SOURCE: National American University Holdings, Inc.

National American University Holdings, Inc.

January 07, 2015 16:05 ET

National American University Holdings, Inc. Reports Fiscal 2015 Second Quarter and Six Months Results

Company to Host Conference Call on Thursday, January 8, 2015, at 11:00 a.m. EST

RAPID CITY, SD--(Marketwired - Jan 7, 2015) - National American University Holdings, Inc. (NASDAQ: NAUH)

Financial and Operational Highlights

  • Enrollment by headcount decreased 7.0% over the prior-year period to 10,590 students as of November 30, 2014.
  • FY 2015 second quarter total revenue was $30.6 million, compared to $33.2 million in the prior-year period. The Company's academic segment's revenue was $30.3 million in the FY 2015 second quarter, compared to $32.9 million in the prior-year period.
  • FY 2015 second quarter net income attributable to the Company increased 107.5% to $2.8 million, from $1.4 million in the prior-year period, primarily as a result of lower SG&A expenses during the quarter.
  • 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, 2014, which will be paid on or about January 16, 2015.
  • Balance sheet at November 30, 2014, included cash and cash equivalents and investments of $40.5 million; working capital of $33.4 million; no outstanding lending debt; and stockholders' equity of $52.9 million, or approximately $2.10 per diluted share.
  • During the FY 2015 second quarter, the Company recorded two one-time, nonrecurring transactions: the reversal of a $1.7 million equity plan expense and a revenue offset of $664,000 for a required return of funds to the Department of Education arising from a determination that funds had been disbursed at one of NAU's newer locations before the location was approved by the Department for the purposes of federal student financial aid. 

National American University Holdings, Inc. (the "Company") (NASDAQ: NAUH), which through its wholly owned subsidiary operates National American University ("NAU"), a regionally accredited, proprietary, multi-campus institution of higher learning, today reported unaudited financial results for its fiscal 2015 second quarter and six months ended November 30, 2014.

Ronald L. Shape, Ed.D., Chief Executive Officer of the Company, commented, "We were pleased to achieve significant improvements on our bottom line in the second quarter and first six months of fiscal 2015, which was a result of our continued efforts to better align our expenditures with our current enrollment levels and corresponding needs. We also continue to focus on growing enrollments at our newer campuses and have seen some improvement in this regard, but expect we will continue to experience enrollment pressures in the remainder of fiscal 2015 as we continue to align our expenses and execute on our strategic initiatives. While revenues for the fiscal 2015 second quarter were impacted by lower enrollments and the return of $664,000 that the U.S. Department of Education deemed ineligible disbursements of Title IV funds related to the timing of the approval of one of our newer locations, we were able to lower SG&A expenses nearly 12% through cost-cutting initiatives, enabling the Company to achieve $2.8 million in net income attributable to the Company during the period, compared to $1.4 million in the fiscal 2014 second quarter. We will continue to maintain a watchful eye on our expenditures and anticipate this trend of lower SG&A expenses to continue for the remainder of fiscal 2015."

Dr. Shape continued, "We continue to offer a variety of strong academic programs and have focused our attention on ensuring that our institution provides our students with the best care and counsel as they pursue their career-oriented goals and objectives. We have been working to implement proactive measures to improve our student counseling. For example, the changes we have been making to NAU's enrollment counselor system have been fully in place since Dec. 1, and while we are encouraged by its initial impact, we will continue to evaluate our enrollment system on an ongoing basis to make sure our counselors are able to perform to the best of their abilities. Our priority first and foremost remains our students, and we believe that the enrollment process is a crucial beginning to a student's academic journey. Going forward, we will remain cognizant of our enrollment efforts and student performance as we work to make progress on our strategic initiatives. To further support these efforts, we intend to launch a new branding campaign in the third quarter. We are also keeping our shareholders' interests in mind and continue to leverage a strong balance sheet, have maintained our quarterly dividend, and are focused on increasing shareholder value in the near and long term."

