Grand Canyon Education's First Quarter Net Revenue up 65 Percent;
Enrollment up 62 Percent; Operating Income up 103 Percent; Net Income up 109
Percent
PHOENIX, April 27 /PRNewswire-FirstCall/ -- Grand Canyon Education, Inc.
(Nasdaq: LOPE), a regionally accredited provider of online and campus-based
post-secondary education services, today announced financial results for the
three months ended March 31, 2009.
"Year-over-year, the top and bottom line improvement in our results were
quite strong," said Brian Mueller, Chief Executive Officer of Grand Canyon
Education, Inc. "These results demonstrate the long-term soundness and focus
of our business strategies, the differentiated nature of our business model,
and our ability to execute. Our continued investment in technology, expansion
of our traditional campus facilities, broadening of marketing initiatives and
enhancement of our educational programs will remain key strategic drivers for
the University."
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
For the three months ended March 31, 2009:
- Net revenues increased 65.1% to $59.0 million for the first quarter of
2009, compared to $35.7 million for the first quarter of 2008.
- At March 31, 2009 our enrollment was approximately 28,400, an increase
of 62.4% from our enrollment of approximately 17,500 at March 31,
2008.
- Operating income for the first quarter of 2009 was $12.1 million, an
increase of 102.9% as compared to $5.9 million for the same period in
2008. The operating margin for the first quarter 2009 was 20.4%,
compared to 16.6% for the same period in 2008.
- Adjusted EBITDA increased 77.9% to $14.5 million for the first quarter
of 2009, compared to $8.2 million for the same period in 2008.
- The tax rate in the first quarter of 2009 was 40.0% compared to 38.6%
in the first quarter of 2008.
- Net income increased 109.0% to $6.9 million for the first quarter of
2009, compared to $3.3 million for the same period in 2008.
- Diluted net income per share was $0.15 for the first quarter of 2009,
compared to $0.09 for the same period in 2008.
"In addition to meeting our revenue and EPS objectives for the first
quarter, we continued to generate strong operating margins through revenue
growth, the leveraging of our infrastructure, and our continued focus on
improvements on our traditional campus," said Daniel Bachus, the Company's
Chief Financial Officer. "These strong operating results also had a
significant positive impact on our cash flow, strengthened our balance sheet
and will enhance our business going forward, as we continue to improve our
returns for shareholders."
Balance Sheet and Cash Flow
As of March 31, 2009, the Company had cash and cash equivalents of $68.3
million compared to $35.2 million as of December 31, 2008 and restricted cash,
cash equivalents and investments at March 31, 2009 and December 31, 2008 of
$4.4 million and $5.6 million, respectively. The Company generated $36.6
million in cash from operating activities in the first quarter of 2009
compared to $18.5 million in the same period of 2008. Cash used in investing
activities is primarily related to the purchase of property, plant, and
equipment and leasehold improvements. Capital expenditures were $4.5 million
in the first quarter of 2009 compared to $1.6 million for the same period in
2008. Cash used in financing activities for the three months ended March 31,
2009 and 2008 was $0.1 million and $0.6 million, respectively.
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
Second Quarter 2009 Outlook
For the second quarter ending June 30, 2009, enrollment is expected to
grow by 63.5% to 27,000 from 16,510 at June 30, 2008, and net revenues by
67.8% to $58 million from $34.6 million as compared to the second quarter of
2008. Diluted earnings per share is expected to be $0.10 per share.
2009 Annual Outlook
For fiscal year 2009 we expect net revenues to be between $254 million and
$258 million for the year ended December 31, 2009, and enrollment to be
between 34,500 and 35,000 at December 31, 2009. The annual tax rate is
anticipated to be approximately 40%. Diluted earnings per share is expected to
be between $0.60 and $0.64 per share.
Forward-Looking Statements
This news release contains "forward-looking statements" which include
information relating to future events, future financial performance,
strategies expectations, competitive environment, regulation, and availability
of resources. These forward-looking statements include, without limitation,
statements regarding: proposed new programs; expectations that regulatory
developments or other matters will not have a material adverse effect on our
financial position, results of operations, or liquidity; statements concerning
projections, predictions, expectations, estimates, or forecasts as to our
business, financial and operational results, and future economic performance;
and statements of management's goals and objectives and other similar
expressions concerning matters that are not historical facts. Words such as
"may," "should," "could," "would," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates" and similar expressions, as well as statements in future tense,
identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of
the times at, or by, which such performance or results will be achieved.
