option cancellation charge, net of tax
    
    
    
    
    
    
    0.08
    
    
    
    Share-based compensation, net of tax
    
    
    0.51
    
    
    
    0.43
    
    
    
    0.35Non-GAAP earnings per diluted share
    
    $
    1.86
    
    
    $
    1.66
    
    
    $
    1.73
 Liquidity and Capital Resources
  Cash flows from operating activities.
 Cash flows from investing activities.
    Cash flows from financing activities.
  29




---



##### 



Credit facilities.
 Contractual obligations.
 Payments due by Period(in thousands)Total
    
    <1 Year
    
    1-3 Yrs
    
    4-5 Yrs
    
    >5 YrsNon-cancelable operating leases
    
    $
    73,656
    
    
    $
    8,288
    
    
    $
    28,133
    
    
    $
    18,516
    
    
    $
    18,719Purchase obligations
    
    $
    3,000
    
    
    $
    
    
    
    $
    3,000
    
    
    $
    
    
    
    $
    
 Share Repurchase
  Exercise of Stock Options and Purchases under our Employee Stock Purchase Plan
  Off-Balance Sheet Arrangements
  Summary of Critical Accounting Policies
  30




---



##### 



Revenue recognition
    Allowance for uncollectible revenue
  Property and equipment
  31




---



##### 



Business combinations
  Goodwill and other intangible assets
    32




---



##### 



Recovery of long-lived assets (excluding goodwill)
  Deferred incentive compensation and other charges
  Income taxes
  Stock-based compensation
    Recent Accounting Pronouncements
  33




---



##### 



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Interest rate risk.
 Foreign currency risk. ,
 34




---



##### 



Item 8. Financial Statements and Supplementary Data.
 Report of Managements Assessment of Internal Control Over Financial Reporting
     Internal Control  Integrated Framework
   /s/ Robert W. MusslewhiteRobert W. MusslewhiteChief Executive Officer and Director 
June 14, 2011/s/ Michael T. KirshbaumMichael T. KirshbaumChief Financial Officer and Treasurer 
June 14, 2011 35




---



##### 



Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
 
        
 36




---



##### 



Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
 
      
 37




---



##### 



THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 March 31,2010
    
    
    2011ASSETSCurrent assets:Cash and cash equivalents
    
    $
    61,238
    
    
    $
    30,378Marketable securities
    
    
    10,422
    
    
    
    Membership fees receivable, net
    
    
    143,453
    
    
    
    179,162Prepaid expenses and other current assets
    
    
    3,326
    
    
    
    7,069Deferred income taxes, net
    
    
    5,629
    
    
    
    5,894Total current assets
    
    
    224,068
    
    
    
    222,503Property and equipment, net
    
    
    22,183
    
    
    
    29,529Intangible assets, net
    
    
    9,161
    
    
    
    18,450Goodwill
    
    
    37,255
    
    
    
    67,155Deferred incentive compensation and other charges
    
    
    37,563
    
    
    
    46,226Deferred income taxes, net of current portion
    
    
    7,782
    
    
    
    9,646Other non-current assets
    
    
    7,500
    
    
    
    11,500Marketable securities
    
    
    41,260
    
    
    
    86,179Total assets
    
    $
    386,772
    
    
    $
    491,188LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Deferred revenue
    
    $
    182,689
    
    
    $
    223,876Accounts payable and accrued liabilities
    
    
    51,254
    
    
    
    51,957Accrued incentive compensation
    
    
    12,152
    
    
    
    13,609Total current liabilities
    
    
    246,095
    
    
    
    289,442Long-term deferred revenue
    
    
    25,713
    
    
    
    42,139Other long-term liabilities
    
    
    3,149
    
    
    
    11,015Total liabilities
    
    
    274,957
    
    
    
    342,596Stockholders equity:Preferred stock, par value $0.01; 5,000,000 shares authorized, zero shares issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0.01; 90,000,000 shares authorized, 21,836,893 and 22,530,909 shares
issued as of March 31, 2010 and 2011, respectively, and 15,505,152 and 16,010,238 shares
outstanding as of March 31, 2010 and 2011, respectively
    
    
    218
    
    
    
    225Additional paid-in capital
    
    
    239,548
    
    
    
    267,242Retained earnings
    
    
    145,925
    
    
    
    164,449Accumulated elements of other comprehensive income (loss)
    
    
    1,034
    
    
    
    (120
    )Treasury stock, at cost 6,331,741 and 6,520,671 shares as of March 31, 2010 and 2011, respectively
    
    
    (274,910
    )
    
    
    (283,204
    )Total stockholders equity
    
    
    111,815
    
    
    
    148,592Total liabilities and stockholders equity
    
    $
    386,772
    
    
    $
    491,188
  38




---



##### 



THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
 Year Ended March 31,2009
    
    
    2010
    
    
    2011Revenue
    
    $
    230,360
    
    
    $
    239,323
    
    
    $
    290,248Costs and expenses:Cost of services
    
    
    116,556
    
    
    
    124,412
    
    
    
    154,395Member relations and marketing
    
    
    52,292
    
    
    
    53,928
    
    
    
    65,069General and administrative
    
    
    26,725
    
    
    
    32,133
    
    
    
    38,225Depreciation and amortization of property and equipment
    
    
    5,647
    
    
    
    6,391
    
    
    
    5,971Write-off of capitalized software
    
    
    
    
    
    
    7,397
    
    
    
    Income from operations
    
    
    29,140
    
    
    
    15,062
    
    
    
    26,588Other income, net
    
    
    2,445
    
    
    
    2,340
    
    
    
    1,866Income before provision for income taxes
    
    
    31,585
    
    
    
    17,402
    
    
    
    28,454Provision for income taxes
    
    
    (10,117
    )
    
    
    (5,969
    )
    
    
    (9,930
    )Net income
    
    $
    21,468
    
    
    $
    11,433
    
    
    $
    18,524Earnings per share:Net income per share  basic
    
    $
    1.31
    
    
    $
    0.74
    
    
    $
    1.18Net income per share  diluted
    
    $
    1.30
    
    
    $
    0.73
    
    
    $
    1.13Weighted average number of shares outstanding:Basic
    
    
    16,441
    
    
    
    15,515
    
    
    
    15,733Diluted
    
    
    16,560
    
    
    
    15,692
    
    
    
    16,415
  39




---



##### 



THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands, except share amounts)
 AccumulatedElements ofAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    AnnualCommon Shares
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Stock
    
    
    Total
    
    
    IncomeBalance as of March 31,
2008
    
    
    17,393,626
    
    
    
    215
    
    
    
    217,170
    
    
    
    113,024
    
    
    
    1,540
    
    
    
    (209,420
    )
    
    
    122,529
    
    
    
    Acquisition of Crimson
Software, Inc.
    
