Strayer Education, Inc. Reports Record Third Quarter 2003 Enrollment, Revenues and Earnings
- Strayer Third Quarter Revenues Up 30% - - Strayer Third Quarter Diluted EPS of $0.25 (Before Gain of $0.07 from Asset Sale), Up 32% - - Strayer University Fall 2003 Total Enrollments Up 22%/New Students Up 23%/Online Up 65% - - Two Philadelphia Campuses Opened for a Total of 5 New Campuses in 2003 - - Strayer University Approved by State of Georgia for Two New Campuses in 2004 - - Strayer Full Year EPS Estimate Raised to $2.14 to $2.16 (Excluding Gains from Asset Sales) -
ARLINGTON, Va., Nov 3, 2003 /PRNewswire-FirstCall via COMTEX/ -- Strayer Education, Inc. (Nasdaq: STRA) today announced financial results for the three and nine months ended September 30, 2003. Financial highlights are as follows:
Three Months Ended September 30
* Revenues for the three months ended September 30, 2003 increased 30% to
$30.0 million, compared to $23.0 million for the same period in 2002,
due to increased enrollment and a 5% tuition increase which commenced in
January 2003.
* Operating income (EBIT) (excluding the gain from the sale of the
Washington, D.C. campus building) rose 41% to $5.6 million from
$4.0 million for the same period in 2002. Excluding the gain from the
sale of the building, operating income margin was 18.6%, compared to
17.2% for the same period in 2002. The increase in operating margin was
primarily due to strong revenue growth more than offsetting the
increased expense associated with opening five new campuses in 2003
compared to three new campuses in 2002.
* Net income (excluding the gain from the sale of the Washington, D.C.
campus building) rose 40% to $3.8 million compared to $2.7 million for
the same period in 2002. Including the gain from the sale of the
Washington, D.C. campus building, net income rose 79% to $4.9 million.
Earnings per diluted share (excluding the gain from the sale of the
Washington, D.C. campus building) rose 32% to $0.25 compared to $0.19
for the same period in 2002. Including the gain from the sale of the
Washington, D.C. campus building, earnings per diluted share was $0.32,
an increase of 68%. Diluted weighted average shares outstanding
increased to 14,969,000 from 14,556,000 for the same period in 2002.
Nine Months Ended September 30
* Revenues for the nine months ended September 30, 2003 increased 26% to
$103.7 million, compared to $82.5 million for the same period in 2002,
due to increased enrollment and a 5% tuition increase effective for
2003.
* Operating income (EBIT) (excluding the gain from the sale of the
Washington, D.C. campus building) rose 23% to $33.7 million from $27.5
million for the same period in 2002. Operating income margin was 32.5%
compared to 33.3% for the same period in 2002. The decrease in
operating income margin is primarily attributable to the earlier timing
of two new campus openings in 2003 as compared to 2002, as well as the
increase of the total new campus openings to five in 2003 compared to
three in 2002.
* Net income (excluding the gain from the sale of the Washington, D.C.
campus building) rose 23% to $21.5 million compared to $17.5 million for
the same period in 2002. Including the gain from the sale of the
Washington, D.C. campus building, net income rose 29% to $22.6 million.
Earnings per diluted share (excluding the gain from the sale of the
Washington, D.C. campus building) rose 20% to $1.45 compared to $1.21
for the same period in 2002. Including the gain from the sale of the
Washington, D.C. campus building, earnings per diluted share was $1.53,
an increase of 26%. Diluted weighted average shares outstanding
increased to 14,796,000 from 14,485,000 for the same period in 2002.
"We are pleased with our financial results for the third quarter as our strong summer term enrollment and efficient cost control allowed us to expand operating margins even as we increased our new campus openings from three to five," said Robert Silberman, Chairman and Chief Executive Officer of Strayer Education, Inc. "The 22% enrollment growth for the fall term and the strong openings of our two Philadelphia campuses attest to the quality and convenience of our working adult focused undergraduate and graduate programs. We are particularly pleased with the action of the State of Georgia, bringing the number of states in which Strayer University is approved to award degrees to eight, as we continue executing our geographic and online expansion strategy."
Balance Sheet and Cash Flow
At September 30, 2003, the Company had cash, cash equivalents and marketable securities of $90.0 million and no debt. In the third quarter, as part of its cash management activities, the Company liquidated its $26.1 million investment in a short-term corporate bond fund and re-invested most of the proceeds in a short-term tax exempt bond fund. This transaction resulted in a gain of $0.1 million before tax.
