GRAND CANYON EDUCATION, INC. PHOENIX, Feb. 17, 2016 /PRNewswire/ -- Grand Canyon Education, Inc. (NASDAQ: LOPE), a comprehensive regionally accredited university that offers approximately 200 graduate and undergraduate degree programs and certificates across eight colleges both online and on ground at our 200+ acre campus in Phoenix, Arizona, today announced financial results for the quarter and year ended December 31, 2015.
For the three months ended December 31, 2015:
-- Net revenue increased 13.7% to $216.0 million for the fourth quarter of
2015, compared to $190.0 million for the fourth quarter of 2014.
-- End-of-period enrollment increased 9.9% to 74,506 at December 31, 2015,
from 67,806 at December 31, 2014, as ground enrollment increased 19.2%
to 15,195 at December 31, 2015, from 12,746 at December 31, 2014 and
online enrollment increased 7.7% to 59,311 at December 31, 2015, from
55,060 at December 31, 2014.
-- Operating income for the fourth quarter of 2015 was $63.1 million, an
increase of 17.9% as compared to $53.5 million for the same period in
2014. The operating margin for the fourth quarter of 2015 was 29.2%,
compared to 28.2% for the same period in 2014.
-- Adjusted EBITDA increased 20.1% to $77.0 million for the fourth quarter
of 2015, compared to $64.1 million for the same period in 2014.
-- The tax rate in the fourth quarter of 2015 was 38.6% compared to 38.1%
in the fourth quarter of 2014. The variance in the effective tax rate
is attributable to non-recurring unfavorable items in the fourth quarter
of 2015.
-- Net income increased 15.2% to $38.1 million for the fourth quarter of
2015, compared to $33.1 million for the same period in 2014.
-- Diluted net income per share was $0.81 for the fourth quarter of 2015,
compared to $0.70 for the same period in 2014.
For the year ended December 31, 2015:
-- Net revenue increased 12.6% to $778.2 million for the year ended
December 31, 2015, compared to $691.1 million for the same period in
2014.
-- Operating income for the year ended December 31, 2015 was $210.4
million, an increase of 16.3% as compared to $180.8 million for the same
period in 2014. The operating margin for the year ended December 31,
2015 was 27.0%, compared to 26.2% for the same period in 2014.
-- Adjusted EBITDA increased 15.5% to $263.1 million for the year ended
December 31, 2015, compared to $227.8 million for the same period in
2014.
-- The tax rate in the year ended December 31, 2015 was 37.1% compared to
38.0% for the same period in 2014. The tax rate for 2015 is lower than
the prior year due to state tax apportionment and rate changes. The tax
rate for both periods is less than the annual effective tax rates due to
the contributions made in lieu of state income taxes in the third
quarter of both years.
-- Net income increased 17.9% to $131.4 million for the year ended December
31, 2015, compared to $111.5 million for the same period in 2014.
-- Diluted net income per share was $2.78 for the year ended December 31,
2015, compared to $2.37 for the same period in 2014.
Balance Sheet and Cash Flow
The University financed its operating activities and capital expenditures during the years ended December 31, 2015 and 2014 primarily through cash provided by operating activities. Our unrestricted cash, cash equivalents and investments were $106.4 million and $166.0 million at December 31, 2015 and 2014, respectively. Our restricted cash, cash equivalents and investments at December 31, 2015 and December 31, 2014 were $75.4 million and $67.8 million, respectively.
The University generated $173.9 million in cash from operating activities for the year ended December 31, 2015 compared to $167.0 million for the year ended December 31, 2014. The increase in cash provided by operations in 2015 and 2014 resulted from our net income plus non-cash charges for provision for bad debts, depreciation and amortization, partially offset by the timing of income tax and employee related payments.
