GRAND CANYON EDUCATION, INC. PHOENIX, Feb. 18, 2015 /PRNewswire/ -- Grand Canyon Education, Inc. (NASDAQ: LOPE), a comprehensive regionally accredited university that offers over 160 graduate and undergraduate degree programs across eight colleges both online and on ground at our approximately 205 acre campus in Phoenix, Arizona, today announced financial results for the quarter and fiscal year ended December 31, 2014.
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Grand Canyon Education, Inc. Reports Fourth Quarter and Full Year 2014 Results
For the three months ended December 31, 2014:
-- Net revenue increased 16.9% to $190.0 million for the fourth quarter of
2014, compared to $162.4 million for the fourth quarter of 2013.
-- At December 31, 2014, our enrollment was 67,806, an increase of 13.7%
from our enrollment of 59,658 at December 31, 2013. Ground enrollment
increased 26.5% to 12,746 from enrollment of 10,078 at December 31,
2013. Online enrollment increased 11.1% to 55,060 from enrollment of
49,580 at December 31, 2013.
-- Operating income for the fourth quarter of 2014 was $53.5 million, an
increase of 31.0% as compared to $40.9 million for the same period in
2013. The operating margin for the fourth quarter of 2014 was 28.2%,
compared to 25.2% for the same period in 2013. Operating income for the
fourth quarter of 2013 excluding contributions made in lieu of state
income taxes to school tuition organizations during the quarter of $2.5
million was $43.4 million and the operating margin was 26.7% excluding
these contributions. In 2014, we made contributions in the amount of
$2.8 million in the third quarter of 2014.
-- Adjusted EBITDA increased 22.1% to $64.1 million for the fourth quarter
of 2014, compared to $52.5 million for the same period in 2013.
-- The tax rate in the fourth quarter of 2014 was 38.1% compared to 35.2%
in the fourth quarter of 2013. The effective tax rate was favorably
affected in the fourth quarter of 2013 by our contributions in lieu of
state income taxes to school tuition organizations made during the
quarter. Excluding the contributions of $2.5 million made in the fourth
quarter of 2013 our tax rate was 39.0%.
-- Net income increased 26.5% to $33.1 million for the fourth quarter of
2014, compared to $26.2 million for the same period in 2013.
-- Diluted net income per share was $0.70 for the fourth quarter of 2014,
compared to $0.56 for the same period in 2013.
For the year ended December 31, 2014:
-- Net revenue increased 15.5% to $691.1 million for the year ended
December 31, 2014, compared to $598.3 million for the year ended
December 31, 2013.
-- Operating income for the year ended December 31, 2014 was $180.8
million, an increase of 26.2% as compared to $143.3 million for the same
period in 2013. The operating margin for the year ended December 31,
2014 was 26.2%, compared to 23.9% for the same period in 2013.
-- Adjusted EBITDA increased 23.1% to $227.8 million for the year ended
December 31, 2014, compared to $185.1 million for the same period in
2013.
-- The tax rate for the year ended December 31, 2014 was 38.0% compared to
38.8% for the year ended December 31, 2013. The effective tax rate in
2014 was lower than the prior year due primarily to state tax rate
changes that began a gradual phase-in process during the first quarter
of 2014.
-- Net income increased 25.7% to $111.5 million for the year ended December
31, 2014, compared to $88.7 million for the same period in 2013.
-- Diluted net income per share was $2.37 for the year ended December 31,
2014, compared to $1.92 for the same period in 2013.
Balance Sheet and Cash Flow
The University financed its operating activities and capital expenditures during the year ended December 31, 2014 and 2013 primarily through cash provided by operating activities. Our unrestricted cash and cash equivalents and investments were $166.0 million and $164.2 million at December 31, 2014 and 2013, respectively. Our restricted cash, cash equivalents and investments at December 31, 2014 and 2013 were $67.8 million and $64.4 million, respectively.
The University generated $167.0 million in cash from operating activities for the year ended December 31, 2014 compared to $118.4 million for the year ended December 31, 2013. Cash provided by operations in 2014 and 2013 resulted from our net income plus non-cash charges for provision for bad debts, depreciation and amortization, timing of income tax and employee related payments and student deposits and changes in our working capital.
