Patmo Posted May 30, 2015 Share Posted May 30, 2015 Congratulations on your slam dunk. I'm trying to understand what their cash/liquidity situation will look like at YE 2015. Student enrollment is down substantially, and almost every spare dollar will go interest on their term loan and its mandatory prepayment. To hit your EBITDA projections, they will have to cut their 2015 operating expenses 20-25%. --------------- "Total student enrollment in education programs as of March 31, 2015 was 51,201, a decrease of 10.4% as compared to 57,125 as of March 31, 2014... New student enrollment in education programs in the three months ended March 31, 2015 was 14,104, a decrease of 15.8% as compared to the same prior year period." (58, 10-k) "The Term Loans will mature on December 4, 2017. The Term Loans bear interest, at our option, at: • the higher of (a) the London Interbank Offered Rate (“LIBOR”) and (b) 1.00%, plus a margin of 8.50%; or • the highest of (a) 2.00%, (b) the federal funds rate plus 0.50%, © LIBOR plus 1.00% and (d) the U.S. Prime Rate, plus a margin of 8.00%. The outstanding principal balance under the Financing Agreement must be repaid by us in quarterly installments on the first business day of each March, June, September and December, commencing March 1, 2015 and ending on the maturity date. Each installment payment must be in an amount equal to $2,500 in each quarter of 2015, $5,000 in each quarter of 2016, and $7,500 in each quarter of 2017, provided the last such installment payment shall be in the amount necessary to repay the then outstanding principal balance in full. In addition, the Financing Agreement provides for mandatory prepayment of outstanding principal in an amount equal to 50% of Excess Cash Flow (as defined in the Financing Agreement) calculated based on our cash flows for the fiscal years ended December 31, 2015 and 2016." (F-35, 10-k) Thank you. It's only just one step, there is plenty of opportunity for more curveballs. Feels good to be on the winning side this time though. I just want to clarify on EBITDA projection, this is not my projection but the company's guidance for FY15. I have 0 clue how exactly they will achieve it, just taking guidance at face value here. Link to comment Share on other sites More sharing options...
Patmo Posted May 31, 2015 Share Posted May 31, 2015 Congratulations on your slam dunk. I'm trying to understand what their cash/liquidity situation will look like at YE 2015. Student enrollment is down substantially, and almost every spare dollar will go interest on their term loan and its mandatory prepayment. To hit your EBITDA projections, they will have to cut their 2015 operating expenses 20-25%. --------------- "Total student enrollment in education programs as of March 31, 2015 was 51,201, a decrease of 10.4% as compared to 57,125 as of March 31, 2014... New student enrollment in education programs in the three months ended March 31, 2015 was 14,104, a decrease of 15.8% as compared to the same prior year period." (58, 10-k) "The Term Loans will mature on December 4, 2017. The Term Loans bear interest, at our option, at: • the higher of (a) the London Interbank Offered Rate (“LIBOR”) and (b) 1.00%, plus a margin of 8.50%; or • the highest of (a) 2.00%, (b) the federal funds rate plus 0.50%, © LIBOR plus 1.00% and (d) the U.S. Prime Rate, plus a margin of 8.00%. The outstanding principal balance under the Financing Agreement must be repaid by us in quarterly installments on the first business day of each March, June, September and December, commencing March 1, 2015 and ending on the maturity date. Each installment payment must be in an amount equal to $2,500 in each quarter of 2015, $5,000 in each quarter of 2016, and $7,500 in each quarter of 2017, provided the last such installment payment shall be in the amount necessary to repay the then outstanding principal balance in full. In addition, the Financing Agreement provides for mandatory prepayment of outstanding principal in an amount equal to 50% of Excess Cash Flow (as defined in the Financing Agreement) calculated based on our cash flows for the fiscal years ended December 31, 2015 and 2016." (F-35, 10-k) Re: Liquidity, there is 225mil in cash + student loans recoverable vs. 300mil in debt. That's only a 75mil gap and they averaged 100 mil in operating cash (this includes interest expense naturally) in past 3 years, with similar expectations for the next 3. Even with a total write off of peaks/cuso loans recoverable which imo is completely unrealistic (believe it or not some people do have the pride to uphold their end of a mutually agreed upon contract), the company could have 0 debts by the end of 2017 with a 150mil cash cushion, excluding significant int exp savings (let's call them a wash vs. lawsuit settlement costs). In other words, even if the business model truly was unsustainable in the long term as the disaster prophets yell out from their soapbox and revenues declined 10% annually forever, the investment will still be profitable at current price. It just makes no sense. I'm not as big of a fan of share buybacks as most people on this board but at this point they have so much breathing room that they could honestly start considering the idea again. Just setting aside a little 20mil for buybacks sub $10ps would be NASTY. