10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2016

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

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 of incorporation or organization)	(I.R.S. Employer Identification Number)
2445 M Street, NW, Washington, D.C.	20037
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (202) 266-5600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

As of August 1, 2016, the registrant had outstanding 40,264,365 shares of Common Stock, par value $0.01 per share.

THE ADVISORY BOARD COMPANY

INDEX TO FORM 10-Q

	Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements	1
Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015	1
Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	2
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2016 and 2015	3
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	4
Notes to Unaudited Consolidated Financial Statements	5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	29
ITEM 4. Controls and Procedures	29
PART II. OTHER INFORMATION	31
ITEM 1A. Risk Factors	31
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
ITEM 5. Other Information	32
ITEM 6. Exhibits	33
Signatures	34

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE ADVISORY BOARD COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	June 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	17,487		$	71,825
Membership fees receivable, net	600,496			605,444
Prepaid expenses and other current assets	20,986			22,543
Total current assets	638,969			699,812
Property and equipment, net	187,984			183,057
Intangible assets, net	264,948			274,721
Deferred incentive compensation and other charges	69,641			81,181
Goodwill	740,458			738,200
Investments in unconsolidated entities	—			706
Other non-current assets	1,800			1,800
Total assets	$	1,903,800		$	1,979,477
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Deferred revenue, current	$	568,329		$	581,471
Accounts payable and accrued liabilities	64,506			74,879
Accrued incentive compensation	16,765			41,173
Debt, current	51,946			27,743
Total current liabilities	701,546			725,266
Deferred revenue, net of current portion	152,039			173,953
Deferred income taxes	91,047			93,893
Debt, net of current portion	501,015			522,086
Financing obligation	15,054			2,700
Other long-term liabilities	17,157			12,488
Total liabilities	1,477,858			1,530,386
Stockholders’ equity:
Preferred stock, par value $0.01; 5,000,000 shares authorized, zero shares issued and outstanding	—			—
Common stock, par value $0.01; 135,000,000 shares authorized, 40,264,365 and 41,572,523 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	403			416
Additional paid-in capital	759,832			744,333
Accumulated deficit	(331,625		)	(295,860		)
Accumulated other comprehensive (loss) income	(2,668		)	202
Total stockholders’ equity	425,942			449,091
Total liabilities and stockholders’ equity	$	1,903,800		$	1,979,477

The accompanying notes are an integral part of these consolidated balance sheets.

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THE ADVISORY BOARD COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Revenue	$	198,382		$	183,583		$	399,117		$	362,905
Costs and expenses:
Cost of services, excluding depreciation and amortization	96,440			92,536			192,389			188,026
Member relations and marketing	32,718			29,375			65,113			60,101
General and administrative	32,219			30,853			64,047			62,527
Depreciation and amortization	18,917			18,499			38,684			35,773
Operating income	18,088			12,320			38,884			16,478
Other expense:
Interest expense	(4,389		)	(5,154		)	(9,210		)	(10,766		)
Other expense, net	(923		)	(128		)	(862		)	(1,247		)
Loss on financing activities	—			—			—			(17,398		)
Total other expense, net	(5,312		)	(5,282		)	(10,072		)	(29,411		)
Income (loss) before provision for income taxes and equity in (loss) income of unconsolidated entities	12,776			7,038			28,812			(12,933		)
Provision for income taxes	(4,870		)	(3,372		)	(10,533		)	(3,094		)
Equity in (loss) income of unconsolidated entities	(411		)	4,000			(445		)	1,621
Net income (loss)	$	7,495		$	7,666		$	17,834		$	(14,406	)
Earnings per share
Net income (loss) per share—basic	$	0.19		$	0.18		$	0.44		$	(0.35	)
Net income (loss) per share—diluted	$	0.18		$	0.18		$	0.43		$	(0.35	)
Weighted average number of shares outstanding:
Basic	40,365			42,440			40,928			41,686
Diluted	40,570			42,914			41,222			41,686

The accompanying notes are an integral part of these consolidated financial statements.

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THE ADVISORY BOARD COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016			2015		2016			2015
Net income (loss)	$	7,495		$	7,666	$	17,834		$	(14,406	)
Other comprehensive income (loss):
Net unrealized loss on available-for-sale securities, net of income tax (benefit) expense of $0 and $0 for the three months ended June 30, 2016 and 2015, respectively; and $0 and $(150) for the six months ended June 30, 2016 and 2015, respectively	—			—		—			(81		)
Net unrealized (loss) gain on cash flow hedges, net of income tax (benefit) expense of $(392) and $449 for the three months ended June 30, 2016 and 2015, respectively; and $(1,960) and $449 for the six months ended June 30, 2016 and 2015, respectively	(433		)	747		(2,870		)	747
Comprehensive income (loss)	$	7,062		$	8,413	$	14,964		$	(13,740	)

The accompanying notes are an integral part of these consolidated financial statements.

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THE ADVISORY BOARD COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended   June 30,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	17,834		$	(14,406	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	38,684			35,773
Loss on financing activities	—			17,398
Amortization of debt issuance costs	668			704
Deferred income taxes	(881		)	11,356
Excess tax benefits from stock-based awards	(633		)	(2,745		)
Stock-based compensation expense	14,947			15,036
Gain on investment in common stock warrants	—			(70		)
Equity in loss (income) of unconsolidated entities	445			(1,621		)
Changes in operating assets and liabilities (net of the effect of acquisitions):
Membership fees receivable	4,948			(34,872		)
Prepaid expenses and other current assets	7,268			(1,995		)
Deferred incentive compensation and other charges	11,408			870
Other non-current assets	—			(258		)
Deferred revenue	(35,056		)	46,655
Accounts payable and accrued liabilities	(10,738		)	(10,949		)
Acquisition-related earn-out payments	(1,432		)	(1,948		)
Accrued incentive compensation	(24,408		)	(12,031		)
Other long-term liabilities	27			(5,168		)
Net cash provided by operating activities	23,081			41,729
Cash flows from investing activities:
Purchases of property and equipment	(19,877		)	(23,285		)
Capitalized external-use software development costs	(1,608		)	(2,181		)
Cash paid for acquisitions, net of cash acquired	(1,900		)	(744,193		)
Investment in unconsolidated entity	—			(3,006		)
Redemptions of marketable securities	—			14,714
Net cash used in investing activities	(23,385		)	(757,951		)
Cash flows from financing activities:
Proceeds from debt, net	17,000			1,280,292
Pay down of debt	(14,375		)	(732,189		)
Debt issuance costs	—			(2,568		)
Proceeds from issuance of common stock, net of selling costs	—			148,786
Proceeds from issuance of common stock from exercise of stock options	3,100			3,014
Withholding of shares to satisfy minimum employee tax withholding for vested restricted stock units	(3,432		)	(6,007		)
Proceeds from issuance of common stock under employee stock purchase plan	256			263
Acquisition-related earn-out payments	(3,600		)	(1,500		)
Excess tax benefits from stock-based awards	633			2,745
Purchases of treasury stock	(53,616		)	—
Net cash (used in) provided by financing activities	(54,034		)	692,836
Net decrease in cash and cash equivalents	(54,338		)	(23,386		)
Cash and cash equivalents, beginning of period	71,825			72,936
Cash and cash equivalents, end of period	$	17,487		$	49,550
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes	$	2,841		$	(1,746	)
Cash paid for interest	$	7,097		$	9,473
Non-cash increase in estimated cost of construction of a building under a build-to-suit lease	$	12,354		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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THE ADVISORY BOARD COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business description and basis of presentation

The Advisory Board Company (individually and collectively with its subsidiaries, the “Company”) provides best practices research and insight, performance technology software, data- and tech-enabled services, and consulting and management services, through discrete programs to hospitals, health systems, independent medical groups, pharmaceutical and biotechnology companies, health care insurers, medical device companies, and colleges, universities, and other health care-focused organizations and educational institutions. Members of each subscription-based membership program are typically charged a separate fixed annual fee and have access to an integrated set of services that may include best practices research studies, executive education, proprietary content databases and online tools, daily online executive briefings, original executive inquiry services, cloud-based software applications, data- and tech-enabled services, and consulting and management services.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as reported in the Company’s Form 10-K for the year ended December 31, 2015 and the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2016.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company uses the equity method to account for equity investments in instances in which it owns common stock and has the ability to exercise significant influence, but not control, over the investee and for all investments in partnerships or limited liability companies where the investee maintains separate capital accounts for each investor. All significant intercompany transactions and balances have been eliminated.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows as of the dates and for the periods presented have been included. The consolidated balance sheet presented as of December 31, 2015 has been derived from the financial statements that have been audited by the Company’s independent registered public accounting firm. The consolidated results of operations for the three and six months ended June 30, 2016 may not be indicative of the results that may be expected for the Company’s fiscal year ending December 31, 2016, or any other period.

Note 2. Recent accounting pronouncements

Recently adopted

In April 2015, the Financial Accounting Standards Board ("FASB") issued guidance on the presentation of debt issuance costs. The guidance requires debt issuance costs related to a recognized debt liability to be presented as a direct deduction from the carrying amount of that debt liability and only impacts financial position presentation. In August 2015, the FASB issued guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The guidance codified the Securities and Exchange Commission staff's view on the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements consistent with prior practice as an asset. The Company adopted these standards retrospectively on January 1, 2016. The impact the adoption had on the Company's consolidated financial position as of December 31, 2015 is disclosed below. The adoption had no effect on the Company's results of operations for any period.

	As reported		Adjustments			As adjusted
Prepaid expenses and other current assets	$	22,651	$	(108	)	$	22,543
Deferred incentive compensation and other charges	81,462		(281		)	81,181
Total assets	1,979,866		(389		)	1,979,477
Debt, current	27,851		(108		)	27,743
Debt, net of current portion	522,367		(281		)	522,086
Total liabilities	1,530,775		(389		)	1,530,386
Total liabilities and stockholders’ equity	1,979,866		(389		)	1,979,477

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Recently issued

In May 2014, the FASB issued accounting guidance related to revenue recognition. The new standard supersedes most of the existing revenue recognition guidance under GAAP, and requires revenue to be recognized when goods or services are transferred to a customer in an amount that reflects the consideration a company expects to receive. The new standard may require more judgment and estimates relating to the recognition of revenue, which could result in additional disclosures to the financial statements. The original effective date of the new standard was for annual and interim reporting periods beginning after December 15, 2016. In July 2015, the FASB decided to defer by one year the effective date of this new revenue recognition standard. As a result, the new standard will be effective for annual and interim reporting periods beginning after December 15, 2017, with an option that permits companies to adopt the standard as early as the original effective date. Early application prior to the original effective date is not permitted. The Company plans to adopt this standard on January 1, 2018. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

In February 2016, the FASB issued accounting guidance relating to leases. The guidance requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The new guidance also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The guidance is effective for annual reporting and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2016, the FASB issued accounting guidance relating to stock compensation. The guidance simplifies various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to impact net income, earnings per share, and the statement of cash flows. The guidance is effective for annual reporting and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Note 3. Acquisitions

Increasing service to members through the introduction and expansion of new programs and services is a key component of the Company's growth strategy. From time to time the Company supplements its organic new program development efforts with acquisitions that allow it to introduce new offerings to its members, or that complement and enhance the value of existing products and services through the addition of new capabilities.

Royall Acquisition Co.

On January 9, 2015, the Company completed the acquisition of all of the issued and outstanding capital stock of Royall Acquisition Co. (together with its subsidiaries, “Royall”) from Royall Holdings, LLC (the “Seller”). Royall is an education market leader in strategic, data-driven student engagement and enrollment management solutions.

Total consideration consisted of the following (in thousands):

Net cash paid (1)	$	744,193
Fair value of equity issued	121,224
Total	$	865,417

(1) Net of cash acquired of $7,065 and a working capital adjustment payment of $1,278.

On January 9, 2015, in connection with the completion of the acquisition of Royall, the Company entered into a credit agreement with various lenders. See Note 8, "Debt," for further details regarding this credit agreement.

The fair value of equity issued was approximately $121.2 million based on 2,428,364 shares of the Company's common stock valued at $49.92 per share, which was the closing price of the common stock on January 9, 2015 as reported on the NASDAQ Global Select Market.

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The purchase price allocation resulting from the acquisition of Royall is set forth below (in thousands):

	As of January 9, 2015
Consideration paid for the acquisition	$	865,417
Allocated to:
Membership fees receivable, net	29,239
Prepaid expenses and other current assets	8,237
Property and equipment	44,209
Intangible assets, net	262,000
Deferred revenue, current	(18,300		)
Accounts payable and accrued liabilities	(5,621		)
Deferred income taxes, net of current portion	(102,599		)
Preliminary fair value of net assets acquired	$	217,165
Preliminary allocation to goodwill	$	648,252

Acquisition-related costs of $9.9 million were incurred related to this transaction. Of this amount, $6.6 million was recognized and included in general and administrative costs in the Company’s consolidated statements of operations for the six months ended June 30, 2015.

Royall goodwill impairment

Goodwill is reviewed for impairment at least annually as of October 1, which is the first date of the fourth quarter of the Company's fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company performs its goodwill impairment test at the reporting unit level, which is one level below the operating segment. The Company has one operating segment, which is consistent with the way management runs the business and allocates resources. The operating segment has been divided into two reporting units largely as a result of the Royall acquisition and continued integration efforts. The two reporting units are Royall and the remaining Advisory Board business ("Core ABC"). Goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination.

As of the October 1, 2015 goodwill impairment assessment, the Royall reporting unit failed the step one test and the Company performed the step two test. In connection with the step two test, the Company estimated the fair value of identifiable intangible assets and deferred revenue using methodologies consistent with those used in the original Royall purchase price allocation. Key assumptions were updated to reflect the current outlook for the Royall business as well as market conditions. The step two analysis resulted in a goodwill impairment of $99.1 million, which was recorded in the year ended December 31, 2015.

Pro forma

The following table presents the Company’s pro forma consolidated revenues and net income for the three and six months ended June 30, 2015. The unaudited pro forma results include the historical statements of operations information of the Company and of Royall, giving effect to the acquisition of Royall and related financing as if they had occurred on January 1, 2014. The unaudited pro forma financial information presented below does not reflect the effect of any actual or anticipated synergies expected to result from the acquisition of Royall. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations that would have been recognized had the acquisition of Royall and the related financing been effected on the assumed date.

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The unaudited pro forma results are set forth below (in thousands):

	Unaudited Pro Forma Results
	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
Revenue	$	190,199	$	378,197
Net income	$	12,331	$	10,416

For the six months ended June 30, 2015, the pro forma results, prepared in accordance with GAAP, include the following pro forma adjustments related to the acquisition of Royall:

(i) an increase in revenue of $2.8 million and an increase in expense of $1.7 million for Royall's activity from January 1, 2015 to the January 9, 2015 acquisition date;

(ii) an increase in revenue of $12.5 million representing the purchase accounting fair value effect to revenue that was recognized in the six months ended June 30, 2015;

(iii) an increase in amortization expense related to the fair value of the identifiable intangible assets of $0.4 million;

(iv) the elimination, and replacement, of the historical Royall interest expense with the interest expense from the Company's new senior secured term credit facility totaling $9.5 million;

(v) the elimination of $17.4 million of loss on financing activities related to the acquisition-related debt activity; and

(vi) the elimination of $6.6 million of acquisition-related costs.

Note 4. Fair value measurements

Financial assets and liabilities

The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision. The Company’s financial instruments consist primarily of cash, cash equivalents, and interest rate swaps. In addition, contingent earn-out liabilities resulting from business combinations are recorded at fair value. The following methods and assumptions are used to estimate the fair value of each class of financial assets or liabilities that is valued on a recurring basis.

Cash and cash equivalents. This includes all cash and liquid investments with an original maturity of three months or less from the date acquired. The carrying amount approximates fair value because of the short maturity of these instruments. Cash equivalents also consist of money market funds with fair values based on quoted market prices. The Company’s cash and cash equivalents are held at major commercial banks.

Contingent earn-out liabilities. This class of financial liabilities represents the Company’s estimated fair value of the contingent earn-out liabilities related to acquisitions based on probability assessments of certain performance achievements during the earn-out periods. The performance targets are specific to the operation of the acquired company subsequent to the acquisition. These inputs are considered key estimates made by the Company that are unobservable because there are no active markets to support them. Contingent earn-out liabilities are included in accounts payable and accrued liabilities and other long-term liabilities on the consolidated balance sheets.

Interest rate swaps. The Company uses interest rate swaps to manage interest rate risk. The fair values of interest rate swaps are determined using the market standard methodology of discounting the future variable cash payments, or receipts, over the life of the agreements. The variable interest rates used in the calculation of projected receipts are based on observable market interest rate curves.

Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The valuation can be determined using widely accepted valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). As a basis for applying a market-based approach

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in fair value measurements, GAAP establishes a fair value hierarchy that prioritizes into three broad levels the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels:

• 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.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no significant transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2016 or 2015.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the related classifications are as follows (in thousands):

	Fair value as of June 30,		Fair value measurement as of June 30, 2016 using fair value hierarchy
	2016		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	17,487	$	17,487	$	—	$	—
Financial liabilities
Interest rate swaps (2)	4,779		—		4,779		—
Contingent earn-out liabilities (3)	3,280		—		—		3,280
	Fair value as of December 31,		Fair value measurement as of December 31, 2015 using fair value hierarchy
	2015		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	71,825	$	71,825	$	—	$	—
Interest rate swaps (2)	419		—		419		—
Financial liabilities
Contingent earn-out liabilities (3)	7,250		—		—		7,250

(1) Fair value is based on quoted market prices.

(2) Fair value is determined using market standard models with observable inputs.

(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 macroeconomic environment and industry trends.

Contingent earn-out liabilities

The Company entered into an earn-out agreement in connection with its acquisition of Southwind Health Partners, L.L.C. and Southwind Navigator, LLC (together, “Southwind”) in December 2009. The Company’s fair value estimate of the Southwind earn-out liability was $5.6 million as of the date of acquisition. The fair value of the Southwind earn-out liability was affected by changes in the Company's stock price and by changes in estimates regarding expected operating results through the end of the evaluation period, which was December 31, 2014. As of June 30, 2016, $21.4 million had been earned and paid in cash and shares to the former owners of the Southwind business, which includes the final payment of $1.0 million that was paid during the six months ended June 30, 2016. There is no remaining contingent obligation related to this earn-out agreement.

The Company's fair value estimate of the earn-out liability related to the Company’s acquisition of Clinovations, LLC (“Clinovations”) in November 2014 was $4.5 million as of the date of acquisition. The fair value of the Clinovations earn-out liability is affected by changes in estimates regarding expected operating results through the evaluation periods, which will end

9

on December 31, 2017 with payments extending through April 2018. A portion of the earn-out liability will be paid in the form of the Company’s common stock. The maximum payout of the earn-out liability is $9.5 million, while the minimum is $0. Based on the results of Clinovations’ operating results, the fair value of the contingent obligation for Clinovations as of June 30, 2016 was estimated at $2.9 million. The fair value of the Clinovations earn-out liability is affected by changes in estimates regarding expected operating results, discount rates for each evaluation period, which vary from approximately 6.7% to 7.5%, and the volatility of the Company's common stock, which was 27.0% as of June 30, 2016.

The Company's fair value estimate of the earn-out liability related to the Company’s acquisition of ThoughtWright, LLC d/b/a GradesFirst (“GradesFirst”) in December 2014 was $3.6 million as of the date of acquisition. The fair value of the GradesFirst earn-out liability was affected by changes in estimates regarding expected operating results through the evaluation period, which ended on December 31, 2015. The maximum earn-out potential of $4.0 million was earned during the evaluation period and paid during the six months ended June 30, 2016. There is no remaining contingent obligation related to this earn-out agreement.

Changes in the fair value of the contingent earn-out liabilities subsequent to the acquisition date, including changes arising from events that occurred after the acquisition date, such as changes in the Company’s estimate of performance achievements, discount rates, and stock price, are recognized in earnings in the periods during which the estimated fair value changes.

The following table represents a reconciliation of the change in the contingent earn-out liabilities for the three and months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016			2015
Beginning balance	$	1,505	$	11,790		$	7,250		$	12,946
Addition due to acquisition	—		—			357			—
Fair value change in Southwind contingent earn-out liability (1)	—		—			—			209
Fair value change in Clinovations contingent earn-out liability (1)	1,750		(1,427		)	680			(1,292		)
Fair value change in other contingent earn-out liabilities (1)	25		—			25			—
Southwind earn-out payments	—		(1,947		)	(1,032		)	(1,947		)
GradesFirst earn-out payments	—		—			(4,000		)	—
360Fresh, Inc. earn-out payments	—		—			—			(1,500		)
Ending balance	$	3,280	$	8,416		$	3,280		$	8,416

(1) Amounts were recognized in cost of services on the consolidated statements of operations.

Financial instruments not recorded at fair value on a recurring basis

Equity method investments. The Company's equity method investments represent the Company's ownership interest in Evolent Health, Inc. and its subsidiary, Evolent Health LLC. The fair value of the Company's ownership interest in Evolent Health, Inc. and its subsidiary prior to any discount was $222.5 million as of June 30, 2016 based on the quoted closing stock price as reported on the New York Stock Exchange. For further information, see Note 7, "Investments in unconsolidated entities." The fair value of the Company's equity method investments is measured quarterly for disclosure purposes. The Company's equity method investments are recorded at fair value only if an impairment charge is recognized.

Credit facilities. The Company estimates that the fair value of its credit facilities was $553.5 million as of June 30, 2016. The fair value was determined based on discounting the future expected variable cash payments over the life of the loan. The variable interest rates used in the calculation are based on observable market interest rates. The credit facilities would be classified as Level 2 within the fair value hierarchy if it were measured at fair value.

Non-financial assets and liabilities

Certain assets and liabilities are not measured at fair value on an ongoing basis but instead are measured at fair value on a non-recurring basis, so that such assets and liabilities are subject to fair value adjustments in certain circumstances (such as when there is evidence of impairment). During the six months ended June 30, 2016 and 2015, no fair value adjustments or material fair value measurements were required for non-financial assets or liabilities.

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Note 5. Property and equipment

Property and equipment consists of leasehold improvements, furniture, fixtures, equipment, capitalized internal-use software development costs, and acquired developed technology. Property and equipment is stated at cost, less accumulated depreciation and amortization. In certain membership programs, the Company provides software applications under a hosting arrangement where the software application resides on the Company’s or its service providers’ hardware. The members do not take delivery of the software and only receive access to the software during the term of their membership agreement. Software development costs that are incurred in the preliminary project stage are expensed as incurred. During the development stage, direct consulting costs and payroll and payroll-related costs for employees that are directly associated with each project are capitalized and amortized over the estimated useful life of the software once placed into operation. Capitalized software is amortized using the straight-line method over its estimated useful life, which is generally five years. Replacements and major improvements are capitalized, while maintenance and repairs are charged to expense as incurred.

The acquired developed technology, which includes acquired software, databases, and analytics, is classified as software within property and equipment because the developed software application, database, or analytic resides on the Company’s or its service providers’ hardware. Amortization for acquired developed technology is included in depreciation and amortization on the Company’s consolidated statements of operations. Developed technology obtained through acquisitions is amortized using the straight-line method over the estimated useful life used in determining the fair value of the assets at acquisition. As of June 30, 2016, the weighted average useful life of existing acquired developed technology was approximately eight years. The amount of acquired developed technology amortization included in depreciation and amortization for the three and six months ended June 30, 2016 was approximately $2.3 million and $4.6 million, respectively. The amount of acquired developed technology amortization included in depreciation and amortization for the three and six months ended June 30, 2015 was approximately $2.6 million and $4.6 million, respectively.

Furniture, fixtures, and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. There are no capitalized leases included in property and equipment, net for the periods presented. The amount of depreciation expense recognized on furniture, fixtures, and equipment during the three and six months ended June 30, 2016 was $5.4 million and $10.8 million, respectively. The amount of depreciation expense recognized on furniture, fixtures, and equipment during the three and six months ended June 30, 2015 was $5.0 million and $9.9 million, respectively.

Internally developed capitalized software related to the Company's hosted software is classified as software within property and equipment and has an estimated useful life of five years. The carrying value of internally developed capitalized software was $73.2 million as of both June 30, 2016 and December 31, 2015. Amortization expense for internally developed capitalized software for the three and six months ended June 30, 2016 recorded in depreciation and amortization on the accompanying statements of operations, was approximately $5.5 million and $11.9 million, respectively. Amortization expense for internally developed capitalized software for the three and six months ended June 30, 2015 recorded in depreciation and amortization on the consolidated statements of operations, was approximately $4.8 million and $9.0 million, respectively.

