Bridgepoint Education CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.11.14 | About: Bridgepoint Education, (BPI)

Bridgepoint Education, Inc. (NYSE:BPI)

Q4 2013 Earnings Conference Call

March 10, 2014 11:30 AM ET

Executives

Paul Goodson - Associate VP of IR

Andrew Clark - CEO

Jane McAuliffe - Chief Academic Officer

Daniel Devine - CFO

Analysts

Tim Connor - William Blair

Jeff Silber - BMO Capital Markets

David Warner - First Analysis

Trace Urdan - Wells Fargo

Adrian Colby - Deutsche Bank

Operator

Good morning. My name is Jay and I will be your conference operator today. At this time I would like to welcome everyone to the Bridgepoint Education Fourth Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to introduce Mr. Paul Goodson, Associate Vice President of Investor Relations. Please go ahead.

Paul Goodson

Thank you, Jay, and good morning everyone. Bridgepoint Education's four quarter 2013 earnings release was issued earlier this morning and is posted on the Company's website at www.bridgepointeducation.com. Joining me on the call today are Andrew Clark, Chief Executive Officer; Dr. Jane McAuliffe, Chief Academic Officer; and Dan Devine, Chief Financial Officer.

Before we begin, we'd like to remind you that some of the statements we make today may be considered forward-looking, including statements regarding enrollments, student persistence and graduation rates, bad debt, pending legal matters and other financial and related guidance, the impact of our student support efforts, our ability to manage regulatory metrics and commentary regarding 2014 and lever.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual performance or results to differ materially including the risks of the total enrollments [indiscernible] increased during 2014. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws.

Please refer to the our SEC filings, including our year-end report on Form 10-Q for the period ended December 31, 2013, to be filed with the SEC, as well as our earnings press release posted this morning for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

At this time, it is my pleasure to introduce Bridgepoint Education's CEO, Andrew Clark.

Andrew Clark

Thank you, Paul, and welcome to Bridgepoint Education's 2013 Earnings Call. After I discuss last year’s performance and provide you with my view of 2014, our Chief Academic Officer, Dr. Jane McAuliffe will provide you with the results of our annual student and alumni survey and then our CFO, Dan Devine, will review our fourth quarter and full year 2013 results and key operating metrics and comment on 2014. After Dan speaks, I’ll offer my closing comments.

Before I share my thoughts with you about our performance last year, I want to address items that I know are a considerable interest. First, throughout 2013 we said that new enrollments would turn positive in the fourth quarter and as you may have seen in our press release this morning, fourth quarter new enrollments were 10,200, up more than 10% over 2012 fourth quarter new enrollments of 9,260.

Second, I want to reiterate our prior comment that we anticipate total enrollment should turn positive by the end of 2014 compared with total enrollment at the beginning of the year.

So looking back on 2013, we are pleased with our execution during the year. Of course highlight with Ashford’s successful migration to WASC accreditation, most of you know that the WASC action letter stress the importance of Ashford’s continued focus on retention, improvement efforts and with a company by positive comments from the WASC visiting team which acknowledge the educational quality Ashford offers. Among many positives of particular note is the visiting team’s comment that Ashford had established a number of best practices and had created what can become a model for online higher education for a non-traditional student population.

Obtaining this sort of recognition from a regional accreditor is no small accomplishment and it was achieved only after an extraordinary effort by Ashford President, Dr. Richard Pattenaude and the University staff, faculty and board trustees. Serving the non-traditional students with the quality education is a goal our institutions have always pursued and thus it is especially gratifying to me that in addition to receiving WASC accreditation, WASC made complementary comments about the institution Ashford has become. A copy of the WASC action letter and special visit team report from the review of Ashford University is available on the WASC website at www.wascseniors.org.

The commitment to quality and student success noted by WASC was demonstrated in multiple ways in 2013. For example, through the orientation program, the Ashford Promise and through other means, we have increased admission standards to help ensure that students who are admitted have the best chance to be successful. Continuing a trend we had already established, we are expanding the use of technology to provide better support to students which was also recognized and applauded by WASC. This includes expanded use of Waypoint and Constellation as well as analyzing over 3.5 million student performance data point every single day to track, evaluate and help student succeed. This provides us with an early warning system for each individual student that helps identify problems the student is facing and positions us to proactively assess high risk students.

