STRA

Strayer Education, Inc. (STRA)

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Exchange: NASDAQ
Industry: Consumer Services
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Strayer Education (STRA)

Q4 2012 Earnings Call

February 14, 2013 10:00 am ET

Executives

Sonya G. Udler - Senior Vice President of Corporate Communications

Robert S. Silberman - Chairman and Chief Executive Officer

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

Karl McDonnell - President, Chief Operating Officer and Director

Analysts

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Zachary Fadem - Barclays Capital, Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

Jason P. Anderson - Stifel, Nicolaus & Co., Inc., Research Division

Kelly A. Flynn - Crédit Suisse AG, Research Division

Timo Connor

Trace A. Urdan - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good morning, everyone, and welcome to Strayer Education, Inc.'s Fourth Quarter and Full Year 2012 Earnings Results Conference Call. This call is being recorded Following today's call, we will offer the opportunity for questions and answers. 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 Communication, Ms. Sonya Udler. Ms. Udler, please go ahead.

Sonya G. Udler

Thank you, operator. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education; Karl McDonnell, President and Chief Operating Officer; 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 go to strayereducation.com, where the call will be archived. Following Strayer's remarks, we will open the call for questions and answers.

I would like to remind everyone that today's press release contains and certain information on this call may contain 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 paragraph on forward-looking statements at the end of its press release and that could cause the company's actual results to differ materially.

Further information about these and other relevant uncertainties may be found in the company's annual report on Form 10-K and its other filings with the Securities Exchange Commission. Copies of these filings and the full press release are available online and upon request from the company's Corporate Communications department.

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. Mark will comment on our company's financial results for the fourth quarter and the full year of 2012. I'll then ask Karl McDonnell, our newly designated Chief Executive Officer, to provide an update on our operating results, as well as provide the company's earnings outlook for Q1 2013. Finally, I'll provide some comments on both capital allocation over the last year and on our announcement this morning regarding leadership transition.

Strayer Education is an education service company, whose primary asset is Strayer University, a 50,000-student, 100-campus post secondary education institution, which offers masters, bachelors and associates degrees in business administration, accounting, computer science, public administration and education. Unlike traditional universities, Strayer students are working adults, who are returning to school to further their careers.

Our revenue comes from tuition payments and associated fees. Approximately 75% of that revenue comes to us from federal Title IV loans issued to our students.

Our expenses at Strayer Education include the costs of our professors, our admissions and administrative staff, marketing expenses and facilities and supplies costs. We serve students in 23 states through our 100 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 Commission on Higher Education.

Now, Mark, will you run through the financials?

Mark C. Brown

Sure. Revenues for the 3 months ended December 31, 2012, decreased 9% to $141.9 million compared to $155.8 million for the same period in 2011, principally due to lower enrollment and lower revenue per student. Income from operations was $28.7 million compared to $45.4 million for the same period in 2011, a decrease of 37%. Operating income margin was 20.2% compared to 29.1% in 2011. Net income was $16.6 million compared to $26.7 million for the same period in 2011, a decrease of 38%.

Diluted earnings per share was $1.47 compared to $2.30 for the same period in 2011, a decrease of 36%. Diluted weighted average shares outstanding decreased 2% to 11,314,000 from 11,592,000 for the same period in 2011.

Revenues for the year ended December 31, 2012, decreased 10% to $562 million compared to $627.4 million for the same period in 2011, principally due to lower enrollment.

Income from operations was $113.6 million compared to $179.1 million for the same period in 2011, a decrease of 37%. Operating income margin was 20.2% compared to 28.6% in 2011.

Net income was $65.9 million compared to $106 million in 2011, a decrease of 38%. Diluted earnings per share was $5.76 compared to $8.88 in 2011, a decrease of 35%. Diluted weighted average shares outstanding decreased 4% to 11,440,000 from 11,943,000 in 2011. Rob?

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