Apollo Group, Inc. Reports First Quarter 2013 Results
Apollo Group, Inc. Reports First Quarter 2013 Results
PHOENIX--(BUSINESS WIRE)-- Apollo Group, Inc. (NAS: APOL) today reported financial results for the three months ended November 30, 2012, with revenue of $1.1 billion and diluted earnings per share of $1.18 per share, or $1.22 per share excluding special items.
"In the first quarter, we continued to execute on our strategy to differentiate University of Phoenix, diversify Apollo Group and to further optimize our operations," said Apollo Group Chief Executive Officer Greg Cappelli. "We are rolling out new career-oriented tools for students, as well as working with leading companies to help them meet their needs to develop an educated workforce. We are committed to become the educator of choice to connect education to careers and believe this approach will position us for long-term success."
First Quarter 2013 Results of Operations
Net revenue for the first quarter 2013 was $1.1 billion compared to $1.2 billion in the first quarter 2012.
University of Phoenix Degreed Enrollment was 319,700, a 14.3% decrease from the prior year first quarter, and New Degreed Enrollment was 54,100, a 15.1% decrease from the prior year first quarter.
Operating income for the first quarter 2013 was $230.9 million, down 11.7%, compared to $261.7 million from the prior year first quarter.
Income from continuing operations attributable to Apollo Group for the first quarter 2013 was $133.5 million, or $1.18 per share, compared to $147.5 million, or $1.13 per share in the first quarter 2012.
Results for the first quarter 2013 include restructuring and other charges of $24.1 million attributable to the Company's optimization efforts and a $16.9 million credit for the reversal of charges associated with a securities class action lawsuit.
Excluding the special items noted above, income from continuing operations for the first quarter 2013 was $137.9 million, or $1.22 per share, compared to income from continuing operations of $165.3 million, or $1.26 per share, for the first quarter 2012. (See the reconciliation of GAAP financial information to non-GAAP financial information in the tables section of this press release for first quarter 2013 and 2012 special items).
Operating Expenses
Operating expenses for the first quarter 2013 totaled $824.2 million, a decrease of 9.4%, as compared to first quarter 2012. Excluding special items, operating expenses were $817.0 million, a decrease of 8.0%. This decrease was primarily attributable to a reduction in costs from restructuring activities, which contributed to the decline in admissions advisory headcount, rent expense and depreciation expense. Additionally, a portion of the decrease was related to variable expenses due to lower net revenue. The provision for uncollectible accounts receivable ("bad debt") also declined 19.7% to $33.4 million, primarily due to lower enrollment, as well as improved collection rates for aged receivables, at University of Phoenix.
Balance Sheet and Cash Flow
As of November 30, 2012, cash and cash equivalents, excluding restricted cash, totaled $776 million compared to $1.3 billion as of August 31, 2012. The decrease was primarily due to $625.8 million used for payments on borrowings, including the payment of $615.0 million borrowed under the Company's revolving credit facility, the Company's $42.5 million cash payment for its purchase of the noncontrolling interest in Apollo Global and $27.5 million for capital expenditures. These items were partially offset by $210.1 million of cash provided by operations.
Accounts receivable were $201.5 million as of November 30, 2012, compared to $198.3 million at August 31, 2012. Excluding accounts receivable and the related net revenue for Apollo Global, the Company's days sales outstanding was 20 days as of November 30, 2012, as compared to 24 days as of November 30, 2011.
Business Outlook
The Company offers the following outlook for fiscal year 2013 based on the business trends observed during the first quarter 2013, as well as management's current expectations of future trends.
Net revenue of $3.65 - $3.75 billion; and
Operating income of $500.0 - $550.0 million, excluding the impact of special items and restructuring and other charges.
Conference Call Information
The Company will hold a conference call to discuss these earnings results at 5:00 p.m. ET, 3:00 p.m. MT, today, Tuesday, January 8, 2013.
Dial-In Numbers:
877-292-6888 (Domestic)
973-200-3381 (International)
Conference ID: 82100134
A live webcast of this event may be accessed by visiting the Company's website at www.apollogrp.edu. A webcast replay will be available approximately one hour following the conclusion of the call at the same link.
A telephone replay will be available approximately two hours following the conclusion of the call until January 22, 2013.
Dial-In Numbers:
855-859-2056 (Domestic)
404-537-3406 (International)
Conference ID: 82100134
About Apollo Group, Inc.
Apollo Group, Inc. is one of the world's largest private education providers and has been in the education business for nearly 40 years. The Company offers innovative and distinctive educational programs and services both online and on-campus at the undergraduate, master's and doctoral levels through its subsidiaries: University of Phoenix, Apollo Global, Institute for Professional Development and College for Financial Planning. The Company offers programs and services throughout the United States and in Latin America and Europe, as well as online throughout the world.
