STRA

Strayer Education, Inc. (STRA)

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Strayer Education (STRA)

Q4 2011 Earnings Call

February 16, 2012 10:00 am ET

Executives

Sonya G. Udler - Senior Vice President of Corporate Communications

Robert S. Silberman - Chairman of the Board and Chief Executive Officer

Karl McDonnell - President, Chief Operating Officer and Director

Analysts

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

George K. Tong - Piper Jaffray Companies, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

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

Corey Greendale - First Analysis Securities Corporation, Research Division

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

Trace A. Urdan - Wunderlich Securities Inc., Research Division

Patrick Elgrably - Crédit Suisse AG, Research Division

Presentation

Operator

Good morning, everyone, and welcome to Strayer Education Inc's Fourth Quarter and Full Year 2011 Earnings Results Conference Call. This call is being recorded. [Operator Instructions] At this time for opening remarks and introductions, I'd like to turn the call over to Strayer Education Senior Vice President of Corporate Communications, Ms. Sonya Udler. Ms Udler, please go ahead.

Sonya G. Udler

Thank you, operator. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education; and Karl McDonnell, President and Chief Operating Officer. Unfortunately, Mark Brown, our Chief Financial Officer, will not be joining us today due to a death in his family.

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 Time through Thursday, February 23. The replay is available at (855) 859-2056, conference ID 32870725.

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 Provision 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 S. 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 Karl to provide a brief update on our operating results, including our enrollment results for the University's winter academic term. Our company's financial results for the fourth quarter and full year of 2011 are contained in this morning's press release, so I would refer listeners to our release for that detailed information, but I will summarize some of the financial highlights in Mark's absence. And to conclude, I'll provide an update on our growth strategy and the company's earnings outlook for Q1 2012.

Strayer Education is an education service company whose primary asset is Strayer University, a 50,000-student, 92-campus, post-secondary education institution, which offers masters, bachelors and associates degrees in Business Administration, Accounting, Computer Science, Public Administration and Education. Unlike traditional universities, Strayer 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 our 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 23 states through our 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, Karl, how about running them through the operational results?

Karl McDonnell

Sure. First, on our enrollment results, total enrollment for the winter academic term was down 12% to 50,432 students. Our new students were down 8%, and our continuing students were down 12%. Our continuation rate was down a couple of hundred basis points, mostly attributable to the fact that over the last year we've had a decline in new students, and so we have a mismatch compared to the number of students who are graduating. However, even net of that this quarter, our continuation rate was down slightly. We also believe that the continued economic downturn has an impact as well. Enrollment at our mature campuses decreased 15%, while enrollment at new campuses increased 18%. Global online students fell 17%.

Turning to our national accounts, we find 5 new agreements during the quarter, including agreements with the U.S. Department of Health and Human Services and Hewlett-Packard. For the winter term, students from our national accounts increased 11% and on a full year basis, national account students grew 8% in 2011. Lastly, in terms of student mix, graduate students grew slightly in the winter term, while our undergraduate students decreased. As a matter of fact, new graduate students grew significantly for the winter academic term. They were up 30%. As a result, graduate students now comprise 32% of our student population, which on a mix basis, is up about 400 basis points from the prior year. Rob?

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