Strategic Education, Inc. (STRA) Q4 2011 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to Strayer Education Inc's Fourth Quarter and Full Year 2011 Earnings Results Conference Call. This call is being recorded. [Operator Instructions] At this time for opening remarks and introductions, I'd like to turn the call over to Strayer Education Senior Vice President of Corporate Communications, Ms. Sonya Udler. Ms Udler, please go ahead.

Thank you, operator. With us today to discuss the results are Robert Silberman, Chairman and Chief Executive Officer for Strayer Education; and Karl McDonnell, President and Chief Operating Officer. Unfortunately, Mark Brown, our Chief Financial Officer, will not be joining us today due to a death in his family. For those of you that wish to listen to the conference via the Internet, please go to strayereducation.com, where the call will be archived for 90 days. If you are unable to listen to the call in real time, a replay will be available beginning today at 1:00 p.m. Eastern Time through Thursday, February 23. The replay is available at (855) 859-2056, conference ID 32870725. Following Strayer's remarks, we will open the call for questions and answers. I would like to remind everyone that today's press release contains and certain information on this call may contain statements that are forward-looking and are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act. The statements are based on the company's current expectations and are subject to a number of uncertainties and risks that the company has identified in the paragraph on forward-looking statements at the end of its press release and that could cause the company's actual results to differ materially. Further information about these and other relevant uncertainties may be found in the company's annual report on Form 10-K and its other filings with the Securities and Exchange Commission. Copies of these filings and the full press release are available online and upon request from the company's Corporate Communications department. And now, I'd like to turn the call over to Rob. Rob, please go ahead.

Thank you, Sonya, and good morning, ladies and gentlemen. As is our custom, I'd like to begin this morning with a brief overview of both our company and our business model for any listeners who are new to Strayer. I'll then ask Karl to provide a brief update on our operating results, including our enrollment results for the University's winter academic term. Our company's financial results for the fourth quarter and full year of 2011 are contained in this morning's press release, so I would refer listeners to our release for that detailed information, but I will summarize some of the financial highlights in Mark's absence. And to conclude, I'll provide an update on our growth strategy and the company's earnings outlook for Q1 2012. Strayer Education is an education service company whose primary asset is Strayer University, a 50,000-student, 92-campus, post-secondary education institution, which offers masters, bachelors and associates degrees in Business Administration, Accounting, Computer Science, Public Administration and Education. Unlike traditional universities, Strayer students are working adults who are returning to school to further their careers. Our revenue comes from tuition payments and associated fees. Approximately 75% of our revenue comes to us from Federal Title IV loans issued to our students. Our expenses at Strayer Education include the cost of our professors, our admissions and administrative staff, marketing expenses and facilities and supplies costs. We serve students in 23 states through our physical campuses, as well as in all 50 states and over 30 foreign countries through our online courses. Strayer University is accredited by the Middle States Commission on Higher Education. Now, Karl, how about running them through the operational results?

Sure. First, on our enrollment results, total enrollment for the winter academic term was down 12% to 50,432 students. Our new students were down 8%, and our continuing students were down 12%. Our continuation rate was down a couple of hundred basis points, mostly attributable to the fact that over the last year we've had a decline in new students, and so we have a mismatch compared to the number of students who are graduating. However, even net of that this quarter, our continuation rate was down slightly. We also believe that the continued economic downturn has an impact as well. Enrollment at our mature campuses decreased 15%, while enrollment at new campuses increased 18%. Global online students fell 17%. Turning to our national accounts, we find 5 new agreements during the quarter, including agreements with the U.S. Department of Health and Human Services and Hewlett-Packard. For the winter term, students from our national accounts increased 11% and on a full year basis, national account students grew 8% in 2011. Lastly, in terms of student mix, graduate students grew slightly in the winter term, while our undergraduate students decreased. As a matter of fact, new graduate students grew significantly for the winter academic term. They were up 30%. As a result, graduate students now comprise 32% of our student population, which on a mix basis, is up about 400 basis points from the prior year. Rob?

