Strayer Education, Inc. (STRA)
Q4 2008 Earnings Call
February 12, 2009 10:00 AM ET
Sonya G. Udler - Senior Vice President, Corporate Communications
Robert S. Silberman - Chairman and Chief Executive Officer
Mark C. Brown - Executive Vice President and Chief Financial Officer
Brandon Dobell - William Blair & Company
Kevin Dorothy - Banc of America
Gary Bisbe - Barclay's Capital
Andrew Fones - UBS
Susie Stein - Morgan Stanley
Mark Marostica - Piper Jaffray
Jerry Herman - Stifel Nicolaus
Andrew Steinerman - J.P. Morgan
Kelly Flynn - Credit Suisse
Cory Greendale - First Analysis
Gordon Lasik - Robert W. Baird
Trace Urdan - Signal Hill Group
Ethan Steinberg - Friess Associates
Todd Young - Morningstar
Previous Statements by STRA
» Strayer Education, Inc. Q3 2009 Earnings Call Transcript
» Strayer Education Inc. Q2 2009 Earnings Call Transcript
» Strayer Education Inc.Q1 2009 Earnings Call Transcript
At this time, for opening remarks and introductions, I would like to turn the call over to Strayer Education's Senior Vice President of Corporate Communications, Ms. Sonya Udler. Ms. Udler, please go ahead ma'am.
Sonya G. Udler
Good morning. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education, and Mark Brown, Executive Vice President and Chief Financial Officer. For those of you that wish to listen to the conference via the internet, please to go to strayereducation.com where the call will be archived for 90 days.
If you are unable to listen to the call in real time, a replay will be available beginning today at 1 PM Eastern Time, through Tuesday February 17. The replay is available at 888-203-1112, passcode 4098443.
Following Strayer's remarks, we will open the call for questions and answers.
Please note that today's press release contains statements that are forward-looking and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act. The statements are based on the company's current expectations and are subject to a number of uncertainties and risks that the company has identified in the press release, and could cause the company's actual results to differ materially.
Further information about these and other relevant uncertainties, maybe found in the company's annual report on Form 10-K and its other filings with the Securities and Exchange Commission.
And now, I'd like to turn the call over to Rob. Rob, please go ahead.
Robert S. Silberman
Thank you Sonya, and good morning ladies and gentlemen. As is our custom; I'd like to begin this morning with a brief overview of both our company and our business model for any listeners who are new to Strayer. I'll then ask Mark to report on the detailed financial results for the fourth quarter and the full year 2008. After which I'll comment on our enrollment results for the 2009 winter academic term. And I'd like to provide an update on our growth strategies and finally end up with the company's earnings outlook for Q1 2009.
Strayer Education, Inc. is an education service company whose primary asset is Strayer University, a 115 year old, 45,000 students, 64 campus, post-secondary education institution, which offers associates Bachelor's and Master's degrees in Business Administration, Accounting, Computer Science, Public Administration and Education.
Strayer students are working adults who are returning to school to further their careers. Our revenue comes from tuition payments and associated fees. Approximately 70% of our revenue comes to us from federally insured Title IV loans issued to our students.
Our expenses at Strayer Education include the cost of our professors, our admissions and administrative staff, marketing expenses, and facilities and supplies costs. We search students in 15 states through our physical campuses, as well as in all 50 states and over 30 foreign countries through our online courses.
Strayer University is accredited by the Middle States Association of Colleges and Schools.
Mark, do you want to run through the financials?
Mark C. Brown
Sure. Revenues for the three months ended December 31, 2008, increased 28% to $114.3 million compared $89.1 million for the same period in '07, due to the increased enrollment and a 5% tuition increase which commenced in January of '08.
Income from operations was $39.4 million compared to $29.2 million for the same period in '07, an increase of 35%.
Operating income margin was 34.5% compared to 32.8% in '07. Net income was $24.2 million compare to $19.5 million for the same period in '07, an increase of 24%.
Diluted earnings per share was $1.71 compared to $1.34 for the same period in '07, an increase of 28%. Diluted weighted average shares outstanding decreased to 14,143,000 from 14,536,000 for the same period in '07. Revenues for the year ended December 31, 2008, increased 25% to $396.3 million compared to $318 million for the same period in '07, due to increased enrolment and a 5% tuition increase effective for 2008.
Income from operations was $126.9 million compared to $97.6 million for the same period in '07, an increase of 30%. Operating income margin was 32% compared to 30.7% in 2007. Net income was $80.8 million compared to $64.9 million in 2007, an increase of 24%. Diluted earnings per share was $5.67 compared to $4.47 in '07, an increase of 27%. Diluted weighted average shares outstanding decreased to 14,242,000 from 14,517,000 in '07.
At December 31, 2008, the company had cash, cash equivalents and marketable securities of a $107 million and no debt. The company reported cash from operating activities of $88.6 million in 2008 compared to $80.8 million in 2007.
However, the company's reported cash from operations for the year ended December 31, 2008, was negatively affected by the timing of divesting of restricted stock in the fourth quarter of 2008. That negative timing effect related to a $13 million tax benefit we reversed itself in the first quarter of 2009.
Capital expenditures in 2008 where $20.7 million compared to $14.9 million in 2007.
During the fourth quarter of '08, the company invested $29.9 million to repurchase 138,100 shares of stock at an average price of $216.21 per share, as a part of our previously announced stock repurchase authorization.
During the year ended December 31, 2008, the company invested $109.1 million to repurchase approximately 603,0400 shares of common stock at an average price of $180.86 per share.
During the year ended December 31, 2008, the company paid regular quarterly dividends of $23.1 million and a special dividend of $28.9 million. The company also received $10.6 million upon the exercise of stock options.
For the fourth quarter of 2008, bad debt expense as a percentage of revenues was 3.8% compared to 3.6% for the same period in '07. Days sales outstanding adjusted to exclude tuition receivables related to future quarters, was 14 days at the end of the fourth quarter of '08 compared to 12 days at the of fourth quarter of '07.