Like other for-profit education companies, Schaumburg-based Career Education hasn’t done a lot of profit making lately. It’s seen its student numbers decline from 118,000 in 2010 to just 38,000 today while coming under fire from legislators and regulators who’ve accused for-profit schools of leaving students with useless degrees and large debts.
Its plan to close all but two of its schools may be bearing fruit. Its second-quarter results Friday exceeded market expectations and gave interim CEO Ron McCray grounds to argue that Career Education is turning the corner.
By the numbers: For the quarter, Career Education’s loss per share narrowed to 31 cents from 69 cents, beating Wall Street’s expectations of a loss of around 50 cents per share.
Revenue was $175 million, down from $186 million in the same period last year. But the firm stemmed its losses in the second quarter, which fell to $21 million from $47 million.
Overall student enrollment decreased, reflecting the winding down of 30 Career Education career college campuses. But enrollment at the firm’s remaining schools in its university group — Colorado Technical University and American InterContinental University — increased slightly to 31,300 from 30,600 in the second quarter of 2014.
The “why”: Career Education isn’t enrolling new students at the schools it is winding down but still has expenses while current students complete programs. Its “transition group” of closing schools took a $32 million loss.
On the plus side, it has increased the number of deals it has to provide education and training to employees of other firms, cut overhead associated with support and marketing for its closing career colleges to help reduce its operating costs for the quarter to $184 million from $197 million. And tuition revenue at CTU and AIU was up $29 million.
Quote you on that: “I believe we’re on the right path to profitability that will benefit our students, staff and shareholders,” McCray said.
Highlights from the quarter: Career Education sold its Brooks Institute visual arts school in California to Gphomestay. It started popular new courses in nursing and health care at its universities and continued to develop its Intellipath computer system, which personalizes course materials for students. A favorable ruling from the Seventh Circuit of the U.S. Appeals Court on a False Claims Act case brought against the firm encouraged it that its regulatory troubles may be receding.
What’s next: Experienced education industry executive Todd Nelson takes over as Career Education’s CEO on Wednesday. Nelson told investors that despite the turmoil the for-profit education industry has been going through, demand for education continues to grow, and that “the ability for the traditional providers to meet that is just not there.” Career Education aims to complete the closing of its career colleges by the middle of 2018 and to continue to cut corporate overhead, including $375 million in annual operating expenses by the end of 2018.
Market reaction: Career Education shares gained $1.06, or 32.7 percent, to $4.31 on Friday morning.
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