Attached files
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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 THIRD QUARTER AND NINE MONTHS RESULTS
Company to host conference call on April 6, 2017, at 11:00 a.m.
ET
Financial and Operational Highlights
●
Combined
enrollment in continuing education/workforce development, graduate,
and doctoral programs increased 28.5% during the FY 2017 third
quarter from the prior-year quarter.
●
Enrollment
by total headcount for the FY 2017 third quarter (winter 2016-17
term) decreased 4.4% from the prior-year period, to 7,314 students
as of February 28, 2017. However, total headcount increased by 1.0%
from the FY 2017 second quarter (fall 2016 term).
●
FY 2017 third
quarter total revenue was $21.3 million, compared to $22.7 million
in the prior-year period. The Company’s total academic
segment revenue was $21.0 million in the FY 2017 third quarter,
compared to $22.4 million in the prior-year period.
●
FY 2017 third
quarter losses before interest, tax, and depreciation and
amortization (“LBITDA”) was $(0.9) million, compared to
$(1.4) million in the prior-year period. A table reconciling
EBITDA/LBITDA to net income/loss can be found at the end of this
release.
●
FY 2017 third
quarter net loss attributable to the Company was $(2.5) million,
compared to net loss attributable to the Company of $(1.9) million
in the prior-year period, primarily as a result of lower revenues
and a $1 million deferred tax asset valuation allowance, partially
offset by lower SG&A expense.
●
Balance sheet at
February 28, 2017, included cash and cash equivalents and
investments of $15.8 million; taxes receivable of $2.7 million,
working capital of $13.9 million; no outstanding lending debt; and
stockholders’ equity of $31.9 million, or approximately $1.32
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 March 31, 2017, which
will be paid on or about April 7, 2017.
Rapid City, South Dakota, April 5, 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 third quarter and nine months ended February 28,
2017.
Management Commentary
Ronald
L. Shape, Ed.D., President and Chief Executive Officer of the
Company, stated, “We continue to see enrollment trending in a
more positive direction and were pleased to report a second
consecutive period of quarter-over-quarter enrollment growth from
fall to winter 2016-17 term, even in spite of typical seasonality
due to the holidays. As year-over-year enrollment declines are
narrowing with each term, our continuing education, doctoral, and
graduate programs continue to see healthy growth. Across our
footprint, an increasing number of our campuses have begun turning
organic enrollment growth on a year-over-year basis. While this may
be a reflection of the markets in which other schools have closed,
NAU has also refocused its marketing and redesigned its website to
be more accessible and intuitive for prospective and current
students. We remain focused on providing our students with the
necessary tools and support to help them persist with their
academic studies and ultimately achieve their goals of graduating
and finding a job within their field of study. In this regard, we
introduced NAU Tuition Advantage during the spring 2017 term, a new
pricing structure that is simple to understand and enables students
to take advantage of more courses at a lower per-credit hour price
point. Not only does this make an education at NAU more affordable
for our students, but we expect it will have a positive impact on
our top and bottom lines in the quarters to
come.”
1
Dr.
Shape continued, ?During the fiscal 2017 third quarter, we enrolled
former students of Career Point College in San Antonio and Austin,
Texas, as well as other institutions that closed their doors during
this challenging time. We also continue to accept enrollments from
students in Canada while remaining cognizant of the compliance
requirements of various Canadian regulatory authorities. Though we
are growing to serve a broader population of students, we have made
continued efforts to right-size our operations to be more in line
with current enrollment levels while keeping in mind our commitment
to academic quality and student support. As a result of several
cost-cutting initiatives, we have reduced SG&A expenses by
nearly 15% year to date and continue to closely monitor areas where
we may be able to find cost savings. With this conservative
approach, we believe we are in an increasingly advantageous
position to execute on our strategic plan and to move forward with
any suitable opportunities we may see within the
space.?