Net cash used in investing activities was $200.9 million and $161.0 million for the years ended December 31, 2015 and 2014, 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. Proceeds from investment, net of purchases of short-term investments, was $17.4 million and $7.6 million during the year ended December 31, 2015 and 2014, respectively. Capital expenditures were $204.7 million and $168.7 million for the years ended December 31, 2015 and 2014, respectively. In 2015, in order to accommodate the continued growth of our traditional ground population, we completed four additional dormitories, a classroom building for our College of Science, Technology and Engineering, and a third parking structure prior to the 2015/2016 school year and have recently started construction on three more apartment style residence halls, a 170,000 square foot classroom building for our College of Science, Engineering and Technology, a student service center, and a fourth parking structure, as well as land purchases adjacent to or near our Phoenix campus, and purchases of computer equipment, other internal use software projects and furniture and equipment to support our increasing employee headcount. Included in off-site development during 2015 is $10.0 million we spent to revitalize what was formerly known as the Maryvale Golf Course under a partnership agreement with the City of Phoenix. The golf course is now known as Grand Canyon University Championship golf course. Also, in late 2015, we commenced construction on an off-site office building and parking garage that is in close proximity to our ground traditional campus. Employees that work in two leased office buildings in the Phoenix area will be consolidated into this new building when it's expected to be completed in late 2016. Although the University is funding the construction of the building and parking garage, the University is marketing these, along with a recently refurbished office building in the same development, as part of a sale-leaseback transaction. . 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.
Net cash used in financing activities was $15.2 million for the year ended December 31, 2015 whereas net cash provided by financing activities was $3.4 million for the year ended December 31, 2014. During 2015, $11.3 million was used to purchase treasury stock in accordance with the University's share repurchase program and $4.3 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 $6.8 million, partially offset by proceeds from the exercise of stock options of $3.5 million and excess tax benefits from share-based compensation of $3.6 million. 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 $3.7 million used to purchase common shares withheld in lieu of income taxes resulting from restricted share awards and $1.6 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.
2016 Outlook by Quarter
Q1 2016: Net revenue of $224.0 million; Target Operating Margin 30.0%; Diluted EPS of $0.88 using 46.9 million diluted shares; student counts of 75,500
Q2 2016: Net revenue of $189.0 million; Target Operating Margin 22.0%; Diluted EPS of $0.54 using 47.0 million diluted shares; student counts of 67,200
Q3 2016: Net revenue of $205.0 million; Target Operating Margin 23.5%; Diluted EPS of $0.63 using 47.2 million diluted shares; student counts of 81,250
Q4 2016: Net revenue of $240.0 million; Target Operating Margin 31.0%; Diluted EPS of $0.96 using 47.5 million diluted shares; student counts of 80,900
Full Year 2016: Net revenue of $858.0 million; Target Operating Margin 27.0%; Diluted EPS of $3.01 using 47.2 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 fourth quarter 2015 results and 2016 outlook during a conference call scheduled for today, February 17, 2016 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 17883391 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 17883391. 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 approximately 200 graduate and undergraduate degree programs and certificates 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. We offer master and doctoral degrees in contemporary fields that are designed to provide students with the capacity for transformational leadership in their chosen industry, emphasizing the immediate relevance of theory, application, and evaluation to promote personal and organizational change. Approximately 74,500 students were enrolled as of December 31, 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 Twelve Months Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