Net cash used in investing activities was $161.0 million and $172.5 million for the years ended December 31, 2014 and 2013, respectively. Our cash used in investing activities is primarily related to the purchase of short-term investments and property and equipment, partially offset by proceeds from the sale or maturity of short-term investments and in 2013 proceeds received from the settlement of a note receivable of $29.2 million. Proceeds from investment, net of purchases of short-term investments, was $7.6 million during the year ended December 31, 2014. Purchases of short-term investments, net of proceeds of these investments, was $108.4 million during the year ended December 31, 2013. Capital expenditures were $168.7 million and $78.9 million for the years ended December 31, 2014 and 2013, respectively. In 2014, capital expenditures primarily consisted of ground campus building projects such as the construction of an additional classroom building and parking garage, additional residence halls that accommodate another 1,600 students and land purchases adjacent to our Phoenix campus to support our growing traditional student enrollment as well as purchases of computer equipment, other internal use software projects and furniture and equipment to support our increasing employee headcount. Also, in late 2014 we commenced construction on an additional classroom building for our College of Science, Technology and Engineering, started four additional dormitories that will house 3,200 students beginning in the Fall of 2015 and a new parking garage to increase our capacity on the Phoenix, Arizona campus. In 2013, capital expenditures primarily consisted of ground campus building projects including the construction costs for two additional dormitories and an expansion of our student union, which includes additional food services and library space to support our growing traditional student enrollment as well as purchases of computer equipment, other internal use software projects and furniture and equipment to support our increasing employee headcount. In addition, during 2013 we spent $14.5 million to purchase and refurbish a building that is located less than two miles from our Phoenix, Arizona campus and is being used as office space for our employees.
Net cash provided by financing activities was $3.4 million and $4.8 million for the years ended December 31, 2014 and 2013, respectively. During 2014, proceeds from the exercise of stock options of $7.8 million and excess tax benefits from share-based compensation of $7.6 million were partially offset by $5.3 million used to purchase treasury stock in accordance with the University's share repurchase program and principal payments on notes payable and capital leases totaling $6.7 million. During 2013, proceeds from the exercise of stock options of $16.3 million and excess tax benefits from share-based compensation of $4.5 million were partially offset by $9.3 million used to purchase treasury stock in accordance with the University's share repurchase program and principal payments on notes payable and capital leases totaling $6.7 million.
2015 Outlook by Quarter
Q1 2015: Net revenue of $193.0 million; Target Operating Margin 27.3%; Diluted EPS of $0.68 using 47.2 million diluted shares; student counts of 68,700
Q2 2015: Net revenue of $172.8 million; Target Operating Margin 23.5%; Diluted EPS of $0.52 using 47.7 million diluted shares; student counts of 62,500
Q3 2015: Net revenue of $193.3 million; Target Operating Margin 26.6%; Diluted EPS of $0.65 using 47.9 million diluted shares; student counts of 75,600
Q4 2015: Net revenue of $211.9 million; Target Operating Margin 28.9%; Diluted EPS of $0.77 using 48.1 million diluted shares; student counts of 75,200
Full Year 2015: Net revenue of $771.0 million; Target Operating Margin 26.7%; Diluted EPS of $2.62 using 48.1 million diluted shares
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: projections, predictions, expectations, estimates, and forecasts as to our business, financial and operating 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 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, including pending rulemaking by the Department of Education; potential damage to our reputation or other adverse effects as a result of negative publicity in the media, in the industry or in connection with governmental reports or investigations or otherwise, affecting us or other companies in the for-profit postsecondary education sector; our ability to properly manage risks and challenges associated with potential acquisitions of, or investments in, new businesses, acquisitions of new properties, or the expansion of our campus to new locations; our ability to hire and train new, and develop and train existing, faculty and employees; 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; the extent to which obligations under our loan agreement, including the need to comply with restrictive and financial covenants and to pay principal and interest payments, limits our ability to conduct our operations or seek new business opportunities; 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.
