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Career Education Corporation
ThinkEquity Partners
Growth Conference
September 16, 2003
www.careered.com Nasdaq: CECO
“We’re
only limited
by the size
of our goals.”
Jack LarsonChairman, President & CEO
Safe Harbor Statement
Except for the historical and present factual information contained herein, the matters set forth in this presentation, including statements identified by words such as "anticipates," "expects," "projects," "plans," "will," and similar expressions, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on information currently available to us and involve risks and uncertainties that could cause our actual growth, results, performance and business prospects and opportunities to differ materially from those expressed in, or implied by these statements. These risks and uncertainties include, but are not limited to, costs and difficulties related to the integration of acquired businesses, risks and effects of legal and administrative proceedings and governmental regulations, future financial and operational results, competition, general economic conditions, ability to manage and continue growth, and other risk factors relating to our industry and business as detailed in our Annual Report on Form 10-K for the year ended December 31, 2002, as amended and from time to time in our reports filed with the SEC. We disclaim any responsibility to update these forward-looking statements.
• Formed in 1994 to create a premium education system
• Initial Public Offering in 1998• 75 worldwide campuses• #1 on-campus provider in for-profit sector• #2 online provider in for-profit sector• 22 consecutive quarters of record revenue &
earnings
A brief look at CEC…
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2,150% shareholder return since IPO
IPO - Jan. ’98
$2 per share
Sept. ’03
$45 per share
Fall Student Population
15,90022,700
29,000
42,00050,400
62,000
010,00020,00030,00040,00050,000
60,00070,000
1998 1999 2000 2001 2002 2003* As of July 31
*
Strategic Growth GoalStart-ups/Satellites
Acquisitions
ProgramTransplants
Largest Global Quality Provider of Postsecondary Education
AdvancedDegrees
OnlineEducation
RegionalAccreditation
InternationalExpansion
AdditionalCurricula
Two Operating Groups
• Colleges, Schools & Universities Group– Le Cordon Bleu – International Academy of Design & Technology – Katharine Gibbs– College– American InterContinental University– International – Health Education
• Online Education Group– American InterContinental University – Online– Colorado Technical University - Online
• $270 billion North America postsecondary market• Online market growing 40% annually• For-profit & non-profit sectors are highly
fragmented• Strong long-term demographic trends• High barriers to entry• Acyclical demand• Attractive financial characteristics
– Tuition pricing is inelastic– Predictability of future revenue and earnings– Economies of scale
Favorable Industry Dynamics
Top 20 U.S. Universities by PopulationFall 1995 Fall 2001
University Population University Population1 Community College of the Air Force 89,611 1 Apollo Group 139,3002 University of Minnesota–Twin Cities 51,445 2 Community College of the Air Force 89,6113 Ohio State University–Main Campus 48,676 3 DeVry University 58,7364 The University of Texas at Austin 47,905 4 University of Minnesota-Twin Cities 51,3885 Miami-Dade Community College 47,060 5 Miami-Dade Community College 49,8366 Arizona State University-Main Campus 42,040 6 Ohio State University-Main Campus 48,3627 Texas A&M University-Main Campus 41,790 7 The University of Texas at Austin 48,0088 Michigan State University 40,647 8 Arizona State University-Main Campus 42,4839 Pennsylvania State University-Main Campus 39,646 9 Texas A&M University-Main Campus 41,89210 Houston Community College System 39,641 10 Michigan State University 41,545
11 University of Florida 39,412 11 Career Education 40,80012 University of Wisconsin-Madison 39,005 12 University of Florida 39,88313 University of Illinois-Urbana-Champaign 38,420 13 Pennsylvania State Univ-Main Campus 39,85514 Northern Virginia Community College 37,144 14 University of Wisconsin-Madison 39,28915 University of Michigan-Ann Arbor 36,687 15 University of Illinois-Urbana-Champaign 38,84116 Purdue University-Main Campus 36,427 16 Houston Community College System 38,49317 University of South Florida 36,142 17 Education Management 37,65818 New York University 35,835 18 University of Phoenix Online 37,60019 Indiana University-Bloomington 35,083 19 Purdue University-Main Campus 36,89320 University of Arizona 34,777 20 University of Michigan-Ann Arbor 36,625
Source: Chronicle of Higher Education
Competitive Advantages• Career-oriented curriculum• Diversification creates stable market demand
– Curriculum in multiple high-growth demand areas– Demographics in age & gender– Various degree offerings– Geography
• Strong marketing expertise• Online Education’s cutting-edge technology• Excellent placement success• Quality name brand institutions
Visual Communication& Design Technologies
Business Studies
Information Technology
Culinary Arts
Health Education
% of Students
62,000 students
Full-time degree seeking students
Current Core Curricula
34%
25%
17%
12%
12%
Diversified Student Demographics
Under 21 yr.30%
21 – 30 yr.53%
Over 30 yr.17%
50%/50%
Male/Female
Student Population by age group
Diversified Student Demographics
Bachelor’s/Master’s/Doctoral
30% Associate48%
Certificate22%
Student Population by degree objective
CEC generated 1.7 million leads in 2002
60% over 2001
High Impact Marketing
Convert Leads to Enrollments