    
    102,984
    
    
    
    1
    
    
    
    4,724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,725
    
    
    
    Proceeds from exercise of
stock options
    
    
    18,625
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    Vesting of restricted
stock units, net of shares
withheld to satisfy
minimum employee tax
withholding
    
    
    80,070
    
    
    
    1
    
    
    
    (825
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (824
    )
    
    
    Deficient tax benefits
from stock-based awards
    
    
    
    
    
    
    
    
    
    
    (479
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (479
    )
    
    
    Proceeds from issuance of
common stock under
employee stock purchase
plan
    
    
    14,844
    
    
    
    
    
    
    
    337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    337
    
    
    
    Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    12,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,447
    
    
    
    Purchases of treasury stock
    
    
    (2,051,255
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,491
    )
    
    
    (61,491
    )
    
    
    Change in net unrealized
gains (losses) on
available-for-sale
marketable securities, net
of income taxes of ($125)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (233
    )
    
    
    
    
    
    
    (233
    )
    
    
    (233
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,468
    
    
    
    
    
    
    
    
    
    
    
    21,468
    
    
    
    21,468Balance as of March 31,
2009
    
    
    15,558,894
    
    
    
    217
    
    
    $
    233,794
    
    
    $
    134,492
    
    
    $
    1,307
    
    
    $
    (270,911
    )
    
    $
    98,899
    
    
    $
    21,235Proceeds from exercise of
stock options
    
    
    11,500
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    Vesting of restricted
stock units, net of shares
withheld to satisfy
minimum employee tax
withholding
    
    
    75,364
    
    
    
    1
    
    
    
    (1,249
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,248
    )
    
    
    Deficient tax benefits
from stock-based awards
    
    
    
    
    
    
    
    
    
    
    (811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (811
    )
    
    
    Proceeds from issuance of
common stock under
employee stock purchase
plan
    
    
    5,573
    
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    12,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,152
    
    
    
    Purchases of treasury stock
    
    
    (146,179
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,999
    )
    
    
    (3,999
    )
    
    
    Reversal of deferred tax
asset for option
cancellation
    
    
    
    
    
    
    
    
    
    
    (4,700
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,700
    )
    
    
    Change in net unrealized
gains (losses) on
available-for-sale
marketable securities, net
of income taxes of ($94)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (273
    )
    
    
    
    
    
    
    (273
    )
    
    
    (273
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,433
    
    
    
    
    
    
    
    
    
    
    
    11,433
    
    
    
    11,433Balance as of March 31,
2010
    
    
    15,505,152
    
    
    
    218
    
    
    $
    239,548
    
    
    $
    145,925
    
    
    $
    1,034
    
    
    $
    (274,910
    )
    
    $
    111,815
    
    
    $
    11,160Proceeds from exercise of
stock options
    
    
    605,641
    
    
    
    6
    
    
    
    17,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,776
    
    
    
    Vesting of restricted
stock units, net of shares
withheld to satisfy
minimum employee tax
withholding
    
    
    84,039
    
    
    
    1
    
    
    
    (1,628
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,627
    )
    
    
    Excess tax benefits from
stock-based awards
    
    
    
    
    
    
    
    
    
    
    2,569
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,569
    
    
    
    Proceeds from issuance of
common stock under
employee stock purchase
plan
    
    
    4,336
    
    
    
    
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    191
    
    
    
    Stock-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    8,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,792
    
    
    
    Purchases of treasury stock
    
    
    (188,930
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,294
    )
    
    
    (8,294
    )
    
    
    Change in net unrealized
gains (losses) on
available-for-sale
marketable securities, net
of income taxes of ($619)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,154
    )
    
    
    
    
    
    
    (1,154
    )
    
    
    (1,154
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,524
    
    
    
    
    
    
    
    
    
    
    
    18,524
    
    
    
    18,524Balance as of March 31,
2011
    
    
    16,010,238
    
    
    
    225
    
    
    $
    267,242
    
    
    $
    164,449
    
    
    $
    (120
    )
    
    $
    (283,204
    )
    
    $
    148,592
    
    
    $
    17,370
  40




---



##### 



THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Year EndedMarch 31,2009
    
    
    2010
    
    
    2011Cash flows from operating activities:Net income
    
    $
    21,468
    
    
    $
    11,433
    
    
    $
    18,524Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    5,647
    
    
    
    6,391
    
    
    
    5,971Write-off of capitalized software
    
    
    
    
    
    
    7,397
    
    
    
    Amortization of intangible assets
    
    
    980
    
    
    
    1,644
    
    
    
    4,723Deferred income taxes
    
    
    3,635
    
    
    
    (8,136
    )
    
    
    (1,511
    )Excess tax benefits from stock-based awards
    
    
    (291
    )
    
    
    
    
    
    
    (2,569
    )Stock-based compensation expense
    
    
    12,447
    
    
    
    12,152
    
    
    
    8,792Amortization of marketable securities premiums
    
    
    681
    
    
    
    633
    
    
    
    741Changes in operating assets and liabilities:Membership fees receivable
    
    
    (25,485
    )
    
    
    (25,822
    )
    
    
    (32,346
    )Prepaid expenses and other current assets
    
    
    (1,381
    )
    
    
    1,799
    
    
    
    (3,339
    )Deferred incentive compensation and other charges
    
    
    (4,529
    )
    
    
    (10,826
    )
    
    
    (8,663
    )Deferred revenues
    
    
    22,410
    
    
    
    36,277
    
    
    
    56,310Accounts payable and accrued liabilities
    
    
    4,449
    
    
    
    9,532
    
    
    
    9,573Accrued incentive compensation
    
    
    (2,712
    )
    
    
    4,832
    
    
    
    394Other long-term liabilities
    
    
    2,372
    
    
    
    (635
    )
    
    
    (6,131
    )Net cash provided by operating activities
    
    
    39,691
    
    
    