Forward-looking statements are based on information available at the time
those statements are made or management's good faith belief as of that time
with respect to future events, and are subject to risks and uncertainties that
could cause actual performance or results to differ materially from those
expressed in or suggested by the forward-looking statements. Important factors
that could cause such differences include, but are not limited to: our failure
to comply with the extensive regulatory framework applicable to our industry,
including Title IV of the Higher Education Act and the regulations thereunder,
state laws and regulatory requirements, and accrediting commission
requirements; the results of the ongoing investigation by the Department of
Education's Office of Inspector General and the pending qui tam action
regarding the manner in which we have compensated our enrollment personnel,
and possible remedial actions or other liability resulting therefrom; the
ability of our students to obtain federal Title IV funds, state financial aid,
and private financing; risks associated with changes in applicable federal and
state laws and regulations and accrediting commission standards; our ability
to hire and train new, and develop and train existing, enrollment counselors;
the pace of growth of our enrollment; our ability to convert prospective
students to enrolled students and to retain active students; our success in
updating and expanding the content of existing programs and developing new
programs in a cost-effective manner or on a timely basis; industry
competition, including competition for qualified executives and other
personnel; risks associated with the competitive environment for marketing our
programs; failure on our part to keep up with advances in technology that
could enhance the online experience for our students; our ability to manage
future growth effectively; general adverse economic conditions or other
developments that affect job prospects in our core disciplines; and other
factors discussed in reports on file with the Securities and Exchange
Commission.
Forward-looking statements speak only as of the date the statements are
made. You should not put undue reliance on any forward-looking statements. We
assume no obligation to update forward-looking statements to reflect actual
results, changes in assumptions, or changes in other factors affecting
forward-looking information, except to the extent required by applicable
securities laws. If we do update one or more forward-looking statements, no
inference should be drawn that we will make additional updates with respect to
those or other forward-looking statements.
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
Conference Call
Grand Canyon Education, Inc. will discuss its first quarter 2009 results
and 2009 outlook during a conference call scheduled for today, April 27, 2009
at 5:00 p.m. Eastern time (ET). To participate in the live call, investors
should dial 877-815-5362 (domestic and Canada) or 706-679-7806
(international), passcode 95934085 at 4:50 p.m. (ET). The Webcast will be
available on the Grand Canyon Education, Inc. Web site at www.gcu.edu.
A replay of the call will be available approximately two hours following
the conclusion of the call through April 28, 2010, at 800-642-1687 (domestic)
or 706-645-9291 (international), passcode 95934085. It will also be archived
at www.gcu.edu in the investor relations section for 60 days.
About Grand Canyon Education, Inc.
Grand Canyon Education, Inc. is a regionally accredited provider of online
postsecondary education services focused on offering graduate and
undergraduate degree programs in its core disciplines of education, business,
and healthcare. In addition to its online programs, it offers programs at its
traditional campus in Phoenix, Arizona and onsite at the facilities of
employers. Approximately 28,400 students were enrolled as of March 31, 2009.
For more information about Grand Canyon Education, Inc., please visit
http://www.gcu.edu.
* Grand Canyon Education, Inc. is regionally accredited by The Higher
Learning Commission of the North Central Association of Colleges and Schools
(NCA), http://www.ncahlc.org. Grand Canyon University, 3300 W. Camelback Road,
Phoenix, AZ 85017, www.gcu.edu.
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
GRAND CANYON EDUCATION, INC.
Statements of Operations
Three Months
Ended
March 31,
2008 2009
(In thousands, except per share data)
(Unaudited)
Net revenue $35,709 $58,964
Costs and expenses:
Instructional costs and services 11,620 18,332
Selling and promotional, including $1,512 and $1,612
for the three months ended March 31, 2008 and 2009,
respectively, to related parties 12,586 19,670
General and administrative 4,541 8,833
Royalty to former owner 1,022 74
Total costs and expenses 29,769 46,909
Operating income 5,940 12,055
Interest expense (813) (667)
Interest income 252 108
Income before income taxes 5,379 11,496
Income tax expense 2,076 4,593
Net income 3,303 6,904
Preferred dividends (253) -
Net income available to common stockholders $3,050 $6,904
Earnings per share:
Basic income per share $0.16 $0.15
Diluted income per share $0.09 $0.15
Basic weighted average shares outstanding 19,036 45,474
Diluted weighted average shares outstanding 33,849 45,821
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
GRAND CANYON EDUCATION, INC.