The Company generated $23.6 million from operating activities in the first nine months of 2003. Capital expenditures were $4.3 million for the same period.
In the third quarter 2003, bad debt expense as a percentage of revenue was 1.7% compared to 1.3% for the same period in 2002. Days sales outstanding, adjusted to exclude tuition receivable related to future quarters, was seven days at the end of the third quarter 2003, compared to seven days for the same period in 2002.
Student Enrollment
Total enrollment at Strayer University for the 2003 fall term increased 22% to 20,138 students compared to 16,532 for the same term in 2002. Across the Strayer University campus network, new student enrollments increased 23% and continuing student enrollments increased 22%. Students taking 100% of their classes at Strayer University Online increased 58% to 8,550 students from 5,401. The total number of students taking any courses online (including students at brick and mortar campuses taking at least one online course) in the fall 2003 quarter was 10,615.
Student Enrollment
Fall Fall %
2002 2003 Change
New Campuses (11 in operation 3 or less years)
Campus Based Students 864 1,926 123%
Online Based Students 662 1,774 168%
Total New Campus Students 1,526 3,700 142%
Mature Campuses (14 in operation 4 or more
years)
Campus Based Students 10,267 9,662 -6%
Online Based Students 3,661 4,994 36%
Total Mature Campus Students 13,928 14,656 5%
Out of Area Online Students 1,078 1,782 65%
Total University Enrollment 16,532 20,138 22%
Total Students Taking 100% Courses Online 5,401 8,550 58%
Total Students Taking At Least 1 Course Online 6,822 10,615 56%
New Campus/New State Openings
Philadelphia, Pennsylvania
Strayer University successfully opened its two campuses in the Philadelphia area for the fall 2003 term, completing its goal of opening five new campuses in 2003.
Georgia
Strayer University has obtained approval from Georgia's Nonpublic Postsecondary Education Commission to open two campuses in the Atlanta area in 2004.
Expanded Online Course Offerings
Strayer University Online is offering 621 online classes in the fall 2003 term, with all academic programs available synchronously and asynchronously.
PBS Joint Venture
Strayer University has entered into an agreement with the Public Broadcasting Service (PBS) to offer certain PBS courses in the form of continuing education units (CEUs), not for college credit, through Strayer University Online. Strayer University Online will be marketed by PBS through its various media and on its web site. Strayer University will offer the PBS courses starting in January 2004.
Real Estate Transaction
The Company also reported today the closing of the previously announced sale of its Washington, D.C. campus building which took place during the third quarter for $5.2 million. This building was purchased in the first quarter of 2002 for a total of $3.0 million from an entity affiliated with the Company's former CEO and majority stockholder. The Company will be relocating its Washington, D.C. campus to a larger and newly refurbished, leased facility nearby. This transaction resulted in a gain of $1.8 million before tax or $0.07 per diluted share.
Sale of Student Loan Portfolio
The Company today announced that it had sold its student loan portfolio. The Company sold a total of $9.1 million in loans for a price of $9.7 million to a national student loan marketing organization. Under the arrangement, Strayer will continue to originate student loans but will periodically divest these at various prices based on market conditions. As a result of the loan portfolio sale, Strayer will recognize an estimated gain of $0.5 million before tax in the fourth quarter, or $0.02 per share.
Fiscal Year 2001 Cohort Default Rate
During the third quarter of 2003, the Company was notified by the U.S. Department of Education that its Cohort Default Rate for fiscal year 2001 (the most recent annual period for which data is available) declined to 4.3% from 4.7% for the fiscal year 2000.
2003 Business Outlook
Based on the strong enrollment growth announced for the fall 2003 term, the Company estimates fourth quarter 2003 diluted EPS will be in the range of $0.69 - $0.71 excluding the gain on sale of the student loan portfolio. Based on its fourth quarter estimates, the Company therefore is increasing its estimate of full year 2003 diluted EPS (before the effect of gains from asset sales of approximately $0.09) to $2.14 - $2.16 from $2.04 - $2.08.
2004 Business Outlook
The Company announced that it intends to open five new campuses in 2004, and that based on the expected 2004 new campus opening schedule, the Company is providing the following full year 2004 estimates:
Enrollment: 15% - 18% growth
Revenue: 20% - 23% growth
Operating Margin: 34.5% - 35.0%
Diluted EPS: $2.60 - $2.65
Diluted Shares Outstanding: 15,000,000
Share Repurchase Plan
Strayer today announced that the Company's Board of Directors has authorized the Company to repurchase up to an aggregate of $15 million in value of the Common Stock over the next 14 months in open market purchases from time to time at the discretion of the Company's management, depending on market conditions and other corporate considerations. The Company intends to effect such purchases, if any, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. This share Repurchase Plan may be modified, suspended or terminated at any time by the Company without notice.
