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#Thank you, Rob.
Good morning, everyone.
I have just a few comments on our third-quarter results and our fall term enrollment before <UNK> will walk you through the financials in more detail.
Our third-quarter revenue of $102 million grew 3% from the prior year, and that represents our first year-over-year growth in revenue since the second quarter of 2011.
When we reduced our undergraduate tuition by 20% at the start of 2014, we said that once we achieved consistent enrollment growth, revenue growth would trail by roughly four quarters ---+ and that is essentially the case here, as our total enrollments have been growing since the third quarter of last year.
Our third-quarter operating expenses were up 6% over last year, as we previously indicated they would be, to support our various growth initiatives.
And these are investments that we anticipate continuing throughout the fourth quarter.
And based on that, we expect our operating expenses for the full year to be up somewhere between 5% and 5.5%.
Turning to the fall term enrollment results, we grew our total student population by 6% to 45,509 students.
That is the highest fall term enrollment we have had since 2012, and that is our sixth consecutive quarter of total enrollment growth.
For the fall term, our continuing students grew 4% and our new students grew 13%.
We were also very pleased that the Jack Welch Management Institute was recognized by the Princeton Review as one of the top 25 online MBA programs in its very first year of consideration.
For the fall term, JWMI grew 29%, and it increased their continuation rate 300 basis points to a University-leading 97%.
Lastly, late last week we received the Department of Education's draft gainful employment data, which showed that none of our programs failed.
Draft data did show that two of our very small associate programs indicated in the zone.
We are in the process of reviewing all of this draft data and will report once the data is finalized.
<UNK>.
Thank you, <UNK>, and good morning.
First, I would like to remind everyone that our financial statements continue to include the impact of non-cash adjustments to our liability for losses on facilities that we ceased using during the fourth quarter of 2013.
Consequently, we will continue to describe our operating income, net income, and earnings per share with and without these non-cash adjustments.
Now onto our third quarter.
Revenue for the quarter was $102.2 million, up 3% from last year; and as <UNK> mentioned, the increase was driven by increased enrollment, partly offset by lower revenue per student.
Income from operations was $4.8 million for the quarter compared to $7.3 million for the same period last year.
Excluding non-cash adjustments, income from operations was $4.6 million and $6.9 million for the third quarter of 2016 and 2015, respectively.
Operating margin was 4.5% for the third quarter of 2016, compared to 6.9% for the same period in 2015, excluding the non-cash adjustments.
The roughly 6% increase in total operating expenses was primarily the result of accelerated investments in NYCDA expansion, academic program enhancements, and brand awareness initiatives.
Bad debt expense was 3.8% for the quarter compared to 2.3% for the same period last year.
Bad debt for the quarter was in line with our second quarter this year, though higher than the same period in 2015 due to a one-time true-up we recorded in our third quarter last year.
Net income was $2.9 million compared to $3.7 million in 2015.
Excluding non-cash adjustments, net income was $2.7 million for the third quarter compared to $3.5 million for the same period in 2015.
Consistent with the first half of this year, net income in our third quarter benefited from lower interest expense resulting from the payoff of our term loan last year.
Diluted earnings per share was $0.27 for the quarter compared to $0.35 for the same period in 2015.
Excluding non-cash adjustments, earnings per share was $0.25 for the quarter compared to $0.32 for the same period in 2015.
Our ongoing investment in the growth of NYCDA resulted in about $0.17 of dilution to our Q3 earnings.
Moving to year-to-date results, revenues year to date increased slightly to $321.8 million compared to $320.8 million for the first three quarters of 2015 due to increased enrollment, offset by lower revenue per student.
Income from operations was $37.8 million for the first three quarters this year compared to $48 million in 2015, a decrease of 21%.
Excluding non-cash adjustments, year-to-date income from operations was $35.9 million and $47.6 million in 2015.
Our operating margin was 11.1% compared to 14.8% for the same period in 2015 when excluding the non-cash adjustments.