Adjusted EBITDA
Adjusted EBITDA is defined as net income plus interest expense net of
interest income, plus income tax expense, and plus depreciation and
amortization (EBITDA), as adjusted for (i) royalty payments incurred pursuant
to an agreement with our former owner that has been terminated as of April 15,
2008; (ii) management fees and expenses that are no longer paid; and (iii)
share-based compensation. All of the adjustments made in our calculation of
Adjusted EBITDA are adjustments to items that management does not consider to
be reflective of our core operating performance. Management considers our core
operating performance to be that which can be affected by our managers in any
particular period through their management of the resources that affect our
underlying revenue and profit generating operations during that period.
Although we believe that equity-plan related compensation will be a key
element of our employee relations and long-term incentives, we intend to
exclude it as an expense when evaluating our core operating performance in any
particular period. Accordingly, we have included share-based compensation
expenses, along with management fees and expenses, royalty expenses to our
former owner, and any other expenses and income that we do not consider
reflective of our core operating performance, as an adjustment when
calculating Adjusted EBITDA.
Our management uses Adjusted EBITDA:
- in developing our internal budgets and strategic plan;
- as a measurement of operating performance;
- as a factor in evaluating the performance of our management for
compensation purposes: and
- in presentations to the members of our board of directors to enable
our board to have the same measurement basis of operating performance
as are used by management to compare our current operating results
with corresponding prior periods and with the results of other
companies in our industry.
Adjusted EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or GAAP, and when analyzing our operating
performance, investors should use Adjusted EBITDA in addition to, and not as
an alternative for, net income, operating income, or any other performance
measure presented in accordance with GAAP, or as an alternative to cash flow
from operating activities or as a measure of our liquidity.
The following table provides a reconciliation of net income to Adjusted
EBITDA, which is a non-GAAP measure for the periods indicated:
Three Months
Ended
March 31,
2008 2009
(In thousands) (Unaudited)
Net income $3,303 $6,904
Plus: interest expense net of interest income 561 559
Plus: income tax expense 2,076 4,593
Plus: depreciation and amortization 1,090 1,632
EBITDA 7,030 13,688
Plus: royalty to former owner 1,022 74
Plus: management fees and expenses 115 -
Plus: share-based compensation - 764
Adjusted EBITDA $8,167 $14,526
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
GRAND CANYON EDUCATION, INC.
Balance Sheets
December March
31, 31,
(In thousands, except share data) 2008 2009
(Unaudited)
ASSETS:
Current assets
Cash and cash equivalents $35,152 $68,275
Restricted cash and cash equivalents 2,197 3,946
Accounts receivable, net of allowance for
doubtful accounts of $6,356 and $6,068 at
December 31, 2008 and March 31, 2009,
respectively 9,442 10,509
Income taxes receivable 1,576 938
Deferred income taxes 2,603 2,175
Other current assets 2,629 2,660
Total current assets 53,599 88,503
Property and equipment, net 41,399 45,922
Restricted cash and investments (of which
$2,928 and $0 is restricted at December 31,
2008 and March 31, 2009, respectively) 3,403 483
Prepaid royalties 8,043 7,860
Goodwill 2,941 2,941
Deferred income taxes 7,404 12,018
Other assets 201 166
Total assets $116,990 $157,893
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Accounts payable $5,770 $7,547
Accrued liabilities 9,674 11,935
Income taxes payable 172 4,123
Deferred revenue and student deposits 14,262 31,995
Due to related parties 1,197 2,429
Current portion of capital lease obligations 1,125 1,746
Current portion of notes payable 357 447
Total current liabilities 32,557 60,222
Capital lease obligations, less current
portion 29,384 30,332
Notes payable, less current portion and other 1,459 1,713
Total liabilities 63,400 92,267
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.01 par value, 10,000,000
shares authorized; 0 shares issued and
outstanding at December 31, 2008 and March
31, 2009 - -
Common stock, $0.01 par value, 100,000,000
shares authorized; 45,465,160 and 45,485,765
shares issued and outstanding at December
31, 2008 and March 31, 2009, respectively 455 455
Additional paid-in capital 64,808 69,935
Accumulated other comprehensive income 16 21
Accumulated deficit (11,689) (4,785)
Total stockholders' equity 53,590 65,626
Total liabilities and stockholders' equity $116,990 $157,893
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
GRAND CANYON EDUCATION, INC.
