STRA

Strayer Education, Inc. (STRA)

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Exchange: NASDAQ
Industry: Consumer Services
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Strayer Education, Inc. (STRA)

Q2 2010 Earnings Call

July 29, 2010 10:00 am ET

Executives

Sonya Udler - SVP of Corporate Communications

Robert Silberman - Chairman & CEO

Karl McDonnell - President & COO

Mark Brown - EVP & CFO

Analysts

Andrew Steinerman - JPMorgan

Sara Gubins - Bank of America

Amy Junker - Rober W. Baird

Kelly Flynn - Credit Suisse

Gary Bisbee - Barclays Capital

Bob Wetenhall - RBC

Jeff Silber - BMO Capital Markets

Brandon Dobell - William Blair

Bob Craig- Stifel Nicolaus

Kelly Flynn - Credit Suisse

Presentation

Operator

Good day, everyone. And welcome to today’s Strayer Education Incorporated Second Quarter 2010 Earnings Results Conference. Just as a reminder, today’s call is being recorded. Following today’s presentation, we will offer the opportunity for questions-and-answers. As 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.

Sonya Udler

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 for 90 days. If you are unable to listen to the call in real time, a replay will be available beginning today at 1:00 p.m. Eastern through Wednesday, August 4th. The replay is available at 888-203-1112, pass code 4187238. 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 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 and Exchange Commission.

And now I’d like to turn the call over to Rob. Rob, please go ahead.

Robert 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 our second quarter financial results and Karl to comment on our second quarter operational results as well as our enrollment statistics for the summer academic term.

Finally, I’d provide an update on our growth strategy and the company’s earnings outlook for Q3 2010 and some thoughts on the department of Education recently published notice and proposed rule making. Strayer Education, is an education service company whose primary asset is Strayer University, a 55,000 student, 80 campus post-secondary education institution founded in 1892, which offers Bachelor’s, Master’s, and Associates degrees in business administration, accounting, computer science, public administration, and education. Unlike traditional universities, Strayer University students are working adults, who are returning to college and graduate school to improve their lives. Our revenue comes from tuition payments and associated fees. Approximately 70% of that 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 serve students in 15 states through 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.

Mark, you want to run them through the financials?

Mark Brown

Sure. Revenues for the three months ended June 30, 2010 increased 26% to $159.3 million, compared to $125.9 million for the same period in 2009, due to increased enrollment and a 5% tuition increased which commenced at the beginning of this year. Income from operations was $58.7 million, compared to $45.1 million for the same period in 2009, an increase of 30%. Operating income margin was 36.8% compared to 35.8% for the same period in ‘09. Net income was $35.7 million, compared to $27.5 million for the same period in 2009 an increase of 30%.

Diluted earnings per share was $2.60, compared to $2 for the same period in 2009, an increase of 30%. Diluted weighted average shares outstanding decreased to 13,704,000 from 13,771,000 for the same period in ‘09. Revenues for the six months ended June 30th, 2010 increased 27%, to $317.2 million, compared to $250.4 million for the same period in 2009. Due to increased enrollment and a 5% tuition increased which commenced in January of this year. Income from operations was $118.6 million, compared to $92.7 million for the same period in ‘09, an increase of 28%. Operating income margin was 37.4%, compared to 37% for the same period in ‘09. Net income was $72 million, compared to $56.6 million for the same period in ‘09, an increase of 27%. Diluted earnings per share was $5.25, compared to $4.07 for the same period in ‘09, an increase of 29%. Diluted weighted average shares outstanding decreased to 13,716,000, from 13,886,000 for the same period in 2009.

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