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8-K - CURRENT REPORT - National American University Holdings, Inc. | nauh_8k.htm |
Exhibit 99.1
NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. REPORTS
FISCAL 2017 SECOND QUARTER AND SIX MONTHS RESULTS
Company to host conference call on January 5, 2017, at 11:00 a.m.
ET
Financial and Operational Highlights
●
Combined
enrollment in continuing education/workforce development, graduate,
and doctoral programs increased 21.1% during the FY 2017 second
quarter from the prior year quarter, and 19.0% from the FY 2017
first quarter.
●
Enrollment
by total headcount for the FY 2017 second quarter (Fall 2017 term)
decreased 12.2% from the prior-year period, to 7,240 students as of
November 30, 2016. However, the total headcount increased by 6.0%
from the FY 2017 first quarter.
●
FY 2017 second
quarter total revenue was $22.0 million, compared to $25.7 million
in the prior-year period. The Company’s academic revenue was
$20.3 million in the FY 2017 second quarter, compared to $23.6
million in the prior-year period.
●
FY 2017 second
quarter net loss attributable to the Company was $(0.8) million,
compared to net loss attributable to the Company of $(1.2) million
in the prior-year period, primarily as a result of decreased
revenue on lower enrollment and fixed educational services
expenditures, offset by lower SG&A expenses.
●
Balance sheet at
November 30, 2016, included cash and cash equivalents and
investments of $19.7 million; taxes receivable of $4.6 million,
working capital of $17.4 million; no outstanding lending debt; and
stockholders’ equity of $35.5 million, or approximately $1.47
per diluted share.
●
The Board of
Directors declared a cash dividend in the amount of $0.045 per
share on all shares of the Company’s common stock outstanding
and of record as of the close of business on December 31, 2016,
which will be paid on or about January 13, 2017.
Rapid City, South Dakota, January 4, 2017
— National American University Holdings, Inc. (the
“Company”) (NASDAQ: NAUH), which through its
wholly owned subsidiary operates National American University
(“NAU” or
the
“University”), a regionally accredited,
proprietary, multi-campus institution of higher learning, today
reported unaudited financial results for its fiscal 2017 second
quarter ended November 30, 2016.
Management Commentary
Ronald
L. Shape, Ed.D., President and Chief Executive Officer of the
Company, stated, “We were pleased to see positive enrollment
trends despite a lower year-over-year headcount. We continued to
see double-digit percentage growth in our continuing education,
doctoral, and graduate programs, and saw our total headcount
increase quarter-over-quarter. Many of our peers are faced with
challenging operating conditions in light of the current market,
and as a result certain institutions have no answer but to close
their doors, which in turn displaces many thousands of students. We
are pleased to have received applicable regulatory approvals for a
teach-out of over 1,000 students at a recently closed school in
Texas. As of the date of this press release, approximately 1,000 of
those students have expressed interest to enroll at NAU. In
addition, we continue to develop our international student
enrollments through our Canadian relationships efforts. Likewise,
we continue to develop and improve our online enrollment efforts by
adapting our hybrid and online curriculums so that they are both
practical and dynamic as well as exploring additional markets to
build online recruitment teams. This has our University well
positioned to provide students with information on NAU and the
opportunities available to seamlessly transfer credits and achieve
their educational goals.”
Dr.
Shape continued, “In recent quarters we have been very
stringent on costs throughout our organization, highlighted this
quarter by decreased SG&A on a dollar basis and as a percentage
of revenues. We have considerable operational leverage in our
campus agreements and have maintained a strong balance sheet which
will allow the Company to continue taking advantages of
opportunities as they arise.”
1
Operating Review
Enrollment Update
Total
NAU student enrollment for the Fall 2017 term decreased 12.2% to
7,240 students from 8,249 during the prior fall term. Students
enrolled in 61,454 credit hours compared to 72,563 credit hours
during the prior fall term. The
current average age of NAU’s students continues to be in the
mid-30s, with those seeking undergraduate degrees remaining the
highest portion of NAU’s student
population.
