Corinthian Colleges Inc. (COCO)

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Corinthian Colleges (COCO)

Q3 2013 Earnings Call

April 30, 2013 12:00 pm ET


Anna Marie Dunlap - Senior Vice President of Investor Relations and Corporate Communications

Jack D. Massimino - Chairman of the Board and Chief Executive Officer

Robert C. Owen - Chief Financial Officer and Executive Vice President


Paul Ginocchio - Deutsche Bank AG, Research Division

Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division

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

Jeffrey M. Silber - BMO Capital Markets U.S.

Jackson Turner



Good day, ladies and gentlemen, and welcome to the Third Quarter Fiscal 2013 Corinthian Colleges Earnings Conference Call. My name is Said, and I will be your conference coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would like to turn the conference over to your host for today, Ms. Anna Marie Dunlap, Senior Vice President of Investor Relations. Please proceed, ma'am.

Anna Marie Dunlap

Thanks, Said. Good day, everyone, and thanks for joining us. I'm here today with Jack Massimino, Chairman and Chief Executive Officer; Bob Owen, Chief Financial Officer; and Ken Ord, Chief Administrative Officer. This call is being webcast, and an audio version of the call and transcript will be available on Corinthian's website for 30 days. In addition, the telephonic replay of the call will be available until Monday, May 5. The details for accessing the replay are included in the press release we issued this morning. Please note that during this conference call, we may make projections or other forward-looking statements regarding a variety of issues. These statements are based upon current information and expectations. Actual results may differ materially based on a number of risk factors, which we have identified in our filings with the SEC. And with that, I'll turn the time over to you, Jack.

Jack D. Massimino

Thanks, Anna Marie, and hello to everyone on the call. Before discussing our third quarter results, I want to comment on 2 new additions to our Board of Directors: Leon Panetta and Marc Morial. As we announced earlier today, our board voted unanimously to appoint both of these gentlemen to our Board of Directors. Secretary Panetta left our board in 2008 when he was asked by President Obama to head up the Central Intelligence Agency. After serving as Director of the CIA, Leon was appointed U.S. Secretary of Defense. During 3 decades of distinguished public service, he's proven to be a man of uncommon intelligence, judgment and character. He's visited our schools and believes that institutions like ours have an important role to play in providing access to career education. We're delighted that we can once again call upon his experience and insight. Marc Morial is President and Chief Executive Officer of the National Urban League, one of the nation's largest and most influential civil rights organizations. From 1994 to 2002, he served as Mayor of New Orleans. Throughout his career, he's been a tireless and effective advocate for African Americans and other minority groups. Marc has a deep understanding of the student population we serve. He too has visited our schools and spoken with our students, instructors and graduates. He shares our commitment to quality career education and understands the vital importance in creating economic opportunities. We believe he will also be a valuable addition to our board.

I'll move now to the highlights of our operational performance. The third quarter can best be described as steady as she goes, with a continuing focus on student outcomes and a number of ongoing initiatives to strengthen operations, diversify revenue and increase our student population. Here are a few headlines. Our graduate placement rate, the most important metric in the company, remains steady in a challenging labor market. New student enrollment, excluding Ability-To-Benefit students, was slightly positive in the third quarter compared with the same period last year. Our total student population was down due to the loss of Ability-To-Benefit students, but our non-ATB student population has been stabilizing relative to industry peers over the past few quarters. In online learning, we increased staffing in our admissions and student financing departments during the quarter and achieved a sequential improvement in new enrollment growth. The Department of Education recently published draft 2010 cohort default rates under the new 3-year measurement rule, and we were, as expected, well below federal thresholds. In the third quarter, bad debt as a percent of revenue returned to a normalized level after a temporary spike earlier in the fiscal year. Moving now to some of our key third quarter metrics. Our total new student enrollment declined 5.7% in the third quarter versus the same quarter last year, in line with our previous guidance. New enrollment of non-ATB students increased 1.3% for the third quarter and increased 4.1% fiscal year-to-date versus the same period last year. To help increase our student population in the ground schools, we continue to implement new diploma level programs and offer free GED programs to the general public. During the quarter, we also continued to accept transfer students from competitor school closures and expect to see more of these closures in the months ahead.

In terms of revenue and earnings per share, our third quarter results were within our previous guidance ranges. For continuing operations, our third quarter revenue was $400.2 million and diluted earnings per share were $0.04, excluding severance charges of $0.01 per share. As we move through the rest of our discussion today, I'll cover the quarter's results as it relates to student outcomes, enrollment trends, our growth plan, followed by an update on regulatory matters. Bob will then review the third quarter operational and financial metrics and provide guidance for the fourth quarter and full fiscal year.

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