Property and equipment consists of the following (in thousands):

	As of
	June 30, 2016			December 31, 2015
Leasehold improvements	$	67,015		$	63,608
Furniture, fixtures, and equipment	65,762			62,790
Software	213,677			202,384
Construction in progress, subject to a build-to-suit lease	15,054			2,700
Property and equipment, gross	361,508			331,482
Accumulated depreciation and amortization	(173,524		)	(148,425		)
Property and equipment, net	$	187,984		$	183,057

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The Company evaluates its long-lived assets for impairment when changes in circumstances exist that suggest the carrying value of a long-lived asset may not be fully recoverable. If an indication of impairment exists, and the Company’s net book value of the related assets is not fully recoverable based upon an analysis of its estimated undiscounted future cash flows, the assets are written down to their estimated fair value. During the six months ended June 30, 2016, the Company recognized a $1.0 million impairment loss recorded in depreciation and amortization on the consolidated statements of operations related to certain internally developed software that is no longer in use. The Company did not recognize any impairment losses on any of its long-lived assets during the six months ended June 30, 2015.

Note 6. Goodwill and intangibles

Included in the Company’s goodwill and intangibles balances are goodwill and acquired intangibles, as well as internally developed capitalized software for sale. Goodwill is not amortized because it has an estimated indefinite life. Goodwill is reviewed for impairment at least annually as of October 1, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes that no such impairment indicators existed during the six months ended June 30, 2016 or 2015. There was no impairment of goodwill recorded in the six months ended June 30, 2016 or 2015.

The following illustrates the change in the goodwill balance for the six months ended June 30, 2016 (in thousands):

	As of
	June 30, 2016
Beginning balance	$	738,200
Acquisitions	2,258
Ending balance	$	740,458

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, which range from 2 years to 17 years. As of June 30, 2016, the weighted average remaining useful life of acquired intangibles was approximately 13.6 years. As of June 30, 2016, the weighted average remaining useful life of internally developed intangibles was approximately 3.6 years. The gross and net carrying balances and accumulated amortization of intangibles are as follows (in thousands):

		As of June 30, 2016							As of December 31, 2015
	Weighted average useful life	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Intangibles
Internally developed software for sale	5.0	$	18,510	$	(8,350	)	$	10,160	$	16,902	$	(6,796	)	$	10,106
Acquired intangibles:
Developed software	5.2	9,450		(8,325		)	1,125		9,450		(8,075		)	1,375
Customer relationships	16.2	277,710		(34,379		)	243,331		277,710		(25,769		)	251,941
Trademarks	8.6	14,900		(5,225		)	9,675		14,900		(4,490		)	10,410
Non-compete agreements	3.8	1,400		(1,394		)	6		1,400		(1,379		)	21
Customer contracts	4.7	6,449		(5,798		)	651		6,449		(5,581		)	868
Total intangibles		$	328,419	$	(63,471	)	$	264,948	$	326,811	$	(52,090	)	$	274,721

Amortization expense for intangible assets for the three and six months ended June 30, 2016, recorded in depreciation and amortization on the consolidated statements of operations, was approximately $5.7 million and $11.4 million, respectively. Amortization expense for intangible assets for the three and six months ended June 30, 2015 was approximately $6.1 million and $12.3 million, respectively. The following approximates the aggregate amortization expense to be recorded in depreciation and amortization on the consolidated statements of operations for the remaining six months of the fiscal year ending December 31, 2016, for each of the following fiscal years ending December 31, 2017 through 2020, and thereafter: $11.4 million, $22.2 million, $21.3 million, $19.6 million, and $18.4 million, respectively, and $172.0 million thereafter.

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Note 7. Investments in unconsolidated entities

As of June 30, 2016, the Company held an 8.7% direct equity interest in Evolent Health LLC (“Evolent LLC”) and a 15.0% equity ownership interest in Evolent Health, Inc. (“Evolent Inc.”), which had no material operations outside of its 70.8% ownership interest in Evolent LLC. These investments are accounted for under the equity method, with the Company’s proportionate share of the investees’ losses recognized in the consolidated statements of operations. The Company has the right to designate two individuals to Evolent Inc.'s board of directors, which seats were occupied by the Company’s Company's Chief Financial Officer and an unaffiliated designee of the Company as of June 30, 2016.

During the three months ended June 30, 2016, the Company's proportionate share of the losses of Evolent Inc. was $1.2 million. The Company recorded $0.3 million of these losses against the remaining carrying amount of its investment. The remaining losses were not recorded as they exceeded the Company's investment balance. The Company will track these unrecorded losses until such time as the Company's investment in Evolent Inc. produces earnings or a gain sufficient to offset the unrecorded losses. During the six months ended June 30, 2016, the Company's proportionate shares of the losses of Evolent Inc. was $2.0 million, of which $1.1 million was recognized in the consolidated statements of operations offset by a $1.1 million dilution gain. The carrying balance of the Company’s investment in Evolent Inc. was $0.0 million as of June 30, 2016. The Company had a total of $0.9 million in unrecorded losses related to its investment in Evolent Inc. as of June 30, 2016.

During the three months ended June 30, 2016, the Company's proportionate share of the losses of Evolent LLC was $1.0 million. The Company recorded $0.2 million of these losses against the remaining carrying amount of its investment. The remaining losses were not recorded as they exceeded the Company's investment balance. During the six months ended June 30, 2016, the Company's proportionate share of the losses of Evolent LLC was $2.5 million, of which $1.6 million was recognized in the consolidated statements of operations, offset by a $0.9 million dilution gain. The carrying balance of the Company’s investment in Evolent LLC was $0.0 million as of June 30, 2016. The Company had a total of $0.8 million in unrecorded losses related to its investment in Evolent LLC as of June 30, 2016.

Because of Evolent LLC's treatment as a partnership for federal income tax purposes, the losses of Evolent LLC pass through to the Company and the other members. The Company's proportionate share of the losses of Evolent LLC is recorded net of the estimated tax benefit the Company believes will be realized from the equity in loss of unconsolidated entities on the consolidated statements of operations. Historically, the Company had provided a full valuation allowance against the deferred tax asset resulting from these benefits. During the three months ended June 30, 2015, the Company determined that it was more-likely-than not able to realize the deferred tax assets associated with its investment in Evolent LLC as a result of the reorganization related to Evolent Inc.'s initial public offering; accordingly, a tax benefit of $6.7 million was recorded to release the valuation allowance previously recorded. An additional tax benefit of $1.5 million was recorded in the three months ended June 30, 2015 for tax benefits associated with current year losses received from Evolent LLC. In the three and six months ended June 30, 2016, additional tax benefits of $0.1 million and $0.3 million, respectively, were recorded for the tax effects of current year losses received from Evolent LLC. Prior to Evolent Inc.’s initial public offering of common stock in June 2015, the Company had provided a full valuation allowance against the deferred tax asset resulting from these benefits.

The equity in (loss) income of unconsolidated entities on the consolidated statement of operations for the combined Evolent entities consisted of the following (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Dilution gain	$	—		$	—		$	2,026		$	—
Allocated share of losses	(511		)	(4,265		)	(2,732		)	(6,644		)
Tax benefit	100			8,265			261			8,265
Equity in (loss) income of unconsolidated entities	$	(411	)	$	4,000		$	(445	)	$	1,621

In connection with Evolent Inc.'s initial public offering and the related reorganization, the Company and certain investors in Evolent LLC entered into a tax receivables agreement with Evolent Inc. Under the terms of that agreement, Evolent Inc. will make cash payments to the Company and certain investors in amounts equal to 85% of Evolent Inc.'s actual tax benefit realized from various tax attributes related to activity before the initial public offering. Interest will be included on the tax savings at the applicable London interbank offered rate plus 100 basis points. The tax receivables agreement will generally apply to Evolent Inc.'s taxable years up to and including the 15th anniversary date of the transaction. As of June 30, 2016, the Company had not received any payments pursuant to the tax receivables agreement. As the amount the Company will receive pursuant to the tax receivables agreement is unknown, the Company will recognize payments, if any, associated with this agreement when such payments are received.

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As of June 30, 2016, the Company’s basis in the Evolent entities was less than its proportional interest in the equity of Evolent Inc. and Evolent LLC in the amounts of $80.4 million and $68.2 million, respectively. The Company has excluded the effects of the purchase and push down accounting in its determination of the equity in such loss, thereby reducing its share of losses from Evolent Inc. and Evolent LLC for the affected periods. As a result, the basis differences will decrease over time.

Evolent LLC is in the early stages of its business plan and, as a result, the Company expects both Evolent Inc. and Evolent LLC to continue to incur losses. The Company’s investments are evaluated for impairment whenever events or changes in circumstances indicate that there may be an other-than-temporary decline in value. As of June 30, 2016, the Company believes that no impairment charge is necessary. For additional information on the fair value of the Company’s investment in the Evolent entities, see Note 4, “Fair value measurements.”

Note 8. Debt

On February 6, 2015, the Company obtained $675 million of senior secured credit facilities, referred to as the “credit facilities,” under a credit agreement with a syndicate of lenders. The credit facilities were amended on October 30, 2015. The amended credit facilities consist of (a) a five-year senior secured term loan facility in the principal amount of $475 million, or “term facility,” and (b) a five-year senior secured revolving credit facility, or “revolving credit facility,” under which up to $200 million principal amount of borrowings and other credit extensions may be outstanding at any time. Amounts drawn under the term loan and revolving credit facilities bear interest, payable quarterly, at an annual rate calculated, at the Company’s option, on the basis of either (a) an alternate base rate plus an initial margin of 1.75% or (b) the applicable London interbank offered rate plus an initial margin of 2.25%, subject in each case to margin reductions based on the Company’s total leverage ratio from time to time. As of June 30, 2016, based on the Company's historical leverage ratio, the interest rate margin was 2.00% and the stated annual interest rate on outstanding borrowings was 2.47%.

On June 10, 2016, the Company drew down $17.0 million of borrowings under its revolving credit facility. The draw down borrowings have a maturity of three months and accrue interest at an annual rate of 2.66%. As of June 30, 2016, there was $117.0 million outstanding under the revolving credit facility and $63.9 million available for future borrowings. As of June 30, 2016, $19.1 million of standby letters of credit had been issued under the revolving credit facility.

Long-term debt is summarized as follows (in thousands): 

	As of June 30, 2016
2.47% term facility due fiscal 2020 ($439,062 face value less unamortized discount of $3,101)	$	435,961
Revolving credit facility	117,000
Less: Amounts due in next twelve months ($52,946 face value less unamortized discount of $1,000)	(51,946		)
Total long-term debt	$	501,015

The credit agreement contains customary representations and warranties, events of default and financial and other covenants, including covenants that require the Company to maintain a maximum total leverage ratio and a minimum interest coverage ratio. The Company's compliance with the two financial covenants is measured as of the end of each fiscal quarter. The Company was in compliance with these financial covenants as of June 30, 2016.

Interest expense for the three months ended June 30, 2016 and 2015 was $4.4 million and $5.2 million, inclusive of $0.3 million and $0.3 million of amortization of debt issuance costs, and $0.6 million and $0.7 million of payments related to the interest rate swaps described below, respectively. Interest expense for the six months ended June 30, 2016 and 2015 was $9.2 million and $10.8 million, inclusive of $0.7 million and $0.7 million of amortization of debt issuance costs, and $1.2 million and $0.7 million of payments related to the interest rate swaps described below, respectively.

Swap agreements

Through its term facility, the Company is exposed to interest rate risk. In April 2015, to minimize the impact of changes in interest rates on its interest payments, the Company entered into three interest rate swap agreements with financial institutions to swap a portion of its variable-rate interest payments for fixed-rate interest payments. The interest rate swap derivative financial instruments are recorded on the consolidated balance sheets at fair value, which is based on observable market-based expectations of future interest rates.

At hedge inception, the Company entered into interest rate swap arrangements with notional amounts totaling $287.5 million. The swap was structured to have a declining notional amount which matches the amortization schedule of the term facility. As of June 30, 2016, the principal amount hedged was $269.5 million. The interest rate swap agreements mature in February 2020 and have periodic interest settlements, both consistent with the terms of the Company's term facility. Under this

14

agreement, the Company is entitled to receive a floating rate based on the 1-month London interbank offered rate and obligated to pay an average fixed rate of 1.282% on the outstanding notional amount. The Company has designated the interest rate swap as a cash flow hedge of the variability of interest payments under its term facility due to changes in the LIBOR benchmark interest rate. The difference between cash paid and received is recorded within interest expense on the consolidated statements of operations.

As of June 30, 2016 and December 31, 2015, the fair value of the interest rate swaps was a liability of $4.8 million and an asset of $0.4 million, respectively, and was recorded within other long-term liabilities on the Company's consolidated balance sheets. For the three months ended June 30, 2016 and 2015, the change in fair value of the swaps, net of tax, was a decrease of $0.4 million and an increase of $0.7 million, respectively, and was reported as a component of accumulated other comprehensive (loss) income. For the six months ended June 30, 2016 and 2015, the change in fair value of the swaps, net of tax, was a decrease of $2.9 million and an increase $0.7 million, respectively. There was no material hedge ineffectiveness as of June 30, 2016 and 2015. Changes in fair value are reclassified from accumulated other comprehensive (loss) income into earnings in the same period in which the hedged item affects earnings.

If, at any time, the swap is determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlying debt agreements, the fair value of the portion of the swap determined to be ineffective will be recognized as a gain or loss on the consolidated statements of operations for the applicable period.

Note 9. Stockholders’ equity

In November 2015, the Company’s board of directors authorized an increase in its cumulative share repurchase program to $550 million of the Company's common stock. The Company repurchased 803,217 and 1,740,247 shares of its common stock at a total cost of approximately $26.2 million and $53.6 million in the three and six months ended June 30, 2016, respectively, pursuant to its share repurchase program. The Company did not repurchase any shares in the three and six months ended June 30, 2015. The total amount of common stock purchased from inception under the program through June 30, 2016 was 19,567,789 shares at a total cost of $505.5 million. All such repurchases have been made in the open market, and all repurchased shares have been retired as of June 30, 2016. No minimum number of shares subject to repurchase has been fixed, and the share repurchase authorization has no expiration date. As of June 30, 2016, the remaining authorized repurchase amount was $44.5 million.

Note 10. Stock-based compensation

Royall inducement plan

On January 9, 2015, in conjunction with the Royall acquisition, the Company created The Advisory Board Company Inducement Stock Incentive Plan for Royall Employees, the "inducement plan," to enable the Company to award options and restricted stock units to persons employed by Royall as an inducement to employees entering into and continuing employment with the Company or its current or future subsidiaries upon consummation of the Royall acquisition. Under the terms of this plan, the aggregate number of shares issuable pursuant to all awards may not exceed 1,906,666. The awards consisted of performance-based stock options to purchase an aggregate of 1,751,000 shares of common stock and performance-based restricted stock units ("RSUs") for an aggregate of 145,867 shares of common stock. Both the performance-based stock options and performance-based RSUs are also subject to service conditions.

Stock options granted under the inducement plan have an exercise price equal to $49.92, which was the closing price of the Company’s common stock on January 9, 2015 as reported on the NASDAQ Global Select Market. The stock options have a seven-year term and are eligible to vest, if performance-based vesting criteria are satisfied, in installments commencing in January 2017 and ending in January 2020. The RSUs were valued at $49.92 and are also eligible to vest in installments commencing in January 2017 and ending in January 2020, subject to satisfaction of performance-based vesting criteria. The vesting criteria in both cases are based on performance of the Royall programs and services. The aggregate grant date fair value of the performance-based stock options, assuming all performance targets are met, is estimated to be approximately $26.8 million. The aggregate grant date fair value of the performance-based RSUs, assuming all performance targets are met, is estimated at approximately $7.3 million. As of June 30, 2016, the Company expects that Royall will achieve 70% to 99% of the performance targets, which would result in vesting of 50% of the performance-based stock options and 50% of the RSUs eligible to vest, subject to forfeitures. The option and RSU awards are reflected in the tables below.

The actual stock-based compensation expense the Company will recognize is dependent upon Royall satisfying the applicable performance conditions and continued employment of award recipients at the time performance conditions are met. The actual amount the Company will recognize may increase or decrease based on Royall's actual results and the employment status of the award recipients at the time performance conditions are met.

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Stock incentive plans

On June 9, 2015, the Company's stockholders approved an amendment to the Company's 2009 Stock Incentive Plan (the “2009 Plan”) that increased the number of shares of common stock authorized for issuance under the plan by 3,800,000 shares. The aggregate number of shares of the Company’s common stock available for issuance under the 2009 Plan, as amended, may not exceed10,535,000.

Performance-based stock option grant. On March 2, 2016, the compensation committee of the board of directors approved a grant of 319,900 nonqualified performance-based stock options under the 2009 Plan to certain executive officers of the Company. These awards are subject to market conditions and portions will vest, with all awards vesting if the highest levels of the performance are achieved, based on the achievement of sustained stock price during the performance period, which could extend to March 2, 2023. The Company has concluded that it is probable that all awards will vest at the highest level of achievement. The estimated requisite service period, which includes the current estimate of the time to achieve the market conditions is 1.2 years. The option awards are reflected in the table below.

The following table summarizes the changes in common stock options outstanding under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2014	994,605		$	50.96	1,746,692		$	37.19
Granted	1,774,820		49.90		328,096		53.42
Exercised	—		—		(128,669	)	23.43
Forfeited	(751,800	)	49.92		(13,569	)	60.27
Outstanding, as of June 30, 2015	2,017,625		$	50.30	1,932,550		$	40.70
	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2015	2,013,325		$	50.42	1,843,110		$	41.73
Granted	319,900		28.20		1,005,756		28.31
Exercised	—		—		(237,158	)	15.29
Forfeited	(215,370	)	49.92		(22,195	)	53.38
Expired	—		—		(17,347	)	51.77
Outstanding, as of June 30, 2016	2,117,855		$	47.11	2,572,166		$	38.75
Exercisable, as of June 30, 2016	20,000		$	29.58	1,073,586		$	41.80

The weighted average fair value of the service-based options, valued using a Black-Scholes model, granted during the six months ended June 30, 2016 was estimated at $9.86 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.2%; an expected term of approximately 5.1 years; expected volatility of 37.46%; and dividend yield of 0.0% over the expected life of the option.

The weighted average fair value of performance-based options granted with market conditions, valued using a Monte Carlo model, during the six months ended June 30, 2016 was estimated at $10.21 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.6%; an expected term of 6.4 years; volatility of 36.5%; and dividend yield of 0.0% over the expected life of the option.

No options with performance and/or market conditions vested during the six months ended June 30, 2016 and 10,000 options with performance conditions vested during the six months ended June 30, 2015.

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The following table summarizes the changes in RSUs granted under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2014	189,497		$	31.82	857,085		$	48.94
Granted	169,204		49.74		347,958		53.10
Forfeited	(69,389	)	47.90		(19,278	)	56.15
Vested	(2,200	)	29.58		(357,487	)	43.46
Non-vested, June 30, 2015	287,112		$	38.51	828,278		$	52.89
	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2015	301,032		$	39.10	839,613		$	52.82
Granted	23,580		32.28		467,177		30.36
Forfeited	(33,429	)	50.77		(41,089	)	47.73
Vested	—		—		(312,131	)	51.43
Non-vested, June 30, 2016	291,183		$	37.21	953,570		$	42.49

The Company recognized stock-based compensation expense in the following consolidated statements of operations line items for stock options and RSUs for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Stock-based compensation expense included in:
Costs and expenses:
Cost of services	$	2,493	$	2,566	$	4,680	$	4,458
Member relations and marketing	1,387		1,455		2,501		2,601
General and administrative	4,085		4,610		7,766		7,977
Total costs and expenses	$	7,965	$	8,631	$	14,947	$	15,036

There are no stock-based compensation costs capitalized as part of the cost of an asset.

As of June 30, 2016, $66.0 million of total unrecognized compensation cost related to outstanding options and non-vested RSUs was expected to be recognized over a weighted average period of 2.7 years.

Note 11. Income taxes

The Company's effective tax rates were 38.1% and 47.9% for the three months ended June 30, 2016 and 2015, respectively. The Company's effective tax rates were 36.6% and (23.9)% for the six months ended June 30, 2016 and 2015, respectively. Included in the tax expense for the six months ended June 30, 2016 was a discrete benefit of $0.6 million which primarily related to state law changes and the settlement of uncertain tax positions during the period. For the six month period ended June 30, 2015, the Company recognized a discrete tax benefit of $10.8 million related to the write-off of accumulated Washington, D.C. tax credits. The write-off was a result of changes in the District of Columbia tax laws effective January 1, 2015 and resulted in income tax expense in the six month period ended June 30, 2015.

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The Company uses a more-likely-than-not recognition threshold based on the technical merits of the tax position taken for the financial statement recognition and measurement of a tax position. If a tax position does not meet the more-likely-than-not initial recognition threshold, no benefit is recorded in the financial statements. The Company does not expect that the total amounts of unrecognized tax benefits will significantly change within the next 12 months. The Company classifies interest and penalties on any unrecognized tax benefits as a component of the provision for income taxes. The Company recognized an immaterial amount of interest in the consolidated statements of operations during the three and six months ended June 30, 2016 and $0.2 million in interest and penalties in the consolidated statements of operations in both the three and six months ended June 30, 2015.The Company files income tax returns in U.S. federal and state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state, and local tax examinations for filings in major tax jurisdictions before 2010.

Note 12. Earnings per share

Basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the number of weighted average common shares and potentially dilutive common shares outstanding during the period. The number of potential common shares outstanding is determined in accordance with the treasury stock method, using the Company’s prevailing tax rates. Certain potential common share equivalents were not included in the computation because their effect was anti-dilutive.

A reconciliation of basic to diluted weighted average common shares outstanding is as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2015	2016	2015
Basic weighted average common shares outstanding	40,365	42,440	40,928	41,686
Effect of dilutive outstanding stock-based awards	205	474	294	—
Diluted weighted average common shares outstanding	40,570	42,914	41,222	41,686

In the three months ended June 30, 2016 and 2015, 2.8 million and 0.7 million shares, respectively, related to share-based compensation awards have been excluded from the calculation of the effect of dilutive outstanding stock-based awards shown above because their effect was anti-dilutive. In the six months ended June 30, 2016 and 2015, 2.6 million and 2.8 million shares, respectively, related to share-based compensation awards have been excluded from the calculation of the effect of dilutive outstanding stock-based awards shown above because their effect was anti-dilutive.

As of June 30, 2016, the Company had 2.1 million nonqualified stock options and 0.3 million RSUs that contained either performance or market conditions, or both, and therefore are treated as contingently issuable awards. As of June 30, 2015, the Company had 2.0 million nonqualified stock options and 0.3 million RSUs that contained either performance or market conditions and were treated as contingently issuable awards. These awards are excluded from diluted earnings per share until the reporting period in which the necessary conditions are achieved. To the extent all necessary conditions have not yet been satisfied, the number of contingently issuable shares included in diluted earnings per share will be based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period. A total of 19,971 contingently issuable shares were included within the diluted earnings per share calculations three and six months ending June 30, 2016 as the related performance goals were met as of June 30, 2016. There were no contingently issuable awards included within the diluted earnings per share calculations for the three and six months ending June 30, 2015.

Note 13. Subsequent Events

On July 12, 2016, Evolent Inc. entered into an agreement and plan of merger for the acquisition of Valence Health, Inc. When closed, this transaction is expected to reduce the Company’s ownership in Evolent Inc. and Evolent LLC. The Company is currently evaluating the effect that this dilution has on its investment and will finalize its accounting for this transaction once the transaction closes and the final valuation report is available.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us” mean The Advisory Board Company and its consolidated subsidiaries.

This management’s discussion and analysis includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. These statements can sometimes be identified by our use of such forward-looking words as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” and similar words and expressions. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by the forward-looking statements, including the factors discussed under “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2015, or the “2015 Form 10-K.” We undertake no obligation to update any forward-looking statements, whether as a result of circumstances or events that arise after the date the statements are made, new information, or otherwise.

Executive Overview

We are a leading provider of insight-driven performance improvement software and solutions to the rapidly changing health care and education industries. Through our subscription-based membership programs, we leverage our intellectual capital to help members solve their most critical business problems. As of the date of this report, we served approximately 5,500 members, including hospitals, health systems and other health care organizations, and colleges and universities.

