Building Business Acumen. Bridgepoint Education

Transcription

1 Building Business Acumen Bridgepoint Education

2 5 Business Drivers Cash Growth People Profit Assets

3 5 Business Drivers Cash

4 Cash is! Cash is a company s oxygen supply. Cash is more important than your mother. Ram Charan Al Shugart Former Seagate CEO

5 Cash Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Cash Cash $7 $57 $171 $299 As of September 30, 2011, the company had cash, cash equivalents and marketable securities of $344.7 million..

6 Buying back stock: In 2010, we repurchased 3 million shares at an average cost of $14.05 per share, for a total purchase price of $42.2 million. For the first 9 months of the 2011, the company has spent $88 million in buying back stock which brings to an end the current stock buy-back authorized by the board of directors.

7 How Much Cash Should You Have? Companies ought to keep just enough cash to cover their interest, expenses and capital expenditures; plus they should hold a little bit more in case of emergencies. Investopedia

8 Cash Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Cash Cash $7 $57 $171 $299 8% 26% 38% 42%

9 Bridgepoint / Benchmark Companies Peformance Measure Cash Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Cash $299 $1,301 $449 $323 $374 $76 42% 26% 21% 17% 15% 12%

10 Cash Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Cash Cash $7 $57 $171 $299 Cash From Operating Act. $10 $71 $132 $190 Cash From Operating Activities for the first 9 months of 2011 = $149 million..

11 Bridgepoint / Benchmark Companies Peformance Measure Cash Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Cash $299 $1,301 $449 $323 $374 $76 Cash From Operating Act. $190 $1,045 $272 $392 $307 $163

12 5 Business Drivers Cash Profit

13 Target YTD Revenue (Sales) $ Instr. costs & ser. $ Marketing & Promo $ General & Admin. $ = Operating Income $ Interest Income net $ Income Tax $ = Net Income $ 18 21

14 - Profit & Loss Statement (First 9 months 2012) - Revenue (Sales) $100 - Instructional costs & ser. $ Marketing & Promotion $ General & Administrative $ 14 = Operating Income $ 33 33% + Interest Income net $ - - Income Tax $ 13 = Net Income $ 21 21%

15 High Profit Margins S&P Average is: 13% Who has much higher profit margins? Qualcomm 30% Oracle 24% Apple 22% Facebook 20% Coca Cola 20% Why the high margins?

16 Low Profit Margins S&P Average is: 13% Who has much lower profit margins? Exxon Mobile 8% Ford 5% Wal-Mart 3.5% Whole Foods 3.4% Costco 1.8% Amazon 1.3% Why the low margins?

17 Profit Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Net Income $3 $24 $47 $128 Profit Operating Margin % 4.6% 15.3% 18.0% 30.3% Net Income % 3.5% 11.2% 10.2% 17.9% First 9 month of 2011: Operating Margin = 33% Net Income Margin = 21%

18 Bridgepoint / Benchmark Companies Peformance Measure Profit Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 G&A as % of Revenues 13.7% 6.4% 51.6% 35.4% 26.6% 16.0% Operating Margin % 30.3% 20.5% 12.2% 21.5% 14.8% 33.9% Net Income % 17.9% 11.2% 7.8% 14.6% 6.7% 20.6%

19 5 Business Drivers Cash Profit Assets

20 Assets (read from page 16) Balancing Asset Strength & Asset Utilization Cash, ratings, property plan & equipment

21 Assets Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Net Income $3 $24 $47 $128 Assets Return on Assets 8.4% 20.4% 15.7% 27.1% Equity Ratio 12.6% 25.7% 45.6% 50.6% First 9 month of 2011: Return on Assets = 26.5% Equity Ratio = 57%

22 Bridgepoint / Benchmark Companies Peformance Measure Assets Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 Return on Assets 27.1% 15.4% 25.5% 17.2% 3.7% 31.8% Equity Ratio 50.6% 37.7% 59.8% 72.4% 46.0% 42.6%

23 5 Business Drivers Cash Growth Profit Assets

24 Growth Bridgepoint Peformance Measure BridgePoint Est. Net Sales $86 $218 $454 $713 $923 Net Income $3 $26 $47 $128 $169 Driver: Growth Revenue Growth na 153.5% 108.3% 57.0% 30.0% Net Income Growth na 766.7% 80.8% 172.3% 32.0% Revenue in Q3 growing due to the 5% tuition increase on April 1 st of 2011 and increased enrollment.