• Specialized Admissions EffortsApprox. 1,000 Professionals
1. Local Area 2. High school 3. Out-of-area 4. International5. Internet
Automated Enrollment Center- Branded Enrollment Centers
- Virtual Campus Tours/Catalog
- Multi-currency & multi-lingual
- Enrollment Agreement
- Candidate for Acceptance
Superior Education Product• Curricula matched to long-term demographic
and employment trends• Employers help create, refine programs• Advisory boards create lasting relationships• Online Education’s multimedia courseware• High quality faculty and staff
• Approximately 4,000 faculty; industry professionals
• 62% part-time, adjunct faculty• First class equipment, facilities
• Ongoing investments• “Hands-on” education
Placement is our Moral Report Card
A+
Recent placement rate
94.1%
Up from 92% in 2001
98.2%Online
On-Campus
California School of California School of Culinary ArtsCulinary Arts
KatharineKatharineGibbs Gibbs
Date of AcquisitionMarch 1998
PopulationAt acquisition: 762002: 1,000
RevenueAt acquisition: $1.02002: $32.0
Programs addedLe Cordon Bleu
Date of AcquisitionJanuary 2001
PopulationAt acquisition: 4,5002002: 9,600
RevenueAt acquisition: $56.02002: $126.0
Programs addedN/a
Date of AcquisitionMay 1997
PopulationAt acquisition: 3,0192002: 10,400
RevenueAt acquisition: $28.02002: $141.0
Programs addedITVisCom
American American InterContinental InterContinental UniversityUniversity
A Sample of Successful Acquisitions
Nick FlugePresident of the Online Education
Group
• Online market is 350,000 unique students and $1.75 billion in revenue
• Regionally accredited• 100% accelerated online degrees• Participant in Dept. of Ed Demonstration Program• Experienced online faculty with terminal degrees• Student-centered virtual campus• Automated processes
Online Education Group
• 14 programs• Associate, Bachelor’s and Master’s• Business, Info. Technology, Fine Arts, Education• New programs (Aug. ’03): Marketing, Health, H.R. • Revenue is expected to be approx. $120M in ‘03• Revenue is expected to be $300 - $400M in ‘05
American InterContinental University Online
Median Age: 32
94% Working Full Time
Average Income: $44 K
50 States & 27 Countries
55%/45% Male/Female
OnlineStudent Profile
American InterContinental University Online
7,000 students at July 31, 2003
Pat PeschExecutive VP and CFO
Potential for Market Leadership
Excellent Educational Franchise
All activities support business strategies
26 Acquisitions Completed since 1994
Broad StudentMarketability
Excellent Regulatory Compliance
Manageable Near-term EPS impact
Attractive 5-year ROIC
Attractive Long-TermFinancial Profile
Acquisitions
Campus Start-ups –Organic Growth
• Means of geographic market entry • Leverage brand equity of existing CEC
brands• Excellent returns on invested capital• Dedicated divisional team • 4 budgeted start-up campuses for 2003
Numerous additional market opportunities
• Transport proven winners from initial school to other schools
• Leverages development, education, marketing costs
• Provides fast, positive results • Planned acceleration in 2003 to 50 transplants
Year # of Transplants2003 est. 50 2002 152001 122000 10
Program Transplants
Population Revenue EBITDA
59%
57%35%’01 vs. ‘00
’00 vs. ’9921%
24% 35%
’02 vs. ‘01
22% 35% 42%
Strong Internal Growth Record
Annual 2003 Business Outlook *• Revenue to be approx. $1.139 to $1.145 bil (includes
Online of approx. $120 mil & INSEEC Group of approx. $20 mil)
• Operating profit margin to increase approx. 50 basis points
• EPS to be approx. $1.05 to $1.06
• Capital expenditures to be approx. $80 to $85 mil
* Includes Whitman Education Group, Inc.
Revenue (in millions)
$149.2$223.5
$334.5
$547.1
$780.1
$1,145.0
$0
$200
$400
$600
$800
$1,000
$1,200
1998 1999 2000 2001 2002 2003 ** Mid-range of guidance
Net Income (in millions)
$2.1 $10.9$22.2
$38.4
$67.5
$105.0
$0
$20
$40
$60
$80
$100
$120
1998 1999 2000 2001 2002 2003 *
* Mid-range of guidance
Earnings per Share
$0.04$0.17
$0.28$0.42
$0.71
$1.06
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
1998 1999 2000 2001 2002 2003 *
* Mid-range of guidance
Start-up Campus Guidance• 4 start-ups expected in 2003
– Las Vegas – Le Cordon Bleu (Summer ‘03)– Atlanta – Le Cordon Bleu (Fall ‘03)– Detroit – IADT (Fall ‘03)– Houston – AIU –University (Fall ’03)
• 6 to 9 months pre-opening – $0.8 mil to $1.2 mil operating loss
• 9 to 12 months until break-even – $0.8 mil to $1.2 mil operating loss
• Capital Expenditures– Culinary school is $4.0 to $5.0 mil– All other schools are $1.0 to $2.0 mil
Capital Expenditures
Maintenance Expansion/Start-ups
$80 to $85 million expected in 2003
$45 mil $37 mil
$11,500
$15,500
$10,700
$20,000 $20,000
$30,000
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On-campus Online Culinary
Peer * CEC
Avg. Annual Revenue Per Student
* Apollo, Corinthian, EDMC, ITT, DeVry and Strayer
3.0%2.8%
3.7%3.3% 3.3%
0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%
1998 1999 2000 2001 2002
Annual Bad Debt Expense
Oct. 7, 2000
Change in Title IV Return of Funds Policy
31 33 3336 34
33
4038 36
33
05
10152025303540
1st Q 2nd Q 3rd Q 4th Q
2001 2002 2003
Days Sales Outstanding
3 to 5 yr. Business Outlook
• 20 %+ Internal Revenue Growth– 15 % population growth– 5 – 7 % pricing & mix change
• 50 to 100 basis point operating margin improvement
• 25 %+ earnings per share growth
The Future is Bright…
• Favorable industry dynamics• Sustainable growth opportunity• Competitive position in both on-campus
and online• Multi-faceted growth platform• Proven track record as a public company• Positioned for strong EPS growth
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