Strayer Education, Inc. Reports Third Quarter 2012 Revenues and Earnings; and Fall Term 2012 Enrollm

Strayer Education, Inc. Reports Third Quarter 2012 Revenues and Earnings; and Fall Term 2012 Enrollments

-- Third Quarter Diluted EPS $0.36 --


-- Fall 2012 Total Enrollments Down 5% / New Students Increase 4% --

-- Share Repurchase Authorization Increased to $120 Million --

HERNDON, Va.--(BUSINESS WIRE)-- Strayer Education, Inc. (NAS: STRA) today announced financial results for the three months ended September 30, 2012. Financial highlights are as follows:

Three Months Ended September 30

  • Revenues for the three months ended September 30, 2012 decreased 9% to $124.3 million, compared to $135.9 million for the same period in 2011, principally due to lower enrollment.

  • Income from operations was $7.8 million compared to $24.4 million for the same period in 2011, a decrease of 68%. Operating income margin was 6.3% compared to 18.0% for the same period in 2011.

  • Net income was $4.1 million compared to $13.9 million for the same period in 2011, a decrease of 71%. Diluted earnings per share was $0.36 compared to $1.20 for the same period in 2011, a decrease of 70%. Diluted weighted average shares outstanding decreased 1% to 11,487,000 from 11,647,000 for the same period in 2011.

Nine Months Ended September 30

  • Revenues for the nine months ended September 30, 2012 decreased 11% to $420.0 million, compared to $471.6 million for the same period in 2011, principally due to lower average enrollments.

  • Income from operations was $84.9 million compared to $133.8 million for the same period in 2011, a decrease of 37%. Operating income margin was 20.2% compared to 28.4% for the same period in 2011.

  • Net income was $49.3 million compared to $79.4 million for the same period in 2011, a decrease of 38%. Diluted earnings per share was $4.29 compared to $6.58 for the same period in 2011, a decrease of 35%. Diluted weighted average shares outstanding decreased 5% to 11,482,000 from 12,055,000 for the same period in 2011.

Balance Sheet and Cash Flow

At September 30, 2012, the Company had cash and cash equivalents of $45.6 million. The Company generated $57.2 million from operating activities in the first nine months of 2012 compared to $122.7 million during the same period in 2011. Capital expenditures were $18.2 million for the nine months ended September 30, 2012 compared to $24.9 million for the same period in 2011. At September 30, 2012, the Company had $77.5 million outstanding under its term loan and $25 million outstanding under its revolving credit facility.

During the nine months ended September 30, 2012, the Company paid regular, quarterly dividends of $35.6 million ($1.00 per share for each quarterly dividend). The Company had $80 million of share repurchase authorization remaining at September 30, 2012. No shares were repurchased in the third quarter of 2012.

For the third quarter 2012, bad debt expense as a percentage of revenues was 4.2% compared to 3.8% for the same period in 2011. Days sales outstanding was 18 days at the end of the third quarter of 2012, compared to 14 days at the end of the third quarter of 2011.

Student Enrollment

Enrollment at Strayer University for the 2012 fall term decreased 5% to 51,727 students compared to 54,233 students for the same term in 2011. Across the Strayer University campus and online system, new student enrollments increased 4%, while continuing student enrollments decreased 7%. Global online students increased 13%. Students taking 100% of their classes online (including campus based students) decreased 4%.

Student Enrollment

Fall

Fall

%

2011

2012

Change

Campus Based Students:

New Campuses (26 in operation 3 years or less)

Classroom Students

1,400

2,021

44%

Online Students

1,778

2,429

37%

Total New Campus Based Students

3,178

4,450

40%

Mature Campuses (71 in operation more than 3 years)

Classroom Students

20,416

18,433

-10%

Online Students

25,535

23,094

-10%

Total Mature Campus Based Students

45,951

41,527

-10%

Total Campus Based Students

49,129

45,977

-6%

Global Online Students

5,104

5,750

13%

Total University Enrollment

54,233

51,727

-5%

Total Students Taking 100% of Courses Online

32,417

31,273

-4%

New Campus Openings

The Company announced today that Strayer University successfully opened one new campus for the fall academic term, which is located in San Antonio, Texas, a new market for Strayer University. Subject to regulatory approval, the Company plans to open three new campuses during the remainder of the year for a total of eight new campuses in 2012. These three planned new campuses will be located in Houston, Texas, the University's third campus in that market, and in St. Louis and Kansas City, Missouri, both new markets for the University.

2012 Business Outlook

Based on enrollments announced for the 2012 fall term, the Company estimates fourth quarter 2012 diluted earnings per share will be in the range of $1.43 to $1.45. Based on its fourth quarter 2012 estimates, the Company expects its full year 2012 diluted earnings per share will be in the range of $5.73 to $5.75.

New Term Loan and Revolving Credit Facility

The Company announced today that on November 8, 2012, it entered into an amended and restated revolving credit and term loan agreement. This credit facility, which is secured by the assets of the Company, provides for a $125.0 million term loan facility and $100.0 million revolving credit facility with a maturity date of December 31, 2016. Proceeds from the new term loan were used to pay off $77.5 million outstanding under the original term loan facility. The Company had no outstanding balance under the revolving credit facility on the day of closing.