25 Guidance for 2011: - Total student enrollment of 83,000 to 85,000 - Revenue of $920 to $926 million - Net income of $168.5 to $170.3 million - Diluted EPS of $2.95 to $2.98.

26 We believe that the performance of our company has been resilient in the current economic environment due to: (i) The continued availability of Title IV funds to finance student tuition payments, (ii) Increased demand for postsecondary education resulting from a deteriorating labor market and (iii) Efficiencies in advertising costs. Page 72, 10-K

27 Bridgepoint / Benchmark Companies Peformance Measure Growth Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 Revenue Growth 57% 25% 16% 31% 25% 24% Net Income Growth 175% -8% 94% 69% 61% 25% Diluted EPS Growth 189% -3% 107% 70% 40% 28%

28 5 Business Drivers Cash Growth People Customers & Employees Profit Assets

29 Employees A s hire A+ s and B s hire C s The #1 reason a person will leave their job? 38% of current employees believe they will be somewhere else in 18 months. Airplane

30 People Bridgepoint BridgePoint Peformance Measure Net Sales $86 $218 $454 $713 Net Income $3 $24 $47 $128 People Number of students enrolled 12,623 31,558 53,688 77,892 Enrollment forecasted to be 83,000 to 85,000 students for year-end 2011.

31 Bridgepoint / Benchmark Companies Peformance Measure People Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 Number of students enrolled 77, , ,000 80, ,000 60,700

32 Anticipation He skates to where the puck is going to be Walter Gretzky If I would have asked my customers what they wanted, they would have said a faster horse Henry Ford

33 5 Business Drivers Cash Growth People Profit Assets

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35 Description Includes the Notes

36 5 Business Drivers Cash Statement of Cash Flows Growth People Profit & Loss Balance Sheet Assets

37 Assets = Liabilities + Equity Asset Strength Most Liquid Becomes Cash < 1 year Least Liquid Current ratio = 1.7 Due First Due in < 1 year Due Last Balance Equity ratio = 51%

38 Strong Balance Sheet 1. Plenty of cash 2. Current ratio at Trends are good 4. Strong equity position, 51%.

39 For Title IV, one financial responsibility standard is based on the institution's composite score, which is derived from a formula established by the Department that is a weighted average of three financial ratios: equity ratio, which measures the institution's capital resources, financial viability and ability to borrow; primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and net income ratio, which measures the institution's ability to operate at a profit or within its means. The composite score is a number between negative 1.0 and positive 3.0 and it must be at least 1.5. We expect our scores for 2010 to be 3.0. Financial responsibility section, Item 1, Form 10-K

40 Sales Expenses =Net Income Top Line 26% 30% 14% Operating Margin = 30% (P&L) 57% 56% 45% -8% 33% 165% Profit Var. - Bottom Net Profit Line Margin = 18% 175% Net Income / Number of Shares 189%

41 Increase Sales by 100K for taxes + 26

42 Work Team Impact on the 5 Elements (Table Activity) If your team cuts $100 thousand from the General and Administrative line item, what would be the impact on the P&L? Assume quality is the same.

43 Decrease by 100K for taxes + 59

44 Work Team Impact on the 5 Elements Which is better, increasing sales by $100K or cutting costs by $100K? Increasing sales increases Net Income by $26K. Cutting costs increases Net Income by $59K. What are the other considerations of increasing sales vs. cutting costs?