Thanks, Karl. Just a few amplifying comments on the financials which, as I said, are contained on our press release. For the fourth quarter, our revenue and expenses were both slightly higher than our forecast for the quarter. On the revenue side, we had a slight year-over-year increase in revenue per student. We were modeling that to be flat, basically due to the mix shift that Karl described towards graduate students and corporate-sponsored students. On expenses, again, slightly above our forecast, most of that was due to bad debt, was up slightly 4.4%, I believe, versus 4.2% last year. Our operating margin forecast for the quarter was spot on. The increase in operating income was basically at the same operating margin that we were forecasting, more revenue, more expenses, and that generated a slightly higher operating income than we were expecting. The EPS of $2.30 was $0.05 better than the midpoint of our forecast. Most of that was due to the higher operating income, about $0.01 of it was due to share repurchases during the quarter. A couple of key points on the full year financial results. Every year at this time, we try and look back and analyze the full year against our operating model that we've provided to you all. First, on the book income statement. In 2011, we had 4% less enrollment, which led to 1.5% less revenue, 530 basis points of lower operating margin, 19% less net income and $8.88 per share of earnings, which is down 8% from the prior year. The decrease in revenue was obviously less than the decrease in enrollment with the price increase. The operating margin compression leads to a higher or a greater loss in net income. Earnings per share was not down as much, mainly due to share repurchases. Second, on cash flow. Net cash from operations actually did much better. We were down only 5% on a 19% drop in net income and owners' distributable cash flow did even better than that, we were actually up 7% in the year when every other financial indice was down. During the year, we generated $154 million in cash from operations. We used that $154 million, plus $20 million of cash from our year end 2010 balance sheet, plus $118 million in loan proceeds during the year as follows. We invested $37 million to maintain and grow Strayer University, including our portion of the purchase price for the Welch Wealth Management Institute and we repurchased approximately $200 million of our common stock during the year at roughly $128 per share, and we returned $50 million to our owners in dividends or $4 per share annually. Turning to an update on our growth strategy looking forward into 2012, many of you will remember that the strategy is based on 5 objectives: The first is to maintain enrollment in the company's mature markets; the second is to invest our human and financial capital in opening new campuses, particularly in new states and markets; third, invest in and build our online curricula; fourth, increase our corporate and institutional alliances; and the final objective is to effectively redeploy our owners' capital. Karl has already reported on the first 4 objectives, so I won't add anything there. On the capital redeployment, we announced this morning our regular quarterly dividend of $1 per share, and we also announced that we'd repurchased approximately 210,000 shares of our common stock during the fourth quarter of 2011. On our business outlook for the first quarter of 2012, based on the University's 12% lower enrollment for the winter term than we experienced last year, we expect EPS in the first quarter of 2012 to be in the $2.07 to $2.09 range and roughly 500 basis points of lower operating margin. And with that, operator, we'd be pleased to answer any questions. We generally do this on a first-come first-serve basis, but this quarter, we'd like to throw the first question to Brandon Dobell since he felt like he had the last one last time. So Sonya, will you make sure Brandon gets the first question.

[Operator Instructions] I'm not showing Brandon in queue at this time.

Well, go ahead take the first question then.

Our first question comes from Jeff Meuler with Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: In terms of revenue per student, what drove the upside in the quarter given that grad student growth was strong and the national accounts student growth was strong? And then as you guys anniversaried the 5% price increase in January and put in a 3% price increase this year, are you expecting a step down, I guess, in Q1 and is there a reason that it should recover from that level later in 2012?

Well, we put it in place, the 3% tuition increase. But we are modeling, to the degree that we can, increased mix shift towards both graduate and corporate-sponsored students and because of that, our internal model suggests that we'll have flat revenue per student during the year. We expected that in the fourth quarter and we did a little bit better, just a few points better. Probably that was because even with the mix shift, we ended up with more students than we were expecting at essentially the full pay in the undergraduate area as well as slightly higher seat count per student. Jeff, the reason that mix shift to graduate tends to lower revenue per student is because graduate students tend to take less courses per term, usually one versus 2. And if -- for the fourth quarter of 2011 -- for that fall term, we had a slightly higher seat count per student. We don't really have a means of forecasting that going forward. We know what our seat count per student is for the winter term already, and that's rolled into sort of our expectation that we would expect flat revenue per student. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then I know you guys didn't give previous Q1 guidance, but given that the EPS outlook that you're presenting today is below where the consensus estimate was, just wanted to verify that the 2012 business models that you presented last quarter are still in play. And then with that, on the starts figures that you incorporated in the business model, I just wanted to, I guess, verify that, that's the full year-over-year change in the starts numbers, not something like an average quarterly year-over-year change? And if that's the case, could you give some sense of what's the percentage of the full year starts you typically have in, say, Q1 and in Q4?