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted June 1, 2015 Share Posted June 1, 2015 Patmo: You very well might be right! If so, you'll make a ton of money. HOWEVER, the nature of this industry is changing and the glory days of the past I don't think are ever coming back. There is an argument to be made that this industry has a good chance of going away. The odds of this are certainly greater than zero, and are not trivial (single digit odds). What is this investment worth if enrollment drops 20% a year? 30% a year? Who is going to enroll with school that is under investigation? criminal probes? Their reputation is permanently damaged/impaired. What if the government puts the kibosh on student loans? If that happens, the industry is done. Who benefits from the existence of these companies? Certainly NOT a lot of the students...certainly not the government who is backstopping a lot of these loans. ESI might not be as bad as some of the other companies, COCO, EDMC, and some of the others... If half their students have terrible outcomes, how much longer will the company go on? I am passionate about this as several friends and employees have been VERY badly hurt by "education". I have also seen some of this stuff up close and personal and found it to be quite shocking... On the other hand... PERHAPS certain bad actors pay for their misdeeds... PERHAPS the schools rework their offerings and actually offer value to the students. How is this done? Offer more/higher quality instruction. That costs money. Have the students take more classes. Lower price of tuition. Increase spending on career guidance/development. Almost all actions will cost money. That will reduce the return on investment.... IF these companies survive, I don't see how they will earn anything like the returns they did in the past. Link to comment Share on other sites More sharing options...
Patmo Posted June 1, 2015 Share Posted June 1, 2015 Patmo: You very well might be right! If so, you'll make a ton of money. HOWEVER, the nature of this industry is changing and the glory days of the past I don't think are ever coming back. There is an argument to be made that this industry has a good chance of going away. The odds of this are certainly greater than zero, and are not trivial (single digit odds). What is this investment worth if enrollment drops 20% a year? 30% a year? Who is going to enroll with school that is under investigation? criminal probes? Their reputation is permanently damaged/impaired. What if the government puts the kibosh on student loans? If that happens, the industry is done. Who benefits from the existence of these companies? Certainly NOT a lot of the students...certainly not the government who is backstopping a lot of these loans. ESI might not be as bad as some of the other companies, COCO, EDMC, and some of the others... If half their students have terrible outcomes, how much longer will the company go on? I am passionate about this as several friends and employees have been VERY badly hurt by "education". I have also seen some of this stuff up close and personal and found it to be quite shocking... On the other hand... PERHAPS certain bad actors pay for their misdeeds... PERHAPS the schools rework their offerings and actually offer value to the students. How is this done? Offer more/higher quality instruction. That costs money. Have the students take more classes. Lower price of tuition. Increase spending on career guidance/development. Almost all actions will cost money. That will reduce the return on investment.... IF these companies survive, I don't see how they will earn anything like the returns they did in the past. No hard feelings DTEJD, I already know you are passionate about this topic. The late 2000's were definitely bubble years and these organizations were willful participants in the craziness by offering crappy education. Stupid and greedy of course. However it also took 2 parties to play along. I agree with you that margins are going to be compressed compared to the old highs, but the underlying economics of the business are still intact: It's a capital-light business that enjoys flexibility scale-wise. We don't need to net 500 million a year for a profitable investment at current share price. I will be content with fair profits on fair education at a fair price. In fact if it works out in the end, investors will be left with a multibagger from here with just that. Don't forget the company is still working with a billion dollars in revenue here, and was trading at a 50mil market cap... ESI has done a lot to improve, and credit should be given in this regard. There is plenty of work to be done still, but its chances of folding are low enough to make this investment a no-brainer, in my opinion. I am fully cognizant of this possibility, but if it does happen it won't be from the economics of the business but from a regulatory trip-up imo. Link to comment Share on other sites More sharing options...
