Fiscal 2018 First Quarter Financial Results Presentation
This presentation discusses National American University Holdings, Inc.'s financial results for the first quarter of fiscal 2018. Presenters include Dr. Ronald Shape, President and CEO, and Dr. David Heflin, CFO. The presentation covers strategic enrollment growth, online delivery model optimization, expansion in Canada, and investor highlights. It also addresses forward-looking statements and potential risks affecting the company's performance.
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Conference Call Presentation Fiscal 2018 First Quarter Financial Results September 28, 2017 Presenters Dr. Ronald Shape President and CEO Dr. David Heflin CFO
Safe Harbor This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, about National American University Holdings, Inc. and its affiliated entities (the Company ). Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of the Company s management, are subject to risks and uncertainties, which could cause actual results of the Company to differ from any future results expressed or implied by such forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: future operating or financial results; uncertainties regarding the strength of the future growth of the education industry; uncertainties regarding the availability of student loans and other financing sources primarily used for tuition; continued compliance with government regulations; changing legislative or regulatory environments; management of growth; intensity of competition; the availability of cash to pay dividends; the ability to meet debt obligations or obtain additional financing to fund operations and/or acquisitions; changing interpretations of generally accepted accounting principles; and general market and economic conditions, as well as other relevant risks detailed in the Company s filings with the Securities and Exchange Commission, including its annual report on Form 10-K, which the Company filed on August 4, 2017. The information set forth herein should be read in light of such risks. The Company does not undertake any obligation to update anyone with regard to the forward-looking statements. 2
Investor Highlights Strategic Enrollment Growth Grow Enrollments Through Dedicated Online System While Optimizing Ground Operations Students are increasingly choosing to pursue their educational goals through our online delivery model. As we start our Fall term, nearly 90% of our student population is enrolled in our online course delivery. Expand Options for Military Students Through Acquisition and Focused Support Services Through the asset purchase agreement with Henley-Putnam University, we feel we are well positioned to further support the expansion of our College of Military Studies. Expand and Grow Canada Operations Through Dedicated Staff Efforts We continue to focus on the growth opportunities we see in Canada and are pleased with the enrollment numbers for the summer and fall terms. In addition, we continue to consolidate and develop a dedicated division in Minnesota. 3
Grow Enrollments Through Focused Online Efforts While Optimizing Ground Operations More and more of our students prefer to learn, receive information, and engage through online delivery. Approximately 90% of the current fall term students, excluding teach- out students, are enrolled through online course delivery. The financial support, in fixed costs, to operate a large physical presence remains a challenge. Division FY 2016 Surplus % Surplus $ DL 42.28% $ 3,963,440 Ground 2.47% $ 1,908,478 (429,966) Grad -12.95% 137,827 DL FY 2017 Surplus % 45.61% $ 4,496,760 40.02% $ 939,029 0.96% $ 644,462 -2.95% $ FY 2016 FY 2017 Surplus % Surplus % Q1 FY2018 (8/31/17) Surplus $ Surplus % Surplus $ Q1 FY2018 (8/31/17) Surplus % Division $ (497,694) 42.28% 6.63% $ 327,841 10.42% $ 45.61% 40.02% Ground 2.47% 0.96% -2.95% Grad -12.95% 6.63% 10.42% 4
Expanded Military Operations Through Acquisition and Support Services College of Military Studies the acquisition of assets from Henley- Putnam University could allow us to accelerate the development of our military degree programs by 3 to 5 years and at a significantly lower cost than developing them in-house Henley-Putnam University Purchase potentially brings Over 150 online courses in Strategic Security and Protection Management, Intelligence Management, and Terrorism and Counterterrorism Studies 31 Certificate programs Bachelor Degree Programs Master Degree Programs Doctoral Degree Program 713 students enrolled as of December 31, 2016 Over 90 adjunct faculty with an average of 20 years of operational field experience 5
Expand and Grow Canada Operations Through Focused and Dedicated Staff Summer 2016 Fall 2016 Winter 16/17 Spring 2017 Summer 2017 Fall 2017 (Estimate) Undergraduate 12 22 33 46 48 82 Graduate 7 9 11 13 13 22 Total 19 31 44 59 61 104 6
Investor Highlights Q1 Financial Performance FY 2018 first quarter total revenue was $19.8 million, compared to $21.1 million in the prior-year period, as impact of lower enrollments partially offset by increased revenues from NAU Tuition Advantage plan FY 2018 first quarter operating loss of $(3.9) million, compared to $(2.9) million in the prior-year period, primarily as a result of lower enrollment as well loss on lease termination Net cash flows used in operating activities improved to $(2.9) million compared to $(3.0) million in the prior-year period despite paying early lease termination costs of $(0.9) million in the quarter Real estate appraisal market valuation of $12.4 million. In addition, the Company invested in land preparation costs of $1.6 million to provide for additional apartment unit development. 7
Investor Highlights - Marketing and Enrollment Transition to a new agency of record and continue to see improvement in lead flow We are planning our first monthly start in October. We continue to believe the monthly starts will allow students to engage more quickly and begin their program of study on a more timely schedule. We continue to see improved website visibility and marketing focus of the website to support enrollment efforts. We continue to build on local relationships to support student transfer and degree completion options through specialized articulation agreements creating low cost student enrollments. We continue to see many of our teach-out students complete their degrees. Great news (seeing the students succeed) but a challenge as our enrollment numbers will decline accordingly We continue see enrollment growth in select markets. Enrollment declines have been isolated to a couple of markets. For the summer term, our Minnesota campus operations were the hardest hit by enrollment declines, accounting for nearly 50% of the University s total enrollment decline. 8