Sure. Well, the answer to the first question is, yes, the business model that we put forward in October still governs. We still believe that's how the business will operate. It can be extrapolated above and below those start numbers to get a fairly accurate picture. And the answer to the second question is, yes, the entering arguments or the entering data for that model, which is new student starts, is based on an annual average. And so within that model, there can be some variation based on when the starts happen, i.e., if we had a very high increase in new students in the fall term in the fourth quarter of the year, it would have less of a positive impact than, obviously, if we had one in the first quarter, because the continuation rate of students and the fact that our students tend to stay in for several quarters drives enrollment through the whole year. So that -- and in terms of historical averages, we generally get about 25% of our starts in each of the winter and spring term, a lot less in the summer and a lot more in the fall. So, again, we don't really forecast what's going to happen in the future year, but that's the way it's been historically.

Our next question does come from Brandon Dobell with William Blair. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: A couple of things I want to focus on. First, last quarter you talked about the impact on revenue per student and kind of on the persistence from the mix between bachelors and masters, and it sounds like that continues maybe at a bit of a faster pace than either you had thought or we would expect. Should we continue to see that kind of trend going forward the next 2 or 3 quarters just because the master seems to be a lot stronger, or do you think there's something else going on that we should think about in terms of persistence?

Well, independent of persistence, the mix shift, I think, was clearly helped by our acquisition of the Welch Management Institute, so we've got a few hundred additional MBA students that help those numbers. But even without that, we were still over 20% growth on new students for graduate. Personally, I think the real issue is not so much that the graduate students are growing, it's that the undergraduates are continuing to shrink. And I think that's related to what I talked about in the last couple of calls that the economy definitely is having a negative impact on our enrollment and particularly for those students who are unemployed. We just don't -- we're not a great solution for a unemployed, non-working adult. Graduate students, by definition, have college degrees, and so have a lower unemployment rate and I think that, that's clearly helping that area. And we're just going to have to ride out what happens at the undergraduate level. We're pleased by the fact the graduates are growing, but we're still focused on making sure that we have real great academics, logistically convenient facilities and campuses open in areas that will ultimately be attractive to undergraduate students as well. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: And I guess as a segue into how you guys think about price for the upcoming academic year, given the strength in masters and the weakness in bachelors, would you anticipate a framework where you could feel more comfortable taking price at the masters level and not at the undergrad level? Or do you not look at it that way and it's more of a kind of one-size-fits-all pricing mentality?

Well, we don't really look at it that way, but we also don't think of it as a one-size-fits-all. I mean, we have a different price point for our graduate students, always have. But in terms of price increases from our current tuition levels, our Board of Trustees looks at that every year, usually in the summer, and what we're really focused on is are we providing a great value to our students? Are we generating enough revenue that we can make the investments we need to make in academic quality and the hiring of full-time faculty that we think are necessary to support our university? And is there a real value to the student? Is the education frankly worth what they're being charged? And so our rate of increase is, in the past, we felt like there was more pricing power than we took advantage of. We always tried to make it as simple as possible and peg it at 5%. This year, we decided that given the economic distress, and frankly, given the downturn in new student enrollments, we would be a little more judicious, a little more modern on that. We'll take up that decision again with the Board of Trustees in the summer of 2012 for 2013. But I don't think that any pricing decision will be based on trying to surge revenue from a part of the University that's growing versus a part that's not. That's not really the way we think about it. Brandon Burke Dobell - William Blair & Company L.L.C., Research Division: Yes. And then final one for me, I think last quarter you talked about the schools recently opened in, let's call it, the upper Midwest performing worse than you'd seen in the past couple of years but relatively in line with what the plan had been in the past '10. Have those schools continued to perform kind of like, let's call it, the last 10-year average? Or is the demographic in those markets making it tougher than you would have thought now that you've got a couple of quarters under your belt?

Well, it's certainly tougher than it has been in the past, it is basically in line with our investment model. So whereas on a year-over-year basis, it makes for an ugly comparison. On a long-term return on capital basis, we're delighted to be investing in those markets.

Our next question comes from Suzy Stein with Morgan Stanley.

