Career Education Corporation ANALYST DAY February 12, 2003 Nasdaq: CECO www. careered. com
Safe Harbor Statement The forward-looking statements contained in this presentation and those statements made during this presentation are based upon various assumptions, and certain risks and uncertainties could cause actual results to differ materially from those stated. Factors that could cause such differences include costs and difficulties associated with opening new campuses and in integrating acquisitions, costs associated with the Online operations, changes in the regulatory environment and those matters disclosed in Career Education Corporation's filings with the Securities and Exchange Commission. Career Education Corporation assumes no obligation to update those forward-looking statements.
Jack Larson Chairman, President & CEO Nasdaq: CECO www. careered. com
A brief look at CEC… • Formed in 1994 to create a premium education system • Initial Public Offering in 1998 • 43 worldwide campuses • Rapidly growing Online Education presence • #1 on-campus provider in for-profit sector • 20 consecutive quarters of record revenue & earnings • Cumulative shareholder return since IPO = 1, 000%
Revenue (in millions)
Earnings per Share
Favorable Industry Dynamics • $270 billion North America market • For-profit & non-profit sectors are highly fragmented • Strong long-term demographic trends • Barriers to entry • Attractive financial characteristics
Top 3 Reasons Why Freshman Enroll in College … To get training for a specific career 71. 3% To be able to get a better job 70. 3% To be able to make more money 69. 8% Source: The Chronicle of Higher Education A person with a bachelor’s degree is expected to earn almost $1. 0 million more in their career than a high-school grad – US Department of Labor
Top 2 Reasons Why Freshman Select a College … 1. College has a very good academic reputation CEC’s “Schools of Choice” & nationally recognized programs 2. College’s graduates get good jobs CEC’s Placement rate of 94. 1% Source: The Chronicle of Higher Education
Top 20 U. S. Universities by Population Fall 1995 University Fall 2001 Population University Population 1 2 Community College of the Air Force 89, 611 1 Apollo Group University of Minnesota–Twin Cities 51, 445 2 Community College of the Air Force 89, 611 3 4 5 6 7 8 9 10 Ohio State University–Main Campus 48, 676 3 De. Vry University 58, 736 The University of Texas at Austin Miami-Dade Community College Arizona State University-Main Campus Texas A&M University-Main Campus Michigan State University Pennsylvania State University-Main Campus Houston Community College System 47, 905 47, 060 42, 040 41, 790 40, 647 39, 646 39, 641 4 5 6 7 8 9 10 University of Minnesota-Twin Cities Miami-Dade Community College Ohio State University-Main Campus The University of Texas at Austin Arizona State University-Main Campus Texas A&M University-Main Campus Michigan State University 51, 388 49, 836 48, 362 48, 008 42, 483 41, 892 41, 545 11 12 13 14 15 16 University of Florida 39, 412 11 University of Wisconsin-Madison University of Illinois-Urbana-Champaign Northern Virginia Community College University of Michigan-Ann Arbor Purdue University-Main Campus 39, 005 38, 420 37, 144 36, 687 36, 427 12 13 14 15 16 University of Florida Pennsylvania State Univ-Main Campus University of Wisconsin-Madison University of Illinois-Urbana-Champaign Houston Community College System 39, 883 39, 855 39, 289 38, 841 38, 493 17 University of South Florida 36, 142 18 19 20 New York University 35, 835 17 18 Education Management University of Phoenix Online 37, 658 37, 600 Indiana University-Bloomington University of Arizona 21 35, 083 34, 777 19 20 Purdue University-Main Campus University of Michigan-Ann Arbor 36, 893 36, 625 Career Education 139, 300 40, 800 Source: Chronicle of Higher Education
Sustainable Growth Opportunity • Demographic trends support sustainable growth 2. 5 mil increase in college enrollment in the next decade – National Center of Education Statistics • States are cutting budgets for public postsecondary education at the same time demand is escalating 19 states have cut their higher education funding midway through the current fiscal year – National Conference of State Legislatures
CEC’s Competitive Advantages • Career-oriented curriculum • Diversification creates stable market demand: – – • • Curriculum in multiple high-growth demand areas Demographics in age & gender Various degree offerings Geography Strong Marketing Expertise Excellent Placement Success Technology Innovation Quality name brand institutions
CEC’s Brand Names
Global System Onsite & Online
Strategic Growth Goal Acquisitions Start-ups/ Satellites Program Transplants Advanced Degrees Largest Global Quality Provider of Postsecondary Education International Expansion Additional Curricula Online Education Regional Accreditation
Poised for the Future • Two Operating Groups – Colleges, Schools & Universities Group – Jake Gruver - President – Online Education Group – Nick Fluge - President
Jake Gruver President – Colleges, Schools & Universities Group Nasdaq: CECO www. careered. com
Cycle of Success “Schools of Choice” Refining Education Programs Operating Strategy Capital Investments Retention & Placement Direct Response Marketing Implementing Systems & Procedures
