GRAND CANYON EDUCATION, INC. PHOENIX, Aug. 10, 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 200+ acre campus in Phoenix, Arizona, today announced financial results for the quarter ended June 30, 2015.
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For the three months ended June 30, 2015:
-- Net revenue increased 10.2% to $174.7 million for the second quarter of
2015, compared to $158.6 million for the second quarter of 2014.
-- End-of-period enrollment increased 9.1% to 62,935 at June 30, 2015, from
57,707 at June 30, 2014, as ground enrollment increased 10.9% to 5,254
at June 30, 2015, from 4,738 at June 30, 2014 and online enrollment
increased 8.9% to 57,681 at June 30, 2015, from 52,969 at June 30, 2014.
-- Operating income for the second quarter of 2015 was $42.3 million, an
increase of 11.5% as compared to $37.9 million for the same period in
2014. The operating margin for the second quarter of 2015 was 24.2%,
compared to 23.9% for the same period in 2014.
-- Adjusted EBITDA increased 7.7% to $54.3 million for the second quarter
of 2015, compared to $50.4 million for the same period in 2014.
-- The tax rate in the second quarter of 2015 was 39.0% compared to 38.9%
in the second quarter of 2014.
-- Net income increased 11.7% to $25.8 million for the second quarter of
2015, compared to $23.1 million for the same period in 2014.
-- Diluted net income per share was $0.55 for the second quarter of 2015,
compared to $0.49 for the same period in 2014.
For the six months ended June 30, 2015:
-- Net revenue increased 13.1% to $368.9 million for the six months ended
June 30, 2015, compared to $326.0 million for the same period in 2014.
-- Operating income for the six months ended June 30, 2015 was $98.2
million, an increase of 20.8% as compared to $81.3 million for the same
period in 2014. The operating margin for the six months ended June 30,
2015 was 26.6%, compared to 24.9% for the same period in 2014.
-- Adjusted EBITDA increased 16.5% to $121.3 million for the six months
ended June 30, 2015, compared to $104.1 million for the same period in
2014.
-- The tax rate in the six months ended June 30, 2015 and 2014 was 38.9%
for both periods.
-- Net income increased 21.5% to $60.0 million for the six months ended
June 30, 2015, compared to $49.4 million for the same period in 2014.
-- Diluted net income per share was $1.27 for the six months ended June 30,
2015, compared to $1.05 for the same period in 2014.
Balance Sheet and Cash Flow
The University financed its operating activities and capital expenditures during the six months ended June 30, 2015 and 2014 primarily through cash provided by operating activities. Our unrestricted cash, cash equivalents and investments were $134.2 million and $166.0 million at June 30, 2015 and December 31, 2014, respectively. Our restricted cash, cash equivalents and investments at June 30, 2015 and December 31, 2014 were $63.7 million and $67.8 million, respectively.
The University generated $81.7 million in cash from operating activities for the six months ended June 30, 2015 compared to $89.4 million for the six months ended June 30, 2014. The decrease in cash generated from operating activities between the six months ended June 30, 2014 and the six months ended June 30, 2015 is primarily due to the timing of income tax related payments partially offset by increased net income.
Net cash used in investing activities was $94.7 million and $130.1 million for the six months ended June 30, 2015 and 2014, respectively. Our cash used in investing activities was primarily related to capital expenditures. Capital expenditures were $111.9 million and $82.0 million for the six months ended June 30, 2015 and 2014, respectively. During the first six months of 2015, capital expenditures primarily consisted of ground campus building projects such as the construction of four additional dormitories, an additional classroom building for our College of Science, Engineering and Technology, a new parking structure 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. During the first six months of 2014, capital expenditures primarily consisted of ground campus building projects such as the construction of an additional classroom building, additional residence halls, the expansion of our arena, 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 included in investing activities is the net short-term investment activity. In the first six months of 2015 proceeds from the sale of short-term investments exceeded purchases by $17.3 million whereas in the first six months of 2014 purchases exceeded proceeds by $48.1 million.
Net cash used in financing activities was $1.5 million for the six months ended June 30, 2015 whereas net cash provided by financing activities was $5.0 million for the six months ended June 30, 2014. During the first six months of 2015 $4.2 million was used to purchase common shares withheld in lieu of income taxes resulting from restricted share awards while principal payments on notes payable and capital leases totaled $3.4 million. These uses were partially offset by proceeds from the exercise of stock options of $2.7 million and excess tax benefits from share-based compensation of $3.4 million. During the first six months of 2014, proceeds from the exercise of stock options of $6.6 million and excess tax benefits from share-based compensation of $7.1 million were partially offset by $3.6 million used to purchase common shares withheld in lieu of income taxes resulting from restricted share awards, $1.7 million used to purchase treasury stock in accordance with the university's share repurchase program and principal payments on notes payable and capital leases totaled $3.3 million.
