Strayer Education Q4 2008 Earnings Call Transcript

Feb.12.09 | About: Strayer Education, (STRA)

Strayer Education, Inc. (NASDAQ:STRA)

Q4 2008 Earnings Call

February 12, 2009 10:00 AM ET

Executives

Sonya G. Udler - Senior Vice President, Corporate Communications

Robert S. Silberman - Chairman and Chief Executive Officer

Mark C. Brown - Executive Vice President and Chief Financial Officer

Analysts

Brandon Dobell - William Blair & Company

Kevin Dorothy - Banc of America

Gary Bisbe - Barclay's Capital

Andrew Fones - UBS

Susie Stein - Morgan Stanley

Mark Marostica - Piper Jaffray

Jerry Herman - Stifel Nicolaus

Andrew Steinerman - J.P. Morgan

Kelly Flynn - Credit Suisse

Cory Greendale - First Analysis

Gordon Lasik - Robert W. Baird

Trace Urdan - Signal Hill Group

Ethan Steinberg - Friess Associates

Todd Young - Morningstar

Operator

Good morning everyone and welcome to Strayer Education Incorporated Fourth Quarter full Year 2008 Earnings Results Conference Call. This call is being recorded. Following today's call, we will offer the opportunity for questions and answers.

At this time, for opening remarks and introductions, I would like to turn the call over to Strayer Education's Senior Vice President of Corporate Communications, Ms. Sonya Udler. Ms. Udler, please go ahead ma'am.

Sonya G. Udler

Good morning. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education, and Mark Brown, Executive Vice President and Chief Financial Officer. For those of you that wish to listen to the conference via the internet, please to go to strayereducation.com where the call will be archived for 90 days.

If you are unable to listen to the call in real time, a replay will be available beginning today at 1 PM Eastern Time, through Tuesday February 17. The replay is available at 888-203-1112, passcode 4098443.

Following Strayer's remarks, we will open the call for questions and answers.

Please note that today's press release contains statements that are forward-looking and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act. The statements are based on the company's current expectations and are subject to a number of uncertainties and risks that the company has identified in the press release, and could cause the company's actual results to differ materially.

Further information about these and other relevant uncertainties, maybe found in the company's annual report on Form 10-K and its other filings with the Securities and Exchange Commission.

And now, I'd like to turn the call over to Rob. Rob, please go ahead.

Robert S. Silberman

Thank you Sonya, and good morning ladies and gentlemen. As is our custom; I'd like to begin this morning with a brief overview of both our company and our business model for any listeners who are new to Strayer. I'll then ask Mark to report on the detailed financial results for the fourth quarter and the full year 2008. After which I'll comment on our enrollment results for the 2009 winter academic term. And I'd like to provide an update on our growth strategies and finally end up with the company's earnings outlook for Q1 2009.

Strayer Education, Inc. is an education service company whose primary asset is Strayer University, a 115 year old, 45,000 students, 64 campus, post-secondary education institution, which offers associates Bachelor's and Master's degrees in Business Administration, Accounting, Computer Science, Public Administration and Education.

Strayer students are working adults who are returning to school to further their careers. Our revenue comes from tuition payments and associated fees. Approximately 70% of our revenue comes to us from federally insured Title IV loans issued to our students.

Our expenses at Strayer Education include the cost of our professors, our admissions and administrative staff, marketing expenses, and facilities and supplies costs. We search students in 15 states through our physical campuses, as well as in all 50 states and over 30 foreign countries through our online courses.

Strayer University is accredited by the Middle States Association of Colleges and Schools.

Mark, do you want to run through the financials?

Mark C. Brown

Sure. Revenues for the three months ended December 31, 2008, increased 28% to $114.3 million compared $89.1 million for the same period in '07, due to the increased enrollment and a 5% tuition increase which commenced in January of '08.

Income from operations was $39.4 million compared to $29.2 million for the same period in '07, an increase of 35%.

Operating income margin was 34.5% compared to 32.8% in '07. Net income was $24.2 million compare to $19.5 million for the same period in '07, an increase of 24%.

Diluted earnings per share was $1.71 compared to $1.34 for the same period in '07, an increase of 28%. Diluted weighted average shares outstanding decreased to 14,143,000 from 14,536,000 for the same period in '07. Revenues for the year ended December 31, 2008, increased 25% to $396.3 million compared to $318 million for the same period in '07, due to increased enrolment and a 5% tuition increase effective for 2008.

Income from operations was $126.9 million compared to $97.6 million for the same period in '07, an increase of 30%. Operating income margin was 32% compared to 30.7% in 2007. Net income was $80.8 million compared to $64.9 million in 2007, an increase of 24%. Diluted earnings per share was $5.67 compared to $4.47 in '07, an increase of 27%. Diluted weighted average shares outstanding decreased to 14,242,000 from 14,517,000 in '07.

At December 31, 2008, the company had cash, cash equivalents and marketable securities of a $107 million and no debt. The company reported cash from operating activities of $88.6 million in 2008 compared to $80.8 million in 2007.

However, the company's reported cash from operations for the year ended December 31, 2008, was negatively affected by the timing of divesting of restricted stock in the fourth quarter of 2008. That negative timing effect related to a $13 million tax benefit we reversed itself in the first quarter of 2009.

Capital expenditures in 2008 where $20.7 million compared to $14.9 million in 2007.

During the fourth quarter of '08, the company invested $29.9 million to repurchase 138,100 shares of stock at an average price of $216.21 per share, as a part of our previously announced stock repurchase authorization.

During the year ended December 31, 2008, the company invested $109.1 million to repurchase approximately 603,0400 shares of common stock at an average price of $180.86 per share.

During the year ended December 31, 2008, the company paid regular quarterly dividends of $23.1 million and a special dividend of $28.9 million. The company also received $10.6 million upon the exercise of stock options.

For the fourth quarter of 2008, bad debt expense as a percentage of revenues was 3.8% compared to 3.6% for the same period in '07. Days sales outstanding adjusted to exclude tuition receivables related to future quarters, was 14 days at the end of the fourth quarter of '08 compared to 12 days at the of fourth quarter of '07.

Rob?

Robert S. Silberman

Thanks Mark. Just a few amplifying comments on the financials from my perspective. For the fourth quarter, our revenue growth of 28% was right on our model. We previously had reported enrollment growth for the fall term of just under 24% and our 5% tuition increase, along with the relatively stable mix of graduate and undergraduate students in the quarter versus the same quarter the previous year, lead to an additional 450 basis points of revenue growth.

So, that was almost exactly were Mark and I had predicted.