Members of each subscription-based membership program are typically charged a separate fixed annual fee and have access to an integrated set of services that may include best practices research studies, executive education, proprietary content databases and online tools, daily online executive briefings, original executive inquiry services, cloud-based business intelligence and software applications, tech-enabled services, and consulting and management services.

Our five key areas of focus for the fiscal year are to orient our delivery infrastructure to be more coordinated around each member; innovate our commercial model to continue moving towards a relationship-based approach to our sales; accelerate our growth strategy by investing in both platform expansion and new offerings and services within each member problem area; align our organization with our strategy to ensure that structure, governance, and incentives support our goals; and continue to meet our commitments both to our members through continuing to deliver a strong return on investment and to our shareholders through achieving performance targets.

Our membership business model allows us to create value for our members by providing proven solutions to common and complex problems as well as high-quality content and innovative software on a broad set of relevant issues. Our growth has been driven by the expansion of our relationships with existing members, strong renewal rates, acquisition activity, new program launches, addition of new members, and annual price increases.Our revenue grew 10.0% in the six months ended June 30, 2016 over the six months ended June 30, 2015. Our contract value increased 4.5% to $774.9 million as of June 30, 2016 from $741.7 million as of June 30, 2015. We define contract value as the aggregate annualized revenue attributable to all agreements in effect at a particular date, without regard to the initial term or remaining duration of any such agreement. In each of our programs, we generally invoice and collect fees in advance of accrual revenue recognition.

Our operating costs and expenses consist of cost of services, member relations and marketing expense, general and administrative expenses, and depreciation and amortization expense.

• Cost of services includes the costs associated with the production and delivery of our products and services, consisting of compensation for research, creative, data, and analysis personnel, consultants, software developers, and in-house faculty; costs of the organization and delivery of membership meetings, teleconferences, and other events; production of published materials; technology license fees; costs of developing and supporting our cloud-based content and performance technology software; and fair value adjustments to acquisition-related earn-out liabilities.

• Member relations and marketing expense includes the costs of acquiring new members and the costs of account management, and consists of compensation (including sales incentives); travel and entertainment expenses; costs for training personnel; sales and marketing materials; and associated support services.

• General and administrative expense includes the costs of human resources and recruiting; finance and accounting; legal support; management information systems; real estate and facilities management; corporate development; new program development; and other administrative functions.

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• Depreciation and amortization expense includes the cost of depreciation of our property and equipment; amortization of costs associated with the development of software and tools that are offered as part of certain of our membership programs; and amortization of acquired intangibles.

Our operating costs for each period include stock-based compensation expenses and expenses representing additional payroll taxes for compensation expense as a result of the taxable income employees recognize upon their exercise of common stock options and the vesting of restricted stock units issued under our stock incentive plans.

Acquisitions that we have completed since December 31, 2014, including our acquisition of Royall in January 2015, affect the comparability of our results of operations for the three and six months ended June 30, 2016 to our results of operations for the comparable periods in our prior fiscal year.

Critical Accounting Policies

Our accounting policies, which are in compliance with U.S. generally accepted accounting principles, or “GAAP,” require us to apply methodologies, estimates, and judgments that have a significant effect on the results we report in our financial statements. In our 2015 Form 10-K, we have discussed those material accounting policies that we believe are critical and require the use of complex judgment in their application. There have been no material changes to our policies since our fiscal year ended December 31, 2015.

Non-GAAP Financial Presentation

This management’s discussion and analysis presents supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These financial measures, which are considered “non-GAAP financial measures” under SEC rules, are referred to as adjusted revenue, adjusted EBITDA, adjusted net income, non-GAAP earnings per diluted share, adjusted effective tax rate, and adjusted weighted average common shares outstanding - diluted. See “Non-GAAP Financial Measures” below for reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

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Results of Operations

The following tables show consolidated statements of operations data, including the amounts expressed as a percentage of revenue for the periods indicated (in thousands, except percentages):

	Three Months Ended June 30,
	2016					2015
Revenue	$	198,382		100.0	%	$	183,583		100.0	%
Costs and expenses:
Cost of services, excluding depreciation and amortization	96,440			48.6	%	92,536			50.4	%
Member relations and marketing	32,718			16.5	%	29,375			16.0	%
General and administrative	32,219			16.2	%	30,853			16.8	%
Depreciation and amortization	18,917			9.5	%	18,499			10.1	%
Total costs and expenses	180,294			90.8	%	171,263			93.3	%
Operating income	18,088			9.2	%	12,320			6.7	%
Other expense:
Interest expense	(4,389		)	(2.2	)%	(5,154		)	(2.8	)%
Other expense, net	(923		)	(0.5	)%	(128		)	(0.1	)%
Loss on financing activities	—			—	%	—			—	%
Total other expense, net	(5,312		)	(2.7	)%	(5,282		)	(2.9	)%
Income before provision for income taxes and equity in (loss) income of unconsolidated entities	12,776			6.5	%	7,038			3.8	%
Provision for income taxes	(4,870		)	(2.6	)%	(3,372		)	(1.9	)%
Equity in (loss) income of unconsolidated entities	(411		)	(0.2	)%	4,000			2.2	%
Net income	$	7,495		3.7	%	$	7,666		4.1	%

	Six Months Ended June 30,
	2016					2015
Revenue	$	399,117		100.0	%	$	362,905		100.0	%
Costs and expenses:
Cost of services, excluding depreciation and amortization	192,389			48.2	%	188,026			51.8	%
Member relations and marketing	65,113			16.3	%	60,101			16.6	%
General and administrative	64,047			16.0	%	62,527			17.2	%
Depreciation and amortization	38,684			9.7	%	35,773			9.9	%
Total costs and expenses	360,233			90.2	%	346,427			95.5	%
Operating income	38,884			9.8	%	16,478			4.5	%
Other expense:
Interest expense	(9,210		)	(2.3	)%	(10,766		)	(3.0	)%
Other expense, net	(862		)	(0.2	)%	(1,247		)	(0.3	)%
Loss on financing activities	—			—	%	(17,398		)	(4.8	)%
Total other expense, net	(10,072		)	(2.5	)%	(29,411		)	(8.1	)%
Income before provision for income taxes and equity in (loss) income of unconsolidated entities	28,812			7.3	%	(12,933		)	(3.6	)%
Provision for income taxes	(10,533		)	(2.7	)%	(3,094		)	(1.0	)%
Equity in (loss) income of unconsolidated entities	(445		)	(0.1	)%	1,621			0.4	%
Net income (loss)	$	17,834		4.5	%	$	(14,406	)	(4.2	)%

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Three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015

Net income (loss). Net income was $7.5 million in the three months ended June 30, 2016 compared to $7.7 million in the three months ended June 30, 2015. The slight decrease in net income in the three months ended June 30, 2016 was primarily attributable to an $8.3 million tax benefit recorded in the three months ended June 30, 2015 from the release of a valuation allowance, as we determined that we are now more-likely-than not able to realize deferred tax assets associated with our investment in Evolent Health LLC. Our results in the 2016 three-month period reflected an increase in revenue of $14.8 million, partially offset by an increase in operating expenses of $9.0 million.

Net income was $17.8 million in the six months ended June 30, 2016 compared to a net loss of $14.4 million in the six months ended June 30, 2015. The net loss in the prior year period was primarily attributable due to financing losses of $17.4 million and a $10.8 million discrete tax expense related to a write-off of accumulated Washington, D.C. income tax credits as a result of changes in District of Columbia tax laws effective January 1, 2015. We did not incur comparable expenses in the current period. Our results in the 2016 six-month period reflected an increase in revenue of $36.2 million, partially offset by an increase in operating expenses of $13.8 million.

Revenue. Total revenue increased 8.1% to $198.4 million in the three months ended June 30, 2016 from $183.6 million in the three months ended June 30, 2015. Total revenue increased 10.0% to $399.1 million in the six months ended June 30, 2016 from $362.9 million in the six months ended June 30, 2015, while contract value increased 4.5% to $774.9 million as of June 30, 2016 from $741.7 million as of June 30, 2015. The increases in revenue and contract value were attributable to continued improvements in our Royall business, as well as, expansion of our health care and education research programs, our student success software program, and our Clinovations services offering. Also contributing to the increase was a $12.5 million fair value adjustment to acquisition-related deferred revenue in the six months ended June 30, 2015.

Cost of services. Cost of services increased to $96.4 million in the three months ended June 30, 2016 from $92.5 million in the three months ended June 30, 2015, and increased to $192.4 million in the six months ended June 30, 2016 from $188.0 million in the six months ended June 30, 2015. As a percentage of revenue, cost of services was 48.6% and 50.4% in the three months ended June 30, 2016 and June 30, 2015, respectively, and 48.2% and 51.8% in the six months ended June 30, 2016 and June 30, 2015, respectively. The decrease in cost of services as a percentage of revenue was attributable to the scalability of incremental revenue inherent in our model. Cost of services included fair value adjustments to our acquisition-related earn-out liabilities which consisted of an increase of $1.8 million and a decrease of $1.4 million in the three months ended June 30, 2016 and 2015, respectively, and an increase of $0.7 million and a decrease of $1.1 million in the six months ended June 30, 2016 and 2015, respectively.

Member relations and marketing expense. Member relations and marketing expense increased to $32.7 million in the three months ended June 30, 2016 from $29.4 million in the three months ended June 30, 2015, and increased to $65.1 million in the six months ended June 30, 2016 from $60.1 million in the six months ended June 30, 2015. The increases in member relations and marketing expense were primarily attributable to increases in sales staff and related travel and other associated costs, as well as to an increase in member relations personnel and related costs required to serve our expanding membership base. As a percentage of revenue, member relations and marketing expense was 16.5% and 16.0% in the three months ended June 30, 2016 and 2015, respectively, and 16.3% and 16.6% in the six months ended June 30, 2016 and 2015, respectively.

General and administrative expense. General and administrative expense increased to $32.2 million in the three months ended June 30, 2016 from $30.9 million in the three months ended June 30, 2015, and increased to $64.0 million in the six months ended June 30, 2016 from $62.5 million in the six months ended June 30, 2015. The increases in general and administrative expense in the current periods were primarily attributable to increased investment in administrative functions and office space to support our growing organization, partially offset by the recognition of $1.0 million and $6.6 million in acquisition costs related to our acquisition of Royall in the three and six months ended June 30, 2015, respectively. As a percentage of revenue, general and administrative expense decreased to 16.2% in the three months ended June 30, 2016 from 16.8% in the three months ended June 30, 2015, and decreased to 16.0% in the six months ended June 30, 2016 from 17.2% in the six months ended June 30, 2015.

Depreciation and amortization expense. Depreciation and amortization expense increased to $18.9 million in the three months ended June 30, 2016 from $18.5 million in the three months ended June 30, 2015, and increased to $38.7 million in the six months ended June 30, 2016 from $35.8 million in the six months ended June 30, 2015. As a percentage of revenue, depreciation and amortization expense was 9.5% and 10.1% in the three months ended June 30, 2016 and 2015, respectively, and 9.7% and 9.9% in the six months ended June 30, 2016 and 2015, respectively. The increases in depreciation and amortization expense in the current periods were primarily attributable to increased amortization expense from developed capitalized internal-use software and depreciation of improvements made to build-out our new Chicago office.

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Interest expense. Interest expense decreased to $4.4 million and $5.2 million for the three months ended June 30, 2016 and 2015, respectively, and decreased to $9.2 million and $10.8 million for the six months ended June 30, 2016 and 2015, respectively. The decreases in interest expense were due to lower debt balances following our retirement of $150 million of indebtedness during the three months ended March 31, 2015, as well as the related refinancing, in connection with our acquisition of Royall.

Other expense, net. Other expense, net was $0.9 million in the three months ended June 30, 2016 compared to $0.1 million in the three months ended June 30, 2015 and $0.9 million in the six months ended June 30, 2016 compared to $1.2 million in the six months ended June 30, 2015. We recognized foreign exchange losses of $0.8 million and $0.2 million in the three months ended June 30, 2016 and 2015, respectively, and losses of $0.7 million and $1.3 million in the six months ended June 30, 2016 and 2015, respectively, as a result of the effect of fluctuating currency rates on our receivable balances denominated in foreign currencies.

Loss on financing activities. We recognized a loss on financing activities of $17.4 million in connection with the refinancing of acquisition indebtedness during the six months ended June 30, 2015. There was no comparable activity in the six months ended June 30, 2016.

Provision for income taxes. Our provision for income taxes was $4.9 million and $3.4 million for the three months ended June 30, 2016 and 2015, respectively, and $10.5 million and $3.1 million for the six months ended June 30 2016 and 2015, respectively. Our effective tax rate for the three months ended June 30, 2016 was 38.1% compared to 47.9% for the three months ended June 30, 2015. Our effective tax rate for the six months ended June 30, 2016 was 36.6% compared to (23.9)% for the six months ended June 30, 2015. Our results for the six months ended June 30, 2015 included a $10.8 million discrete tax expense related to a write-off of accumulated Washington, D.C. income tax credits as a result of changes in District of Columbia tax laws effective January 1, 2015. The effective tax rate was also increased by the non-deductible portion of the acquisition costs related to our purchase of Royall and lower pre-tax book income due to our loss on financing activities.

Equity in (loss) income of unconsolidated entities. Our proportionate share of losses and income of investments in Evolent Health LLC and Evolent Health, Inc., net of tax, during the three months ended June 30, 2016 and 2015 was a loss of$0.4 million and income of $4.0 million, respectively. Our proportionate share of losses and income of investments in Evolent Health LLC and Evolent Health, Inc., net of tax, during the six months ended June 30, 2016 and 2015 was a loss of $0.4 million and income of $1.6 million, respectively. Our results for the three and six months ended June 30, 2015 included an $8.2 million tax benefit from the release of a valuation allowance, as we had determined that we are more-likely-than not able to realize deferred tax assets associated with our investment in Evolent LLC. We did not recognize losses of $1.7 million during the six months ended June 30, 2016 that were in excess of our investment balances. These unrecorded losses are being tracked and will be recognized at such time as the Evolent Health LLC and Evolent Health, Inc. investments generate earnings or other gains.

Stock-based compensation expense. We recognized the following stock-based compensation expense in the consolidated statements of operations line items for stock options and restricted stock units, or "RSUs," issued under our stock incentive plans for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Stock-based compensation expense included in:
Costs and expenses:
Cost of services	$	2,493	$	2,566	$	4,680	$	4,458
Member relations and marketing	1,387		1,455		2,501		2,601
General and administrative	4,085		4,610		7,766		7,977
Total costs and expenses	$	7,965	$	8,631	$	14,947	$	15,036

There are no stock-based compensation costs capitalized as part of the cost of an asset.

As of June 30, 2016, $66.0 million of total unrecognized compensation cost related to outstanding options and non-vested RSUs was expected to be recognized over a weighted average period of 2.7 years.

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Non-GAAP Financial Measures

We present in our 2015 Form 10-K information about our use of non-GAAP measures, including our reasons for including the measures and limitations with respect to the usefulness of such measures. A reconciliation of adjusted revenue, adjusted EBITDA, adjusted net income, non-GAAP earnings per diluted share, adjusted effective tax rate, and adjusted weighted average common shares outstanding - diluted to the most directly comparable GAAP financial measures is provided below (in thousands, except per share data).

Adjusted net income and adjusted EBITDA. Adjusted net income increased 12.2% to $19.0 million for the three months ended June 30, 2016 from $16.9 million for the three months ended June 30, 2015, while adjusted EBITDA increased 4.7% to $47.7 million for the three months ended June 30, 2016 from $45.6 million for the three months ended June 30, 2015. Adjusted net income increased 30.5% to $38.4 million for the six months ended June 30, 2016 from $29.4 million for the six months ended June 30, 2015, while adjusted EBITDA increased 12.6% to $95.1 million for the six months ended June 30, 2016 from $84.5 million for the six months ended June 30, 2015. The increases in adjusted EBITDA and adjusted net income were attributable to increased revenue in our Royall business, as well as, continued expansion in our health care and education research programs, our student success software program, and our Clinovations services offering, and also includes a decrease in interest expense and effective tax rate for adjusted net income. The effects of these factors were partially offset by higher marketing and member relations costs and increased depreciation and amortization attributable to increased amortization expense from developed capitalized internal-use software and depreciation of improvements made to build out our new Chicago office.

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Revenue	$	198,382	$	183,583	$	399,117	$	362,905
Effect on revenue of fair value adjustments to acquisition-related deferred revenue	—		6,617		—		12,499
Adjusted revenue	$	198,382	$	190,200	$	399,117	$	375,404

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
Net income (loss)	$	7,495	$	7,666		$	17,834	$	(14,406	)
Effect on revenue of fair value adjustments to acquisition-related deferred revenue	—		6,617			—		12,499
Equity in loss (income) of unconsolidated entities	411		(4,000		)	445		(1,621		)
Provision for income taxes	4,870		3,372			10,533		3,094
Loss on financing activities	—		—			—		17,398
Interest expense	4,389		5,154			9,210		10,766
Other expense, net	923		128			862		1,247
Depreciation and amortization	18,917		18,499			38,684		35,773
Acquisition and similar transaction charges	—		961			—		6,610
Fair value adjustments to acquisition-related earn-out liabilities	1,775		(1,427		)	705		(1,083		)
Build-to-suit land rent	995		—			1,870		—
Vacation accrual adjustment	—		—			—		(850		)
Stock-based compensation	7,965		8,631			14,947		15,036
Adjusted EBITDA	$	47,740	$	45,601		$	95,090	$	84,463

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	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
Net income (loss)	$	7,495	$	7,666		$	17,834	$	(14,406	)
Effect of adjusted tax rate on net income (loss)	—		332			—		8,861
Effect on revenue of fair value adjustments to acquisition-related deferred revenue, net of tax	—		3,758			—		7,046
Equity in loss (income) of unconsolidated entities	411		(4,000		)	445		(1,621		)
Amortization of acquisition-related intangibles, net of tax	4,437		4,562			9,116		8,782
Loss on financing activities, net tax	—		—			—		9,725
Acquisition and similar transaction charges, net of tax	—		546			—		3,704
Fair value adjustments to acquisition-related earn-out liabilities, net of tax	1,099		(811		)	407		(619		)
Gain on investment in common stock warrants, net of tax			(40		)	—		(40		)
Build-to-suit land rent, net of tax	616		—			1,183		—
Vacation accrual adjustment, net of tax	—		—			—		(475		)
Stock-based compensation, net of tax	4,930		4,902			9,447		8,483
Adjusted net income	$	18,988	$	16,915		$	38,432	$	29,440

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016		2015
GAAP earnings (loss) per diluted share	$	0.18	$	0.18		$	0.43	$	(0.35	)
Effect of adjusted tax rate on net income (loss)	—		0.01			—		0.22
Effect of adjusted weighted average common shares outstanding - diluted on earnings (loss) per share	—		—			—		0.01
Effect on revenue of fair value adjustments to acquisition-related deferred revenue, net of tax	—		0.09			—		0.17
Equity in loss (income) of unconsolidated entities	0.01		(0.09		)	0.01		(0.03		)
Amortization of acquisition-related intangibles, net of tax	0.11		0.11			0.22		0.21
Loss on financing activities, net of tax	—		—			—		0.23
Acquisition and similar transaction charges, net of tax	—		0.01			—		0.09
Fair value adjustments to acquisition-related earn-out liabilities, net of tax	0.03		(0.02		)	0.01		(0.02		)
Gain on investment in common stock warrants, net of tax	—		(0.01		)	—		(0.01		)
Build-to-suit land rent, net of tax	0.02		—			0.03		—
Vacation accrual adjustment, net of tax	—		—			—		(0.01		)
Stock-based compensation, net of tax	0.12		0.11			0.23		0.19
Non-GAAP earnings per diluted share	$	0.47	$	0.39		$	0.93	$	0.70

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	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Effective tax rate	38.1	%	47.9	%	36.6	%	(23.9	)%
Effect on tax rate of Washington, D.C. tax law change, including write-off of Washington, D.C. income tax credits	—	%	—	%	—	%	73.2	%
Effect on tax rate of loss on financing activities	—	%	0.9	%	—	%	(8.5	)%
Effect on tax rate of unconsolidated equity method investment related FIN 48 liability	—	%	(14.9	)%	—	%	—	%
Effect on tax rate of Royall acquisition costs and other tax items	—	%	9.3	%	—	%	2.8	%
Adjusted effective tax rate	38.1	%	43.2	%	36.6	%	43.6	%

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2015	2016	2015
Weighted average common shares outstanding - diluted	40,570	42,914	41,222	41,686
Dilutive shares outstanding	—	—	—	555
Adjusted weighted average common shares outstanding - diluted	40,570	42,914	41,222	42,241

Liquidity and Capital Resources

Cash flows generated from operating activities represent our primary source of liquidity. We believe that operating cash flows and existing cash and cash equivalents will be sufficient to support our expected operating and capital expenditures, as well as debt service obligations, during at least the next 12 months.

We had cash and cash equivalents of $17.5 million as of June 30, 2016 compared to $71.8 million as of December 31, 2015. We expended $53.6 million in cash to purchase shares of our common stock through our share repurchase program during the six months ended June 30, 2016. During the six months ended June 30, 2015, we did not purchase any shares of our common stock through our share repurchase program.

Cash flows

Cash flows from operating activities. The combination of revenue growth, profitable operations, and payment for services in advance of accrual revenue typically results in operating activities that generate cash flows in excess of net income on an annual basis. Cash flows from operating activities fluctuate from quarter to quarter based on the timing of new and renewal contracts as well as certain expenses, and the second quarter of our fiscal year typically provides the lowest quarterly cash flows from operations. Net cash flows provided by operating activities decreased to $23.1 million in the six months ended June 30, 2016 from net cash flows provided by operating activities of $41.7 million in the six months ended June 30, 2015. The decrease in net cash flows provided by operating activities in the six months ended June 30, 2016 was primarily attributable to lower cash collections in the current period when compared to above average cash collections in the prior year period, as well as the timing of payment for certain large vendor invoices.

Cash flows from investing activities. Our cash management and investment strategy and capital expenditure programs affect investing cash flows. Net cash flows used in investing activities decreased to $23.4 million in the six months ended June 30, 2016 from $758.0 million in the six months ended June 30, 2015. Investing activities during the six months ended June 30, 2016 consisted of payments of $1.9 million for acquisitions and $21.5 million in capital expenditures. Investing activities during the six months ended June 30, 2015 consisted of payments of $744.2 million for acquisitions and $25.5 million in capital expenditures, the effects of which were partially offset by redemptions of marketable securities of $14.7 million.

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Cash flows from financing activities. We had net cash flows used in financing activities of $54.0 million and net cash flows provided by financing activities of $692.8 million in the six months ended June 30, 2016 and 2015, respectively. Cash flows from financing activities during the six months ended June 30, 2016 consisted of the repurchase of $53.6 million of shares under our stock repurchase program, $14.4 million of debt repayments, $3.6 million of acquisition-related earn-out payments, and the withholding of $3.4 million of shares to satisfy the minimum employee tax withholding for vested restricted stock units. These cash flows were offset in part by $17.0 million of proceeds from borrowings under our revolving credit facility, $3.1 million of proceeds from the issuance of common stock upon the exercise of stock options, and $0.6 million in additional tax benefits related to stock-based compensation arrangements.

Financing activities during the six months ended June 30, 2015 primarily consisted of $1.3 billion in proceeds from borrowings under our senior secured term loan facilities obtained to finance our acquisition of Royall and to retire and refinance such indebtedness. These cash flows were offset in part by $732.2 million of debt repayments in connection with the foregoing financings. In addition, financing activities during the six months ended June 30, 2016 included $148.8 million in proceeds from issuance of common stock, net of selling costs, in an underwritten public offering conducted to retire a portion of the Royall acquisition indebtedness, $3.0 million of proceeds from the issuance of common stock upon the exercise of stock options, and $2.7 million in additional tax benefits related to stock-based compensation arrangements, offset in part by the withholding of $6.0 million of shares to satisfy the minimum employee tax withholding for vested restricted stock units, $2.6 million of debt issuance costs, and a $1.5 million acquisition-related earn-out payment.

Senior secured credit facilities

On February 6, 2015, we obtained $675 million of senior secured credit facilities, referred to as the “credit facilities,” under a credit agreement with a syndicate of lenders. The credit facilities were amended on October 30, 2015.

The amended credit facilities consist of (a) a five-year senior secured term loan facility in the principal amount of $475 million, or “term facility,” and (b) a five-year senior secured revolving credit facility, or “revolving credit facility,” under which up to $200 million principal amount of borrowings and other credit extensions may be outstanding at any time.