Stock Option Activity and Calculation of Total Potential Share Issuance
The Company uses the intrinsic-value-based method of accounting for its stock option plan. Under this method, compensation expense is the excess, if any, of the quoted market price of the stock at grant date over the amount an employee must pay to acquire the stock. Had compensation expense been determined based on the fair value of the options at grant dates computed by the Black-Scholes methodology, the Company estimates net income and diluted net income per share would have been $4.0 million and $0.27 per share, respectively, for the three months ended September 30, 2003, and $19.6 million and $1.32 per share, respectively, for the nine months ended September 30, 2003.
The following assumptions were used to estimate fair value as of the date of grant using The Black-Scholes option pricing model:
2002 2003
Dividend yield 0.5% 0.5%
Risk-free interest rates 4.8% 3.0%
Volatility 43% 40%
Expected option term (years) 5.9 5.2
Weighted average fair value of options granted during
the year $23.65 $21.88
Shares used to compute diluted earnings per share include common shares issued and outstanding, the assumed conversion of Series A Convertible Redeemable Preferred Stock outstanding, and the assumed exercise of issued stock options using the Treasury Stock Method. Our total current and potential common shares outstanding are as follows:
Shares
(in thousands)
Current
Weighted average common shares outstanding for the
three months ended 9/30/03 10,727
Convertible Series A Preferred Stock, convertible on a
1:1 basis (outstanding or recorded) at 9/30/03 3,864
Issued stock options using Treasury Stock Method 378
Total current 14,969
Potential
Accrual of required PIK dividends on Convertible Series A
Preferred Stock through May 2006 458(a)
Total issued stock options, less options accounted for using
the Treasury Stock Method above 763
Authorized but unissued options 334
Total potential 1,555
Total current and potential common shares 16,524
(a) This number may be smaller as it does not reflect that the Company has
the right to cause conversion of all remaining Series A preferred
shares into common shares after May 15, 2004 if the Company's common
stock price trades above $52.00 per share for twenty consecutive
trading days. Of the 458,000 shares, 130,000 would potentially accrue
through May 15, 2004.
Conference Call with Management
Strayer Education, Inc. will host a conference call to discuss its third quarter 2003 earnings on November 3 at 10:00 a.m. ET. To participate on the live call, investors should dial 800-289-0468 10 minutes prior to the start time. In addition, the call will be available via live Web cast over the Internet. To access the live Web cast of the conference call, please go to www.strayereducation.com 15 minutes prior to the start time of the call to register.
Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company that owns Strayer University and certain other assets. Strayer's mission is to make higher education achievable and convenient 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, and information technology to more than 20,000 working adult students at 25 campuses in Maryland, North Carolina, Pennsylvania, Tennessee, Virginia and Washington, D.C. and worldwide via the Internet through Strayer University Online. 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 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.
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 "(Reform Act)." The statements are based on the Company's current expectations and are subject to a number of 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. The 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 state and regional regulatory requirements, 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 associated with the acquisition of existing educational institutions, risks relating to the timing of regulatory approvals, our ability to implement our growth strategy, 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 and its other 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
For the three months For the nine months
ended September 30, ended September 30,
% %
2002 2003 Change 2002 2003 Change
Revenues $23,026 $29,993 30.3% $82,547 $103,652 25.6%
Costs and expenses:
Instructional and
educational support 9,770 12,236 25.2% 29,768 38,324 28.7%
Selling and promotion 5,044 7,104 40.8% 12,537 16,940 35.1%
General and
administration 4,254 5,085 19.5% 12,757 14,687 15.1%
Total expenses 19,068 24,425 28.1% 55,062 69,951 27.0%
Income from operations,
before gain on sale
of asset 3,958 5,568 40.7% 27,485 33,701 22.6%
Operating income margin,