On the expenses, we were also just about right on budget for the quarter. Our bad debt expense was up slightly at 3.8%, but the kind of key thinks was not withstanding the operating losses that we incurred in opening nine new campuses in 2008. We did achieve about a 170 basis points of margin expansion in the quarter and that was as we discussed in October, based on the very high enrollment growth and revenue growth, which fell to the bottom line in the fourth quarter.

Now as Mark did predict, we ended up with significantly lower yields on our cash holdings versus the prior year, which led to lower investment income and a higher effective tax rate and that's something I am going to comeback to you and talk about the first quarter of '09 as well.

Couple of points on the full year results; first on the income statement in 2008, again, 20% average enrollment growth led to 25% revenue growth, 140 basis points in margin expansion, $5.67 per share of earnings which is up 27% versus the previous year.

What I take from all of that is the relationship between our enrollment growth, our revenue growth, our operating margin, our new campus openings, and ultimately our earnings per share during the year, were all consistent with financial model that Mark and I developed, and that we've communicated with you all over the last several years.

So everything basically was right down the glide slope on that. On cash flow, owners' distributable cash was up 23% for the year, roughly equal to the 24% increase in net income. Again, we calculate owners' distributable cash as to catch the after-tax cash generated from the operations of the business, minus all of the investment dollars necessary to both maintain the business and grow it. And we'd like that to be roughly equal to our net income.

During the year as Mark mentioned, we generated actually $101 million in cash from operations after you adjust for the timing issue that he described. We also received approximately $16 million in cash proceeds and tax benefits from stock-based compensation transactions.

So, basically the pool that we had was $117 million. We also used during the year about $64 million of cash on our balance sheet at the end of 2007.

And we invested all that money as follows: We invested $20 million in CapEx to maintaining growth at Strayer University; we invested $109 million as Mark said for the year in repurchasing common shares; and we returned $52 million to our owners in dividends or roughly $3.50 a share between the common and the special dividend.

So we continued in 2008 to be both a fairly efficient generator and user of cash, but more importantly again, all the operational and financial indices for the year moved in relative harmony with where we would expect them to given the labors that we control.

Turning to the winter term enrollment results; we had a pretty strong quarter. The total University enrollment increased 22% on year-over-year basis. I noticed that one of the analyst, I am sure innocently and inadvertently he had that number at 20% however I assure you its 22%, it's in the release, that's up from 16% for the same quarter last year.

Our strong fall enrollment clearly helped us in the winter quarter and our continuing student enrollments were up a little over 23%. Our new student growth was up 20% versus the prior year.

With regard to student mix, Business Administration, Accounting, Economics Degree seekers, sort of our core subject matter areas, that make up about 70% of our student body for the winter term.

With Computer Science should be (ph) candidates at about 20% the total student population. The graduate population in all areas is relatively stable at about 30% of our student mix in the quarter.

Turning to an update on the growth strategy; just real quickly, many of you remember that our strategy is based on five objectives.

The first is to maintain enrollment in the company's mature markets. Second is to accelerate rate of growth of new campuses, particularly into new states. Third, is to invest in and build-up our online offerings. Fourth, increase our corporate and institutional alliances, and the final objective is to effectively redeploy our owners' capital either within or out of the business.

On our first objective for the winter-term, we were pretty well ahead of the target of our mature campuses. I think it's far ahead as we've been ever showing 10% growth. With regard to new campus activity, for the winter-term we opened one campus each in two new markets for us, Augusta, Georgia and Huntsville, Alabama.

We also announced our intention to open three campuses in our spring academic term, these are all being new markets, and they include Allentown, Pennsylvania; Charleston, West Virginia; and Salt Lake City, Utah.

In the global online unit, a pretty healthy quarter again. The growth rate was 47%.

On capital redeployment, we announced this morning our regular quarterly dividend of $0.50 per share, and we also announced that we have repurchased approximately $30 million of our common stock during the fourth quarter of 2008.

So, we very rigorously continue to look at that fifth leg of our strategy and make sure we are doing it efficiently.

On the business outlook for the first quarter of 2009, University's 22% enrollment growth for the winter term will almost completely offset the increased expenses associated with the openings of our new campuses and the opening of our second online operation center. So we actually expect roughly flat operating margins in the first quarter. And with that 22% enrolment growth, we would expect 25 to 26% revenue and operating income growth.

We do however expect again in the first quarter significantly lower investment income versus the prior year. That's really for two reasons: One, yields are down about 300 basis points, right?

Mark C. Brown

Right

Robert S. Silberman

...75%. And we also had a gain on a sale of a financial asset in the first quarter of last year which was about...

Mark C. Brown

800,000 in terms of the gain.

Robert S. Silberman

... we rolled out of the short-term bond fund and into that, yeah. So, again, that comparison will be rather stark. The... what that does is since our actually incremental tax rate of our operating income is about 39.5%, it won't be offset by as much non-taxable or tax exempted investment income, and so again we expect to see our tax rate up significantly on a year-over-year basis, probably a couple of 100 basis points there as well.

So, that will drive EPS in the quarter in the sort of $1.96 to $1.98 range. And I suspect again as long as we're matching sort of the first half of last year before the interest rates really came down we are going have that impact both on investment income and tax rates.

And with that operator, we'd be pleased to answer any questions. However, since we were unfairly accused of cutting off Brandon Dobell before he could ask a question on last quarter's call, I think it's more likely Mark, he just couldn't use the touch tone pad on his phone.

We'd like the first question operator that go to Mr. Dobell if he is listening.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). And for our first question, we will go to Brandon Dobell with William Blair.

Brandon Dobell - William Blair & Company

That's like being called out on conference call. But I really appreciate that's great. Thanks for...

Robert Silberman

You're welcome.

Brandon Dobell - William Blair & Company

I am not sure if it was bad fingers last time, but I think it not a lot of worst, but let us go with that. So, first off I'll throw you the obvious soft ball which is corporate reimbursement, and two parts there. One; if you've seen any impact on just the number of companies you are dealing with, on kind of an on going basis? And second; if there is any impact are you seeing that flow through in to how students are reacting to it? Are they changing their behavior with you in terms of more or less courses pulling out, does it in batch and re-catching those kinds of things?

Robert Silberman

Well, in the quarter, for our winter term enrollment, we actually had a higher rate of growth among our corporate alliance partners and we did overall. I mean that rate I forget exactly what it was, I think it was like 24, 25% versus 22% enrollment growth. So, we certainly haven't seen any negative impact in totality. We have more alliance partners. We haven't had any partners who have said that they wanted to limit or pull out of the program.

