AMERICAN PUBLIC EDUCATION, INC. (APEI, Financial) filed Quarterly Report for the period ended 2011-09-30.
American Public Education Inc. has a market cap of $616.6 million; its shares were traded at around $34.58 with a P/E ratio of 19.9 and P/S ratio of 3.1.
Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010 Revenues. Our revenues for the three months ended September 30, 2011 were $65.3 million, an increase of $17.0 million, or 35%, compared to $48.3 million for the three months ended September 30, 2010. The increase was primarily a result of an increase in the number of net course registrations from civilian students, as well as an increase in the number of net course registrations from military students. Costs and Expenses. Costs and expenses for the three months ended September 30, 2011 were $50.2 million, an increase of $11.2 million, or 29%, compared to $39.0 million for the three months ended September 30, 2010. Costs and expenses as a percentage of revenues decreased to 76.9% for the three months ended September 30, 2011 from 80.7% for the three months ended September 30, 2010. Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended September 30, 2011 were $23.9 million, representing an increase of 23% from $19.5 million for the three months ended September 30, 2010. This increase was directly related to an increase in the number of classes offered due to the increase in net course registrations. Instructional costs and services expenses as a percentage of revenues were 36.7% for the three months ended September 30, 2011, compared to 40.3% for the three months ended September 30, 2010. Selling and promotional expenses. Our selling and promotional expenses for the three months ended September 30, 2011 were $11.7 million, representing an increase of 22% from $9.6 million for the three months ended September 30, 2010. This increase was primarily due to an increase in civilian outreach, online advertising and media advertising expenses. Selling and promotional expenses as a percentage of revenues decreased to 17.9% for the three months ended September 30, 2011 from 19.9% for the three months ended September 30, 2010. This decrease as a percent of revenue is a result of increased civilian registrations from greater awareness of the APU brand. 12
General and administrative expenses. Our general and administrative expenses for the three months ended September 30, 2011 were $12.2 million representing an increase of 49% from $8.2 million for the three months ended September 30, 2010. The increase in expense was a result of an increase in expenditures for financial aid processing fees and expenditures for technology required to support the increase in civilian students and regulatory changes. In addition, bad debt expense increased as a percentage of revenue from 1.2% for the six months ended June 30, 2011 to 1.9% for the nine months ended September 30, 2011 related to our increase in civilian students. General and administrative expenses as a percentage of revenues increased to 18.6% for the three months ended September 30, 2011 from 17.0% for the three months ended September 30, 2010. The percentage increase was primarily due to financial aid processing, bad debt expense and technology spending increases to manage the increase in civilian students and regulatory changes. Depreciation and amortization. Depreciation and amortization expenses were $2.4 million for the three months ended September 30, 2011, compared with $1.7 million for the three months ended September 30, 2010. This represents an increase of 41%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed asset base. Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense for the three months ended September 30, 2011 were $812,000 in the aggregate, representing an increase of 15% from $704,000 for the three months ended September 30, 2010. The increase in stock-based compensation for the three months ended September 30, 2011 is primarily attributable to new grants issued in the first quarter of 2011. Income tax expense. We recognized income tax expense for the three months ended September 30, 2011 and September 30, 2010 of $4.1 million and $3.8 million, respectively, or effective tax rates of 27.4% and 40.2%, respectively. The reduction in our effective tax rate in 2011 is primarily due to the state tax and research and development tax credit studies that were completed during the third quarter of 2011. The state tax study was undertaken to refine our allocation of income to various states. The research and development tax credit study was completed to claim the credit for our increased software development activities qualifying under the tax law. This resulted in a tax savings of $498,000 related to research and development tax credits and a $1.4 million state income tax savings related to the state tax study. The adjustment was taken in the quarter ended September 30, 2011. Net income. Our net income was $10.9 million for the three months ended September 30, 2011, compared to net income of $5.6 million for the three months ended September 30, 2010, an increase of $5.3 million, or 96%. This increase was related to the factors discussed above. Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010 Revenues. Our revenues for the nine months ended September 30, 2011 were $184.7 million, an increase of $42.8 million, or 30%, compared to $141.9 million for the nine months ended September 30, 2010. The increase was primarily a result of an increase in the number of net course registrations from military and civilian students. Costs and Expenses. Costs and expenses for the nine months ended September 30, 2011 were $141.7 million, an increase of $34.0 million, or 32%, compared to $107.7 million for the nine months ended September 30, 2010. Costs and expenses as a percentage of revenues increased to 76.7% for the nine months ended September 30, 2011 from 75.9% for the nine months ended September 30, 2010. 13
