Exhibit 99.1
NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. REPORTS FISCAL 2018 FIRST QUARTER
RESULTS
Company to host conference call on September 28, 2017, at 11:00
a.m. ET
Financial and Operational Highlights
*
Combined enrollment
in graduate and doctoral programs increased 21.9% to 478 students
during the FY 2018 first quarter (summer 2017 term) from the
prior-year quarter.
*
Students enrolled
in 54,951 credit hours in the FY 2018
first quarter, a 5.0% decrease from 57,841 credit hours
during the prior summer term. Enrollment by total headcount decreased 13.4% from
the prior-year period, to 5,917 students as of August 31, 2017, as
a result of a decrease in continuing education and undergraduate
& diploma students.
*
FY 2018 first
quarter total revenue was $19.8 million, compared to $21.1 million
in the prior-year period. The Company’s total academic
segment revenue was $19.2 million in the FY 2018 first quarter,
compared to $20.8 million in the prior-year period.
*
FY 2018 first
quarter net loss attributable to the Company was $(3.8) million,
compared to $(2.1) million in the prior-year period, primarily as a
result of decreased revenue on lower enrollment and a $1.0 million
deferred tax asset valuation allowance, as well as increased
operating expenses related to educational services, a one-time loss
on lease termination of $0.4 million, and condominium
sales.
*
Balance sheet at
August 31, 2017, included cash and cash equivalents and investments
of $11.2 million, taxes receivable of $2.3 million, working capital
of $6.4 million; no outstanding lending debt; and
stockholders’ equity of $25.1 million, or approximately $1.04
per diluted share.
*
The Board of
Directors declared a cash dividend in the amount of $0.045 per
share on all shares of the Company’s common stock outstanding
and of record as of the close of business on September 30, 2017,
which will be paid on or about October 6, 2017.
Rapid City, South Dakota, September 27, 2017 — National
American University Holdings, Inc. (the “Company”)
(NASDAQ: NAUH), which through its wholly owned subsidiary
operates National American University (“NAU” or the “University”), a
regionally accredited, proprietary, multi-campus institution of
higher learning, today reported unaudited financial results for its
fiscal 2018 first quarter ended August 31, 2017.
Management Commentary
Ronald
L. Shape, Ed.D., President and Chief Executive Officer of the
Company, stated, “During the summer 2017 term, we continued
to see students take advantage of the NAU Tuition Advantage plan,
enrolling in more courses at a lower per-credit hour price point.
This had a positive impact on our top line, which offset the effect
the lower enrollment headcount would have had on the period. While
the summer term is generally impacted by seasonality due to the
timing of student vacations, the number of credit hours enrolled
was also affected by the discontinuation of certain programs in
certain locations. We continue to focus on our enrollment effort,
placing emphasis on retention initiatives, proactive student
support, and improved marketing programs, while continuing to work
with former students of recently closed institutions and
prospective students in Canada. We are also making progress on our
planned acquisition of the assets of Henley-Putnam University. We
expect this transaction to close in early 2018 as it is subject to
certain approvals by various regulatory and accrediting bodies,
including the Higher Learning Commission. We look forward to begin
offering programming in strategic security, intelligence and
counter-terrorism, areas that are seeing high job growth in
today’s economy.”
Dr.
Shape continued, “We continue to review areas throughout our
organization, seeking ways to improve profitability while remaining
committed to our core principles and leveraging our nationally
recognized brand. In addition, we continue to review our physical
footprint, taking a hard look at each location and whether students
find the on-ground resources valuable to their academic success. As
we complete this review, we will be able to determine how best to
achieve greater efficiencies across our system while still
providing students the resources they need and in the delivery
format they prefer. In recent years, we have made a concerted
effort to better align our expenses with revenue and enrollment
expectations while holding steadfast on our non-negotiables of
academic quality and student support. Our students are our no. 1
priority, and we are committed to ensuring any changes we make do
not impact the resources they need to achieve their academic
goals.”
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National
American University Holdings Inc.
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Page
2
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September
27, 2017
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Operating Review
Enrollment Update
Total
NAU student enrollment for the summer 2017 term was 5,917 students,
compared to 6,832 during the prior summer term. Students enrolled
in 54,951 credit hours compared to 57,841 credit hours during the
prior summer term. The current average
age of NAU’s students continues to be in the mid-30s, with
those seeking undergraduate degrees remaining the highest portion
of NAU’s student population.