Conference Call
Grand Canyon Education, Inc. will discuss its fourth quarter 2014 results and 2015 outlook during a conference call scheduled for today, February 18, 2015 at 4:30 p.m. Eastern time (ET). To participate in the live call, investors should dial 877-577-1769 (domestic and Canada) or 706-679-7806 (international), passcode 80714931 at 4:25 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, at 855-859-2056 (domestic) or 404-537-3406 (international), passcode 80714931. 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 comprehensive regionally accredited university that offers over 160 graduate and undergraduate degree programs across eight colleges both online and on ground at our approximately 205 acre campus in Phoenix, Arizona, and at facilities we lease and at facilities owned by third party employers. Our undergraduate programs are designed to be innovative and meet the future needs of employers while providing students with the needed critical thinking and effective communication skills developed through a Christian, liberal arts foundation. Approximately 67,800 students were enrolled as of December 31, 2014. 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, Grand Canyon University, 3300 W. Camelback Road, Phoenix, AZ 85017, www.gcu.edu.
GRAND CANYON EDUCATION, INC.
Consolidated Income Statements
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
(In thousands, except per share data) (Unaudited) (Unaudited)
------------------------------------ ---------- ----------
Net revenue $189,973 $162,443 $691,055 $598,335
Costs and expenses:
Instructional costs and services 78,552 67,971 288,791 254,419
Admissions advisory and related, including $601 and $838 for the three months ended December 31,
2014 and 2013, respectively, and $2,974 and $3,412 for the year ended December 31, 2014 and 2013,
respectively, to related parties 28,774 26,160 108,567 97,077
Advertising 16,854 15,038 65,808 60,985
Marketing and promotional 1,810 1,527 7,439 5,644
General and administrative 10,447 10,870 39,635 36,934
------ ------ ------ ------
Total costs and expenses 136,437 121,566 510,240 455,059
------- ------- ------- -------
Operating income 53,536 40,877 180,815 143,276
Interest expense (346) (609) (1,801) (2,244)
Interest and other income 307 104 684 3,863
--- --- --- -----
Income before income taxes 53,497 40,372 179,698 144,895
Income tax expense 20,404 14,215 68,232 56,184
------ ------ ------ ------
Net income $33,093 $26,157 $111,466 $88,711
======= ======= ======== =======
Earnings per share:
Basic income per share $0.72 $0.58 $2.45 $1.98
===== ===== ===== =====
Diluted income per share $0.70 $0.56 $2.37 $1.92
===== ===== ===== =====
Basic weighted average shares outstanding 45,652 45,026 45,538 44,731
====== ====== ====== ======
Diluted weighted average shares outstanding 47,097 46,712 47,006 46,131
====== ====== ====== ======
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) the amortization of prepaid royalty payments recorded in conjunction with a settlement of a dispute with our former owner; (ii) contributions to Arizona school tuition organizations in lieu of the payment of state income taxes; (iii) share-based compensation and (iv) one-time, unusual charges or gains, such as litigation and regulatory reserves, impairment charges and asset write-offs, exit or lease termination costs or the gain recognized on the settlement of a third party note receivable. We present Adjusted EBITDA because we consider it to be an important supplemental measure of our operating performance. We also make certain compensation decisions based, in part, on our operating performance, as measured by Adjusted EBITDA, and our loan agreement requires us to comply with covenants that include performance metrics substantially similar to Adjusted EBITDA. 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. Royalty expenses paid to our former owner, contributions made to Arizona school tuition organizations in lieu of the payment of state income taxes, share-based compensation, one time unusual charges or gains such as estimated litigation and regulatory reserves, exit costs, contract and lease termination fees, and the gain recognized on the settlement of notes receivable are not considered reflective of our core performance.
We believe Adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by variations in capital structures (affecting relative interest expense, including the impact of write-offs of deferred financing costs when companies refinance their indebtedness), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the book amortization of intangibles (affecting relative amortization expense), and other items that we do not consider reflective of underlying operating performance. We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors, and other interested parties as a measure of performance.