I mean it's a topic of great concern and focus, and all I can tell you is that, it's going fine for us. It's going great for us. I do know of one partner, who was involved with a merger. They had a... prior to the merger, had a tuition reimbursement amount per student which was well in excess of the IRS limit. I think it was $8,000 per year.

The entity they merged with, with that the IRS limit was, I think was about $5500 and that one entity as it rationalized, lowered its tuition coverage. But that is literally the only specific impact that I'm aware of and in terms of the overall support of the growth of the University, it couldn't be better.

Brandon Dobell - William Blair & Company

Do you think, this is an issue for students or this is an issue for us, right now?

Robert Silberman

It isn't an issue for our students, Brandon. I would never pretty supposed the judge the question you guys are asking. I can just answer it. It's not an issue for our students.

Brandon Dobell - William Blair & Company

That's fair. As you look at the sources of your students, you talked about the corporate alliances. From the community college perspective, how the conversations going with the people that you talk to on the academic side? Would you expect just giving all the things we heard about, burdening community college enrollments. Would you expect to see a long tail on that matriculation opportunity for you or is it difficult to tell right now kind of overlay in this over unemployment process?

Robert Silberman

Well I think it's a long tale for us even without regard to the current economic situation. We think that our alliances to the community colleges is just a really important part of our growth strategy and more importantly academically than operationally or financially. There are students they come to us graduating from community colleges to just have a higher rate of academic success.

And so we are really excited about those relationships. My conversations with community college representatives over the last three months has suggested they are somewhat concerned about funding. They have clearly seeing an increase in enrollment and so that they have an increase in enrollment and a pressure on the funding side due to state tax receipts. They get caught in kind of a squeeze play there and we are trying to be as helpful as we can in those circumstances.

But we are pretty excited about that. That's a really valuable part of our business. Again, mainly because of the strength it gives us on academic performance.

Brandon Dobell - William Blair & Company

As you look across the different types of students, either by degree or by program, any changes in the number of courses that students are taking or kind of their behavior around, how quickly they expect to progress through a degree?

Robert Silberman

You'd would see that, the answer is no Brandon.

Brandon Dobell - William Blair & Company

Right.

Robert Silberman

You could see that in our revenue numbers. They are taking less courses, you get less revenue growth on top of your enrollment growth.

Brandon Dobell - William Blair & Company

Right.

Robert Silberman

And that's why I was talking about with regard to both the fourth quarter and the full year, all of those indices were right down the glide slope path that we have projected.

Brandon Dobell - William Blair & Company

Okay. Then final question for as you look out on the lease rolls you have on our campus locations, any significant changes in terms of how you view the rent expense? I know commercial real estates are in a lot of pressure, so do you see opportunities to lower your cost base with those locations or it does not make too much of a difference?

Robert Silberman

Well, there is certainly that opportunity. Although our lease costs are such a small percentage of our expense anyway I don't think it has really meaningful impact on our bottom line. But one thing that I think is a legitimate issue is that, we have talking about internally is that, our model is not to own real estate. However, if there aren't a lot of developers, people around who have access to credit, and who can provide the product that we need where we need it, it certainly is the relative returns on ...real estate investment go up for us because we have capital and nobody else does and we would certainly look at that mainly from the standpoint of making sure that we have that physical product that we needed where we needed it.

But right now, it's, we haven't seen that sort of long term planning around very negative scenarios with regard to the economy. But as of now, it's actually been quite healthy for us.

Brandon Dobell - William Blair & Company

So, we shouldn't expect the campuses if you plan to open in the next 12 months or so to change from a leased model to an owned model for the longer-term opportunity for you.

Robert Silberman

Correct.

Robert Silberman

Okay, great. Thanks a lot and I look forward to being the last in the queue next time.

Robert Silberman

You are welcome Brandon.

Brandon Dobell - William Blair & Company

Thanks.

Operator

And for our next question we go to Kevin Dorothy with Bank of America.

Kevin Dorothy - Banc of America

Thanks guys. Just had a question on the online operation center, just wondered if you can talk a little more about the timing of the investment there. I know you gave some guidance on the margins for 1Q but how should we think about the investment maybe from 1Q to 2Q as we think about the margin trajectory, going forward?

Robert Silberman

It has some impact in Q1. It has a lot of negative impact in Q2. It will have ...that's probably the peak in terms of negative impact. If we are enrolling students for our summer term, it's not quite clear that we will be able to do that. We'll know later on in the year. But we may have some revenue for Q3 which mitigate a little bit of the losses and then we would expect it to trail off in Q4 and then hopefully breakeven in 2010.

Kevin Dorothy - Banc of America

Okay. And how do we think I guess just about the returns of that new center? I know there is going be a campus out there as well, but just in terms of how you'll utilize that increased capacity for the global online versus the existing center you have right now?

Robert Silberman

Well it will be additive. And so when we think about returns, I think we talked about it in the last call, Mark and I sort of see this as the equivalent of five campuses. And we expect them to operate, we expect it to operate like our campuses. So if we get a 70% un-levered return opening a new campus, that's ultimately what we'd expect to see on this unit as well. But it will be 70% of a five times larger investment.

Kevin Dorothy - Banc of America

Right. Presumably there'll be a different ramp up in what you would have hoping in an ongoing campus then?

Robert Silberman

Not too significantly actually. The ramp that we have on both the campuses and that we have in an online operation centre, is really dictated by the rate at which we can provide the academic personnel to support the expansion, to make sure that we have reasonable class sizes and adequate student learning outcomes.

Its not really constrained by the demand side. That's never really been an issue for us. So I actually do expect it to have a similar ramp rate as we do existing campus. Our existing global operation centre which serves about 5,000 students, we started it about eight years ago. And that's ...so it's kind of five times a campus size and has ramped at about the rate that a campus, we respect campus to in.

Kevin Dorothy - Banc of America

Okay, that's fair. And just thinking about some of the margin leverage in the core business, where do you guys stand in terms of your professors staffing levels and some of the other support staff and should we expect any accelerated hiring just to support the growing enrollment base?

Robert Silberman

You should expect accelerated hiring but that's in the, that's baked into the model that we laid out for the year. And so, nothing...there is no change to what we talked about in October.

Kevin Dorothy - Banc of America

But I guess if enrollment would come in a little better than expected there shouldn't really be any incremental hiring now?

Robert Silberman

No because... when the enrollment comes in a few percentage points variation up or down, we just absorb within our classes. And it has to be markedly above that in order for us to have to go back to well and hire a lot more faculty and deans. And so, within the normal variation, that's ...I don't see that is having that big impact on our hiring expense.

