Market Overview

Strayer Education, Inc. Reports Second Quarter Enrollment, Revenues and Earnings; Q3 2017 Enrollment Outlook

Share:

--Middle States Reaffirms Strayer University's Regional
Accreditation--

--Strayer University Second Quarter New Enrollment Up 8%, Total
Enrollments Up 6%--

Strayer Education, Inc. (NASDAQ:STRA) today announced financial results
for the period ended June 30, 2017. Financial highlights are as follows:

Three Months Ended June 30

  • During the second quarter, student enrollment at the Company's main
    operating unit, Strayer University, increased 6% to 43,411, compared
    to 41,029 for the same period in 2016. New student enrollment for the
    period increased 8% and continuing student enrollment increased 5%.
  • Revenues increased 4% to $112.7 million compared to $108.5 million for
    the same period in 2016, principally due to higher enrollment
    partially offset by lower revenue per student.
  • Income from operations was $13.9 million compared to $12.9 million for
    the same period in 2016, an increase of 7%. Excluding noncash
    adjustments, income from operations was $11.9 million compared to
    $12.8 million for the same period in 2016. The noncash adjustments are
    associated with a reduction to the value of contingent consideration
    related to the Company's acquisition of the New York Code & Design
    Academy, and adjustments to the Company's reserve for leases on
    facilities no longer in use. Operating margin was 12.3%, compared to
    11.9% for the same period in 2016. Excluding the noncash adjustments,
    operating income margin was 10.5% compared to 11.8% for the same
    period in 2016.
  • Net income was $10.3 million compared to $7.8 million for the same
    period in 2016, an increase of 32%. Excluding the noncash adjustments,
    net income was $8.2 million compared to $7.7 million for the same
    period in 2016.
  • Diluted earnings per share was $0.92 compared to $0.72 for the same
    period in 2016, an increase of 28%. Excluding the noncash adjustments,
    diluted earnings per share was $0.73 compared to $0.71 for the same
    period in 2016. Diluted weighted average shares outstanding increased
    4% to 11,190,000 from 10,799,000 for the same period in 2016.

Six Months Ended June 30:

  • Revenues increased 4% to $227.6 million compared to $219.7 million for
    the same period in 2016, principally due to higher enrollment
    partially offset by lower revenue per student.
  • Income from operations was $32.3 million compared to $33.0 million for
    the same period in 2016, a decrease of 2%. Excluding the noncash
    adjustments, income from operations was $30.3 million compared to
    $31.3 million for the same period in 2016. Operating income margin was
    14.2%, compared to 15.0% for the same period in 2016. Excluding the
    noncash adjustments, operating income margin was 13.3% compared to
    14.2% for the same period in 2016.
  • Net income was $20.9 million compared to $20.2 million for the same
    period in 2016, an increase of 3%. Excluding the noncash adjustments,
    net income was $18.8 million compared to $19.1 million for the same
    period in 2016.
  • Diluted earnings per share was $1.87 for 2017 and for 2016. Excluding
    the noncash adjustments, diluted earnings per share was $1.68 compared
    to $1.77 for the same period in 2016. Diluted weighted average shares
    outstanding increased 3% to 11,155,000 from 10,790,000 for the same
    period in 2016.

Balance Sheet and Cash Flow

At June 30, 2017, the Company had cash and cash equivalents of $147.9
million and no debt. The Company generated $32.8 million in cash from
operating activities in the first six months of 2017 compared to $22.4
million during the same period in 2016. Capital expenditures for the
first six months of 2017 were $8.4 million, compared to $3.9 million for
the same period in 2016.

The Company had $70.0 million of share repurchase authorization
remaining at June 30, 2017. No shares were repurchased in the second
quarter of 2017.

For the second quarter of 2017, bad debt expense as a percentage of
revenues was 4.5%, compared to 3.8% for the same period in 2016.

Q3 Enrollment Outlook

Total enrollments at Strayer University for the third quarter 2017 are
anticipated to grow 7% to approximately 41,600 students from 38,813
students for the same period in 2016. New student enrollments are
expected to increase approximately 7%, while continuing student
enrollments are expected to increase approximately 8%. Revenue per
student for the third quarter is expected to decrease between 1% and 2%.

Accreditation

During the second quarter, the Middle States Commission on Higher
Education (Middle States) reaffirmed Strayer University's regional
accreditation, with no required follow-up reporting. Middle States found
that Strayer is in full compliance with all fourteen of its Standards of
Excellence. The Standards of Excellence constitute Middle States'
qualitative measures of institutional performance. The Middle States
accreditation is for eight years, during which time the University will
submit annual reports, and the University's next review will be in
2025-26.

Additionally during the second quarter, the Commission on Collegiate
Nursing Education (CCNE) granted accreditation to Strayer University's
RN to BSN program. This specialized, programmatic accreditation is for
five years, through June 2022, with the University's next on-site
evaluation in fall 2021. CCNE's accreditation recognizes that the
program engages in effective educational practice in nursing and
effective educational preparation of members of the nursing profession.

Stock-based Compensation Activity

In May 2017, the Company awarded 7,541 shares of restricted stock 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 $86.83 on the date of these restricted stock grants.