Term facility. As of June 30, 2016, $439.1 million was outstanding under the term facility.

To the extent not previously paid, the term facility will mature, and all term loans outstanding under the facility will become due and payable, on February 6, 2020. The term loans are repayable in quarterly installments, which commenced with the quarter ended June 30, 2015, equal to a specified percentage of the aggregate principal amount drawn on the facility closing date, as follows: (a) 1.25% for each of the first eight full fiscal quarters following the facility closing date; (b) 2.5% for each of the ninth through twelfth full fiscal quarters following the facility closing date; and (c) 3.75% for each of the thirteenth through nineteenth full fiscal quarters following the facility closing date. We also are required to make principal prepayments under the term facility from the net proceeds of specified types of asset sales, casualty events, and incurrences of debt. We may voluntarily prepay outstanding term loans without premium or penalty.

Amounts drawn under the term facility generally bear interest, payable monthly, at an annual rate calculated, at our option, on the basis of either (a) an alternate base rate plus an initial margin of 1.25% or (b) the applicable London interbank offered rate, or “LIBOR,” plus an initial margin of 2.25%, subject in each case to margin reductions based on our total leverage ratio from time to time. As of June 30, 2016, based on our historical leverage ratio, the interest rate margin was 2.00%. The interest rate on the alternate base rate loans will fluctuate as the base rate fluctuates, while the interest rate on the LIBOR loans will be adjusted at the end of each applicable interest period. Interest on alternate base rate loans will be payable monthly in arrears, while interest on LIBOR loans will be payable at the end of each applicable interest period, except that, in the case of any interest period longer than three months, interest will be payable at the end of each three-month period.

Revolving facility. On June 10, 2016, we drew down borrowings of $17.0 million under our revolving credit facility. The borrowings have a maturity of three months and a accrue interest at an annual rate of 2.66%. As of June 30, 2016, under the revolving facility, $117.0 million of borrowings were outstanding, $19.1 million of standby letters of credit had been issued, and $63.9 million was available for future borrowings.

The revolving facility will mature, and all revolving loans outstanding under the facility will become due and payable, on February 6, 2020. The facility loans may be borrowed, repaid and reborrowed from time to time during the term of the facility. We may use the proceeds of borrowings under the revolving facility, when drawn, to finance working capital needs and for general corporate purposes, including permitted acquisitions.

Amounts drawn under the revolving facility generally bear interest, payable quarterly, at an annual rate calculated, at our option, on the basis of either (a) an alternate base rate plus an initial margin of 1.25% or (b) the applicable London interbank offered rate plus an initial margin of 2.25%, subject in each case to margin reductions based on our total leverage ratio from time to time. As of June 30, 2016, based on our historical leverage ratio, the interest rate margin was 2.00%.

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We are obligated to pay a commitment fee at an initial annual rate of 0.25%, subject to reduction based on our total leverage ratio from time to time, accruing on the average daily amount of available commitments under the revolving facility.

We are required to maintain compliance with financial covenants consisting of (a) a maximum total leverage ratio and (b) a minimum interest coverage ratio, each measured as of the last day of our fiscal quarter, for a period consisting of our most recently completed four fiscal quarters. We were in compliance with these financial covenants as of June 30, 2016.

Contractual Obligations

There were no material changes related to contractual obligations and commitments from the information provided in our 2015 Form 10-K.

Off-Balance Sheet Arrangements

As of June 30, 2016, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition or results of operations.

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Seasonality

Our revenues and operating results normally fluctuate as a result of seasonal variations in our business, principally due to certain education program offerings in which contracts typically are aligned with our members' academic year. Historically, these education programs have had lower revenues in the second and third fiscal quarters and higher revenues in the first and fourth fiscal quarters. We expect quarterly fluctuations in operating results to continue as a result of seasonal patterns. Such patterns may change, however, as a result of changes in service, timing, contract terms, new program offerings, increased sales, or acquisitions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest rate risk. As of June 30, 2016, we had $439.1 million of outstanding borrowings under our term facility and $117.0 million of outstanding borrowings under our revolving facility. Amounts drawn under each facility generally bear interest, payable quarterly, at an annual rate calculated, at our option, on the basis of either (a) an alternate base rate plus an initial margin of 1.25% or (b) the applicable London interbank offered rate, plus an initial margin of 2.25%, subject in each case to margin reductions based on our total leverage ratio from time to time. As of June 30, 2016, our outstanding borrowings accrued interest at an annual rate of 2.47%. Accordingly, we are exposed to fluctuations in interest rates on borrowings under the facilities. A hypothetical 10% increase in LIBOR would increase our annual cash interest expense on our variable-rate debt by approximately $0.2 million.

We utilize three interest rate swaps to manage exposure to interest rates on a portion of the variable rate of our indebtedness. Our interest rate swaps are with major financial institutions and are not used for speculative or trading purposes. As of June 30, 2016, the outstanding notional amount on the interest rate swaps was $269.5 million. Our objective with respect to these interest rate swaps is to protect us against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows relating to interest payments on a portion of our outstanding debt. We have designated our interest rate swaps as cash flow hedges, and changes in the fair value of the interest rate swaps are recognized in other comprehensive (loss) income. Hedge ineffectiveness, if any, associated with the interest rate swap will be reported in interest expense. We recorded the interest rate swaps at fair value, which amounted to a liability of $4.8 million as of June 30, 2016.

Foreign currency risk. Our international operations, which account for approximately 2.4% of our revenue, subject us to risks related to currency exchange fluctuations. Prices for our services sold to members located outside the United States are sometimes denominated in local currencies (primarily British Pound Sterling). As a consequence, increases in the value of the U.S. dollar against local currencies in countries where we have members would result in a foreign exchange transaction loss recognized by us. We recognized foreign exchange losses of $0.8 million and $0.2 million in the three months ended June 30, 2016 and 2015, respectively, and losses of $0.7 million and $1.3 million in the six months ended June 30, 2016 and 2015, respectively, which are included in other expense, net in our consolidated statements of operations appearing elsewhere in this report. A hypothetical 10% change in foreign currency exchange rates would not have had a material effect on our financial position as of June 30, 2016.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

During the second quarter of 2016, we identified a material weakness related to the internal controls over the income tax process. The Company identified errors in current and prior periods in the income tax accounts that resulted from control deficiencies in the income tax process. These errors were not material to the affected financial statements. However, the Company concluded that these control deficiencies in aggregate represent a material weakness in the income tax process as there is a reasonable possibility the controls as currently operating would not prevent or detect a material misstatement.

As previously disclosed under “Item 9A-Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2015, we concluded that our disclosure controls and procedures were not effective as of December 31, 2015 due to two material weaknesses in our internal control over financial reporting described below. Based on the newly identified material weakness in the second quarter of 2016 and those previously disclosed material weaknesses which we continue to work to remediate and view as an integral part of our disclosure controls and procedures, our Chief Executive

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Officer and Chief Financial Officer have concluded that, as of the three months ended June 30, 2016, our disclosure controls and procedures were not effective. In light of the weaknesses in internal control over financial reporting, prior to filing our Annual Report on Form 10-K for our fiscal year ended December 31, 2015, and prior to filing this Quarterly Report on Form 10-Q, we completed substantive procedures that have allowed us to conclude that, notwithstanding the material weakness in our internal controls over financial reporting described below, the condensed consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with GAAP.

The material weaknesses in our internal control over financial reporting, which are described more fully in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, that existed as of December 31, 2015 and continued to exist as of June 30, 2016, are as follows:

1. We did not have sufficient controls to properly identify and account for customer cancellation provisions and contingent fee arrangements. These errors were attributable to insufficient qualified personnel to handle complex revenue arrangements, as well as to limitations of the Company’s revenue recognition system.

2. We did not have sufficient controls over the review of third-party valuations and related projected financial information. Due to the subjectivity of the estimates inherent in the process and the materiality of the transaction, management concluded that these control deficiencies potentially would not prevent or detect a material misstatement. 

With respect to the newly identified material weakness related to the income tax process, our preliminary determination is that our management review controls over the income tax process do not operate at a sufficient level of precision to prevent or detect a material misstatement. We are still in the process of evaluating the underlying cause of this operating deficiency and developing our remediation plan.

Management's Remediation Initiatives

We are making progress toward achieving the effectiveness of our disclosure controls and procedures. Remediation generally requires making changes to how controls are designed and then adhering to those changes for a sufficient period of time such that the effectiveness of those changes is demonstrated with an appropriate amount of consistency. We have assigned some personnel to implement and monitor our short-term and long-term remediation plans and other personnel to oversee the necessary remedial changes to the overall design of our internal control environment and to address the root causes of our material weaknesses.

Our initiatives, summarized below, are intended to remediate our material weaknesses and to continue to enhance our internal control over financial reporting.

1. With respect to the material weakness in the revenue recognition process, we have made process improvements, including a process for a contemporaneous review of contracts and the dedication of additional subject matter expert staff, and are planning an upgraded software solution to properly account for complex contract terms, including customer cancellation provisions and contingent fee arrangements.

2. With respect to the material weakness in the business combination process, we have made process improvements including standardized review procedures over third-party valuations and related projections. In addition, we have added resources to our accounting and financial reporting functions to facilitate the timely execution of the process improvements.

3. With respect to the material weakness in the income tax process, we are evaluating the appropriate remediation procedures and will implement process improvements to remediate upon final conclusion of our evaluation.

(b) Changes in Internal Control over Financial Reporting

We are taking actions to remediate the material weakness related to our internal control over financial reporting, as described above. However, our remediation efforts were not complete as of June 30, 2016. Other than the changes disclosed above, there were no material changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act that occurred during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1A. Risk Factors.

As discussed in this report, our actual results could differ materially from the expected results expressed or implied in our forward-looking statements. There have been no material changes in our risk factors from those described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The risks described in our 2015 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or operating results.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In January 2004, our board of directors authorized the repurchase by us from time to time of up to $50 million of our common stock. That authorization was increased in cumulative amount to $100 million in October 2004, to $150 million in February 2006, to $200 million in January 2007, to $250 million in July 2007, to $350 million in April 2008, to $450 million in May 2013, and to $550 million in November 2015. All repurchases have been made in the open market pursuant to this publicly announced repurchase program. No minimum number of shares has been fixed, and the share repurchase authorization has no expiration date. A summary of the share repurchase activity for the three months ended June 30, 2016 is as follows:

	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plan
April 1 to April 30, 2016	657,263	$	32.21	657,263	$	49,544,302
May 1 to May 31, 2016	—	$	—	—	$	49,544,302
June 1 to June 30, 2016	145,954	$	34.26	145,954	$	44,544,345
Total	657,408,954	$	32.58	657,408,954

As of June 30, 2016, we had repurchased a total of 19,567,789 shares under our repurchase program since the program’s inception.

Item 5. Other Information.

a)    Effective on August 8, 2016, upon the recommendation of the governance committee, our board of directors approved an amendment to our amended and restated bylaws to provide for majority voting in the election of directors on the terms and subject to the conditions specified in the amendment.

The amendment provides that, except in the case of a contested election, each director will be elected at a meeting of stockholders by the vote of the majority of the votes cast with respect to that director’s election. For purposes of this bylaw provision, a majority of the votes cast will mean that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election. Abstentions and broker non-votes will not be counted as a vote cast either “for” or “against” that director’s election.

In the case of a contested election, the directors will be elected by a vote of a plurality of the votes cast. The bylaw provision defines a “contested election” as one in which the number of nominees exceeds the number of directors to be elected, determined as of the 10^th day preceding the date on which we first mail to our stockholders our notice of the meeting at which directors are to be elected.

In order for any incumbent director to become a nominee of the board of directors for further service on the board of directors, such person must submit an irrevocable resignation to the board of directors, contingent on (a) that person not receiving a majority of the votes cast in an election that is not a contested election, and (b) acceptance of that resignation by the board of directors in accordance with the policies and procedures adopted by the board of directors for that purpose. If an incumbent director fails to receive a majority of the votes cast in an election that is not a contested election, the governance committee, or such other committee as may be designated by the board of directors, will make a recommendation to the board of directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The board of directors will act on the resignation, taking into account the committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within 90 days following certification of the election results. The committee in making its recommendation and the board of directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. Any nominee who tenders his or her resignation will not participate in the deliberations of the committee or the board of directors regarding whether to accept the resignation.

The bylaw amendment is filed as Exhibit 3.2.1 to the report. The amended and restated bylaws containing the amendment is filed as Exhibit 3.2.2 to this report.

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Item 6. Exhibits.

(a) Exhibits. The Company files herewith or incorporates by reference herein the exhibits identified below. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K under Commission File No. 000-33283.

3.2.1	Amendment to Amended and Restated Bylaws of the Company adopted effective on August 8, 2016
3.2.2	Amended and Restated Bylaws of the Company as in effect on August 8, 2016
12.1	Computation of Ratio of Earnings to Fixed Charges
31.1	Certification of the Chief Executive Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of the Chief Financial Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certifications pursuant to 18 U.S.C. Section 1350
101	XBRL (Extensible Business Reporting Language). The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015, (ii) Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015, (iii) Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015, (v) Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015, and (v) Notes to Unaudited Consolidated Financial Statements

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE ADVISORY BOARD COMPANY
Date: August 9, 2016	By:	/s/ Michael T. Kirshbaum
		Michael T. Kirshbaum
		Chief Financial Officer and Treasurer (Duly Authorized Officer)

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INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
3.2.1	Amendment to Amended and Restated Bylaws of the Company adopted effective on August 8, 2016
3.2.2	Amended and Restated Bylaws of the Company as in effect on August 8, 2016
12.1	Computation of Ratio of Earnings to Fixed Charges
31.1	Certification of the Chief Executive Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934, as amended
31.2	Certification of the Chief Financial Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1	Certifications pursuant to 18 U.S.C. Section 1350
101	XBRL (Extensible Business Reporting Language). The following materials from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015, (ii) Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015, (iii) Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015, (v) Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015, and (v) Notes to Unaudited Consolidated Financial Statements

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EX-3.2.1

Exhibit 3.2.1

Bylaw Amendment Adopted Effective August 8, 2016

(g)    Voting; Proxies. Except as otherwise expressly required by law or provided in the Certificate of Incorporation, each share of capital stock of the Corporation shall entitle the holder thereof to one vote. Except as provided in the next paragraph of this Section 6(g) with respect to the election of directors, any action shall be authorized by a majority of the votes cast except where the Delaware General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation and these Bylaws. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date. In the election of directors, and for any other action, voting need not be by ballot.

Except as otherwise provided by these Bylaws, each director shall be elected by the vote of the majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that if, as of the tenth (10th) day preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders of the Corporation, the number of nominees exceeds the number of directors to be elected (a “Contested Election”), the directors shall be elected by the vote of a plurality of the votes cast. For purposes of this paragraph, a majority of votes cast shall mean that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election (with “abstentions” and “broker nonvotes” not counted as a vote cast either “for” or “against” that director’s election). In order for any incumbent director to become a nominee of the Board of Directors for further service on the Board of Directors, such person must submit an irrevocable resignation, contingent on (i) that person not receiving a majority of the votes cast in an election that is not a Contested Election, and (ii) acceptance of that resignation by the Board of Directors in accordance with the policies and procedures adopted by the Board of Directors for such purpose. In the event an incumbent director fails to receive a majority of the votes cast in an election that is not a Contested Election, the Governance Committee, or such other committee designated by the Board of Directors pursuant to these Bylaws, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. Any nominee who tenders his or her resignation pursuant to this Section 6(g) will not participate in the deliberations of the committee or the Board of Directors regarding whether to accept the resignation.

EX-3.2.2

Exhibit 3.2.2

AMENDED AND RESTATED BYLAWS

OF

THE ADVISORY BOARD COMPANY

(a Delaware corporation)

Effective August 8, 2016

ARTICLE I
OFFICES

The Corporation may have offices within and without the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE II
STOCKHOLDERS

1.    Stock Certificates; Uncertificated Shares.

(a)    The shares of capital stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of capital stock of the Corporation shall be uncertificated shares. Any or all of the signatures on any such certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

(b)    Restrictions; Legends and Notice. Whenever the Corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the Corporation shall issue any shares of its stock as partly paid stock, the certificates, if any, representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the Delaware General Corporation Law. Within a reasonable time after the issuance or transfer of any uncertificated shares, the Corporation shall send to the registered owner thereof any written notice prescribed by the Delaware General Corporation Law.

(c)    Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

2.    Fractional Share Interests. The Corporation may, but shall not be required to, issue fractions of a share.

3.    Stock Transfers; Registered Stockholders. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the Corporation shall be made only on the stock ledger of the Corporation by the registered holder thereof or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates representing such shares of stock properly endorsed and the payment of all taxes due thereon. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

4.    Record Date for Stockholders.

(a)    Notice and Voting. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b)    Calling Special Meetings. Any stockholder of record seeking to have the stockholders call a special meeting of stockholders shall deliver to the Secretary of the Corporation a notice and request to fix a record date for purposes of determining stockholders entitled to request such meeting in writing, and the Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date, which record date shall be fixed in accordance with these Bylaws and the Delaware General Corporation Law; provided that, if no record date is set by the Board within ten days of the date on which such notice and request is delivered to the Secretary, the record date for determining stockholders entitled to request such special meeting shall be deemed to be the first date on which such notice and request to fix a record date for purposes of determining stockholders entitled to request such meeting was delivered to the Secretary of the Corporation.

(c)    Dividends and Other Rights. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

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5.    Meaning of Certain Terms. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat, as the case may be, the term “share” or “shares” or “share of stock” or “shares of stock” or “stockholder” or “stockholders” refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the Corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the Delaware General Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the Certificate of Incorporation, except as any provision of law may otherwise require.

6.    Stockholder Meetings.

(a)    Place of Meetings. Meetings of the stockholders shall be held at such place, if any, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting.

(b)    Annual Meetings. If required by law, an annual meeting of stockholders for the election of directors and the transaction of any other proper business as may come before the meeting shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Except as otherwise provided by law, notice of the annual meeting, stating the place, if any, date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.

(c)    Special Meetings. Unless otherwise prescribed by law or by the Certificate of Incorporation, special meetings of stockholders, for any purpose or purposes, shall be called by the Secretary (i) at the direction of either (x) the Chairman of the Board of Directors or (y) a majority of directors of the Board of Directors by a resolution of the Board of Directors, or (ii) at the request of the holder or holders of at least forty percent of the capital stock of the Corporation issued and outstanding as of the record date determined in accordance with Section 4(b) of this Article II (the “Requisite Percent”) who are entitled to vote on any matter for which the special meeting is being called and who deliver to the Secretary a Special Meeting Request (as defined below) satisfying the requirements of Section 7(a) of this Article II.

(d)    Stockholder List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (ii) during ordinary business hours at the principal place of business of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof; and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote at any meeting of stockholders.

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(e)    Nominations and Stockholder Business.

(i)    To be properly brought before an annual meeting, nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders at an annual meeting of stockholders must be either (x) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (y) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (z) otherwise brought before the annual meeting by any stockholder of the Corporation who is a stockholder of record on the record date determined in accordance with Section 4(a) of this Article II, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 6(e).

(ii)    For nominations or other business to be properly brought before an annual meeting by a stockholder under this Section 6(e), the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any proposed business must be a proper subject for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety days nor more than one hundred twenty days prior to the first anniversary of the date of the prior year’s annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than sixty days after such date, then notice by the stockholder to be timely must be delivered not earlier than the one hundred twentieth day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to the annual meeting or the tenth day following the day on which the date of the meeting is publicly announced. Such stockholder’s notice must set forth (x) as to each person whom the stockholder proposes to nominate for election or reelection as a director (1) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) and (2) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director; (y) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (z) as to the stockholder giving the notice and the beneficial owners, if any, on whose behalf the nomination or proposal is made (I) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (II) the class and the number of shares of stock of the Corporation which are owned (beneficially or of record) by such stockholder and such beneficial owner, (III) a description of all arrangements or understandings between such stockholder and such beneficial owner and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder and of such beneficial owner in such business, and (IV) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (1) to

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deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (2) otherwise to solicit proxies from stockholders in support of such proposal or nomination.

(iii)    Notwithstanding anything in this Section 6(e) to the contrary, if the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement specifying the size of the increased Board of Directors made by the Corporation at least ninety days prior to the date of the first anniversary of the prior year’s annual meeting of stockholders, then a stockholder’s notice required by this Section 6(e) will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(iv)    Only such business may be conducted at a special meeting of stockholders as has been brought before the meeting pursuant to the Corporation’s notice of meeting. Business proposals and nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (x) by or at the direction of the Board of Directors or (y) by any stockholder of the Corporation who is a stockholder of record at the time of giving the notice required by this Section 6(e) (or, in the case of a holder or holders at whose direction the special meeting is called, at the time of giving the notice required by Section 7(a) of this Article II) in accordance with this Section 6(e) or Section 7(a), as applicable, who is entitled to vote at the meeting and who gives timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice delivered pursuant to this Section 6(e)(iv) shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the one hundred twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. With respect to any notice of nomination submitted by a stockholder, such stockholder’s notice must set forth the information described in clauses (x) and (z) of the third sentence of Section 6(e)(ii) of this Article II and, with respect to notice of any business proposal submitted by a stockholder, such stockholder’s notice must set forth the information described in clauses (y) and (z) of the third sentence of Section 6(e)(ii) of this Article II.

(v)    Only those persons who are nominated in accordance with the procedures set forth in this Section 6(e) or Section 7 of this Article II will be eligible for election as directors at any meeting of stockholders. Only business brought before the meeting in accordance with the procedures set forth in this Section 6(e) or Section 7 of this Article II, as applicable, may be conducted at a meeting of stockholders.

(vi)     For purposes of this Section 6(e), “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

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(vii)    Notwithstanding the foregoing provisions of this Section 6(e), a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 6(e). Nothing in this Section 6(e) shall be deemed to affect any rights of (1) stockholders to request inclusion of proposals or nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (2) the holders of any series of preferred stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation of the Corporation.

(f)    Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, at all meetings of the stockholders, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.

(g)    Voting; Proxies. Except as otherwise expressly required by law or provided in the Certificate of Incorporation, each share of capital stock of the Corporation shall entitle the holder thereof to one vote. Except as provided in the next paragraph of this Section 6(g) with respect to the election of directors, any action shall be authorized by a majority of the votes cast except where the Delaware General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation and these Bylaws. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date. In the election of directors, and for any other action, voting need not be by ballot.

Except as otherwise provided by these Bylaws, each director shall be elected by the vote of the majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that if, as of the tenth (10th) day preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders of the Corporation, the number of nominees exceeds the number of directors to be elected (a “Contested Election”), the directors shall be elected by the vote of a plurality of the votes cast. For purposes of this paragraph, a majority of votes cast shall mean that the number of votes cast “for” a director’s election exceeds the number of votes cast “against” that director’s election (with “abstentions” and “broker nonvotes” not counted as a vote cast either “for” or “against” that director’s election). In order for any incumbent director to become a nominee of the Board of Directors for further service on the Board of Directors, such person must submit an irrevocable resignation, contingent on (i) that person not receiving a majority of the votes cast in an election that is not a Contested Election, and (ii) acceptance of that resignation by the Board of Directors in accordance with the policies and procedures adopted by the Board of Directors for such purpose. In

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the event an incumbent director fails to receive a majority of the votes cast in an election that is not a Contested Election, the Governance Committee, or such other committee designated by the Board of Directors pursuant to these Bylaws, shall make a recommendation to the Board of Directors as to whether to accept or reject the resignation of such incumbent director, or whether other action should be taken. The Board of Directors shall act on the resignation, taking into account the committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the Securities and Exchange Commission) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision within ninety (90) days following certification of the election results. The committee in making its recommendation and the Board of Directors in making its decision each may consider any factors and other information that they consider appropriate and relevant. Any nominee who tenders his or her resignation pursuant to this Section 6(g) will not participate in the deliberations of the committee or the Board of Directors regarding whether to accept the resignation.