Operating Review
Enrollment Update
Total
NAU student enrollment for the winter 2016-17 term decreased 4.4%
to 7,314 students from 7,649 during the prior winter term. Students
enrolled in 62,607 credit hours compared to 66,295 credit hours
during the prior winter 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 February 28,
2017, and February 29, 2016, by degree level and by instructional
delivery method:
|
February 28, 2017
(Winter ’16-’17 Term)
|
February 29, 2016
(Winter ’15-’16 Term)
|
||
|
No. of Students
|
% of Total
|
No. of Students
|
% of Total
|
Continuing
Ed
|
202
|
2.8%
|
167
|
2.2%
|
Doctoral
|
98
|
1.3%
|
88
|
1.2%
|
Graduate
|
386
|
5.3%
|
279
|
3.6%
|
Undergraduate
& Diploma
|
6,628
|
90.6%
|
7,115
|
93.0%
|
|
|
|
|
|
Total
|
7,314
|
100.0%
|
7,649
|
100.0%
|
|
No. of Credits
|
% of Total
|
No. of Credits
|
% of Total
|
On-Campus
|
11,642
|
18.6%
|
8,883
|
13.4%
|
Online
|
46,491
|
74.3%
|
51,491
|
77.7%
|
Hybrid
|
4,474
|
7.1%
|
5,921
|
8.9%
|
|
|
|
|
|
Total
|
62,607
|
100.0%
|
66,295
|
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 February 28,
2017.
Fiscal 2017 Third Quarter Financial Results
●
Total revenue for
the FY 2017 third quarter was $21.3 million, compared to $22.7
million in the same period last year. Academic tuition revenue was
$20.2 million, compared to $21.1 million in the prior-year period.
Auxiliary (bookstore) revenue was $0.9 million for the FY 2017
third quarter, compared to $1.3 million in the prior-year period.
This decrease in academic revenue was primarily a result of a
decrease in enrollment.
●
For the FY 2017
third quarter, educational services expense was $7.6 million, or
36.2% of total academic segment revenue, compared to $6.3 million,
or 27.9%, for the FY 2016 third quarter. This percentage increase
was a result of fixed costs on a decreasing revenue base and the
additional expense to launch new programs and transfer programs
from closing institutions.
2
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
third quarter, SG&A expenses decreased to $15.3 million, or
71.8% of total revenue, from $17.7 million, or 77.9%, in the
prior-year period.
●
Loss before income
taxes and non-controlling interest for the FY 2017 third quarter
narrowed to $(2.4) million from $(3.0) million in the same period
last year.
●
Net loss
attributable to the Company for the FY 2017 third quarter was
$(2.5) million, or ($0.10) per diluted share based on 24.2 million
shares outstanding, compared to net loss attributable to the
Company of $(1.9) million, or ($0.08) per diluted share based on
24.2 million shares outstanding, in the prior-year period,
primarily as a result of a $1.0 million reduction in benefit from
income taxes.
●
During the third
quarter, the Company recorded a $1.0 million valuation allowance
against its deferred tax assets. This non-cash charge, reducing the
benefit from income taxes, is a result of the Company’s
assessment of the realizability of its deferred tax assets over a
certain period of time. A primary factor in the assessment is that
the Company is in a cumulative loss position over the three-year
period ended February 28, 2017. This valuation allowance can be
reduced or reversed in the future as the Company returns to
profitability.
●
LBITDA for the FY
2017 third quarter were $(0.9) million, compared to LBITDA of
$(1.4) 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 Nine Months Financial Results
●
Total revenues for
the first nine months of FY 2017 were $64.4 million, compared to
$73.1 million in the prior-year period. Total academic segment
revenue was $63.6 million, compared to $72.2 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 nine months of FY 2017
was $20.6 million, or 32.4% of total academic segment revenue,
compared to $19.4 million, or 26.8%, in the prior-year
period.
●
During the first
nine months of FY 2017, SG&A expenses decreased to $47.2
million, or 73.3% of total revenues, compared to $55.5 million, or
75.9%, in the prior-year period.
●
Loss before income
taxes and non-controlling interest for the first nine months of FY
2017 was flat at $(6.6) million, compared to loss before income
taxes and non-controlling interest of $(6.6) million in the
prior-year period.
●
Net loss
attributable to the Company during the first nine months of FY 2017
was $(5.3) million, or $(0.22) per diluted share based on 24.1
million shares outstanding, compared to net loss attributable to
the Company of $(4.4) million, or $(0.18) per diluted share based
on 24.8 million shares outstanding, in the prior-year period,
primarily due to the decreased income tax benefit mentioned
above.
●
LBITDA for the
first nine months of FY 2017 were $(2.1) million, compared to
$(1.7) million in the prior-year period. A table reconciling
EBITDA/LBITDA to net income/loss can be found at the end of this
release.