The following is a summary of student enrollment at November 30,
2016, and November 30, 2015, by degree level and by instructional
delivery method:
|
November 30, 2016
(Fall ’17 Term)
|
November 30, 2015
(Fall ’16 Term)
|
||
|
No. of Students
|
% of Total
|
No. of Students
|
% of Total
|
Continuing
Ed
|
300
|
4.1%
|
278
|
3.4%
|
Doctoral
|
110
|
1.5%
|
77
|
0.9%
|
Graduate
|
359
|
5.0%
|
280
|
3.4%
|
Undergraduate
& Diploma
|
6,471
|
89.4%
|
7,614
|
92.3%
|
|
|
|
|
|
Total
|
7,240
|
100.0%
|
8,249
|
100.0%
|
|
No. of Students
|
% of Total
|
No. of Students
|
% of Total
|
On-Campus
|
1,357
|
18.7%
|
1,433
|
17.4%
|
Online
|
4,879
|
67.4%
|
5,572
|
67.5%
|
Hybrid
|
1,004
|
13.9%
|
1,244
|
15.1%
|
|
|
|
|
|
Total
|
7,240
|
100.0%
|
8,249
|
100.0%
|
Financial Review
The
Company, through its wholly owned subsidiary, operates in two
business segments: academics, which consists of NAU’s
undergraduate, graduate, and doctoral education programs and
contributes the primary portion of the Company’s revenue; and
ownership in and development of multiple apartments and condominium
complexes from which it derives sales and rental income. The real
estate operations generated approximately 1.3% of the
Company’s revenue for the quarter ended November 30,
2016.
Fiscal 2017 Second Quarter Financial Results
●
Total revenue for
the FY 2017 second quarter was $22.0 million, compared to $25.7
million in the same period last year. Academic tuition revenue was
$20.3 million, compared to $23.6 million in the prior-year period.
Auxiliary (bookstore) revenue was $1.4 million for the FY 2017
second quarter, compared to $1.9 million in the prior year period.
This decrease in academic revenue was primarily a result of a
decrease in enrollment.
●
For the FY 2017
second quarter, educational services expense was $6.5 million, or
30.0% of the academic’s total revenue, compared to $6.8
million, or 26.8%, for the FY 2016 second quarter. This percentage
increase was a result of fixed costs being compared to a decreasing
revenue base and the additional expense to launch new programs and
transfer programs from closing institutions.
Educational
services expense specifically relates to academics, and includes
salaries and benefits of faculty and academic administrators, costs
of educational supplies, faculty reference and support material and
related academic costs.
●
During the FY 2017
second quarter, SG&A expenses decreased to $15.4 million, or
70% of total revenue, from $18.8 million, or 73%, in the prior-year
period.
2
●
Loss before income
taxes and non-controlling interest for the FY 2017 second quarter
was $(1.1) million, compared to a loss before income taxes and
non-controlling interest of $(1.5) million in the same period last
year, primarily as a result of decreased revenue on lower
enrollment.
●
Net loss
attributable to the Company for the FY 2017 second quarter was
$(0.8) million, or ($0.03) per diluted share based on 24.1 million
shares outstanding, compared to net loss attributable to the
Company of $(1.2) million, or ($0.05) per diluted share based on
25.2 million shares outstanding, in the prior-year
period.
●
Earnings before
interest, tax, and depreciation and amortization
(“EBITDA”) for the FY 2017 second quarter were $0.3
million, compared to $0.1 million in the prior-year period. A table
reconciling EBITDA/LBITDA to net income/loss can be found at the
end of this release.
Fiscal 2017 Six Months Financial Results
●
Total revenues for
the first six months of FY 2017 were $43.1 million, compared to
$50.4 million in the prior-year period. Academic’s total
revenue was $42.5 million, compared to $49.8 million in the
prior-year period, as a result of the decrease in enrollment. The
Company continues to execute on its strategic plan, which includes
growing enrollments at its current existing locations by investing
in new program development and expansion, academic advisor support,
and student retention initiatives.
●
NAU’s
educational services expense for the first six months of FY 2017
was $13.0 million, or 30.5% of academic’s total revenue,
compared to $13.1 million, or 26.4%, in the prior-year
period.
●
During the first
six months of FY 2017, SG&A expenses decreased to $31.9
million, or 74.0% of total revenues, compared to $37.8 million, or
75.0%, in the prior-year period.
●
Loss before income
taxes and non-controlling interest for the first six months of FY
2017 was $(4.2) million, compared to loss before income taxes and
non-controlling interest of $(3.6) million in the prior-year
period, primarily as a result of decreased revenues offset by lower
SG&A expenses.
●
Net loss
attributable to the Company during the first six months of FY 2017
was $(2.8) million, or $(0.12) per diluted share based on 24.1
million shares outstanding, compared to net loss attributable to
the Company of $(2.5) million, or $(0.10) per diluted share based
on 25.2 million shares outstanding, in the prior-year
period.