(In thousands, except per share data)
------------------------------------
Net revenue $215,954 $189,973 $778,200 $691,055
Costs and expenses:
Instructional
costs and
services 92,427 78,552 329,651 288,791
Admissions
advisory and respectively, parties
related, and $1,575
including and $2,974
$169 and for the year
$601 for the ended
three months December 31,
ended 2015 and
December 31, 2014,
2015 and respectively,
2014, 29,361 28,774 112,572 108,567
Advertising 18,419 16,854 76,229 65,808
Marketing and
promotional 1,978 1,810 7,287 7,439
General and
administrative 10,634 10,447 42,100 39,635
------ ------ ------ ------
Total costs
and expenses 152,819 136,437 567,839 510,240
------- ------- ------- -------
Operating
income 63,135 53,536 210,361 180,815
Interest
expense (414) (346) (1,248) (1,801)
Interest and
other income (691) 307 (106) 684
---- --- ---- ---
Income before
income taxes 62,030 53,497 209,007 179,698
Income tax
expense 23,916 20,404 77,596 68,232
------ ------ ------ ------
Net income $38,114 $33,093 $131,411 $111,466
======= ======= ======== ========
Earnings per share:
Basic income
per share $0.83 $0.72 $2.86 $2.45
===== ===== ===== =====
Diluted
income per
share $0.81 $0.70 $2.78 $2.37
===== ===== ===== =====
Basic
weighted
average
shares
outstanding 46,035 45,652 45,975 45,538
====== ====== ====== ======
Diluted
weighted
average
shares
outstanding 47,337 47,097 47,281 47,006
====== ====== ====== ======
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 (loss) 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 Twelve Months Ended
December 31, December 31,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
(Unaudited, in thousands)
Net income $38,114 $33,093 $131,411 $111,466
Plus: interest
expense net of
interest
income 147 39 395 1,117
Plus: income
tax expense 23,916 20,404 77,596 68,232
Plus:
depreciation
and
amortization 10,241 7,981 35,379 29,177
------ ----- ------ ------
EBITDA 72,418 61,517 244,781 209,992
------ ------ ------- -------
Plus: royalty
to former
owner 74 74 296 296
Plus: prepaid
royalty
impairment and
other fixed
asset
impairments 657 - 2,755 3,441
Plus:
contributions
in lieu of
state income
taxes - - 2,750 2,750
Plus: estimated
litigation and
regulatory
reserves 21 - 328 870
Plus: lease
termination
costs - - - 518
Plus: loss from
note
receivable 958 - 958 -
Plus: share-
based
compensation 2,834 2,533 11,257 9,945
----- ----- ------ -----
Adjusted EBITDA $76,962 $64,097 $263,125 $227,812
======= ======= ======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Balance Sheets
ASSETS: December 31, December 31,
(In
thousands,
except
par
value) 2015 2014
----------- ---- ----
Current
assets (Unaudited)
Cash and
cash
equivalents $23,036 $65,238
Restricted
cash, cash
equivalents
and
investments 75,384 67,840
Investments 83,364 100,784
Accounts
receivable,
net 8,298 7,605
Income
taxes
receivable 3,952 1
Deferred
income
taxes 6,448 6,149
Other
current
assets 20,863 19,428
------ ------
Total
current
assets 221,345 267,045
Property
and
equipment,
net 667,483 478,170
Prepaid
royalties 3,355 3,650
Goodwill 2,941 2,941
Other
assets 3,306 3,907
----- -----
Total
assets $898,430 $755,713
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities
Accounts
payable $34,149 $22,715
Accrued
compensation
and
benefits 17,895 23,995
Accrued
liabilities 13,846 13,533
Income
taxes
payable 29 4,906
Student
deposits 76,742 69,584
Deferred
revenue 37,876 36,868
Due to
related
parties 675 403
Current
portion
of
capital
lease
obligations 697 91
Current
portion
of notes
payable 6,625 6,616
----- -----
Total
current
liabilities 188,534 178,711
Capital
lease
obligations,
less
current
portion 788 406
Other
noncurrent
liabilities 4,302 4,513
Deferred
income
taxes,
noncurrent 21,303 15,974
Notes
payable,
less
current
portion 73,252 79,877
------ ------
Total
liabilities 288,179 279,481
------- -------
Commitments and contingencies
Stockholders' equity
Preferred
stock, at
$0.01 par December
value, 31, 2015
10,000 and 2014
shares
authorized;
0 shares
issued
and
outstanding - -
Common
stock, issued and 2014,
$0.01 par and respectively
value, 46,877
100,000 and
shares 46,744
authorized; shares
50,288 outstanding
and at
49,746 December
shares 503 497
Treasury
stock, at respectively
cost,
3,411 and
3,002
shares of
common
stock at
December