    46,671
    
    
    
    50,469Cash flows from investing activities:Purchases of property and equipment
    
    
    (14,017
    )
    
    
    (1,802
    )
    
    
    (10,317
    )Capitalized external use software development costs
    
    
    (996
    )
    
    
    (742
    )
    
    
    (2,012
    )Cash paid for acquisition, net of cash acquired
    
    
    (18,592
    )
    
    
    (13,600
    )
    
    
    (42,605
    )Redemptions of marketable securities
    
    
    88,054
    
    
    
    45,412
    
    
    
    26,080Purchases of marketable securities
    
    
    (27,033
    )
    
    
    (28,561
    )
    
    
    (63,083
    )Other investing activities
    
    
    
    
    
    
    (5,000
    )
    
    
    Net cash provided by / (used in) investing activities
    
    
    27,416
    
    
    
    (4,293
    )
    
    
    (91,937
    )Cash flows from financing activities:Proceeds from issuance of common stock from exercise of stock options
    
    
    420
    
    
    
    214
    
    
    
    17,770Withholding of shares to satisfy minimum employee tax withholding for vested restricted stock units
    
    
    (825
    )
    
    
    (1,249
    )
    
    
    (1,628
    )Proceeds from issuance of common stock under employee stock purchase plan
    
    
    337
    
    
    
    148
    
    
    
    191Excess tax benefits from stock-based awards
    
    
    291
    
    
    
    
    
    
    
    2,569Purchases of treasury stock
    
    
    (61,491
    )
    
    
    (3,999
    )
    
    
    (8,294
    )Net cash used in financing activities
    
    
    (61,268
    )
    
    
    (4,886
    )
    
    
    10,608Net increase / (decrease) in cash and cash equivalents
    
    
    5,839
    
    
    
    37,492
    
    
    
    (30,860
    )Cash and cash equivalents, beginning of period
    
    
    17,907
    
    
    
    23,746
    
    
    
    61,238Cash and cash equivalents, end of period
    
    $
    23,746
    
    
    $
    61,238
    
    
    $
    30,378Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    5,211
    
    
    $
    12,958
    
    
    $
    12,068
  41




---



##### 



THE ADVISORY BOARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Business description
  Note 2. Basis of presentation
  Note 3. Summary of significant accounting policies
 Cash equivalents and marketable securities
  Property and equipment
    42




---



##### 



Business Combinations
  Goodwill and other intangible assets
    Recovery of long-lived assets (excluding goodwill)
  43




---



##### 



Revenue recognition
    Allowance for uncollectible revenue
  Deferred incentive compensation and other charges
  Earnings per share
  44




---



##### 



Year Ended March 31,2009
    
    2010
    
    2011Basic weighted average common shares outstanding
    
    
    16,441
    
    
    
    15,515
    
    
    
    15,733Dilutive impact of stock options
    
    
    94
    
    
    
    101
    
    
    
    539Dilutive impact of restricted stock units
    
    
    25
    
    
    
    76
    
    
    
    110Dilutive impact of earn-out liability
    
    
    
    
    
    
    
    
    
    
    33Diluted weighted average common shares outstanding
    
    
    16,560
    
    
    
    15,692
    
    
    
    16,415The following stock based awards that were not included in calculating diluted net income per
share because their effect was anti-dilutive (in thousands):Year Ended March 31,2009
    
    2010
    
    2011Anti-dilutive stock based awards
    
    
    2,920
    
    
    
    1,753
    
    
    
    485
 Concentrations of risk
   Other income, net
  Income taxes
  Fair value of financial instruments
  45




---



##### 



Segment reporting
  Research and development costs
  Stock-based compensation
  Use of estimates in preparation of consolidated financial statements
  Recent accounting pronouncements
 Recently adopted
   46




---



##### 



Accounting pronouncements not yet adopted
   Note 4. Marketable securities
  As of March 31, 2011Gross
    
    
    GrossFair
    
    
    Amortized
    
    
    unrealized
    
    
    unrealizedvalue
    
    
    cost
    
    
    gains
    
    
    lossesU.S. government agency obligations
    
    $
    23,721
    
    
    $
    24,042
    
    
    $
    164
    
    
    $
    485Tax exempt obligations of other states
    
    
    62,458
    
    
    
    62,310
    
    
    
    1,109
    
    
    
    961$
    86,179
    
    
    $
    86,352
    
    
    $
    1,273
    
    
    $
    1,446
 As of March 31, 2010Gross
    
    
    GrossFair
    
    
    Amortized
    
    
    unrealized
    
    
    unrealizedvalue
    
    
    cost
    
    
    gains
    
    
    lossesU.S. government agency obligations
    
    $
    11,956
    
    
    $
    11,630
    
    
    $
    326
    
    
    $
    Washington, D.C. tax exempt obligations
    
    
    2,521
    
    
    
    2,506
    
    
    
    15
    
    
    
    Tax exempt obligations of other states
    
    
    37,205
    
    
    
    35,902
    
    
    
    1,485
    
    
    
    182$
    51,682
    
    
    $
    50,038
    
    
    $
    1,826
    
    
    $
    182
  As of March 31, 2011Fair market
    
    
    Amortizedvalue
    
    
    costMatures in less than 1 year
    
    $
    
    
    
    $
    Matures after 1 year through 5 years
    
    
    34,783
    
    
    
    33,616Matures after 5 years through 10 years
    
    
    51,396
    
    
    
    52,736$
    86,179
    
    
    $
    86,352
   47




---



##### 



Note 5. Acquisitions
 Cielo
    Concuity
  Purchase price allocation
  Unbilled accounts receivable
    
    $
    3,207Accounts receivable
    
    
    529Other assets
    
    
    4,199
 48




---



##### 



Acquired developed technology
    
    
    6,250Customer related intangible assets
    
    
    4,000Employee related intangible assets
    
    
    500Trademarks
    
    
    500Goodwill
    
    
    21,808Current liabilities
    
    
    (1,339
    )Contingent earn-out liability
    
    
    (4,000
    )Deferred revenue
    
    
    (1,670
    )Total purchase price, net of cash acquired
    
    $
    33,984
   Southwind
    49




---



##### 



Note 6. Other non-current assets
  Note 7. Property and equipment
    As of March 31,2010
    
    
    2011Leasehold improvements
    
    $
    15,270
    
    
    $
    15,734Furniture, fixtures and equipment
    
    
    16,242
    
    
    