before gain on sale
of asset 17.2% 18.6% 33.3% 32.5%
Gain on sale of asset -- 1,772 NM -- 1,772 NM
Income from operations 3,958 7,340 85.4% 27,485 35,473 29.1%
Operating income margin 17.2% 24.5% 33.3% 34.2%
Investment and other
income 484 688 42.1% 1,242 1,850 49.0%
Income before income
taxes 4,442 8,028 80.7% 28,727 37,323 29.9%
Provision for income
taxes 1,732 3,174 83.3% 11,203 14,753 31.7%
Net income 2,710 4,854 79.1% 17,524 22,570 28.8%
Net income, before
gain on sale of asset 2,710 3,784 39.6% 17,524 21,496 22.7%
Preferred stock
dividends and
accretion 2,035 1,287 (36.8%) 6,076 3,843 (36.8%)
Net income available
to common stockholders $675 $3,567 428.4% $11,448 $18,727 63.6%
Basic net income
per share $0.08 $0.33 312.5% $1.37 $1.75 27.7%
Diluted net income
per share $0.19 $0.32 68.4% $1.21 $1.53 26.4%
Diluted net income per
share, before gain on
sale of asset $0.19 $0.25 31.6% $1.21 $1.45 19.8%
Common dividend per
share $0.065 $0.065 - $0.195 $0.195 -
Weighted average shares
outstanding
Basic 8,352 10,727 28.4% 8,352 10,682 27.9%
Diluted 14,556 14,969 2.8% 14,485 14,796 2.1%
STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
December 31, September 30,
2002 2003
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $49,135 $63,935
Marketable securities available for sale,
at fair value 18,121 26,033
Income taxes receivable -- 2,210
Tuition receivable, net of allowances
for doubtful accounts 25,759 36,772
Student loans receivable, net of allowances
for losses - held for sale -- 9,672
Other current assets 773 1,338
Total current assets 93,788 139,960
Student loans receivable, net of allowances
for losses 9,453 --
Property and equipment, net 36,571 34,307
Restricted cash -- 500
Other assets 312 369
Total assets $140,124 $175,136
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,534 $4,392
Accrued expenses 1,181 1,582
Income taxes payable 1,812 --
Dividends payable 1,507 1,512
Unearned tuition 29,853 42,939
Total current liabilities 37,887 50,425
Deferred income taxes 70 158
Long-term liabilities 1,985 2,194
Total liabilities 39,942 52,777
Commitments and contingencies
Mandatorily redeemable convertible Series
A preferred stock, par value $.01; 6,000,000
shares authorized; 3,758,456 and 3,863,644
shares issued and outstanding at December 31,
2002 and September 30, 2003, respectively 93,807 95,207
Stockholders' equity:
Common stock, par value $.01; 20,000,000
shares authorized; 10,652,412 and 10,735,745
shares issued and outstanding at December 31,
2002 and September 30, 2003 107 107
Additional paid-in capital 58,868 63,059
Retained earnings (accumulated deficit) (52,674) (36,034)
Accumulated other comprehensive income 74 20
Total stockholders' equity 6,375 27,152
Total liabilities and stockholders' equity $140,124 $175,136
STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
For the nine months ended September 30,
2002 2003
Cash flow from operating activities:
Net income $ 17,524 $ 22,570
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of marketable securities -- (135)
Gain on sale of property and equipment -- (1,772)
Amortization of deferred rent (165) 198
Depreciation and amortization 2,652 3,235
Provision for student loan losses 163 141
Deferred income taxes 76 1
Changes in assets and liabilities:
Tuition receivable, net (8,623) (11,013)
Other current assets (956) (444)
Restricted cash -- (500)
Other assets (74) (57)
Accounts payable 1,891 858
Accrued expenses 357 401
Income taxes payable (3,741) (2,638)
Unearned tuition 11,324 13,086
Student loans originated (6,433) (6,460)
Collections on student loans receivable 5,411 6,100
Net cash provided by operating activities 19,406 23,571
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 5,150
Proceeds from sale of marketable securities -- 26,135
Purchases of property and equipment (16,082) (4,349)
Purchases of marketable securities (12,000) (34,000)
Net cash used in investing activities (28,082) (7,064)
Cash flows from financing activities:
Deferred lease incentives 1,313 11
Common dividends paid (1,628) (2,080)
Preferred dividends paid (3,937) (2,445)
Proceeds from exercise of stock options -- 2,807
Issuance cost of preferred stock (29) --
Net cash used in financing activities (4,281) (1,707)
Net increase (decrease) in cash and
cash equivalents (12,957) 14,800
Cash and cash equivalents - beginning of period 58,705 49,135
Cash and cash equivalents - end of period $ 45,748 $ 63,935
SOURCE Strayer Education, Inc.
Mark C. Brown, Senior Vice President and Chief Financial Officer, +1-703-247-2514, or Sonya Udler, Vice President, Corporate Communications, +1-703-247-2517, sonya.udler@strayer.edu, both of Strayer Education, Inc.
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