You mentioned the economy as being a big factor in the weak enrollments, but is there any material change in what you're seeing competitively? And if you can just update us, just in general, maybe on competition at both the masters and the bachelor level, that would be helpful.

Well, I've always felt it was a very competitive marketplace for educational opportunities. And certainly, at the graduate level, I think in many ways it's even more competitive, because most traditional universities have some sort of executive or part-time graduate program. But I wouldn't say that there's anything particular over the last quarter or even over the last year that's different from what we've seen over the last 10 years. Karl, you're closer to this. Any feedback from the field that's relevant here?

No. I mean, nothing other than what we've already said. There's just -- there's some reluctance at the undergraduate level given the economic conditions, but no changes competitively that I would note.

Okay. And then, can you maybe go into a little detail on your marketing strategy and just give us some help in terms of how we should think about that line item going forward?

Well, Karl, why don't you talk about the strategy then I'll try and deal with the...

Sure. Well, the strategy continues to be just to try to highlight the brand. Given that we grow the University by opening new campuses, our objective there is just to get the Strayer name out. We're helped in that regard by our national accounts, so we typically have agreements with large employers such as Home Depot and other organizations. So chances are that some number of people in the community will have heard of us, either through that or being a global online student. But the bulk of what we try to do is just build the brand.

And Suzy, in terms of the financials in the line item, I mean, it's probably our most seasonal line item. That number goes up significantly, excuse me, in the third quarter, which is the period in which you're enrolling students for the -- our seasonally largest start period, which is the fall term. The actual dollars in the first and second quarter tends to be, I think, relatively consistent, but I'd have to take a look at that and get back to you to confirm it. But it's not going to be a major increase or decrease except with regard to those terms in which we open up a lot of new markets and that we do intend to open new markets in the spring term and so -- and even more in the summer term. So there maybe some slight increment with regard to that. But in general, first and second quarter tends to be fairly consistent.

Our next question comes from Peter Appert with Piper Jaffray.

This is George Tong for Peter Appert. This question piggybacks on Jeff's earlier question on your 2012 business model scenarios provided last quarter. Based on your performance this quarter and your current visibility in 2012, what factors could cause you to achieve your high case?

More students enrolling.

Any other color beyond that?

No. I mean, it's a fairly straightforward model, and we don't try to predict it or forecast it. And we're happy to be building this University and we think it's, over the long-term, a very high return on our owners' capital to do so. And on a quarter-to-quarter basis, we basically are observers and tell you as soon as we see anything. But there's nothing magical about what drives the financial performance of the model.

Got it. And can you give us an update on how productivity levels at new campuses are ramping and how much they're expected to contribute to new student growth over the next several quarters?

Well, by productivity, if you mean the number of new students who are enrolling at those new campuses, they've been fairly consistent with our notional model. When we open up a brand-new campus, there may be no more than a couple of dozen students to start in that first term, and then a few more after that, and a few more after that. What we felt is that the most effective way to expand the University is patiently and deliberately build the facility, hire the faculty, you've got some amount of brand building and advertising in that market, which Karl described already. And then you get, as I said, a relatively small number of students. But as long as you've done a good job with those students, they continue to enroll and the brand build, the referral network and base that you have, continues to compound and then over time, you're adding significant numbers of students. And so far, that's essentially what we're seeing this year with our new campuses that we opened in 2011. We haven't opened any yet in 2012, but that's what I would expect to see as well.

Our next question comes from Sara Gubins with Bank of America Merrill Lynch.

Impressive new student growth in the graduate program, even if you take out the acquisition of the Jack Welch School. Could you talk about what's driving that, and is that a recent change versus prior quarters?

Well, in terms of what's driving it, we're not really doing anything differently operationally. We have seen an increase in graduate-level inquiries, so more prospective graduate students are inquiring with the University. And as for whether or not they will continue, I mean, that remains to be seen.

Have you ramped up your marketing efforts there at all?

Well, most of our marketing, as I just said, is sort of generic brand building. We don't do program-specific marketing with the exception of Jack Welch Management Institute. So, no, we're not doing anything specifically to generate the graduate inquiries.

Okay. And then on bad debt, it was a bit above what it had been a year ago, and I think a little bit above what you were talking about the range being comfortable. Where are you expecting that to trend in 2012, and can you maybe talk about what was driving where it came out in the fourth quarter?