2013 was also a year of progress in several other important areas. Then enrollment declines we experienced throughput 2013 were due in large part to an intentional shift in our marketing mix, in favor of branding and other organic channels, including approximately a 60% reduction in our admissions counsel workforce as well as strengthened admissions requirements intended to provide a greater assurance that incoming students are better positioned to persist and complete their degree programs.

As part of the changes in how we attract and matriculate students, our institutions use an evidence based medium mix designed to appeal to the type of students who is more likely to do well at our universities.

We believe the increased effort to appropriately inform perspective students of our value proposition through branding and targeted organic channel has been a successful alternative to third party inquiry. Over the past eight quarters we have seen a 50% increase in the portion of our enrollment application that have come from organic channels. We implemented this approach because we have evidence supporting this conclusion that students who learn about Ashford and come to us organically are better prepared for college, learn course material better and persist in their studies through graduation than students who come to us from third party enquiries.

As another example of how we are strengthening our brand identity while simultaneously creating value for students, in 2013 we announced the Ashford Business School was renamed the Forbes School of Business at Ashford University. The association with Forbes provides the university and its students with online access to Forbes' rich archives, curetted talents, pool of authors and guest lecturers, and extensive global network including approximately 1,200 international contributors.

We launched our national advertising campaign for the Forbes School of Business just a week ago and look forward to welcoming new students into the school. We believe this new affiliation with such a highly respected business brand as Forbes will attract high quality students. As such, we anticipate that our affiliation with Forbes should lead to increased new and total enrollments in the school of business.

We also plan to embed Forbes content within the program to enhance business curriculum in a manner that leads to better student educational outcome and improved retention. The goal of our redesigned marketing strategy, the enhancement in our business school through our association with Forbes and our use of evidenced based marketing mix is to attract better prepared students for whom our institutions are a good fit and to provide more effective support for them once onboard, so that they will persist and graduate at higher rates.

As we move into 2014, we are increasing our investments in organic channels while continuing to reduce our use of third-party enquiries. For the first time ever, in the first quarter, we launched a new advertising campaign that will encompass multiple television commercials emphasizing our belief that technology changes everything, for today's adult learners.

The campaigns are essential to our differentiation, increased awareness and a focus on recruiting highly motivated and fully prepared students to attend Ashford University. It is important that we track our performance to ensure that we are achieving our goal. One tool that will track our future progress is an annual measure of Ashford’s cohort based retention. This metric compares the total number of students who are active on a census date in early September to the next census date on the following September, adjusted to account for students who have graduated. From September of 2012 to September of 2013 this statistic was 60%, a number that has been consistent for Ashford over the past four years.

It is important to note that this measurement was made based on the fall 2012 entering class, which entered prior to the significant changes we made to help ensure student preparedness and success. Our goal in 2014 and beyond is to improve on these numbers and we believe the initiatives we have put in place will contribute to that goal.

Another important highlight for 2013 was the graduation of a record number of students, well over 17,000 for both of our institutions, bringing our total alumni population now to approximately 67,000. In addition to their success at earning their degrees, our institution’s alumni carry less debt on average than graduates from other institutions. For 2013, I am pleased to report that on average, Ashford Bachelors' Degree graduates have school related debt that is approximately $3,000 below the national average of over $29,000. This favorable result is the outcome of Ashford’s historical commitment to offering affordable tuition as well as our focus on helping our students transfer qualified credits into their program at Ashford.

Finally we made some significant financial changes in 2013, cost reductions at the parent company and at our institutions were implemented that do not effect academic quality or student service levels, but that better reflects our current level of enrollment and position us to perform well as growth materializes in the future.

We are excited about 2014 and we are expanding our investments in marketing based on the data analytics we have developed to attract and support high quality students in our institutions. These changes are an acceleration of the strategy we initiated in 2013 and while the acceleration of changes may present some challenges for the Company, we are confident that all of the changes we are making will position our institution for a long-term success.

And now our Chief Academic Officer, Dr. Jane McAuliffe will provide you with the results of our student and alumni survey.

Jane McAuliffe

Thank you, Andrew. Our focus has always been to deliver a high quality education that is affordable and delivers high levels of student satisfaction. One of the ways we measure this is through the net promoter score which is a single question metric that simply asks, how likely would you be to recommend your school to a friend. The score is calculated by subtracting the number of negative answers from the number of positive answers and is the metric used by many successful companies including GE, American Express, Procter & Gamble among others. I am pleased to report that Ashford net promoter score have been rising over three years we have measured it from 60.0 in 2011 to 61.4 in 2012 now to 61.5 in 2013.