For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit the Company's website at www.apollogrp.edu.
Forward-Looking Statements Safe Harbor
Statements about Apollo Group and its business in this release which are not statements of historical fact, including statements regarding Apollo Group's future strategy and plans and commentary regarding future results of operations and prospects, are forward-looking statements and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual plans implemented and actual results achieved may differ materially from those set forth in or implied by such statements due to various factors, including without limitation (i) the impact of increased competition from traditional public universities and proprietary educational institutions, (ii) the impact of the Company's restructuring initiatives to increase operating efficiency and better align operations with student demand and business strategy, including the substantial reduction in University of Phoenix on-ground locations, (iii) the impact of changes in marketing channels and other recruiting practices to better identify students who are more likely to succeed at University of Phoenix, (iv) the impact of the Company's initiatives to improve the student experience, improve student outcomes and enhance the connection between education and careers, (v) changes in enrollment or student mix, (vi) changes in the overall U.S. or global economy, (vii) changes in law or regulation affecting the Company's eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs, and (viii) changes in the Company's business necessary to remain in compliance with existing, new, or amended U.S. federal student financial aid program regulations, including the so-called 90/10 Rule and the limitations on cohort default rates, and to remain in compliance with the accrediting criteria of the relevant accrediting bodies. For a discussion of the various factors that may cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements, please refer to the risk factors and other disclosures contained in Apollo Group's Form 10-K for fiscal year 2012 and subsequent Form 10-Q, and other filings with the Securities and Exchange Commission, all of which are available on the Company's website at www.apollogrp.edu.
Use of Non-GAAP Financial Information
This press release and the related conference call contain non-GAAP financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management uses, and chooses to disclose to investors, these non-GAAP financial measures because (i) such measures provide an additional analytical tool to clarify the Company's results from operations and help to identify underlying trends in its results of operations, (ii) as to the non-GAAP earnings measures, such measures help compare the Company's performance on a consistent basis across time periods, and (iii) these non-GAAP measures are employed by the Company's management in its own evaluation of performance and are utilized in financial and operational decision-making processes, such as budgeting and forecasting. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently, limiting their usefulness as a comparative measure across companies.
Financial and Operating Metrics
Below are Apollo Group's unaudited financial data and operating metrics for the first quarter 2013 compared to the first quarter 2012.
Degreed Enrollment(1) | New Degreed Enrollment(2) | ||||||||||||||||||||
Enrollment (rounded to hundreds) | Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |||||||||||||||||
Associate's | 99,100 | 130,300 | 22,900 | 27,800 | |||||||||||||||||
Bachelor's | 168,000 | 182,500 | 22,500 | 26,100 | |||||||||||||||||
Master's | 46,000 | 52,900 | 8,000 | 8,900 | |||||||||||||||||
Doctoral | 6,600 | 7,400 | 700 | 900 | |||||||||||||||||
319,700 | 373,100 | 54,100 | 63,700 | ||||||||||||||||||
Revenues (in thousands) | |||||||||||||||||||||
Degree Seeking Gross Revenues(3) | $ | 992,274 | $ | 1,108,616 | |||||||||||||||||
Less: Discounts and other | (67,275 | ) | (62,734 | ) | |||||||||||||||||
Degree Seeking Net Revenues(3) | 924,999 | 1,045,882 | |||||||||||||||||||
Non-degree Seeking Revenues | 9,813 | 8,577 | |||||||||||||||||||
Other, net of discounts | 120,371 | 117,441 | |||||||||||||||||||
$ | 1,055,183 | $ | 1,171,900 | ||||||||||||||||||
Revenue by Degree Type (in thousands)(3) | |||||||||||||||||||||
Associate's | $ | 251,890 | $ | 313,598 | |||||||||||||||||
Bachelor's | 560,806 | 592,910 | |||||||||||||||||||
Master's | 158,891 | 178,445 | |||||||||||||||||||
Doctoral | 20,687 | 23,663 | |||||||||||||||||||
Less: Discounts and other | (67,275 | ) | (62,734 | ) | |||||||||||||||||
$ | 924,999 | $ | 1,045,882 | ||||||||||||||||||
Degree Seeking Gross Revenues per Degreed Enrollment(1), (3) | |||||||||||||||||||||
Associate's | $ | 2,542 | $ | 2,407 | |||||||||||||||||
Bachelor's | 3,338 | 3,249 | |||||||||||||||||||
Master's | 3,454 | 3,373 | |||||||||||||||||||