    18,472Software
    
    
    19,865
    
    
    
    30,52451,377
    
    
    
    64,730Accumulated depreciation and amortization
    
    
    (29,194
    )
    
    
    (35,201
    )Property and equipment, net
    
    $
    22,183
    
    
    $
    29,529
  Note 8. Goodwill and other intangibles
  50




---



##### 



As of March 31, 2010
    
    
    As of March 31, 2011Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    Netcarrying
    
    
    Accumulated
    
    
    carrying
    
    
    carrying
    
    
    Accumulated
    
    
    carryingamount
    
    
    amortization
    
    
    amount
    
    
    amount
    
    
    amortization
    
    
    amountOther IntangiblesInternally developed intangible for sale:Capitalized software
    
    $
    2,715
    
    
    $
    (553
    )
    
    $
    2,162
    
    
    $
    4,695
    
    
    $
    (1,173
    )
    
    $
    3,522Acquired intangibles:Developed software
    
    
    738
    
    
    
    (723
    )
    
    
    15
    
    
    
    6,988
    
    
    
    (1,988
    )
    
    
    5,000Customer relationships
    
    
    3,600
    
    
    
    (100
    )
    
    
    3,500
    
    
    
    8,200
    
    
    
    (1,320
    )
    
    
    6,880Trademarks
    
    
    1,500
    
    
    
    (75
    )
    
    
    1,425
    
    
    
    2,000
    
    
    
    (500
    )
    
    
    1,500Non-compete agreements
    
    
    100
    
    
    
    (25
    )
    
    
    75
    
    
    
    750
    
    
    
    (205
    )
    
    
    545Customer contracts
    
    
    3,713
    
    
    
    (1,729
    )
    
    
    1,984
    
    
    
    3,713
    
    
    
    (2,710
    )
    
    
    1,003Total other intangibles
    
    $
    12,366
    
    
    $
    (3,205
    )
    
    $
    9,161
    
    
    $
    26,346
    
    
    $
    (7,896
    )
    
    $
    18,450
  Note 9. Membership fees receivable
  As of March 31,2010
    
    
    2011Billed fees receivable
    
    $
    36,827
    
    
    $
    38,055Unbilled fees receivable
    
    
    110,238
    
    
    
    145,992147,065
    
    
    
    184,047Allowance for uncollectible revenue
    
    
    (3,612
    )
    
    
    (4,885
    )Membership fees receivable, net
    
    $
    143,453
    
    
    $
    179,162
  Note 10. Fair value measurements
 Financial assets and liabilities
  Cash and cash equivalents
 51




---



##### 



Marketable securities
 Contingent earn-out liabilities
 Measurements
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Observable market-based inputs other than Level 1 inputs, such as quoted prices
for similar assets or liabilities in active markets; quoted prices for similar or identical
assets or liabilities in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data.
    
    Level 3  Unobservable inputs that are supported by little or no market activity, such as
discounted cash flow methodologies.
  Fair value
    
    Fair value measurement as of March 31, 2011as of March 31,
    
    using fair value hierarchy2011
    
    Level 1
    
    Level 2
    
    Level 3Financial assetsCash and cash equivalents (1)
    
    $
    30,378
    
    
    $
    30,378
    
    
    
    
    
    
    
    Available-for-sale marketable securities (2)
    
    
    86,179
    
    
    
    86,179
    
    
    
    
    
    
    
    Financial liabilitiesContingent earn-out liabilities (3)
    
    
    15,500
    
    
    
    
    
    
    
    
    
    
    
    15,500
 Fair value
    
    Fair value measurement as of March 31, 2010as of March 31,
    
    using fair value hierarchy2010
    
    Level 1
    
    Level 2
    
    Level 3Financial assetsCash and cash equivalents (1)
    
    $
    61,238
    
    
    $
    61,238
    
    
    
    
    
    
    
    Available-for-sale marketable securities (2)
    
    
    51,682
    
    
    
    51,682
    
    
    
    
    
    
    
    Financial liabilitiesContingent earn-out liabilities (3)
    
    
    5,600
    
    
    
    
    
    
    
    
    
    
    
    5,600
 
 (1)
    
    Fair value is based on quoted market prices.(2)
    
    Fair value is determined using quoted market prices of the assets. For further detail, see Note 4, Marketable securities.(3)
    
    This fair value measurement is based on unobservable inputs that are supported by little or no market activity and reflect
the Companys own assumptions in measuring fair value using the income approach. In developing these estimates, the
Company considered certain performance projections, historical results, and general macro-economic environment and
industry trends.  52




---



##### 



As of March 31,2009
    
    
    2010
    
    
    2011Beginning balance
    
    $
    
    
    
    $
    5,600
    
    
    $
    5,600Fair value change in Southwind contingent earn-out liability (1)
    
    
    
    
    
    
    
    
    
    
    1,500Addition of Concuity contingent earn-out liability
    
    
    
    
    
    
    
    
    
    
    4,000Addition of Cielo contingent earn-out liability
    
    
    
    
    
    
    
    
    
    
    4,400Ending balance
    
    $
    
    
    
    $
    5,600
    
    
    $
    15,500
 
 (1)
    
    Amounts were recognized in cost of services on the accompanying
consolidated statements of income. Non-financial assets and liabilities
   Note 11. Stock-based compensation
 Equity incentive plans
    53




---



##### 



Stock option activity.
  Restricted stock unit activity
  Employee stock purchase plan
  Valuation assumptions and equity based award activity
  54




---



##### 



Stock option valuation
   Year Ended March 31,2009
    
    2010
    
    2011 (1)Stock option grants:Risk-free interest rate
    
    
    2.80% - 3.28
    %
    
    
    1.44% - 2.19
    %
    
    
    0.8% - 2.56
    %Expected lives in years
    
    
    4.0
    
    
    
    4.0
    
    
    
    3.9Expected volatility
    
    
    28.0% - 31.0
    %
    
    
    35.8% - 41.9
    %
    
    
    36.7% - 42.1
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Weighted average exercise price of options granted
    
    $
    44.64
    
    
    $
    19.04
    
    
    $
    34.75Weighted average grant date fair value of options granted
    
    $
    12.08
    
    
    $
    6.01
    
    
    $
    11.27Number of shares granted
    
    
    437,911
    
    
    