Instructional costs and services expenses. Our instructional costs and services expenses for the nine months ended September 30, 2011 were $69.1 million, representing an increase of 26% from $54.9 million for the nine months ended September 30, 2010. This increase was directly related to an increase in the number of classes offered due to the increase in net course registrations. Instructional costs and services expenses as a percentage of revenues were 37.4% for the nine months ended September 30, 2011, compared to 38.7% for the nine months ended September 30, 2010. Selling and promotional expenses. Our selling and promotional expenses for the nine months ended September 30, 2011 were $32.3 million, representing an increase of 30% from $24.9 million for the nine months ended September 30, 2010. This increase was primarily due to an increase in civilian outreach, online advertising and media advertising expenses. Selling and promotional expenses as a percentage of revenues was 17.5% for the nine months ended September 30, 2011 and the nine months ended September 30, 2010. General and administrative expenses. Our general and administrative expenses for the nine months ended September 30, 2011 were $33.6 million representing an increase of 44% from $23.3 million for the nine months ended September 30, 2010. The increase in expense was a result of an increase in expenditures for recruiting, financial aid processing fees and expenditures for technology required to support a larger civilian student population and regulatory changes. In addition, bad debt expense increased as a percentage of revenue from 1.2% for the six months ended June 30, 2011 to 1.9% for the nine months ended September 30, 2011 related to our increase in civilian students. General and administrative expenses as a percentage of revenues increased to 18.2% for the nine months ended September 30, 2011 from 16.4% for the nine months ended September 30, 2010. The percentage increase was primarily due to recruiting, financial aid processing, bad debt expense and technology spending increases to manage the increase in civilian students and regulatory changes. Depreciation and amortization. Depreciation and amortization expenses were $6.7 million for the nine months ended September 30, 2011, compared with $4.7 million for the nine months ended September 30, 2010. This represents an increase of 43%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed asset base. Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense for the nine months ended September 30, 2011 were $2.4 million in the aggregate, representing an increase of 11% from $2.2 million for the nine months ended September 30, 2010. The increase in stock-based compensation for the nine months ended September 30, 2011 is primarily attributable to new grants issued in the first quarter of 2011. Income tax expense. We recognized income tax expense for the nine months ended September 30, 2011 and September 30, 2010 of $15.3 million and $14.0 million, respectively, or effective tax rates of 35.6% and 40.9%, respectively. The reduction in our effective tax rate in 2011 is primarily due to the state tax and research and development tax credit studies that were completed during the third quarter of 2011. The state tax study was undertaken to refine our allocation of income to various states. The research and development tax credit study was completed to claim the credit for our increased software development activities qualifying under the tax law. This resulted in tax savings of $498,000 related to research and development tax credits and a $1.4 million state income tax savings related to the state tax study. The adjustment was taken in the quarter ended September 30, 2011. Net income. Our net income was $27.8 million for the nine months ended September 30, 2011, compared to net income of $20.3 million for the nine months ended September 30, 2010, an increase of $7.5 million, or 37%. This increase was related to the factors discussed above. 14
Liquidity and Capital Resources Liquidity The Company financed operating activities and capital expenditures during the nine months ended September 30, 2011 and 2010 primarily through cash provided by operating income and proceeds received from the exercise of stock options. Cash and cash equivalents were $107.3 million and $86.6 million at September 30, 2011 and September 30, 2010, respectively, representing an increase of $20.7 million, or 23.9%. We derive a significant portion of our revenues from tuition assistance programs from the Department of Defense, or DoD. Generally, these funds are received within 60 days of the start of the classes to which they relate. A growing source of revenue is derived from our participation in Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable class. These factors, together with the number of classes starting each month, affect our operational cash flow. Our costs and expenses have increased with the increase in student enrollment, as well as our increased selling and promotional expenses, and we expect to fund these expenses through cash generated from operations. Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations and planned capital expenditures for the foreseeable future. Operating Activities Net cash provided by operating activities was $47.5 million and $32.8 million for the nine months ended September 30, 2011 and 2010, respectively. As revenue and profits have grown, cash has increased. Investing Activities Net cash used in investing activities was $14.0 million and $14.3 million for the nine months ended September 30, 2011 and 2010, respectively. Capital expenditures were related to the acquisition of existing structures, new construction projects due to our ongoing evaluation of space needs and our continued investment in systems. We began construction on a new 106,000 square foot financial center in Charles Town, West Virginia that should be completed by August 2012 and is estimated to cost approximately $18.0 million. In the nine months ended September 30, 2011, we have spent $2.8 million for land and building related to new finance center. We expect these factors, and potentially others, to cause capital expenditures to increase in future periods, including in the near term. Financing Activities Net cash used in financing activities for the nine months ended September 30, 2011 was $7.6 million from the repurchase of our common stock, net of cash received from the issuance of common stock as a result of stock option exercises, and the excess tax benefit from stock based compensation. Net cash provided by financing activities for the nine months ended September 30, 2010 was $6.8 million from cash received from the issuance of common stock as a result of stock option exercises and the excess tax benefit from stock based compensation offset by the repurchase of common stock. The Board of Directors has authorized a repurchase program to repurchase up to the cumulative number of shares issued or deemed issued under the Company s equity incentive and stock purchase plans after January 1, 2011, which management currently estimates to be approximately 219,208 shares of the Company s common stock. As of September 30, 2011 the Company had repurchased 219,208 shares under the repurchase program for an aggregate amount of $9.5 million. 15
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American Public Education Inc. has a market cap of $616.6 million; its shares were traded at around $34.58 with a P/E ratio of 19.9 and P/S ratio of 3.1.
Highlight of Business Operations:
Adjusted net course registrations increased 32% and 30% for the three and nine month period ended September 30, 2011 over the three and nine month period ended September 30, 2010. Adjusted net course registrations are net course registrations that are adjusted to reflect that beginning January 3, 2011, the Company combined one-credit lab courses with their related three-credit classes. As a result, adjusted net course registration growth rates exclude other non-credit registrations and are presented as if labs and classes were combined in the prior year period. Our revenue increased from $48.3 million to $65.3 million, or by 35%, and $141.9 million to $184.7 million, or by 30%, for the three and nine month period ended September 30, 2011 over the three month and nine month period ended September 30, 2010, respectively. Operating margins increased to 23.1% from 19.3% and decreased from 24.1% to 23.3% for the three month and nine month period ended September 30, 2011 over the three and six month period ended September 30, 2010, respectively.Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010 Revenues. Our revenues for the three months ended September 30, 2011 were $65.3 million, an increase of $17.0 million, or 35%, compared to $48.3 million for the three months ended September 30, 2010. The increase was primarily a result of an increase in the number of net course registrations from civilian students, as well as an increase in the number of net course registrations from military students. Costs and Expenses. Costs and expenses for the three months ended September 30, 2011 were $50.2 million, an increase of $11.2 million, or 29%, compared to $39.0 million for the three months ended September 30, 2010. Costs and expenses as a percentage of revenues decreased to 76.9% for the three months ended September 30, 2011 from 80.7% for the three months ended September 30, 2010. Instructional costs and services expenses. Our instructional costs and services expenses for the three months ended September 30, 2011 were $23.9 million, representing an increase of 23% from $19.5 million for the three months ended September 30, 2010. This increase was directly related to an increase in the number of classes offered due to the increase in net course registrations. Instructional costs and services expenses as a percentage of revenues were 36.7% for the three months ended September 30, 2011, compared to 40.3% for the three months ended September 30, 2010. Selling and promotional expenses. Our selling and promotional expenses for the three months ended September 30, 2011 were $11.7 million, representing an increase of 22% from $9.6 million for the three months ended September 30, 2010. This increase was primarily due to an increase in civilian outreach, online advertising and media advertising expenses. Selling and promotional expenses as a percentage of revenues decreased to 17.9% for the three months ended September 30, 2011 from 19.9% for the three months ended September 30, 2010. This decrease as a percent of revenue is a result of increased civilian registrations from greater awareness of the APU brand. 12