In addition to active students, we also pull our alumni to gather their reactions. Now for the fifth year running, I am pleased to present to you the results of Ashford's annual alumni survey which are very consistent with prior years and which we believe again demonstrate the university’s success at delivering these important outcomes to Ashford graduates.

With minor exception, these responses also reflect answers given by our currently active students to similar questions. Of the 80% of alumni who reported having previously attended a traditional institution, 92% feel the quality of education at Ashford is the same as or higher than at a traditional college or university. This result does not stand in isolation since in WASC's own survey of nearly 23,000 Ashford students, 91% of respondents said they are satisfied or very satisfied with the quality of instruction they are receiving at Ashford.

In our survey, 93% said they would recommend Ashford to others seeking their degree. 91% of our graduates indicated that they were satisfied or very satisfied with their Ashford experience. 89% of our alumni agree that earning their degree from Ashford gave them the confidence to pursue new job opportunities.

And finally, 92% of alumni agree that getting their Ashford degree was worth the time commitment required to fulfill their educational goal. We also asked our alumni about how they view their return on their investment in their education as measured by their salary before and after attending Ashford. Based on alumni survey responses reported in 2014 from our bachelor degree earners, we estimate that the average salary of these alumni is 9.6% greater than the average salary they were earning when they first enrolled at Ashford.

Our graduate degree earners feel even better. We estimate the average salary of these alumni is 11.7% higher than their average salary upon first enrolling at Ashford. These survey results continue to reaffirm that in Ashford education is creating a positive return on investments for our alumni. At a time in our nation when the incomes of many families are stagnant or even declining, we continue to be pleased with the value proposition offered by an Ashford degree and the benefit it is bringing to the lives of our alumni and their families.

Now I would like to turn the call over to our Chief Financial Officer, Dan Devine to review our financial and operating results.

Daniel Devine

Thank you, Jane. Today, I will provide you with some key financial and operating figures for our year ended December 31, 2013. For the fiscal year 2013, revenue was 768.6 million compared with 968.2 million for 2012. The decrease in revenue was due primarily to a decline in total enrollments partially offset by 2.75% tuition increase implemented on April 1, 2013. As of December 31, 2013, total student enrollment decreased to 63,624 from 81,810 at December 31, 2012. Persistence in the quarter was 77.9%, as we are accounting for higher graduates and was essentially flat as compared to the fourth quarter of 2012.

For the year ended December 31, 2013, instructional costs and services were 395.9 million for 51.5% of revenue compared with 364 million or 37.5% in the same period last year. The increase in 2013 was primarily composed of increased labor, higher bad debt, increased allocation of corporate support and additional cost for instruction related facilities.

Admission, advisory and marketing expenses for the year ended December 31, 2013 were 235.4 million or 30.6% of revenue compared with 339.2 million or 35% of revenue in the prior year primarily due to reduced admission employee headcount and lower IT and advertising expense during 2013.

General and administrative expenses for the year ended December 31, 2013 were 76.9 million or 10% of revenue compared with 69.5 million or 7.2% of revenue for the prior year. As we previously disclosed, we have been in discussions with the Attorney General to resolve a pending civil investigated demand. These discussions are continuing and during the fourth quarter of 2013, we recorded an accrual of $9 million in G&A expense which represents our best estimate of the cost of the resolution of this matter.

Included in our three main expense categories for the fiscal year 2013, is approximately 13.9 million related to stock based compensation expense in the aggregate compared with 13.7 million for the fiscal year 2012. For the year ended 2013, operating income decreased to 60.4 million from a 195.5 million in the year ended 2012.

Net income for the year ended December 31, 2013 was 41 million or $0.74 per diluted share compared with 123.4 million or $2.21 per diluted share for 2012. 2013 $0.74 earnings per share result include $0.10 per share impact from the $9 million accrual we recorded related to the Civil Investigated demand. Fully diluted EPS is calculated based on a diluted share count of 55.5 million shares for the fiscal year 2013 and 55.9 million shares for the fiscal year 2012.