Well, our model for 2012 basically anticipates flat bad debt expense. We -- I don't remember exactly, Sara, to be honest, but I believe that it was a combination of both slightly slower collections on some of our financial aid processing as well as slightly lower recoveries of previously-written off accounts. It is above a sort of trendline comfort level when I look at it very, very closely. We've got a strong team that focuses on that, but it's not at a level where we're making any sort of credit decisions at the campus in a tighter way than we would otherwise. We think it's generally related to economic distress. And as long, at the campuses, we're making smart decisions with regard to students who enroll, I expect that will be under control.

Okay. And then, just last question, given the growth that you've been getting in the national or corporate accounts, is there any change in the percent of your revenue that's coming from corporate tuition reimbursement, and can you update us on what those numbers look like?

It's up slightly and it's generally run between sort of 15% and 20%. I forget what it was the year before. In this case, I would guess it's probably up a couple hundred basis points from where it had been. And so that's more of a -- it's a mix shift issue. It's more -- it's growing slightly and the other stuff is shrinking.

Our next question comes from Gary Bisbee with Barclays Capital.

I guess the first question, over the last quarter or two, you've had decreases in a couple of the cost lines. And last quarter, you said there was nothing other than just being conscious at all levels around cost. Any other color on what drove that? And the second part of the question is, the guidance seems to imply a return to cost growth year-over-year, unless I'm doing something wrong in getting to the revenue number. And so I wondered if there's some areas you're expecting accelerating cost or is there timing of campus openings? Any color there would be helpful.

Well, on the first part of the question, expenses were down for the most part sequentially, and that is just related to Karl and his team doing a great job matching expenses to lower student count. And we had less students in the fourth quarter than we had in the third quarter, and so that's basically going to drive that -- I'm sorry, in the fourth quarter the previous year. It's actually a little bit less in expense than in the third quarter, the sequential quarter, but that has to do with the seasonality of the marketing expenses that I described earlier. In terms of the upcoming quarter, we do expect to have some expenses associated with campus openings, which will drive that somewhat. We also have ongoing investments, some of which went through our expense line in terms of faculty and academic programs, but there's nothing that's really out of the ordinary here. I think it's basically bouncing up and down around a trendline which is, I think, fairly consistent.

Okay. And then, in talking to a couple of your reps and playing around on the website, it seems to us that you're offering more, maybe, scholarships or discounts, things have been successful in the undergrad program. Is that an accurate statement or am I using a poor baseline in thinking about that? And if so, is that likely to continue? Is that leading to better results, any color there?

Karl, go ahead.

Sure. We have and continue to offer scholarships. All of our scholarships are for students who either are at a graduate-level or who are students who have prior collegiate experience. And most of the reason why we offer these scholarships is we're trying to attract students that we know are going to be successful based on our own track record. And those are the types of students that we want to have in our classrooms.

Yes. I mean, I think the short answer to your question, Gary, is, yes. We do it because it helps shape a stronger academically-performing class, and we've been doing it for years. So I don't know that there's a significant increase now, but it certainly is a phenomenon with how we try and shape the class.

Okay. And then just last question for me, can you give us a sense how you're thinking about the covenants on this debt? It looks to me like you're not that far from the liquidity minimum covenant, and if EBITDA continues to fall or margins compress at a fairly aggressive rate this year, you might even trigger the EBITDA one at some point. Is that reasonable to think that or are you pretty comfortable you can remain in line with the ...

I'm quite comfortable that we'll operate this enterprise in a way that it is compliant with all covenants, debt or otherwise.

Our next question comes from Jerry Herman with Stifel, Nicolaus. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: You guys are good to provide the business model, but I think many would presume if you look at that framework, that total volume should improve from here. Are you comfortable saying that you've sort of reached the trough on total volume at this juncture?

Total student volume? Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Correct.

Well, we never forecast the future. I think it is accurate to say that the rate of new student shrinkage has sequentially lessened over the last 2 quarters. On the other side, we've reached the point that I described last quarter where the trough of new students, the 20% drop of new students in 2011, is working through our total student population. This is the first quarter since the downturn happened that our total student population growth is lower than our new student growth. So -- and you can plot those out, it's a stock and flow concept. So it'll all depend on what our new student enrollment is in the next 3 quarters. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just a follow-up, I know that at the time that the initial tranche to gainful employment metrics were released, the repayment rate for you guys was disappointing. It looks like those are going to be released sometime soon here. Are you at all comfortable talking about maybe how those numbers have been reengineered? Have you gotten any additional information from the Department and is that just generally a concern for you at this point?