Statements of Cash Flows
Three Months Ended
March 31,
(In thousands) 2008 2009
Cash flows provided by operating (Unaudited)
activities:
Net income $3,303 $6,904
Adjustments to reconcile net income to
net cash provided by operating
activities:
Share-based compensation - 764
Excess tax benefits from share-based
compensation - (9)
Provision for bad debts 1,680 3,295
Depreciation and amortization 1,090 1,632
Deferred income taxes 2 (79)
Other - (14)
Changes in assets and liabilities:
Accounts receivable (2,465) (4,362)
Prepaid expenses and other assets (199) 185
Due to/from related parties 809 1,232
Accounts payable 1,667 2,435
Accrued liabilities 659 2,261
Income taxes payable 2,014 4,598
Royalty payable to former owner 1,022 -
Deferred revenue and student deposits 8,958 17,733
Net cash provided by operating activities 18,540 36,575
Cash flows used in investing activities:
Capital expenditures (1,583) (4,500)
Change in restricted cash and cash
equivalents (1,390) 1,187
Purchases of investments (2,399) (11)
Proceeds from sale or maturity of
investments 2,342 -
Net cash used in investing activities (3,030) (3,324)
Cash flows used in financing activities:
Principal payments on notes payable and
capital lease obligations (321) (384)
Repayment on line of credit (6,000) -
Proceeds from related party payable on
preferred stock 5,725 -
Excess tax benefits from share-based
compensation - 9
Net proceeds from exercise of stock
options - 247
Net cash used in financing activities (596) (128)
Net increase in cash and cash equivalents 14,914 33,123
Cash and cash equivalents, beginning of
period 18,930 35,152
Cash and cash equivalents, end of period $33,844 $68,275
Supplemental disclosure of cash flow
information
Cash paid for interest $687 $673
Cash paid for income taxes $53 $138
Supplemental disclosure of non-cash
investing and financing activities
Purchase of equipment through capital
lease obligations $760 $2,116
Purchases of property and equipment
included in accounts payable $349 $658
Tax benefit of Spirit warrant intangible $- $4,107
Accretion of dividends on Series C
convertible preferred stock $253 $-
Grand Canyon Education, Inc. Reports First Quarter 2009 Results
The following is a summary of our student enrollment at March 31, 2008 and
March 31, 2009 (which included less than 150 students pursuing non-degree
certificates) by degree type and by instructional delivery method:
March 31, 2008 March 31, 2009
# of % of Total # of % of Total
Students Students
Master's(1) 10,276 58.8% 14,128 49.8%
Bachelor's 7,210 41.2% 14,265 50.2%
Total 17,486 100.0% 28,393 100.0%
March 31, 2008 March 31, 2009
# of % of Total # of % of Total
Students Students
Online 15,133 86.5% 25,758 90.7%
Ground(2) 2,353 13.5% 2,635 9.3%
Total 17,486 100.0% 28,393 100.0%
(1) Includes 162 students pursuing doctoral degrees at March 31, 2009.
(2) Includes our traditional students, as well as our professional
studies students.
Subsequent Event
On April 27, 2009, we signed a purchase agreement pursuant to which we
agreed to acquire our campus land and buildings and 909,348 shares of our
common stock from Spirit Master Funding, LLC and Spirit Management Company,
respectively (collectively, "Spirit") for an aggregate purchase price of $50
million. Prior to the acquisition, we had leased the land and buildings from
Spirit, accounting for the land as an operating lease and the buildings and
improvements as capital lease obligations. To finance this purchase, we also
entered into a loan agreement with a financial institution pursuant to which
we agreed to borrow $25.7 million, all of which will be used as part of the
purchase price. Under the terms of the loan agreement, the Company will make
principal payments in equal monthly installments of approximately $143,000
plus accrued interest at 30 day LIBOR plus 3.5% (approximately 4.0% at April
27, 2009).
Investor Relations Contact:
Dan Bachus
Chief Financial Officer
Grand Canyon Education, Inc.
602-639-6648
dbachus@gcu.edu
Media Contact:
Bill Jenkins
Grand Canyon Education, Inc.
602-639-6678
bjenkins@gcu.edu
SOURCE Grand Canyon Education, Inc.
Web Site: http://www.gcu.edu