Due to the nature of weighted average share calculation and the timing of our repurchase of 10.25 million shares late in the fourth quarter, the effect of the reduced share counts in the repurchase on the EPS calculation will not be fully apparent until 2014. Our effective tax rate for the year ended December 31, 2013 was 35.7%. As of December 31, 2013 we had cash, cash equivalence and investments of 356.4 million. This reflects the completion of the repurchase of 10.25 million shares of common stock for a total cost of approximately 201 million inclusive of fees. The Company generated 75.5 million of cash from operations for the year ended December 31, 2013 compared with 143.2 million for the same period in 2012. Our accounts receivable net of allowance for doubtful accounts was 28.6 million, which represents 15.7 days sales outstanding on a quarter-to-date basis, compared with 29.2 days sales outstanding at December 31, 2012. Capital expenditures for the year ended December 31, 2013, were $14.8 million compared with $25.3 million for the prior year.

Moving to regulatory items. For the year ended December 31, 2013, Ashford University derived 85.6% of its revenue from Title IV funds, calculated according to department of education regulations. For the year ended December 31, 2013, the University of the Rockies derived 87.6% of its revenue from Title IV funds, also calculated under department regulations. Our institutions have managed its metric effectively since our founding and expect to continue to do so going forward.

I’d like to give you some comments on 2014. We expect that the first half of 2014 will produce revenue and earnings results similar to the second half of 2013 and we expect that the second half of 2014's financial performance will be more favorable in the first half.

In the first quarter of 2014, we will have one last week of revenue and one last enrollment week as compared to the first quarter of 2013. The lower revenue for the quarter combined with increased branding development expenses and the marketing and branding mix strategy Andrew previously mentioned, will result in an operating loss for the first quarter. We anticipate that in the second quarter, we should see new enrollment growth year-over-year and a continued narrowing of year-over-year total enrollment. The second half of 2014 looks to be more favorable due primarily to a trending new enrollment we see in the back half of the year. We anticipate an inflection point in 2014 with total enrollments turning upward during the year which should produce total higher enrollment by yearend. We believe that the changes we make in 2014 should position the Company to return to revenue and earnings growth beyond 2014.

Now, I’ll turn the call back over to Andrew for its closing comments.

Andrew Clark

Thank you, Dan. Although we have said this previously, I think it bears repeating that the essence of our value proposition is the purpose for positioning of our institutions at the intersection of affordability, innovation and quality. These are important differentiating factors that are attractive to higher quality perspective students when choosing among alternatives for higher education. Once on board, as you heard from Dr. McAuliffe a few minutes ago, our institution students and alumina agreed in survey after survey, they rate the quality of their education as being equal to or greater than experiences at pervious traditional institutions. And our focus on quality translates into a tangible return on our students' investment in the form increased earnings power once they graduate.

WASC recognized Ashford’s commitment to student success as well. In the report of the WASC special visit team which was submitted to WASC governing board in support of this review of Ashford’s application for initial accreditation, the special visit team stated “the team found an institution that has been and who's culture has been changed in significant ways including a shift from the market driven approach to an institution committed to student retention and success.”

Consistent with this observation and in parallel with Ashford's commitment to educational quality, persistence and student success, we will no longer report quarterly new enrollment although we will report our annual cohort based retention statistics. I have talked today about some of the changes we have made to help ensure that we attract the right students to our institutions and provide them with the support necessary for them to persist and attain their educational goal. As a leader in the use of technology to deliver education, we believe we’re also one of the industry leaders in the proactive use of data analytics to identify which students are at risk and what sorts of problems they are having and then develop and deliver effective interventions to them.

We have made significant investments in this area and our capabilities have continued to grow over the last three years resulting in our current team of 25 individuals solely dedicated to supporting students with the help of these technological capabilities. We remain committed to supporting students through these technological means and others that we may implement in the future.

At this time, I will ask the operator to open the phone line for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Tim Connor, William Blair. Your line is open.

Tim Connor - William Blair

I get that you’re not going to be reporting your new enrollment going forward but just to clear the 2014 total enrollment goal imply pretty strongly positive new enrollment is that correct?

Andrew Clark

Yes, Tim that is correct. I mean as Dan indicated, we expect our new enrollments to be positive in the second quarter and certainly throughout the back half of the year and total reenrollment will turn positive towards the end of the year.

Tim Connor - William Blair

And is there an underlying participant improvement built into that metric as well?

Andrew Clark

Yes, I mean I would just comment that my belief is that throughout 2014, you should see improving persistence throughout the year as a result of the initiatives that the institution put in place at the very end of the fourth quarter of last year.