Operating Review

Enrollment Update
Total NAU student enrollment for the fall term of 2014 decreased 7.0% to 10,590 students from 11,386 during the prior fall term. Students enrolled in 89,171 credit hours compared to 98,167 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 Company reported significant enrollment growth in its continuing education and doctoral degree programs, which did not exist in prior-year periods. While still a relatively small percentage of total students, enrollment in these programs improved to 512 students from 141 in NAU's fiscal 2015 first quarter.

The following is a summary of student enrollment at November 30, 2014, and November 30, 2013, by degree level and by instructional delivery method:

         
  November 30, 2014   November 30, 2013  
  No. of Students   % of Total   No. of Students   % of Total  
Continuing Ed 460   4.3 % 0   0 %
                 
Doctoral 52   0.5 % 0   0 %
                 
Graduate 306   2.9 % 380   3.3 %
                 
Undergraduate 9,772   92.3 % 11,006   96.7 %
                 
Total 10,590   100.0 % 11,386   100.0 %
                 
  November 30, 2014   November 30, 2013  
  No. of Students   % of Total   No. of Students   % of Total  
Online 6,418   60.6 % 6,853   60.2 %
On-Campus 2,558   24.2 % 2,625   23.1 %
Hybrid 1,614   15.2 % 1,908   16.8 %
                 
Total 10,590   100.0 % 11,386   100.0 %
                 

Financial Review

The Company, through its wholly owned subsidiary, operates in two business segments: the academic segment, which consists of NAU's undergraduate, graduate, and doctoral education programs and contributes the primary portion of the Company's revenue; and ownership in multiple apartments and condominium complexes from which it derives sales and rental income. The real estate operations generated approximately 1.0% of the Company's revenues for the quarter ended November 30, 2014.

Fiscal 2015 Second Quarter Financial Results

  • Total revenues for the FY 2015 second quarter were $30.6 million, compared to $33.2 million in the same period last year. The academic segment's total revenue was $30.3 million, compared to $32.9 million in the prior-year period. This decrease in academic segment revenues was primarily a result of a decrease in enrollment, which was driven by weaker market demand among NAU's targeted student demographic, but was partially offset by a Board of Governors-approved tuition increase of 0.5% that became effective in September 2014.

  • For the FY 2015 second quarter, educational services expense was $7.1 million, or 23.3% of the academic segment's total revenue, compared to $7.6 million, or 23.1%, for the FY 2014 second quarter. The increase in cost of educational services as a percentage of total academic revenue was the result of fixed facility costs on lower revenues.

    Educational services expense specifically relates to the academic segment, and includes salaries and benefits of faculty and academic administrators, costs of educational supplies, facility costs, faculty reference and support material and related academic costs.

  • During the FY 2015 second quarter, SG&A expenses decreased 19.7% to $17.3 million, or 56.5% of total revenues, from $21.5 million, or 64.9%, in the prior-year period.

  • Income before income taxes and non-controlling interest for the FY 2015 second quarter increased 103.3% to $4.5 million, from $2.2 million in the same period last year, primarily as a result of lower SG&A expenses.

  • Net income attributable to the Company for the FY 2015 second quarter increased 107.5% to $2.8 million, or $0.11 per diluted share based on 25.2 million shares outstanding, compared to $1.4 million, or $0.05 per diluted share based on 25.1 million shares outstanding, in the prior-year period.

  • EBITDA for the FY 2015 second quarter increased 59.9% to $6.3 million from $3.9 million in the prior-year period. A table reconciling EBITDA to net income can be found at the end of this release.

Fiscal 2015 Six Months Financial Results

  • Total revenues for the first six months of FY 2015 were $59.9 million, compared to $64.1 million in the prior-year period. The academic segment's total revenue was $58.9 million, compared to $63.3 million in the prior-year period, as a result of the 7.0% decrease in enrollment, which was partially offset by the previously mentioned tuition increase of 0.5%. The Company believes it will achieve increased revenue growth as it 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 2015 was $14.2 million, or 24.1% of the academic segment's total revenue, compared to $14.6 million, or 23.1%, in the prior-year period.