●
Losses before
interest, tax, and depreciation and amortization
(“LBITDA”) for the first six months of FY 2016 were
$(1.2) million, compared to LBITDA of $(0.3) million in the
prior-year period. A table reconciling EBITDA/LBITDA to net
income/loss can be found at the end of this release.
Balance Sheet Highlights
(in millions except for percentages)
|
11/30/2016
|
5/31/2016
|
% Change
|
Cash
and Cash Equivalents/Investments
|
$19.7
|
$25.8
|
(23.6) %
|
Working
Capital
|
17.4
|
22.2
|
(21.6) %
|
Other
Long-term Liabilities
|
4.3
|
4.7
|
(8.5) %
|
Stockholders’
Equity
|
35.5
|
40.4
|
(12.1) %
|
Quarterly Dividend
The
Board of Directors declared a cash dividend in the amount of $0.045
per share on all shares of the Company’s common stock
outstanding and of record as of the close of business on December
31, 2016 that will be paid on or about January 13,
2017.
Conference Call Information
Management will
discuss these results in a conference call (with accompanying
presentation) on Thursday, January 5, 2017, at 11:00 a.m.
ET.
The
dial-in numbers are:
(877)
407-9078 (U.S.)
(201)
493-6745 (International)
3
Accompanying Slide Presentation and Webcast
The
Company will also have an accompanying slide presentation available
in PDF format at the “Investor Relations” section of
the NAU website at http://investors.national.edu.
The presentation will be made available 30 minutes prior to the
conference call. In addition, the call will be simultaneously
webcast over the Internet via the “Investor Relations”
section of the NAU website or by clicking on the conference call
link: http://national.equisolvewebcast.com/q2-2017.
About National American University Holdings, Inc.
National
American University Holdings, Inc., through its wholly owned
subsidiary, operates National American University
(“NAU”), a regionally accredited, proprietary,
multi-campus institution of higher learning offering associate,
bachelor’s, master’s, and doctoral degree programs in
technical and professional disciplines. Accredited by the Higher
Learning Commission, NAU has been providing technical and
professional career education since 1941. NAU opened its first
campus in Rapid City, South Dakota, and has since grown to multiple
locations throughout the United States. In 1998, NAU began offering
online courses. Today, NAU offers degree programs in traditional,
online, and hybrid formats, which provide students increased
flexibility to take courses at times and places convenient to their
busy lifestyles.
Forward Looking Statements
This
press release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
regarding the Company's business. Statements made in this release,
other than those concerning historical financial information, may
be considered forward-looking statements, which speak only as of
the date of this release and are based on current beliefs and
expectations and involve a number of assumptions. These
forward-looking statements include outlooks or expectations for
earnings, revenue, expenses or other future financial or business
performance, strategies or expectations, or the impact of legal or
regulatory matters on business, results of operations or financial
condition. Specifically, forward-looking statements may include
statements relating to the future financial performance of the
Company; the ability to continue to receive Title IV funds; the
growth of the market for the Company’s services; expansion
plans and opportunities; consolidation in the market for the
Company’s services generally; and other statements preceded
by, followed by or that include the words “estimate,”
“plan,” “project,” “forecast,”
“intend,” “expect,”
“anticipate,” “believe,”
“seek,” “target” or similar expressions.
These forward-looking statements involve a number of known and
unknown risks and uncertainties or other assumptions that may cause
actual results or performance to be materially different from those
expressed or implied by those forward-looking statements. Other
factors that could cause the Company’s results to differ
materially from those contained in its forward-looking statements
are included under, among others, the heading “Risk
Factors” in the Company’s Annual Report on Form 10-K,
which the Company filed on August 5, 2016, and in its other filings
with the Securities and Exchange Commission. The Company assumes no
obligation to update the information contained in this
release.
Contact
Information:
National American University Holdings, Inc.
Dr.
Ronald Shape
605-721-5220
rshape@national.edu
Investor
Relations Counsel
The Equity Group Inc.