Tim Connor - William Blair

Okay thanks and then final one for me. Bad debt expense ticked up in the quarter, what are the expectations for that for 2014 and then what are sort of more normalized levels for bad debt expense in the future?

Andrew Clark

It did tick up in the quarter. We expect that going forward it should be at 7% or below for 2014 and our goal was to drive it below that number.

Operator

The next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

Jeff Silber - BMO Capital Markets

Just a follow-up on that question, why did bad debt expense tick up some much?

Andrew Clark

Why did it spike up so much or why did it -- we discussed it last quarter, we’re finishing basically our final completion of the adjustments we made to our model. And as a percentage of revenue, its spikes up in the fourth quarter every year because there is only 12 weeks of revenue in the quarter.

Jeff Silber - BMO Capital Markets

Okay got it. Thanks for that. I know the gainful employment rolls are still in flux but you commented on some of the other regulatory audits, I’m just wondering how you think your schools would fair if the rules were (propagated) [ph] as they currently stand?

Andrew Clark

Well, it’s hard for me to say Jeff, because I haven't seen the rules come out of the department. I know that they’ve been over at [indiscernible] and they’re going to come back to the department and they’ll get published and once those get published, I can definitely comment. I mean obviously I know you’re aware that because of the affordability of our institution, we fared well in the last round.

Jeff Silber - BMO Capital Markets

Can you talk about your scholarship strategy for 2014 and how that might impact revenue per student?

Andrew Clark

Well I mean I’ll make a couple of comments and then I can let Dan talk about revenue per student. But our scholarship strategy is no different, we of course scholarship, our military affiliated students but we’re not doing anything differently. I can tell you that Jeff, that in January we saw application on a year-over-year basis for us materially over the last year. Now we have some new leadership in the admission areas at Ashford that did a little reorganization. And so as a result of that we did see fewer students matriculate in the month than they did over prior year. So we believe that our Q1 new enrollments will be negative on a year-over-year basis. But as you can tell, the reason we feel strongly about our ability to grow new enrollments and demand is from my comments that January’s applications were up meaningfully on a year-over-year basis and we believe the executional issue that occurred in the quarter will not repeat itself in the future.

Daniel Devine

Jeff, I’ll just follow up on the area of scholarship, we -- for your purpose of modeling we have not introduced any scholarships and we don’t plan to introduce any scholarships in a year, so as Andrew said, military is our largest component of the scholarships and we expect at that level, military enrollment will remain flat throughout the year, so generally if you’re looking at the year, you’ll probably be, year over year flat to slightly positive in Q1 and probably throughout the year, for I mean tuition increase is very small.

Operator

The next question comes from Corey Greendale with First Analysis, your line is open.

David Warner - First Analysis

Hi good morning, this is David Warner for Corey, just looking at the Q4 revenue per student, it looks like it came in a little bit above our expectations especially given the temporary scholarships to the active duty personnel, can you maybe parse that impact, maybe quantify that and other shifts, enrollment shifts or mixed shifts that might have affected that?

Andrew Clark

Yes, the largest variance in student enroll -- in revenue per student in the fourth quarter has to do with there were a few more days of revenue in 2013 compared to 2012. You take that out, you’re basically flat year over year. So we had a few more revenue dates which contributed to a little more revenue per student in the quarter year over year.

David Warner - First Analysis

And looking forward on for the tuition price increase at the end of the month, is that flat across the board increase and if not what, what areas are you seeing demand giving you the headroom to maybe raise price or where you’re seeing like more competition that would put a ceiling on price increases?

Andrew Clark

Well if you look at the amount its 1.7% I believe, that is for the Ashford online undergraduate students which represents the vast majority of the students in our system, and I’m not sure of the other entities, what their percentages are but its effectively kind of a rounding error in our tuition so it should have no effect on revenue for student going forward.

Daniel Devine

In terms of competition David, let me just comment on that, our quarterly marketing surveys continue to demonstrate that the competition that we face today is the same competition that we faced consistently over the past four or five years. We have not seen any meaningful new competitor in that survey, but with that said we really obviously believe that differentiating the institution through our branding initiative is important for a variety of reasons including recruiting a better prepared, higher quality student, and we think the Forbes School of Business throughout the year should also help to differentiate it and probably drive new enrollment and total enrollment growth within the Forbes School of Business itself but at the undergraduate and graduate level.