In evaluating Adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments described above. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine, or non-recurring. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income, operating income, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity. Some of these limitations are that it does not reflect:
-- cash expenditures for capital expenditures or contractual commitments;
-- changes in, or cash requirement for, our working capital requirements;
-- interest expense, or the cash required to replace assets that are being
depreciated or amortized; and
-- the impact on our reported results of earnings or charges resulting from
the items for which we make adjustments to our EBITDA, as described
above and set forth in the table below.
In addition, other companies, including other companies in our industry, may calculate these measures differently than we do, limiting the usefulness of Adjusted EBITDA as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered as a substitute for net income, operating income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. We compensate for these limitations by relying primarily on our GAAP results and only use Adjusted EBITDA as a supplemental performance measure.
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 Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
(Unaudited, in thousands)
Net income $33,093 $26,157 $111,466 $88,711
Plus: interest expense net of interest income 39 505 1,117 2,027
Plus: income tax expense 20,404 14,215 68,232 56,184
Plus: depreciation and amortization 7,981 6,761 29,177 25,141
----- ----- ------ ------
EBITDA 61,517 47,638 209,992 172,063
------ ------ ------- -------
Plus: royalty to former owner 74 74 296 296
Plus: prepaid royalty impairment and other fixed asset
impairments - - 3,441 -
Plus: contributions in lieu of state income taxes - 2,500 2,750 2,500
Plus: lease termination costs - - 518 -
Less: gain on proceeds received from note receivable - - - (3,646)
Plus: estimated litigation and regulatory reserves (27) - 870 3,937
Plus: share-based compensation 2,533 2,268 9,945 9,936
----- ----- ----- -----
Adjusted EBITDA $64,097 $52,480 $227,812 $185,086
======= ======= ======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Balance Sheets
ASSETS: December 31, December 31,
(In thousands, except par value) 2014 2013
------------------------------- ---- ----
Current assets (Unaudited)
Cash and cash equivalents $65,238 $55,824
Restricted cash, cash equivalents and investments 67,840 64,368
Investments 100,784 108,420
Accounts receivable, net 7,605 7,217
Income taxes receivable 1 3,599
Deferred income taxes 6,149 5,159
Other current assets 19,428 19,116
------ ------
Total current assets 267,045 263,703
Property and equipment, net 478,170 339,596
Prepaid royalties 3,650 4,641
Goodwill 2,941 2,941
Other assets 3,907 5,219
----- -----
Total assets $755,713 $616,100
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Accounts payable $22,715 $24,231
Accrued compensation and benefits 23,995 20,093
Accrued liabilities 13,533 14,554
Income taxes payable 4,906 7
Student deposits 69,584 66,772
Deferred revenue 36,868 32,816
Due to related parties 403 454
Current portion of capital lease obligations 91 89
Current portion of notes payable 6,616 6,607
----- -----
Total current liabilities 178,711 165,623
Capital lease obligations, less current portion 406 497
Other noncurrent liabilities 4,513 6,811
Deferred income taxes, noncurrent 15,974 11,832
Notes payable, less current portion 79,877 86,493
------ ------
Total liabilities 279,481 271,256
------- -------
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and
outstanding at December 31, 2014 and 2013 - -
Common stock, $0.01 par value, 100,000 shares authorized; 49,746 and 48,890 shares
issued and 46,744 and 46,045 shares outstanding at December 31, 2014 and 2013,
respectively 497 489
Treasury stock, at cost, 3,002 and 2,845 shares of common stock at December 31, 2014
and 2013, respectively (53,770) (48,432)
Additional paid-in capital 158,549 132,904
Accumulated other comprehensive (loss) income (35) 358
Retained earnings 370,991 259,525
------- -------
Total stockholders' equity 476,232 344,844
------- -------