    950,050
    
    
    
    297,500
 
 (1)
    
    Includes 45,000 stock options that were issued with market-based
conditions to an employee. The Company calculated the fair value of
these stock option awards. The options were valued on the date of
grant at $9.82 per share using a lattice option-pricing model. The
significant assumptions used were as follows: risk-free interest rate
of 1.71%; expected term of 3.3 years; expected volatility of 38.35%;
dividend yield of 0.0%; and a weighted average exercise price of
$34.27 per share.  WeightedAverageRemainingWeighted
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Average
    
    
    Term (in
    
    
    Intrinsic ValueOptions
    
    
    Exercise Price
    
    
    years)
    
    
    (in thousands)Outstanding, March 31, 2008
    
    
    2,445,979
    
    
    $
    42.17Granted
    
    
    437,911
    
    
    $
    44.64Exercised
    
    
    (18,625
    )
    
    $
    22.48Forfeited
    
    
    (29,500
    )
    
    $
    37.88Outstanding, March 31, 2009
    
    
    2,835,765
    
    
    $
    42.73Granted
    
    
    950,050
    
    
    $
    19.04Exercised
    
    
    (11,500
    )
    
    $
    18.58Forfeited
    
    
    (75,085
    )
    
    $
    47.37Cancellations
    
    
    (830,365
    )
    
    $
    53.14Outstanding, March 31, 2010
    
    
    2,868,865
    
    
    $
    31.81Granted
    
    
    297,500
    
    
    $
    34.75Exercised
    
    
    (605,641
    )
    
    $
    29.35Forfeited
    
    
    (31,125
    )
    
    $
    43.15Outstanding, March 31, 2011
    
    
    2,529,599
    
    
    $
    32.79
    
    
    
    3.52
    
    
    $
    47,876Exercisable
    
    
    1,494,709
    
    
    $
    37.32
    
    
    
    3.19
    
    
    $
    21,247
  55




---



##### 



Valuation for restricted stock units
  Valuation for employee stock purchase rights
  Forfeitures
  Compensation expense
  Year Ended March 31,2009
    
    
    2010
    
    
    2011Stock-based compensation expense included in:Costs and expenses:Cost of services
    
    $
    4,273
    
    
    $
    3,930
    
    
    $
    2,763Member relations and marketing
    
    
    2,436
    
    
    
    2,248
    
    
    
    1,663General and administrative
    
    
    5,738
    
    
    
    5,974
    
    
    
    4,366Depreciation
    
    
    
    
    
    
    
    
    
    
    Total costs and expenses
    
    
    12,447
    
    
    
    12,152
    
    
    
    8,792Income from operations
    
    
    (12,447
    )
    
    
    (12,152
    )
    
    
    (8,792
    )Net income
    
    $
    (8,464
    )
    
    $
    (7,984
    )
    
    $
    (5,725
    )Impact on diluted earnings per share
    
    $
    (0.51
    )
    
    $
    (0.51
    )
    
    $
    (0.35
    )
   Year Ended March 31,2009
    
    
    2010
    
    
    2011Stock-based compensation expense by award type:Stock options
    
    $
    7,209
    
    
    $
    6,287
    
    
    $
    3,590Restricted stock units
    
    
    5,179
    
    
    
    5,857
    
    
    
    5,202Employee stock purchase rights
    
    
    59
    
    
    
    8
    
    
    
    Total stock-based compensation
    
    $
    12,447
    
    
    $
    12,152
    
    
    $
    8,792
 56




---



##### 



Tax benefits
  Note 12. Accumulated other comprehensive income
  Note 13. Income taxes
  Year Ended March 31,2009
    
    
    2010
    
    
    2011Current
    
    $
    6,482
    
    
    $
    14,105
    
    
    $
    11,441Deferred
    
    
    3,635
    
    
    
    (8,136
    )
    
    
    (1,511
    )Provision for income taxes
    
    $
    10,117
    
    
    $
    5,969
    
    
    $
    9,930
  Year Ended March 31,2009
    
    2010
    
    2011Statutory U.S. federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income tax, net of U.S. federal income tax benefit
    
    
    2.2
    
    
    
    5.7
    
    
    
    5.5Tax-exempt interest income
    
    
    (1.6
    )
    
    
    (2.7
    )
    
    
    (1.5
    )D.C. QHTC income tax credits
    
    
    (5.0
    )
    
    
    (9.1
    )
    
    
    (7.3
    )Other permanent differences, net
    
    
    1.4
    
    
    
    5.4
    
    
    
    3.2Effective tax rate
    
    
    32.0
    %
    
    
    34.3
    %
    
    
    34.9
    %
  As of March 31,2010
    
    
    2011Deferred income tax assets (liabilities):Tax credit carry forwards
    
    $
    6,818
    
    
    $
    7,775Deferred compensation accrued for financial reporting purposes
    
    
    4,885
    
    
    
    5,515Stock-based compensation
    
    
    6,487
    
    
    
    6,831Reserve for uncollectible revenue
    
    
    1,550
    
    
    
    1,980Depreciation
    
    
    
    
    
    
    270Acquired intangibles
    
    
    
    
    
    
    298Unrealized losses on available-for-sale securities
    
    
    
    
    
    
    61Other
    
    
    918
    
    
    
    295Total deferred tax assets
    
    
    20,658
    
    
    
    23,025Capitalized software development costs
    
    
    (3,157
    )
    
    
    (4,584
    )Acquired intangibles
    
    
    (1,529
    )
    
    
    Deferred incentive compensation and other deferred charges
    
    
    (1,769
    )
    
    
    (2,901
    )Unrealized gains on available-for-sale securities
    
    
    (557
    )
    
    
    Depreciation
    
    
    (235
    )
    
    
    Total deferred tax liabilities
    
    
    (7,247
    )
    
    
    (7,485
    )Net deferred income tax assets
    
    $
    13,411
    
    
    $
    15,540
 57




---



##### 



Washington, D.C. income tax incentives
   Note 14. Stockholders equity
   Note 15. Commitments and contingencies
 Operating leases
  58




---



##### 



Year Ending March 31,2012
    
    $
    8,2882013
    
    
    9,3182014
    
    
    9,5732015
    
    
    9,2422016
    
    
    9,413Thereafter
    
    
    27,822Total
    
    $
    73,656
 Purchase obligations
  Credit facility
  Benefit plan
  Litigation
  Note 16. Segments and geographic areas
   Year Ended March 31,2009
    