Well, we have not gotten any additional information from the Department, and that is slightly concerning. I think that, as we've described in the past, we're comfortable, quite comfortable, with compliance with the new Gainful Employment Regulation because of the fact that it's both a debt-to-income and a repayment rate test, and it's either/or in terms of passing. I mean, we have a lot of data with regard to our median debt loads and our income levels of our students. So the information that is necessary to really deconflict our view of the repayment rate versus what was released in August of 2010, we still don't have. We'll wait and see what the released data is, the illustrative data, which the Department has said is going to be provided with more clarity and more depth, and we take them at their word on that. So we'll have a better sense when that does come out.

Our next question comes from Jeff Silber with BMO Capital Markets.

I wanted to talk about the Jack Welch Management Institute acquisition. I know it's relatively small in the scheme of things, but if you can talk to us about your plans for that business, any impact on the core business in terms of sharing curricula, et cetera?

Well, we're delighted with it. I mean, it's been a great integration and we're actually teaching this term, this winter term. It's currently small, as you suggest, but we have high hopes for it. The strategy behind it or the theory behind it is we've been looking at a true executive MBA for a couple of years and also thinking about beefing up our corporate training and non-credit learning executive education programs just because we think they're great brand builders. They increase the knowledge and the awareness of Strayer University in those organizations that we want to be providers of undergraduate and graduate students to us. And so when Jack approached me, I mean, there was an obvious synergy there given what they had already put together. So far, it's gone exactly as I would have hoped. And without being specific in terms of what we expect, we think it'll be a much larger part of the University over time.

All right, great. And then just a couple of numbers questions. In terms of your business outlook for the first quarter, what tax rate and share count are implied in that? And if we can also talk about 2012 in terms of tax rate and capital spending requirements?

You'll have to bear with me on this because I'm without my wingman this morning. I'm pretty sure the tax rate is 39.5%, but we'll confirm that and get back to you. The share count would have assumed the ending share count on December 31, 2011, and obviously, any changes to that would have an impact on the EPS.

And, I'm sorry, capital spending for the year?

Oh, I'm sorry. It's -- Karl, help me with this. It's below 5% of...

Yes, about 4.5%.

Yes, certainly, some logical revenue. It's not a big year for us. We only have 8 campuses. We did a significant amount of spending over the last 2 years in some of the academic technology areas, so I think it would be at or below last year's.

All right. And just one more, in terms of stock-based compensation for the year?

That, I going to have to get back to you on, Jeff.

Our next question comes from Corey Greendale with First Analysis.

Just a couple of questions. Also, on the Jack Welsh Institute, just the way you're reporting it, are those students entirely in global online or are you distributing them among the campuses?

No, we just count them as part of global online because we essentially manage them through that administrative organization.

Okay. And then back to the question about the strong performance at the graduate level, is that tied pretty significantly to the strength you're seeing among your national accounts? In other words, are national accounts weighted toward people who would be enrolling for graduate program?

No, I don't think it's significantly weighted, it might be slightly more. I just think it's more associated with the fact that I think the single biggest inhibitant or deterrent to our enrollment across the board is unemployment. And I think at the graduate level, you're just dealing with, by definition, lower levels of unemployment.

Okay. And then you commented on your confidence over Gainful Employment outcomes. But one specific question about that. Some others have, in this space, have commented on relative to other programs, weaker outcomes in criminal justice programs. Can you just talk a little bit about the outcomes for your students in criminal justice versus your other, your legacy program areas?

Well, our criminal justice is much newer, so we don't have as long a track record of information. But based on our calculation of our alumni survey data in terms of earnings and the relatively modest median debt level, we're quite comfortable with that program as well.

Okay. And just finally, what are your current thoughts on the timing of the new campus openings through the year?

Well, it'll certainly be more back-half loaded. It depends a little bit of some real estate issues and state regulatory issues. It'll either be a couple in the spring term and maybe 2 or 3 in the summer, or 2 or 3 in the fall, or it'll all be summer and fall.