2015 Outlook by Quarter
Q3 2015: Net revenue of $191.8
million; Target Operating
Margin 24.7%; Diluted EPS
of $0.65 using 47.6
million diluted shares;
student counts of 75,600
Q4 2015: Net revenue of $211.9
million; Target Operating
Margin 28.4%; Diluted EPS
of $0.78 using 47.9
million diluted shares;
student counts of 75,200
Full Year 2015: Net revenue of $772.6
million; Target Operating
Margin 26.6%; Diluted EPS
of $2.70 using 47.5
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, lawsuits, or otherwise, affecting us or other companies in the for-profit postsecondary education sector; our ability to properly manage risks and challenges associated with strategic initiatives, including the potential conversion of our university operations to non-profit status, the expansion of our campus, potential acquisitions of, or investments in, new businesses, acquisitions of new properties, or the development of new campuses; 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 of our students; 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 second quarter 2015 results and 2015 outlook during a conference call scheduled for today, August 10, 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 75266655 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 75266655. 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 200+ acre campus in Phoenix, Arizona, at leased facilities and at facilities owned by third party employers of our students. 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 62,900 students were enrolled as of June 30, 2015. 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
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
(In thousands, except per share data)
------------------------------------
Net revenue $174,726 $158,594 $368,853 $326,026
Costs and expenses:
Instructional
costs and
services 75,357 67,847 154,044 138,525
Admissions
advisory and $1,611 for the
related, six months
including $489 ended June 30,
and $806 for 2015 and 2014,
the three respectively,
months ended to related
June 30, 2015 parties
and 2014,
respectively,
and $994 and 27,372 26,208 55,705 52,469
Advertising 18,419 15,751 38,450 32,463
Marketing and
promotional 1,788 1,907 3,482 3,698
General and
administrative 9,534 8,994 18,930 17,548
----- ----- ------ ------
Total costs and
expenses 132,470 120,707 270,611 244,703
------- ------- ------- -------
Operating income 42,256 37,887 98,242 81,323
Interest expense (146) (356) (521) (879)
Interest and
other income 127 197 384 334
--- --- --- ---
Income before
income taxes 42,237 37,728 98,105 80,778
Income tax
expense 16,461 14,659 38,150 31,421
------ ------ ------ ------
Net income $25,776 $23,069 $59,955 $49,357
======= ======= ======= =======
Earnings per share:
Basic income per
share $0.56 $0.51 $1.31 $1.09
===== ===== ===== =====
Diluted income
per share $0.55 $0.49 $1.27 $1.05
===== ===== ===== =====
Basic weighted
average shares
outstanding 46,012 45,598 45,901 45,403
====== ====== ====== ======
Diluted weighted
average shares
outstanding 47,263 46,990 47,233 46,917
====== ====== ====== ======
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 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 Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
(Unaudited, in thousands)
Net income $25,776 $23,069 $59,955 $49,357
Plus: interest
expense net of
interest income 19 159 137 545
Plus: income tax
expense 16,461 14,659 38,150 31,421
Plus: depreciation
and amortization 8,159 6,997 16,239 13,852
----- ----- ------ ------
EBITDA 50,415 44,884 114,481 95,175
------ ------ ------- ------
Plus: royalty to
former owner 74 74 148 148
Plus: prepaid
royalty impairment
and other fixed
asset impairments 872 1,969 872 3,056
Plus: estimated
litigation and
regulatory reserves 50 870 241 897
Plus: share-based
compensation 2,909 2,633 5,512 4,837
----- ----- ----- -----
Adjusted EBITDA $54,320 $50,430 $121,254 $104,113
======= ======= ======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Balance Sheets
ASSETS: June 30, December 31,
(In
thousands,
except
par
value) 2015 2014
----------- ---- ----
Current
assets (Unaudited)
Cash and
cash
equivalents $50,710 $65,238
Restricted
cash, cash
equivalents
and
investments 63,696 67,840
Investments 83,533 100,784
Accounts
receivable,
net 8,158 7,605
Deferred
income
taxes 6,441 6,149
Other
current
assets 18,539 19,429
------ ------
Total
current
assets 231,077 267,045
Property
and
equipment,
net 588,275 478,170
Prepaid
royalties 3,503 3,650
Goodwill 2,941 2,941
Other
assets 3,145 3,907
----- -----
Total
assets $828,941 $755,713
======== ========
LIABILITIES
AND
STOCKHOLDERS'
EQUITY:
Current
liabilities
Accounts
payable $36,410 $22,715
Accrued
compensation
and
benefits 23,101 23,995
Accrued
liabilities 14,883 13,533
Income
taxes
payable 220 4,906
Student
deposits 64,895 69,584
Deferred
revenue 42,409 36,868
Due to
related
parties 401 403
Current
portion
of
capital
lease
obligations 518 91
Current
portion
of notes
payable 6,620 6,616
----- -----
Total
current
