Apollo Group (APOL)

Q4 2011 Earnings Call

October 19, 2011 8:00 am ET


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

Joseph L. D'Amico - President and Chief Operating Officer

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

Beth Coronelli -

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


Trace A. Urdan - Wunderlich Securities Inc., Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Peter P. Appert - Piper Jaffray Companies, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

Amy W. Junker - Robert W. Baird & Co. Incorporated, Research Division

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

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

James Samford - Citigroup Inc, Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

Michael Tarkan - FBR Capital Markets & Co., Research Division

Patrick Elgrably - Crédit Suisse AG, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

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



Good morning, ladies and gentlemen, and welcome to the fourth quarter and 2011 fiscal year-end and earnings release conference call. [Operator Instructions] This conference call is being recorded today, October 19, 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 October 28, beginning approximately 2 hours after we conclude today. The replay number is (800) 642-1687 or (706) 645-9291 internationally. The conference ID for the replay is 12862966. I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Mrs. Coronelli, go ahead, please.

Beth Coronelli

Thank you. Thank you for joining us today to discuss our fourth quarter results. Participating on the call today are Chas Edelstein, Co-Chief Executive Officer; Greg Cappelli, Co-Chief Executive Officer and Chairman of Apollo Global; and Brian Swartz, 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 will be comparing the fourth quarter of fiscal 2011, which ended August 31, 2011, to the fourth 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 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 any future results expressed or implied by such forward-looking statements. These factors are discussed on the risk factors and elsewhere in the company's most recent 10-K and subsequent 10-Q reports filed with the SEC and available on our website. The company disclaims any obligation to upgrade any forward-looking statements made during 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, which contains financial and other quantitative information to be discussed today is on our website, and we expect to file our 10-K for fiscal 2011 later this week. And with that, I will turn the call over to Chas.

Charles B. Edelstein

Okay. Thank you, Beth, and good morning, everyone. I'd like to start up this morning with a brief overview of our business and how we are positioning ourselves within the higher education sector. Then Greg will talk a bit about the key initiatives we've been working on and what we're seeing. And Brian will conclude with the results from the quarter in more detail and provide some commentary on the outlook for the business.

The past year has been a time of considerable change within our sector and for our company. At Apollo, we set out an ambitious plan to implement leading-edge student protection to differentiate the University of Phoenix, our flagship institution, and expand our business thoughtfully beyond the University of Phoenix. We are pleased by the progress we've made in fiscal 2011 in advancing these goals by, first, enhancing our student-centric approach to admissions with the elimination of all enrollment factors in our advisor evaluation and compensation system. Second, by implementing our free 3-week orientation program. Third, by launching the first class under our new learning platform. Fourth, advancing our adaptive learning capabilities. And fifth, connecting education to careers.

While some of these initiatives had an impact on our enrollments over the past year, we are pleased with the trends we have observed in the fourth quarter on a number of key operational metrics. For example, following the coaching and training we've provided to our admissions advisors, we've seen advisor effectiveness continue to recover, leading to improved new enrollment trends in the latter part of the fourth quarter. Also, we continue to see higher retention rates following the implementation of our orientation program and other initiatives. And finally, the mix of our student population has continued to shift away from Associates and toward bachelor level students, which we believe is having favorable benefits on our bad debts, our 90/10 ratio and cohort default rates over time.

As we move into the year ahead, we remain focused on several things. First, further differentiating University of Phoenix through investments in academics and the classroom experience. Next, integrating Carnegie Learning, and through its engine, accelerating our adaptive learning capabilities. Also, continuing to align our programs to prepare our students to meet the needs of today's employers. And finally, enhancing our efforts related to career services.

Now on the regulatory and compliance front, we maintain an active dialogue with policymakers in Washington to be sure we communicate the direction we are taking University of Phoenix. We also are making preparations for our upcoming HLC comprehensive evaluation in 2012, and we believe we are well prepared for these visits.

Lastly, let me say we remain focused on expanding along the lines of our core capabilities through opportunities in international markets and by leveraging those capabilities to help traditional postsecondary schools serve their markets more effectively. We're committed to using our extraordinary platform to lead exemplary change in the higher education sector. We believe the initiatives we've undertaken in 2011 and the innovations we continue to pursue will lead to improved student outcomes and improve student experience, and position our company for continued success while reducing risks to the business. With that, I'll turn the call over to Greg.

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