Balance Sheet Highlights
(in millions except for percentages)
|
2/28/2017
|
5/31/2016
|
% Change
|
Cash
and Cash Equivalents/Investments$
|
$15.8
|
25.8
|
(38.9) %
|
Working
Capital
|
13.9
|
22.2
|
(37.5) %
|
Other
Long-term Liabilities
|
4.1
|
4.7
|
(12.9) %
|
Stockholders’
Equity
|
31.9
|
40.4
|
(20.9) %
|
3
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 March 31,
2017, that will be paid on or about April 7, 2017.
Conference Call Information
Management
will discuss these results in a conference call (with accompanying
presentation) on Thursday, April 6, 2017, at 11:00 a.m.
ET.
The
dial-in numbers are:
(877)
407-9078 (U.S.)
(201)
493-6745 (International)
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/q3-2017.
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.
|
Carolyne Y.
Sohn
415-568-2255
csohn@equityny.com
Adam
Prior
212-836-9606
aprior@equityny.com
|
4
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
FOR THE NINE MONTHS AND THREE MONTHS ENDED FEBRUARY 28, 2017 AND
FEBRUARY 29, 2016
(In thousands, except share and per share amounts)
|
Nine
Months Ended
|
Three
Months Ended
|
||
|
February
28 and
|
February
28 and
|
||
|
February
29
|
February
29
|
||
|
2017
|
2016
|
2017
|
2016
|
REVENUE:
|
|
|
|
|
Academic revenue
|
$59,872
|
$67,381
|
$20,158
|
$21,130
|
Auxiliary revenue
|
3,699
|
4,854
|
891
|
1,273
|
Rental income — apartments
|
873
|
831
|
282
|
275
|
|
|
|
|
|
Total revenue
|
64,444
|
73,066
|
21,331
|
22,678
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Cost of educational services
|
20,594
|
19,380
|
7,629
|
6,252
|
Selling, general and administrative
|
47,228
|
55,480
|
15,321
|
17,672
|
Auxiliary expense
|
2,694
|
3,590
|
591
|
927
|
Loss on disposition of property
|
8
|
734
|
2
|
671
|
|
|
|
|
|
Total operating expenses
|
70,524
|
79,184
|
23,543
|
25,522
|
|
|
|
|
|
OPERATING
LOSS
|
(6,080)
|
(6,118)
|
(2,212)
|
(2,844)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
Interest income
|
77
|
62
|
28
|
18
|
Interest expense
|
(639)
|
(654)
|
(211)
|
(217)
|
Other income — net
|
83
|
133
|
14
|
45
|
|
|
|
|
|
Total other expense
|
(479)
|
(459)
|
(169)
|
(154)
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
(6,559)
|
(6,577)
|
(2,381)
|
(2,998)
|
|
|
|
|
|
INCOME
TAX BENEFIT (PROVISION)
|
1,254
|
2,234
|
(143)
|
1,123
|
|
|
|
|
|
NET
LOSS
|
(5,305)
|
(4,343)
|
(2,524)
|
(1,875)
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO NON-CONTROLLING
|
(39)
|
(35)
|
(12)
|
(16)
|
INTEREST
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO NATIONAL AMERICAN
|
|
|
|
|
UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
|
(5,344)
|
(4,378)
|
(2,536)
|
(1,891)
|
|
|
|
|
|
OTHER
COMPREHENSIVE (LOSS) GAIN — Unrealized (losses) gains on
investments, net of tax
|
(2)
|
(3)
|
3
|
0
|
Income
tax benefit related to items of other comprehensive
loss
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS ATTRIBUTABLE TO
|
|
|
|
|
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
|
$(5,346)
|
$(4,381)
|
$(2,533)
|
$(1,891)
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss attributable to National
|
$(0.22)
|
$(0.18)
|
$(0.10)
|
$(0.08)
|
American University Holdings, Inc.
|
|
|
|
|
Diluted
net loss attributable to National
|
$(0.22)
|
$(0.18)
|
$(0.10)
|
$(0.08)
|
American University Holdings, Inc.