45 Cash from Operations + Cash from Investing + Cash from Financing = Change in Cash

46 Cash Flow

47 Financial Statements: Inter-relationship INCOME STATEMENT Revenues - COGS = Gross Margin - Opera2ng Costs = Opera2ng Income - Interest & Taxes Net Income CASH FLOW STATEMENT Net Income + Non- cash transac2ons = Cash from Ops +/- Cash from Inves2ng +/- Cash from Financing = Change in Cash + Beginning Cash Balance Cash & Cash Equivalents BALANCE SHEET Cash & Cash Equivalents + Other Assets = Total Assets Total Liabili2es Total Equity $713,233 Expenses $ 127,580 $ 127,580 $ 188,518 $ 188,518 $ 238,241 Bridgepoint Education STARTS with Customers This statement shows how much the company generated in sales (revenues) from it s customers. Then expenses are subtracted, and Net Income is shown. This statement shows how much cash actually flowed into the company (cash inflows) and the cash that flowed out of the company (cash ourlows) during the statement year, and finally the cash amount les over at the end of the year. ENDS with Owners This statement shows what the company owns (assets), what the company owes (liabili2es), and how much equity the owners have (owners equity), at a specific point in 2me.

48 Finding our performance on the 5 Drivers Cash Growth People Profit Assets

49 Navigating The Financials (NTF) Cash Component Location in annual report Balance Sheet P & L Statement of Cash Flow s Calculation Cash + Marketable Securities Enter Results Here Cash None $ Cash Cash from operating act. None $ Metric Cash Flow from operating Act. 713 Revenue None $ Revenue People Growth Asset Profit Net Income None $ Net Income Operating Income Net Income Total Assets Revenue Net Income Total Stockholder's Equity Diluted Earnings Per Share Student Enrollment From Internal Data or Market Research Earnings Total Stockholders' Equity This year's revenues This This year's Net Income This Operating income Net Income Net Income This This year's Diluted EPS None Revenue Revenue Total Assets Total Assets Last year's revenues Last year's Net Income Last year's diluted EPS 100 = 100 = 100 = 100 = = = = ,892 % % Operating Income Margin (%) Net Income Margin (%) % Return on Assets % Equity Ratio % Revenue growth % Net Income growth % Diluted EPS Growth Student Enrollment

50 The Role of the Stock Market 1) What is the role of the stock market? 2) Why did Bridgepoint go public? 3) Who cares about your stock price and why? a. Investors b. Analysts

51 Analyst Ratings

52 The Role of the Stock Market 1) What is the role of the stock market? 2) Why did you go public? 3) Who cares about your stock price and why? a. Investors b. Analysts c. Andrew Clark d. Employees 4) What are the benefits of a higher stock price?

53 6 Benefits of a Higher Stock Price: (Page 41) 1) Treasury stock worth more. 2) Secondary offering brings more cash. 3) Better credit ratings = more access to cash at a cheaper rate. 4) More acquisition power. 5) Can attract talented people. 6) More expensive in a buy-out.

54 Market Cap = Share Price X Number of Shares Peformance Measure Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 Market Capitalization 1.3 Bil. 6.7 Bil. 843 Mil. 2.6 Bil. 3.3 Bil. 1.4 Bil.

55 The P/E Ratio (Page 42, 43) Price (of one share of stock) Earnings Per Share (for last 12 months) Price $ EPS $ 3.05 = 8.5 P/E ratio

56 P/E Ratios Peformance Measure Bridge Point Apollo Group Career Education Corp DeVry, Inc. Education Man. Corp. Strayer Education Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637 Net Income $128 $553 $158 $280 $169 $131 P/E Ratio

57 External Factors Stock price

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59 External Factors Stock price vs. Dow and S&P

60 Engage your teams: People will work hard for a paycheck, harder for a person, and hardest for a reason.