  • During the first six months of FY 2015, SG&A expenses decreased 17.9% to $35.9 million, or 60.0% of total revenues, compared to $43.8 million, or 68.3%, in the prior-year period. The decrease was driven by cost-cutting initiatives, including a reduction in staffing and marketing costs, to better align with the decreased enrollments and needs of the Company as well as the reversal of the 2013 stock compensation.

  • Income before income taxes and non-controlling interest for the first six months of FY 2015 increased 374.7% to $8.0 million, from $1.7 million in the prior-year period.

  • Net income attributable to the Company during the first six months of FY 2015 increased 383.6% to $5.0 million, or $0.20 per diluted share based on 25.2 million shares outstanding, compared to $1.0 million, or $0.04 per diluted share based on 25.1 million shares outstanding, in the prior-year period.

  • The Company's EBITDA for the first six months of FY 2015 increased 122.1% to $11.4 million, from $5.2 million in the prior-year period. A table reconciling EBITDA to net income can be found at the end of this release.

   
Balance Sheet Highlights
 
(in millions except for percentages)     11/30/2014     5/31/2014   % Change  
Cash and Cash Equivalents/Investments   $ 40.5   $ 19.6   107.0 %*
Working Capital     33.4     25.7   29.9 %
Total Long-term Debt     0     0   N/A  
Stockholders' Equity     52.9     51.2   3.4 %
 
* The increase in cash is primarily due to increased net income and the timing of funds received from student receivables, which the Company received in June and July this year versus April and May of last year.         
 

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, 2014, that will be paid on or about January 16, 2015.

Conference Call Information

Management will discuss these results in a conference call (with accompanying presentation) on Thursday, January 8, 2015, at 11:00 a.m. EST.

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://www.national.edu/InvestorRelations. 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/q2-2015.

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 and a member of the North Central Association of Colleges and Schools, 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, revenues, 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 was filed on August 8, 2014, and in its other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information contained in this release.

         
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES  
   
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME  
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2014 AND NOVEMBER 30, 2013  
(In thousands except per share data)  
                         
    Three Months Ended     Six Months Ended  
    November 30,     November 30,  
    2014     2013     2014     2013  
                                 
REVENUE:                                
  Academic revenue   $ 28,133     $ 30,583     $ 54,809     $ 58,233  
  Auxiliary revenue     2,212       2,318       4,093       5,090  
  Rental income - apartments     293       281       593       568  
  Condominium sales     0       0       447       220  
                                 
    Total revenue     30,638       33,182       59,942       64,111  
                                 
OPERATING EXPENSES:                                
  Cost of educational services     7,077       7,596       14,210       14,601  
  Selling, general and administrative     17,301       21,543       35,943       43,765  
  Auxiliary expense     1,562       1,698       2,865       3,668  
  Cost of condominium sales     0       3       368       194  
  (Gain) loss on disposition of property     0       27       (1,678 )     (70 )
                                 
    Total operating expenses     25,940       30,867       51,708       62,158  
                                 
OPERATING INCOME     4,698       2,315       8,234       1,953  
                                 
OTHER INCOME (EXPENSE):                                
  Interest income     12       24       111       50  
  Interest expense     (222 )     (147 )     (451 )     (399 )
  Other income - net     42       36       100       80  
                                 
    Total other expense     (168 )     (87 )     (240 )     (269 )
                                 
INCOME BEFORE INCOME TAXES     4,530       2,228       7,994       1,684  
                                 
INCOME TAX EXPENSE     (1,690 )     (865 )     (2,986 )     (687 )
                                 
NET INCOME     2,840       1,363       5,008       997  
                                 
NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST     (14 )     (1 )     (12 )     36  
                                 
NET INCOME ATTRIBUTABLE TO NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES    

2,826
     

1,362
     

4,996
     

1,033
 
                                 
OTHER COMPREHENSIVE INCOME (LOSS) - Unrealized gains(losses) on investments, net of tax    
6
     
(2

)
   
1
     
(7

)
                                 