Colleges, Schools & Universities 8 Diversified Platforms for Growth Academy College Culinary Gibbs Health Education International Start-up University
Current Core Curricula 51, 100 students Visual Communication & Design Technologies % of Students 43% Business Studies 22% Information Technology 18% Culinary Arts 15% Health Education Full-time degree seeking students 2%
Diversified Student Demographics Student Population by Age Group Under 21 yr. 30% 21 – 30 yr. 53% Over 30 yr. 17% 50%/50% Male/Female
Diversified Degree Offerings Student Population by degree objective Bachelor’s/ Master’s 28% Certificate 14% Associate’s 58%
Superior Execution • Attract & convert prospects using full marketing mix • Assist students in financing their education • Deliver a superior education product • Develop new programs • Keep students in school through innovative retention programs • Place students in their field of study by soliciting job openings
School Operations President VP of Operations VP of Financial Services VP of Student Services VP of Academic Affairs VP Marketing/ Admissions
Patrick Andrews First VP of Marketing Nasdaq: CECO www. careered. com
High Impact Marketing CEC generated 1. 7 million leads in 2002 60% over 2001
Effective Lead Generation • Tailored marketing at each school Internet-based advertising High school recruiting TV infomercials & commercials Direct mail Referrals Newspapers & print media
Leads By Media Source 2002 TV 13% Internet Direct Mail 10% 36% H. S. 30% Other Referral Print 4% 4% 3%
Media Source Examples
Marketing Site - Over 150 school marketing Web Sites - Interactive Media Presentations & Webmercials - Leads automatically loaded into CEC’s database
Dr. Jon Coover Senior VP of Marketing & Admissions Nasdaq: CECO www. careered. com
Marketing & Admissions Process 1. Generate leads 2. Convert leads to enrollments (“booked futures”) 3. Convert enrollments to starts
Convert Leads to Enrollments • Specialized Admissions Efforts Approx. 1, 000 Professionals 1. 2. 3. 4. 5. Local Area High school Out-of-area International Internet
Automated Enrollment Center - Branded Enrollment Centers - Virtual Campus Tours/Catalog - Multi-currency & multi-lingual - Enrollment Agreement - Candidate for Acceptance
Start Culture- “Start to Stay” • 2 nd Interview • Tuition planning session • Set financial aid deadline • Mandatory orientation • • • “Stitch-In” process Part-time job President’s acceptance letter Open house Housing
Jeff Tice Senior VP of Student Finance Nasdaq: CECO www. careered. com
How do Students Pay for College ? • Title IV Financial Aid • Grants • Cash Pay – Family – Personal Investment – Part-time Employment • Alternative Third Party Loans
Personalized Tuition Plan • Financial Aid – Review State & Federal Programs – Determine Eligibility – Design a Personal Financial Aid Package • Family Commitment – Assistance from Family or Significant Other – Monthly School Payment • Personal Investment – Tuition Deposit – Personal Responsibilities – Part-time Income
Financial Aid Online - Opportunity 28% of CEC’s students completed the FAFSA online for 2002 -2003
Dr. Patricia Kapper Senior VP of Education Nasdaq: CECO www. careered. com
Mission Statement for Learning Our mission is to serve students from diverse backgrounds, seeking to enhance their individual worth and professional potential, by delivering quality educational programs and services. Our faculty and staff are committed to promoting student success as measured by graduation and career achievement.
Our Education Product Focused on 21 st Century Careers • Curricula matched to long-term demographic and employment trends • Employers help create, refine programs • Advisory boards create lasting relationships
Superior Education Product • High quality faculty and staff • Approximately 4, 000 faculty; industry professionals • 62% part-time, adjunct faculty • First class equipment, facilities • Ongoing investments • “Hands-on” education
Retention for Success • Retention is everyone’s responsibility – from the President, to the faculty, to the staff • A practical, institutional approach • Weekly reporting and monitoring
Kathy Bennicoff Vice President of Career Services Nasdaq: CECO www. careered. com
Our moral report card Recent placement rate Up from 92% in 2001 94. 1% A+
Placement for Success • 200 Career Service Professionals focused on securing job orders • Students required to take a professional development class or attend seminars that discusses job search skills • Transferred proven marketing discipline to the career services department
CEC’s Career Services Website 4, 000 Employers 5, 200 Jobs 17, 200 Applications
CEC’s Virtual Job Fair 723 Employers 4, 161 CEC Students/Alumni 116 Chat Rooms 2, 500 Job postings 12 Hours
Some Well-known Employers Vis. Comm & Design Culinary • JAK Films (Star War’s) • DDB Worldwide • Jockey • EMCI • Hyatt • Hilton • Spago/Wolfgang Puck • Ritz Carlton Business Studies IT • CIA • Bank Atlantic • Booz, Allen & Hamilton • ADP • Intel • Televista • Cox Communications • Spherion
Mark Griesbaum Chief Information Officer Nasdaq: CECO www. careered. com
Technology New technologies are changing the most traditional college campuses. The conditions are finally right for these technologies on campus; the traditional classroom has found a powerful companion in Technology.