BeerBBQ Posted June 1, 2015 Share Posted June 1, 2015 Patmo, Are you involved with APOL or have any thoughts there? Seems like APOL is quite cheap as well - maybe not as cheap as ESI at $2.50 but potentially less of a mess? If you have any comments re: APOL, would you mind sharing them on the APOL thread? Thanks. Link to comment Share on other sites More sharing options...
thepupil Posted June 1, 2015 Share Posted June 1, 2015 Patmo how are you sized in this? I hope you are treating it like an option with 100% downside. I admire your willingness to be contrarian, that you were pounding the table before the recent 100% move, but you seem a touch confident for an investor in something that to me looks so binary. What you are paying relative to earnings is kind of a nebulous concept here considering the likely off balance sheet liabilities, the fact that the business is going to change markedly, the fact there may be criminal charges and class actions and this and that. I would never short something like this and it obviously has boat loads of upside. I don't know a lot here and am just observing be that the "BUFFETT BITCH!" Signature and seeming disregard of the existential risks here seems like a recipe to lose money. I don't mean to pour salt in an open wound but cheapness is not everything. Remember green star at a 2x PE? If you are sized appropriately and can afford to lose everything in your ESI, or are playing with "house money", then I will get off my soap box. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/gre-greenstar-agricultural/msg166584/#msg166584 EDIT: ignore irrelevant comment on the signature, I like the signature Link to comment Share on other sites More sharing options...
jawn619 Posted June 1, 2015 Share Posted June 1, 2015 Buffett bitch Link to comment Share on other sites More sharing options...
Patmo Posted June 2, 2015 Share Posted June 2, 2015 Patmo how are you sized in this? I hope you are treating it like an option with 100% downside. I admire your willingness to be contrarian, that you were pounding the table before the recent 100% move, but you seem a touch confident for an investor in something that to me looks so binary. What you are paying relative to earnings is kind of a nebulous concept here considering the likely off balance sheet liabilities, the fact that the business is going to change markedly, the fact there may be criminal charges and class actions and this and that. I would never short something like this and it obviously has boat loads of upside. I don't know a lot here and am just observing be that the "BUFFETT BITCH!" Signature and seeming disregard of the existential risks here seems like a recipe to lose money. I don't mean to pour salt in an open wound but cheapness is not everything. Remember green star at a 2x PE? If you are sized appropriately and can afford to lose everything in your ESI, or are playing with "house money", then I will get off my soap box. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/gre-greenstar-agricultural/msg166584/#msg166584 EDIT: ignore irrelevant comment on the signature, I like the signature Hello pupil, Sorry if my online demeanor appears less than curated. I don't necessarily make much of an attempt to come across as very professional, maybe I could do a better job of it. The buffet bitch thing just sprung about from my annoyance at the cultish level of reverence many have for Warren. He's among the best there ever was, but if I see another person using a Buffet quote as an argument in defending their position I'm going to gouge my eyes out. Ok, not really... Yes, naturally, I remember GRE! The sheer obviousness of the situation is quite embarrassing to be honest. Are you saying the endgame is as clear for ESI? If so I disagree wholeheartedly. I'm not denying the presence of any existential risks. Even the largest and best companies in the world are not bulletproof, let alone a bird with broken wings. What I've been arguing is that these risks are far overweighted and share price is far too discounted, creating a textbook value opportunity. Additionally, a large chunk of the threat to ESI's ability to continue as a going concern has been washed away in the last filing. Don't underestimate the impact of the last 10k in clarifying ESI's liquidity concerns. I expect the number-crunching value guys will start paying attention. These things you listed as existential risk will almost always be at the forefront in a low PE/PB/whatever environment anyway, someone who doesn't embrace this uncertainty should focus on a different strategy imo. Deep & dirty value is a game of odds, and I'm (surely you are aware) super duper excited to take the odds on this one. If this investment fails I will chalk it up to variance and buy DTDJE a beer. Or maybe he should buy me one if it gets to that 8) Hope this clarifies my thoughts Link to comment Share on other sites More sharing options...
