ITT Educational Services (ESI)
Q2 2012 Earnings Call
July 26, 2012 11:00 am ET
Kevin M. Modany - Chairman and Chief Executive Officer
Daniel M. Fitzpatrick - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Kelly A. Flynn - Crédit Suisse AG, Research Division
Suzanne E. Stein - Morgan Stanley, Research Division
Jeffrey Y. Volshteyn - JP Morgan Chase & Co, Research Division
Paul Ginocchio - Deutsche Bank AG, Research Division
Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division
Sara Gubins - BofA Merrill Lynch, Research Division
George K. Tong - Piper Jaffray Companies, Research Division
James Samford - Citigroup Inc, Research Division
Gary E. Bisbee - Barclays Capital, Research Division
Corey Greendale - First Analysis Securities Corporation, Research Division
Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division
Trace A. Urdan - Wells Fargo Securities, LLC, Research Division
Previous Statements by ESI
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Greetings, ladies and gentlemen, and welcome to the ITT Educational Services 2012 Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today from the management of ITT Educational Services, we have Kevin Modany, Chief Executive Officer and Chairman; and Dan Fitzpatrick, Executive Vice President and Chief Financial Officer.
Before we begin, ITT Educational Services, Inc. wishes to remind you that this conference call may include forward-looking information. Actual results may differ from the information presented during this call. For additional information, please review the section on forward-looking information contained in today's news release or in the company's public filings with the Securities and Exchange Commission. Thank you, Mr. Modany, you may begin.
Kevin M. Modany
Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us on our conference call to review our 2012 second quarter results. As usual, Dan Fitzpatrick, our Executive Vice President and Chief Financial Officer, is on the call with me this morning. For our prepared remarks today, we'll follow our standard format and limit our comments so as to allow more time for your questions during the Q&A session.
We'll begin the call with a brief review of our marketing and advertising efforts in the quarter. We'll then provide some additional color on the new student enrollment results for the academic period that began in June 2012. Additionally, we'll speak to the leading indicators related to new student enrollment for the academic period that will begin in September 2012. Next, we'll provide an overview of student retention and the number of graduates in the second quarter of 2012 compared to the same period in the prior year, as well as the resulting impact on our student persistence rate in the quarter. At that point, we'll provide the graduate employment metrics for our 2011 graduates compared to the same metrics for our 2010 graduates. We'll also provide an update on the year-to-date graduate employment metrics of our 2012 graduates in comparison to the 2011 graduate metrics at the same point in the prior year. I will then provide an update on our progress related to various elements of our strategic plan. And lastly, before I turn it over to Dan, I'll provide a few comments regarding our efforts to facilitate additional private education loan options for our students. Dan will then conclude the prepared comments portion of our call by providing additional color on the financial results reported in this morning's press release. At that point, we'll open up the call for your questions.
With the agenda for the call out of the way, let me begin with a review of our 2012 second quarter marketing and advertising results. Advertising expense decreased 2.9% in the second quarter of 2012 compared to the same prior year period, as we continued to rebalance our spending in an effort to generate efficiencies in our student enrollment process. The rebalanced advertising generated an increase in perspective student increase in the second quarter of 2012 compared to the same period in the prior year. However, the increased number of student increase converted to new students had a lower rate, resulting in a 9.5% decrease in new student enrollment in the second quarter of 2012 compared to the second quarter of 2011. As a result of the conversion rate decline, we have increased our efforts to better convey the value proposition of the investment in a career-based education for graduates of ITT Technical Institute via various communication campaigns directed towards individuals who have indicated an interest in pursuing their studies at our institution.
For the fourth consecutive quarter, we experienced a more material year-over-year decline in new student enrollment in the criminal justice programs in the second quarter compared to new student enrollment in our other curricula, as a result of self-directed changes to program offerings at select campuses. The year-over-year decline in new student enrollment in the School of Criminal Justice during the 2012 second quarter represented approximately 85% of the year-over-year decline in new student enrollment in the second quarter of 2012.
We also experienced a more material year-over-year decline in new student enrollment in our School of Drafting and Design in the second quarter of 2012, principally in graphics design-related programs, compared to all other schools of study. The year-over-year decline in new student enrollment in the School of Drafting and Design in the 2012 second quarter represented approximately 40% of the year-over-year decline in new student enrollment in the second quarter.
The year-over-year declines in new student enrollment in the Schools of Criminal Justice and Drafting and Design were offset by year-over-year increases in new student enrollment in the School of Business, the Breckinridge School of Nursing and Health Sciences and the School of Electronics Technology. New student enrollment in the School of Information Technology in the second quarter of 2012 was down from the same period in the prior year but at a lesser rate than the 9.5% year-over-year decline in overall new student enrollment. The year-over-year decline in new student enrollment in the second quarter of 2012 compared to the same period in 2011 was generally in line with our expectations.