Sylvan Learning Systems Inc. reported yesterday a net income of $1.2 million for the first quarter of 2000, down more than 57 percent from the first quarter of 1999.
Revenue from continuing operations was $85.3 million, up 23 percent from $69.3 million in the first quarter of 1999.
The Baltimore-based education services company attributed part of the drop in income to the $1.7 million it spent in the quarter to launch Sylvan Ventures, an incubator for Internet-related education companies. Sylvan announced plans for the venture in February, along with its $500 million investment.
Sylvan's stock hasn't come close to its 52-week high of $29 since August. It hit $7 a share in November, but closed yesterday at $14.5625, up 62.5 cents.
Sylvan Chief Financial Officer Lee McGee, who will be joining Sylvan Ventures soon, said Sylvan is comfortable with its Internet foray, but acknowledged that it does not make for impressive earnings reports. "We went through this period of a slowdown and a change of direction, and Wall Street wants to see results," he said.
Sylvan earned $775 million selling its Prometric computerized testing division to Thomson Corp. of Canada, a price McGee considered a vote of confidence in Sylvan's brand. The testing business, while profitable, demanded a lot of management's time. Sylvan preferred having the cash to fuel its incubator, McGee said.
Few analysts submitted quarterly earnings estimates on Sylvan because of the transition, but estimates by First Call were in line with the company's results.
"The quarterly numbers are, frankly, not all that meaningful," said Peter Appert of Deutsche Bank Alex. Brown.
Appert said revenue from Sylvan's learning center business beat his predictions, while revenue from Aspect, one of its English-language instruction components, was low. Aspect's revenue dropped to $9.7 million, from $12.1 million in the first quarter of 1999.
Appert predicts that Sylvan will succeed with its Internet businesses. Historically, he said, "they've been very good at finding the next big thing."
McGee said the company is looking at proposals. It has received more than 200 e-business plans since announcing the incubator plans. The downturn in technology stocks is not discouraging applicants, he said, but is resulting in more realistic business possibilities.