thepupil Posted June 2, 2015 Share Posted June 2, 2015 please remain uncurated. The Buffett Bitch! signature provides me with a pleasing mental image of warren buffett storming onto a dance floor and screaming this britney spears style I don't know enough about ESI to comment as to whether the market is right or wrong or overweighting or underweighting them. I just wanted to preach that the downside here seems to be 100% and if it isn't sized as such, I ask you to consider it for your own sake. That is all. Link to comment Share on other sites More sharing options...
Patmo Posted August 25, 2015 Share Posted August 25, 2015 One hurdle cleared today. Risk wise we've gone full circle, it's back mostly to the rate of declining revs. Enrollments went down a monstrous amount this year, and while the business has showed the ability to scale down successfully so far, will it be able to keep up at this pace? Time will tell Another big risk left is that Cerberus covenant trap loan, which could wipe a lot of property off the books. It would be kind of like that sale and leaseback deal from last year, but without the proceeds........... As before, I maintain that if ESI can successfully tread these dangerous waters, a double digit bagger is possible from here. I think the co will require more efforts than its currently deploying to regain student confidence. Its going in the right direction (focusing on student outcomes), but the level of urgency necessary is just not there yet. A new CEO would possibly be a welcome change on that front, if they can find someone qualified enough for the job. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 4, 2015 Share Posted October 4, 2015 hey all: Anybody still following this? Last trade on 10.2.15 was at $3.30/share. Apparently the company is under investigation by the Department of Justice for fraud...This is the latest investigation, started in the latter part of September 2015. Meanwhile, the bad news & reputation of the "for profit" industry keeps mounting. Are there any participants that might thrive long term? Any thoughts? Link to comment Share on other sites More sharing options...
DTEJD1997 Posted January 23, 2016 Share Posted January 23, 2016 Hey all: Not sure if anybody is still "invested" in this or even following it... There was a massive insider "whistle blower" fraud lawsuit filed a couple of days ago. Turns out the DEAN of one of their Florida skools rolled over after he was fired. He is alleging that blind students were enrolled in networking classes where they had to see the color of different wires and had to complete tasks where vision was required. That students incapable of reading & writing were enrolled. That wildly false claims were made to prospective students in order to get them to enroll. That they specifically targeted minority & poor students. It is like a greatest hits of fraud & abuse. What is really interesting is that the law firm representing the dean claims to have several more suits against these guys: "It’s likely we’ll be seeing more suits of this nature. Scher said his firm currently has four or five cases similar to Lipscomb’s suit under seal. Fraud of this kind is “quite rampant and all over the country we are pursuing claims of this nature,” he said." For the whole of the article: http://www.marketwatch.com/story/at-itt-tech-a-greatest-hits-of-abuses-attorney-2016-01-21 Link to comment Share on other sites More sharing options...
Patmo Posted January 23, 2016 Share Posted January 23, 2016 Hey all: Not sure if anybody is still "invested" in this or even following it... There was a massive insider "whistle blower" fraud lawsuit filed a couple of days ago. Turns out the DEAN of one of their Florida skools rolled over after he was fired. He is alleging that blind students were enrolled in networking classes where they had to see the color of different wires and had to complete tasks where vision was required. That students incapable of reading & writing were enrolled. That wildly false claims were made to prospective students in order to get them to enroll. That they specifically targeted minority & poor students. It is like a greatest hits of fraud & abuse. What is really interesting is that the law firm representing the dean claims to have several more suits against these guys: "It’s likely we’ll be seeing more suits of this nature. Scher said his firm currently has four or five cases similar to Lipscomb’s suit under seal. Fraud of this kind is “quite rampant and all over the country we are pursuing claims of this nature,” he said." For the whole of the article: http://www.marketwatch.com/story/at-itt-tech-a-greatest-hits-of-abuses-attorney-2016-01-21 These kind of lawsuits keep getting thrown out, settled for peanuts at worst. You fail to mention that in the same 8k, it is mentioned that the DOJ elected not to go against the company after investigating them. The DOJ. Not another peddler looking to take advantage of the system for their cut of the pie in the form of a lowly settlement, but one of the most important regulatory bodies in the US. They have nothing. This company will do very well in the long term as long as it manages to survive the short term, and while it's not a guarantee, it has some options in its pockets to get that done. Once the public recognizes the new value proposition that the company is in the process of developing, on real education for real jobs with real demand - eg STEM fields, things will turn around. Within 2 years tops, enrollments will start going the other way and the suits with red ties will lose their shirts on their shorts. Link to comment Share on other sites More sharing options...
