Education Management Corporation beats by $0.02, misses on revenue

Education Management Corporation (EDMC): FQ2 EPS of $0.10 beats by $0.02.

Revenue of $593.7M (-9.3% Y/Y) misses by $12.15M.

Comments (3)
  • dahnshaulis
    , contributor
    Comments (256) | Send Message
    Looks like a common theme in for-profit education: revenue reductions and profits created by cutting workers.
    5 Feb 2014, 06:20 PM Reply Like
  • Moneycurious
    , contributor
    Comments (21) | Send Message
    The only hope for a sustainable EDMC is to take the company private.
    Clear the desk first. EDMC has settled lawsuits since the Art Institutes were caught abusing recruiting practices in Houston a decade ago. Sidestepping the consumer issues associated with this organization is the glaring mismanagement: These lawsuits are a coming at an alarming number and have left the company with little good will. Crisis management is not rocket science. Acknowledge the error, minimize responsibility, redesign the business model and delivery system and make public reassurances, e.g., JPMorgan Chase. As of last conference call the company was still denying the accusations outright. To seal the argument, West said that the company was not even setting aside funds for lawsuit settlement. He did this knowing that as he spoke his counsel was offering a settlement to the State of Colorado. This does not qualify for even amateur management.
    Over the past three years EDMC has consistently failed to make rational business decisions. This is essentially a sales organization. As such there is the glaring reality that questionable business practices persist. Rather than focus on the persistent and present sales issues the company has publicly stated that it is focusing on educational quality. This is while it has changed its library vendors for stark shadowy imitation of an online library. Hiring practices for educators in all levels continually fail to meet educational standards and faculty with false or no credentials persist. Instead of revising its catalogue by discontinuing terminal and low employment degrees it continues to add and promote degrees which have no relationship with the professional marketplace. If students are not being retained the common sense practice is to target students who show some academic promise, can be screened as candidates for the university delivery system, and who invest some of their own capital in their future. However EDMC has chosen to lower its admission standards further and to increase lobbying expenses to continue to support itself through Title IV and similar government loans.
    If the corporation was an individual we would call it self-defeating, self-destructive, confrontational, and perhaps suicidal. We certainly would not trust this person. If the person were punished for bad behavior we would say it was deserved.
    In the past eighteen months EDMC has failed to put together a suite of executives that appear even remotely appropriate to the context of the organization. Not a single executive has any experience nor appears to have any interest in the product, education. The combative roles that the executives have assumed are incompatible with the manifest needs of the organization. If the company had working components this might be a situation that could be corrected. However, as the recent public exposure reveals the company fails from sale to the very few graduations. As a public company this approach cannot be corrected by these individuals, at their incomes, with no definable vision for the company and surely without some candid effort to restore good will. It is not an airline, not a military unit, not a retail bank and not an education company to be certain. Take the company private, restore the delivery systems, reestablish good will, figure out what to do with the enormous amount of real estate, and find a way of merging educators with business. Respectable institutions and schools do it all the time, why not this Goldman asset? Until such time this is just too hard of a stock to understand and trust, even for the short market.
    5 Feb 2014, 10:33 PM Reply Like
  • Matt Cavanaugh
    , contributor
    Comments (2) | Send Message
    EDMC only made a profit in recent quarters in its EBITDA fantasy land. As the financial statements the company filed with the SEC illustrate, EDMC has tangible equity that is negative by over three quarters of a billion dollars. The scariest thing, however, is that the company spent over 67% of its cash in the past year, including $70 million in the past six months, leaving a balance of only $61 million. This suggests that EDMC will run out of cash before July.

    6 Feb 2014, 02:33 AM Reply Like
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