Total liabilities and stockholders' equity $755,713 $616,100
======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Statements of Cash Flows
Year Ended
----------
December 31,
------------
(In thousands) 2014 2013
------------- ---- ----
(Unaudited)
Cash flows provided
by operating
activities:
Net income $111,466 $88,711
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Share-based
compensation 9,945 9,936
Excess tax benefits
from share-based
compensation (7,637) (4,469)
Provision for bad
debts 15,045 19,897
Depreciation and
amortization 29,473 25,437
Gain on proceeds
received from note
receivable - (3,646)
Loss on asset
disposal and fixed
asset impairments 2,475 -
Deferred income
taxes 2,651 5,472
Prepaid royalty
impairment 966 -
Changes in assets
and liabilities:
Restricted cash,
cash equivalents
and investments (3,472) (8,404)
Accounts receivable (15,433) (19,163)
Prepaid expenses
and other 81 (7,316)
Due to/from
related parties (51) (69)
Accounts payable (2,448) 8,563
Accrued liabilities
and employee
related
liabilities 2,991 (1,756)
Income taxes
receivable/
payable 16,378 (7,769)
Deferred rent (2,298) (204)
Deferred revenue 4,052 4,202
Student deposits 2,812 9,027
----- -----
Net cash provided
by operating
activities 166,996 118,449
------- -------
Cash flows used in
investing
activities:
Capital
expenditures (168,646) (78,948)
Purchase of land
and building
related to off-
site development - (14,542)
Purchases of
investments (114,919) (168,953)
Proceeds from sale
or maturity of
investments 122,555 60,533
Restricted funds
held for
derivative
collateral - 225
Proceeds received
from note
receivable - 29,187
--- ------
Net cash used in
investing
activities (161,010) (172,498)
-------- --------
Cash flows provided
by financing
activities:
Principal payments
on notes payable
and capital lease
obligations (6,696) (6,689)
Repurchase of
common shares
including shares
withheld in lieu
of income taxes (5,338) (9,296)
Net proceeds from
exercise of stock
options 7,825 4,469
Excess tax benefits
from share-based
compensation 7,637 16,278
----- ------
Net cash provided
by financing
activities 3,428 4,762
----- -----
Net increase
(decrease) in cash
and cash
equivalents 9,414 (49,287)
Cash and cash
equivalents,
beginning of
period 55,824 105,111
------ -------
Cash and cash
equivalents, end
of period $65,238 $55,824
======= =======
Supplemental
disclosure of cash
flow information
Cash paid for
interest $1,793 $2,176
Cash paid for
income taxes $48,835 $59,892
Cash received for
income tax refunds $385 $728
Supplemental
disclosure of non-
cash investing and
financing
activities
Purchases of
property and
equipment included
in accounts
payable $5,845 $1,494
Tax benefit of
Spirit warrant
intangible $16 $209
Shortfall tax
expense from
share-based
compensation $260 $267
The following is a summary of our student enrollment at December 31, 2014 and 2013 by degree type and by instructional delivery method:
2014(1) 2013(1)
------ ------
# of Students % of Total # of Students % of Total
------------- ---------- ------------- ----------
Graduate degree(2) 26,319 38.8% 22,476 37.7%
Undergraduate degree 41,487 61.2% 37,182 62.3%
------ ---- ------ ----
Total 67,806 100.0% 59,658 100.0%
====== ===== ====== =====
2014(1) 2013(1)
------ ------
# of Students % of Total # of Students % of Total
------------- ---------- ------------- ----------
Online(3) 55,060 81.2% 49,580 83.1%
Ground(4) 12,746 18.8% 10,078 16.9%
------ ---- ------ ----
Total 67,806 100.0% 59,658 100.0%
====== ===== ====== =====
(1) Enrollment represents individual
students who attended a course
during the last two months of
the calendar quarter. Included
in enrollment at December 31,
2014 and 2013 are students
pursuing non-degree
certificates of 585 and 487,
respectively.
(2) Includes 5,570 and 4,285 students
pursuing doctoral degrees at
December 31, 2014 and 2013,
respectively.
(3) As of December 31, 2014 and 2013,
46.0% and 43.5%, respectively,
of our working adult students
(online and professional studies
students) were pursuing graduate
or doctoral degrees.
(4) Includes both our traditional on-
campus ground students, as well
as our professional studies
students.
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SOURCE Grand Canyon Education, Inc.