Guest roark33 Posted January 24, 2016 Share Posted January 24, 2016 The DOJ did decline to intervene, but I think it is a stretch to say the companies will do very well in the long term. ITT may be the worst positioned one going forward based on their course offerings and their financial position. Cerberus is continuing to tighten the strings, each extra dollar that comes in gets set aside to paying them off faster. Given that APOL already reported and their enrollment numbers were quite bad, I imagine ESI's numbers will be the same or worse. That being said, it is a great trading sardine.... Link to comment Share on other sites More sharing options...
DTEJD1997 Posted January 24, 2016 Share Posted January 24, 2016 Hey all: Not sure if anybody is still "invested" in this or even following it... There was a massive insider "whistle blower" fraud lawsuit filed a couple of days ago. Turns out the DEAN of one of their Florida skools rolled over after he was fired. He is alleging that blind students were enrolled in networking classes where they had to see the color of different wires and had to complete tasks where vision was required. That students incapable of reading & writing were enrolled. That wildly false claims were made to prospective students in order to get them to enroll. That they specifically targeted minority & poor students. It is like a greatest hits of fraud & abuse. What is really interesting is that the law firm representing the dean claims to have several more suits against these guys: "It’s likely we’ll be seeing more suits of this nature. Scher said his firm currently has four or five cases similar to Lipscomb’s suit under seal. Fraud of this kind is “quite rampant and all over the country we are pursuing claims of this nature,” he said." For the whole of the article: http://www.marketwatch.com/story/at-itt-tech-a-greatest-hits-of-abuses-attorney-2016-01-21 These kind of lawsuits keep getting thrown out, settled for peanuts at worst. You fail to mention that in the same 8k, it is mentioned that the DOJ elected not to go against the company after investigating them. The DOJ. Not another peddler looking to take advantage of the system for their cut of the pie in the form of a lowly settlement, but one of the most important regulatory bodies in the US. They have nothing. This company will do very well in the long term as long as it manages to survive the short term, and while it's not a guarantee, it has some options in its pockets to get that done. Once the public recognizes the new value proposition that the company is in the process of developing, on real education for real jobs with real demand - eg STEM fields, things will turn around. Within 2 years tops, enrollments will start going the other way and the suits with red ties will lose their shirts on their shorts. I am not short this name or any others in the for profit education sector. I fail to see how these guys escape all the lawsuits. Just because the DOJ declined to pick up on this suit, who is to say they don't change course in the near future? Who is to say more state's AG's don't come after them? At some point, the bad press is going to really hurt these guys...what students go these skools that are facing so many lawsuits? What employers hire graduates from these places? That could lead to awkward advertising..."Come to ITT Tech, now with 90% less lawsuits!" Finally, what happens when a few of these suits get through and somebody gets a judgment? Where there is smoke there is fire. The first dozen roaches are hardly the first ones in the kitchen... We'll see, maybe I'm wrong, but I very much doubt it... Link to comment Share on other sites More sharing options...
