Grand Canyon Education, Inc. Reports Fourth Quarter and Full Year 2008 Results
"We achieved higher than expected net revenue, enrollment and operating income growth, coupled with the completion of our initial public offering, and continuing operational strides we have made with respect to our student services, allows us to continue to provide what we believe is an excellent education environment," said
For the three months ended
- Net revenues increased 67.5% to
$51.7 millionfor the fourth quarter of 2008, compared to $30.8 millionfor the fourth quarter of 2007.
December 31, 2008our enrollment was 24,636, an increase of 67.0% from our enrollment of 14,754 at December 31, 2007.
- Operating income for the fourth quarter of 2008 was
$3.8 million, compared to $2.1 millionfor the same period in 2007. The operating margin for the fourth quarter 2008 was 7.4%, compared to 6.9% for the same period in 2007.
- Adjusted EBITDA increased 152.3% to
$11.1 millionfor the fourth quarter of 2008, compared to $4.4 millionfor the same period in 2007.
- The tax rate in the fourth quarter of 2008 was 30.9% compared to 40.0% in the fourth quarter of 2007.
- Net income increased 119.8% to
$2.2 millionfor the fourth quarter of 2008, compared to $1.0 millionfor the same period in 2007.
- Diluted net income per share was
$0.06for the fourth quarter of 2008, compared to $0.03for the same period in 2007.
"Our growth in net revenue, enrollment and operating margin continues to demonstrate the strength in our business model and the ability to grow in the future," said
For the fiscal year ended
- Net revenues increased 62.4% to
$161.3 millionfor fiscal 2008, compared to $99.3 millionfor fiscal 2007.
- Operating income for fiscal 2008 was
$12.8 million, compared to $4.3 millionfor fiscal 2007. The operating margin for fiscal 2008 was 7.9%, compared to 4.4% for fiscal 2007.
- Adjusted EBITDA increased 119.0% to
$25.7 millionfor fiscal 2008, compared to $11.7 millionfor fiscal 2007.
- The tax rate for fiscal 2008 was 36.6% compared to 40.0% for fiscal 2007.
- Net income increased 338.2% to
$6.7 millionfor fiscal 2008, compared to $1.5 millionfor fiscal 2007.
- Diluted net income per share was
$0.17for fiscal 2008, compared to $0.03for fiscal 2007.
Balance Sheet and Cash Flow
First Quarter 2009 Outlook
For the first quarter ending
2009 Annual Outlook
For fiscal year 2009 we expect net revenues to be between
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. will discuss its fourth quarter and full year 2008 results and 2009 outlook during a conference call scheduled for today,
A replay of the call will be available approximately two hours following the conclusion of the call through
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 ground programs at its traditional campus in
* 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 EDUCATION, INC. Statements of Operations Three Months Ended Year Ended December 31, December 31, 2007 2008 2007 2008 (In thousands, except per share amounts) Unaudited Net revenue $ 30,854 $ 51,683 $ 99,326 $ 161,309 Costs and expenses: Instructional costs and services 11,519 17,455 39,050 54,450 Selling and promotional, including $4,293 in 2007; $5,895 in 2008; $1,173 and $1,572 for the three months ended December 31, 2007 and 2008, respectively, to related parties 10,857 19,516 35,148 65,551 General and administrative 5,153 10,833 17,001 26,825 Royalty to former owner 1,197 74 3,782 1,686 Total costs and expenses 28,726 47,878 94,981 148,512 Operating income 2,128 3,805 4,345 12,797 Interest expense (738) (741) (2,975) (2,897) Interest income 284 132 1,172 640 Income before income taxes 1,674 3,196 2,542 10,540 Income tax expense 669 987 1,016 3,855 Net income 1,005 2,209 1,526 6,685 Preferred dividends (98) (147) (349) (938) Net income available to common stockholders $ 907 $ 2,062 $ 1,177 $ 5,747 Net income per common share: Basic $ 0.05 $ 0.07 $ 0.06 $ 0.26 Diluted $ 0.03 $ 0.06 $ 0.03 $ 0.17 Weighted average number of common shares outstanding: Basic 19,036 31,240 18,923 22,185 Diluted 35,215 37,488 35,143 33,430
GRAND CANYON EDUCATION, INC.
