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Bridgepoint Education Building Business Acumen®
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Bridgepoint Education
Main Color
Palette
Building Business Acumen®
5 Business Drivers
Cash
Assets
Growth ProfitPeople
5 Business Drivers
Cash
Cash – Bridgepoint
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Cash
Cash $7 $57 $171 $299
Peformance Measure
BridgePoint
“As of September 30, 2011, the company had cash, cash equivalents and marketable securities of $344.7 million.”
.
In 2010, we repurchased 3 million shares at an average cost of $14.05 per share, for a total purchase price of $42.2 million.
For the first 9 months of the 2011, the company has spent $88 million in buying back stock which brings to an end the current stock buy-back authorized by the board of directors.
Buying back stock:
Companies ought to keep just enough cash to cover their interest, expenses and capital expenditures; plus they should hold a little bit more in case of emergencies.
Investopedia
How Much Cash Should You Have?
Cash – Bridgepoint
8% 26% 38% 42%
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Cash
Cash $7 $57 $171 $299
Peformance Measure
BridgePoint
Bridgepoint / Benchmark Companies
42% 26% 21% 17% 15% 12%
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Cash
Cash $299 $1,301 $449 $323 $374 $76
Peformance Measure
BridgePoint
Cash – Bridgepoint
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Cash
Cash $7 $57 $171 $299
Cash From Operating Act. $10 $71 $132 $190
Peformance Measure
BridgePoint
“Cash From Operating Activities for the first 9 months of 2011 = $149 million.
.
5 Business Drivers
Cash
Profit
Revenue (Sales) $100 100 100
- Instr. costs & ser. $ 26 26 30- Marketing & Promo $ 30 27 26 - General & Admin. $ 14 14 12.5
= Operating Income $ 30 33 32+ Interest Income net $ 1 -
= Net Income $ 18 21
- Income Tax $ 13 13
2010 2011 Target
YTD
High Profit Margins
S&P Average is: 13%
Who has much higher profit margins?
Qualcomm 30%
Oracle 24%
Apple 22%
Facebook 20%
Coca Cola 20%
Why the high margins?
Low Profit MarginsS&P Average is: 13%
Who has much lower profit margins?
Exxon Mobile 8%
Ford 5%
Wal-Mart 3.5%
Whole Foods 3.4%
Costco 1.8%
Amazon 1.3%
Why the low margins?
Profit – Bridgepoint
First 9 month of 2011:Operating Margin = 33%
Net Income Margin = 21%
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Net Income $3 $24 $47 $128
Profit
Operating Margin % 4.6% 15.3% 18.0% 30.3%
Net Income % 3.5% 11.2% 10.2% 17.9%
Peformance Measure
BridgePoint
Bridgepoint / Benchmark Companies
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
Profit
G&A as % of Revenues 13.7% 6.4% 51.6% 35.4% 26.6% 16.0%
Operating Margin % 30.3% 20.5% 12.2% 21.5% 14.8% 33.9%
Net Income % 17.9% 11.2% 7.8% 14.6% 6.7% 20.6%
Peformance Measure
BridgePoint
5 Business Drivers
Cash
Assets
Profit
Assets (read from page 16)
Balancing…
Asset Asset StrengthStrength
Asset Asset UtilizationUtilization&
Cash, ratings, property plan & equipment
Assets – Bridgepoint
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Net Income $3 $24 $47 $128
Assets
Return on Assets 8.4% 20.4% 15.7% 27.1%
Equity Ratio 12.6% 25.7% 45.6% 50.6%
Peformance Measure
BridgePoint
First 9 month of 2011:Return on Assets = 26.5%
Equity Ratio = 57%
Bridgepoint / Benchmark Companies
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
Assets
Return on Assets 27.1% 15.4% 25.5% 17.2% 3.7% 31.8%
Equity Ratio 50.6% 37.7% 59.8% 72.4% 46.0% 42.6%
Peformance Measure
BridgePoint
5 Business Drivers
Cash
Assets
Growth Profit
Growth – Bridgepoint
2007 2008 2009 2010 2011 Est.