CEC’s 2003 IT Initiatives • • • Online Tools & Services for Students Business Process Improvements Financial Systems Implementation Management Information Delivery Business Expansion/Integration
CEC’s 2003 IT Initiatives • Online Tools & Services – “My. Campus. Com” - where students & faculty can communicate, share information, view academic progress, schedule & account information, make payments, register, etc.
My. Campus. Com Login Sample
CEC’s IT 2003 Initiatives • Business Process Improvements – Leverage student database & drive continuous business process improvements allowing CEC to scale it’s growth • Financial Systems Implementations – Implement & convert existing financial data to new G/L & automated T&E system
CEC’s IT 2003 Initiatives • Management Information Delivery – Enhance delivery of online information across our business • Business Expansion/Integration – Work closely with the business to incorporate new schools & integrate acquisitions into CEC’s technology infrastructure & business application suite
Steve Sotraidis Executive VP of Administration Nasdaq: CECO www. careered. com
Support Services for Schools • • Financial Aid Information Technology Innovations Financial Admissions Education Student Retention Career Services
Reports we use to Manage our Business? • • Monthly Marketing Report Daily/Weekly/Monthly Flash Financial Reports Daily Cash Collection Reports Financial Aid Packaging Reports Retention Reports Many more…
“CEC University”- Staff Development • CEC Online Courses • Faculty Development • Achieve. Global / Managing Interpersonal Skills • Training at CEC • Regional, Divisional, Departmental Training We have 7, 000 employees worldwide: 4, 000 faculty 1, 000 marketing 2, 000 administration
Todd Steele Executive VP of Strategic Planning & Development Nasdaq: CECO www. careered. com
Four Principal Activities 1. Strategic Planning 2. Acquisitions 3. Campus Start-ups 4. International Expansion
Acquisitions Excellent Educational Franchise Broad Student Marketability All activities support business strategies Potential for Market Leadership Excellent Regulatory Compliance Attractive 5 -year ROIC Manageable Near-term EPS impact Attractive Long-Term Financial Profile 24 Acquisitions Completed since 1994
Acquisitions – Keys to Success • Rigorous, structured due-diligence process • “Conservatively honest” assessment of required investment & growth potential • Detailed integration plans, efficient integration process • Accurate long-term opportunity assessment Full pipeline, many attractive opportunities
Campus Start-ups • Means of geographic market entry • Leverage brand equity of existing CEC brands • Excellent returns on invested capital
Campus Start-ups • 4 start-ups to date – all operating ahead of budget – 2 in 2001 - Gibbs in Philadelphia, IADT in Orlando – 2 in 2002 – Le Cordon Bleu in Orlando, Brooks in Sunnyvale • 4 start-ups in 2003 – – Las Vegas – Le Cordon Bleu (Summer ‘ 03) Atlanta – Le Cordon Bleu (Fall ‘ 03) Detroit – IADT (Fall ‘ 03) Houston – AIU –University (Fall ’ 03) • Dedicated divisional team Numerous additional market opportunities
International Expansion • Growing demand for postsecondary education • Opportunity to leverage best practices, utilize corporate assets to grow schools overseas • Proven success with AIU-London & AIU-Dubai • Visited numerous properties over past 24 months
Pat Pesch Executive VP and CFO Nasdaq: CECO www. careered. com
Annual 2003 Business Outlook • Revenue to be approx. $940 to $950 mil (includes Online of approx. $60 mil) • Operating profit margin to increase approx. 50 basis points • EPS to be approx. $1. 80 to 1. 82 • Capital expenditures to be approx. $75 to $80 mil
Revenue (in millions) * mid-range of ’ 03 Guidance
EBITDA (in millions) * mid-range of ’ 03 Guidance
Earnings per Share * mid-range of ’ 03 Guidance
Capital Expenditures $75 to $80 million expected in 2003 $43 mil $35 mil
Internal Growth Record Population Revenue EBITDA ’ 02 vs. ‘ 01 21% 34% 42% ’ 01 vs. ‘ 00 21% 35% 57% ’ 00 vs. ’ 99 24% 35% 59%
Avg. Annual Revenue Per Student * Apollo, EDMC, Strayer, COCO, ITT and De. Vry
Annual Bad Debt Expense Oct. 7, 2000 Change in Title IV Return of Funds Policy
Days Sales Outstanding
Start-up Campus Guidance • 6 to 9 months pre-opening – $0. 8 mil to $1. 2 mil operating loss • 9 to 12 months until break-even – $0. 8 mil to $1. 2 mil operating loss • Capital Expenditures – Culinary school is $4. 0 to $5. 0 mil – All other schools are $1. 0 to $2. 0 mil
3 to 5 yr. Business Outlook • 20%+ Internal Revenue Growth – 15 % population growth – 5 – 7 % pricing • 50 to 100 basis point operating margin improvement • 25%+ earnings per share growth
Jack Larson Chairman, President & CEO Nasdaq: CECO www. careered. com
The Future is Bright… • • • Favorable industry dynamics Sustainable growth opportunity Competitive position Multi-faceted growth platform Proven track record Positioned for strong EPS growth
QUESTIONS
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