Strayer Education Inc. (NASDAQ:STRA) Q1 2018 Earnings Conference Call Transcript

May 02, 2018 • 10:00 am ET

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Strayer Education Inc. (NASDAQ:STRA) Q1 2018 Earnings Conference Call Transcript

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Presentation
Executive
Daniel W. Jackson

for the quarter, compared to 16% in 2017.

GAAP net income for the first quarter was $9.5 million, compared to $10.6 million in 2017. Excluding merger-related costs, adjusted net income in the first quarter of 2018 was $13.9 million. Our GAAP earnings per share was $0.84, compared to $0.95 in 2017 and our adjusted earnings per share grew 30% to $1.23 for the first quarter of 2018.

Diluted weighted average shares outstanding increased 2% to $11,311,000 million from $11,121,000 million in 2017. The effective tax rate for the first quarter of 2018 was 18.5%, reflecting the new lower federal tax rate, tax benefits associated with restricted stock that vested during the quarter and the impact of nondeductible merger costs.

Excluding the nondeductible merger costs, our adjusted effective tax rate for the first quarter was 18.1% For the remainder of the year, excluding the tax impact of merger costs and other discrete tax adjustments, we expect an effective tax rate between 27% and 28%.

Our bad debt for the first quarter was 5.5%, compared to 3.8% in Q1 2017. And as I reported last quarter, bad debt has been negatively impacted by an anomalous increase in the proportion of our students selected by the Department of Education for financial aid verification.

We saw slight decrease in this volume during the first quarter and expect it to recede further through the balance of the year, as the Department indicated they're adjusting the verification algorithm back to normal levels.

We ended the quarter with $165.9 million of cash and no debt. We generated $17 million in cash from operating activities during the quarter, compared to $24.5 million during the first quarter 2017.

Regarding capital expenditures, we spent $4.2 million during the first quarter, compared to $3.8 million in the same period last year. We expect full-year CapEx to be in the range of 4% of revenue.

And finally, we continue to maintain $150 million in available credit on our revolver. Karl?

Executive
Karl McDonnell

Thanks, Dan. Good morning, everyone. In addition to Dan's comments, I'd just like to add that we continue to be very pleased with our enrollment results. In the first quarter, both our new student and our total enrollment grew 6% versus the prior year and our continuation rate increased 50 basis points.

Our outlook for the second quarter's enrollment is for new students to grow approximately 7% and our total enrollment to grow 8%. That would be the strongest overall growth rate that we've had since 2011.

We also announced this morning that we've successfully opened our first new campus in several years in Macon, Georgia, and we're already seeing pretty strong demand in that market. We're also on track to open four additional new campuses in the second-half of 2018.

I'd now like to provide more commentary on the integration planning for our pending merger with Capella Education Company. The Strayer and Capella management teams have been engaged in detailed integration planning since December of last year, following our announcement of