[Operator Instructions] Our next question comes from Andrew Steinerman with JPMorgan. Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division: This is Jeff for Andrew. Now that we count slightly more sort of graduate and national account students, can you update us on the average duration, student duration?

I'm sorry, Jeff, I missed the question. Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division: Can you update us on the average student duration for the program? Is that changing at all?

No. It's -- I mean, for graduate students, there's no transfer credit in, so it's about 8 quarters to finish. And for undergraduate students, most of the students come in -- sorry, most of the successful ones come in with some transfer credit and, again, the average duration is 8 to 10 quarters. There are some who will stay longer than that and obviously, we have academic failures and dropouts in the first quarter, but on average, those are both pretty good numbers. Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division: Is the duration for national account students any different? Are they staying longer?

I would say, yes, slightly. I mean, they tend to be stronger students. Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division: Okay. And then on the graduates, can you share the number of graduates you get in 2011 and what do you see for 2012?

Well, we had close to 10,000 graduates in -- somewhere between 8,000 and 10,000; I don't know the exact number. And I would expect it would be a similar number in 2012, because those would be students mainly who entered in 2010 -- 2009 and 2010.

Our next question comes from Trace Urdan with Wunderlich Securities.

Rob, I'm sorry if you'd mentioned this already, but I missed it. What was the contribution from the corporate referrals in the quarter? You guys were kind enough to give us that number last quarter. I wonder how it compares with what the trendline looks like there.

I'm not sure I understood the question.

The number of students that are coming in from corporate relationships.

Yes. It's around -- well, it's up some. It's probably close to 20% or so. You can...

Okay. And is the mix there, I mean, are those almost exclusively masters students or what's the mix of bachelors versus masters in that number?

No, it's skewed slightly more towards masters, but it's not exclusively masters at all. As a matter of fact, for some programs, it's almost exclusively undergraduate, really.

Okay, fair enough. So then it's fair to say that the strength that you're seeing on the masters side is not simply coming as a result of the growth of the corporate referral program. It's also coming from folks off the street, if you will?

Absolutely.

[Operator Instructions] Our next question comes from Kelly Flynn with Crédit Suisse. Patrick Elgrably - Crédit Suisse AG, Research Division: It's Patrick Elgrably for Kelly. I have a follow-up to Brandon's question on persistence, and specifically what assumption is embedded within the 2012 business model? I guess, what I'm trying to get to is how much wiggle room there is in the model in the face of worsening persistence?

Well, the assumption would be similar to our performance over the last several years, which is, I mean, I think on an annual average, it's around 80%. Isn't it Karl?

Yes.

And there's not -- I mean, this model is designed to sort of put the 4 corners of performance out there in a way which you can extrapolate above and below. And so I don't really think of it as wiggle room. If our continuation rates remain where we expect them to remain, then what we try to give you is what the impact of various new student enrollment numbers are, mainly because there's such a significant lag between when we expect new student numbers to grow and when total student numbers will grow. And then obviously, if there was a market deterioration in continuation rates, that would have a negative impact on this model, but we're not seeing that. Patrick Elgrably - Crédit Suisse AG, Research Division: Just as a follow-up to that, I guess, in the prepared remarks, I thought you seemed to infer that retention was a little bit lower than expected. I guess, one, was that case? And if it was, can you provide any color on why that was?

I think it was in your remarks, Karl.

Yes, it was found in the winter academic term, as I said, about 200 basis points. And again, we think that some measure of that is just due to the mismatch that we've had over the last year of declining new students compared to graduate students. But we also believe that just the general economic conditions out there play a role.

Yes. I mean, we -- not every student who is making satisfactory academic progress signs up for the next term. Now you can be out of the -- not enrolled in the university for 2 terms and still be a continuing student. So we do see those kinds of things happen occasionally. I think the lion's share of the impact is what I tried to sort of forecast last quarter, which is, when you're down 20% on new students for a full year, you've got a large trough that's running through over the next 18 months through your total student population.

I'm not showing any other questions in the queue. I'd like to turn it back over to Mr. Silberman for closing comments.

Thank you, operator, and thanks to everybody and everyone for participating. We'll look forward to talking to you again at our annual meeting or on our earnings -- first quarter earnings call in April. Thanks very much.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference. You may now disconnect. Good day.