    
    2010
    
    
    2011United States
    
    $
    223,497
    
    
    $
    229,389
    
    
    $
    280,273
 59




---



##### 



Year Ended March 31,2009
    
    
    2010
    
    
    2011Other countries
    
    
    6,863
    
    
    
    9,934
    
    
    
    9,975Total revenue
    
    $
    230,360
    
    
    $
    239,323
    
    
    $
    290,248
 Note 17. Quarterly financial data (unaudited)
  Fiscal 2010 Quarter EndedJune 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,Revenue
    
    $
    56,703
    
    
    $
    58,323
    
    
    $
    60,893
    
    
    $
    63,404Income (loss) from operations (1)
    
    
    5,412
    
    
    
    (3,804
    )
    
    
    5,955
    
    
    
    7,499Income (loss) before provision for income taxes (1)
    
    
    6,374
    
    
    
    (3,220
    )
    
    
    6,558
    
    
    
    7,690Net income (loss)
    
    $
    4,188
    
    
    $
    (2,116
    )
    
    $
    4,309
    
    
    $
    5,052Earnings per share:Basic
    
    $
    0.27
    
    
    $
    (0.14
    )
    
    $
    0.28
    
    
    $
    0.33Diluted
    
    $
    0.27
    
    
    $
    (0.14
    )
    
    $
    0.27
    
    
    $
    0.32
 Fiscal 2011 Quarter EndedJune 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,Revenue
    
    $
    66,688
    
    
    $
    71,102
    
    
    $
    75,210
    
    
    $
    77,248Income from operations
    
    
    6,945
    
    
    
    7,043
    
    
    
    5,658
    
    
    
    6,942Income before provision for income taxes
    
    
    7,166
    
    
    
    7,620
    
    
    
    6,138
    
    
    
    7,530Net income
    
    $
    4,593
    
    
    $
    4,884
    
    
    $
    3,934
    
    
    $
    5,113Earnings per share:Basic
    
    $
    0.30
    
    
    $
    0.31
    
    
    $
    0.25
    
    
    $
    0.32Diluted
    
    $
    0.29
    
    
    $
    0.30
    
    
    $
    0.24
    
    
    $
    0.31
 
 (1)
    
    Includes a non-cash charge of $1.9 million associated with the cancellation of certain stock
options and a $7.4 million non-cash charge resulting from the write-off of capitalized
software in the quarter ended September 30, 2009. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  Item 9A. Controls and Procedures.
    Item 9B. Other Information.
  60




---



##### 



PART III
 Item 10. Directors, Executive Officers, and Corporate Governance.
   Item 11. Executive Compensation.
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  Item 13. Certain Relationships and Related Transactions, and Director Independence.
  Item 14. Principal Accounting Fees and Services.
  61




---



##### 



Part IV
 Item 15. Exhibits and Financial Statement Schedules.
            ExhibitNumber
    
    Description of Exhibit3.1
    
    Certificate of Incorporation of the Company, as amended. Incorporated by reference to the
Companys Registration Statement on Form S-1/A filed with the Securities and Exchange
Commission (the Commission) on October 29, 2001.3.2
    
    Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.1 of the
Companys Current Report on Form 8-K filed with the Commission on November 14, 2007.4.1
    
    Form of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Companys
Registration Statement on Form S-1/A filed with the Commission on October 29, 2001.10.1*
    
    The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan. Incorporated by
reference to Exhibit 10.13 of the Companys Registration Statement on Form S-1/A filed with the
Commission on August 22, 2001.10.2*
    
    Form of Term Sheet and Standard Terms and Conditions pursuant to The Advisory Board Company
2001 Stock-Based Incentive Compensation Plan. Incorporated by reference to Exhibit 10.14 of the
Companys Registration Statement on Form S-1/A filed with the Commission on August 22, 2001.10.3*
    
    The Advisory Board Company Directors Stock Plan. Incorporated by reference to Exhibit 10.15 of
the Companys Registration Statement on Form S-1/A filed with the Commission on August 22,
2001.10.4*
    
    Form of Term Sheet and Standard Terms and Conditions for Director Non-qualified Stock Options
pursuant to The Advisory Board Company Directors Stock Plan Incorporated by reference to
Exhibit 10.16 of the Companys Registration Statement on Form S-1/A filed with the Commission
on August 22, 2001.10.5
    
    Form of Indemnity Agreement between the Company and certain officers, directors and employees.
Incorporated by reference to Exhibit 10.33 of the Companys Registration Statement on Form
S-1/A filed with the Commission on August 22, 2001.10.6
    
    Form of Indemnification Agreement between the Company and certain officers, directors and
employees. Incorporated by reference to Exhibit 10.5 of the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2009.
 62




---



##### 



ExhibitNumber
    
    Description of Exhibit10.7*
    
    Employee Stock Purchase Plan. Incorporated by reference to Exhibit 10.34 of the Companys
Registration Statement on Form S-1/A filed with the Commission on October 29, 2001.10.8*
    
    The Advisory Board Company 2005 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1
of the Companys Current Report on Form 8-K filed with the Commission on November 17, 2005.10.9*
    
    Form of Standard Terms and Conditions for Restricted Stock Units pursuant to The Advisory Board
Company 2005 Stock Incentive Plan. Incorporated by reference to Exhibit 10.39 of the Companys
Annual Report on Form 10-K for the fiscal year ended March 31, 2006.10.10*
    
    Form of Restricted Stock Unit Award Agreement pursuant to The Advisory Board Company 2005 Stock
Incentive Plan. Incorporated by reference to Exhibit 10.40 of the Companys Annual Report on
Form 10-K for the fiscal year ended March 31, 2006.10.11*
    
    The Advisory Board Company 2006 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1
of the Companys Current Report on Form 8-K filed with the Commission on November 17, 2006.10.12*
    
    Form of Restricted Stock Award Agreement pursuant to The Advisory Board Company 2005 and 2006
Stock Incentive Plans. Incorporated by reference to Exhibit 10.3 of the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 2008.10.13*
    
    Form of Award Agreement for Non-qualified Stock Options pursuant to The Advisory Board Company
2005 and 2006 Stock Incentive Plans. Incorporated by reference to Exhibit 10.1 of the Companys
Quarterly Report on Form 10-Q for quarter ended September 30, 2008.10.14*
    