Net income was $23.1 million for the first three quarters of the year compared to $27 million last year, a decrease of 14%.
And excluding non-cash adjustments, year-to-date net income was $21.9 million compared to $26.7 million in 2015.
Earnings per share was $2.14 compared to $2.52 for 2015.
And excluding non-cash adjustments, EPS was $2.03 for the first third of this ---+ sorry; three quarters of this year compared to $2.49 last year.
And year to date, our investment in NYCDA has resulted in about $0.34 of dilution to EPS.
Our diluted shares outstanding as of the end of our third quarter increased 1% to 10,803,000.
We ended the quarter with $120.5 million of cash and no debt.
Year to date, our cash from operations was $30.1 million compared to $54.5 million in 2015.
And as I mentioned last quarter, our cash flow from operations of this year has been negatively impacted by a few moving pieces, including our investment in NYCDA as well as a 2015 tax payment we made in the first quarter of this year; higher graduation fund redemptions; and in this third quarter, some unfavorable timing on a few large vendor payments.
Regarding capital expenditures, we spent about $7.5 million year to date 2016 compared to $9.6 million in the same period 2015.
We expect full-year capital expenditures to be at the lower end of my previously communicated range of 3% to 4% of revenue.
And, finally, we continue to maintain $150 million in available credit on our revolver.
Rob.
Well, good morning, <UNK>.
We said at the last quarterly call that we seem to have seen a better economy ---+ a firming up of the economy, which seems to have helped our unaffiliated undergraduate students.
I would say that that is a trend that has continued into the fall term.
We saw a lot of interest among that segment of students.
It remains to be seen what happens in future quarters, but it definitely is an improved environment from our perspective with respect to undergraduate students.
No.
It was pretty consistent across most of our programs.
So I can't say that it was concentrated in one particular area.
Well, we are in seven locations.
We are ---+
Seven new locations ---+ nine total.
It is still relatively early.
They have only been operating just starting into their second quarter.
So that is something, <UNK>, that we will comment on in future quarters.
But we are very excited to have made the acquisition, as we said last quarter.
And we are working to integrate their systems where we can inside of Strayer.
And we will comment on it as we get forward into the future.
Last year we had a one-time true-up that was related to what we determined was an overaccrual on some of our AR.
So it was a benefit in the third quarter last year.
On the expense side.
Not necessarily, <UNK>.
For the full year, we expect that the dilution will be in the range of $0.45 ---+.
And some of the expense, though, is ---+
Integration related.
And that is not going to continue into next year, <UNK>.
Correct.
Yes, the Forbes School is a different organization.
Well, the Jack Welch Management Institute is becoming a big part of our graduate enrollments.
It grew just under 30% in the quarter.
As I said, it was rep recognized by the Princeton Review as a top 25 online MBA program, and it is basically five years old.
So to go from a standing start to a top 25 program inside of five years ---+ we are very proud of that, obviously.
Our corporate channels remain very strong.
Enrollments in that channel were up 9% for the quarter.
So we continue to see strength there, and it remains a big part of our focus.
Well, the JWMI enrollments are about 1,300 students now, so you can just divide that by our total population to get the mix.
Our affiliated students are about a third of our total student population.
No.
We don't.
No, it did not, <UNK>.
Well, it is a completely different program, obviously ---+ much shorter in duration.
Most of the students so far that have gone through NYCDA's programs are already college graduates.
Some of them actually have graduate degrees.
Typically, these are individuals either who just have a love of programming or mobile app design ---+ or, more frequently, are interested in career switching.
And they find that this is a good value proposition for them to spend 10 weeks full-time or about 16 weeks part time to become a junior web developer, mobile app designer.
With respect to marketing, we use similar channels ---+ meaning digital, some radio advertising, and so forth.
The message is a little bit different, obviously, because, as I said, it is a very different program.
We have seen some early traction in some of these other markets in terms of generating awareness.
But as I said, it is so early that we really need to get a few more quarters under our belt before we'll have a better sense of what the trends look like.
