News Column

Strayer Education, Inc. Reports Second Quarter 2014 Revenues and Earnings; Summer Term 2014 Enrollments; and CFO Succession Plan

July 31, 2014

HERNDON, Va.--(BUSINESS WIRE)-- Strayer Education, Inc. (Nasdaq: STRA) today announced financial results for the three months ended June 30, 2014. Financial highlights are as follows:

Three Months Ended June 30

  • Revenues for the three months ended June 30, 2014 decreased 15% to $112.7 million, compared to $132.0 million for the same period in 2013, principally due to lower enrollment and lower revenue per student.
  • Income from operations was $24.0 million compared to $26.3 million for the same period in 2013, a decrease of 9%. Operating income margin was 21.3% compared to 19.9% for the same period in 2013.
  • Net income was $13.7 million compared to $15.0 million for the same period in 2013, a decrease of 9%. Diluted earnings per share was $1.29 compared to $1.42 for the same period in 2013, a decrease of 9%. Diluted weighted average shares outstanding increased 1% to 10,623,000 from 10,535,000 for the same period in 2013.

    Six Months Ended June 30

  • Revenues for the six months ended June 30, 2014 decreased 15% to $229.2 million, compared to $269.5 million for the same period in 2013, principally due to lower enrollment and lower revenue per student.
  • Income from operations was $49.9 million compared to $56.2 million for the same period in 2013, a decrease of 11%. Operating income margin was 21.8% compared to 20.8% for the same period in 2013.
  • Net income was $28.5 million compared to $32.2 million for the same period in 2013, a decrease of 12%. Diluted earnings per share was $2.68 compared to $3.01 for the same period in 2013, a decrease of 11%. Diluted weighted average shares outstanding decreased 1% to 10,602,000 from 10,693,000 for the same period in 2013.

    Balance Sheet and Cash Flow

    At June 30, 2014, the Company had cash and cash equivalents of $136.1 million. The Company generated $45.2 million from operating activities in the first six months of 2014 compared to $51.6 million during the same period in 2013. Capital expenditures were $2.3 million for the six months ended June 30, 2014 compared to $5.0 million for the same period in 2013.

    The Company is party to a revolving credit and term loan agreement. This credit facility, which is secured by the assets of the Company, provides a $100.0 million revolving credit facility and a $125.0 million term loan facility with a maturity date of December 31, 2016. At June 30, 2014, the Company had $120.3 million outstanding under its term loan and no outstanding balance under its revolving credit facility.

    The Company had $70.0 million of share repurchase authorization remaining at June 30, 2014. No shares were repurchased in the second quarter of 2014.

    For the second quarter of 2014, bad debt expense as a percentage of revenues was 3.2% compared to 4.3% for the same period in 2013. Days sales outstanding was 14 days at the end of the second quarter of 2014, compared to 16 days at the end of the second quarter of 2013.

    Student Enrollment

    Total enrollments at Strayer University for the 2014 summer term decreased 6% to 36,403 students compared to 38,627 students for the same term in 2013. Across the Strayer University campus and online system, new student enrollments increased 2%, while continuing student enrollments decreased 8%.

    Stock-based Compensation Activity

    In May 2014, the Company awarded 62,542 shares of restricted stock to certain individuals under the Company’s 2011 Equity Compensation Plan, of which 46,674 shares are performance-based and vest four years from the date of grant subject to performance criteria being met. The remaining 15,868 shares of restricted stock were awarded to various non-employee members of the Company’s Board of Directors, as part of the Company’s annual director compensation. The Company’s stock price closed at $42.85 on the date of these restricted stock grants.

    Common Stock and Common Stock Equivalents

    At June 30, 2014, the Company had 10,905,843 common shares issued and outstanding, including 334,552 shares of restricted stock. The Company also had 200,000 restricted stock units outstanding, and 100,000 unvested stock options outstanding.