Doctoral | 3,134 | 3,198 | |||||||||||||||||||
All degrees (after discounts) | $ | 2,893 | $ | 2,803 | |||||||||||||||||
(1) Represents students enrolled in a University of Phoenix degree program who attended a credit bearing course during the quarter and had not graduated as of the end of the quarter; students who previously graduated from one degree program and started a new degree program in the quarter (for example, a graduate of the associate's degree program returns for a bachelor's degree); and students participating in certain certificate programs of at least 18 credits with some course applicability into a related degree program. |
(2) Represents new students and students who have been out of attendance for more than 12 months who enroll in a University of Phoenix degree program and start a credit bearing course in the quarter; students who have previously graduated from a degree program and start a new degree program in the quarter; and students who commence participation in certain certificate programs of at least 18 credits with some course applicability into a related degree program. |
(3) Represents revenue from tuition and other fees for students enrolled in University of Phoenix degree programs. Also includes revenue from tuition and other fees for students participating in University of Phoenix certificate programs of at least 18 credits in length with some course applicability into a related degree program. |
Apollo Group, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Balance Sheets | |||||||||||
(Unaudited) | |||||||||||
As of | |||||||||||
($ in thousands) | November 30, | August 31, | |||||||||
ASSETS: | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 776,009 | $ | 1,276,375 | |||||||
Restricted cash and cash equivalents | 351,575 | 318,334 | |||||||||
Accounts receivable, net | 201,456 | 198,279 | |||||||||
Prepaid taxes | 5,041 | 26,341 | |||||||||
Deferred tax assets, current portion | 55,489 | 69,052 | |||||||||
Other current assets | 64,513 | 49,609 | |||||||||
Total current assets | 1,454,083 | 1,937,990 | |||||||||
Property and equipment, net | 546,520 | 571,629 | |||||||||
Goodwill | 103,558 | 103,345 | |||||||||
Intangible assets, net | 145,789 | 149,034 | |||||||||
Deferred tax assets, less current portion | 80,446 | 77,628 | |||||||||
Other assets | 38,521 | 28,696 | |||||||||
Total assets | $ | 2,368,917 | $ | 2,868,322 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||||||
Current liabilities | |||||||||||
Short-term borrowings and current portion of long-term debt | $ | 22,236 | $ | 638,588 | |||||||
Accounts payable | 63,202 | 74,872 | |||||||||
Income taxes payable | 60,717 | — | |||||||||
Student deposits | 381,124 | 362,143 | |||||||||
Deferred revenue | 262,813 | 254,555 | |||||||||
Accrued and other current liabilities | 263,433 | 324,881 | |||||||||
Total current liabilities | 1,053,525 | 1,655,039 | |||||||||
Long-term debt | 75,562 | 81,323 | |||||||||
Deferred tax liabilities | 16,096 | 15,881 | |||||||||
Other long-term liabilities | 203,705 | 191,756 | |||||||||
Total liabilities | 1,348,888 | 1,943,999 | |||||||||
Commitments and contingencies | |||||||||||
Shareholders' equity | |||||||||||
Preferred stock, no par value | — | — | |||||||||
Apollo Group Class A nonvoting common stock, no par value | 103 | 103 | |||||||||
Apollo Group Class B voting common stock, no par value | 1 | 1 | |||||||||
Additional paid-in capital | 41,311 | 93,770 | |||||||||
Apollo Group Class A treasury stock, at cost | (3,864,989 | ) | (3,878,612 | ) | |||||||
Retained earnings | 4,876,645 | 4,743,150 | |||||||||
Accumulated other comprehensive loss | (34,188 | ) | (30,034 | ) | |||||||
Total Apollo shareholders' equity | 1,018,883 | 928,378 | |||||||||
Noncontrolling interests (deficit) | 1,146 | (4,055 | ) | ||||||||
Total equity | 1,020,029 | 924,323 | |||||||||
Total liabilities and shareholders' equity | $ | 2,368,917 | $ | 2,868,322 | |||||||
Apollo Group, Inc. and Subsidiaries | ||||||||||||||||||||
Condensed Consolidated Statements of Income | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended November 30, | % of Net Revenue | |||||||||||||||||||
(In thousands, except per share data) | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Net revenue | $ | 1,055,183 | $ | 1,171,900 | 100.0 | % | 100.0 | % | ||||||||||||
Costs and expenses: | ||||||||||||||||||||
Instructional and student advisory | 432,150 | 453,281 | 40.9 | % | 38.7 | % | ||||||||||||||
Marketing | 162,873 | 165,564 | 15.4 | % | 14.1 | % | ||||||||||||||
Admissions advisory | 71,308 | 101,388 | 6.8 | % | 8.7 | % | ||||||||||||||
General and administrative | 73,539 | 79,899 | 7.0 | % | 6.8 | % | ||||||||||||||
Depreciation and amortization | 43,695 | 46,167 | 4.1 | % | 3.9 | % | ||||||||||||||
Provision for uncollectible accounts receivable | 33,406 | 41,583 | 3.2 | % | 3.6 | % | ||||||||||||||
Restructuring and other charges | ||||||||||||||||||||