|
|
|
|
|
Basic
weighted average shares outstanding
|
24,146,643
|
24,836,759
|
24,177,979
|
24,152,228
|
Diluted
weighted average shares outstanding
|
24,146,643
|
24,836,759
|
24,177,979
|
24,152,228
|
5
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
|
||
|
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEET
|
||
AS OF FEBRUARY 28, 2017 AND CONDENSED
|
||
CONSOLIDATED BALANCE SHEET AS OF MAY 31,
2016
|
||
(In thousands, except share and per share
amounts)
|
|
February
28,
|
May
31,
|
|
2017
|
2016
|
ASSETS
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash equivalents
|
$9,591
|
$21,713
|
Available for sale investments
|
$6,184
|
$4,117
|
Student receivables — net of allowance of $1,184 and $723 at
February 28, 2017 and
|
|
|
May 31, 2016, respectively
|
$3,336
|
$3,011
|
Other receivables
|
$801
|
$375
|
Income taxes receivable
|
$2,684
|
$2,780
|
Prepaid and other current assets
|
$2,601
|
$2,078
|
Total current assets
|
$25,197
|
$34,074
|
Total
property and equipment - net
|
$31,744
|
$31,273
|
OTHER
ASSETS:
|
|
|
Condominium inventory
|
$621
|
$621
|
Land held for future development
|
$229
|
$312
|
Course development — net of accumulated amortization of
$3,254 and $3,051 at
|
|
|
February 28,
2017 and May
31, 2016, respectively
|
$1,086
|
$817
|
Deferred income taxes
|
$-
|
$431
|
Other
|
$745
|
$998
|
Total other assets
|
$2,681
|
$3,179
|
TOTAL
|
$59,622
|
$68,526
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
CURRENT
LIABILITIES:
|
|
|
Current portion of capital lease payable
|
$319
|
$285
|
Accounts payable
|
$2,580
|
$2,913
|
Dividends payable
|
$1,093
|
$1,090
|
Income taxes payable
|
$92
|
$110
|
Deferred income
|
$1,590
|
$1,649
|
Accrued and other liabilities
|
$5,673
|
$5,861
|
Total current liabilities
|
$11,347
|
$11,908
|
DEFERRED
INCOME TAXES
|
$943
|
$-
|
OTHER
LONG-TERM LIABILITIES
|
$4,081
|
$4,686
|
CAPITAL
LEASE PAYABLE, NET OF CURRENT PORTION
|
$11,324
|
$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 February 28, 2017; 28,472,129 issued
and 24,140,972
|
|
|
outstanding as of May 31, 2016)
|
$3
|
$3
|
Additional paid-in capital
|
$59,036
|
$58,893
|
(Accumulated deficit) Retained earnings
|
$(4,602)
|
$4,012
|
Treasury stock, at cost
(4,333,044 shares
at February 28, 2017 and 4,331,157
|
|
|
shares at May 31, 2016)
|
$(22,481)
|
$(22,477)
|
Accumulated other comprehensive loss, net of taxes - unrealized
loss
|
|
|
on available for sale securities
|
$(4)
|
$(2)
|
Total
National American University Holdings, Inc. stockholders'
equity
|
$31,952
|
$40,429
|
Non-controlling
interest
|
$(25)
|
$(64)
|
Total
stockholders' equity
|
$31,927
|
$40,365
|
TOTAL
|
$59,622
|
$68,526
|
6
The following table provides a reconciliation of net income
attributable to the Company to EBITDA/LBITDA:
|
Three Months Ended
|
Nine Months Ended
|
||
|
February 28,
2017
|
February 29,
2016
|
February 28,
2017
|
February 29,
2016
|
|
(dollars in
thousands)
|
|||
Net
(Loss) Income attributable to the Company
|
$(2,536)
|
$(1,891)
|
$(5,344)
|
$(4,378)
|
Income
attributable to non-controlling interest
|
12
|
16
|
39
|
35
|
Interest
Income
|
(28)
|
(18)
|
(77)
|
(62)
|
Interest
Expense
|
211
|
217
|
639
|
654
|
Income
Tax (Benefit) Provision
|
143
|
(1,123)
|
(1,254)
|
(2,234)
|
Depreciation
and Amortization
|
1,260
|
1,399
|
3,857
|
4,242
|
|
|
|
|
|
LBITDA
|
$(938)
|
$(1,400)
|
$(2,140)
|
$(1,743)
|
EBITDA/LBITDA 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/LBITDA as a
measure of operating performance. However, EBITDA/LBITDA is not a
recognized measurement under U.S. generally accepted accounting
principles, or GAAP, and when analyzing its operating performance,
investors should use EBITDA/LBITDA 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/LBITDA 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/LBITDA 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/LBITDA 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/LBITDA 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/LBITDA 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.
7