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Bridgepoint Education Reports Third Quarter 2010 Results

Total student enrollment increases 40.6% year-over-year; Revenue increases 49.9% year-over-year

 

SAN DIEGO, Nov. 2, 2010 /PRNewswire-FirstCall/ -- Bridgepoint Education, Inc. (NYSE: BPI), a provider of postsecondary education services, announced today its results for the three and nine months ended September 30, 2010.

Highlights for the third quarter ended September 30, 2010 are as follows:

  • Total student enrollment at period end increased 40.6% year-over-year to 77,179.
  • Revenue increased 49.9% to $190.9 million from $127.4 million for the same period in 2009.
  • Operating income increased to $62.4 million from $38.8 million for the same period in 2009.
  • Net income was $36.1 million compared with net income of $22.4 million for the same period in 2009.
  • Fully diluted earnings per common share was $0.61, compared with $0.37 for the same period in 2009.
  • Repurchased 3.0 million shares under the share repurchase program announced during the third quarter.

 

"Enrollments increased and demand remained strong, underscoring the strength of our value proposition to academically well-prepared students.  Clearly, the affordability, accessibility, credit transferability and institutional heritage we offer differentiate our institutions and resonate with working adults and other non-traditional students seeking high quality college degrees," said Andrew Clark, Chief Executive Officer of Bridgepoint Education. 

"Bridgepoint's primary goal is to bring a high quality college education within the financial reach of working adults today, and we're using innovation and technology in ways that improve our ability to achieve that goal and improve learning outcomes for our students," concluded Mr. Clark.

Student Enrollment

Total student enrollment at the Company's academic institutions, Ashford University and University of the Rockies, increased 40.6% to 77,179 students at September 30, 2010, compared with 54,894 students at the end of the third quarter of 2009.

Combined new student enrollments for the third quarter of 2010 at Bridgepoint Education's academic institutions were approximately 24,000, an increase of 23.1%, compared with combined new student enrollments of approximately 19,500 for the third quarter of 2009.

Financial Results

Revenue for the third quarter of 2010 was $190.9 million, an increase of 49.9% compared with revenue of $127.4 million for the third quarter of 2009.  Revenue for the nine months ended September 30, 2010, was $520.8 million, an increase of 61.5% compared with revenue of $322.6 million for the same period in 2009.

Operating income for the third quarter of 2010 was $62.4 million compared with operating income of $38.8 million for the third quarter of 2009. Operating income for the nine months ended September 30, 2010, was $171.7 million compared with operating income of $47.8 million for the same period in 2009, which included a $30.4 million charge related to the acceleration of certain exit options and also an $11.1 million charge related to the settlement of a stockholder claim, of which $10.6 million was non-cash.

Net income for the third quarter of 2010 was $36.1 million compared with net income of $22.4 million for the third quarter of 2009. Net income for the nine months ended September 30, 2010, was $101.2 million compared with net income of $27.5 million for the same period in 2009, which included the net income effect of $17.1 million of the option acceleration charge discussed above and also the net income effect of $8.6 million related to the stockholder settlement charge discussed above.

Fully diluted earnings per common share for the third quarter of 2010 was $0.61 compared with fully diluted earnings per common share of $0.37 for the third quarter of 2009.  The share repurchase program announced in the third quarter resulted in a $0.02 increase in fully diluted earnings per common share in the third quarter of 2010.  Fully diluted earnings per common share for the nine months ended September 30, 2010, was $1.68 compared with fully diluted earnings per common share of $0.42 for the same period in 2009.

The Company's effective tax rate for the nine months ended September 30, 2010, was 41.4%.  

Balance Sheet and Cash Flow

As of September 30, 2010, the Company had cash, cash equivalents and marketable securities of $229.7 million, compared with $170.6 million as of December 31, 2009. The Company generated $115.2 million of cash from operating activities for the nine months ended September 30, 2010, compared with $115.7 million for the same period in 2009.

On July 30, 2010, the Company's Board of Directors authorized the repurchase of up to $60 million of the Company's outstanding shares of common stock over the following 12 months. During the three months ended September 30, 2010, the Company repurchased 3.0 million shares at a weighted average purchase price of $14.05 per share, for a total cost of $42.2 million, under the repurchase program. Approximately $17.8 million remains authorized and available under the repurchase program, which the Company may suspend at any time.

Full-Year 2010 Outlook

The Company expects the following financial and operating metrics for the full-year:

  • Total student enrollment is expected to be between 71,800 and 73,800, at December 31, 2010.
  • Revenue is expected to be between $700.3 million and $702.8 million.
  • Net income is expected to be between $120.8 million and $122.3 million.
  • Fully diluted earnings per common share is expected to be between $2.02 and $2.05, based on an estimated fully diluted weighted average share count of 59.6 million for the year ending December 31, 2010.
  • Bad debt as a percentage of revenue for 2010 is expected to be 5.4%.
  • Capital expenditures for 2010 are expected to be approximately 5% of revenue.
  • The effective tax rate for 2010 is estimated to be 41.4%.