(h)    Conduct of Meetings. All meetings of stockholders shall be presided over by the Chairman of the Board of Directors, or in his absence, by the Chief Executive Officer, or in his absence, by the President, if any, or in his absence, by a Vice President, or in the absence of the foregoing persons, by a chairman designated by the Board of Directors, or in the absence of such designation, by a chairman chosen at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman of the meeting, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chairman of the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chairman should so determine, such chairman shall so declare to the meeting, and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

(i)    Inspectors of Election; Opening and Closing the Polls. Prior to any meeting of stockholders, the Board of Directors, the Chairman of the Board, the Chief Executive Officer or any other officer designated by the Board of Directors shall appoint one or more inspectors, who shall have the powers and duties set forth in Section 231 of the Delaware General Corporation Law as currently in effect or as the same may hereafter be amended or replaced, which inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his duties, shall

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take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. The inspectors shall have the duties prescribed by law. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

7.    Stockholder Requested Special Meetings.

(a)    In order for a special meeting of stockholders to be called pursuant to clause (ii) of Section 6(c) of this Article II (a “Stockholder Requested Special Meeting”), one or more notices requesting a special meeting of stockholders (such notice, the “Special Meeting Request”) must be signed by a holder or holders of the Requisite Percent (or their duly authorized agents) and must be delivered to the Secretary. The Special Meeting Request(s) shall be delivered to the Secretary at the principal executive offices of the Corporation by registered mail, return receipt requested. Each Special Meeting Request shall (i) set forth a statement of the specific purpose(s) of the meeting and the matters proposed to be acted on at such meeting, (ii) bear the date of signature of each stockholder (or duly authorized agent thereof) signing the Special Meeting Request, (iii) set forth (A) the name and address, as they appear in the Corporation’s stock ledger, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), (B) the class, if applicable, and the number of shares of capital stock of the Corporation that are owned of record and beneficially by each such stockholder and (C) include documentary evidence of such stockholder’s record and beneficial ownership of such stock, (iv) set forth all information relating to each such stockholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, and (v) contain the information described in the third sentence of Section 6(e)(ii) of this Article II. Any requesting stockholder may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary at the principal executive offices of the Corporation.

(b)    Except as provided in the next sentence, any special meeting shall be held at such date and time as may be fixed by the Board of Directors in accordance with these Bylaws and the Delaware General Corporation Law. In the case of a Stockholder Requested Special Meeting, such meeting shall be held at such date and time as may be fixed by the Board of Directors in accordance with applicable law (the “Meeting Date”); provided, however, that the record date for such meeting shall be fixed in accordance with Section 4(a) of this Article II and applicable law, and if the Board of Directors fails to designate a Meeting Date within ten (10) days after the record date established in accordance with Section 4(b) of this Article II, then such Meeting Date shall be the 30th day after such record date (or, if that day shall not be a business day, then on the next business day); provided, further, however, that the date of any Stockholder Requested Special Meeting shall be not more than forty-five days after such record date; and provided, further, that in the event that the Board of Directors fails to designate a time and place for a Stockholder Requested Special Meeting, then such meeting shall be held at the Corporation’s principal executive offices at 9 A.M. local time. In fixing a date and time for any Stockholder Requested Special Meeting, the Board of Directors may consider such factors as it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for a meeting and any plan of the Board of Directors to call an annual meeting or a special meeting.

(c)    Business transacted at any Stockholder Requested Special Meeting shall be limited to the purpose stated in the Special Meeting Request(s); provided, however, that notwithstanding anything to the contrary set forth herein, the Board of Directors shall not be prohibited from submitting additional matters to the stockholders at any Stockholder Requested Special Meeting.

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ARTICLE III
DIRECTORS

1.    Election of Directors. Except as provided in the Certificate of Incorporation, Section 2 of this Article III or applicable law, directors shall be elected at annual meetings of stockholders, and each director so elected shall hold office until the succeeding annual meeting and until his successor is duly elected and qualified, or until his earlier resignation or removal. Any director may resign at any time upon notice to the Corporation. Such resignation shall take effect at the time specified therein or, if the time be not specified, upon the delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Directors need not be stockholders of the Corporation. The number of directors of the Corporation shall be determined by resolution of a majority of the Board of Directors of the Corporation.

2.    Vacancies. Vacancies on the Board of Directors shall be filled in accordance with the provisions of the Corporation’s Certificate of Incorporation.

3.    Duties and Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

4.    Meetings.

(a)    Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors shall be called by the Secretary (i) at the direction of (x) the Chairman of the Board of Directors or (y) the Chief Executive Officer, if the Chief Executive Officer is a member of the Board of Directors, or (ii) at the written request of a majority of the entire Board of Directors. Notice of a meeting of the Board of Directors, stating the place, date and hour of the meeting, shall be given to each director either by mail not less than forty-eight hours before the date of such meeting or by telephone or other means of electronic transmission not less than twenty-four hours before the date of such meeting.

(b)    Quorum and Action. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all of the members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmissions, setting forth the action so taken, are filed with the minutes of proceedings of the Board of Directors or committee.

5.    Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or of any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons

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participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 5 shall constitute presence in person at such meeting.

6.    Committees. The Board of Directors shall adopt resolutions establishing an audit committee and a compensation committee. In addition, the Board of Directors may designate one or more additional committees. Each committee shall consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors as requested or required.

7.    Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum and/or an amount of shares of the Corporation’s stock (or options or other rights to purchase or obtain shares of the Corporation’s stock) for attendance at each meeting of the Board of Directors and/or as compensation for service as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV
OFFICERS

1.    General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board (who must be a director), a Chief Executive Officer, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a President and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation.

2.    Election. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by or at the direction of the Board of Directors and/or the Compensation Committee thereof.

3.    Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be

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executed in the name of and on behalf of the Corporation by the Chief Executive Officer or such other authorized officer of the Corporation, and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons.

4.    Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.

5.    Chief Executive Officer. The Chief Executive Officer shall, subject to the control of the Board of Directors and the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board of Directors or the Chief Executive Officer. In the absence or disability of the Chairman of the Board of Directors, the Chief Executive Officer shall preside at all meetings of the stockholders and, if a member of the Board of Directors, of the Board of Directors. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.

6.    President. The President, who may be the same person as the Chief Executive Officer, shall have such powers and duties as generally pertain to the office of President and as the Board of Directors may from time to time prescribe, subject generally to the direction of the Board of Directors and the Executive Committee, if any. If the Chief Executive Officer and the President are not the same individual, at the request of the Chief Executive Officer or in his absence, or in the event of his inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. If there be no President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the Chief Executive Officer, or in the event of the inability or refusal of the Chief Executive Officer to act, shall perform the duties of the Chief Executive Officer, and when so acting, such officer shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.

7.    Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board may from time to time prescribe.

8.    Secretary. The Secretary shall, unless otherwise directed by the Board of Directors, attend all meetings of the Board of Directors and all meetings of stockholders, and shall record (or arrange for the recordation of) all the proceedings at each meeting of the Board of Directors and stockholders in a book or books to be kept for that purpose; the Secretary shall also perform like duties, when required, for the committees of the Board of Directors. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all

11

meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the Chief Executive Officer may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.

9.    Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.

10.    Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

11.    Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.

12.    Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

13.    Outside or Private Employment. No officer or employee shall have any outside or private employment or affiliation with any firm or organization incompatible with his concurrent employment by the Corporation, nor shall he accept or perform any outside or private employment which the Chief Executive Officer of the Corporation determines will interfere with the efficient performance of his official duties.

ARTICLE V
NOTICES

1.    Notices. Whenever notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the

12

records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice may also be given personally or by electronic transmission in accordance with Section 232 of the Delaware General Corporation Law. Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the “householding” rules set forth in Rule 14a-3(e) under the Exchange Act, and Section 233 of the General Corporation Law.

2.    Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business to be transacted, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

ARTICLE VI
GENERAL PROVISIONS

1.    Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, and applicable law may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

2.    Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

3.    Fiscal Year. The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors.

4.    Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the word “Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VII
AMENDMENTS

Subject to the provisions of the Certificate of Incorporation, as such may be amended from time to time, and the provisions of the Delaware General Corporation Law, these Bylaws may be altered, amended, changed, added to or repealed in whole or in part, or new Bylaws may be adopted, by the stockholders or the Board of Directors. All such amendments must be approved by either the holders of a majority of the outstanding capital stock of the Corporation entitled to vote thereon or by a majority of the entire Board of Directors.

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ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS

1.    Power to Indemnify in Actions, Suits or Proceedings other than those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding the preceding sentence, except as otherwise provided in Section 4 of this Article VIII, the Corporation shall be required to indemnify a current or former director or officer in connection with any action, suit or proceeding (or part thereof) commenced by such director or officer only if the commencement of such action, suit or proceeding (or part thereof) by such director or officer was authorized in the specific case by the Board of Directors.

2.    Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Notwithstanding the preceding sentence, except otherwise provided in Section 4 of this Article VIII, the Corporation shall be required to indemnify a current or former director or officer in connection with any action, suit or proceeding (or part thereof) commenced by such director or officer only if the commencement of such action, suit or proceeding (or part thereof) by such director or officer was authorized in the specific case by the Board of Directors.

3.    Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a

14

determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made with respect to a person who is an officer or director at the time of such determination (a) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (b) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (c) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case.

4.    Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 4 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

5.    Expenses Payable in Advance. Expenses incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation, upon the determination by the Board of Directors, in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII.

6.    Non-exclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, these Bylaws or any agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the Delaware General Corporation Law, or otherwise.

7.    Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not

15

the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII.

8.    Certain Definitions. For purposes of this Article VIII, references to the “Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VIII.

9.    Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by the Corporation pursuant to this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

10.    Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 4 of this Article VIII), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.

11.    Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.

12.    Severability. If this Article VIII or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each person as provided above as to the expenses (including attorney’s fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a grand jury proceeding and an action by the Corporation, to the full extent permitted by any applicable portion of this Bylaw that shall not have been invalidated or by any other applicable law.

* * *

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EX-12.1

Exhibit 12.1

Computation of ratio of earnings to fixed charges (a)

(dollars in thousands)

	Six Months Ended June 30, 2016		Year Ended December 31, 2015			Year Ended March 31, 2014		Year Ended March 31, 2013		Year Ended March 31, 2012		Year Ended March 31, 2011
Pre-tax income from continuing operations before adjustment for income or loss from equity investees	$	28,812	$	(99,418	)	$	48,661	$	47,728	$	39,406	$	28,145
Fixed charges	12,320		26,537			4,833		3,582		2,650		2,189
Total earnings available for fixed charges	$	41,132	$	(72,881	)	$	53,494	$	51,310	$	42,056	$	30,334
Fixed charges:
Interest factor of rental expense	$	3,110	$	5,416		$	4,254	$	3,214	$	2,650	$	2,189
Interest expense	9,210		21,121			579		368		—		—
Total fixed charges	12,320		26,537			4,833		3,582		2,650		2,189
Ratio of earnings to fixed charges	3.34x		*			11.06x		14.32x		15.87x		13.86x

*Earnings for the year ended December 31, 2015 were inadequate to cover fixed charges by $46,344.

(a) The Advisory Board had no preferred equity securities outstanding and did not pay preferred dividends in any of the periods presented. Consequently, the Advisory Board’s ratio of earnings to combined fixed charges and preferred stock dividends for each of such periods is identical to the Advisory Board’s ratio of earnings to fixed charges as indicated above.

The Advisory Board computes its ratio of earnings to fixed charges by dividing pre-tax income (loss) from continuing operations, before adjustment for income or loss from equity investees, plus fixed charges and less capitalized interest, by fixed charges. Fixed charges consist of interest expense, including interest expense from amortized premiums, discounts and capitalized expenses related to indebtedness, and the estimated portion of rental expense deemed by the Advisory Board to be representative of the interest factor of rental payments under operating leases, which the Advisory Board estimates to be one-third of such payments.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert W. Musslewhite, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Advisory Board Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2016	/s/ Robert W. Musslewhite
	Robert W. Musslewhite
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael T. Kirshbaum, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Advisory Board Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2016	/s/ Michael T. Kirshbaum
	Michael T. Kirshbaum,
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

THE ADVISORY BOARD COMPANY

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of The Advisory Board Company (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert W. Musslewhite

Robert W. Musslewhite

Chief Executive Officer

August 9, 2016

/s/ Michael T. Kirshbaum

Michael T. Kirshbaum

Chief Financial Officer and Treasurer

August 9, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 01, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	ADVISORY BOARD CO
Entity Central Index Key	0001157377
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		40,264,365

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 17,487	$ 71,825
Membership fees receivable, net	600,496	605,444
Prepaid expenses and other current assets	20,986	22,543
Total current assets	638,969	699,812
Intangible assets, net	264,948	274,721
Property and equipment, net	187,984	183,057
Deferred incentive compensation and other charges	69,641	81,181
Goodwill	740,458	738,200
Investments in unconsolidated entities	0	706
Other non-current assets	1,800	1,800
Total assets	1,903,800	1,979,477
Current liabilities:
Deferred revenue, current	568,329	581,471
Accounts payable and accrued liabilities	64,506	74,879
Accrued incentive compensation	16,765	41,173
Debt, current	51,946	27,743
Total current liabilities	701,546	725,266
Deferred revenue, net of current portion	152,039	173,953
Deferred income taxes	91,047	93,893
Debt, net of current portion	501,015	522,086
Financing obligation	15,054	2,700
Other long-term liabilities	17,157	12,488
Total liabilities	1,477,858	1,530,386
Stockholders’ equity:
Preferred stock, par value $0.01; 5,000,000 shares authorized, zero shares issued and outstanding	0	0
Common stock, par value $0.01; 135,000,000 shares authorized, 40,264,365 and 41,572,523 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively	403	416
Additional paid-in capital	759,832	744,333
Accumulated deficit	(331,625)	(295,860)
Accumulated other comprehensive (loss) income	(2,668)	202
Total stockholders’ equity	425,942	449,091
Total liabilities and stockholders’ equity	$ 1,903,800	$ 1,979,477

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (shares)	5,000,000	5,000,000
Preferred stock, shares issued (shares)	0	0
Preferred stock, shares outstanding (shares)	0	0
Common stock, par value (dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (shares)	135,000,000	135,000,000
Common stock, shares issued (shares)	40,264,365	41,572,523
Common stock, shares outstanding (shares)	40,264,365	41,572,523

XML

Unaudited Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Revenue	$ 198,382	$ 183,583	$ 399,117	$ 362,905
Costs and expenses:
Cost of services, excluding depreciation and amortization	96,440	92,536	192,389	188,026
Member relations and marketing	32,718	29,375	65,113	60,101
General and administrative	32,219	30,853	64,047	62,527
Depreciation and amortization	18,917	18,499	38,684	35,773
Operating income	18,088	12,320	38,884	16,478
Interest expense	(4,389)	(5,154)	(9,210)	(10,766)
Other expense, net	(923)	(128)	(862)	(1,247)
Loss on financing activities	0	0	0	(17,398)
Total other expense, net	(5,312)	(5,282)	(10,072)	(29,411)
Income (loss) before provision for income taxes and equity in (loss) income of unconsolidated entities	12,776	7,038	28,812	(12,933)
Provision for income taxes	(4,870)	(3,372)	(10,533)	(3,094)
Equity in (loss) income of unconsolidated entities	(411)	4,000	(445)	1,621
Net income (loss)	$ 7,495	$ 7,666	$ 17,834	$ (14,406)
Earnings per share (dollars per share)
Net income (loss) per share—basic (in dollars per share)	$ 0.19	$ 0.18	$ 0.44	$ (0.35)
Net income (loss) per share—diluted (in dollars per share)	$ 0.18	$ 0.18	$ 0.43	$ (0.35)
Weighted average number of shares outstanding:
Basic (in shares)	40,365	42,440	40,928	41,686
Diluted (in shares)	40,570	42,914	41,222	41,686

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Unaudited Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 7,495	$ 7,666	$ 17,834	$ (14,406)
Other comprehensive income (loss):
Net unrealized loss on available-for-sale securities, net of income tax (benefit) expense of $0 and $0 for the three months ended June 30, 2016 and 2015, respectively; and $0 and $(150) for the six months ended June 30, 2016 and 2015, respectively	0	0	0	(81)
Net unrealized (loss) gain on cash flow hedges, net of income tax (benefit) expense of $(392) and $449 for the three months ended June 30, 2016 and 2015, respectively; and $(1,960) and $449 for the six months ended June 30, 2016 and 2015, respectively	(433)	747	(2,870)	747
Comprehensive income (loss)	$ 7,062	$ 8,413	$ 14,964	$ (13,740)

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Unaudited Consolidated Statements of Comprehensive (Loss) Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement of Comprehensive Income [Abstract]
Net unrealized (losses) gains on marketable securities, tax	$ 0	$ 0	$ 0	$ 150
Net unrealized (loss) gain on cash flow hedges, tax expense (benefit)	$ (392)	$ 449	$ (1,960)	$ 449

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Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Statement of Cash Flows [Abstract]
Net income (loss)	$ 17,834	$ (14,406)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	38,684	35,773
Loss on financing activities	0	17,398
Amortization of debt issuance costs	668	704
Deferred income taxes	(881)	11,356
Excess tax benefits from stock-based awards	(633)	(2,745)
Stock-based compensation expense	14,947	15,036
Gain on investment in common stock warrants	0	(70)
Equity in loss (income) of unconsolidated entities	445	(1,621)
Changes in operating assets and liabilities (net of the effect of acquisitions):
Membership fees receivable	4,948	(34,872)
Prepaid expenses and other current assets	7,268	(1,995)
Deferred incentive compensation and other charges	11,408	870
Other non-current assets	0	(258)
Deferred revenue	(35,056)	46,655
Accounts payable and accrued liabilities	(10,738)	(10,949)
Acquisition-related earn-out payments	(1,432)	(1,948)
Accrued incentive compensation	(24,408)	(12,031)
Other long-term liabilities	27	(5,168)
Net cash provided by operating activities	23,081	41,729
Cash flows from investing activities:
Purchases of property and equipment	(19,877)	(23,285)
Capitalized external-use software development costs	(1,608)	(2,181)
Cash paid for acquisitions, net of cash acquired	(1,900)	(744,193)
Investment in unconsolidated entity	0	(3,006)
Redemptions of marketable securities	0	14,714
Net cash used in investing activities	(23,385)	(757,951)
Cash flows from financing activities:
Proceeds from debt, net	17,000	1,280,292
Pay down of debt	(14,375)	(732,189)
Debt issuance costs	0	(2,568)
Proceeds from issuance of common stock, net of selling costs	0	148,786
Proceeds from issuance of common stock from exercise of stock options	3,100	3,014
Withholding of shares to satisfy minimum employee tax withholding for vested restricted stock units	(3,432)	(6,007)
Proceeds from issuance of common stock under employee stock purchase plan	256	263
Acquisition-related earn-out payments	(3,600)	(1,500)
Excess tax benefits from stock-based awards	633	2,745
Purchases of treasury stock	(53,616)	0
Net cash (used in) provided by financing activities	(54,034)	692,836
Net decrease in cash and cash equivalents	(54,338)	(23,386)
Cash and cash equivalents, beginning of period	71,825	72,936
Cash and cash equivalents, end of period	17,487	49,550
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes	2,841	(1,746)
Cash paid for interest	7,097	9,473
Non-cash increase in estimated cost of construction of a building under a build-to-suit lease	$ 12,354	$ 0

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Business Description and Basis of Presentation

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Business description and basis of presentation

Business description and basis of presentation

The Advisory Board Company (individually and collectively with its subsidiaries, the “Company”) provides best practices research and insight, performance technology software, data- and tech-enabled services, and consulting and management services, through discrete programs to hospitals, health systems, independent medical groups, pharmaceutical and biotechnology companies, health care insurers, medical device companies, and colleges, universities, and other health care-focused organizations and educational institutions. Members of each subscription-based membership program are typically charged a separate fixed annual fee and have access to an integrated set of services that may include best practices research studies, executive education, proprietary content databases and online tools, daily online executive briefings, original executive inquiry services, cloud-based software applications, data- and tech-enabled services, and consulting and management services.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as reported in the Company’s Form 10-K for the year ended December 31, 2015 and the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2016.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company uses the equity method to account for equity investments in instances in which it owns common stock and has the ability to exercise significant influence, but not control, over the investee and for all investments in partnerships or limited liability companies where the investee maintains separate capital accounts for each investor. All significant intercompany transactions and balances have been eliminated.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows as of the dates and for the periods presented have been included. The consolidated balance sheet presented as of December 31, 2015 has been derived from the financial statements that have been audited by the Company’s independent registered public accounting firm. The consolidated results of operations for the three and six months ended June 30, 2016 may not be indicative of the results that may be expected for the Company’s fiscal year ending December 31, 2016, or any other period.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Recent accounting pronouncements

Recent accounting pronouncements

Recently adopted

In April 2015, the Financial Accounting Standards Board ("FASB") issued guidance on the presentation of debt issuance costs. The guidance requires debt issuance costs related to a recognized debt liability to be presented as a direct deduction from the carrying amount of that debt liability and only impacts financial position presentation. In August 2015, the FASB issued guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The guidance codified the Securities and Exchange Commission staff's view on the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements consistent with prior practice as an asset. The Company adopted these standards retrospectively on January 1, 2016. The impact the adoption had on the Company's consolidated financial position as of December 31, 2015 is disclosed below. The adoption had no effect on the Company's results of operations for any period.

	As reported		Adjustments			As adjusted
Prepaid expenses and other current assets	$	22,651	$	(108	)	$	22,543
Deferred incentive compensation and other charges	81,462		(281		)	81,181
Total assets	1,979,866		(389		)	1,979,477
Debt, current	27,851		(108		)	27,743
Debt, net of current portion	522,367		(281		)	522,086
Total liabilities	1,530,775		(389		)	1,530,386
Total liabilities and stockholders’ equity	1,979,866		(389		)	1,979,477

Recently issued

In May 2014, the FASB issued accounting guidance related to revenue recognition. The new standard supersedes most of the existing revenue recognition guidance under GAAP, and requires revenue to be recognized when goods or services are transferred to a customer in an amount that reflects the consideration a company expects to receive. The new standard may require more judgment and estimates relating to the recognition of revenue, which could result in additional disclosures to the financial statements. The original effective date of the new standard was for annual and interim reporting periods beginning after December 15, 2016. In July 2015, the FASB decided to defer by one year the effective date of this new revenue recognition standard. As a result, the new standard will be effective for annual and interim reporting periods beginning after December 15, 2017, with an option that permits companies to adopt the standard as early as the original effective date. Early application prior to the original effective date is not permitted. The Company plans to adopt this standard on January 1, 2018. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

In February 2016, the FASB issued accounting guidance relating to leases. The guidance requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The new guidance also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The guidance is effective for annual reporting and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2016, the FASB issued accounting guidance relating to stock compensation. The guidance simplifies various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to impact net income, earnings per share, and the statement of cash flows. The guidance is effective for annual reporting and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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Acquisitions

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Acquisitions

Acquisitions

Increasing service to members through the introduction and expansion of new programs and services is a key component of the Company's growth strategy. From time to time the Company supplements its organic new program development efforts with acquisitions that allow it to introduce new offerings to its members, or that complement and enhance the value of existing products and services through the addition of new capabilities.

Royall Acquisition Co.

On January 9, 2015, the Company completed the acquisition of all of the issued and outstanding capital stock of Royall Acquisition Co. (together with its subsidiaries, “Royall”) from Royall Holdings, LLC (the “Seller”). Royall is an education market leader in strategic, data-driven student engagement and enrollment management solutions.

Total consideration consisted of the following (in thousands):

Net cash paid (1)	$	744,193
Fair value of equity issued	121,224
Total	$	865,417

(1) Net of cash acquired of $7,065 and a working capital adjustment payment of $1,278.

On January 9, 2015, in connection with the completion of the acquisition of Royall, the Company entered into a credit agreement with various lenders. See Note 8, "Debt," for further details regarding this credit agreement.

The fair value of equity issued was approximately $121.2 million based on 2,428,364 shares of the Company's common stock valued at $49.92 per share, which was the closing price of the common stock on January 9, 2015 as reported on the NASDAQ Global Select Market.

The purchase price allocation resulting from the acquisition of Royall is set forth below (in thousands):

	As of January 9, 2015
Consideration paid for the acquisition	$	865,417
Allocated to:
Membership fees receivable, net	29,239
Prepaid expenses and other current assets	8,237
Property and equipment	44,209
Intangible assets, net	262,000
Deferred revenue, current	(18,300		)
Accounts payable and accrued liabilities	(5,621		)
Deferred income taxes, net of current portion	(102,599		)
Preliminary fair value of net assets acquired	$	217,165
Preliminary allocation to goodwill	$	648,252

Acquisition-related costs of $9.9 million were incurred related to this transaction. Of this amount, $6.6 million was recognized and included in general and administrative costs in the Company’s consolidated statements of operations for the six months ended June 30, 2015.