liabilities 189,457 178,711
Capital
lease
obligations,
less
current
portion 170 406
Other
noncurrent
liabilities 3,953 4,513
Deferred
income
taxes,
noncurrent 15,469 15,974
Notes
payable,
less
current
portion 76,565 79,877
------ ------
Total
liabilities 285,614 279,481
------- -------
Commitments
and
contingencies
Stockholders'
equity
Preferred
stock, at June
$0.01 par 30, 2015
value, and
10,000 December
shares 31, 2014
authorized;
0 shares
issued
and
outstanding - -
Common
stock, issued December
$0.01 par and 31, 2014,
value, 47,133 respectively
100,000 and
shares 46,744
authorized; shares
50,237 outstanding
and at June
49,746 30, 2015
shares 502 497
Treasury
stock, at 31, 2014,
cost, respectively
3,104 and
3,002
shares of
common
stock at
June 30,
2015 and
December (58,000) (53,770)
Additional
paid-in
capital 170,194 158,549
Accumulated
other
comprehensive
loss (315) (35)
Retained
earnings 430,946 370,991
------- -------
Total
stockholders'
equity 543,327 476,232
------- -------
Total
liabilities
and
stockholders'
equity $828,941 $755,713
======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
----------------
June 30,
--------
(In thousands) 2015 2014
------------- ---- ----
Cash flows provided by operating activities:
Net income $59,955 $49,357
Adjustments to reconcile net income to net cash provided by
operating activities:
Share-based compensation 5,512 4,837
Excess tax benefits from share-based
compensation (3,361) (7,085)
Provision for bad debts 7,412 7,061
Depreciation and amortization 16,387 14,000
Deferred income taxes (1,077) (862)
Prepaid royalty impairment - 966
Other, including fixed asset
impairments 872 2,090
Changes in assets and liabilities:
Restricted cash, cash equivalents and
investments 4,144 11,135
Accounts receivable (7,965) (8,359)
Prepaid expenses and other 1,373 2,062
Due to/from related parties (2) 46
Accounts payable (1,083) (1,151)
Accrued liabilities and employee
related liabilities 422 2,087
Income taxes receivable/payable (1,214) 16,956
Deferred rent (560) (665)
Deferred revenue 5,541 8,870
Student deposits (4,689) (11,905)
------ -------
Net cash provided by operating
activities 81,667 89,440
------ ------
Cash flows used in investing activities:
Capital expenditures (111,903) (82,013)
Purchases of investments (25,023) (87,217)
Proceeds from sale or maturity of
investments 42,274 39,145
------ ------
Net cash used in investing activities (94,652) (130,085)
------- --------
Cash flows (used in) provided by financing activities:
Principal payments on notes payable
and capital lease obligations (3,374) (3,346)
Repurchase of common shares including
shares withheld in lieu of income
taxes (4,230) (5,338)
Excess tax benefits from share-based
compensation 3,361 7,085
Net proceeds from exercise of stock
options 2,700 6,634
----- -----
Net cash (used in) provided by
financing activities (1,543) 5,035
------ -----
Net decrease in cash and cash
equivalents (14,528) (35,610)
Cash and cash equivalents, beginning
of period 65,238 55,824
------ ------
Cash and cash equivalents, end of
period $50,710 $20,214
======= =======
Supplemental disclosure of cash flow information
Cash paid for interest $534 $916
Cash paid for income taxes $39,986 $14,885
Supplemental disclosure of non-cash investing and financing
activities
Purchases of property and equipment
included in accounts payable $20,623 $10,210
Purchases of equipment through
capital lease obligations $257 $ -
Tax benefit of Spirit warrant
intangible $129 $130
Shortfall tax expense from share-
based compensation $18 $14
The following is a summary of our student enrollment at June 30, 2015 and 2014 by degree type and by instructional delivery method:
2015(1) 2014(1)
------ ------
# of Students % of Total # of Students % of Total
------------- ---------- ------------- ----------
Graduate
degrees(2) 28,224 44.80% 24,438 42.30%
Undergraduate
degree 34,711 55.20% 33,269 57.70%
------ ----- ------ -----
Total 62,935 100.00% 57,707 100.00%
====== ====== ====== ======
2015(1) 2014(1)
------ ------
# of Students % of Total # of Students % of Total
------------- ---------- ------------- ----------
Online(3) 57,681 91.70% 52,969 91.80%
Ground(4) 5,254 8.30% 4,738 8.20%
----- ---- ----- ----
Total 62,935 100.00% 57,707 100.00%
====== ====== ====== ======
(1) Enrollment at June 30, 2015 and
2014 represents individual
students who attended a course
during the last two months of
the calendar quarter. Included
in enrollment at June 30, 2015
and 2014 are students pursuing
non-degree certificates of 858
and 795, respectively.
(2) Includes 6,106 and 4,930 students
pursuing doctoral degrees at
June 30, 2015 and 2014,
respectively.
(3) As of June 30, 2015 and 2014,
47.2% and 44.4%, respectively,
of our working adult students
(online and professional studies
students) were pursuing graduate
degrees.
(4) Includes both our traditional on-
campus ground students attending
summer semester, and our
professional studies students.
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SOURCE Grand Canyon Education, Inc.