Adam Prior
212-836-9606
aprior@equityny.com
Carolyne Y. Sohn
415-568-2255
csohn@equityny.com
4
NATIONAL AMERICAN
UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 2016 AND 2015
(In thousands, except share and per share amounts)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 2016 AND 2015
(In thousands, except share and per share amounts)
|
Three Months Ended
|
Six Months Ended
|
||
|
November 30,
|
November 30,
|
||
|
2016
|
2015
|
2016
|
2015
|
REVENUE:
|
|
|
|
|
Academic
revenue
|
$20,276
|
$23,593
|
$39,714
|
$46,251
|
Auxiliary
revenue
|
1,414
|
1,865
|
2,808
|
3,581
|
Rental
income — apartments
|
293
|
281
|
591
|
556
|
|
|
|
|
|
Total
revenue
|
21,983
|
25,739
|
43,113
|
50,388
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Cost
of educational services
|
6,497
|
6,832
|
12,965
|
13,128
|
Selling,
general and administrative
|
15,425
|
18,805
|
31,907
|
37,808
|
Auxiliary
expense
|
1,054
|
1,397
|
2,103
|
2,663
|
Loss
on disposition of property
|
0
|
63
|
6
|
63
|
|
|
|
|
|
Total
operating expenses
|
22,976
|
27,097
|
46,981
|
53,662
|
|
|
|
|
|
OPERATING
LOSS
|
(993)
|
(1,358)
|
(3,868)
|
(3,274)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
Interest
income
|
27
|
25
|
49
|
44
|
Interest
expense
|
(214)
|
(218)
|
(428)
|
(437)
|
Other
income — net
|
32
|
46
|
69
|
88
|
|
|
|
|
|
Total
other expense
|
(155)
|
(147)
|
(310)
|
(305)
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
(1,148)
|
(1,505)
|
(4,178)
|
(3,579)
|
|
|
|
|
|
INCOME
TAX BENEFIT
|
406
|
335
|
1,397
|
1,111
|
|
|
|
|
|
NET
LOSS
|
(742)
|
(1,170)
|
(2,781)
|
(2,468)
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO NON-CONTROLLING
|
(10)
|
(8)
|
(27)
|
(19)
|
INTEREST
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO NATIONAL AMERICAN
|
|
|
|
|
UNIVERSITY
HOLDINGS, INC. AND SUBSIDIARIES
|
(752)
|
(1,178)
|
(2,808)
|
(2,487)
|
|
|
|
|
|
OTHER
COMPREHENSIVE LOSS — Unrealized losses on investments,
net of tax
|
(9)
|
(2)
|
(5)
|
(3)
|
Income
tax benefit related to items of other comprehensive
loss
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS ATTRIBUTABLE TO
|
|
|
|
|
NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC.
|
$(761)
|
$(1,180)
|
$(2,813)
|
$(2,490)
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss attributable to National
|
$(0.03)
|
$(0.05)
|
$(0.12)
|
$(0.10)
|
American
University Holdings, Inc.
|
|
|
|
|
Diluted
net loss attributable to National
|
$(0.03)
|
$(0.05)
|
$(0.12)
|
$(0.10)
|
American
University Holdings, Inc.
|
|
|
|
|
Basic
weighted average shares outstanding
|
24,148,355
|
25,164,128
|
24,131,231
|
25,177,155
|
Diluted
weighted average shares outstanding
|
24,148,355
|
25,164,128
|
24,131,231
|
25,177,155
|
5
NATIONAL AMERICAN
UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 2016 AND CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2016
(In thousands, except share and per share amounts)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 2016 AND CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2016
(In thousands, except share and per share amounts)
|
November 30,
|
May 31,
|
|
2016
|
2016
|
ASSETS
|
|
|
CURRENT
ASSETS:
|
|
|
Cash
and cash equivalents
|
$10,599
|
$21,713
|
Available
for sale investments
|
9,104
|
4,117
|
Student
receivables — net of allowance of $1,041 and $723 at November
30, 2016 and
|
|
|
May
31, 2016, respectively
|
2,945
|
3,011
|
Other
receivables
|
217
|
375
|
Income
taxes receivable
|
4,592
|
2,780
|
Prepaid
and other current assets
|
2,291
|
2,078
|
Total
current assets
|
29,748
|
34,074
|
Total
property and equipment - net
|
31,157
|
31,273
|
OTHER
ASSETS:
|
|
|
Condominium
inventory
|
621
|
621
|
Land
held for future development
|
229
|
312
|
Course
development — net of accumulated amortization of $3,182 and
$3,051 at
|
|
|
November
30, 2016 and May 31, 2016, respectively
|
1,076
|
817
|
Deferred
income taxes
|
0
|
431
|
Other
|
756
|
998
|
Total
other assets
|
2,682
|
3,179
|
TOTAL
|
$63,587
|
$68,526
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
CURRENT
LIABILITIES:
|
|
|
Current
portion of capital lease payable
|
$307
|
$285
|
Accounts
payable
|
3,582
|
2,913
|
Dividends
payable
|
1,090
|
1,090
|
Income
taxes payable
|
91
|
110
|
Deferred
income
|
913
|
1,649