31, 2015
and 2014, (69,332) (53,770)
Additional
paid-in
capital 177,167 158,549
Accumulated
other
comprehensive
loss (489) (35)
Retained
earnings 502,402 370,991
------- -------
Total
stockholders'
equity 610,251 476,232
------- -------
Total
liabilities
and
stockholders'
equity $898,430 $755,713
======== ========
GRAND CANYON EDUCATION, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended
December 31,
------------
(In thousands) 2015 2014
------------- ---- ----
Cash flows provided by operating activities:
Net income $131,411 $111,466
Adjustments to reconcile net income to net cash provided by
operating activities:
Share-based compensation 11,257 9,945
Excess tax benefits from share-based
compensation (3,636) (7,637)
Provision for bad debts 16,620 15,045
Depreciation and amortization 35,675 29,473
Loss on note receivable 958 -
Loss on asset disposal and fixed
asset impairments 2,755 2,475
Deferred income taxes 4,576 2,651
Prepaid royalty impairment - 966
Changes in assets and liabilities:
Restricted cash, cash equivalents and
investments (7,544) (3,472)
Accounts receivable (17,313) (15,433)
Prepaid expenses and other (2,351) 81
Due to/from related parties 272 (51)
Accounts payable 5,002 (2,448)
Accrued liabilities (5,772) 2,991
Income taxes receivable/payable (4,965) 16,378
Deferred rent (1,211) (2,298)
Deferred revenue 1,008 4,052
Student deposits 7,158 2,812
----- -----
Net cash provided by operating
activities 173,900 166,996
------- -------
Cash flows used in investing activities:
Capital expenditures (204,718) (168,646)
Purchases of land, building and golf
course improvements related to off-
site development (13,583) -
Purchases of investments (48,122) (114,919)
Proceeds from sale or maturity of
investments 65,542 122,555
------ -------
Net cash used in investing activities (200,881) (161,010)
-------- --------
Cash flows (used in) provided by financing activities:
Principal payments on notes payable
and capital lease obligations (6,784) (6,696)
Repurchase of common shares including
shares withheld in lieu of income
taxes (15,562) (5,338)
Net proceeds from exercise of stock
options 3,489 7,825
Excess tax benefits from share-based
compensation 3,636 7,637
----- -----
Net cash (used in) provided by
financing activities (15,221) 3,428
------- -----
Net (decrease) increase in cash and
cash equivalents (42,202) 9,414
Cash and cash equivalents, beginning
of year 65,238 55,824
------ ------
Cash and cash equivalents, end of
year $23,036 $65,238
======= =======
Supplemental disclosure of cash flow information
Cash paid during the year for
interest $1,244 $1,793
Cash paid during the year for income
taxes $75,587 $48,835
Cash received for income tax refunds $4 $385
Supplemental disclosure of non-cash investing and financing
activities
Purchases of property and equipment
included in accounts payable $13,277 $5,845
Purchases of equipment through
capital lease obligations $1,156 $ -
Shortfall tax expense from share-
based compensation $26 $16
Tax benefit of Spirit warrant
intangible $253 $260
The following is a summary of our student enrollment at December 31, 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) 29,237 39.2% 26,319 38.8%
Undergraduate degree 45,269 60.8% 41,487 61.2%
------ ---- ------ ----
Total 74,506 100.0% 67,806 100.0%
====== ===== ====== =====
2015(1) 2014(1)
------ ------
# of Students % of Total # of Students % of Total
------------- ---------- ------------- ----------
Online(3) 59,311 79.6% 55,060 81.2%
Ground(4) 15,195 20.4% 12,746 18.8%
------ ---- ------ ----
Total 74,506 100.0% 67,806 100.0%
====== ===== ====== =====
(1) Enrollment at December 31, 2015
and 2014 represents individual
students who attended a course
during the last two months of
the calendar quarter. Included
in enrollment at December 31,
2015 and 2014 are students
pursuing non-degree
certificates of 679 and 585,
respectively.
(2) Includes 6,302 and 5,570 students
pursuing doctoral degrees at
December 31, 2015 and 2014,
respectively.
(3) As of December 31, 2015 and 2014,
47.8% and 46.0%, respectively,
of our working adult students
(online and professional studies
students) were pursuing graduate
degrees.
(4) Includes both our traditional on-
campus ground students and our
professional studies students.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/grand-canyon-education-inc-reports-fourth-quarter-and-full-year-2015-results-300221663.html
SOURCE Grand Canyon Education, Inc.