    CFO Succession

    The Company also announced that, effective March 1, 2015, Chief Financial Officer Mark Brown will retire after 13 years with the Company. Brown will be replaced by Daniel Jackson, who is being promoted from his current role as Senior Vice President and Treasurer. Jackson joined Strayer Education in 2003, and has served as Vice President of Finance and Regional Vice President of Operations, among other roles. “It has been my great pleasure and honor to work with Mark over these many years. In his tenure as CFO he has been a key strategic advisor and an integral part of our leadership team,” said Robert Silberman, Strayer Education Executive Chairman. “We extend our appreciation to Mark and wish him all the best in his next chapter,” added Karl McDonnell, Strayer Education President and CEO. “We are confident that Dan will continue to build on the established infrastructure and expertise within our finance and accounting organization, and look forward to his tenure as our new CFO.”

    Conference Call with Management

    Strayer Education, Inc. will host a conference call to discuss its second quarter 2014 earnings at 10:00 a.m. (ET) today. To participate on the live call, investors should dial (877) 303-9047 10 minutes prior to the start time. In addition, the call will be available via live webcast. To access the live webcast of the conference call, please go to www.strayereducation.com 15 minutes prior to the start time of the call to register. Following the call, the webcast will be archived and available at www.strayereducation.com.

    About Strayer Education, Inc.

    Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company that owns Strayer University. Strayer’s mission is to make higher education achievable for working adults in today’s economy. Strayer University is a proprietary institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health services administration, public administration, and criminal justice to working adult students. Strayer University also offers an executive MBA online and corporate training programs through its Jack Welch Management Institute. Strayer University is committed to providing an education that prepares working adult students for advancement in their careers and professional lives. Founded in 1892, Strayer University is based in Washington, D.C. and accredited by the Middle States Commission on Higher Education.

    For more information on Strayer Education, Inc. visit www.strayereducation.com and for Strayer University visit www.strayer.edu.

    Forward-Looking Statements

    This press release contains statements that are forward-looking and are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “will,” “forecast,” “plan,” “project,” or similar words. The statements are based on the Company’s current expectations and are subject to a number of assumptions, uncertainties and risks. In connection with the safe-harbor provisions of the Reform Act, the Company has identified important factors that could cause the Company’s actual results to differ materially from those expressed in or implied by such statements. The assumptions, uncertainties and risks include the pace of growth of student enrollment, our continued compliance with Title IV of the Higher Education Act, and the regulations thereunder, as well as regional accreditation standards and state regulatory requirements, rulemaking by the Department of Education and increased focus by the U.S. Congress on for-profit education institutions, competitive factors, risks associated with the opening of new campuses, risks associated with the offering of new educational programs and adapting to other changes, risks relating to the timing of regulatory approvals, our ability to implement our growth strategy, risks associated with the ability of our students to finance their education in a timely manner, and general economic and market conditions. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and in its subsequent filings with the Securities and Exchange Commission, all of which are incorporated herein by reference and which are available from the Commission. We undertake no obligation to update or revise forward-looking statements.

       

    STRAYER EDUCATION, INC.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

    (Amounts in thousands, except per share data)

     
    For the three months endedFor the six months ended
    June 30,June 30,
    2013   20142013   2014
     
    Revenues $ 131,980 $ 112,747 $ 269,486 $ 229,215
    Costs and expenses:
    Instruction and educational support 71,305 59,799 144,732 118,912
    Marketing 16,228 13,360 33,949 29,674
    Admissions advisory 5,212 4,433 10,563 8,552
    General and administration   12,978   11,157   24,066   22,170
    Total costs and expenses   105,723   88,749   213,310   179,308
    Income from operations 26,257 23,998 56,176 49,907
    Investment income - 2 - 3
    Interest expense   1,337   1,281   2,633   2,634
    Income before income taxes 24,920 22,719 53,543 47,276
    Provision for income taxes   9,918   9,042   21,310   18,816
    Net income $ 15,002 $ 13,677 $ 32,233 $ 28,460
     
    Earnings per share:
    Basic $ 1.43 $ 1.29 $ 3.02 $ 2.70
    Diluted $ 1.42 $ 1.29 $ 3.01 $ 2.68
     
    Weighted average shares outstanding:
    Basic 10,502 10,565 10,658 10,547
    Diluted 10,535 10,623 10,693 10,602
     


       

    STRAYER EDUCATION, INC.

