Apollo Group Inc. (APOL)

F1Q2011 Earnings Call Transcript

January 10, 2011 5:00 pm ET

Executives

Allyson Pooley – VP, IR

Greg Cappelli – Co-CEO

Brian Swartz – SVP and CFO

Chas Edelstein – Co-CEO

Joe D'Amico – President and COO

Analysts

Suzi Stein – Morgan Stanley

Andrew Steinerman – JP Morgan

Gary Bisbee – Barclays Capital

Sara Gubins – Bank of America-Merrill Lynch

Trace Urdan – Signal Hill

Ariel Sokol – UBS Securities

Jerry Herman – Stifel Nicolaus

Arvind Bhatia – Sterne Agee

Peter Appert – Piper Jaffray

Jeff Silber – BMO Capital Markets

Amy Junker – Robert W. Baird

Paul Ginocchio – Deutsche Bank

Scott Schneeberger – Oppenheimer

Bob Wetenhall – RBC

James Samford – Citigroup

Brandon Dobell – William Blair

Presentation

Operator

Good afternoon, ladies and gentlemen and welcome to the first quarter 2011 earnings release conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please refrain from entering into the queue until permitted. (Operator instructions)

This conference call is being recorded today, January 10, 2011, 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 January 17 beginning approximately two hours after we conclude today. The replay number is 800-642-1687 or 706-645-9291 internationally. The conference ID for the replay is 29367436.

I would now like to turn the call over to Allyson Pooley, Vice President of Investor Relations. Ms. Pooley, go ahead, please.

Allyson Pooley

Thanks, Katherine, and thank you everyone for joining us today to discuss our first quarter results. Participating with me on the call are Chas Edelstein, our Co-Chief Executive Officer; Greg Cappelli, our Co-Chief Executive Officer and Chairman of Apollo Global; and Brian Swartz, Senior Vice President and Chief Financial Officer. Joe D'Amico, President and Chief Operating Officer, is here as well and will be available during the Q&A portion of the call.

As we discuss our results today, unless otherwise noted, we will be comparing the first quarter of fiscal '11, which ended November 30, 2010, to the first quarter of fiscal 2010. I'd also like to remind you that this conference call may contain forward-looking statements with respect to future performance, financial conditions, 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 any future 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 report filed with the SEC and available on our website at www.apollogrp.edu. The Company disclaims any obligation to update any forward-looking statements made during the 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, which contains financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measure is also available on our website.

With that, I'll turn the call over to Greg.

Greg Cappelli

Okay. Thanks, Allyson. Good afternoon. I know this is a volatile time within the education sector. There’s many questions about the sector and its growth prospects and our position within the sector. We'll do our best to address your questions as we've been working very hard for the past year to put the Apollo Group and the University of Phoenix in the position of strength, and it demonstrate true leadership in the areas of compliance and student protections.

Although, there is still much work to do and despite the recent downturn in enrollment, we remain steadfast in our mission to continue to invest and enhance our academic platform, develop new technological capabilities and further improve student outcomes. We still believe the future of our country and its competitive position globally will in some part depend on the education levels and productivity of our labor force.

Now, it's 132 million strong, and despite what we might be in an economic cycle, we intend to do our part to try and help many of the millions who are working with us become more competitive in the now global labor force.

The first quarter was significant for us. We implemented several important initiatives that have been in development. Each is consistent with our focus on enhancing the student experience, expanding student protections and ensuring we enroll students who had the greatest likelihood of succeeding in our programs.

We recognize that these initiatives are adversely impacting our enrollment and financial results during this period of transition. But we continue to believe that we're making the right decisions now to position the Company for more stable and higher quality long-term growth.

Now, let me update you on our key initiatives. There were three during the quarter. First, beginning September 1, we eliminated any tie to enrollment factors as a component of valuation or compensation for all of our admissions professionals and other employees.

Second, beginning November 1, at University of Phoenix, we rolled out University Orientation nationwide as requirement for incoming students with limited college experience.

Third, on the marketing side, we continue to refine our approach to digital marketing in order to better identify students who are more likely to succeed at our universities.

With respect to admissions, this was a big undertaking and it will take some time for our enrollment advisors and supporting staff to gain comfort and get acclimated to our new approach. However, we're pleased with the progress we made in the rollout over the past four months.

As you know, we eliminated the old performance evaluation and compensation system earlier than originally planned. This was the right thing to do, but it did create some initial uncertainty for our staff in the field as understandably our employees were anxious to comprehend and learn our new evaluation system.

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