Net Sales $86 $218 $454 $713 $923
Net Income $3 $26 $47 $128 $169
Driver: Growth
Revenue Growth na 153.5% 108.3% 57.0% 30.0%
Net Income Growth na 766.7% 80.8% 172.3% 32.0%
Peformance Measure
BridgePoint
Revenue in Q3 growing due to the 5% tuition increase on April 1st of 2011 and increased enrollment.
Guidance for 2011:
- Total student enrollment of 83,000 to 85,000
- Revenue of $920 to $926 million
- Net income of $168.5 to $170.3 million
- Diluted EPS of $2.95 to $2.98.
(i) The continued availability of Title IV funds to finance student tuition payments,
(ii) Increased demand for postsecondary education resulting from a deteriorating labor market and
(iii) Efficiencies in advertising costs.
Page 72, 10-K
We believe that the performance of our company has been resilient in the current economic environment due to:
Bridgepoint / Benchmark Companies
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
Growth
Revenue Growth 57% 25% 16% 31% 25% 24%
Net Income Growth 175% -8% 94% 69% 61% 25%
Diluted EPS Growth 189% -3% 107% 70% 40% 28%
Peformance Measure
BridgePoint
5 Business Drivers
Cash
Assets
Growth ProfitPeopleCustomers & Employees
Employees
“A’s hire A+’s and B’s hire C’s”
The #1 reason a person will leave their job?
38% of current employees believe they will be somewhere else in 18 months.
Airplane
People – Bridgepoint
2007 2008 2009 2010
Net Sales $86 $218 $454 $713
Net Income $3 $24 $47 $128
People
Number of students enrolled 12,623 31,558 53,688 77,892
Peformance Measure
BridgePoint
Enrollment forecasted to be 83,000 to 85,000 students for year-end 2011.
Bridgepoint / Benchmark Companies
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
People
Number of students enrolled 77,892 470,500 117,000 80,000 136,000 60,700
Peformance Measure
BridgePoint
“He skates to where the puck is going to be…”
Walter Gretzky
Anticipation
“If I would have asked my customers what they wanted, they would have said a faster horse”
Henry Ford
5 Business Drivers
Cash
Assets
Growth ProfitPeople
Description
Includes the Notes
5 Business Drivers
Cash
Assets
Growth ProfitPeople
Statement of Cash Flows
Profit & Loss
Balance Sheet
Becomes Cash < 1 year
Most Liquid
Least Liquid
Due First
Due Last Due in < 1 year
Asset StrengthB
alanceAssets = Liabilities + Equity
Equity ratio = 51%
Current ratio =
1.7
1.Plenty of cash
2.Current ratio at 1.7
3.Trends are good
4.Strong equity position, 51%.
Strong Balance Sheet
For Title IV, one financial responsibility standard is based on the institution's composite score, which is derived from a formula established by the Department that is a weighted average of three financial ratios:
• equity ratio, which measures the institution's capital resources, financial viability and ability to borrow;
• primary reserve ratio, which measures the institution's ability to support current operations from expendable
resources; and
• net income ratio, which measures the institution's ability to operate at a profit or within its means.
The composite score is a number between negative 1.0 and positive 3.0 and it must be at least 1.5. We expect our scores for 2010 to be 3.0. Financial responsibility section, Item 1, Form 10-K
Net Income / Number of Shares
Profit(P&L)
Top Line
Bottom Line
Sales –Expenses =Net Income
57%
189%
56%45%
-8%33%
-
Operating Margin = 30%
Net Profit Margin = 18% 175%
165%
26%30%14%
09-10 Var.
Increase Sales by 100K
+100
26
+ 44
18 for taxes
+ 26
30
56
+ 44
If your team cuts $100 thousand from the “General and Administrative” line item, what would be the
impact on the P&L?
Assume quality is the same.
Work Team Impact on the 5 Elements(Table Activity)
Decrease by 100K
- 100
+ 100
41 for taxes
+ 59
+ 100
- 100
Which is better, increasing sales by $100K or cutting
costs by $100K?
Increasing sales increases Net Income by $26K.
Cutting costs increases Net Income by $59K.
What are the other considerations of increasing sales vs. cutting costs?