The following is a summary of student enrollment at August 31,
2017, and August 31, 2016, by degree level and by instructional
delivery method:
|
|
August 31, 2017
(Summer ’17 Term)
|
August 31, 2016
(Summer ’16 Term)
|
||
|
|
No. of Students
|
% of Total
|
No. of Students
|
% of Total
|
|
Continuing
Ed
|
103
|
1.7%
|
254
|
3.7%
|
|
Doctoral
|
94
|
1.6%
|
80
|
1.2%
|
|
Graduate
|
384
|
6.5%
|
312
|
4.6%
|
|
Undergraduate
& Diploma
|
5,336
|
90.2%
|
6,186
|
90.5%
|
|
|
|
|
|
|
|
Total
|
5,917
|
100.0%
|
6,832
|
100.0%
|
|
|
|
|
|
|
|
|
No. of Credits
|
% of Total
|
No. of Credits
|
% of Total
|
|
On-Campus
|
9,323
|
17.0%
|
7,392
|
12.8%
|
|
Online
|
40,512
|
73.7%
|
45,542
|
78.7%
|
|
Hybrid
|
5,116
|
9.3%
|
4,907
|
8.5%
|
|
|
|
|
|
|
|
Total
|
54,951
|
100.0%
|
57,841
|
100.0%
|
Financial Review
The
Company, through its wholly owned subsidiary, operates in two
business segments: academics, which consists of NAU’s
undergraduate, graduate, and doctoral education programs and
contributes the primary portion of the Company’s revenue; and
ownership in and development of multiple apartments and condominium
complexes from which it derives sales and rental income. The real
estate operations generated approximately 2.8% of the
Company’s revenue for the quarter ended August 31,
2017.
Fiscal 2018 First Quarter Financial Results
●
Total revenue for
the FY 2018 first quarter was $19.8 million, compared to $21.1
million in the same period last year. Academic tuition revenue was
$18.2 million, compared to $19.4 million in the prior-year period.
Auxiliary (bookstore) revenue was $1.0 million for the FY 2018
first quarter, compared to $1.4 million in the prior-year period.
This decrease in academic revenue was primarily a result of a
decrease in enrollment, which was partially offset by the new NAU
Tuition Advantage plan that was approved by NAU’s board of
governors in November 2016 and became effective in March
2017.
●
For the FY 2018
first quarter, educational services expense was $6.9 million, or
35.9% of total academic segment revenue, compared to $6.5 million,
or 31.0%, for the FY 2017 first quarter. This percentage increase
was a result of fixed costs on a decreasing revenue base and
additional expense to launch new programs and transfer programs
from closing institutions.
Educational
services expense specifically relates to academics, and includes
salaries and benefits of faculty and academic administrators, costs
of educational supplies, faculty reference and support material and
related academic costs.
●
During the FY 2018
first quarter, SG&A expenses decreased to $15.5 million, or
78.3% of total revenue, from $16.5 million, or 78.0%, in the
prior-year period.
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National
American University Holdings Inc.
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Page
3
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September
27, 2017
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●
Loss before income
taxes and non-controlling interest for the FY 2018 first quarter
was $(4.1) million, compared to $(3.0) million in the same period
last year, primarily as a result of decreased revenue on lower
enrollment, as well as increased operating expenses related to
educational services, loss on lease termination, and condominium
sales.
●
Operating expense
was impacted by a one-time loss on lease termination of $0.4
million related to the payment to terminate the lease for the
Tigard, Oregon, campus. This campus closed in the third quarter of
FY 2017.
●
Net loss
attributable to the Company for the FY 2018 first quarter was
$(3.8) million, or ($0.16) per diluted share based on 24.2 million
shares outstanding, compared to net loss attributable to the
Company of $(2.1) million, or ($0.09) per diluted share based on
24.1 million shares outstanding, in the prior-year period, as a
result of the reasons mentioned above and a $1.0 million reduction
in benefit from income taxes.
●
During the FY 2018
first quarter, the Company recorded a $1.0 million valuation
allowance against its deferred tax assets, similar to the charge
taken during the FY 2017 third quarter. This non-cash charge,
reducing the benefit from income taxes, is a result of the
Company’s assessment of the realizability of its deferred tax
assets over a certain period of time. A primary factor in the
assessment is that the Company is in a cumulative loss position
over the three-year period ended August 31, 2017. This valuation
allowance can be reduced or reversed in the future as the Company
returns to profitability.