General and administrative expenses. Our general and administrative expenses for the three months ended September 30, 2011 were $12.2 million representing an increase of 49% from $8.2 million for the three months ended September 30, 2010. The increase in expense was a result of an increase in expenditures for financial aid processing fees and expenditures for technology required to support the increase in civilian students and regulatory changes. In addition, bad debt expense increased as a percentage of revenue from 1.2% for the six months ended June 30, 2011 to 1.9% for the nine months ended September 30, 2011 related to our increase in civilian students. General and administrative expenses as a percentage of revenues increased to 18.6% for the three months ended September 30, 2011 from 17.0% for the three months ended September 30, 2010. The percentage increase was primarily due to financial aid processing, bad debt expense and technology spending increases to manage the increase in civilian students and regulatory changes. Depreciation and amortization. Depreciation and amortization expenses were $2.4 million for the three months ended September 30, 2011, compared with $1.7 million for the three months ended September 30, 2010. This represents an increase of 41%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed asset base. Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense for the three months ended September 30, 2011 were $812,000 in the aggregate, representing an increase of 15% from $704,000 for the three months ended September 30, 2010. The increase in stock-based compensation for the three months ended September 30, 2011 is primarily attributable to new grants issued in the first quarter of 2011. Income tax expense. We recognized income tax expense for the three months ended September 30, 2011 and September 30, 2010 of $4.1 million and $3.8 million, respectively, or effective tax rates of 27.4% and 40.2%, respectively. The reduction in our effective tax rate in 2011 is primarily due to the state tax and research and development tax credit studies that were completed during the third quarter of 2011. The state tax study was undertaken to refine our allocation of income to various states. The research and development tax credit study was completed to claim the credit for our increased software development activities qualifying under the tax law. This resulted in a tax savings of $498,000 related to research and development tax credits and a $1.4 million state income tax savings related to the state tax study. The adjustment was taken in the quarter ended September 30, 2011. Net income. Our net income was $10.9 million for the three months ended September 30, 2011, compared to net income of $5.6 million for the three months ended September 30, 2010, an increase of $5.3 million, or 96%. This increase was related to the factors discussed above. Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010 Revenues. Our revenues for the nine months ended September 30, 2011 were $184.7 million, an increase of $42.8 million, or 30%, compared to $141.9 million for the nine months ended September 30, 2010. The increase was primarily a result of an increase in the number of net course registrations from military and civilian students. Costs and Expenses. Costs and expenses for the nine months ended September 30, 2011 were $141.7 million, an increase of $34.0 million, or 32%, compared to $107.7 million for the nine months ended September 30, 2010. Costs and expenses as a percentage of revenues increased to 76.7% for the nine months ended September 30, 2011 from 75.9% for the nine months ended September 30, 2010. 13
Instructional costs and services expenses. Our instructional costs and services expenses for the nine months ended September 30, 2011 were $69.1 million, representing an increase of 26% from $54.9 million for the nine months ended September 30, 2010. This increase was directly related to an increase in the number of classes offered due to the increase in net course registrations. Instructional costs and services expenses as a percentage of revenues were 37.4% for the nine months ended September 30, 2011, compared to 38.7% for the nine months ended September 30, 2010. Selling and promotional expenses. Our selling and promotional expenses for the nine months ended September 30, 2011 were $32.3 million, representing an increase of 30% from $24.9 million for the nine months ended September 30, 2010. This increase was primarily due to an increase in civilian outreach, online advertising and media advertising expenses. Selling and promotional expenses as a percentage of revenues was 17.5% for the nine months ended September 30, 2011 and the nine months ended September 30, 2010. General and administrative expenses. Our general and administrative expenses for the nine months ended September 30, 2011 were $33.6 million representing an increase of 44% from $23.3 million for the nine months ended September 30, 2010. The increase in expense was a result of an increase in expenditures for recruiting, financial aid processing fees and expenditures for technology required to support a larger civilian student population and regulatory changes. In addition, bad debt expense increased as a percentage of revenue from 1.2% for the six months ended June 30, 2011 to 1.9% for the nine months ended September 30, 2011 related to our increase in civilian students. General and administrative expenses as a percentage of revenues increased to 18.2% for the nine months ended September 30, 2011 from 16.4% for the nine months ended September 30, 2010. The percentage increase was primarily due to recruiting, financial aid processing, bad debt expense and technology spending increases to manage the increase in civilian