COMPREHENSIVE INCOME ATTRIBUTABLE TO NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.  
$

2,832
   
$

1,360
   
$

4,997
   
$

1,026
 
                                 
Basic net earnings attributable to National American University Holdings, Inc.   $ 0.11     $ 0.05     $ 0.20     $ 0.04  
Diluted net earnings attributable to National American University Holdings, Inc.   $ 0.11     $ 0.05     $ 0.20     $ 0.04  
Basic weighted average shares outstanding     25,151,291       25,094,063       25,136,778       25,075,120  
Diluted weighted average shares outstanding     25,166,940       25,096,152       25,157,424       25,079,741  
   
   
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES  
   
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET  
AS OF NOVEMBER 30, 2014 AND CONDENSED  
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2014  
(In thousands except share data)  
   
    November 30,     May 31,  
    2014     2014  
ASSETS                
CURRENT ASSETS:                
  Cash and cash equivalents   $ 28,204     $ 4,154  
  Available for sale investments     12,345       15,435  
  Student receivables - net of allowance of $600 and $1,026 at November 30, 2014 and May 31, 2014, respectively     3,576       16,532  
  Other receivables     671       291  
  Deferred income taxes     1,333       1,688  
  Prepaid and other current assets     2,298       2,180  
    Total current assets     48,427       40,280  
Total property and equipment - net     38,980       43,258  
OTHER ASSETS:                
  Condominium inventory     377       744  
  Land held for future development     312       312  
  Course development - net of accumulated amortization of $2,593 and $2,421 at November 30, 2014 and May 31, 2014, respectively     888       1,000  
  Note receivable - tenant improvements     0       1,308  
  Deposit on property and equipment     100       200  
  Other     1,213       1,355  
    Total other assets     2,890       4,919  
TOTAL   $ 90,297     $ 88,457  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES:                
  Current portion of capital lease payable   $ 224     $ 206  
  Accounts payable     3,031       3,411  
  Dividends payable     1,135       1,134  
  Student accounts payable     1,225       969  
  Income taxes payable     1,752       1,158  
  Deferred income     270       341  
  Accrued and other liabilities     7,382       7,347  
    Total current liabilities     15,019       14,566  
DEFERRED INCOME TAXES     4,165       4,168  
OTHER LONG-TERM LIABILITIES     6,191       6,431  
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION     11,982       12,097  
COMMITMENTS AND CONTINGENCIES (Note 8)                
STOCKHOLDERS' EQUITY:                
  Common stock, $0.0001 par value (50,000,000 authorized; 28,245,930 issued and 25,179,333 outstanding as of November 30, 2014; 28,177,827 issued and 25,117,454 outstanding as of May 31, 2014)    

3
     

3
 
  Additional paid-in capital     58,213       59,191  
  Retained earnings     14,302       11,573  
  Treasury stock, at cost (3,066,597 shares at November 30, 2014 and 3,060,373 at May 31, 2014)    
(19,442

)
   
(19,423

)
  Accumulated other comprehensive loss, net of taxes - unrealized loss on available for sale securities    
(2

)
   
(3

)
Total National American University Holdings, Inc. stockholders' equity     53,074       51,341  
Non-controlling interest     (134 )     (146 )
Total stockholders' equity     52,940       51,195  
TOTAL   $ 90,297     $ 88,457  
                 

The following table provides a reconciliation of net income attributable to the Company to EBITDA:

             
    Three Months Ended
November 30,
    Six Months Ended
November 30,
 
    2014     2013     2014     2013  
    (dollars in thousands)  
Net Income attributable to the Company   $ 2,826     $ 1,362     $ 4,996     $ 1,033  
(Income) Loss attributable to non-controlling interest     14       1       12       (36 )
Interest Income     (12 )     (24 )     (111 )     (50 )
Interest Expense     222       147       451       399  
Income Taxes     1,690       865       2,986       687  
Depreciation and Amortization     1,533       1,572       3,115       3,123  
                                 
EBITDA   $ 6,273     $ 3,923     $ 11,449     $ 5,156  
                                 

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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