●
LBITDA for the FY
2018 first quarter were ($2.7) million, compared to LBITDA of
$(1.5) million in the prior-year period. A table reconciling
EBITDA/LBITDA to net income/loss can be found at the end of this
release.
Balance Sheet Highlights
|
(in millions except for percentages)
|
8/31/2017
|
5/31/2017
|
% Change
|
|
Cash
and Cash Equivalents/Investments
|
$11.2*
|
16.2
|
(30.7)%
|
|
Working
Capital
|
6.4
|
11.2
|
(43.5)%)
|
|
Other
Long-term Liabilities
|
3.3
|
4.0
|
(17.9)%
|
|
Stockholders’
Equity
|
25.1
|
29.9
|
(16.2)%
|
*Decrease
in cash was primarily the result of expenditures related to lease
terminations, operating loss, the dividend, and the construction of
Arrowhead Apartments.
Quarterly Dividend
The
Board of Directors declared a cash dividend in the amount of $0.045
per share on all shares of the Company’s common stock
outstanding and of record as of the close of business on September
30, 2017, which will be paid on or about October 6,
2017.
Conference Call Information
Management
will discuss these results in a conference call (with accompanying
presentation) on Thursday, September 28, 2017, at 11:00 a.m.
ET.
The
dial-in numbers are:
(877)
407-9078 (U.S.)
(201)
493-6745 (International)
Accompanying Slide Presentation and Webcast
The
Company will also have an accompanying slide presentation available
in PDF format at the “Investor Relations” section of
the NAU website at http://investors.national.edu.
The presentation will be made available 30 minutes prior to the
conference call. In addition, the call will be simultaneously
webcast over the Internet via the “Investor Relations”
section of the NAU website or by clicking on the conference call
link: http://national.equisolvewebcast.com/q1-2018.
About National American University Holdings, Inc.
National American University Holdings, Inc., through its wholly
owned subsidiary, operates National American University, a
regionally accredited, proprietary, multi-campus institution of
higher learning offering associate, bachelor’s,
master’s, and doctoral degree programs in technical and
professional disciplines. Accredited by the Higher Learning
Commission, NAU has been providing technical and professional
career education since 1941. NAU opened its first campus in Rapid
City, South Dakota, and has since grown to multiple locations
throughout the United States. In 1998, NAU began offering online
courses. Today, NAU offers degree programs in traditional, online,
and hybrid formats, which provide students increased flexibility to
take courses at times and places convenient to their busy
lifestyles.
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National
American University Holdings Inc.
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Page
4
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September
27, 2017
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Forward Looking Statements
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
regarding the Company's business. Statements made in this release,
other than those concerning historical financial information, may
be considered forward-looking statements, which speak only as of
the date of this release and are based on current beliefs and
expectations and involve a number of assumptions. These
forward-looking statements include outlooks or expectations for
earnings, revenue, expenses or other future financial or business
performance, strategies or expectations, or the impact of legal or
regulatory matters on business, results of operations or financial
condition. Specifically, forward-looking statements may include
statements relating to the future financial performance of the
Company; the ability to continue to receive Title IV funds; the
growth of the market for the Company’s services; expansion
plans and opportunities; consolidation in the market for the
Company’s services generally; and other statements preceded
by, followed by or that include the words “estimate,”
“plan,” “project,” “forecast,”
“intend,” “expect,”
“anticipate,” “believe,”
“seek,” “target” or similar expressions.
These forward-looking statements involve a number of known and
unknown risks and uncertainties or other assumptions that may cause
actual results or performance to be materially different from those
expressed or implied by those forward-looking statements. Other
factors that could cause the Company’s results to differ
materially from those contained in its forward-looking statements
are included under, among others, the heading “Risk
Factors” in the Company’s Annual Report on Form 10-K,
which the Company filed on August 4, 2017, and in its other filings
with the Securities and Exchange Commission. The Company assumes no
obligation to update the information contained in this
release.
Contact
Information:
National American University Holdings, Inc.
Dr.
Ronald Shape
605-721-5220
rshape@national.edu
Investor
Relations Counsel
The Equity Group Inc.
415-568-2255
csohn@equityny.com
Adam
Prior
212-836-9606
aprior@equityny.com
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National
American University Holdings Inc.