Patmo Posted February 12, 2016 Share Posted February 12, 2016 The DOJ did decline to intervene, but I think it is a stretch to say the companies will do very well in the long term. ITT may be the worst positioned one going forward based on their course offerings and their financial position. Cerberus is continuing to tighten the strings, each extra dollar that comes in gets set aside to paying them off faster. Given that APOL already reported and their enrollment numbers were quite bad, I imagine ESI's numbers will be the same or worse. That being said, it is a great trading sardine.... Agreed on overall financial position, but I would like to discuss the other 2 points. What tells you Cerberus is tightening the strings? The recent news that are coming out are pointing towards a "restructuring" (it's not that but I don't know a better word for it) of the liabilities, with minor optimizations here and there (eg. renegotiation of the letter of credit). It would fit the current flow much more if the narrative was that they are paying down Cerberus early to refinance some less expensive way while they still can - eg. RE sale+leaseback, or through a less expensive creditor. Cerberus can only be giddy as hell with their investment so far, what reason do they have to end it early? Am I missing something? In regards to their program mix. They are clearly focusing on hard demand areas, eg. recently coming out and announcing that they are focusing their entire attention on STEM fields. They already ditched criminal justice and other such nonsense. Compare that to all the online programs and artsy programs out there... How do you teach someone to jam a needle in an arm through a multiple choice questionnaire on the internet? ESI's program mix will be fine, the concern is that its quality is sub-par. And on that point, I know you do your DD like nobody else so you don't need me to point you to pg3 of the Jan 29 8k, management objectives 2,3&4 for yet another indication of the route ESI is taking. They have surrendered on the bullshit, and as human nature dictates, they needed their back stacked against the wall for that to happen. Is it too little, too late? That one's a toss up, but it's an entirely different argument. Link to comment Share on other sites More sharing options...
Patmo Posted March 2, 2016 Share Posted March 2, 2016 CECO just posted 10k, latest quarter was very positive and stock jumped 30%. CECO is in a very similar position to ESI, with less leverage but not profitable. The rest of the situation is substantially the same for both companies. CECO is much more transparent in its reporting, it actually breaks down the schools' performance by segment. Like ESI with criminal justice, CECO is teaching out its lower quality programs - Cooking and crap like that. These lower quality programs hide out the profit potential of the other schools. The traditional schools posted 2015 EBIT of 65mil, but its crappy programs reduced this EBIT by 150mil, down to a significant operating loss for the year. These teach-out programs make up 35% of the company's revenue. ESI and CECO are using the same playbook to get out of the same hole they dug themselves in (CECO appears a year ahead in progress despite incurring financial losses, eg. enrollments are stabilizing). I don't think it's an aggressive sale to propose that Criminal Justice is hiding profit potential from the rest of the business similarly to CECO's Cordon Bleu. Here's a quick and dirty back-of-envelope exercise: Criminal justice accounts for roughly 8% of total enrollment, so 71mil in revs. At Cordon Bleu margin of -40%, this means an -EBIT of 28mil, which the company can expect to save post-CJ. Bears can bring many arguments to the table, but they can't argue that ESI has done a fantastic job in maintaining cash flows given its situation. It cannot be escaped, other credit less astute than Cerberus will catch on and start showing up again. Once they are paid off I expect a much more reasonable cost of borrowing for ESI. 2016 will be a pivotal year, if things go well 2017-2018 will be beautiful years for ESI. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 2, 2016 Share Posted March 2, 2016 Patmo, could you point me to the 8% figure on criminal justice for ESI. I can't seem to locate that quickly. I really thought that entire unit was gone by now. Link to comment Share on other sites More sharing options...
Patmo Posted March 2, 2016 Share Posted March 2, 2016 CJ page wouldn't be up on their website if it was fully gone. I can't give you source while I'm at work but it's definitely not 100% fresh, think a year old. ESI is weak on disclosure for sure. I think 2014 ye cc transcript or rev2013 cc at earliest (the one done near end of 2014), it was just a rough & quick exercise to show a portion of earning power is hidden still. Worth calling to ask maybe, doesn't affect the thesis either way for me. CJ can't be taught out in a year though Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 2, 2016 Share Posted March 2, 2016 Ok, found it. In Oct 2014, CJ only represented 4% of student enrollment: and total student enrollment declined 54.9% in the School of Criminal Justice and represented 4% of the total. That was end of Q3 numbers for 2014. They had stopped enrollments at that point, so I would imagine it is a rounding error now. I get that thesis with CECO (although I disagree), but I think the idea that CJ is hiding their profitability at ESI is wrong. There are a lot of difference, mainly that the infrastructure to teach out CJ is the same for any replacement programs. That's not the same with the culinary and other divisions being taught out at CECO. Additionally, the debt from the off-balance sheet loan programs is so large that the cash flow on the substantially reduced student enrollment may not even be able to support it. My two cents. But, it might be good for a trade on good cash flow numbers.... Link to comment Share on other sites More sharing options...