Enrollment Breakout Summer 2017 credit hour enrollment decreased 5% YoY to 54,951 credit hours August 31, 2017 (Summer 2017 Quarter) August 31, 2016 (Summer 2016 Quarter)* YoY Percent Change Students % of Total Students % of Total Continuing Ed Doctoral Graduate Undergraduate & Diploma Total 103 94 384 1.7% 1.6% 6.5% 90.2% 100.0% 254 80 312 3.7% 1.2% 4.6% 90.5% 100.0% -59.4% 17.5% 23.1% -13.7% -13.4% 5,336 5,917 6,186 6,832 YoY Percent Change 26.1% -11.0% 4.3% -5.0% Number of Credits 9,323 40,512 54,951 Number of Credits 7,392 45,542 57,841 % of Total % of Total On-Campus Online Blended Total 17.0% 73.7% 9.3% 100.0% 12.8% 78.7% 8.5% 100.0% 5,116 4,907 * Non-degree seeking students were classified as Continuing Ed Students in 2016. 9
Investor Highlights Strategic Academic Focus Persistence and Completion NAU is one of 20 institutions invited to be a part of a Higher Learning Commission Lumina Foundation grant to discern institutional and educational effectiveness data. Curricular Evolution With the implementation of D2L Brightspace, mobile functionality, and increased faculty-student engagement, we continue to provide courses and programs that are relevant and focus on added value for NAU students. Successful Course Completion The rate of students successfully completing courses with a grade of C or higher is at a nine quarter high. 11
Academic Initiatives FY 2018-19 Initiatives Revise all online courses in D2L BrightSpace to integrate new learning and engagement technologies, simulations, mobile-first technology, and authentic assessment. Revisions ensure relevant, current competencies designed for NAU s distinctive working adult student. Expand laddered credentials, embedded certifications, separate certifications, and flexible competency-based curricula that integrates high levels of faculty-student engagement. Expand synchronous learning opportunities across the system to serve international and military students needing additional ground courses Enhance student academic support and career services to increase student learning, satisfaction, persistence, completion, and placement. Implement new technologies and data analytics and intervention strategies to intrusively engage and retain students. 13
Academic Initiatives FY 2018-19 Initiatives Expand transfer and prior learning assessment options for all students, offering the maximum acceptance of transfer credit, ACE-transcripted credit, and other credit for prior learning. Expand education opportunities uniquely designed to meet the needs of active military, veterans, and their dependents. The expansion of military offerings is anticipated to increase to three master s programs, one doctoral program, and 31 certificates through the consolidation of Henley-Putnam University into NAU. Expand undergraduate allied health and nursing programs to select campuses. Increase the professional development and research and scholarship of graduate faculty and students, as well as undergraduate faculty. Expand graduate programs in human resources, global supply chain management, education, and executive management. 14
Serving Students from Closing Institutions Students Actively serving displaced students from Westwood College, Brown Mackie College, Wright Career College, ITT, Career Point College, Globe University, Colorado Heights University, and Minnesota School of Business. More than 2,900 students have been served, totaling 20,249+ graduate and undergraduate credits since Spring and Summer 2017. Overall, teach-out students have comprised 53,000+ credit hours since Spring 2016. Programs Worked with accreditors, boards, and states to: Provide seamless transfer with minimal disruption and full transfer (with minimal or no credit loss) into more than 25 NAU graduate and undergraduate programs. Provide teach-out and transfer agreements that allow re-entry and graduates of closed schools to enter NAU with minimal or no credit loss. 15
Academic Breakdown for Summer 2017 Term Academic Area Degree Offering Doctoral 1% Cont.? Ed/WFD* 4% Cont.? Ed/WFD* 4% Master's 6% Legal? Studies 9% Doctoral 2% Diploma 8% Allied?Health 26% Nursing 17% Associate 35% Bachelor's 46% Business? &? Accounting 36% IT 6% *Non-degree seeking 16
Course Completion *Represents students who received a grade in the course. 17
Financials 18
FY 2018 Q1 Revenue and Cost of Educational Services FY 2018 Q1 Results FY 2018 Q1 Revenue Q1 2018 (unaudited) Q1 2017 (unaudited) (in USD thousands) Revenue $19,796 $21,130 Cost of educational services $6,900 $6,468 SG&A $15,508 $16,482 19
FY 2018 Q1 Net Income and EBITDA FY 2018 Q1 Results FY 2018 Q1 EBITDA (LBITDA) Q1 2018 (unaudited) Q1 2017 (unaudited) (in USD thousands) (Loss) Income before non- controlling interest and taxes ($4,055) ($3,030) Net (loss) income attributable to NAUH ($3,828) ($2,056) EBITDA (LBITDA)* ($2,660) ($1,532) *Please see reconciliation of EBITDA to net income attributable to the Company in the press release dated September 27, 2017, available at http://www.national.edu/about-nau/investor-relations/. . 20
Strong Balance Sheet August 31, 2017 May 31, 2017 (in USD thousands) Cash and cash equivalents/available for sale investments $11,202 $16,157 Working capital $6,358 $11,249 Long-term debt 0 0 Stockholders equity $25,080 $29,940 21
Change in Cash and For Sale Investments Cash and For Sale Investments ($ Millions) 18 16.2 16 14 Detail of Changes in Cash Balance Dividends Paid Arrowhead View Apts Cash Used in Operations (2.9) CAPEX/Other (0.2) Total Decrease (1.1) $ (0.8) $ $ $ (5.0) $ 12 11.2 10 8 6 4 2 0 5/31/2017 16.2 8/31/2017 11.2 End of Period 22
Thank You Contact Information: National American University Holdings, Inc. Dr. Ronald Shape 605-721-5220 rshape@national.edu Investor Relations Counsel The Equity Group Inc. Carolyne Y. Sohn 415-568-2255 csohn@equityny.com Adam Prior 212-836-9606 aprior@equityny.com 23