Kevin Dorothy - Banc of America

Okay. I'll jump back in the queue, thanks guys.

Robert Silberman

Thank you.

Operator

For our next question we go to Gary Bisbe with Barclays capital.

Gary Bisbe - Barclay's Capital

Hey guys good morning.

Robert Silberman

Hey Gary.

Gary Bisbe - Barclay's Capital

I guess a couple of questions, first of all it seems to me that over the last couple of quarters and the ones opening for the spring, you've being going into a bit smaller markets and less doubling up on more campuses in the larger market. Is there anything we should read into that or is that just the way it goes and you're probably having the drawing broad some other larger markets in the next few quarters at some point?

Robert Silberman

There is nothing to read into it. It is the way just the way it goes as you put it. Although, I did say in October that a higher percentage of our investments this year in new campuses will be in brand new markets for us.

Now, some of those brand new markets in the latter half of the year are likely to be in big metropolitan areas. But, we've got a lot of untapped opportunity in front of us and were we take advantage of that. It tends to be sort of a surge in one direction and then a little bit of surge in another. A couple of years ago we did a lot of doubling up in big markets. This year there is very little of that.

We'll sit down and plan 2010 and then in four or five months and we'll just look at a little bit of squeaky wheel kind of analysis of where do we really need to put these, the scarce resources, not the financial capital, we've got plenty of that, it's the human capital to staff these facilities.

Gary Bisbe - Barclay's Capital

Do you see any different performance, the much bigger markets versus the smaller ones or is it, is the model hold pretty similar all things considered?

Robert Silberman

No. The amplitude is certainly... there is different performance but it can be... there are other things that affect the difference beyond just the size of the market that can completely offset the size of the market.

All other things being equal, a third or fourth or fifth campus in a large market is going to perform slightly better than a brand new campus and a brand a new market. But we've certainly had brand new campuses and brand new markets that have outperformed any of our previous openings. If you get the right combination of dean and director and faculty there. And so it really doesn't go a lot in to our strategic planning as to which of these, where we decide put these units.

And all of the results are within, as I said a variation on amplitude to mark and are quite comfortable with it. It doesn't change our view as to how many of these we'll try and open.

Gary Bisbe - Barclay's Capital

Okay. And then just on... it seems like the state schools were seeing more and more documented evidence that they having a real hard time on the funding. Do you change how you market, you're trying to compete with the part-time programs with some of the larger state schools in some of your markets based on the economy or is it pretty much doing what you've always done? And, I know you've been gaining share and will keep doing it. I'm wondering if there is opportunity, based for the question?

Robert Silberman

Well, the short answer is, no. We don't change on the basis of that. I mean, our marketing is really based on trying to slowly build a brand and an academic reputation in a market. And it's less affected by shorter-term and transitory phenomenon like this.

More importantly, we want to be a supportive and integrated part of the educational community, any market that we're in. So we're really not trying to go in and talk about taking market share or competitive marketing from that standpoint.

There is an awful lot of students out there, Gary, I mean it's just, demand has not ever been the issue for us. So it's just not the kind of thing we really focus on.

Gary Bisbe - Barclay's Capital

Okay. And it seems like some of your competitors have got pricing similar to yours in the lower end, relative to lot of the fore profit... other fore profits out there have gotten a real good benefit from the loan increases last summer, having reduced to what were small, but I guess in this economy important funding gaps that students had away from the government loans.

Does that had a big impact on your Bachelor Degree completion program or is...I don't know I am trying to decide if growth has accelerated a little bit the last couple quarters if that might be part of the formula? Or if you don't really think that's been a big contributor. Because it seems to me you don't get a huge benefit from the economy but maybe that is a significant thing to happen?

Robert Silberman

I don't think that that is particularly significant. And we didn't much have of the GAAP before the increase. So it wouldn't have had as much of an impact on us. The other thing that we've been quite adamant about is we wouldn't use an increase in funding to affect our tuition policy. We are not going to increase our tuition to basically sort that up. It just seems like a bad business strategy. I mean our tuition is based on what we think is the value proposition for the student and more credit available to the student doesn't change that value proposition.

And so, we would never take advantage of that, suck more profit out of the individual student. The... I think that over the last couple of quarters, maybe going back six quarters or so, there was a couple of things going on, one is; we are in the midst of a very aggressive capital expansion strategy. And we're opening a lot of new campuses.

We are also getting a significant benefit, in that our brand in some of our mature markets is really starting to have some impact. As I mentioned, our 10% growth in our mature markets, that includes that markets now like Rowley and Charlotte, and North Virginia, and even Atlanta and Philadelphia. Whereas before, a couple of years ago, our only mature market was Washington DC, where we were already at sort of peak efficiency.

So you are seeing that brand really build in some of these markets and that is clearly helping us in terms of our performance.

And then finally, I don't think we're counter cyclical. I don't think that we get any structural long-term benefit from the economy being down. But it surely doesn't hurt us. And maybe a touch of... what does help us is, what drives that working adult to go back to school is a sense of economic insecurity. And there is clearly been a lot of that over the last 12 to 18 months.

And so, that has not ...it certainly hasn't hurt. So all that together I think is responsible for very efficient performance over the last nearly 18 months.

Gary Bisbe - Barclay's Capital

Okay and then just one last one. You are not seeing any real big trend in terms of an increase in withdrawals based on people not wanting to take on a loan?

Robert Silberman

That's I am not seen a trend. I am not seeing it at all. It's not happening. It's not evident in our results.

Gary Bisbe - Barclay's Capital

Great. Glad to hear it, thanks.

Robert Silberman

Thank you, Gary.

Operator

And we go next to Andrew Fones with UBS.

Andrew Fones - UBS

Yes hi, thank you. I was looking at the year-over-year growth trend in your revenue. Which is obviously, we've seen some acceleration here, this year versus instructional costs which have remained kind of fairly steady. And you are now seeing about and over the last two quarters, you've seen about an 800 basis point differential there.

Is there anything you would point to that you think has driven that difference? I guess looking back to over the last few years have been a much narrower differential there, perhaps said in other way, is there anything you're seeing that's limiting your gross profit to a high 80, 68% type level? Thanks.

Robert Silberman

Sure, let me take in a reverse order. I do think there is a limit on where our operating margins will go. If we stopped opening new units, it would go up significantly. And as much of the operating margin diminution is related to the losses associated with new units. So if we weren't doing that, I mean if you calculate it, it would go up, I don't know, 500 to 600 basis points.