|
Accrued
and other liabilities
|
6,344
|
5,861
|
Total
current liabilities
|
12,327
|
11,908
|
DEFERRED
INCOME TAXES
|
40
|
0
|
OTHER
LONG-TERM LIABILITIES
|
4,296
|
4,686
|
CAPITAL
LEASE PAYABLE, NET OF CURRENT PORTION
|
11,410
|
11,567
|
COMMITMENTS
AND CONTINGENCIES (Note 8)
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
Common
stock, $0.0001 par value (50,000,000 authorized; 28,557,968 issued
and
|
|
|
24,224,924
outstanding as of November 30, 2016; 28,472,129 issued and
24,140,972
|
|
|
outstanding
as of May 31, 2016)
|
3
|
3
|
Additional
paid-in capital
|
59,012
|
58,893
|
Retained
earnings
|
(976)
|
4,012
|
Treasury
stock, at cost (4,333,044 shares at November 30, 2016 and
4,331,157
|
|
|
shares
at May 31, 2016)
|
(22,481)
|
(22,477)
|
Accumulated
other comprehensive income (loss), net of taxes - unrealized gain
(loss)
|
|
|
on
available for sale securities
|
(7)
|
(2)
|
Total
National American University Holdings, Inc. stockholders'
equity
|
35,551
|
40,429
|
Non-controlling
interest
|
(37)
|
(64)
|
Total
stockholders' equity
|
35,514
|
40,365
|
TOTAL
|
$63,587
|
$68,526
|
6
The following table provides a reconciliation of net income
attributable to the Company to EBITDA/LBITDA:
|
Three Months Ended
November 30,
|
Six Months Ended
November 30,
|
||
|
2016
|
2015
|
2016
|
2015
|
|
(dollars in thousands)
|
|||
Net
(Loss) Income attributable to the Company
|
$(752)
|
$(1,178)
|
$(2,808)
|
$(2,487)
|
Income
attributable to non-controlling interest
|
10
|
8
|
27
|
19
|
Interest
Income
|
(27)
|
(25)
|
(49)
|
(44)
|
Interest
Expense
|
214
|
218
|
428
|
437
|
Income
Tax Benefit
|
(406)
|
(335)
|
(1,397)
|
(1,111)
|
Depreciation
and Amortization
|
1,291
|
1,420
|
2,597
|
2,843
|
|
|
|
|
|
EBITDA
(LBITDA)
|
$330
|
$108
|
$(1,202)
|
$(343)
|
EBITDA consists of income attributable to the Company, less income
from non-controlling interest, plus loss from non-controlling
interest, minus interest income, plus interest expense (which is
not related to any debt but to the accounting required for the
capital lease), plus income taxes, plus depreciation and
amortization. The Company uses EBITDA as a measure of operating
performance. However, EBITDA is not a recognized measurement under
U.S. generally accepted accounting principles, or GAAP, and when
analyzing its operating performance, investors should use EBITDA in
addition to, and not as an alternative for, income as determined in
accordance with GAAP. Because not all companies use identical
calculations, the Company’s presentation of EBITDA may not be
comparable to similarly titled measures of other companies and is
therefore limited as a comparative measure. Furthermore, as an
analytical tool, EBITDA has additional limitations, including that
(a) it is not intended to be a measure of free cash flow, as it
does not consider certain cash requirements such as tax payments;
(b) it does not reflect changes in, or cash requirements for, its
working capital needs; and (c) although depreciation and
amortization are non-cash charges, the assets being depreciated and
amortized often will have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements, or
future requirements for capital expenditures or contractual
commitments. To compensate for these limitations, the Company
evaluates its profitability by considering the economic effect of
the excluded expense items independently as well as in connection
with its analysis of cash flows from operations and through the use
of other financial measures.
The Company believes EBITDA is useful to an investor in evaluating
its operating performance because it is widely used to measure a
company’s operating performance without regard to certain
non-cash expenses (such as depreciation and amortization) and
expenses that are not reflective of its core operating results over
time. The Company believes EBITDA presents a meaningful measure of
corporate performance exclusive of its capital structure, the
method by which assets were acquired and non-cash charges, and
provides us with additional useful information to measure its
performance on a consistent basis, particularly with respect to
changes in performance from period to period.
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