2013 Business Model

The Company announced today that Strayer University will implement a 3% tuition increase effective January 2013, but is assuming roughly flat revenue per student in 2013 due to the University's continued mix shift towards graduate and corporate sponsored students, as well as continued targeted use of scholarships. The Company also announced today that it expects Strayer University's expenses to grow 1% to 2% in 2013, reflecting the annualization of operating costs at the eight new campuses opened during 2012, but that no additional campuses are currently planned for 2013. Therefore, the Company expects that at the 2012 revenue level, anticipated 2013 expenses would lead to a 19-20% operating margin in 2013, and EPS in the $5.40-$5.60 range. Each 1% increase (or decrease) in revenue from 2012 levels in 2013 will have an approximate 50 basis points positive (or negative) impact on operating margin, and an approximate $0.20 positive (or negative) impact on earnings per share. Finally, this model assumes an effective tax rate of 39.5% and 11,500,000 diluted shares outstanding.

Capital Allocation

The Company announced today that its Board of Directors declared a regular, quarterly cash dividend of $1.00 per share to be paid on December 10, 2012 to shareholders of record as of November 26, 2012. The Company also announced that it does not currently intend to pay a regular quarterly dividend in 2013. In addition, the Company announced that the Company's Board of Directors amended its share repurchase program to authorize the repurchase of up to $120 million in value of the Company's common stock. The Company had $80 million left under its authorization at September 30, 2012 and at the time the new authorization was approved by the Company's Board of Directors. The Company intends to conduct such purchases, if any, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. This share repurchase program may be modified, suspended or terminated at any time by the Company without notice.

Shares and Options Outstanding

At September 30, 2012, the Company had 11,873,156 common shares issued and outstanding, and 100,000 stock options outstanding with an exercise price of $107.28 and a remaining contractual life of four months.

Conference Call with Management

Strayer Education, Inc. will host a conference call to discuss its third quarter 2012 earnings at 9:00 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 over the Internet. 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. An archived replay of the conference call will be available at (855) 859-2056 (conference id 39822150) starting at 1:00 p.m. (ET) today and will be available through Friday, November 23, and archived at www.strayereducation.com for 90 days.

About Strayer Education, Inc.

Strayer Education, Inc. (NAS: 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 at 97 campuses in 23 states and Washington, D.C. and worldwide via the Internet. Strayer University also offers an executive MBA online 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 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, 2011 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

For the nine months

ended September 30,

ended September 30,

2011

2012

2011

2012

Revenues

$

135,865

$

124,260

$

471,610

$

420,046

Costs and expenses:

Instruction and educational support

68,170

72,997

219,519

222,413

Marketing

23,351

23,171

55,634

53,693

Admissions advisory

6,533

6,487

20,174

19,733

General and administration

13,406

13,769

42,508

39,345

Income from operations

24,405

7,836

133,775

84,862

Investment income

5

1

149

4

Interest expense

1,209

1,055

2,559

3,373

Income before income taxes

23,201

6,782

131,365

81,493

Provision for income taxes

9,266

2,679

51,992

32,190

Net income

$

13,935

$

4,103

$

79,373

$

49,303

Earnings per share:

Basic

$

1.20

$

0.36

$

6.61

$

4.31

Diluted

$

1.20

$

0.36

$

6.58

$

4.29

Weighted average shares outstanding:

Basic

11,623

11,433

12,016

11,428

Diluted

11,647

11,487

12,055

11,482

Shares outstanding at end of quarter

12,006

11,873

12,006

11,873

Dividends per share (paid)

$

1.00

$

1.00

$

3.00

$

3.00

STRAYER EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

December 31,

September 30,

2011

2012

ASSETS

Current assets:

Cash and cash equivalents

$

57,137

$

45,609

Tuition receivable, net of allowances for doubtful accounts of $7,279 and $7,373 at December 31, 2011 and September 30, 2012, respectively

25,006

24,109

Income taxes receivable

394

7,964

Other current assets

12,131

14,255

Total current assets

94,668

91,937

Property and equipment, net

121,149

122,620

Deferred income taxes

3,326

5,615

Goodwill

6,800

6,800

Other assets

5,190

4,642

Total assets

$

231,133

$

231,614

LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

34,039

$

40,362

Unearned tuition

15,364

1,163

Other current liabilities

281

281

Current portion of term loan

27,500

30,000

Total current liabilities

77,184

71,806

Revolving credit facility

20,000

25,000

Term loan, less current portion

70,000

47,500

Other long-term liabilities

21,656

22,315

Total liabilities

188,840

166,621

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01; 20,000,000 shares authorized; 11,792,456 and 11,873,156 shares issued and outstanding at December 31, 2011 and September 30, 2012, respectively

118

119

Additional paid-in capital

295

9,234

Retained earnings

42,491

56,185

Accumulated other comprehensive income (loss)

(611

)

(545

)

Total stockholders' equity

42,293

64,993

Total liabilities and stockholders' equity

$

231,133

$

231,614

STRAYER EDUCATION, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

For the nine months ended

September 30,

2011

2012

Cash flows from operating activities:

Net income

$

79,373

$

49,303

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

Amortization of gain on sale of assets

(211

)

(210

)

Amortization of deferred rent

885

173

Gain on sale of marketable securities

(66

)

--

Amortization of deferred financing costs

463

599

Depreciation and amortization

15,779

17,857

Deferred income taxes

941

(2,827

)

Stock-based compensation

9,798

9,358

Changes in assets and liabilities:

Tuition receivable, net

811

897

Other current assets

(2,580

)

(1,992

)

Other assets

80

(134

)

Accounts payable and accrued expenses

4,505

5,307

Income taxes payable and income taxes receivable

1,585

(7,630

)

Unearned tuition

11,089

(14,201

)

Other long-term liabilities

297

746

Net cash provided by operating activities

122,749

57,246

Cash flows from investing activities:

Purchases of property and equipment

(24,887

)

(18,165

)

Purchases of marketable securities

(2

)

--

Proceeds from the sale of marketable securities