Common Stock and Common Stock Equivalents

At June 30, 2017, the Company had 11,167,425 common shares issued and
outstanding, including 466,318 shares of restricted stock. The Company
also had 250,000 restricted stock units outstanding and 100,000 vested
stock options outstanding.

Common Stock Cash Dividend

The Company announced today that its Board of Directors had declared a
regular, quarterly cash dividend of $0.25 per share of common stock.
This dividend will be paid on September 18, 2017 to shareholders of
record as of September 5, 2017.

Conference Call with Management

Strayer Education, Inc. will host a conference call to discuss its
second quarter 2017 earnings results at 10:00 a.m. (ET) today. To
participate on the live call, investors should dial (877) 303-9047 ten
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 educating a more competitive and
qualified workforce by solving higher education's most challenging
problems. It includes Strayer
University
, a regionally accredited institution that delivers
affordable degree programs for working adults, and a Top
25 Princeton Review-ranked executive MBA program
through the Jack
Welch Management Institute
. Non-degree web and mobile application
development courses are offered through the New
York Code + Design Academy
. Strayer also transforms the workforces
of its corporate partners through customized degree and professional
development programs. By deploying innovative teaching methods and
technologies that enhance student learning outcomes, Strayer makes it
possible for working adults to acquire the skills they need to succeed
in today's rapidly changing economy.

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," "outlook," "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, the Company's 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, the Company's
ability to implement its growth strategy, risks associated with the
ability of the University's 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, 2016 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. The Company
undertakes 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 ended
June 30,

For the six months ended
June 30,

2016   2017 2016   2017
Revenues $ 108,487 $ 112,720 $ 219,653 $ 227,632
Costs and expenses:
Instruction and educational support 61,782 61,656 119,880 123,072
Marketing 17,748 19,226 36,046 37,944
Admissions advisory 4,131 4,779 8,480 9,495
General and administration   11,930   13,205   22,259   24,824
Total costs and expenses   95,591   98,866   186,665   195,335
Income from operations 12,896 13,854 32,988 32,297
Investment income 112 253 212 434
Interest expense   160   160   320   319
Income before income taxes 12,848 13,947 32,880 32,412
Provision for income taxes   5,062   3,645   12,674   11,532
Net income $ 7,786 $ 10,302 $ 20,206 $ 20,880
 
Earnings per share:
Basic $ 0.73 $ 0.96 $ 1.91 $ 1.96
Diluted $ 0.72 $ 0.92 $ 1.87 $ 1.87
 
Weighted average shares outstanding:
Basic 10,610 10,680 10,603 10,655
Diluted 10,799 11,190 10,790 11,155
 

       

STRAYER EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

 
December 31, June 30,
2016 2017
ASSETS
Current assets:
Cash and cash equivalents $ 129,245 $ 147,867
Tuition receivable, net 20,532 20,342
Income taxes receivable 1,485
Other current assets   10,766   10,357
Total current assets 160,543 180,051
Property and equipment, net 73,124 72,706
Deferred income taxes 31,096 32,441
Goodwill 20,744 20,744
Other assets   13,189   12,540
Total assets $ 298,696 $ 318,482
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 41,132 $ 41,286
Income taxes payable 1,883
Deferred revenue 16,691 20,017
Other current liabilities   133  
Total current liabilities 59,839 61,303
Other long-term liabilities   50,483   47,978
Total liabilities   110,322   109,281
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.01, 20,000,000 shares authorized;
11,093,489 and 11,167,425 shares issued and outstanding at
December 31, 2016 and June 30, 2017, respectively 111 112
Additional paid-in capital 35,453 41,106
Retained earnings   152,810   167,983
Total stockholders' equity   188,374   209,201
Total liabilities and stockholders' equity $ 298,696 $ 318,482
 

   

STRAYER EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 
For the six months ended

June 30,

2016     2017
Cash flows from operating activities:
Net income $ 20,206 $ 20,880
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of gain on sale of assets (140 ) (133 )
Amortization of deferred rent (446 ) (859 )
Amortization of deferred financing costs 131 131
Depreciation and amortization 8,873 8,975
Deferred income taxes (2,158 ) (1,560 )
Stock-based compensation 4,926 5,654
Changes in assets and liabilities:
Tuition receivable, net 245 (137 )
Other current assets (1,466 ) 409
Other assets (2,639 ) 829
Accounts payable and accrued expenses (726 ) 559
Income taxes payable (3,314 ) (3,153 )
Deferred revenue 3,313 4,356
Other long-term liabilities   (4,380 )   (3,187 )
Net cash provided by operating activities   22,425     32,764  
 
Cash flows from investing activities:
Purchases of property and equipment (3,852 ) (8,435 )
Cash used in acquisition, net of cash acquired   (7,635 )    
Net cash used in investing activities   (11,487 )   (8,435 )
 
Cash flows from financing activities:
Payments of contingent consideration (405 )
Common dividends paid       (5,707 )
Net cash used in financing activities   (405 )   (5,707 )
Net increase in cash and cash equivalents 10,533 18,622
Cash and cash equivalents - beginning of period   106,889     129,245  
Cash and cash equivalents - end of period $ 117,422   $ 147,867  
 
Non-cash transactions:
Purchases of property and equipment included in accounts payable $ 274 $ 469
 

View Comments and Join the Discussion!