Tag Archives: ITT Educational Services Inc.

ESI 10-K Highlights, the “More You Learn, the More You Earn” Student Covenant Continues to Slip Away While Cohort Default Rates Remain Surprisingly Low

February 21, 2010 – 12:08 pm

ESI released its annual 10-K filing on Friday. We wanted to provide you with a few key observations and revisit some of the original tenets of our short thesis on the stock.  Overall, there was nothing in the 10K that we would characterize as “earth shattering”, although we anticipate many investors will be interested to [...]

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ESI Reports a Solid Quarter, New “Private Student Loan Program” Optically Looks Good, Economically “Kicks the Can Down the Road”

January 21, 2010 – 10:36 am

ESI reported 4Q09 results this morning. You can read the full press release here. Overall we would characterize the results as a solid beat relative to consensus.  Here are the quick highlights:

Revenues of $374.4 million vs. consensus of $370.6 million (we had forecast $378 million)
Gross margin of 67.6% increased an astounding 400 bps YOY.  Clearly [...]

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ESI 4Q09 Preview: The Last Days of Operating Margin Leverage?

January 19, 2010 – 5:50 pm

ESI will report 4Q09 results on Thursday, before the market opens.  Here are the issues which we expect to be at the forefront of investor concerns heading into and subsequent to the company’s earnings release:

Sustainability of enrollment growth – On the heels of APOL’s 1Q10 results, we think investors are increasingly concerned about the implications [...]

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The Dept. of Education Fires A Shot Across the Bow of the Higher Learning Commission (HLC)

December 17, 2009 – 4:33 pm

The education stocks are trading off today following the release of a memorandum from the Department of Education’s Office of Inspector General (OIG).   You can find the memorandum here.  Effectively the OIG has asked the Department of Education to review the status of the HLC and potentially “limit, suspend, or terminate HLC’s recognition by the [...]

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WPO Alters Revenue Recognition Policy for Kaplan Higher Education, More Enrollment Reconcilliation

November 8, 2009 – 6:58 pm

In a recent letter to Warren Buffet, we voiced our concerns about what seem to be growing regulatory issues at Washington Post Company’s most important division, Kaplan Higher Education.  From an outsiders perspective the magnitude and rate of increase in 2-year cohort default rates at many of the company’s schools is alarming in the context of [...]

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Apollo Group’s 4Q09 Results Send Shockwaves: Could the SEC Inquiry Relate to Accounting for Student Withdrawals? APOL Backs Away From Lower Quality Students

October 28, 2009 – 1:08 am

Readers of our research know that we have been bearish on the for-profit education sector for the past few quarters based on our concerns about growing fundamental headwinds, increasing regulatory scrutiny, and what we view as significant structural issues for a few operators in the sector. Outside of our analysis of COCO’s bad-debt expense recognition, [...]

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Quick Thoughts on ESI’s 3Q09 Results: Low Quality EPS Beat, Bad-Debt Expense Continues to Grow, First Ever Seq. Decline Op. Margins 2Q to 3Q

October 22, 2009 – 8:18 am

ESI reported 3Q09 result this morning. You can find the release here.  Overall the company beat by approximately $5 million on the topline and $0.03 on the bottomline. Here are our quick observations:

We would characterize the EPS beat as low quality.  Excluding the benefit of share buybacks during the quarter we estimate the company would [...]

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ESI 3Q09 Preview, Backing Into FY10 Consensus – Margins Don’t Grow to the Sky Do They?

October 21, 2009 – 8:42 am

ESI reports 3Q09 earnings and fall term enrollments Thursday morning.  In general, we have discussedat great length our concerns about what we view as structural issues with the company’s tuition policies and the return on educational investment students now receive.  We think this will eventually cause the company to reduce tuition, which could severely alter [...]

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At Least For Now For the Bulls In For-Profit Education “It Just Doesn’t Matter”, Next Up Earnings and “NegReg”

October 14, 2009 – 8:05 pm

A hearing was held today by the House Committee on Education and Labor entitled: “Ensuring Student Eligibility Requirements for Federal Aid”.  You can find all of the details here.  The hearing was called as a result of a report released by the US Government Accountability Office (GAO), which attempted to compare the cohort default rate of [...]

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A Question of Recourse – The GAO Report Might Not Have Been As Bad As Feared, but It Still Confirmed Our Short Thesis

September 22, 2009 – 8:28 am

For those of you that have followed our research since inception, you are probably intimately familiar with our concerns about the for-profit education sector.  We have been bearish on a few of the publicly traded for-profit education providers for the past few months. As a reminder, The central tenets of our investment thesis are as [...]

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