Princeton Review Inc. (REVU) filed Quarterly Report for the period ended 2009-09-30.
Priceton Review Inc. helps students and families achieve their educational and career goals elementary and secondary schools maximize their effectiveness and colleges and graduate schools attract greater numbers of qualified applicants at lower cost. The company provides preparation for the SAT as well as for most of the other major post-secondary and graduate admissions tests. Princeton Review Inc. has a market cap of $152.1 million; its shares were traded at around $4.51 with and P/S ratio of 1.2.
Highlight of Business Operations:
Test Preparation Services revenue remained flat at $34.1 million for the three months ended September 30, 2009 as compared to the same period of 2008. Increases in revenue of $1.4 million from domestic franchises acquired subsequent to June 30, 2008 and $812,000 from increased institutional contract revenue were offset by a $2.2 million reduction attributed primarily to lower classroom-based and tutoring revenues. Increases in organic classroom-based enrollments were offset by lower prices charged for our classroom-based courses and a higher percentage of enrollments from lower-priced services. Organic tutoring revenues declined due to lower enrollments and a shift towards lower priced tutoring packages. We expect these pricing and enrollment trends to continue through the remainder of 2009.
SES Services cost of revenue decreased by $58,000, or 11%, to $486,000 from $544,000 in the three months ended September 30, 2008 and gross margin during the same period decreased from 22% to (107%). The decrease in gross margin is primarily due to the lower revenue described above without a proportionate decrease in costs, as the majority of the costs per class are relatively fixed.
Interest expense decreased by $374,000 to $136,000, from $510,000 in the three months ended September 30, 2008, primarily due to a decrease in our term loan outstanding under our credit facility. Since September 30, 2008, we have repaid approximately $12.0 million of principal under our credit facility term loan.
Test Preparation Services revenue increased by $1.2 million, or 1%, to $86.7 million from $85.5 million in the nine months ended September 30, 2008. This increase is primarily due to incremental revenue of $9.1 million from domestic franchises acquired during 2008 as described above. This increase in revenue is partially offset by a $1.7 million reduction in franchise fees as a direct result of the same franchise acquisitions and a $0.8 million reduction in non-franchise licensing revenue due to the termination of a contract with a marketing partner that has filed for bankruptcy. The increase is further offset by a decrease of $5.4 million due primarily to lower classroom-based and tutoring revenues during the nine months ended September 30, 2009. Increases in classroom-based enrollments were offset by lower prices charged for our classroom-based courses and a higher percentage of enrollments from lower-priced services. Organic tutoring revenues declined due to lower enrollments and a shift towards lower priced tutoring packages. We expect these pricing and enrollment trends to continue through the remainder of 2009.
Test Preparation Services cost of revenue increased by $2.2 million, or 8%, to $30.7 million from $28.5 million in the nine months ended September 30, 2008. This increase is primarily due to incremental costs of $3.7 million related to the 2008 acquisitions. Excluding the impact of franchises acquired, cost of revenue decreased by $1.5 million due to improved classroom operating efficiencies which lowered relative teacher, course material and facility costs required to deliver our services. Gross margin during the period for the Test Preparation Services division decreased from 67% to 65%, primarily as a result of lower prices charged for our classroom-based courses, as costs per an instruction session are relatively fixed. We expect the impact of lower prices to continue to negatively impact gross margin through the remainder of 2009.
SES Services cost of revenue increased by $3.4 million, or 40%, to $12.0 million from $8.6 million in the nine months ended September 30, 2008 as a direct result of the increase in revenue and the additional operating regions in the 2008-2009 school year that were not included in the results for the nine months ended September 30, 2008. Gross margin during the period for the SES Services division decreased from 55% to 50% due primarily to lower gross margins in new operating regions as average students per class were lower than existing regions as of the nine months ended September 30, 2008.
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