But above that, we think it there is a cost to providing high quality education. And we certainly do not think of these organizations as sort of infinite margin expansion machines. It's not like you are selling software. And I don't know exactly where that number is, if you not in a growth mode, somewhere in the high 30s, low 40s. But that's where it would...when we stop growing, that's where we will rise to and then settle out.

The first part of your question with regard to last couple of quarters on the INE line is that we've had faster than expected growth in a lot of the new campuses that we opened last year 2008, and in 2007.

What that means is, we are normally in a brand new campus, we might have a bunch of classes that have two or three people in them and one professor, which is just the nature of sort of slowly building the brand in that market. If the performance is quicker than that and you have more students, that's where you'll see that margin expansion. That's a better way to put it. That's where you'll a less of a margin contraction and then as the rest of our business grows, that has that positive impact.

So, it is something that we've noticed. We're keeping a careful eye on. It's not associated with anything that can go on forever but it is a nice benefit at least in the short-term, if you are really focused on the kind of short term results.

Andrew Fones - UBS

Okay thanks. And then, on G&A, obviously in terms of year-over-year growth, you saw a significant step up there, was there anything kind of one time in nature you would point to in terms of G&A spending in the fourth quarter? Obviously, we know that you are ramping up a new service centre, is that way some of that spending is going it was that part for the close or how we should be thinking about that?

Robert Silberman

The new online operation center was actually kind of spread through all three categories. Probably the biggest impact on increase in G&A is something that I hope is one time but I don't know and that's the increase in bad debt. Bad debt's up about 20 basis points. It was up, 20 some basis points the quarter before. But that's something we are trying to manage very carefully.

Andrew Fones - UBS

Okay, thanks.

Robert Silberman

Thank you, Andrew.

Operator

We go next to Mark ...I do apologize; we go next to Susie Stein with Morgan Stanley.

Susie Stein - Morgan Stanley

Hi.

Robert Silberman

Hi Suzie.

Susie Stein - Morgan Stanley

Just following up on the bad debt issue, what are you doing to bring down the bad debt? I know in the past you've always said there is kind of some deal level of bad debt, what would you say at this point in time would be a better level for you of bad debt?

Robert Silberman

Well, I mean ideal level would be zero obviously, which we could do easily. The way this business works is, in most cases you are paid before the, guess you provide the service, so if you are unwilling to extend any kind of trade credit if you will, if you're unwilling to let a student enroll, if a 100% of their tuition isn't paid at the start of the quarter, you could easily make bad debt zero.

Our view has been because we only have four academic starts per year, we like to give our campus Directors and Deans some authority to essentially extend some forbearance or credit because for if whatever reason the student hasn't clear their Title IV application, they don't have an evidence of corporate alliance partnership, if they are a self payer, they just don't have the capital available, at some minor level, we give this authority to our campus leadership to go ahead and enroll the student, so that they don't have to wait 3.5 months till the next term starts.

Our focus on the bad debt expense is really less of a financial concern, because now these you could probably run this business at a much higher level of bad debt and still be more profitable. Because your revenue growth is associated with that, would be foreign excess to the bad debt expense that you bring in and it would all fall to the bottom-line.

The reason we don't do that is we find there is a very high correlation among our students, between those students who are not performing academically and those who don't pay. And so, one way to try and control for academic quality in an open access university is to work around, and then to see like the bad debt expense.

The actual number is less important to Mark and Karl and I and Dr. Stallard our President, then the rate of change. Anytime we see bad debt expense growing at a significantly faster rate than our revenue or enrolment that need to be have a cultural concern, are we trying too hard, are we getting the students who may not belong in the class room and trying too hard to get in there.

And that's when we tend to pull those authorities away from the campus leadership and it always gets under control. Because it easy to have solve to zero. But we try and not do it that drastically because we think it would be at disservice to students who deserve the opportunity for credit and those of are campus leadership teams that do as good job with it.

So we tend to manage it on a case by case basis, keep very careful track of its rate of change. This rate of change was not particularly concerning to me. There's been a couple of times in the past where its been much higher and more a rough rate of change relative to our revenue growth and in those cases we've talked, we've gone in and just pulled those authorities away completely and that it always comes back down.

We are not doing that right now. We think where the management criteria that we have in place is sufficient. We'll watch it closely. And we are not ignorant of potential impact of the economy on these indices, but for now I'd say we are fairly comfortable with it.

Susie Stein - Morgan Stanley

Okay. And than just a follow up on the corporate partners. If you took ...I know you won't comment specifically on what you are seeing with individual partners. But if you took them and put them lets say in to two groups, the one group that is experiencing difficulty because of the economy and announcing layoffs and then maybe the other group. Are you seeing any change in behavior of...in terms of enrollments from the ones that are announcing layoffs?

Robert Silberman

No. no, we have a number that have a lot announced significant layoffs that we have increased student population for them.

Susie Stein - Morgan Stanley

Okay. And what's been the behavior of student lets say laid-off that are receiving corporate reimbursement? I mean how's that handled and if you could put a percentage on the number that ...staying versus the number dropping. What are they?

Robert Silberman

Honestly Suzie, the number is not large enough for me to have...I mean I don't know of any. Do you know of any Mark?

Mark Brown

No.

Susie Stein - Morgan Stanley

Right.

Robert Silberman

I mean I think practically the answer would be that is they are interested in continuing their education and the corporation didn't extend benefits, they would have access to the Title IV funds. But, we just don't have it. I mean literally I don't know of any.

Susie Stein - Morgan Stanley

Okay, great. Thank you.

Robert Silberman

Thank you, Susie.

Operator

We go next to Mark Marostica with Piper Jaffray.

Mark Marostica - Piper Jaffray

Thank you. First question I have is in regards to your second global online operation center and I wonder if you could help us characterize the transition risk as you move to having two of these centers, is there are there any risk that you are concerned about as you open that new center?

Robert Silberman

Well, of our expansion entails risk and its less risk associated with the business operations of either the campuses or the center, because those are pretty easy to control and more risk associated with your academic oversight. I don't see anything, since our online... the students that these campuses... this unit will be serving are, by definition already just aggregated, they are already all over the world. We've absorbed that risk with our online academic oversight.

And so, I don't see it as either significant or different from any of the expansion risk that we've entail with anything that we are doing.

Mark Marostica - Piper Jaffray

Fair enough. And Rob, in the past you have given some commentary around student retention or persistence in the quarter. Can you give you us the metrics for this winter term?

Robert Silberman

Yes, it was basically flat. We had about 23% enrollment growth in the fall term; a little over by 23.5% and our continuing student population was up about 23.5%. So, we've reached a very high level of efficiency with regard to retention. If you get the exact number in the quarter, Mark it was like 82% or something?

