STRA

Strayer Education, Inc. (STRA)

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Strayer Education (STRA)

Q4 2010 Earnings Call

February 17, 2011 10:00 am ET

Executives

Karl McDonnell - President and Chief Operating Officer

Sonya Udler - Senior Vice President of Corporate Communications

Robert Silberman - Chairman of the Board and Chief Executive Officer

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

Analysts

Brandon Dobell - William Blair & Company L.L.C.

Ariel Sokol - UBS Investment Bank

Robert Craig - Stifel, Nicolaus & Co., Inc.

Amy Junker - Robert W. Baird & Co. Incorporated

Jeffrey Silber - BMO Capital Markets U.S.

Andrew Steinerman - JP Morgan Chase & Co

Sara Gubins - BofA Merrill Lynch

Peter Appert - Piper Jaffray Companies

Arvind Bhatia - Sterne Agee & Leach Inc.

Thomas Allen

Robert Wetenhall - RBC Capital Markets, LLC

Peter Wahlstrom - Goldman Sachs

Trace Urdan - Signal Hill Capital Group LLC

Gary Bisbee - Barclays Capital

Presentation

Operator

Good morning, everyone, and welcome to Strayer Education Inc.'s Fourth Quarter and Full Year 2010 Earnings Results Conference Call. [Operator Instructions] 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.

Sonya 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 www.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 Friday, February 25. The replay is available at (800) 642-1687, conference ID 38456711. 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 filings with the Securities and 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 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 may be new to Strayer. I'll then ask Mark to report on the detailed financial results for the fourth quarter and the full year of 2010. We already covered our enrollment results for the winter academic term on the call we had in January so I'll just ask Karl to provide a brief update on the operating results. Finally, I'll provide an update on our growth strategy and the company's earnings outlook for Q1 2011.

Strayer Education is an education service company whose primary asset is Strayer University, a 57,000-student, 87-campus postsecondary education institution which offers master's, bachelor's and associate's degrees in Business Administration, Accounting, Computer Science, Public Administration and Education. Unlike traditional universities, Strayer's 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 include the cost of our professors, our admissions and administrative staff, marketing expenses and facilities and supplies costs. We serve students in 18 states through our physical campuses, as well as in all 50 states an over 30 foreign countries through our online courses. Strayer University is accredited by the Middle States Commission on Higher Education. And Mark, will you run through the financials?

Mark Brown

Sure. Revenues for the three months ended December 31, 2010, increased 17% to $172 million compared to $147.2 million for the same period in 2009 due to increased enrollment and a 5% tuition increase, which commenced in January of 2010. Income from operations was $58.9 million compared to $52.4 million for the same period in '09, an increase of 12%.

Operating income margin was 34.3% compared to 35.6% in 2009. Net income was $35.9 million compared to $31.9 million for the same period in '09, an increase of 13%. Diluted earnings per share was $2.73 compared to $2.32 for the same period in '09, an increase of 18%. Diluted weighted average shares outstanding decreased to 13,156,000 from 13,751,000 for the same period in '09. Revenues for the year ended December 31, 2010, increased 24% to $636.7 million compared to $512 million for the prior year, due to increased enrollment and a 5% tuition increase effective for 2010.

Income from operations was $215.8 million compared to $172.4 million for the same period in '09, an increase of 25%. Operating income margin was 33.9% compared to 33.7% in 2009. Net income was $131.3 million compared to $105.1 million in '09, an increase of 25%. Diluted earnings per share was $9.70 compared to $7.60 in '09, an increase of 28%. Diluted weighted average shares outstanding decreased to 13,535,000 from 13,825,000 in 2009.

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