DeVry's CEO Discusses Q3 2012 Results - Earnings Call Transcript

DeVry (DV)

Q3 2012 Earnings Call

April 24, 2012 4:30 pm ET


Joan Bates -

Daniel M. Hamburger - Chief Executive Officer, President and Director

Timothy J. Wiggins - Chief Financial Officer, Senior Vice President and Treasurer

Patrick J. Unzicker - Chief Accounting Officer and Vice President of Finance


Suzanne E. Stein - Morgan Stanley, Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

David Chu - BofA Merrill Lynch, Research Division

Peter P. Appert - Piper Jaffray Companies, Research Division

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

Zachary Fadem - Barclays Capital, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

James Samford - Citigroup Inc, Research Division

Peter Wahlstrom - Morningstar Inc., Research Division

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

Kelly A. Flynn - Crédit Suisse AG, Research Division

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

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

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



Good day, ladies and gentlemen, and welcome to DeVry's Fiscal 2012 Third Quarter Conference Call. My name is Jeremy, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Ms. Joan Bates, Senior Director of Investor and Media Relations. Please proceed.

Joan Bates

Thank you, Jeremy. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer; Tim Wiggins, our Chief Financial Officer; and Pat Unzicker, Vice President of Finance.

I'll now paraphrase our Safe Harbor language. This call may contain forward-looking statements. Actual results could differ materially from those expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any such statements. Please consult our most recent 10-K and 10-Q filings for a more complete description of factors that could affect our financial results.

On today's call, we'll highlight certain non-GAAP financial measures. Further information about these non-GAAP financial measures, including reconciliations to U.S. GAAP can be found in our results release, which is available as an exhibit to our Form 8-K, dated April 24, 2012. Telephone and webcast replays of today's call are available until May 1, 2012. To access the replays, please refer to today's release for more information.

I'll now turn the call over to Daniel Hamburger.

Daniel M. Hamburger

Thanks, Joan, and thank you all very much for joining us today in our fiscal 2012 third quarter results call. I'll begin with an overview of the quarter, followed by Tim and Pat, who will walk through the financial results, and I'll wrap it up with our perspective for the long-term. And we continue to navigate through a challenging environment, but it's an environment we're increasingly familiar with and understand. We're not satisfied with the results this quarter. They don't yet fully reflect our sense of urgency. This is not business as usual. We know strong efforts and changes are required for us to get where we want to go. And while we see progress that reinforces our confidence that we are on the right path, we also recognize that we've got a lot of work to do. It is going to take some time to reflect in our results.

So on my upfront summary, let me cover the actions we have taken and are taking on our performance improvement plan where we see opportunities to make targeted investments to drive growth, the outlook over our 5-year planning horizon and our approach to capital allocation. So here's an update on our 5-point performance improvement plan.

First off, we've made progress in more closely aligning our costs with enrollment levels. We have a task force of internal and external people working on this, and they've been doing a good job. Over the last 12 months, we've reduced our workforce generating about $25 million in annual savings with the vast majority of those reductions coming from DeVry University and Carrington. We've now identified an additional $50 million of cost savings from our fiscal 2012 full year cost base, again the majority of which is focused at DeVry University and Carrington.

We're finding savings through reducing variable costs, centralizing processes and by reengineering processes, for example, using new technology. We've also identified revenue enhancement ideas. This is about value creation, not just cost reduction. I'll ask Tim to discuss our initiatives on point one of the plan in a little bit more detail.

The second point of our performance improvement plan is enhancing the effectiveness of our recruiting efforts. Last month, we held additional training for DeVry University admissions and revisions to their performance management system. These revisions were driven by carefully listening to our teams and learning what's worked well and what could be improved. As a result, we believe our revision advisors and their managers are beginning to feel a little more comfortable with the new system and over time, these efforts should begin to have a positive effect on enrollment trends. We're also working on new technologies to enhance the student enrollment process and further strengthening our outreach to corporations and to community colleges as part of the recruiting process.

The third point of the plan is to improve awareness building and marketing. At the tactical level of efficiency and effectiveness, we're cultivating higher-quality student inquiries through organic sources like an improved website and search optimization. We're focused on all forms of digital in a big way, including mobile, social and so on. And at the strategic level, we're building on DeVry's strong brand as a means of driving long-term growth and differentiation.

DeVry's partnership with the U.S. Olympic Committee is an excellent example of enhancing our brand. The USOC selected DeVry as an official education provider to Team U.S.A. We're very proud of this partnership. We have 40 students athletes already enrolled in DeVry University. You may have seen a new series of Olympic-themed advertisements, which will be bringing additional awareness to the flexible delivery option and the student support services that we offer to our DeVry family of institutions. This relationship and this campaign are perfectly aligned with DeVry University's message to students: Let nothing stand in your way. We've provided a link to one of the ads in the press release, you can see it.

Fourth, we're making targeted investments that are laying the foundation for future growth. During this quarter, DeVry Brasil acquired Faculdade Boa Viagem, which further expands our presence in the fast-growing region of Northeast Brazil. FBV currently serves about 5,800 students and offers both undergraduate and graduate degree programs, including business, law, engineering, information technology and that's at 3 campuses. FBV provides excellent academic quality to students and is one of the top-ranked colleges in this city of Recife.

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