Mark Brown

Yeah.

Robert Silberman

And that's inclusive of graduations and academic failures and things that happen to people in life. So, I don't expect that to be significantly higher. What we want to do is keep it at this level and then make sure that the students that we bring in as new students progress through the program and graduate.

Mark Marostica - Piper Jaffray

Your mix of business accounting and economic students has stayed relatively flattish over the last several quarters. And trying to line that up with commentary from one of the other publicly traded peers in the group, that business was a little bit softer than this company had expected or compared to some of the other areas. As I am curious, as you look at your winter start, did you see any unusual trends around the mix of students, business kind, econ versus computer science?

Robert Silberman

No.

Mark Marostica - Piper Jaffray

Okay. And then last question, the favorite topic of the day, corporate tuition reimbursement. Can you give us an idea of what percentage of your students actually tap into corporate intuition reimbursement? Less than 25% of revenue, but just in terms of the number of students?

Robert Silberman

Yes, I think it's probably pretty close to that. I mean we have two different categories. We have a specific program with corporate partners who we track quite closely. And then we have other students who... we don't have a specific alliance partnership with, but their employer provides tuition benefits. And those numbers have been sort of on the high teens to low 20s for as long as we have been here, Mark?

Mark Brown

Right. Yeah.

Robert Silberman

I would guess that the revenue is 20% to 25% in the... excuse me, the student population is around 20% also.

Mark Marostica - Piper Jaffray

Okay. Great. Thanks I'll turn it over.

Robert Silberman

You bet. Thank you, Mark.

Operator

And for our next question we go to Jerry Herman with Stifel Nicolaus.

Jerry Herman - Stifel Nicolaus

Thanks I am on here buddy. I want to just a follow-up on a Mark's question, Rob. How many...

Robert Silberman

That's not a lot, Jerry, he's already asked that one. Go ahead.

Jerry Herman - Stifel Nicolaus

How many partners do you actually have at this point, corporate partners?

Robert Silberman

We probably have over a 100 that we are tracking individually. But my guess is the number of companies that our students are employed at who provide tuition reimbursement is significantly higher than that.

Jerry Herman - Stifel Nicolaus

Okay, great. Rob, I don't expect you to...

Robert Silberman

I am sorry. Jerry, I should correct that. That 100 number includes government agencies as well. So we have to go back and look at how many are private sector companies.

Jerry Herman - Stifel Nicolaus

Okay. Including the government. Okay great. I know you don't update your model during the course of the year, but you guys are running above the model with regard to enrollment. I am wondering if you could just comment if there is any other components of the model that are varying either positively or negatively, I guess one that comes to mind is just your yield on cash, but is there anything i.e. ramp up cost that is falling either favorably or un-favorably relative to the model?

Robert Silberman

No. And actually, yield on cash, we really don't think about as part of our operating financial model. That's a separate discussion that the Board and Mark and I have with regard to what we do with our owner's capital which is generated by the business. The only sort of impact which that have, was I guess is driven an impact on the model, is our tax rate, our affective tax rate.

Should we had no tax exempted income, our effective tax rate would be 39.5% and so the degree that those yields go down than the taxes that we pay. The taxes that we pay on our income from operations are always the same. The amount that shows up as an effective tax rate on our income statement is related to the amount of our assets that we hold as financial assets and tax exemption securities and what those yields are.

Jerry Herman - Stifel Nicolaus

Okay. But other than that things are pretty much inline?

Robert Silberman

Yes.

Jerry Herman - Stifel Nicolaus

Okay. And then a question about programs, the new criminal justice program which we see is about to be rolled out. What sort of campus penetration will that have initially? Will it be at all campuses or will it be?

Robert Silberman

I can't answer that right now Jerry because we're still waiting on I believe some state approvals. I think, and we can get back here on this week. We have around half of states already through. And so, I have not heard from our academic staff which campuses and which states they want to roll it out at and which time. We would hope that by the end of the year, it's just about everywhere and I would expect that it would be in a large number of areas by the mid point of the year.

Jerry Herman - Stifel Nicolaus

Okay, that's great. I'll turn it over thanks guys.

Robert Silberman

Thank you, Jerry.

Operator

For our next question we go to Andrew Steinerman with J.P. Morgan.

Andrew Steinerman - J.P. Morgan

Hi, Rob. I know you sort of just answered this question by saying there is no favorable, unfavorable things happening relative to the original model. But I just wanted to ask the question, one different way because I am getting the questions about kind of the expenses for the year. My interpretation of what you just said is that there has been no change in your plans for total expenses for the year.

And you never told us really about the timing of investments. And while the first quarter indication that you said, is a little more heavily invested than I had, to me that's just kind of the company's decision of timing investment opposed to any kind of increased investment intentions for the year, is that fair?

Robert Silberman

Yes, that's exactly accurate Andrew. And I also just want to clarify your opening comment which is, there is no substantial benefit, except for the higher enrollment. We are, as we said in October, that our operating margins would be flat given this level of investment, if we had 20% enrollment growth.

Andrew Steinerman - J.P. Morgan

Right.

Robert Silberman

The first term we're already 200 points above that. So that is a benefit.

Andrew Steinerman - J.P. Morgan

Right. And then just to clarify in the first quarter where you're saying operating margins could be flat with the level of investment that we have. Would that be kind of across all three lines, because your expense line because as I know campus openings expect gross margins, special cost (ph) and G&A or may be because of the great kind of, the great progress you're seeing on gross margin that gross margins could still be up despite will be investments?

Robert Silberman

I know to the answer to that, do you Mark?

Mark Brown

No.

Robert Silberman

We just have ...we haven't broken that kind of planning down to that line. I mean ...we know how many faculty we've hired for the winter term. So I mean we know what that expense is. But I don't... I haven't looked at it that way yet, so I can't answer the question.

Andrew Steinerman - J.P. Morgan

Right. But, may be look backward at the fourth quarter and when you think about everything that's driving the great gross margins in the fourth quarter, is there anything in the fourth quarter that you would say doesn't sort of have relevance moving forward?

Robert Silberman

No.

Andrew Steinerman - J.P. Morgan

Okay.

Robert Silberman

No. It's basically the same business. The other way to say that is, had we had 20% enrollment growth for the winter term we would that expected some margin compression given the investments we are making in the first half of the year. The 22% is kind of moving us up to a point where we think it will be relatively flat.

Andrew Steinerman - J.P. Morgan

Okay, thanks for the clarification.

Robert Silberman

You bet.

Operator

We go next to Kelly Flynn with Credit Suisse.

