Ms. Stein: I cover almost exclusively the postsecondary education space, but outside of that I cover K-12 in the primary and secondary education area. My coverage includes Apollo (APOL), DeVry (DV), ITT [Educational Services] (ESI), American Public (APEI), Strayer (STRA), Corinthian (COCO), Capella (CPLA), Career Education (CECO).
TWST: Would you talk a little about how the economy is affecting the space?
Ms. Stein: The economy actually has had many positive impacts on the group, not
only in terms of individuals seeking education to make themselves more equipped
for jobs. It's become more competitive obviously to get any job. So that
advantage of having education has been, and is always, a positive. If you look
at just the income effect of additional education, it's pretty remarkable. If
you look historically pretty much through many of the cycles, you will see that
kind of an impact. I think what was maybe more unexpected in this cycle was the
impact that things like state budgets had on core profits. Community colleges
were getting hurt by declining state budgets, which caused them to reduce the
number of seats available for students. The spillover of that has been very
positive for the for-profits, and that if students can't go to a community
college, this may be another option for them. So many of them have said that's
one of the reasons that enrollments have been very strong. The other thing are
things that I think we didn't really think of upfront: Things like the
advertising market really softening - advertising is a huge expense for these
companies - so they get much more bang for their buck in advertising, and that
also helped to fuel enrollment growth. That was another thing. And one more
thing that I think we didn't look at was the fact that the enrollment
counselors, which are essentially salespeople, because their job opportunities
were, because the job market was difficult, they stayed on much longer, so the
turnover in that job has been much lower. And the longer you keep salespeople,
the more they are able to convert leads into students. So all these things in a
weak economy really helped the group. And I think that the companies were not
all helped equally. I mean they all had a positive impact from some of those
cost issues, so low sales force turnover, inexpensive advertising, things like
that. But just in terms of end-market demand, there was a little bit of a
discrepancy across the schools in terms of some saw more of a boost than others
in terms of demand.
Tickers included in this excerpt: APEI, APOL, CECO, COCO, CPLA, DV, ESI, STRA
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