    The Advisory Board Company 2009 Stock Incentive Plan. Incorporated by reference to Exhibit 10.1
of the Companys Current Report on Form 8-K filed with the Commission on September 16, 2009.10.15*
    
    Form of Award Agreement for Restricted Stock Units pursuant to The Advisory Board Company 2005
and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K filed with the Commission on September 16, 2009.10.16*
    
    Form of Award Agreement for Qualified Stock Options pursuant to The Advisory Board Company 2005
and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.3 of the Companys
Current Report on Form 8-K filed with the Commission on September 16, 2009.10.17*
    
    Form of Award Agreement for Non-Qualified Stock Options pursuant to The Advisory Board Company
2005 and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.4 of the Companys
Current Report on Form 8-K filed with the Commission on September 16, 2009.10.18*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and Frank J.
Williams. Incorporated by reference to Exhibit 10.4 of the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2008.10.19*
    
    Amended and Restated Employment Agreement, entered into as of November 3, 2010, by and between
The Advisory Board Company and Frank J. Williams. Incorporated by reference to Exhibit 10.1 of
the Companys Current Report on Form 8-K filed with the Commission on November 9, 2010.10.20*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and Robert W.
Musslewhite. Incorporated by reference to Exhibit 10.5 of the Companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008.10.21*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and David L.
Felsenthal. Incorporated by reference to Exhibit 10.6 of the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2008.10.22
    
    Agreement of Lease, dated October 20, 2003, between the Company and 2445 M Street Property LLC.
Incorporated by reference to Exhibit 10.37 of the Companys Quarterly Report on Form 10-Q for
the quarter ended September 30, 2003.10.23
    
    Agreement to Commercial Note and attachments thereto, dated, dated November 7, 2006, between
SunTrust Bank and the Company. Incorporated by reference to Exhibit 10.34 of the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.10.24
    
    Investment Property Security Agreement, dated as of November 7, 2006, by and between SunTrust
Bank, Merrill Lynch and the Company. Incorporated by reference to Exhibit 10.35 of the
Companys Quarterly Report on Form 10-Q for quarter ended September 30, 2006.
 63




---



##### 



ExhibitNumber
    
    Description of Exhibit10.25
    
    Collaboration Agreement, dated as of February 6, 2007, between The Corporate Executive Board
Company and the Company (the Collaboration Agreement). Incorporated by reference to Exhibit
10.42 of the Companys Annual Report on Form 10-K filed for the fiscal year ended March 31,
2007. On May 27, 2008, the Commission granted confidential treatment with respect to certain
portions of the Collaboration Agreement.10.26
    
    Letter agreement, dated February 4, 2010, between The Advisory Board Company and The Corporate
Executive Board Company concerning the Collaboration Agreement, dated February 6, 2007.
Incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for
the quarter ended December 30, 2009.21.1
    
    Subsidiaries of the Registrant. Filed herewith.23.1
    
    Consent of Ernst & Young LLP. Filed herewith.31.1
    
    Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as amended. Filed herewith.31.2
    
    Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the
Securities Exchange Act of 1934, as amended. Filed herewith.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350. Filed herewith.
 
 *
    
    Management contracts or compensation plans or arrangements in which directors or executive
officers participate. 64




---



##### 



THE ADVISORY BOARD COMPANY
SCHEDULE II  Valuation and Qualifying Accounts
(In thousands)
 Balance
    
    
    Additions
    
    
    Additionsat
    
    
    Charged
    
    
    Charged to
    
    
    Deductions
    
    
    BalanceBeginning
    
    
    to
    
    
    Other
    
    
    From
    
    
    at End ofof Year
    
    
    Revenue
    
    
    Accounts
    
    
    Reserve
    
    
    YearYear ending March 31, 2009Allowance for uncollectible revenue
    
    $
    2,977
    
    
    $
    2,413
    
    
    $
    
    
    
    $
    2,652
    
    
    $
    2,738$
    2,977
    
    
    $
    2,413
    
    
    $
    
    
    
    $
    2,652
    
    
    $
    2,738Year ending March 31, 2010Allowance for uncollectible revenue
    
    $
    2,738
    
    
    $
    3,452
    
    
    $
    
    
    
    $
    2,578
    
    
    $
    3,612$
    2,738
    
    
    $
    3,452
    
    
    $
    
    
    
    $
    2,578
    
    
    $
    3,612Year ending March 31, 2011Allowance for uncollectible revenue
    
    $
    3,612
    
    
    $
    4,733
    
    
    $
    
    
    
    $
    3,460
    
    
    $
    4,885$
    3,612
    
    
    $
    4,733
    
    
    $
    
    
    
    $
    3,460
    
    
    $
    4,885
 65




---



##### 



The Advisory Board CompanyDate: June 14, 2011
    /s/ Robert W. MusslewhiteRobert W. Musslewhite,Chief Executive Officer and Director  Signature
    
    Title
    
    Date/s/ Robert W. Musslewhite

Robert W. Musslewhite
    
    Chief Executive Officer and
Director (Principal
Executive Officer)
    
    June 14, 2011/s/ Michael T. Kirshbaum

Michael T. Kirshbaum
    
    Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
    
    June 14, 2011/s/ Frank J. Williams
    
    Executive Chairman
    
    June 14, 2011Frank J. Williams/s/ Sanju K. Bansal
    
    Director
    
    June 14, 2011Sanju K. Bansal/s/ Peter J. Grua
    
    Director
    
    June 14, 2011Peter J. Grua/s/ Kelt Kindick
    
    Lead Director
    
    June 14, 2011Kelt Kindick/s/ Mark R. Neaman
    
    Director
    
    June 14, 2011Mark R. Neaman/s/ Leon D. Shapiro
    
    Director
    
    June 14, 2011Leon D. Shapiro/s/ LeAnne M. Zumwalt
    
    Director
    
    June 14, 2011LeAnne M. Zumwalt
 66




---



##### 



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Certificate of Incorporation of the Company, as amended. Incorporated by reference to
the Companys Registration Statement on Form S-1/A filed with the Securities and
Exchange Commission (the Commission) on October 29, 2001.3.2
    
    Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.1 of
the Companys Current Report on Form 8-K filed with the Commission on November 14, 2007.4.1
    