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Page
5
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September
27, 2017
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NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
|
|
|
|||
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
|
|||||
|
FOR THE THREE MONTHS ENDED AUGUST 31, 2017 AND 2016
|
|
|
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
August 31,
|
|
|
|
2017
|
2016
|
|
REVENUE:
|
|
|
|
Academic
revenue
|
$18,190
|
$19,438
|
|
Auxiliary
revenue
|
1,044
|
1,394
|
|
Rental
income — apartments
|
342
|
298
|
|
Condominium
sales
|
220
|
-
|
|
|
|
|
|
Total
revenue
|
19,796
|
21,130
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
Cost
of educational services
|
6,900
|
6,468
|
|
Selling,
general and administrative
|
15,508
|
16,482
|
|
Auxiliary
expense
|
741
|
1,049
|
|
Cost
of condominium sales
|
236
|
-
|
|
Loss
on lease termination
|
362
|
-
|
|
(Gain)
loss on disposition of property
|
(41)
|
6
|
|
|
|
|
|
Total
operating expenses
|
23,706
|
24,005
|
|
|
|
|
|
OPERATING
LOSS
|
(3,910)
|
(2,875)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
Interest
income
|
20
|
22
|
|
Interest
expense
|
(209)
|
(214)
|
|
Other
income — net
|
44
|
37
|
|
|
|
|
|
Total
other expense
|
(145)
|
(155)
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
(4,055)
|
(3,030)
|
|
|
|
|
|
INCOME
TAX BENEFIT
|
241
|
991
|
|
|
|
|
|
NET
LOSS
|
(3,814)
|
(2,039)
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
(14)
|
(17)
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO NATIONAL AMERICAN UNIVERSITY HOLDINGS,
INC. AND
|
|
|
|
SUBSIDIARIES
|
(3,828)
|
(2,056)
|
|
|
|
|
|
OTHER
COMPREHENSIVE (LOSS) INCOME, NET OF TAX
|
|
|
|
Unrealized
(losses) gains on investments, net of tax benefit
(expense)
|
(6)
|
4
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO NATIONAL AMERICAN
UNIVERSITY
|
|
|
|
HOLDINGS,
INC.
|
(3,834)
|
(2,052)
|
|
|
|
|
|
|
|
|
|
Basic
net loss per share attributable to National American University
Holdings, Inc.
|
$(0.16)
|
$(0.09)
|
|
Diluted
net loss per share attributable to National American University
Holdings, Inc.
|
$(0.16)
|
$(0.09)
|
|
Basic
weighted average shares outstanding
|
24,181,440
|
24,114,294
|
|
Diluted
weighted average shares outstanding
|
24,181,440
|
24,114,294
|
|
National
American University Holdings Inc.
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Page
6
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|
September
27, 2017
|
|
|
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
AS OF AUGUST 31, 2017 AND CONDENSED
|
|
|
|
|
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2017
|
|
|
|
|
(In thousands, except share and per share amounts)
|
|
|
|
|
|
August 31,
|
May 31,
|
|
|
2017
|
2017
|
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
and cash equivalents
|
$7,017
|
$11,974
|
|
Available
for sale investments
|
4,185
|
4,183
|
|
Student
receivables — net of allowance of $1,068 and $1,195 at August
31, 2017 and
|
|
|
|
May
31, 2017, respectively
|
3,336
|
2,895
|
|
Other
receivables
|
217
|
458
|
|
Income
taxes receivable
|
2,300
|
2,301
|
|
Prepaid
and other current assets
|
1,167
|
1,649
|
|
Total
current assets
|
18,222
|
23,460
|
|
Total
property and equipment - net
|
30,586
|
31,318
|
|
OTHER
ASSETS:
|
|
|
|
Condominium
inventory
|
385
|
621
|
|
Land
held for future development
|
229
|
229
|
|
Course
development — net of accumulated amortization of $3,388 and
$3,322 at
|
|
|
|
August
31, 2017 and May 31, 2017, respectively
|
1,114
|
1,111
|
|
Deferred
income taxes
|
47
|
-
|
|
Other
|
802
|
853
|
|
Total
other assets
|
2,577
|
2,814
|
|
TOTAL
|
$51,385
|
$57,592
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Current
portion of capital lease payable
|
$342
|
$331
|
|
Accounts
payable
|
3,098
|
3,076
|
|
Dividends
payable
|
1,097
|
1,094
|
|
Income
taxes payable
|
120
|
113
|
|
Deferred
income
|
1,884
|
1,691
|
|
Accrued
and other liabilities
|
5,323
|
5,906
|
|
Total
current liabilities
|
11,864
|
12,211
|
|
DEFERRED
INCOME TAXES
|
-
|
194
|
