American Public Education, Inc. — Q1 2013 Form 10-Q
Business and period: The company provides online post-secondary education primarily to military and public-service communities through American Public University System. This unaudited report covers the three months ended March 31, 2013; comparisons are with Q1 2012 unless stated otherwise. Amounts are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2013 | Q1 2012 / comparator |
|---|---|---|
| Revenue | $83.8 million | $75.8 million; up 11% |
| Net income | $11.4 million | $9.1 million; up 25% |
| Diluted EPS | $0.63 | $0.50 |
| Operating margin | 21.7% | 19.5% |
| Net income margin | 13.6% | 11.9% |
| Net cash from operating activities | $20.6 million | $14.8 million |
| Capital expenditures | $5.9 million | $6.6 million |
| Cash and cash equivalents | $120.6 million at March 31 | $114.9 million at December 31, 2012 |
Net course registrations increased 9%. Revenue growth reflected more registrations and higher revenue per course following introduction of a technology fee. Costs and expenses rose 8% to $65.6 million; instructional costs fell as a share of revenue, while selling and promotional costs increased as a share. Cash increased $5.6 million during the quarter. Current assets were $143.3 million and current liabilities $56.0 million at quarter-end. The filing reports no borrowings or debt balance; it does report a $6.0 million subordinated note receivable from New Horizons.
Investing cash outflow was $10.0 million, including a $4.0 million preferred-stock investment in Fidelis Education. Financing cash outflow was $4.9 million, including $5.0 million of common-stock repurchases. The company had $18.0 million of remaining authorization under its repurchase program at March 31.
Changes, outlook and risks
- Management stated that DoD tuition-assistance enrollments were suspended by the armed services in March 2013 in response to federal spending sequestration and reinstated in April. The temporary suspension is expected to reduce Q2 enrollments versus expectations. Future funding, benefit levels, or program participation remain uncertain and could materially affect results.
- The company planned to replace Global Financial Aid Services with an internal Title IV administration solution, mainly during Q2. Management anticipated an approximately one-week processing delay, which could defer or cause the loss of some registrations in Q3.
- About 39% of Q1 2013 revenue came from students receiving DoD tuition assistance, 15% from students eligible for veterans benefits, and 35% from students using Title IV aid. Changes to these programs could have a significant impact.
- Management believed cash, operating cash flow, and other liquidity sources would fund operations and planned capital spending for the foreseeable future. No formal financial guidance was provided in the filing.
- The company may continue strategic education-sector investments and could incur higher future capital expenditures for facilities. It reported no material pending legal proceedings and no material changes to contractual commitments outside the ordinary course.
Key investor verification points
- Track the effect of the DoD tuition-assistance suspension and reinstatement on enrollment, revenue, and subsequent quarters.
- Verify whether the Title IV processing transition caused delays or lost registrations and whether the internal system operated effectively.
- Monitor dependence on DoD assistance, veterans benefits, and Title IV funding, as well as changes to eligibility or program funding.
- Assess returns and credit exposure from the Fidelis Education investment and the $6.0 million subordinated New Horizons note.
- Review ongoing share repurchases, capital spending, and cash generation against liquidity and growth plans.