Work Team Impact on the 5 Elements
Cash from Operations + Cash from Investing + Cash from Financing = Change in Cash
Cash Flow
Bridgepoint Education
Main Color
Palette
INCOME STATEMENT Revenues $713,233 - COGS = Gross Margin - Operating Costs = Operating Income - Interest & Taxes
Net Income $ 127,580CASH FLOW STATEMENT Net Income $ 127,580 + Non-cash transactions = Cash from Ops +/- Cash from Investing +/- Cash from Financing = Change in Cash + Beginning Cash Balance
Cash & Cash Equivalents $ 188,518BALANCE SHEET Cash & Cash Equivalents $ 188,518 + Other Assets = Total Assets
Total Liabilities
Total Equity $ 238,241
STARTS with CustomersThis statement shows how much the company generated in sales (revenues) from it’s customers. Then expenses are subtracted, and Net Income is shown.
STARTS with CustomersThis statement shows how much the company generated in sales (revenues) from it’s customers. Then expenses are subtracted, and Net Income is shown.
Expenses
This statement shows how much cash actually flowed into the company (cash inflows) and the cash that flowed out of the company (cash outflows) during the statement year, and finally the cash amount left over at the end of the year.
This statement shows how much cash actually flowed into the company (cash inflows) and the cash that flowed out of the company (cash outflows) during the statement year, and finally the cash amount left over at the end of the year.
Financial Statements: Inter-relationship
Finding our performance on the 5 Drivers
Cash
Assets
Growth ProfitPeople
ComponentBalance Sheet
P & LStatement
of Cash Flows
CalculationEnter Results
HereMetric
Cash None $ Cash
Cash from operating act. None $
Cash Flow from operating Act.
Revenue None $ Revenue
Net Income None $ Net Income
Operating Income %
Operating Income Margin (%)
Net Income %Net Income Margin
(%)
Total Assets % Return on Assets
Total Stockholder's
Equity % Equity Ratio
Revenue % Revenue growth
Net Income % Net Income growth
Diluted Earnings Per Share %
Diluted EPS Growth
Pe
op
le
Student Enrollment
None Student Enrollment
Ca
sh
Pro
fit
As
se
tG
row
th
From Internal Data or Market Research
Location in annual report
Revenue
Last year's revenuesThis year's revenues- 1 100 =
This year's Net Income
Navigating The Financials (NTF)
100 =
Total Assets
Earnings
www.acumenlearning.com
100 =
This Last year's Net Income
This
- 1 100 =
Total Stockholders' Equity
Net Income
100 =
RevenueNet Income
100 =
Operating income
Total Assets
This year's Diluted EPS- 1 100 =
Last year's diluted EPSThis
299
190
713
Cash + Marketable Securities
128
30
18
27
51
57
175
189
77,892
1) What is the role of the stock market?
2) Why did Bridgepoint go public?
3) Who cares about your stock price and why?a. Investorsb. Analysts
The Role of the Stock Market
Analyst Ratings
1) What is the role of the stock market?
2) Why did you go public?
3) Who cares about your stock price and why?a. Investorsb. Analystsc. Andrew Clarkd. Employees
4) What are the benefits of a higher stock price?
The Role of the Stock Market
1) Treasury stock worth more.
2) Secondary offering brings more cash.
3) Better credit ratings = more access to cash at a cheaper rate.
4) More acquisition power.
5) Can attract talented people.
6) More expensive in a buy-out.
6 Benefits of a Higher Stock Price:(Page 41)
Market Cap = Share Price X Number of Shares
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
Market Capitalization 1.3 Bil. 6.7 Bil. 843 Mil. 2.6 Bil. 3.3 Bil. 1.4 Bil.
Peformance Measure
BridgePoint
Price (of one share of stock)
Earnings Per Share (for last 12 months)
Price $ 25.95
EPS $ 3.05
= 8.5 P/E ratio
The P/E Ratio (Page 42, 43)
P/E Ratios
Apollo Group
Career Education
CorpDeVry, Inc.
Education Man. Corp.
Strayer Education
2010 2010 2010 2010 2010 2010
Net Sales $713 $4,926 $2,124 $1,915 $2,509 $637
Net Income $128 $553 $158 $280 $169 $131
P/E Ratio 8.5 15 5.5 12 16 13
Peformance Measure
BridgePoint
External Factors – Stock price
External Factors—Stock price vs. Dow and S&P
Engage your teams:
People will work hard for a paycheck,harder for a person,
and hardest for a reason.
