Apollo Group (APOL)

Q3 2012 Earnings Call

June 25, 2012 5:00 pm ET

Executives

Beth Coronelli - Vice President of Investor Relations

Charles B. Edelstein - Co-Chief Executive Officer and Director

Gregory W. Cappelli - Co-Chief Executive Officer, Director and Chairman of Apollo Global Inc

Brian L. Swartz - Chief Financial Officer and Senior Vice President of Finance

Joseph L. D'Amico - President

Analysts

Sara Gubins - BofA Merrill Lynch, Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

Adrienne Colby - Deutsche Bank AG, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Peter P. Appert - Piper Jaffray Companies, Research Division

Jeffrey M. Silber - BMO Capital Markets U.S.

Kelly A. Flynn - Crédit Suisse AG, Research Division

Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division

Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division

Peter Wahlstrom - Morningstar Inc., Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Trace A. Urdan - Wells Fargo Securities, LLC, Research Division

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Presentation

Operator

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Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2012 Earnings Release Conference Call. [Operator Instructions] This conference call is being recorded today, June 25, 2012, and may not be reproduced in whole or in part without permission from the company. There will be a replay of this call available through July 9, 2012, beginning approximately 2 hours after we conclude today. The replay number is (855) 859-2056 or (404) 537-3406 internationally. The conference ID for the replay is 83919479. I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Mrs. Coronelli, please go ahead.

Beth Coronelli

Thank you. Thank you for joining us today to discuss our third quarter results. Participating are Greg Cappelli, Co-Chief Executive Officer of Apollo Group and Chairman of Apollo Global; Chas Edelstein, Co-Chief Executive Officer; and Brian Schwartz, Senior Vice President and Chief Financial Officer. Our President, Joe D'Amico, is also here and will be available during the Q&A portion of the call. As we discuss our results today, unless noted otherwise, we'll be comparing the third quarter of fiscal 2012 ended May 31, 2012 to the third quarter of fiscal 2011.

I'd also like to remind you that this conference call may contain forward-looking statements with respect to future performance, financial condition, regulatory compliance and other matters regarding the business of Apollo Group that involve risks and uncertainties. Various factors could cause actual results of the company to be materially different from results expressed or implied by such forward-looking statements. These factors are discussed under risk factors and elsewhere in the company's most recent 10-K and subsequent 10-Q filed with the SEC and available on our website at www.apollogrp.edu. The company disclaims any obligation to update any forward-looking statements in this call.

Additionally during the call we may refer to non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Our press release contains financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures is also available on our website. And now, I'll turn the call over to Chas.

Charles B. Edelstein

Okay. Thank you, Beth, and good afternoon, everybody. Greg and I would like to share details about our strategic efforts to differentiate University of Phoenix by Apollo Group and optimize our business, while improving service and enhancing the student experience. I'll share a brief overview of our results

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we will cover with more detail and he'll also provide commentary on our business outlook.

To provide a quick recap, for the third quarter we reported revenues of $1.13 billion, down approximately 9% year-over-year, with net income of $134 million. Our earnings per share was $1.13 or $1.20 per share excluding special items. We ended the quarter with total enrollment of roughly 346,000 students. New Degreed Enrollment for the quarter was 51,500, down 8% on a reported basis as compared to the third quarter of 2011 and down just 5.3% adjusting for available start dates.

Now on to my comments. Today, I'd like to highlight a couple of the areas of focus: the importance of providing a world-class education that connects to relevant careers, a key component of our differentiation efforts. And secondly, about our plans to optimize our business while increasing service and support to our students.

Our top priority is to help our students achieve their desired

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life outcomes. Whether students are unemployed or seeking to gain additional skills for their current positions, our value proposition is to help move to the next career level. This journey begins with providing tools, which increase a prospective candidate's understanding of his or her strengths and weaknesses. Incorporating an end-to-end approach throughout their academic experience, we're putting the tools in place to help our students better connect their academic path to their

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plans.

In April, after extensive research and testing, we launched the initial version of Phoenix Career Services. A cornerstone of this

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approach to support our student success is an interactive career portal. In the short time it's been in place, more than 25% of our students

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portal. We'll add new employers and features to the portal over the coming months, again, all designed to systematically connect students' career after

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through their higher education to their career objectives.

We're also building our employer relationships. We're enhancing

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our 730,000 plus alumni, with nearly 5,000 alumni participating in our career workshops since January.

We're also developing new relationships and building upon existing relationships with community colleges. As an example, we're co-hosting events and partner with community colleges and local employers, again, to help students better connect their education to their career goals. These relationships strengthen education. They build our brand with employers as they hire our graduates and with prospective students to identify University of Phoenix as the university

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to connect their academic and career goals.

Another important area of focus is our strategy to optimize our business. We're working to improve our structure and processes in order to enhance the student educational experience and outcomes while improving our cost efficiency. Significant effort is focused on several things. First, developing business processes that are more efficient and effective that deliver the best possible experience [ph] for our students; second, controlling costs in order to keep education affordable and accessible; and third, creating capital for investing in innovation to develop new and better ways to reach adult learners.

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