 

The above guidance reflects the previously disclosed impact of seasonality in the fourth quarter.

Earnings Conference Call and Webcast

The Company will host a conference call at 11:30 a.m. ET (8:30 a.m. PT) today to discuss its latest financial results, full-year 2010 outlook and recent developments. The dial-in number for callers in the United States and Canada is (800) 289-0468 and for international callers is (913) 312-1386. The access code for all callers is 1337043. A live webcast will also be available on the Company's website at www.bridgepointeducation.com/investment.

A replay of the call will be available via telephone through November 9, 2010. To access the replay, dial (888) 203-1112 in the United States or Canada and (719) 457-0820 for international callers; then enter the access code 1337043.

About Bridgepoint Education

Bridgepoint Education's postsecondary education services focus on offering associate's, bachelor's, master's and doctoral programs in such disciplines as business, education, psychology, social sciences and health sciences.  Bridgepoint Education's regionally accredited academic institutions – Ashford University and University of the Rockies – deliver their programs online as well as at traditional campuses located in Clinton, Iowa, and Colorado Springs, Colorado.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of financial resources. These forward-looking statements are based on assumptions and estimates including, without limitation, those regarding: projections, predictions, expectations, estimates or forecasts as to the Company's business, financial and operational results and future economic performance; the Company's value proposition to students; competitiveness of the Company's tuition; ability to continue to transfer credits from other institutions; ability to maintain and improve the quality of the Company's education; management of future growth and scalability; development of military and corporate channels; estimates of new hires; proposed new programs; expectations that the Company can effectively manage the business within the regulatory environment; expectations regarding enrollments, financial position, results of operations and liquidity; management's goals and objectives; and other similar 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 the future tense, identify forward-looking statements, but their absence does not mean that a statement is not forward-looking.

Forward-looking statements should not be interpreted 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 and management's good faith belief as of that time with respect to future events. Forward-looking statements 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: the potential impact of California state legislative actions on the Company's estimated annual tax rate for 2010, in particular California Proposition 24, which could repeal certain corporate state tax benefits; the Company's inability to influence the U.S. Department of Education's Office of Inspector General (OIG) to change the findings and recommendations in the OIG's draft audit report; the Company's inability to address the findings and recommendations in the OIG's final audit report; the imposition of fines or other corrective measures against Ashford University; the Company's failure to comply with the extensive regulatory framework applicable to its industry, including Title IV of the Higher Education Act and its regulations, state laws and regulatory requirements and accrediting agency requirements, including new regulations proposed by the U.S. Department of Education regarding gainful employment, incentive compensation, state authorization and other matters; adverse regulatory changes affecting the Company's industry; the Company's inability to continue to develop awareness among, to recruit and to retain students; competition in the postsecondary education market and its potential impact on the Company's market share, recruiting cost and tuition rates; reputational and other risks related to potential compliance audits, regulatory actions, negative publicity or service disruptions; the Company's ability to attract and retain the personnel needed to sustain and grow its business; the Company's inability to develop new programs or expand its existing programs in a timely and cost-effective manner; economic or other developments potentially impacting demand in the Company's core disciplines or the availability or cost of Title IV or other funding; and other factors discussed in Part II, Item 1A (Risk Factors) of the Company's quarterly report on Form 10-Q filed on or about November 2, 2010, and in other reports the Company may file with the Securities and Exchange Commission from time to time.

Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. The Company assumes 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 the Company does update one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements.

BRIDGEPOINT EDUCATION, INC.

 

Condensed Consolidated Statements of Income

 

(Unaudited)

 
                 
 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2010

 

2009

 

2010

 

2009

 
 

(In thousands, except per share amounts)

 

Revenue

$190,911

 

$127,382

 

$520,818

 

$322,566

 

Costs and expenses:

               

Instructional costs and services

50,191

 

33,120

 

132,884

 

83,611

 

Marketing and promotional

54,963

 

36,500

 

149,271

 

105,260

 

General and administrative

23,331

 

18,915

 

66,919

 

85,891

 

Total costs and expenses

128,485

 

88,535

 

349,074

 

274,762

 

Operating income

62,426

 

38,847

 

171,744

 

47,804

 

Other income, net

335

 

162

 

951

 

277

 

Income before income taxes

62,761

 

39,009

 

172,695

 

48,081

 

Income tax expense

26,623

 

16,651

 

71,464

 

20,575

 

Net income

36,138

 

22,358

 

101,231

 

27,506

 

Accretion of preferred dividends

-

 

-

 

-

 

645

 

Net income available to common stockholders

$  36,138

 

$  22,358

 

$101,231

 

$  26,861

 

Earnings per common share:

               

Basic

$      0.68

 

$      0.42

 

$      1.87

 

$      0.49

 

Diluted

$      0.61

 

$      0.37

 

$      1.68

 

$      0.42

 

Weighted average common shares outstanding used

               

in computing earnings per common share:

               

Basic

53,482

 

53,335

 

54,151

 

34,508

 

Diluted

59,330

 

59,822

 

60,167

 

40,163

 
               

 

BRIDGEPOINT EDUCATION, INC.