|
OTHER
LONG-TERM LIABILITIES
|
3,293
|
4,010
|
|
CAPITAL
LEASE PAYABLE, NET OF CURRENT PORTION
|
11,148
|
11,237
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
Common stock, $0.0001 par value (50,000,000 authorized;
28,568,855 issued and
|
|
|
|
24,232,895
outstanding as of August 31, 2017; 28,557,968 issued and
24,224,924
|
|
|
|
outstanding
as of May 31, 2017)
|
3
|
3
|
|
Additional
paid-in capital
|
59,117
|
59,060
|
|
(Accumulated
deficit) Retained earnings
|
(11,540)
|
(6,622)
|
|
Treasury
stock, at cost (4,335,960 shares at August 31, 2017 and
4,333,044
|
|
|
|
shares
at May 31, 2017)
|
(22,488)
|
(22,481)
|
|
Accumulated
other comprehensive loss, net of taxes - unrealized loss on
available
|
|
|
|
for
sale securities
|
(10)
|
(4)
|
|
Total
National American University Holdings, Inc. stockholders'
equity
|
25,082
|
29,956
|
|
Non-controlling
interest
|
(2)
|
(16)
|
|
Total
stockholders' equity
|
25,080
|
29,940
|
|
TOTAL
|
$51,385
|
$57,592
|
|
National
American University Holdings Inc.
|
Page
7
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|
September
27, 2017
|
|
The following table provides a reconciliation of net loss
attributable to the Company to EBITDA/LBITDA:
|
|
Three Months Ended August 31,
|
|
|
|
2017
|
2016
|
|
|
(dollars in thousands)
|
|
|
Net
(Loss) Attributable to the Company
|
$(3,828)
|
$(2,056)
|
|
Net
Income Attributable to Non-Controlling Interest
|
14
|
|
|
Interest
Income
|
(20)
|
|
|
Interest
Expense
|
209
|
|
|
Income
Taxes
|
(241)
|
|
|
Depreciation
and Amortization
|
1,206
|
|
|
|
|
|
|
(LBITDA)
|
$(2,660)
|
$(1,532)
|
EBITDA/LBITDA consists of income attributable to the Company, less
income from non-controlling interest, plus loss from
non-controlling interest, minus interest income, plus interest
expense (which is not related to any debt but to the accounting
required for the capital lease), plus income taxes, plus
depreciation and amortization. The Company uses EBITDA/LBITDA as a
measure of operating performance. However, EBITDA/LBITDA is not a
recognized measurement under U.S. generally accepted accounting
principles, or GAAP, and when analyzing its operating performance,
investors should use EBITDA/LBITDA in addition to, and not as an
alternative for, income as determined in accordance with GAAP.
Because not all companies use identical calculations, the
Company’s presentation of EBITDA/LBITDA may not be comparable
to similarly titled measures of other companies and is therefore
limited as a comparative measure. Furthermore, as an analytical
tool, EBITDA/LBITDA has additional limitations, including that (a)
it is not intended to be a measure of free cash flow, as it does
not consider certain cash requirements such as tax payments; (b) it
does not reflect changes in, or cash requirements for, its working
capital needs; and (c) although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized often
will have to be replaced in the future, and EBITDA/LBITDA does not
reflect any cash requirements for such replacements, or future
requirements for capital expenditures or contractual commitments.
To compensate for these limitations, the Company evaluates its
profitability by considering the economic effect of the excluded
expense items independently as well as in connection with its
analysis of cash flows from operations and through the use of other
financial measures.
The Company believes EBITDA/LBITDA is useful to an investor in
evaluating its operating performance because it is widely used to
measure a company’s operating performance without regard to
certain non-cash expenses (such as depreciation and amortization)
and expenses that are not reflective of its core operating results
over time. The Company believes EBITDA/LBITDA presents a meaningful
measure of corporate performance exclusive of its capital
structure, the method by which assets were acquired and non-cash
charges, and provides us with additional useful information to
measure its performance on a consistent basis, particularly with
respect to changes in performance from period to
period.