Kelly Flynn - Credit Suisse

Hi. Just revisiting an issue about the economy, I heard and recognize what you said about your business and nothing cyclical or counter cyclical, but are there any metrics that are being negatively impacted by the weak economy? And in answering that, can you just clarify how much of the bad debt increase do you think you would have to deal with the weak economy if any? And then the second part Rob, I want to get a pick your brain on yours views with respect a prolonged deep recession and whether or not you would change your perspective on how the economy impacts your business, if that ends up to be how it plays out? Thanks.

Robert Silberman

Sure. On the first on, there really isn't any of our line items, again with the exception of yield on investments, where the weak economy has negatively affected us. Within bad debt, I don't think it has right now much of an impact. I mean I guess the only thing Mark is, we do have that very small tail with recoveries of previously written off accounts which I would imagine someone who hasn't paid us and it's gone passed a 180 days and the account has been turned over to someone else.

In the past, we might get a smidge into that back as they recovered. I would guess in a really weak economy the likelihood of an ex-student paying that back would go down to zero. But I mean that's basis points on our bad debt, maybe the whole thing is that $100,000 or something.

So, because we basically write everything off at the end of 180 days. So, there is nothing that I am looking at right now in our business that I would say has been negatively impacted. One could argue that there is a slightly higher propensity to enroll among some students because of the economic insecurity. So, maybe a slight positive but again I wouldn't hang my head on that either.

With regard to the second part of your question, I mean think it's fair to plan around up for long deep recession. I mean that's certainly what we are doing. I do not expect that to have an impact on the execution of our business model. I think that the one thing that is fairly well established and agreed upon both by professional economists and by the students that I talk to, is that the best way to protect yourself in economic insecurity is by increasing their education.

And within sort of a predictable range of unemployment in a long deep recession, as long as you are not, it's a great social unrest in the streets, I think that the size of the market that we're trying to address is so large and the capacity to address it is limited, that I don't expect that they'll have any real change. We talked about this with our Board last quarter. And as we look out five and ten years, if you take a very negative scenario as to what's going to happen in the economy, we don't change a thing with regard to how we are investing and what we expect it to do.

Kelly Flynn - Credit Suisse

Okay. Thank you very much.

Robert Silberman

You bet Kelly.

Operator

For our next question we go to Cory Greendale with First Analysis.

Cory Greendale - First Analysis

Hey, good morning.

Robert Silberman

Hey, you're here!

Cory Greendale - First Analysis

I am here. But not quite boring enough apparently but I like to make it. I just had a couple of questions for you. Are you seeing any shift in the number of classes students are taking other than any little insignificant shift between graduate and undergraduate?

Robert Silberman

No.

Cory Greendale - First Analysis

Okay. One I had is also about the timing of investments, it sounds, I think what I am hearing, if you could just confirm this, is that assuming that enrollment growth is around 20% for the year that you would expect flattish margins in Q1, maybe down in Q2, back to more like flat in Q3 and up in Q4 to offset Q2 to get to flat for the year, is that round about right?

Robert Silberman

Yeah, I mean we haven't model that out, but that's certainly sounds logical. And again Cory, just on your first question, if somebody else would ask that again, you'll see it immediately, because if our students are taking less classes, our revenue growth above our enrollment growth will come down. So as long as we are getting 400... 350 to 450 basis points of revenue growth above our enrollment growth, you can be sure that the students are taking the same number of classes.

Cory Greendale - First Analysis

Okay, great. Then the next question is...could you comment on the new campuses, the Augusta and Huntsville campuses, how are those openings like relative to '08, new campus openings?

Robert Silberman

Well. They went well.

Cory Greendale - First Analysis

And just to know, the two campuses that anniversary ageing (ph) to the mature campus comp I think it was Philadelphia campus and a Delaware campus. Given that those were exceptionally large campuses.

Robert Silberman

They are not. I mean they are not exceptionally large. We don't comment on the individual campus populations but those two were sort of on track. And so if they are four years old, you would expect them to be four or 500 student campuses so.

Cory Greendale - First Analysis

The reason I am asking and I am sure you don't look at it this way but you know that well kind of cut that any possible way is if you look historically, is that a pretty consistent pattern of number of students at new campuses going from the fall term to the winter term, and its usually up more than it was this time and it was just up maybe 100 students and I'm just wondering of anything. I'm trying to figure out why that would be relative to past years, when usually it's been up more like a 1,000 students?

Robert Silberman

I don't know the answer to that Cory. I'm not even sure, I understand the question to be honest. But we did not have anything that was significant in terms of how the campuses aged and moved from category to category. The fact that our matured campuses grew at such a significant rate over the prior year, I thought was one of the more impact-full parts of the quarter from my standpoint.

Cory Greendale - First Analysis

Okay. And then the last question I had, specific to Strayer's value proposition as opposed to education overall, do you collect or get any data on... if you look at your corporate partners where they've had layoffs and whether your graduates who are at those partners are less likely to have been laid off, or any way of measuring that they are getting value out of the degree that they have achieved?

Robert Silberman

We haven't collected that, but I m fairly certain if you looked at that data, what you are going to find is, its not statistically relevant because how people are being laid off now not on the basis of what their academic degree is, its going to be where they are in the company. And so I would be surprised if there was any sort of correlation there.

Cory Greendale - First Analysis

Okay. Alright. So you likely might have moved up in the company because of their degree so there might be some second degree correlation?

Robert Silberman

Well, by moving up doesn't necessarily mean that you are not just not stable (ph) to lay offs.

Cory Greendale - First Analysis

Got you. Okay. Thanks Rob.

Robert Silberman

You're welcome.

Operator

Our next question comes from Gordon Lasik with Robert W. Baird.

Gordon Lasik - Robert W. Baird

Hi, thanks a lot. Just wanted a clear look on the new campus openings for the rest of the year. So, all of your openings up to this point, the five that you are opening in new markets. Can you talk about how many of the remaining six you expect to be in new versus existing markets? And then how that will be spread throughout the remainder of the year?

Robert Silberman

Most will be in new and it will be fairly evenly between the summer and fall term.

Gordon Lasik - Robert W. Baird

Okay. Thanks a lot. And then, just one final question. Obviously enrollments have been very strong currently, but I'm just wondering, is there... are you seeing any initial signs of a slowdown given that you target working adults and if some of those people are being laid off, are they more likely to drop out of Strayer? Anything you can comment regarding to that?

Robert Silberman

The answer is no. We haven't seen any leading indicators for this, no, I can't comment on it. It's not anything we are seeing in our business.

Gordon Lasik - Robert W. Baird

Okay. Thanks a lot.

