First Marblehead Corporation (The) (FMD)

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The First Marblehead (FMD)

Q4 2013 Earnings Call

August 15, 2013 5:00 pm ET


Suzanne Murray - Managing Director, General Counsel and Secretary

Daniel Maxwell Meyers - Co-Founder, Chairman, Chief Executive Officer, President and Member of Award Committee

Kenneth S. Klipper - Chief Financial Officer, Principal Accounting Officer and Managing Director


Rob Haderer

Ann H. Heffron - Zacks Investment Research Inc.

Michael Tarkan - Compass Point Research & Trading, LLC, Research Division

Brian Gerard Steck - Mangrove Partners

Doug Luchner



Good afternoon, and welcome to the First Marblehead Corporation Fourth Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Suzanne Merry, Managing Director and General Counsel. Please go ahead.

Suzanne Murray

Thank you, and good afternoon. Welcome to First Marblehead's earnings call for the fourth quarter of fiscal 2013. On today's call, we have Dan Meyers, our Chairman and CEO; and Ken Klipper, our CFO.

Before we begin, please note that various remarks that we may make about the company's future financial and operating performance, expectations, plans and prospects, including with regard to Tuition Management Systems, Cology LLC, Union Federal Savings Bank, and Monogram-based loan program, the prospects of the private education finance industry and proceedings related to our federal and state income tax returns, including any challenge to the tax refund previously received as a result of the audit being conducted by the Internal Revenue Service, constitute forward-looking statements for the purposes of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are not a representation by us that the future results, plans, estimates, or expectations expressed or implied by us will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory, competitive and other factors, which may cause our actual results or the timing of events to be materially different from those expressed or implied by our forward-looking statements. Important factors that could cause or contribute to those differences include: demand for our Monogram platform; the successful marketing and sales of our client's Monogram-based loan offerings and the products and services offered by TMS and Cology; the volume, timing and performance of disbursed loans; our success in designing, implementing, commercializing private education loan programs through Union Federal, and our compliance with regulatory approvals and conditions; the general interest rate and consumer credit environment; the resolution of any proceedings relating to state or federal income tax matters, including the audit being conducted by the IRS; and other factors set forth under the caption Risk Factors in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2013.

Any forward-looking statements represent our views only as of August 15, 2013. Although we may elect to update our forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely upon these forward-looking statements as representing our views as of any date subsequent to August 15.

During this call, we'll refer to net operating cash usage, which is a non-GAAP financial measure. A reconciliation to loss from continuing operations before income taxes, the most directly comparable GAAP measure, is included in the earnings press release posted on our website under the heading, For Investors.

I'll now turn the call over to Dan.

Daniel Maxwell Meyers

Thank you, Suzanne, and welcome to this evening's call. During fiscal year 2013, we've made substantial progress executing on our business plan. For the fiscal year, our Monogram loan volume more than doubled as we disbursed $134 million in fiscal 2013, an increase of 110% from fiscal year 2012. Including our subsidiary Cology, the private loan processing company we acquired through an asset acquisition in October 2012, we disbursed a total of $443 million in private loans during fiscal year 2013. Had we owned the operating assets of Cology since the beginning of our fiscal year, disbursed volume run rates would've totaled approximately $658 million for fiscal 2013.

Across the entire company, revenues increased 10% to $44.4 million, and our net operating cash usage was down 20% from fiscal year 2012 levels.

At Tuition Management Systems, we handed -- we handled 4.3 -- $4.1 billion in tuition payments for the year, an increase of 7.5% over the previous year, even after excluding the K-12 school contracts sold to Nelnet in June of 2011. TMS's profitability improved 54% as fee income grew 6%, dollars disbursed grew 7.9%, expenses declined 8% compared to fiscal 2012.

Since the launch of its new campus advantage platform, we assigned nearly 30 refund management clients, along with dozens of payment plans, payment acceptance and student account management clients. We are quite pleased with the early traction these new products have experienced. And we expect them to grow substantially over the coming quarters.

An early example of our success includes a recent signing of Auburn University as a TMS client, where student enrollment exceeds 25,000 students. Our Monogram loan programs continue to enjoy significant school acceptance as our products are now listed on over 1,100 school lender list, an increase of more than 25% from the end of last fiscal year.

Since we launched Monogram, we've received nearly 200,000 loan applications requesting over $2 billion in loans. While Monogram-booked loan volume has more than doubled over the past year, high credit quality of the portfolio persists.

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