Royall goodwill impairment

Goodwill is reviewed for impairment at least annually as of October 1, which is the first date of the fourth quarter of the Company's fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company performs its goodwill impairment test at the reporting unit level, which is one level below the operating segment. The Company has one operating segment, which is consistent with the way management runs the business and allocates resources. The operating segment has been divided into two reporting units largely as a result of the Royall acquisition and continued integration efforts. The two reporting units are Royall and the remaining Advisory Board business ("Core ABC"). Goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination.

As of the October 1, 2015 goodwill impairment assessment, the Royall reporting unit failed the step one test and the Company performed the step two test. In connection with the step two test, the Company estimated the fair value of identifiable intangible assets and deferred revenue using methodologies consistent with those used in the original Royall purchase price allocation. Key assumptions were updated to reflect the current outlook for the Royall business as well as market conditions. The step two analysis resulted in a goodwill impairment of $99.1 million, which was recorded in the year ended December 31, 2015.

Pro forma

The following table presents the Company’s pro forma consolidated revenues and net income for the three and six months ended June 30, 2015. The unaudited pro forma results include the historical statements of operations information of the Company and of Royall, giving effect to the acquisition of Royall and related financing as if they had occurred on January 1, 2014. The unaudited pro forma financial information presented below does not reflect the effect of any actual or anticipated synergies expected to result from the acquisition of Royall. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations that would have been recognized had the acquisition of Royall and the related financing been effected on the assumed date.

The unaudited pro forma results are set forth below (in thousands):

	Unaudited Pro Forma Results
	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
Revenue	$	190,199	$	378,197
Net income	$	12,331	$	10,416

For the six months ended June 30, 2015, the pro forma results, prepared in accordance with GAAP, include the following pro forma adjustments related to the acquisition of Royall:

(i) an increase in revenue of $2.8 million and an increase in expense of $1.7 million for Royall's activity from January 1, 2015 to the January 9, 2015 acquisition date;

(ii) an increase in revenue of $12.5 million representing the purchase accounting fair value effect to revenue that was recognized in the six months ended June 30, 2015;

(iii) an increase in amortization expense related to the fair value of the identifiable intangible assets of $0.4 million;

(iv) the elimination, and replacement, of the historical Royall interest expense with the interest expense from the Company's new senior secured term credit facility totaling $9.5 million;

(v) the elimination of $17.4 million of loss on financing activities related to the acquisition-related debt activity; and

(vi) the elimination of $6.6 million of acquisition-related costs.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurements

Financial assets and liabilities

The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision. The Company’s financial instruments consist primarily of cash, cash equivalents, and interest rate swaps. In addition, contingent earn-out liabilities resulting from business combinations are recorded at fair value. The following methods and assumptions are used to estimate the fair value of each class of financial assets or liabilities that is valued on a recurring basis.

Cash and cash equivalents. This includes all cash and liquid investments with an original maturity of three months or less from the date acquired. The carrying amount approximates fair value because of the short maturity of these instruments. Cash equivalents also consist of money market funds with fair values based on quoted market prices. The Company’s cash and cash equivalents are held at major commercial banks.

Contingent earn-out liabilities. This class of financial liabilities represents the Company’s estimated fair value of the contingent earn-out liabilities related to acquisitions based on probability assessments of certain performance achievements during the earn-out periods. The performance targets are specific to the operation of the acquired company subsequent to the acquisition. These inputs are considered key estimates made by the Company that are unobservable because there are no active markets to support them. Contingent earn-out liabilities are included in accounts payable and accrued liabilities and other long-term liabilities on the consolidated balance sheets.

Interest rate swaps. The Company uses interest rate swaps to manage interest rate risk. The fair values of interest rate swaps are determined using the market standard methodology of discounting the future variable cash payments, or receipts, over the life of the agreements. The variable interest rates used in the calculation of projected receipts are based on observable market interest rate curves.

Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The valuation can be determined using widely accepted valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). As a basis for applying a market-based approach in fair value measurements, GAAP establishes a fair value hierarchy that prioritizes into three broad levels the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels:

• 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.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no significant transfers between Level 1, Level 2, or Level 3 during the six months ended June 30, 2016 or 2015.

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the related classifications are as follows (in thousands):

	Fair value as of June 30,		Fair value measurement as of June 30, 2016 using fair value hierarchy
	2016		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	17,487	$	17,487	$	—	$	—
Financial liabilities
Interest rate swaps (2)	4,779		—		4,779		—
Contingent earn-out liabilities (3)	3,280		—		—		3,280
	Fair value as of December 31,		Fair value measurement as of December 31, 2015 using fair value hierarchy
	2015		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	71,825	$	71,825	$	—	$	—
Interest rate swaps (2)	419		—		419		—
Financial liabilities
Contingent earn-out liabilities (3)	7,250		—		—		7,250

(1) Fair value is based on quoted market prices.

(2) Fair value is determined using market standard models with observable inputs.

(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 macroeconomic environment and industry trends.

Contingent earn-out liabilities

The Company entered into an earn-out agreement in connection with its acquisition of Southwind Health Partners, L.L.C. and Southwind Navigator, LLC (together, “Southwind”) in December 2009. The Company’s fair value estimate of the Southwind earn-out liability was $5.6 million as of the date of acquisition. The fair value of the Southwind earn-out liability was affected by changes in the Company's stock price and by changes in estimates regarding expected operating results through the end of the evaluation period, which was December 31, 2014. As of June 30, 2016, $21.4 million had been earned and paid in cash and shares to the former owners of the Southwind business, which includes the final payment of $1.0 million that was paid during the six months ended June 30, 2016. There is no remaining contingent obligation related to this earn-out agreement.

The Company's fair value estimate of the earn-out liability related to the Company’s acquisition of Clinovations, LLC (“Clinovations”) in November 2014 was $4.5 million as of the date of acquisition. The fair value of the Clinovations earn-out liability is affected by changes in estimates regarding expected operating results through the evaluation periods, which will end on December 31, 2017 with payments extending through April 2018. A portion of the earn-out liability will be paid in the form of the Company’s common stock. The maximum payout of the earn-out liability is $9.5 million, while the minimum is $0. Based on the results of Clinovations’ operating results, the fair value of the contingent obligation for Clinovations as of June 30, 2016 was estimated at $2.9 million. The fair value of the Clinovations earn-out liability is affected by changes in estimates regarding expected operating results, discount rates for each evaluation period, which vary from approximately 6.7% to 7.5%, and the volatility of the Company's common stock, which was 27.0% as of June 30, 2016.

The Company's fair value estimate of the earn-out liability related to the Company’s acquisition of ThoughtWright, LLC d/b/a GradesFirst (“GradesFirst”) in December 2014 was $3.6 million as of the date of acquisition. The fair value of the GradesFirst earn-out liability was affected by changes in estimates regarding expected operating results through the evaluation period, which ended on December 31, 2015. The maximum earn-out potential of $4.0 million was earned during the evaluation period and paid during the six months ended June 30, 2016. There is no remaining contingent obligation related to this earn-out agreement.

Changes in the fair value of the contingent earn-out liabilities subsequent to the acquisition date, including changes arising from events that occurred after the acquisition date, such as changes in the Company’s estimate of performance achievements, discount rates, and stock price, are recognized in earnings in the periods during which the estimated fair value changes.

The following table represents a reconciliation of the change in the contingent earn-out liabilities for the three and months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016			2015
Beginning balance	$	1,505	$	11,790		$	7,250		$	12,946
Addition due to acquisition	—		—			357			—
Fair value change in Southwind contingent earn-out liability (1)	—		—			—			209
Fair value change in Clinovations contingent earn-out liability (1)	1,750		(1,427		)	680			(1,292		)
Fair value change in other contingent earn-out liabilities (1)	25		—			25			—
Southwind earn-out payments	—		(1,947		)	(1,032		)	(1,947		)
GradesFirst earn-out payments	—		—			(4,000		)	—
360Fresh, Inc. earn-out payments	—		—			—			(1,500		)
Ending balance	$	3,280	$	8,416		$	3,280		$	8,416

(1) Amounts were recognized in cost of services on the consolidated statements of operations.

Financial instruments not recorded at fair value on a recurring basis

Equity method investments. The Company's equity method investments represent the Company's ownership interest in Evolent Health, Inc. and its subsidiary, Evolent Health LLC. The fair value of the Company's ownership interest in Evolent Health, Inc. and its subsidiary prior to any discount was $222.5 million as of June 30, 2016 based on the quoted closing stock price as reported on the New York Stock Exchange. For further information, see Note 7, "Investments in unconsolidated entities." The fair value of the Company's equity method investments is measured quarterly for disclosure purposes. The Company's equity method investments are recorded at fair value only if an impairment charge is recognized.

Credit facilities. The Company estimates that the fair value of its credit facilities was $553.5 million as of June 30, 2016. The fair value was determined based on discounting the future expected variable cash payments over the life of the loan. The variable interest rates used in the calculation are based on observable market interest rates. The credit facilities would be classified as Level 2 within the fair value hierarchy if it were measured at fair value.

Non-financial assets and liabilities

Certain assets and liabilities are not measured at fair value on an ongoing basis but instead are measured at fair value on a non-recurring basis, so that such assets and liabilities are subject to fair value adjustments in certain circumstances (such as when there is evidence of impairment). During the six months ended June 30, 2016 and 2015, no fair value adjustments or material fair value measurements were required for non-financial assets or liabilities.

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Property and Equipment

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property and equipment

Property and equipment

Property and equipment consists of leasehold improvements, furniture, fixtures, equipment, capitalized internal-use software development costs, and acquired developed technology. Property and equipment is stated at cost, less accumulated depreciation and amortization. In certain membership programs, the Company provides software applications under a hosting arrangement where the software application resides on the Company’s or its service providers’ hardware. The members do not take delivery of the software and only receive access to the software during the term of their membership agreement. Software development costs that are incurred in the preliminary project stage are expensed as incurred. During the development stage, direct consulting costs and payroll and payroll-related costs for employees that are directly associated with each project are capitalized and amortized over the estimated useful life of the software once placed into operation. Capitalized software is amortized using the straight-line method over its estimated useful life, which is generally five years. Replacements and major improvements are capitalized, while maintenance and repairs are charged to expense as incurred.

The acquired developed technology, which includes acquired software, databases, and analytics, is classified as software within property and equipment because the developed software application, database, or analytic resides on the Company’s or its service providers’ hardware. Amortization for acquired developed technology is included in depreciation and amortization on the Company’s consolidated statements of operations. Developed technology obtained through acquisitions is amortized using the straight-line method over the estimated useful life used in determining the fair value of the assets at acquisition. As of June 30, 2016, the weighted average useful life of existing acquired developed technology was approximately eight years. The amount of acquired developed technology amortization included in depreciation and amortization for the three and six months ended June 30, 2016 was approximately $2.3 million and $4.6 million, respectively. The amount of acquired developed technology amortization included in depreciation and amortization for the three and six months ended June 30, 2015 was approximately $2.6 million and $4.6 million, respectively.

Furniture, fixtures, and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. There are no capitalized leases included in property and equipment, net for the periods presented. The amount of depreciation expense recognized on furniture, fixtures, and equipment during the three and six months ended June 30, 2016 was $5.4 million and $10.8 million, respectively. The amount of depreciation expense recognized on furniture, fixtures, and equipment during the three and six months ended June 30, 2015 was $5.0 million and $9.9 million, respectively.

Internally developed capitalized software related to the Company's hosted software is classified as software within property and equipment and has an estimated useful life of five years. The carrying value of internally developed capitalized software was $73.2 million as of both June 30, 2016 and December 31, 2015. Amortization expense for internally developed capitalized software for the three and six months ended June 30, 2016 recorded in depreciation and amortization on the accompanying statements of operations, was approximately $5.5 million and $11.9 million, respectively. Amortization expense for internally developed capitalized software for the three and six months ended June 30, 2015 recorded in depreciation and amortization on the consolidated statements of operations, was approximately $4.8 million and $9.0 million, respectively.

Property and equipment consists of the following (in thousands):

	As of
	June 30, 2016			December 31, 2015
Leasehold improvements	$	67,015		$	63,608
Furniture, fixtures, and equipment	65,762			62,790
Software	213,677			202,384
Construction in progress, subject to a build-to-suit lease	15,054			2,700
Property and equipment, gross	361,508			331,482
Accumulated depreciation and amortization	(173,524		)	(148,425		)
Property and equipment, net	$	187,984		$	183,057

The Company evaluates its long-lived assets for impairment when changes in circumstances exist that suggest the carrying value of a long-lived asset may not be fully recoverable. If an indication of impairment exists, and the Company’s net book value of the related assets is not fully recoverable based upon an analysis of its estimated undiscounted future cash flows, the assets are written down to their estimated fair value. During the six months ended June 30, 2016, the Company recognized a $1.0 million impairment loss recorded in depreciation and amortization on the consolidated statements of operations related to certain internally developed software that is no longer in use. The Company did not recognize any impairment losses on any of its long-lived assets during the six months ended June 30, 2015.

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Goodwill and Intangibles

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangibles

Goodwill and intangibles

Included in the Company’s goodwill and intangibles balances are goodwill and acquired intangibles, as well as internally developed capitalized software for sale. Goodwill is not amortized because it has an estimated indefinite life. Goodwill is reviewed for impairment at least annually as of October 1, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company believes that no such impairment indicators existed during the six months ended June 30, 2016 or 2015. There was no impairment of goodwill recorded in the six months ended June 30, 2016 or 2015.

The following illustrates the change in the goodwill balance for the six months ended June 30, 2016 (in thousands):

	As of
	June 30, 2016
Beginning balance	$	738,200
Acquisitions	2,258
Ending balance	$	740,458

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives, which range from 2 years to 17 years. As of June 30, 2016, the weighted average remaining useful life of acquired intangibles was approximately 13.6 years. As of June 30, 2016, the weighted average remaining useful life of internally developed intangibles was approximately 3.6 years. The gross and net carrying balances and accumulated amortization of intangibles are as follows (in thousands):

		As of June 30, 2016							As of December 31, 2015
	Weighted average useful life	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Intangibles
Internally developed software for sale	5.0	$	18,510	$	(8,350	)	$	10,160	$	16,902	$	(6,796	)	$	10,106
Acquired intangibles:
Developed software	5.2	9,450		(8,325		)	1,125		9,450		(8,075		)	1,375
Customer relationships	16.2	277,710		(34,379		)	243,331		277,710		(25,769		)	251,941
Trademarks	8.6	14,900		(5,225		)	9,675		14,900		(4,490		)	10,410
Non-compete agreements	3.8	1,400		(1,394		)	6		1,400		(1,379		)	21
Customer contracts	4.7	6,449		(5,798		)	651		6,449		(5,581		)	868
Total intangibles		$	328,419	$	(63,471	)	$	264,948	$	326,811	$	(52,090	)	$	274,721

Amortization expense for intangible assets for the three and six months ended June 30, 2016, recorded in depreciation and amortization on the consolidated statements of operations, was approximately $5.7 million and $11.4 million, respectively. Amortization expense for intangible assets for the three and six months ended June 30, 2015 was approximately $6.1 million and $12.3 million, respectively. The following approximates the aggregate amortization expense to be recorded in depreciation and amortization on the consolidated statements of operations for the remaining six months of the fiscal year ending December 31, 2016, for each of the following fiscal years ending December 31, 2017 through 2020, and thereafter: $11.4 million, $22.2 million, $21.3 million, $19.6 million, and $18.4 million, respectively, and $172.0 million thereafter.

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Investment in unconsolidated entities

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Investment in unconsolidated entities

Investments in unconsolidated entities

As of June 30, 2016, the Company held an 8.7% direct equity interest in Evolent Health LLC (“Evolent LLC”) and a 15.0% equity ownership interest in Evolent Health, Inc. (“Evolent Inc.”), which had no material operations outside of its 70.8% ownership interest in Evolent LLC. These investments are accounted for under the equity method, with the Company’s proportionate share of the investees’ losses recognized in the consolidated statements of operations. The Company has the right to designate two individuals to Evolent Inc.'s board of directors, which seats were occupied by the Company’s Company's Chief Financial Officer and an unaffiliated designee of the Company as of June 30, 2016.

During the three months ended June 30, 2016, the Company's proportionate share of the losses of Evolent Inc. was $1.2 million. The Company recorded $0.3 million of these losses against the remaining carrying amount of its investment. The remaining losses were not recorded as they exceeded the Company's investment balance. The Company will track these unrecorded losses until such time as the Company's investment in Evolent Inc. produces earnings or a gain sufficient to offset the unrecorded losses. During the six months ended June 30, 2016, the Company's proportionate shares of the losses of Evolent Inc. was $2.0 million, of which $1.1 million was recognized in the consolidated statements of operations offset by a $1.1 million dilution gain. The carrying balance of the Company’s investment in Evolent Inc. was $0.0 million as of June 30, 2016. The Company had a total of $0.9 million in unrecorded losses related to its investment in Evolent Inc. as of June 30, 2016.

During the three months ended June 30, 2016, the Company's proportionate share of the losses of Evolent LLC was $1.0 million. The Company recorded $0.2 million of these losses against the remaining carrying amount of its investment. The remaining losses were not recorded as they exceeded the Company's investment balance. During the six months ended June 30, 2016, the Company's proportionate share of the losses of Evolent LLC was $2.5 million, of which $1.6 million was recognized in the consolidated statements of operations, offset by a $0.9 million dilution gain. The carrying balance of the Company’s investment in Evolent LLC was $0.0 million as of June 30, 2016. The Company had a total of $0.8 million in unrecorded losses related to its investment in Evolent LLC as of June 30, 2016.

Because of Evolent LLC's treatment as a partnership for federal income tax purposes, the losses of Evolent LLC pass through to the Company and the other members. The Company's proportionate share of the losses of Evolent LLC is recorded net of the estimated tax benefit the Company believes will be realized from the equity in loss of unconsolidated entities on the consolidated statements of operations. Historically, the Company had provided a full valuation allowance against the deferred tax asset resulting from these benefits. During the three months ended June 30, 2015, the Company determined that it was more-likely-than not able to realize the deferred tax assets associated with its investment in Evolent LLC as a result of the reorganization related to Evolent Inc.'s initial public offering; accordingly, a tax benefit of $6.7 million was recorded to release the valuation allowance previously recorded. An additional tax benefit of $1.5 million was recorded in the three months ended June 30, 2015 for tax benefits associated with current year losses received from Evolent LLC. In the three and six months ended June 30, 2016, additional tax benefits of $0.1 million and $0.3 million, respectively, were recorded for the tax effects of current year losses received from Evolent LLC. Prior to Evolent Inc.’s initial public offering of common stock in June 2015, the Company had provided a full valuation allowance against the deferred tax asset resulting from these benefits.

The equity in (loss) income of unconsolidated entities on the consolidated statement of operations for the combined Evolent entities consisted of the following (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Dilution gain	$	—		$	—		$	2,026		$	—
Allocated share of losses	(511		)	(4,265		)	(2,732		)	(6,644		)
Tax benefit	100			8,265			261			8,265
Equity in (loss) income of unconsolidated entities	$	(411	)	$	4,000		$	(445	)	$	1,621

In connection with Evolent Inc.'s initial public offering and the related reorganization, the Company and certain investors in Evolent LLC entered into a tax receivables agreement with Evolent Inc. Under the terms of that agreement, Evolent Inc. will make cash payments to the Company and certain investors in amounts equal to 85% of Evolent Inc.'s actual tax benefit realized from various tax attributes related to activity before the initial public offering. Interest will be included on the tax savings at the applicable London interbank offered rate plus 100 basis points. The tax receivables agreement will generally apply to Evolent Inc.'s taxable years up to and including the 15th anniversary date of the transaction. As of June 30, 2016, the Company had not received any payments pursuant to the tax receivables agreement. As the amount the Company will receive pursuant to the tax receivables agreement is unknown, the Company will recognize payments, if any, associated with this agreement when such payments are received.

As of June 30, 2016, the Company’s basis in the Evolent entities was less than its proportional interest in the equity of Evolent Inc. and Evolent LLC in the amounts of $80.4 million and $68.2 million, respectively. The Company has excluded the effects of the purchase and push down accounting in its determination of the equity in such loss, thereby reducing its share of losses from Evolent Inc. and Evolent LLC for the affected periods. As a result, the basis differences will decrease over time.

Evolent LLC is in the early stages of its business plan and, as a result, the Company expects both Evolent Inc. and Evolent LLC to continue to incur losses. The Company’s investments are evaluated for impairment whenever events or changes in circumstances indicate that there may be an other-than-temporary decline in value. As of June 30, 2016, the Company believes that no impairment charge is necessary. For additional information on the fair value of the Company’s investment in the Evolent entities, see Note 4, “Fair value measurements.”

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Debt

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Debt

Debt

On February 6, 2015, the Company obtained $675 million of senior secured credit facilities, referred to as the “credit facilities,” under a credit agreement with a syndicate of lenders. The credit facilities were amended on October 30, 2015. The amended credit facilities consist of (a) a five-year senior secured term loan facility in the principal amount of $475 million, or “term facility,” and (b) a five-year senior secured revolving credit facility, or “revolving credit facility,” under which up to $200 million principal amount of borrowings and other credit extensions may be outstanding at any time. Amounts drawn under the term loan and revolving credit facilities bear interest, payable quarterly, at an annual rate calculated, at the Company’s option, on the basis of either (a) an alternate base rate plus an initial margin of 1.75% or (b) the applicable London interbank offered rate plus an initial margin of 2.25%, subject in each case to margin reductions based on the Company’s total leverage ratio from time to time. As of June 30, 2016, based on the Company's historical leverage ratio, the interest rate margin was 2.00% and the stated annual interest rate on outstanding borrowings was 2.47%.

On June 10, 2016, the Company drew down $17.0 million of borrowings under its revolving credit facility. The draw down borrowings have a maturity of three months and accrue interest at an annual rate of 2.66%. As of June 30, 2016, there was $117.0 million outstanding under the revolving credit facility and $63.9 million available for future borrowings. As of June 30, 2016, $19.1 million of standby letters of credit had been issued under the revolving credit facility.

Long-term debt is summarized as follows (in thousands): 

	As of June 30, 2016
2.47% term facility due fiscal 2020 ($439,062 face value less unamortized discount of $3,101)	$	435,961
Revolving credit facility	117,000
Less: Amounts due in next twelve months ($52,946 face value less unamortized discount of $1,000)	(51,946		)
Total long-term debt	$	501,015

The credit agreement contains customary representations and warranties, events of default and financial and other covenants, including covenants that require the Company to maintain a maximum total leverage ratio and a minimum interest coverage ratio. The Company's compliance with the two financial covenants is measured as of the end of each fiscal quarter. The Company was in compliance with these financial covenants as of June 30, 2016.

Interest expense for the three months ended June 30, 2016 and 2015 was $4.4 million and $5.2 million, inclusive of $0.3 million and $0.3 million of amortization of debt issuance costs, and $0.6 million and $0.7 million of payments related to the interest rate swaps described below, respectively. Interest expense for the six months ended June 30, 2016 and 2015 was $9.2 million and $10.8 million, inclusive of $0.7 million and $0.7 million of amortization of debt issuance costs, and $1.2 million and $0.7 million of payments related to the interest rate swaps described below, respectively.

Swap agreements

Through its term facility, the Company is exposed to interest rate risk. In April 2015, to minimize the impact of changes in interest rates on its interest payments, the Company entered into three interest rate swap agreements with financial institutions to swap a portion of its variable-rate interest payments for fixed-rate interest payments. The interest rate swap derivative financial instruments are recorded on the consolidated balance sheets at fair value, which is based on observable market-based expectations of future interest rates.

At hedge inception, the Company entered into interest rate swap arrangements with notional amounts totaling $287.5 million. The swap was structured to have a declining notional amount which matches the amortization schedule of the term facility. As of June 30, 2016, the principal amount hedged was $269.5 million. The interest rate swap agreements mature in February 2020 and have periodic interest settlements, both consistent with the terms of the Company's term facility. Under this agreement, the Company is entitled to receive a floating rate based on the 1-month London interbank offered rate and obligated to pay an average fixed rate of 1.282% on the outstanding notional amount. The Company has designated the interest rate swap as a cash flow hedge of the variability of interest payments under its term facility due to changes in the LIBOR benchmark interest rate. The difference between cash paid and received is recorded within interest expense on the consolidated statements of operations.