Robert Silberman

You bet.

Operator

We'll go next to Trace Urdan with Signal Hill.

Trace Urdan - Signal Hill Group

Hey, I'm in the Brandon Dobel spot today maybe...

Robert Silberman

No, he actually got called on, Brandon said he never got called on.

Trace Urdan - Signal Hill Group

Just a couple of small things. The online enrolment centre, is it fair to think of that activity as sort of the equivalent of five new campuses driving increased enrollments in other area online or is that not the case?

Robert Silberman

No it is the case. It is fairly that way.

Trace Urdan - Signal Hill Group

I thought maybe that wasn't an obvious question, but I just couldn't be sure. So, do you expect to see that activity expand?

Robert Silberman

Correct.

Trace Urdan - Signal Hill Group

Okay. Fair enough. And then in the splitting hairs category, so 25% of revenue coming from corporate reimbursement programs, can you give us a sense of how much of that revenue is actually coming from partner organizations relative to sort of non-partner corporate reimbursement dollars?

Mark Brown

Its maybe 10% from partners.

Robert Silberman

So, roughly half ...a little bit less than half maybe from partners, but Mark's saying around 10%.

Trace Urdan - Signal Hill Group

Okay. So, in terms of the ... I guess that you are sort of right on top of those partner relationships, but do you feel equally confident about the non-partner situation and that you've got sort of sufficient insight into what's going on there?

Robert Silberman

I mean, we never had sufficient insight obviously. But we are certainly quite close to situation. It's a little harder to just aggregate it on the type of student level as opposed to the company level. But again, what I keep coming back to on this issue Trace is, the underlying issue is what's going to happen to the value proposition to the student, and what does that mean for our ability to expand the University.

Because our tuition rates are well below the Title IV limits, and our overall percentage of our revenue is well below sort of the dangerous level with regard to nine to ten oversight.

My feeling has been and my confidence has been that were there to be a problem, I would expect to see it manifested less in reduced student enrollment and more in a shift in our revenue source towards Title IV. We haven't seen that. We're watching it quite closely obviously. But, you have to get the sort of a third or fourth level said of hypotheticals to even have there be an issue to look at in our case.

And where Mark and I and our Board and our management team are focused right now, it's not an issue. And it's not one that's affecting remotely our kind of focus on the business and our investment planning. You'll see it, you'll hear it from us if we ever do see it. And again, given the transparency of this business, it will result in either lower enrollments or a more Title IV revenue, I think almost certainly the latter but it's not there now.

Trace Urdan - Signal Hill Group

Okay. Thank you.

Robert Silberman

You bet Trace.

Operator

We go next to Ethan Steinberg with Friess Associates

Ethan Steinberg - Friess Associates

Hey guys. I'm just a little confused or curious. Can you guys quantify a little bit more what the impact is from the higher tax rate in Q1 to the EPS guidance and also the lower investment income?

Robert Silberman

Well, if you look on our income statements I think we had over $2 million in investment income in Q1 of '08 of which about 800,000 was the gain on the when we transitioned out of the short-term bond fund. We keep ...it's pretty easy to model Ethan. We keep about a 100 to $150 million in cash on our balance sheet. We at this point last year we were getting about 5% tax exemption, now we are getting about 1% tax exempted.

Ethan Steinberg - Friess Associates

Okay.

Robert Silberman

And that, that will translate into effective tax rate increase of probably a couple of 100 basis points. We were down at 37, some low number.

Mark Brown

Yeah, we think it will be north of 39.

Ethan Steinberg - Friess Associates

And then does that tax rate stay higher for the rest of the year?

Robert Silberman

It depends on investment income. It's an effective tax rate. The rate that we pay on our operating income is that same no matter what, it's about 39.5%. The affective tax rate on our total income depends on what percentage of the total income comes from tax exempted interest rate.

Ethan Steinberg - Friess Associates

Okay. So either it's probably some where around a dime, is that?

Robert Silberman

I don't think, I don't know.

Ethan Steinberg - Friess Associates

$0.07.

Robert Silberman

We've to go back and calculate if you had, we had last year's investment income and last year's tax rate probably at the dime.

Mark Brown

Yeah, may be a little less.

Ethan Steinberg - Friess Associates

Okay. Thanks.

Robert Silberman

Alright. You're welcome.

Operator

And for our next question we go to Todd Young with Morningstar.

Todd Young - Morningstar

Hey guys. How are you doing?

Robert Silberman

Good Todd. How are you?

Todd Young - Morningstar

I am all right. Hi, I just wanted ask with the new campuses that you are opening up later on and in the rest of the year, there are in new territories. I was wondering how the talent searches for management and personnel will come into those areas?

Robert Silberman

They are two separate issues. On the management on the leadership, the talent search is already done, because we do it internally. We'll take existing leadership teams and move them to the new area. That's one of the ways we control for quality. We rely on those leadership teams to go into the area and source with the entry-level personnel, whether its admissions officers or as on professors or things of that nature.

For the ones that we've opened already this year, it's going quite well. We're very pleased. And the markets that we're looking in the latter half of the year, I think all have very ample supplies of both academic personnel and administrative or business personnel that we'll be able to draw. So, I think we are in pretty good shape there.

Todd Young - Morningstar

Are you seeing an increase in potential candidates given layoffs across the economy as well?

Robert Silberman

Yes.

Todd Young - Morningstar

Are you seeing a better pool?

Robert Silberman

Yes, clearly.

Todd Young - Morningstar

And then, one last question. With the schools that you have opened up recently, have you typically been seeing about that 150 increase per campus per year or has that been slightly higher recently or slightly lower at least on the newer campuses that you have right now?

Robert Silberman

On the most recent campuses in the last couple of years, it's been higher.

Todd Young - Morningstar

Okay.

Robert Silberman

Now, it remains to be seen whether it just means you are getting those students earlier and the campus still tops out of about 1,000 students, or if the actual annual rate of increase is higher.

Todd Young - Morningstar

Okay. Well, great. Thanks so much guys.

Robert Silberman

Thank you, Todd.

Operator

And with that ladies and gentlemen we have no further questions on our roster. Therefore Mr. Silberman, I'll turn the conference back over to you for any closing remarks.

Robert Silberman

Thank you, operator. And thanks everybody for listening. We'll look forward to talking to you again after our next earnings release which I believe is in late April?

Mark Brown

Correct.

Robert Silberman

Great. Thanks very much.

Operator

And ladies and gentlemen, this does conclude the Strayer Education Incorporated fourth quarter full year 2008 earnings results conference call. We do appreciate your participation. And you may disconnect at this time.

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