    Form of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 of the
Companys Registration Statement on Form S-1/A filed with the Commission on October 29,
2001.10.1*
    
    The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan. Incorporated by
reference to Exhibit 10.13 of the Companys Registration Statement on Form S-1/A filed
with the Commission on August 22, 2001.10.2*
    
    Form of Term Sheet and Standard Terms and Conditions pursuant to The Advisory Board
Company 2001 Stock-Based Incentive Compensation Plan. Incorporated by reference to
Exhibit 10.14 of the Companys Registration Statement on Form S-1/A filed with the
Commission on August 22, 2001.10.3*
    
    The Advisory Board Company Directors Stock Plan. Incorporated by reference to Exhibit
10.15 of the Companys Registration Statement on Form S-1/A filed with the Commission on
August 22, 2001.10.4*
    
    Form of Term Sheet and Standard Terms and Conditions for Director Non-qualified Stock
Options pursuant to The Advisory Board Company Directors Stock Plan Incorporated by
reference to Exhibit 10.16 of the Companys Registration Statement on Form S-1/A filed
with the Commission on August 22, 2001.10.5
    
    Form of Indemnity Agreement between the Company and certain officers, directors and
employees. Incorporated by reference to Exhibit 10.33 of the Companys Registration
Statement on Form S-1/A filed with the Commission on August 22, 2001.10.6
    
    Form of Indemnification Agreement between the Company and certain officers, directors
and employees. Incorporated by reference to Exhibit 10.5 of the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 2009.10.7*
    
    Employee Stock Purchase Plan. Incorporated by reference to Exhibit 10.34 of the
Companys Registration Statement on Form S-1/A filed with the Commission on October 29,
2001.10.8*
    
    The Advisory Board Company 2005 Stock Incentive Plan. Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed with the Commission on
November 17, 2005.10.9*
    
    Form of Standard Terms and Conditions for Restricted Stock Units pursuant to The
Advisory Board Company 2005 Stock Incentive Plan. Incorporated by reference to Exhibit
10.39 of the Companys Annual Report on Form 10-K for the fiscal year ended March 31,
2006.10.10*
    
    Form of Restricted Stock Unit Award Agreement pursuant to The Advisory Board Company
2005 Stock Incentive Plan. Incorporated by reference to Exhibit 10.40 of the Companys
Annual Report on Form 10-K for the fiscal year ended March 31, 2006.10.11*
    
    The Advisory Board Company 2006 Stock Incentive Plan. Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed with the Commission on
November 17, 2006.10.12*
    
    Form of Restricted Stock Award Agreement pursuant to The Advisory Board Company 2005 and
2006 Stock Incentive Plans. Incorporated by reference to Exhibit 10.3 of the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.10.13*
    
    Form of Award Agreement for Non-qualified Stock Options pursuant to The Advisory Board
Company 2005 and 2006 Stock Incentive Plans. Incorporated by reference to Exhibit 10.1
of the Companys Quarterly Report on Form 10-Q for quarter ended September 30, 2008.10.14*
    
    The Advisory Board Company 2009 Stock Incentive Plan. Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed with the Commission on
September 16, 2009.10.15*
    
    Form of Award Agreement for Restricted Stock Units pursuant to The Advisory Board
Company 2005 and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.2
of the Companys Current Report on Form 8-K filed with the Commission on September 16,
2009.
 67




---



##### 



ExhibitNumber
    
    Description of Exhibit10.16*
    
    Form of Award Agreement for Qualified Stock Options pursuant to The Advisory Board
Company 2005 and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.3
of the Companys Current Report on Form 8-K filed with the Commission on September 16,
2009.10.17*
    
    Form of Award Agreement for Non-Qualified Stock Options pursuant to The Advisory Board
Company 2005 and 2009 Stock Incentive Plans. Incorporated by reference to Exhibit 10.4
of the Companys Current Report on Form 8-K filed with the Commission on September 16,
2009.10.18*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and Frank J.
Williams. Incorporated by reference to Exhibit 10.4 of the Companys Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008.10.19*
    
    Amended and Restated Employment Agreement, entered into as of November 3, 2010, by and
between The Advisory Board Company and Frank J. Williams. Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed with the Commission on
November 9, 2010.10.20*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and Robert W.
Musslewhite. Incorporated by reference to Exhibit 10.5 of the Companys Quarterly Report
on Form 10-Q for the quarter ended September 30, 2008.10.21*
    
    Employment Agreement, dated as of September 12, 2008, between the Company and David L.
Felsenthal. Incorporated by reference to Exhibit 10.6 of the Companys Quarterly Report
on Form 10-Q for the quarter ended September 30, 2008.10.22
    
    Agreement of Lease, dated October 20, 2003, between the Company and 2445 M Street
Property LLC. Incorporated by reference to Exhibit 10.37 of the Companys Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003.10.23
    
    Agreement to Commercial Note and attachments thereto, dated, dated November 7, 2006,
between SunTrust Bank and the Company. Incorporated by reference to Exhibit 10.34 of the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.10.24
    
    Investment Property Security Agreement, dated as of November 7, 2006, by and between
SunTrust Bank, Merrill Lynch and the Company. Incorporated by reference to Exhibit 10.35
of the Companys Quarterly Report on Form 10-Q for quarter ended September 30, 2006.10.25
    
    Collaboration Agreement, dated as of February 6, 2007, between The Corporate Executive
Board Company and the Company (the Collaboration Agreement). Incorporated by reference
to Exhibit 10.42 of the Companys Annual Report on Form 10-K filed for the fiscal year
ended March 31, 2007. On May 27, 2008, the Commission granted confidential treatment
with respect to certain portions of the Collaboration Agreement.10.26
    
    Letter agreement, dated February 4, 2010, between The Advisory Board Company and The
Corporate Executive Board Company concerning the Collaboration Agreement, dated February
6, 2007. Incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on
Form 10-Q for the quarter ended December 30, 2009.21.1
    
    Subsidiaries of the Registrant. Filed herewith.23.1
    
    Consent of Ernst & Young LLP. Filed herewith.31.1
    
    Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as amended. Filed herewith.31.2
    
    Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under
the Securities Exchange Act of 1934, as amended. Filed herewith.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18
U.S.C. Section 1350. Filed herewith.
 
 *
    
    Management contracts or compensation plans or arrangements in which directors or executive
officers participate. 68