As of June 30, 2016 and December 31, 2015, the fair value of the interest rate swaps was a liability of $4.8 million and an asset of $0.4 million, respectively, and was recorded within other long-term liabilities on the Company's consolidated balance sheets. For the three months ended June 30, 2016 and 2015, the change in fair value of the swaps, net of tax, was a decrease of $0.4 million and an increase of $0.7 million, respectively, and was reported as a component of accumulated other comprehensive (loss) income. For the six months ended June 30, 2016 and 2015, the change in fair value of the swaps, net of tax, was a decrease of $2.9 million and an increase $0.7 million, respectively. There was no material hedge ineffectiveness as of June 30, 2016 and 2015. Changes in fair value are reclassified from accumulated other comprehensive (loss) income into earnings in the same period in which the hedged item affects earnings.

If, at any time, the swap is determined to be ineffective, in whole or in part, due to changes in the interest rate swap or underlying debt agreements, the fair value of the portion of the swap determined to be ineffective will be recognized as a gain or loss on the consolidated statements of operations for the applicable period.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' equity

Stockholders’ equity

In November 2015, the Company’s board of directors authorized an increase in its cumulative share repurchase program to $550 million of the Company's common stock. The Company repurchased 803,217 and 1,740,247 shares of its common stock at a total cost of approximately $26.2 million and $53.6 million in the three and six months ended June 30, 2016, respectively, pursuant to its share repurchase program. The Company did not repurchase any shares in the three and six months ended June 30, 2015. The total amount of common stock purchased from inception under the program through June 30, 2016 was 19,567,789 shares at a total cost of $505.5 million. All such repurchases have been made in the open market, and all repurchased shares have been retired as of June 30, 2016. No minimum number of shares subject to repurchase has been fixed, and the share repurchase authorization has no expiration date. As of June 30, 2016, the remaining authorized repurchase amount was $44.5 million.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock-based compensation

Royall inducement plan

On January 9, 2015, in conjunction with the Royall acquisition, the Company created The Advisory Board Company Inducement Stock Incentive Plan for Royall Employees, the "inducement plan," to enable the Company to award options and restricted stock units to persons employed by Royall as an inducement to employees entering into and continuing employment with the Company or its current or future subsidiaries upon consummation of the Royall acquisition. Under the terms of this plan, the aggregate number of shares issuable pursuant to all awards may not exceed 1,906,666. The awards consisted of performance-based stock options to purchase an aggregate of 1,751,000 shares of common stock and performance-based restricted stock units ("RSUs") for an aggregate of 145,867 shares of common stock. Both the performance-based stock options and performance-based RSUs are also subject to service conditions.

Stock options granted under the inducement plan have an exercise price equal to $49.92, which was the closing price of the Company’s common stock on January 9, 2015 as reported on the NASDAQ Global Select Market. The stock options have a seven-year term and are eligible to vest, if performance-based vesting criteria are satisfied, in installments commencing in January 2017 and ending in January 2020. The RSUs were valued at $49.92 and are also eligible to vest in installments commencing in January 2017 and ending in January 2020, subject to satisfaction of performance-based vesting criteria. The vesting criteria in both cases are based on performance of the Royall programs and services. The aggregate grant date fair value of the performance-based stock options, assuming all performance targets are met, is estimated to be approximately $26.8 million. The aggregate grant date fair value of the performance-based RSUs, assuming all performance targets are met, is estimated at approximately $7.3 million. As of June 30, 2016, the Company expects that Royall will achieve 70% to 99% of the performance targets, which would result in vesting of 50% of the performance-based stock options and 50% of the RSUs eligible to vest, subject to forfeitures. The option and RSU awards are reflected in the tables below.

The actual stock-based compensation expense the Company will recognize is dependent upon Royall satisfying the applicable performance conditions and continued employment of award recipients at the time performance conditions are met. The actual amount the Company will recognize may increase or decrease based on Royall's actual results and the employment status of the award recipients at the time performance conditions are met.

Stock incentive plans

On June 9, 2015, the Company's stockholders approved an amendment to the Company's 2009 Stock Incentive Plan (the “2009 Plan”) that increased the number of shares of common stock authorized for issuance under the plan by 3,800,000 shares. The aggregate number of shares of the Company’s common stock available for issuance under the 2009 Plan, as amended, may not exceed10,535,000.

Performance-based stock option grant. On March 2, 2016, the compensation committee of the board of directors approved a grant of 319,900 nonqualified performance-based stock options under the 2009 Plan to certain executive officers of the Company. These awards are subject to market conditions and portions will vest, with all awards vesting if the highest levels of the performance are achieved, based on the achievement of sustained stock price during the performance period, which could extend to March 2, 2023. The Company has concluded that it is probable that all awards will vest at the highest level of achievement. The estimated requisite service period, which includes the current estimate of the time to achieve the market conditions is 1.2 years. The option awards are reflected in the table below.

The following table summarizes the changes in common stock options outstanding under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2014	994,605		$	50.96	1,746,692		$	37.19
Granted	1,774,820		49.90		328,096		53.42
Exercised	—		—		(128,669	)	23.43
Forfeited	(751,800	)	49.92		(13,569	)	60.27
Outstanding, as of June 30, 2015	2,017,625		$	50.30	1,932,550		$	40.70
	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2015	2,013,325		$	50.42	1,843,110		$	41.73
Granted	319,900		28.20		1,005,756		28.31
Exercised	—		—		(237,158	)	15.29
Forfeited	(215,370	)	49.92		(22,195	)	53.38
Expired	—		—		(17,347	)	51.77
Outstanding, as of June 30, 2016	2,117,855		$	47.11	2,572,166		$	38.75
Exercisable, as of June 30, 2016	20,000		$	29.58	1,073,586		$	41.80

The weighted average fair value of the service-based options, valued using a Black-Scholes model, granted during the six months ended June 30, 2016 was estimated at $9.86 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.2%; an expected term of approximately 5.1 years; expected volatility of 37.46%; and dividend yield of 0.0% over the expected life of the option.

The weighted average fair value of performance-based options granted with market conditions, valued using a Monte Carlo model, during the six months ended June 30, 2016 was estimated at $10.21 per share on the date of grant using the following weighted average assumptions: risk-free interest rate of 1.6%; an expected term of 6.4 years; volatility of 36.5%; and dividend yield of 0.0% over the expected life of the option.

No options with performance and/or market conditions vested during the six months ended June 30, 2016 and 10,000 options with performance conditions vested during the six months ended June 30, 2015.

The following table summarizes the changes in RSUs granted under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2014	189,497		$	31.82	857,085		$	48.94
Granted	169,204		49.74		347,958		53.10
Forfeited	(69,389	)	47.90		(19,278	)	56.15
Vested	(2,200	)	29.58		(357,487	)	43.46
Non-vested, June 30, 2015	287,112		$	38.51	828,278		$	52.89
	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2015	301,032		$	39.10	839,613		$	52.82
Granted	23,580		32.28		467,177		30.36
Forfeited	(33,429	)	50.77		(41,089	)	47.73
Vested	—		—		(312,131	)	51.43
Non-vested, June 30, 2016	291,183		$	37.21	953,570		$	42.49

The Company recognized stock-based compensation expense in the following consolidated statements of operations line items for stock options and RSUs for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Stock-based compensation expense included in:
Costs and expenses:
Cost of services	$	2,493	$	2,566	$	4,680	$	4,458
Member relations and marketing	1,387		1,455		2,501		2,601
General and administrative	4,085		4,610		7,766		7,977
Total costs and expenses	$	7,965	$	8,631	$	14,947	$	15,036

There are no stock-based compensation costs capitalized as part of the cost of an asset.

As of June 30, 2016, $66.0 million of total unrecognized compensation cost related to outstanding options and non-vested RSUs was expected to be recognized over a weighted average period of 2.7 years.

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The Company's effective tax rates were 38.1% and 47.9% for the three months ended June 30, 2016 and 2015, respectively. The Company's effective tax rates were 36.6% and (23.9)% for the six months ended June 30, 2016 and 2015, respectively. Included in the tax expense for the six months ended June 30, 2016 was a discrete benefit of $0.6 million which primarily related to state law changes and the settlement of uncertain tax positions during the period. For the six month period ended June 30, 2015, the Company recognized a discrete tax benefit of $10.8 million related to the write-off of accumulated Washington, D.C. tax credits. The write-off was a result of changes in the District of Columbia tax laws effective January 1, 2015 and resulted in income tax expense in the six month period ended June 30, 2015.

The Company uses a more-likely-than-not recognition threshold based on the technical merits of the tax position taken for the financial statement recognition and measurement of a tax position. If a tax position does not meet the more-likely-than-not initial recognition threshold, no benefit is recorded in the financial statements. The Company does not expect that the total amounts of unrecognized tax benefits will significantly change within the next 12 months. The Company classifies interest and penalties on any unrecognized tax benefits as a component of the provision for income taxes. The Company recognized an immaterial amount of interest in the consolidated statements of operations during the three and six months ended June 30, 2016 and $0.2 million in interest and penalties in the consolidated statements of operations in both the three and six months ended June 30, 2015.The Company files income tax returns in U.S. federal and state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal, state, and local tax examinations for filings in major tax jurisdictions before 2010.

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Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings per share

Earnings per share

Basic earnings per share is computed by dividing net income by the number of weighted average common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the number of weighted average common shares and potentially dilutive common shares outstanding during the period. The number of potential common shares outstanding is determined in accordance with the treasury stock method, using the Company’s prevailing tax rates. Certain potential common share equivalents were not included in the computation because their effect was anti-dilutive.

A reconciliation of basic to diluted weighted average common shares outstanding is as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2015	2016	2015
Basic weighted average common shares outstanding	40,365	42,440	40,928	41,686
Effect of dilutive outstanding stock-based awards	205	474	294	—
Diluted weighted average common shares outstanding	40,570	42,914	41,222	41,686

In the three months ended June 30, 2016 and 2015, 2.8 million and 0.7 million shares, respectively, related to share-based compensation awards have been excluded from the calculation of the effect of dilutive outstanding stock-based awards shown above because their effect was anti-dilutive. In the six months ended June 30, 2016 and 2015, 2.6 million and 2.8 million shares, respectively, related to share-based compensation awards have been excluded from the calculation of the effect of dilutive outstanding stock-based awards shown above because their effect was anti-dilutive.

As of June 30, 2016, the Company had 2.1 million nonqualified stock options and 0.3 million RSUs that contained either performance or market conditions, or both, and therefore are treated as contingently issuable awards. As of June 30, 2015, the Company had 2.0 million nonqualified stock options and 0.3 million RSUs that contained either performance or market conditions and were treated as contingently issuable awards. These awards are excluded from diluted earnings per share until the reporting period in which the necessary conditions are achieved. To the extent all necessary conditions have not yet been satisfied, the number of contingently issuable shares included in diluted earnings per share will be based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period. A total of 19,971 contingently issuable shares were included within the diluted earnings per share calculations three and six months ending June 30, 2016 as the related performance goals were met as of June 30, 2016. There were no contingently issuable awards included within the diluted earnings per share calculations for the three and six months ending June 30, 2015.

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Subsequent Events

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On July 12, 2016, Evolent Inc. entered into an agreement and plan of merger for the acquisition of Valence Health, Inc. When closed, this transaction is expected to reduce the Company’s ownership in Evolent Inc. and Evolent LLC. The Company is currently evaluating the effect that this dilution has on its investment and will finalize its accounting for this transaction once the transaction closes and the final valuation report is available.

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Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recently issued

In May 2014, the FASB issued accounting guidance related to revenue recognition. The new standard supersedes most of the existing revenue recognition guidance under GAAP, and requires revenue to be recognized when goods or services are transferred to a customer in an amount that reflects the consideration a company expects to receive. The new standard may require more judgment and estimates relating to the recognition of revenue, which could result in additional disclosures to the financial statements. The original effective date of the new standard was for annual and interim reporting periods beginning after December 15, 2016. In July 2015, the FASB decided to defer by one year the effective date of this new revenue recognition standard. As a result, the new standard will be effective for annual and interim reporting periods beginning after December 15, 2017, with an option that permits companies to adopt the standard as early as the original effective date. Early application prior to the original effective date is not permitted. The Company plans to adopt this standard on January 1, 2018. The Company is evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

In February 2016, the FASB issued accounting guidance relating to leases. The guidance requires that lessees recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The new guidance also requires disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The guidance is effective for annual reporting and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2016, the FASB issued accounting guidance relating to stock compensation. The guidance simplifies various aspects of the accounting for share-based payments. While aimed at reducing the cost and complexity of the accounting for share-based payments, the amendments are expected to impact net income, earnings per share, and the statement of cash flows. The guidance is effective for annual reporting and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Recent accounting pronouncements

Recently adopted

In April 2015, the Financial Accounting Standards Board ("FASB") issued guidance on the presentation of debt issuance costs. The guidance requires debt issuance costs related to a recognized debt liability to be presented as a direct deduction from the carrying amount of that debt liability and only impacts financial position presentation. In August 2015, the FASB issued guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The guidance codified the Securities and Exchange Commission staff's view on the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements consistent with prior practice as an asset. The Company adopted these standards retrospectively on January 1, 2016.

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Recent Accounting Pronouncements (Tables)

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The impact the adoption had on the Company's consolidated financial position as of December 31, 2015 is disclosed below. The adoption had no effect on the Company's results of operations for any period.

	As reported		Adjustments			As adjusted
Prepaid expenses and other current assets	$	22,651	$	(108	)	$	22,543
Deferred incentive compensation and other charges	81,462		(281		)	81,181
Total assets	1,979,866		(389		)	1,979,477
Debt, current	27,851		(108		)	27,743
Debt, net of current portion	522,367		(281		)	522,086
Total liabilities	1,530,775		(389		)	1,530,386
Total liabilities and stockholders’ equity	1,979,866		(389		)	1,979,477

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition

Total consideration consisted of the following (in thousands):

Net cash paid (1)	$	744,193
Fair value of equity issued	121,224
Total	$	865,417

(1) Net of cash acquired of $7,065 and a working capital adjustment payment of $1,278.

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The purchase price allocation resulting from the acquisition of Royall is set forth below (in thousands):

	As of January 9, 2015
Consideration paid for the acquisition	$	865,417
Allocated to:
Membership fees receivable, net	29,239
Prepaid expenses and other current assets	8,237
Property and equipment	44,209
Intangible assets, net	262,000
Deferred revenue, current	(18,300		)
Accounts payable and accrued liabilities	(5,621		)
Deferred income taxes, net of current portion	(102,599		)
Preliminary fair value of net assets acquired	$	217,165
Preliminary allocation to goodwill	$	648,252

Business Acquisition, Pro Forma Information

The unaudited pro forma results are set forth below (in thousands):

	Unaudited Pro Forma Results
	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
Revenue	$	190,199	$	378,197
Net income	$	12,331	$	10,416

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements of Financial Assets and Liabilities on Recurring Basis

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the related classifications are as follows (in thousands):

	Fair value as of June 30,		Fair value measurement as of June 30, 2016 using fair value hierarchy
	2016		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	17,487	$	17,487	$	—	$	—
Financial liabilities
Interest rate swaps (2)	4,779		—		4,779		—
Contingent earn-out liabilities (3)	3,280		—		—		3,280
	Fair value as of December 31,		Fair value measurement as of December 31, 2015 using fair value hierarchy
	2015		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents (1)	$	71,825	$	71,825	$	—	$	—
Interest rate swaps (2)	419		—		419		—
Financial liabilities
Contingent earn-out liabilities (3)	7,250		—		—		7,250

(1) Fair value is based on quoted market prices.

(2) Fair value is determined using market standard models with observable inputs.

(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 macroeconomic environment and industry trends.

Reconciliation of Change in Contingent Earn-out Liabilities

The following table represents a reconciliation of the change in the contingent earn-out liabilities for the three and months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,					Six Months Ended   June 30,
	2016		2015			2016			2015
Beginning balance	$	1,505	$	11,790		$	7,250		$	12,946
Addition due to acquisition	—		—			357			—
Fair value change in Southwind contingent earn-out liability (1)	—		—			—			209
Fair value change in Clinovations contingent earn-out liability (1)	1,750		(1,427		)	680			(1,292		)
Fair value change in other contingent earn-out liabilities (1)	25		—			25			—
Southwind earn-out payments	—		(1,947		)	(1,032		)	(1,947		)
GradesFirst earn-out payments	—		—			(4,000		)	—
360Fresh, Inc. earn-out payments	—		—			—			(1,500		)
Ending balance	$	3,280	$	8,416		$	3,280		$	8,416

(1) Amounts were recognized in cost of services on the consolidated statements of operations.

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consists of the following (in thousands):

	As of
	June 30, 2016			December 31, 2015
Leasehold improvements	$	67,015		$	63,608
Furniture, fixtures, and equipment	65,762			62,790
Software	213,677			202,384
Construction in progress, subject to a build-to-suit lease	15,054			2,700
Property and equipment, gross	361,508			331,482
Accumulated depreciation and amortization	(173,524		)	(148,425		)
Property and equipment, net	$	187,984		$	183,057

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Goodwill and Intangibles (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following illustrates the change in the goodwill balance for the six months ended June 30, 2016 (in thousands):

	As of
	June 30, 2016
Beginning balance	$	738,200
Acquisitions	2,258
Ending balance	$	740,458

Gross and Net Carrying Balances and Accumulated Amortization of Intangibles

The gross and net carrying balances and accumulated amortization of intangibles are as follows (in thousands):

		As of June 30, 2016							As of December 31, 2015
	Weighted average useful life	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Intangibles
Internally developed software for sale	5.0	$	18,510	$	(8,350	)	$	10,160	$	16,902	$	(6,796	)	$	10,106
Acquired intangibles:
Developed software	5.2	9,450		(8,325		)	1,125		9,450		(8,075		)	1,375
Customer relationships	16.2	277,710		(34,379		)	243,331		277,710		(25,769		)	251,941
Trademarks	8.6	14,900		(5,225		)	9,675		14,900		(4,490		)	10,410
Non-compete agreements	3.8	1,400		(1,394		)	6		1,400		(1,379		)	21
Customer contracts	4.7	6,449		(5,798		)	651		6,449		(5,581		)	868
Total intangibles		$	328,419	$	(63,471	)	$	264,948	$	326,811	$	(52,090	)	$	274,721

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Investment in unconsolidated entities (Tables)

6 Months Ended

Jun. 30, 2016

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

The equity in (loss) income of unconsolidated entities on the consolidated statement of operations for the combined Evolent entities consisted of the following (in thousands):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2016			2015			2016			2015
Dilution gain	$	—		$	—		$	2,026		$	—
Allocated share of losses	(511		)	(4,265		)	(2,732		)	(6,644		)
Tax benefit	100			8,265			261			8,265
Equity in (loss) income of unconsolidated entities	$	(411	)	$	4,000		$	(445	)	$	1,621

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Debt (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Long-term debt is summarized as follows (in thousands): 

	As of June 30, 2016
2.47% term facility due fiscal 2020 ($439,062 face value less unamortized discount of $3,101)	$	435,961
Revolving credit facility	117,000
Less: Amounts due in next twelve months ($52,946 face value less unamortized discount of $1,000)	(51,946		)
Total long-term debt	$	501,015

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Changes in Common Stock Options

The following table summarizes the changes in common stock options outstanding under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2014	994,605		$	50.96	1,746,692		$	37.19
Granted	1,774,820		49.90		328,096		53.42
Exercised	—		—		(128,669	)	23.43
Forfeited	(751,800	)	49.92		(13,569	)	60.27
Outstanding, as of June 30, 2015	2,017,625		$	50.30	1,932,550		$	40.70
	Number of performance-based options		Weighted average exercise price		Number of service-based options		Weighted average exercise price
Outstanding, as of December 31, 2015	2,013,325		$	50.42	1,843,110		$	41.73
Granted	319,900		28.20		1,005,756		28.31
Exercised	—		—		(237,158	)	15.29
Forfeited	(215,370	)	49.92		(22,195	)	53.38
Expired	—		—		(17,347	)	51.77
Outstanding, as of June 30, 2016	2,117,855		$	47.11	2,572,166		$	38.75
Exercisable, as of June 30, 2016	20,000		$	29.58	1,073,586		$	41.80

Summary of Changes in RSUs

The following table summarizes the changes in RSUs granted under the Company’s stock incentive plans during the six months ended June 30, 2016 and 2015:

	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2014	189,497		$	31.82	857,085		$	48.94
Granted	169,204		49.74		347,958		53.10
Forfeited	(69,389	)	47.90		(19,278	)	56.15
Vested	(2,200	)	29.58		(357,487	)	43.46
Non-vested, June 30, 2015	287,112		$	38.51	828,278		$	52.89
	Number of performance-based RSUs		Weighted average grant date fair value		Number of service-based RSUs		Weighted average grant date fair value
Non-vested, December 31, 2015	301,032		$	39.10	839,613		$	52.82
Granted	23,580		32.28		467,177		30.36
Forfeited	(33,429	)	50.77		(41,089	)	47.73
Vested	—		—		(312,131	)	51.43
Non-vested, June 30, 2016	291,183		$	37.21	953,570		$	42.49

Summary of Stock-based Compensation Expense

The Company recognized stock-based compensation expense in the following consolidated statements of operations line items for stock options and RSUs for the three and six months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2016		2015		2016		2015
Stock-based compensation expense included in:
Costs and expenses:
Cost of services	$	2,493	$	2,566	$	4,680	$	4,458
Member relations and marketing	1,387		1,455		2,501		2,601
General and administrative	4,085		4,610		7,766		7,977
Total costs and expenses	$	7,965	$	8,631	$	14,947	$	15,036

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Reconciliation of Basic to Diluted Weighted Average Common Shares Outstanding

A reconciliation of basic to diluted weighted average common shares outstanding is as follows (in thousands):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2016	2015	2016	2015
Basic weighted average common shares outstanding	40,365	42,440	40,928	41,686
Effect of dilutive outstanding stock-based awards	205	474	294	—
Diluted weighted average common shares outstanding	40,570	42,914	41,222	41,686

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Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid expenses and other current assets	$ 20,986	$ 22,543
Deferred incentive compensation and other charges	69,641	81,181
Total assets	1,903,800	1,979,477
Debt, current	51,946	27,743
Debt, net of current portion	501,015	522,086
Total liabilities	1,477,858	1,530,386
Total liabilities and stockholders’ equity	$ 1,903,800	1,979,477
Accounting Standards Update 2015-15
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid expenses and other current assets		22,543
Deferred incentive compensation and other charges		81,181
Total assets		1,979,477
Debt, current		27,743
Debt, net of current portion		522,086
Total liabilities		1,530,386
Total liabilities and stockholders’ equity		1,979,477
Accounting Standards Update 2015-15 | As reported
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid expenses and other current assets		22,651
Deferred incentive compensation and other charges		81,462
Total assets		1,979,866
Debt, current		27,851
Debt, net of current portion		522,367
Total liabilities		1,530,775
Total liabilities and stockholders’ equity		1,979,866
Accounting Standards Update 2015-15 | Adjustments
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Prepaid expenses and other current assets		(108)
Deferred incentive compensation and other charges		(281)
Total assets		(389)
Debt, current		(108)
Debt, net of current portion		(281)
Total liabilities		(389)
Total liabilities and stockholders’ equity		$ (389)

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Acquisitions - Additional Information (Detail)			3 Months Ended		6 Months Ended		12 Months Ended
	Jan. 09, 2015 USD ($) $ / shares shares	Jan. 09, 2015 USD ($) $ / shares	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) reporting_unit Segment	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Business Acquisition [Line Items]
Share price (dollars per share) | $ / shares	$ 49.92	$ 49.92
Number of operating segments | Segment					1
Number of reporting units | reporting_unit					2
Impairment of goodwill					$ 0	$ 0
Revenue			$ 198,382,000	$ 183,583,000	399,117,000	362,905,000
Depreciation and amortization			18,917,000	18,499,000	38,684,000	35,773,000
Interest expense			4,389,000	5,154,000	9,210,000	10,766,000
Gains (loss) on financing activities			$ 0	0	$ 0	(17,398,000)
Royall Acquisition Co.
Business Acquisition [Line Items]
Cash acquired from acquisition	$ 7,065,000
Working capital adjustment payment	1,278,000
Fair value of equity issued	$ 121,224,000
Equity interest issued (shares) | shares	2,428,364
Share price (dollars per share) | $ / shares	$ 49.92	$ 49.92
Transaction costs	$ 9,900,000	$ 9,900,000
Acquisition related costs						6,600,000
Impairment of goodwill							$ 99,100,000
Pro forma revenue		2,800,000		$ 190,199,000		378,197,000
Pro forma operating expenses		$ 1,700,000
Revenue Expense | Royall Acquisition Co.
Business Acquisition [Line Items]
Revenue						12,500,000
Amortization Expense | Royall Acquisition Co.
Business Acquisition [Line Items]
Depreciation and amortization						400,000
Interest Expense Elimination | Royall Acquisition Co.
Business Acquisition [Line Items]
Interest expense						9,500,000
Non-recurring Loss | Royall Acquisition Co.
Business Acquisition [Line Items]
Gains (loss) on financing activities						(17,400,000)
Acquisition-related Costs | Royall Acquisition Co.
Business Acquisition [Line Items]
Acquisition related costs						$ (6,600,000)

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Acquisitions - Consideration (Details) - USD ($) $ in Thousands			6 Months Ended
		Jan. 09, 2015	Jun. 30, 2016	Jun. 30, 2015
Business Acquisition [Line Items]
Net cash paid			$ 1,900	$ 744,193
Royall Acquisition Co.
Business Acquisition [Line Items]
Net cash paid	[1]	$ 744,193
Fair value of equity issued		121,224
Total		$ 865,417

[1] Net of cash acquired of $7,065 and a working capital adjustment payment of $1,278.