David Warner - First Analysis

Got it, and just lastly, you alluded to some pretty strong implied new student growth in 2014, would that imply admissions rep headcount increasing, are you -- you think your staff’s at a level that will allow you to take advantage of that, that additional demand.

Daniel Devine

We have no plans David to increase our admission staffing.

Operator

(Operator Instructions) The next question comes from Trace Urdan with Wells Fargo Securities, your line is open.

Trace Urdan - Wells Fargo

Thank you, I know that you guys explained to us that the retention looks flat on a year over year basis but the piece that we can see looked lower, I guess as a result of the large number of graduates you refer to, so I’m wondering what we can expect in terms of graduates through 2014 just to help us understand what that will look like.

Andrew Clark

Sure, you’re correct, so on the face it looks lower but as we explained that the majority of that variance relates to a higher run rate of graduates. If you’re putting your model together I would expect approximately 18,000 graduates this year.

Trace Urdan - Wells Fargo

Okay, thanks for that, and then Dan you also made reference to the Q1 having one less start than Q1 of 2013 what’s the total number of starts in 2013 and 2014 in the first quarter?

Daniel Devine

2013, there were 13, 2014 there will be 12, what starts in 12 weeks.

Operator

The next question comes from Adrian Colby with Deutsche Bank, your line is open,

Adrian Colby - Deutsche Bank

Hi, thanks for taking my question. So in the fourth quarter admissions and marketing expense decreased but it looked like there was some extra cost in some of the other line items relative at least to recent quarterly results. Just wondering if you could comment on the trends in the quarter versus your expectations if it’s more of a reflection of having fewer weeks of revenue and how we should think about things like G&A trending into 2014?

Andrew Clark

Sure. Well, on the G&A side, that’s where we booked the $9 million. And so there is some slightly above that cost. The fourth quarter if you look back in the prior year, there is always some kind of higher G&A expense in the fourth quarter because some of the things that we do in the fourth quarter. And then the difference in marketing as you mentioned has to do with the advertising campaign is running the third quarter. There is only -- I think the difference in instructional costs and services was approximately less than $1 million so I don’t think there is too much to talk about there. We did make some headcount reductions in the first quarter of 2014 and they should be reflected, but this is kind of our run rate where we’re -- our expenses are this year kind of where the fourth quarter was and that we’ll be addressing those as we move forward.

Adrian Colby - Deutsche Bank

I was wondering if you could comment on the trends you’re seeing with military students, I think you’d mentioned last quarter that approximately 400 new military students were prevented from enrolling in October. Just wondering if you did see those students come back I wasn’t sure from your comments earlier if you’re expecting to see sort of flat enrollment trends from your active duty personnel?

Andrew Clark

Yes. Sure Adrian. Yes, so obviously the government shutdown in the fourth quarter impacted our military students unfortunately. We did try to scholarship students to prevent them from incurring to any meaningful disruption in terms of the courses they were taking. And I think that was definitely helpful to some students. But there was, I am sure some impact in both retention and new enrollment in the fourth quarter because of the government shutdown.

In terms of how things are looking right now, we’re actually seeing some strength in military enrollments both in terms of new enrollments as well as persistence in the early part of the quarter in January. So we’re -- I think the answer to your question is we are seeing some of those folks that were disrupted in the fourth quarter have definitely come back to us in the beginning of this year.

Adrian Colby - Deutsche Bank

Great, and if I could just ask one last one just wondering again about your decision to raise under graduation by I guess 1.7%. Just wondering how you set that particular level I think last year was a 3% increase?

Andrew Clark

I think it was just under 3% last year. So obviously a lot of goes in to the process and I’m not going to bore you with all the details, but everything has looked at from a competitive landscape to the cost that the institution occurs for continuing to provide the types of services that it does everything from increases in faculty salary to additional technology instructional support, a lot of things that go into the student educational outcomes and experience.

And the institution came to the conclusion after looking at the competitive landscape seeing how significantly well intuition was in contrast to the competitors that appear on our quarterly marketing surveys and given the cost and the investment in the educational and student outcomes, that a very small which increased to 1.7 I think is the lowest tuition increase in the University’s history was appropriate. So we don’t -- based on our research and our data we don’t anticipate that this cost increase as small as it is would have any impact on the demand that we’re seeing.

Operator

There are no additional questions at this time. I would like to turn the call back to the presenters.

Andrew Clark

Okay. Well, thank you everybody for joining us today.

Operator

This concludes today’s conference call. You may now disconnect.

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