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
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 Year Ended December 31, December 31, 2007 2008 2007 2008 (Unaudited, in thousands) Net income $ 1,005 $ 2,209 $ 1,526 $ 6,685 Plus: interest expense net of interest income 454 609 1,803 2,257 Plus: income tax expense 669 987 1,016 3,855 Plus: depreciation and amortization 981 1,419 3,300 5,095 EBITDA 3,109 5,224 7,645 17,892 Plus: royalty to former owner 1,197 74 3,782 1,686 Plus: management fees and expenses 108 68 296 356 Plus: contributions to Arizona school tuition organizations in lieu of state income taxes - 750 - 750 Plus: share-based compensation - 4,991 - 4,991 Adjusted EBITDA $ 4,414 $ 11,107 $ 11,723 $ 25,675 GRAND CANYON EDUCATION, INC. Balance Sheets As of December 31, ($ in thousands, except share data) 2007 2008 ASSETS: Current assets Cash and cash equivalents $ 18,930 $ 35,152 Restricted cash and cash equivalents 4,280 2,197 Accounts receivable, net of allowance for doubtful accounts of $12,158 and $6,356 at December 31, 2007 and 2008 7,114 9,442 Due from related parties 6,001 - Income taxes receivable - 1,576 Deferred income taxes 4,640 2,603 Other current assets 1,349 2,629 Total current assets 42,314 53,599 Property and equipment, net 33,849 41,399 Restricted cash and investments 3,298 3,403 Prepaid royalties 317 8,043 Goodwill 2,941 2,941 Deferred income taxes 2,806 7,404 Deposit with former owner 3,000 - Other assets 43 201 Total assets $ 88,568 $ 116,990 LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY: Current liabilities Accounts payable $ 3,434 $ 5,770 Accrued liabilities 6,893 9,674 Income taxes payable 241 172 Deferred revenue and student deposits 10,369 14,262 Royalty payable to former owner 7,428 - Due to related parties 1,005 1,197 Line of credit 6,000 - Current portion of capital lease obligations 1,150 1,125 Current portion of notes payable 646 357 Total current liabilities 37,166 32,557 Capital lease obligations, less current portion 28,078 29,384 Notes payable, less current portion and other 1,762 1,459 Total liabilities 67,006 63,400 Commitments and contingencies Series A convertible preferred stock, $0.01 par value: Authorized - 9,700 and 0 shares at December 31, 2007 and 2008, Respectively Issued and outstanding - 5,953 and 0 shares at December 31, 2007 and 2008, respectively 18,610 - Series B 12% convertible preferred stock, $0.01 par value: Authorized - 2,200 and 0 shares at December 31, 2007 and 2008, respectively Issued and outstanding - 0 shares at December 31, 2007 and 2008 - - Series C convertible preferred stock, $0.01 par value: Authorized - 3,900 and 0 shares at December 31, 2007 and 2008, respectively Issued and outstanding - 3,829 and 0 shares at December 31, 2007 and 2008, respectively 13,338 - Stockholders' (deficit) equity Preferred stock, $0.01 par value, 10,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2007 and 2008 - - Common stock, $0.01 par value, 100,000,000 shares authorized; 19,036,050 and 45,465,160 shares issued and outstanding at December 31, 2007 and 2008, respectively 190 455 Additional paid-in capital 7,719 64,808 Accumulated other comprehensive income 79 16 Accumulated deficit (18,374) (11,689) Total stockholders' (deficit) equity (10,386) 53,590 Total liabilities, preferred stock and stockholders' (deficit) equity $ 88,568 $ 116,990 GRAND CANYON EDUCATION, INC. Statements of Cash Flows Year Ended December 31, ($ in thousands) 2007 2008 Cash flows provided by operating activities: Net income $ 1,526 $ 6,685 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation - 4,991 Excess tax benefits from share-based compensation - (21) Provision for bad debts 6,257 8,465 Depreciation and amortization 3,300 5,095 Deferred income taxes (1,656) (245) Other 19 (106) Changes in assets and liabilities: Accounts receivable (8,573) (10,793) Prepaid expenses and other assets (442) (751) Due to/from related parties (107) 468 Accounts payable 253 927 Accrued liabilities 3,802 3,596 Income taxes payable (2,294) (1,624) Deferred revenue and student deposits 4,236 3,893 Prepaid royalties to former owner - (5,920) Royalty payable to former owner 3,782 (7,428) Deposit with former owner (3,000) 3,000 Net cash provided by operating activities 7,103 10,232 Cash flows used in investing activities: Capital expenditures (7,406) (8,374) Change in restricted cash and cash equivalents (1,454) 2,083 Purchases of investments - (2,627) Proceeds from sale or maturity of investments (149) 2,570 Net cash used in investing activities (9,009) (6,348) Cash flows provided by financing activities: Principal payments on notes payable and capital lease obligations (1,230) (1,357) Repayment on line of credit - (6,000) Proceeds from line of credit and other debt obligations 6,000 - Repurchase of Institute Warrant - (6,000) Repayment of Institute Note Payable - (1,250) Net proceeds from issuance of preferred stock 4,684 - Proceeds from related party payable on preferred stock - 5,725 Dividends on preferred stock (153) - Net proceeds from issuance of common stock - 128,756 Payment of special distribution - (108,675) Proceeds from exercise of warrant - 526 Net proceeds from exercise of stock options - 592 Excess tax benefits from share-based compensation - 21 Net cash provided by financing activities 9,301 12,338 Net increase in cash and cash equivalents 7,395 16,222 Cash and cash equivalents, beginning of year 11,535 18,930 Cash and cash equivalents, end of year $ 18,930 $ 35,152 Supplemental disclosure of cash flow information Cash paid during the year for interest $ 2,645 $ 3,709 Cash paid during the year for income taxes $ 4,964 $ 5,274 Supplemental disclosure of non-cash investing and financing activities Purchase of equipment through capital lease obligations $ 676 $ 2,481 Purchases of property and equipment included in accounts payable $ - $ 1,292 Issuance of Series B and Series C convertible preferred stock for notes receivable $ 5,725 $ - Issuance of Series C convertible preferred stock for settlement of balances owed $ 120 $ - Accretion of dividends on Series C convertible preferred stock $ 29 $ 938 Value assigned to Blanchard shares $ 116 $ 2,996 Assumption of future obligations under gift annuities $ - $ 887 Deferred tax on repurchase of Institute Warrant $ - $ 2,316 Conversion of Series A and Series C convertible preferred stock $ - $ 32,886 The following is a summary of our student enrollment at December 31, 2008 and December 31, 2007 (which included less than 150 students pursuing non-degree certificates) by degree type and by instructional delivery method: December 31, 2008 December 31, 2007 # of Students % of Total # of Students % of Total Master's(1) 13,031 52.9% 9,156 62.1% Bachelor's 11,605 47.1% 5,598 37.9% Total 24,636 100.0% 14,754 100.0% December 31, 2008 December 31, 2007 # of Students % of Total # of Students % of Total Online 21,955 89.1% 12,497 84.7% Ground(2) 2,681 10.9% 2,257 15.3% Total 24,636 100.0% 14,754 100.0% (1) Includes 56 students pursuing doctoral degrees at December 31, 2008. (2) Includes our traditional ground students, as well as our professional studies students.
SOURCE Grand Canyon Education, Inc.