Patmo Posted March 2, 2016 Share Posted March 2, 2016 That's curious, I definitely read 8% but I could have misread something, I was rushing before work. Seeking alpha is so frustrating I'm not gonna bother checking again until I actually get home tomorrow evening, but I believe you. I did not stop to think of the diff. Between cooking school vs. Traditional classroom either, like I said it doesn't chqnge thesis anyway. I'm just glad whenever there's some discussion on this name. Best trading has been on delayed filing rather than cadh flow. I caught the boat on the first go, but missed the boat the second go around. How have your trades gone? Link to comment Share on other sites More sharing options...
Patmo Posted March 4, 2016 Share Posted March 4, 2016 I can't find the 8% figure again????? Same conference call as the 4% figure I think, well I booboo'd either way. One thing that has been on my mind for a while is why has the repayment of Cerberus loan been accelerated. Essentially, if it's happening on purpose by ESI (eg. to enable refinancing via the sale/leaseback of properties) then it would be a pretty neat development, otherwise, well, whomp-whomp. I'm not familiar if the other obligations even permit such a deal, but I'm certain the Cerberus loan doesn't. This weekend I will also try digging to see if there is any disclosure on whether Cerberus has the option of demanding accelerated repayment. I think it's pretty easy to see details tend to really stick with me LOL.................................................. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 4, 2016 Share Posted March 4, 2016 I think the accelerated re-payment is Cerberus wanting their money back as quickly as possible. I am not sure anyone will be willing to refinance any of ESI's debt. If you look at all the other for-profits, their enrollment numbers are in free-fall. ESI's course offerings are among the worst, so I anticipate a continual decline. I still think they have an amazing ability to convert their revenue to cash flow, but I wouldn't own it for more than a trade because their "revenue" base will continue to decline to the point that even at a cash flow profitable level, I am not sure they will be able to pay off all the third-party loans that are now on the books. That's my two cents....so buy it on the cash flow numbers, but don't stick around... Link to comment Share on other sites More sharing options...
Patmo Posted March 4, 2016 Share Posted March 4, 2016 Can you point me to who is in freefall? CECO, DV, STRA, all flat to 5% down and improving, correct me if I am wrong as apparently I can't read LOL. ESI was the worst with 15%+ decrease, and APOL conveniently announced expected 2016 drop in enrollments of 25% moments before being acquired for a pittance. I don't see enrollments decreasing 15% forever, I guess that's where we differ the most in viewpoint. So far the company has done a great job scaling down, there's been a lag with the large enrollment decrease in 2015 but a 5% decrease year would probably see cash flow go up rather than down... Just my thoughts Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 4, 2016 Share Posted March 4, 2016 "For the November 2015 session, new undergraduate students declined 31.4 percent to 2,883 students. Total undergraduate students declined 21.2 percent to 30,132 students. On a same-campus basis (excluding the locations moving to an online-only delivery), new undergraduate student enrollments declined 25.0 percent and total students declined 14.4 percent." This is Devry US unit, non-healthcare, which is most similar to ESI. Apollo is another one I see as very comparable (not sure why it being acquired should affect the 2015 numbers or the guidance, unless you think they are sandbagging to make the acquisition look better). I would exclude Strayer from that bunch as they have a lot of business initiatives, Fiat deal, etc that don't really make them a good comp anymore. I am not saying they can't be cash flow positive, but they have a large overhang of debt and if you are maxed out at 10-15% cash flow margins on your revenues, then as your revenues decline each year, that cash flow obviously shrinks. That debt overhang isn't variable, though... Link to comment Share on other sites More sharing options...
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