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Acquisitions - Recognized Identified Assets Acquired and Liabilities (Details) - USD ($) $ in Thousands	Jan. 09, 2015	Jun. 30, 2016	Dec. 31, 2015
Business Acquisition [Line Items]
Preliminary allocation to goodwill		$ 740,458	$ 738,200
Royall Acquisition Co.
Business Acquisition [Line Items]
Consideration paid for the acquisition	$ 865,417
Membership fees receivable, net	29,239
Prepaid expenses and other current assets	8,237
Property and equipment	44,209
Intangible assets, net	262,000
Deferred revenue, current	(18,300)
Accounts payable and accrued liabilities	(5,621)
Deferred income taxes, net of current portion	(102,599)
Preliminary fair value of net assets acquired	217,165
Preliminary allocation to goodwill	$ 648,252

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Acquisitions - Pro Forma Information (Details) - Royall Acquisition Co. - USD ($) $ in Thousands		3 Months Ended	6 Months Ended
	Jan. 09, 2015	Jun. 30, 2015	Jun. 30, 2015
Business Acquisition [Line Items]
Revenue	$ 2,800	$ 190,199	$ 378,197
Net income		$ 12,331	$ 10,416

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Fair Value Measurements - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014	Nov. 30, 2014	Dec. 31, 2009
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Significant transfers between Level 1, Level 2,or Level 3	$ 0	$ 0
Acquisition-related earn-out payments	3,600,000	1,500,000
Fair value adjustments	0	$ 0
Southwind
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of estimated additional contingent payments	0				$ 5,600,000
Final earn-out payment	21,400,000
Acquisition-related earn-out payments	1,000,000
Clinovations LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of estimated additional contingent payments	2,900,000			$ 4,500,000
Maximum payment to acquire business				9,500,000
Minimum payment to acquire business				$ 0
GradesFirst
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of estimated additional contingent payments	0		$ 3,600,000
Acquisition-related earn-out payments	$ 4,000,000
Contingent Earn-Out Liabilities | Clinovations LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Expected volatility rate (percent)	27.00%
Contingent Earn-Out Liabilities | Minimum | Clinovations LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value estimate discount rate (percent)	6.70%
Contingent Earn-Out Liabilities | Maximum | Clinovations LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value estimate discount rate (percent)	7.50%
Reported Value Measurement
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Variable rate debt instruments	$ 553,500,000
Evolent LLC
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity method investments, fair vale	$ 222,500,000

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Fair Value Measurements - Fair Value Measurements of Financial Assets and Liabilities on Recurring Basis (Detail) - Recurring - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Financial assets
Cash and cash equivalents	[1]	$ 17,487	$ 71,825
Financial liabilities
Interest rate swaps	[2]	4,779
Contingent earn-out liabilities	[3]	3,280	7,250
Level 1
Financial assets
Cash and cash equivalents	[1]	17,487	71,825
Financial liabilities
Interest rate swaps	[2]	0
Contingent earn-out liabilities	[3]	0	0
Level 2
Financial assets
Cash and cash equivalents	[1]	0	0
Financial liabilities
Interest rate swaps	[2]	4,779
Contingent earn-out liabilities	[3]	0	0
Level 3
Financial assets
Cash and cash equivalents	[1]	0	0
Financial liabilities
Interest rate swaps	[2]	0
Contingent earn-out liabilities	[3]	$ 3,280	7,250
Interest Rate Swap
Financial assets
Financial assets	[2]		419
Interest Rate Swap | Level 1
Financial assets
Financial assets	[2]		0
Interest Rate Swap | Level 2
Financial assets
Financial assets	[2]		419
Interest Rate Swap | Level 3
Financial assets
Financial assets	[2]		$ 0

[1] Fair value is based on quoted market prices.

[2] Fair value is determined using market standard models with observable inputs.

[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 macroeconomic environment and industry trends.

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Fair Value Measurements - Reconciliation of Change in Contingent Earn-out Liabilities (Detail) - Contingent Earn-Out Liabilities - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance		$ 1,505	$ 11,790	$ 7,250	$ 12,946
Addition due to acquisition		0	0	357	0
Ending balance		3,280	8,416	3,280	8,416
Southwind
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Adjustment made to the fair value of contingent liability	[1]	0	0	0	209
Earn-out payments		0	(1,947)	(1,032)	(1,947)
Clinovations LLC
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Adjustment made to the fair value of contingent liability	[1]	1,750	(1,427)	680	(1,292)
Other Contingent Earn-Out Liabilities
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Adjustment made to the fair value of contingent liability	[1]	25		25
GradesFirst
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Earn-out payments		0	0	(4,000)	0
360 Fresh
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Earn-out payments		$ 0	$ 0	$ 0	$ (1,500)

[1] Amounts were recognized in cost of services on the consolidated statements of operations.

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Property and Equipment - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation and amortization	$ 18,917,000	$ 18,499,000	$ 38,684,000	$ 35,773,000
Capitalized leases included in property and equipment	0		0		$ 0
Property and equipment, net	187,984,000		$ 187,984,000		183,057,000
Asset impairment charges				0
Software Development
Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment (years)			5 years
Asset impairment charges			$ 1,000,000
Acquired Developed Technology
Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment (years)			8 years
Depreciation and amortization	2,300,000	2,600,000	$ 4,600,000	4,600,000
Furniture, Fixtures and Equipment | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment (years)			3 years
Furniture, Fixtures and Equipment | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment (years)			7 years
Plant, Property and Equipment
Property, Plant and Equipment [Line Items]
Depreciation and amortization	5,400,000	5,000,000	$ 10,800,000	9,900,000
Developed software
Property, Plant and Equipment [Line Items]
Estimated useful lives of property and equipment (years)			5 years
Depreciation and amortization	5,500,000	$ 4,800,000	$ 11,900,000	$ 9,000,000
Property and equipment, net	$ 73,200,000		$ 73,200,000		$ 73,200,000

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Property and Equipment - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Leasehold improvements	$ 67,015	$ 63,608
Furniture, fixtures, and equipment	65,762	62,790
Software	213,677	202,384
Construction in progress, subject to a build-to-suit lease	15,054	2,700
Property and equipment, gross	361,508	331,482
Accumulated depreciation and amortization	(173,524)	(148,425)
Property and equipment, net	$ 187,984	$ 183,057

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Goodwill and Intangibles - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Goodwill And Intangible Assets [Line Items]
Impairment of goodwill			$ 0	$ 0
Estimated useful lives of intangible assets			3 years 7 months
Estimated average useful lives (years)			13 years 7 months
Depreciation and amortization	$ 18,917,000	$ 18,499,000	$ 38,684,000	35,773,000
Future amortization expense remainder of fiscal year ending 2016	11,400,000		11,400,000
Future amortization expense to be recorded in 2017	22,200,000		22,200,000
Future amortization expense to be recorded in 2018	21,300,000		21,300,000
Future amortization expense to be recorded in 2019	19,600,000		19,600,000
Future amortization expense to be recorded in 2020	18,400,000		18,400,000
Future amortization expense to be recorded thereafter	172,000,000		172,000,000
Intangible Assets
Goodwill And Intangible Assets [Line Items]
Depreciation and amortization	$ 5,700,000	$ 6,100,000	$ 11,400,000	$ 12,300,000
Minimum
Goodwill And Intangible Assets [Line Items]
Estimated useful lives of intangible assets			2 years
Maximum
Goodwill And Intangible Assets [Line Items]
Estimated useful lives of intangible assets			17 years

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Goodwill and Intangibles - Changes in Carrying Amount of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 738,200
Acquisitions	2,258
Ending balance	$ 740,458

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Goodwill and Intangibles - Gross and Net Carrying Balances and Accumulated Amortization of Intangibles (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	3 years 7 months
Gross carrying amount	$ 328,419	$ 326,811
Accumulated amortization	(63,471)	(52,090)
Net carrying amount	$ 264,948	274,721
Internally developed software for sale
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	5 years
Gross carrying amount	$ 18,510	16,902
Accumulated amortization	(8,350)	(6,796)
Net carrying amount	$ 10,160	10,106
Developed software
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	5 years 2 months 12 days
Gross carrying amount	$ 9,450	9,450
Accumulated amortization	(8,325)	(8,075)
Net carrying amount	$ 1,125	1,375
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	16 years 2 months
Gross carrying amount	$ 277,710	277,710
Accumulated amortization	(34,379)	(25,769)
Net carrying amount	$ 243,331	251,941
Trademarks
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	8 years 7 months 6 days
Gross carrying amount	$ 14,900	14,900
Accumulated amortization	(5,225)	(4,490)
Net carrying amount	$ 9,675	10,410
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	3 years 9 months 18 days
Gross carrying amount	$ 1,400	1,400
Accumulated amortization	(1,394)	(1,379)
Net carrying amount	$ 6	21
Customer contracts
Finite-Lived Intangible Assets [Line Items]
Weighted average useful life (years)	4 years 8 months 12 days
Gross carrying amount	$ 6,449	6,449
Accumulated amortization	(5,798)	(5,581)
Net carrying amount	$ 651	$ 868

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Investment in unconsolidated entities - Additional Information (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) people	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) people	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Schedule of Equity Method Investments [Line Items]
Gain (loss) from equity method investments	$ (411)	$ 4,000	$ (445)	$ 1,621
Investments in unconsolidated entities	0		0		$ 706
Valuation allowance		6,700
Tax expense (benefit)	$ 4,870	3,372	$ 10,533	$ 3,094
Tax receivable percentage	85.00%		85.00%
Tax receivable agreement period (in years)			15 years
Evolent Inc
Schedule of Equity Method Investments [Line Items]
Equity interest (percent)	70.80%		70.80%
Evolent Inc
Schedule of Equity Method Investments [Line Items]
Equity interest (percent)	8.70%		8.70%
Number of people designated to board of directors by company | people	2		2
Gain (loss) from equity method investments	$ (1,200)		$ (2,000)
Loss against remaining carrying amount of investment	300
Loss from equity method investments			1,100
Dilution gain from equity method investments			1,100
Investments in unconsolidated entities	0		0
Equity method investments, difference between carrying amount and underlying equity	900		900
Equity method investment, discrepancy between company basis and carrying value	$ 80,400		$ 80,400
Evolent LLC
Schedule of Equity Method Investments [Line Items]
Equity interest (percent)	15.00%		15.00%
Gain (loss) from equity method investments	$ (1,000)		$ (2,500)
Loss against remaining carrying amount of investment	200
Loss from equity method investments			1,600
Dilution gain from equity method investments			900
Investments in unconsolidated entities	0		0
Equity method investments, difference between carrying amount and underlying equity	800		800
Tax expense (benefit)	(100)	$ (1,500)	(300)
Equity method investment, discrepancy between company basis and carrying value	$ 68,200		$ 68,200
LIBOR
Schedule of Equity Method Investments [Line Items]
Tax receivable agreement, interest on tax savings (percentage)	1.00%		1.00%

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Investment in unconsolidated entities - Equity in income (loss) of unconsolidated entities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule of Equity Method Investments [Line Items]
Equity in (loss) income of unconsolidated entities	$ (411)	$ 4,000	$ (445)	$ 1,621
Evolent Inc
Schedule of Equity Method Investments [Line Items]
Equity in (loss) income of unconsolidated entities	(1,200)		(2,000)
Evolent LLC
Schedule of Equity Method Investments [Line Items]
Equity in (loss) income of unconsolidated entities	(1,000)		(2,500)
Evolent Inc and Evolent LLC
Schedule of Equity Method Investments [Line Items]
Dilution gain	0	0	2,026	0
Allocated share of losses	(511)	(4,265)	(2,732)	(6,644)
Tax benefit	100	8,265	261	8,265
Equity in (loss) income of unconsolidated entities	$ (411)	$ 4,000	$ (445)	$ 1,621

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Debt - Additional Information (Detail)					3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 10, 2016 USD ($)	Oct. 30, 2015 USD ($)	Feb. 06, 2015 USD ($)	Jun. 30, 2016 USD ($) covenant	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)	Apr. 30, 2015 USD ($) swap_agreement
Line of Credit Facility [Line Items]
Debt instrument, number of financial covenants | covenant					2
Interest expense					$ 4,389,000	$ 5,154,000	$ 9,210,000	$ 10,766,000
Amortization of debt issuance costs					300,000	300,000	668,000	704,000
Senior Secured Credit Facilities | Secured Debt
Line of Credit Facility [Line Items]
Debt instrument, face amount	$ 439,062,000			$ 675,000,000	$ 439,062,000		$ 439,062,000
Debt instrument term (years)			5 years
Amount of revolving credit facility			$ 475,000,000
Stated interest rate percentage	2.47%				2.47%		2.47%
Senior Secured Credit Facilities | Revolving Credit Facility
Line of Credit Facility [Line Items]
Debt instrument term (years)			5 years
Amount of revolving credit facility			$ 200,000,000
Senior Secured Credit Facilities | Standby Letters of Credit
Line of Credit Facility [Line Items]
Stated interest rate percentage	2.47%				2.47%		2.47%
Base Rate | Senior Secured Credit Facilities | Secured Debt
Line of Credit Facility [Line Items]
Basis spread on variable rate				1.75%
LIBOR | Senior Secured Credit Facilities | Secured Debt
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.00%			2.25%
Interest Rate Swap
Line of Credit Facility [Line Items]
Interest expense, interest rate swaps					$ 600,000	700,000	$ 1,200,000	700,000
Number of interest rate swap agreements entered into to swap portion of variable rate interest payments for fixed rate interest payments | swap_agreement										3
Derivative notional amount	$ 269,500,000				269,500,000		269,500,000			$ 287,500,000
Effective portion of gain (loss), net of tax					(400,000)	$ 700,000	(2,900,000)	$ 700,000
Hedge ineffectiveness					$ 0		$ 0
Interest Rate Swap | Base Rate
Line of Credit Facility [Line Items]
Average base rate paid by the Company (percent)	1.282%				1.282%		1.282%
Other Noncurrent Liabilities | Interest Rate Swap
Line of Credit Facility [Line Items]
Interest rate derivative assets at fair value	$ 4,800,000				$ 4,800,000		$ 4,800,000		$ 400,000
Line of Credit | Senior Secured Credit Facilities | Revolving Credit Facility
Line of Credit Facility [Line Items]
Debt instrument term (years)		3 months
Amount of revolving credit facility	19,100,000.0				19,100,000.0		19,100,000.0
Stated interest rate percentage		2.66%
Proceeds from long-term line of credit		$ 17,000,000
Amounts outstanding on the revolving credit facility	117,000,000.0				117,000,000.0		117,000,000.0
Amounts available for borrowing	$ 63,900,000				$ 63,900,000		$ 63,900,000

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Debt - Schedule of Long-term Debt (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Feb. 06, 2015
Debt Instrument [Line Items]
Less: Amounts due in next twelve months ($52,946 face value less unamortized discount of $1,000)	$ (51,946,000)	$ (27,743,000)
Total long-term debt	501,015,000	$ 522,086,000
Secured Debt
Debt Instrument [Line Items]
Long-term debt	435,961,000
Less: Amounts due in next twelve months ($52,946 face value less unamortized discount of $1,000)	(51,946,000)
Total long-term debt	501,015,000
Long-term debt, maturities, repayments of principal in next 12 months	52,946,000
Original issue discount, expected to be amortized in next 12 months	$ 1,000,000
Secured Debt | Senior Secured Credit Facilities
Debt Instrument [Line Items]
Stated interest rate percentage	2.47%
Debt instrument, face amount	$ 439,062,000		$ 675,000,000
Original issue discount	3,101,000
Revolving Credit Facility
Debt Instrument [Line Items]
Long-term debt	$ 117,000,000

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		38 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Nov. 30, 2015
Equity [Abstract]
Total amount authorized under repurchase program						$ 550.0
Number of shares repurchased under stock repurchase program	803,217	0	1,740,247	0	19,567,789
Purchases of treasury stock	$ 26.2		$ 53.6		$ 505.5
Number of shares subject to repurchase			0
Remaining authorized repurchase amount	$ 44.5		$ 44.5		$ 44.5

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Stock-based Compensation - Additional Information (Detail) - USD ($)			6 Months Ended
	Jun. 09, 2015	Jan. 09, 2015	Jun. 30, 2016	Jun. 30, 2015	Mar. 02, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share price (dollars per share)		$ 49.92
Stock options, vested (shares)			0	10,000
Stock-based compensation costs capitalized as part of the cost of an asset			$ 0
Compensation cost related to stock-based compensation			$ 66,000,000
Weighted average period of stock-based compensation			2 years 8 months 3 days
Service-Based Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value (dollars per share)			$ 42.49	$ 52.89		$ 52.82	$ 48.94
Weighted average fair value of options granted (in dollars per share)			$ 9.86
Stock option awards, risk-free interest rate (percent)			1.20%
Stock option awards, expected term (years)			5 years 1 month
Stock option awards, expected volatility (percent)			37.46%
Stock option awards, dividend yield (percent)			0.00%
Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value (dollars per share)			$ 37.21	$ 38.51		$ 39.10	$ 31.82
Stock options, service period (years)			1 year 2 months 15 days
Weighted average fair value of options granted (in dollars per share)			$ 10.21
Stock option awards, risk-free interest rate (percent)			1.60%
Stock option awards, expected term (years)			6 years 4 months 24 days
Stock option awards, expected volatility (percent)			36.50%
Stock option awards, dividend yield (percent)			0.00%
Royall Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized		1,906,666
Options, grant date fair value		$ 26,800,000
Royall Inducement Plan | Service-Based Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized		1,751,000
Award expiration period (in years)		7 years
Award vesting rights (percentage)			50.00%
Royall Inducement Plan | Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized		145,867
Weighted average grant date fair value (dollars per share)		$ 49.92
Equity instrument other than options, grant date fair value		$ 7,300,000
Award vesting rights (percentage)			50.00%
Stock Incentive 2009 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized	10,535,000
Number of additional shares authorized	3,800,000
Stock Incentive 2009 Plan | Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized					319,900
Minimum | Royall Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target (percent)			70.00%
Maximum | Royall Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance target (percent)			99.00%

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Stock-based Compensation - Summary of Changes in Common Stock Options (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Options, Outstanding, beginning of period	2,013,325	994,605
Number of Options, Granted	319,900	1,774,820
Number of Options, Exercised	0	0
Number of Options, Forfeited	(215,370)	(751,800)
Number of Options, Expired	0
Number of Options, Outstanding, end of period	2,117,855	2,017,625
Number of Options, Exercisable, end of period	20,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price (dollars per share) [Roll Forward]
Weighted Average Exercise Price, Outstanding, beginning of period (dollars per share)	$ 50.42	$ 50.96
Weighted Average Exercise Price, Granted (dollars per share)	28.20	49.90
Weighted Average Exercise Price, Exercised (dollars per share)	0.00	0.00
Weighted Average Exercise Price, Forfeited (dollars per share)	49.92	49.92
Weighted Average Exercise Price, Expired (dollars per share)	0.00
Weighted Average Exercise Price, Outstanding, end of period (dollars per share)	47.11	$ 50.30
Weighted Average Exercise Price, Exercisable, end of period (dollars per share)	$ 29.58
Service-Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Options, Outstanding, beginning of period	1,843,110	1,746,692
Number of Options, Granted	1,005,756	328,096
Number of Options, Exercised	(237,158)	(128,669)
Number of Options, Forfeited	(22,195)	(13,569)
Number of Options, Expired	(17,347)
Number of Options, Outstanding, end of period	2,572,166	1,932,550
Number of Options, Exercisable, end of period	1,073,586
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price (dollars per share) [Roll Forward]
Weighted Average Exercise Price, Outstanding, beginning of period (dollars per share)	$ 41.73	$ 37.19
Weighted Average Exercise Price, Granted (dollars per share)	28.31	53.42
Weighted Average Exercise Price, Exercised (dollars per share)	15.29	23.43
Weighted Average Exercise Price, Forfeited (dollars per share)	53.38	60.27
Weighted Average Exercise Price, Expired (dollars per share)	51.77
Weighted Average Exercise Price, Outstanding, end of period (dollars per share)	38.75	$ 40.70
Weighted Average Exercise Price, Exercisable, end of period (dollars per share)	$ 41.80

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Stock-based Compensation - Summary of Changes in RSUs (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of RSUs, Non-vested, beginning of period	301,032	189,497
Number of RSUs, Granted	23,580	169,204
Number of RSUs, Forfeited	(33,429)	(69,389)
Number of RSUs, vested	0	(2,200)
Number of RSUs, Non-vested, end of period	291,183	287,112
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value (dollars per share) [Roll Forward]
Weighted Average Grant Date Fair Value Non-vested, beginning of Period (dollars per share)	$ 39.10	$ 31.82
Weighted Average Grant Date Fair Value, Granted (dollars per share)	32.28	49.74
Weighted Average Grant Date Fair Value, Forfeited (dollars per share)	50.77	47.90
Weighted Average Grant Date Fair Value, Vested (dollars per share)	0.00	29.58
Weighted Average Grant Date Fair Value Non-vested, end of Period (dollars per share)	$ 37.21	$ 38.51
Service-Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of RSUs, Non-vested, beginning of period	839,613	857,085
Number of RSUs, Granted	467,177	347,958
Number of RSUs, Forfeited	(41,089)	(19,278)
Number of RSUs, vested	(312,131)	(357,487)
Number of RSUs, Non-vested, end of period	953,570	828,278
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value (dollars per share) [Roll Forward]
Weighted Average Grant Date Fair Value Non-vested, beginning of Period (dollars per share)	$ 52.82	$ 48.94
Weighted Average Grant Date Fair Value, Granted (dollars per share)	30.36	53.10
Weighted Average Grant Date Fair Value, Forfeited (dollars per share)	47.73	56.15
Weighted Average Grant Date Fair Value, Vested (dollars per share)	51.43	43.46
Weighted Average Grant Date Fair Value Non-vested, end of Period (dollars per share)	$ 42.49	$ 52.89

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Stock-based Compensation - Summary of Stock-based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock Option and RSUs
Stock-based compensation expense included in Costs and expenses
Total costs and expenses	$ 7,965	$ 8,631	$ 14,947	$ 15,036
Cost of Services
Stock-based compensation expense included in Costs and expenses
Total costs and expenses	2,493	2,566	4,680	4,458
Member Relations and Marketing
Stock-based compensation expense included in Costs and expenses
Total costs and expenses	1,387	1,455	2,501	2,601
General and Administrative
Stock-based compensation expense included in Costs and expenses
Total costs and expenses	$ 4,085	$ 4,610	$ 7,766	$ 7,977

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Examination [Line Items]
Effective income tax rate (as a percent)	38.10%	47.90%	36.60%	(23.90%)
Interest and penalties on unrecognized tax benefits		$ 0.2		$ 0.2
Washington DC
Income Tax Examination [Line Items]
Discrete tax benefit related to write off tax credits			$ 0.6	$ 10.8

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Earnings Per Share - Reconciliation of Basic to Diluted Weighted Average Common Shares Outstanding (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Basic weighted average common shares outstanding	40,365	42,440	40,928	41,686
Effect of dilutive outstanding stock-based awards	205	474	294	0
Diluted weighted average common shares outstanding	40,570	42,914	41,222	41,686

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Earnings Per Share - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of dilutive outstanding stock-based awards	205,000	474,000	294,000	0
Stock Compensation Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Share-based compensation awards	2,800,000	700,000	2,600,000	2,800,000
Non-Qualified Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Share-based compensation awards			2,100,000	2,000,000
Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Share-based compensation awards			300,000	300,000
Non-Qualified Stock Options and Restricted Stock Units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Effect of dilutive outstanding stock-based awards	19,971	0	19,971	0