 

Condensed Consolidated Balance Sheets

 

(Unaudited)

 
         
 

As of September 30,

 

As of December 31,

 
 

2010

 

2009

 
 

(In thousands)

 

ASSETS

       

Current assets:

       

Cash and cash equivalents

$          163,884

 

$        125,562

 

Restricted cash

25

 

25

 

Marketable securities

65,776

 

44,988

 

Accounts receivable, net

76,081

 

43,232

 

Deferred income taxes

3,545

 

4,027

 

Prepaid expenses and other current assets

11,465

 

9,581

 

Total current assets

320,776

 

227,415

 

Property and equipment, net

60,852

 

47,362

 

Goodwill and intangibles

3,577

 

3,201

 

Deferred income taxes

13,986

 

13,491

 

Other long term assets

5,367

 

3,762

 

Total assets

$          404,558

 

$        295,231

 
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Current liabilities:

       

Accounts payable

$              3,178

 

$            2,870

 

Accrued liabilities

32,049

 

24,579

 

Deferred revenue and student deposits

146,056

 

121,752

 

Other current liabilities

-

 

172

 

Total current liabilities

181,283

 

149,373

 

Rent liability

10,399

 

6,896

 

Other long term liabilities

7,332

 

4,353

 

Total liabilities

199,014

 

160,622

 

Total stockholders’ equity

205,544

 

134,609

 

Total liabilities and stockholders’ equity

$          404,558

 

$        295,231

 
       

 

BRIDGEPOINT EDUCATION, INC.

 

Consolidated Statements of Cash Flows

 

(Unaudited)

 
         
 

Nine Months Ended

 
 

September 30,

 
 

2010

 

2009

 
 

(In thousands)

 

Cash flows from operating activities

       

Net income

$101,231

 

$  27,506

 

Adjustments to reconcile net income to net cash provided by operating activities:

       

Provision for bad debts

26,845

 

15,886

 

Depreciation and amortization

5,987

 

4,128

 

Amortization of premium/discount

238

 

(40)

 

Deferred income taxes

(13)

 

(11,158)

 

Stock-based compensation

5,658

 

33,947

 

Excess tax benefit of option exercises

(3,900)

 

(429)

 

Stockholder settlement (non-cash portion)

-

 

10,577

 

Loss of disposal of fixed asset

-

 

38

 

Changes in operating assets and liabilities:

       

Accounts receivable

(59,694)

 

(40,005)

 

Prepaid expenses and other current assets

(1,722)

 

130

 

Other longterm assets

(1,605)

 

(2,186)

 

Accounts payable and accrued liabilities

10,943

 

15,619

 

Deferred revenue and student deposits

24,304

 

57,689

 

Other liabilities

6,944

 

3,991

 

Net cash provided by operating activities

115,216

 

115,693

 
         

Cash flows from investing activities

       

Capital expenditures

(18,534)

 

(16,834)

 

Purchase of marketable securities

(66,188)

 

(44,922)

 

Business acquisition

-

 

(1,500)

 

Restricted cash

-

 

641

 

Capitalized course development costs

(584)

 

-

 

Maturities of marketable securities

45,000

 

-

 

Net cash provided by (used in) investing activities

(40,306)

 

(62,615)

 
         

Cash flows from financing activities

       

Proceeds from the issuance of common stock

-

 

28,104

 

Proceeds from exercise of stock options

646

 

38

 

Excess tax benefit of option exercises

3,900

 

429

 

Issuance of common stock under ESPP

501

 

93

 

Proceeds from exercise of warrants

1,192

 

973

 

Repurchase of common stock

(42,193)

 

-

 

Payments of notes payable

-

 

(60)

 

Payments on conversion of preferred stock

-

 

(27,707)

 

Payments of capital lease obligations

(634)

 

(113)

 

Net cash provided by financing activities

(36,588)

 

1,757

 

Net increase in cash and cash equivalents

38,322

 

54,835

 

Cash and cash equivalents at beginning of period

125,562

 

56,483

 

Cash and cash equivalents at end of period

$163,884

 

$111,318

 
         

Supplemental disclosure of non-cash investing and financing activities:

       

Purchase of equipment included in accounts payable and accrued liabilities

$    1,484

 

$       854

 
       

 

SOURCE Bridgepoint Education, Inc.

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