    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    (Amounts in thousands, except share and per share data)

     
    December 31,June 30,
    20132014
    ASSETS
    Current assets:
    Cash and cash equivalents $ 94,760 $ 136,076
    Tuition receivable, net 15,842 15,009
    Other current assets   16,738   15,398  
    Total current assets 127,340 166,483
    Property and equipment, net 94,421 87,097
    Deferred income taxes 17,129 14,875
    Goodwill 6,800 6,800
    Other assets   8,576   6,938  
    Total assets $ 254,266 $ 282,193  
     
    LIABILITIES & STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable and accrued expenses $ 38,527 $ 33,174
    Income taxes payable 2,569 7,741
    Deferred revenue 656 3,372
    Other current liabilities 281 281
    Current portion of term loan   3,125   4,688  
    Total current liabilities 45,158 49,256
    Term loan, net of current portion 118,750 115,625
    Other long-term liabilities   51,456   47,349  
    Total liabilities   215,364   212,230  
    Commitments and contingencies
    Stockholders' equity:

    Common stock, par value $0.01, 20,000,000 shares authorized; 10,797,464 and 10,905,843 shares issued and outstanding at December 31, 2013 and June 30, 2014, respectively

    108 109
    Additional paid-in capital 7,137 9,832
    Retained earnings 31,629 60,089
    Accumulated other comprehensive income (loss)   28   (67 )
    Total stockholders' equity   38,902   69,963  
    Total liabilities and stockholders' equity $ 254,266 $ 282,193  
     


     

    STRAYER EDUCATION, INC.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (Amounts in thousands)

     
      For the six months ended
    June 30,
    2013   2014
    Cash flows from operating activities:
    Net income $ 32,233 $ 28,460

    Adjustments to reconcile net income to net cash provided by operating activities:

    Amortization of gain on sale of assets (140 ) (140 )
    Amortization of deferred rent (114 ) (471 )
    Amortization of deferred financing costs 390 390
    Depreciation and amortization 12,434 10,827
    Deferred income taxes (1,447 ) (358 )
    Stock-based compensation 5,232 4,507
    Changes in assets and liabilities:
    Tuition receivable, net (74 ) 2,019
    Other current assets 2,496 1,042
    Other assets (3 ) -
    Accounts payable and accrued expenses (7,536 ) (5,376 )
    Income taxes payable and income taxes receivable 8,209 6,331
    Deferred revenue (267 ) 5,922
    Other long-term liabilities   165     (7,956 )
    Net cash provided by operating activities   51,578     45,197  
     
    Cash flows from investing activities:
    Purchases of property and equipment   (4,994 )   (2,319 )
    Net cash used in investing activities   (4,994 )   (2,319 )
     
    Cash flows from financing activities:
    Payments on term loan (1,562 ) (1,562 )
    Repurchase of common stock   (24,999 )   -  
    Net cash used in financing activities   (26,561 )   (1,562 )
    Net increase in cash and cash equivalents 20,023 41,316
    Cash and cash equivalents - beginning of period   47,517     94,760  
    Cash and cash equivalents - end of period $ 67,540   $ 136,076  
     
    Non-cash transactions:
    Purchases of property and equipment included in accounts payable $ 557   $ 209  
     





    Strayer Education, Inc.

    Mark C. Brown, Executive Vice President and Chief Financial Officer

    703-247-2514

    Mark.Brown@Strayer.edu

    or

    Dan Jackson, Senior Vice President and Treasurer

    703-713-1862

    Daniel.Jackson@Strayer.edu

    Source: Strayer Education, Inc.


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