STRA

Strayer Education, Inc. (STRA)

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Strayer Education (STRA)

Q1 2011 Earnings Call

April 28, 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

Ariel Sokol - UBS Investment Bank

Maria Karahalis - Goldman Sachs Group Inc.

Jerry Herman - Stifel, Nicolaus & Co., Inc.

Jeffrey Silber - BMO Capital Markets U.S.

Andrew Steinerman - JP Morgan Chase & Co

Kelly Flynn - Crédit Suisse AG

Peter Appert - Piper Jaffray Companies

Sara Gubins - BofA Merrill Lynch

Robert Wetenhall - RBC Capital Markets, LLC

Suzanne Stein - Morgan Stanley

Gordan Lasic - Robert W. Baird & Co. Incorporated

Trace Urdan - Signal Hill Capital Group LLC

Gary Bisbee - Barclays Capital

Presentation

Operator

Good morning, everyone, and welcome to Strayer Education Inc.'s First Quarter 2011 Earnings Results Conference Call. This call is being recorded. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Strayer Education 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 Thursday, May 5. The replay is available at (800) 642-1687, conference ID 54712198. 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 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 are new to Strayer. I'll ask Mark to report on the first quarter financial results, and Karl to comment on our operational results, including our enrollment statistics for the spring academic term. And finally, I'll provide an update on our growth strategy and the company's earnings outlook for Q2.

Strayer Education is an education service company whose primary asset is Strayer University, a 55,000-student, 90-campus postsecondary education institution founded in 1892 which offers bachelors, masters and associates decrease 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 further their careers and improve their lives. 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 cost of our professors, our admissions and administrative staff, marketing expenses and facilities and supplies costs. We serve students in 20 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. Now Mark, run along through the financials?

Mark Brown

Sure. Before walking everyone through our financial results, I would like to highlight the changes in the financial statement presentation, which we implemented beginning in the first quarter of this year. The company changed its presentation of operating expenses and reclassified prior periods to conform to the current presentation. Specifically, we divided the marketing and admissions expense into 2 separate line items. We also grouped all campus-related expenses, except for admissions in the instruction and educational support line. Bad debt expense, which had been included in G&A, is now included in the instruction and educational support line.

Also effective during the first quarter of 2011, the company changed its presentation of tuition receivable and unearned tuition in the balance sheet. Prior to the change, the company recorded tuition receivable and unearned tuition upon registration of the student. Effective with this change, tuition receivable and unearned tuition are not recorded until the start of the academic term. Therefore, at the end of our reporting quarters and our academic terms, our tuition receivable will now represent amounts due from students for educational services already provided, while unearned tuition will represent advanced payments received from students for academic services to be provided in the future.

We believe these changes are preferable because they provide more meaningful information, increased transparency of our operations and improve the comparability of results with others in our sector. The changes have been reported retrospectively for all periods presented and had no impact on income from operations, net income, EPS, working capital, retained earnings, stockholders equity or our net cash provided by operating activities, nor did they affect the company's revenue recognition policies. Now I'll share with you our financial results for the quarter.

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