Education Management Corp CEO Discusses F2Q12 Results - Earnings Call Transcript

Education Management Corp ( EDMC)

F2Q12 Earnings Call

February 02, 2012 09:00 AM ET


Jim Sober - VP, Finance

Todd Nelson - CEO

Ed West - President and CFO


Kelly Flynn - Credit Suisse

Tom Dillon - William Blair

David Warner - First Analysis

Gary Bisbee - Barclays

Jeff Silber - BMO Capital Markets

Trace Urdan - Wunderlich Securities

Jerry Herman - Stifel Nicolaus

Suzanne Stein - Morgan Stanley

Andrew Steinerman - JPMorgan

Jeffrey Meuler - Baird

Peter Appert - Piper Jaffray

Sara Gubins - Bank of America



Good morning and welcome to the Education Management Corporation's Fiscal 2012 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Jim Sober, Vice President, Finance. Please go ahead.

Jim Sober

Thanks, Amy. Welcome to Education Management's fiscal 2012 second quarter earnings call. With me on the call today are Todd Nelson, Chief Executive Officer; and Ed West, President and Chief Financial Officer.

Following our opening remarks, we will begin a question-and-answer session. Before turning the call over to Todd for his opening comments, I'd like to remind everyone that the information presented on the call contains forward-looking statements. These forward-looking statements include but are not limited to statements about our future plans and our future financial and operating performance. Actual results may differ materially from those contained in the forward-looking statements. Additional information containing or concerning factors that could cause actual results to differ materially are set forth in the cautionary statement included in the earnings release. Todd?

Todd Nelson

Thanks, Jim. Welcome to our fiscal 2012 second quarter earnings call. On today's call I'll provide an update of our business operations and Ed will review our first quarter results, cover several operational topics, and provide our guidance.

Given the continued challenges in our industry, we are pleased with our second quarter financial results. We believe that the prolonged recession high unemployment while a benefit to our industry earlier on is now causing perspective students to delay their decision to get the education they desire. Despite these significant headwinds, we have continued to make the investments necessary to continue to provide a high-quality education and good outcomes for our students. We've restructured all aspects of financially processing, transitioned South University online and Argosy University online to a non-term based academic structure, eliminated miscellaneous students fees, standardized credit requirements across the art institutes, and invested in the development and expansion of career services across all of our schools at Argosy University and Brown Mackie Colleges in particular. Plus we have and will continue to evaluate all aspects of our business in order to streamline departments for efficiencies, eliminate unnecessary cost, and make the decisions to match our cost structure to our current enrolment trends.

Finally, we continue to firmly believe that given the competitive global marketplace the long-term growth trends for our industry remain favorable as the need for post-secondary education remains high. And we will work hard to ensure students receive a high-quality education and are prepared to take advantage of their opportunities.

For our recent January start we have enrolled -- enrolment of over 142,600 students, a decrease of 9.3% over the prior year period. Excluding the six locations that are less than a-year-old same school enrolment declined approximately 10%. Students taking their classes in a fully online modality decreased to 8.5% from last year to 35,800 students representing about 25% of the total population.

Further, new students from the three-month period ended December 31, 2011 decreased by approximately 10% over the prior year period, in line with our expectations. While we still believe new students enrolment trends should improve in calendar year 2012, there will be more variability in year-over-year comparisons in the near term.

During the second quarter of fiscal 2012, we rolled out 55 programs across schools not currently offering them, bringing the total programs rolled out during the first six months to 150. Argosy University online has continued to launch new programs and associate degrees in psychology, business administration and criminal justice as well as a Master's of Science degree in human resource management. In addition, South University developed a Master's program in leadership.

I'm also pleased to announce that earlier this week we continued the expansion South University in its high-quality programs into another new market with the opening of a new campus in Cleveland, Ohio. I'd like now to provide a brief update of our graduate statistics -- of our undergraduate students excluding Argosy University available for employment who graduated during the quarter ended this past year, approximately 76% were employed in their fields or related fields within six months of graduation. For the average starting salaries for those graduates from our undergraduate programs for the quarter end of this past year, Bachelor's degree students obtained an average salary of approximately $33,000, while graduates from Associate's and diploma programs earned approximately $27,000.

And lastly, we are seeing positive results from the investments that we've made in our online operations over the past year. For example, the major transitions to a non-term based academic structure at South University online and more recently at Argosy University online are now complete. At South University online, we have seen favorable results on student success with the average student grade point average trending higher, academic progress showing meaningful improvement over prior year periods, and a higher percentage of credits are being successfully earned by students.

We anticipate similar results occurring with students at Argosy University online in the months ahead. In addition, students seem to appreciate the added flexibility that non-term provides in their course schedules. We believe these factors point to a stronger student population to build upon going forward. We firmly believe in the long-term growth opportunities for online education and we'll continue to enhance our academic offerings while expanding the number of programs we offer in order to serve more students over time.

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