students and regulatory changes. Depreciation and amortization. Depreciation and amortization expenses were $6.7 million for the nine months ended September 30, 2011, compared with $4.7 million for the nine months ended September 30, 2010. This represents an increase of 43%. This increase resulted from greater capital expenditures and higher depreciation and amortization on a larger fixed asset base. Stock-based and other compensation expenses. Stock-based compensation expenses included in instructional costs and services, selling and promotional, and general and administrative expense for the nine months ended September 30, 2011 were $2.4 million in the aggregate, representing an increase of 11% from $2.2 million for the nine months ended September 30, 2010. The increase in stock-based compensation for the nine months ended September 30, 2011 is primarily attributable to new grants issued in the first quarter of 2011. Income tax expense. We recognized income tax expense for the nine months ended September 30, 2011 and September 30, 2010 of $15.3 million and $14.0 million, respectively, or effective tax rates of 35.6% and 40.9%, respectively. The reduction in our effective tax rate in 2011 is primarily due to the state tax and research and development tax credit studies that were completed during the third quarter of 2011. The state tax study was undertaken to refine our allocation of income to various states. The research and development tax credit study was completed to claim the credit for our increased software development activities qualifying under the tax law. This resulted in tax savings of $498,000 related to research and development tax credits and a $1.4 million state income tax savings related to the state tax study. The adjustment was taken in the quarter ended September 30, 2011. Net income. Our net income was $27.8 million for the nine months ended September 30, 2011, compared to net income of $20.3 million for the nine months ended September 30, 2010, an increase of $7.5 million, or 37%. This increase was related to the factors discussed above. 14
Liquidity and Capital Resources Liquidity The Company financed operating activities and capital expenditures during the nine months ended September 30, 2011 and 2010 primarily through cash provided by operating income and proceeds received from the exercise of stock options. Cash and cash equivalents were $107.3 million and $86.6 million at September 30, 2011 and September 30, 2010, respectively, representing an increase of $20.7 million, or 23.9%. We derive a significant portion of our revenues from tuition assistance programs from the Department of Defense, or DoD. Generally, these funds are received within 60 days of the start of the classes to which they relate. A growing source of revenue is derived from our participation in Title IV programs, for which disbursements are governed by federal regulations. We have typically received disbursements under Title IV programs within 30 days of the start of the applicable class. These factors, together with the number of classes starting each month, affect our operational cash flow. Our costs and expenses have increased with the increase in student enrollment, as well as our increased selling and promotional expenses, and we expect to fund these expenses through cash generated from operations. Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations and planned capital expenditures for the foreseeable future. Operating Activities Net cash provided by operating activities was $47.5 million and $32.8 million for the nine months ended September 30, 2011 and 2010, respectively. As revenue and profits have grown, cash has increased. Investing Activities Net cash used in investing activities was $14.0 million and $14.3 million for the nine months ended September 30, 2011 and 2010, respectively. Capital expenditures were related to the acquisition of existing structures, new construction projects due to our ongoing evaluation of space needs and our continued investment in systems. We began construction on a new 106,000 square foot financial center in Charles Town, West Virginia that should be completed by August 2012 and is estimated to cost approximately $18.0 million. In the nine months ended September 30, 2011, we have spent $2.8 million for land and building related to new finance center. We expect these factors, and potentially others, to cause capital expenditures to increase in future periods, including in the near term. Financing Activities Net cash used in financing activities for the nine months ended September 30, 2011 was $7.6 million from the repurchase of our common stock, net of cash received from the issuance of common stock as a result of stock option exercises, and the excess tax benefit from stock based compensation. Net cash provided by financing activities for the nine months ended September 30, 2010 was $6.8 million from cash received from the issuance of common stock as a result of stock option exercises and the excess tax benefit from stock based compensation offset by the repurchase of common stock. The Board of Directors has authorized a repurchase program to repurchase up to the cumulative number of shares issued or deemed issued under the Company s equity incentive and stock purchase plans after January 1, 2011, which management currently estimates to be approximately 219,208 shares of the Company s common stock. As of September 30, 2011 the Company had repurchased 219,208 shares under the repurchase program for an aggregate amount of $9.5 million. 15
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