Apollo Education Group, Inc. (NASDAQ: APOL) today reported
financial results for the three and six months ended February 28,
2015, with second quarter revenue of $578.6 million and a $0.31
diluted loss per share, or $0.10 loss per share, excluding special
items.
“While we faced challenges in the second quarter, we believe
Apollo Education Group has the right long-term strategy
in place,” said Greg Cappelli, Chief Executive Officer, Apollo
Education Group. “In a time of unprecedented change in the
higher education industry, we are focused on enhancing outcomes
through a deep understanding of student and employer needs. This
includes differentiating University of Phoenix through its
program-based colleges and diversifying our organization with the
expansion of Apollo Global and other targeted growth initiatives.
We are aligning education to careers, offering students
tangible skills and helping employers develop a high-performance
workforce.”
Second Quarter 2015 Results of
Operations
Apollo Education Group (the “Company”) reported net revenue for
the second quarter 2015 of $578.6 million, compared to $672.8
million for the second quarter 2014. Second quarter 2015 University
of Phoenix New Degreed Enrollment was 28,300 and Degreed Enrollment
was 213,800. Operating loss for the second quarter 2015 was $54.5
million, compared to operating income of $10.3 million for the
second quarter 2014. Loss from continuing operations attributable
to Apollo Education Group for the second quarter 2015 was $33.6
million, or $0.31 per share, compared to income of $16.6 million,
or $0.15 per share for the prior year second quarter.
Excluding special items, operating loss was $17.1 million for
the second quarter 2015, compared to operating income of $47.5
million for the second quarter 2014, and loss from continuing
operations attributable to Apollo Education Group for the second
quarter 2015 was $10.4 million, or $0.10 per share, compared to
income of $34.1 million, or $0.30 per share, for the second quarter
2014. (Special items for the second quarter 2015 and 2014 are
included in the reconciliation of GAAP to non-GAAP financial
information tables of this press release.)
First Six Months of 2015 Results of
Operations
Net revenue for the first six months of fiscal year 2015 totaled
$1.3 billion, compared to $1.5 billion in the first six months of
fiscal year 2014. In the first six months of 2015, University of
Phoenix Average Degreed Enrollment was 224,900. Operating income
for the first six months of 2015 was $6.0 million, compared to
$180.7 million in the prior year period. Income from continuing
operations attributable to Apollo Education Group for the first six
months of 2015 was $0.2 million, or $0.00 per share, compared to
$115.9 million, or $1.02 per share, for the first six months of
2014.
Excluding special items, operating income was $65.6 million for
the first six months of 2015, compared to $249.8 million for the
first six months of 2014, and income attributable to Apollo
Education Group for the first six months of 2015, was $37.4
million, or $0.34 per share, compared to $153.2 million, or $1.35
per share, for the first six months of 2014. (Special items for the
first six months of 2015 and 2014 are included in the
reconciliation of GAAP to non-GAAP financial information tables of
this press release.)
Balance Sheet and Cash
Flow
As of February 28, 2015, the Company’s unrestricted cash and
cash equivalents and short-term marketable securities totaled
$759.8 million, compared to $1.4 billion as of August 31, 2014. The
decrease was primarily attributable to $595.4 million of net
payments on borrowings, $43.3 million for capital expenditures,
$38.7 million of share repurchases (which includes $2.2 million of
share repurchases for tax withholding requirements on restricted
stock units), $34.5 million paid for contingent consideration, and
$21.2 million for acquisitions. These items were partially offset
by cash provided by operations.
Total debt outstanding (including short-term borrowings and the
current portion of long-term debt) was $60.8 million as of February
28, 2015.
Business Outlook
The Company offers the following outlook for fiscal year 2015
based on the business trends observed during the second quarter of
fiscal year 2015, as well as management’s current expectations of
future trends.
- Net revenue of $2.63 to $2.68 billion;
and
- Operating income of $200 to $230
million, excluding the impact of special items.
The Company also provides the following outlook for the third
quarter of fiscal year 2015.
- Net revenue of $690 to $705 million;
and
- Operating income of $85 to $95 million,
excluding the impact of special items
Conference Call
Information
The Company will hold a conference call to discuss these
earnings results at 8:30 a.m. (ET), 5:30 a.m. (MT), today,
Wednesday, March 25, 2015.
Dial-In Numbers:877-292-6888
(Domestic)973-200-3381 (International)Conference ID: 86330045
A live webcast of this event may be accessed by visiting the
Company’s website at www.apollo.edu. A
webcast replay will be available approximately one hour following
the conclusion of the call at the same link.
A telephone replay will be available approximately two hours
following the conclusion of the call until April 1, 2015.
Dial-In Numbers:855-859-2056
(Domestic)404-537-3406 (International)Conference ID: 86330045
About Apollo Education Group,
Inc.
Apollo Education Group, Inc. is one of the world’s largest
private education providers, serving students since 1973. Through
its subsidiaries, Apollo Education Group offers undergraduate,
graduate, professional development and other nondegree educational
programs and services, online and on-campus principally to working
learners. Its educational programs and services are offered
throughout the United States and in Europe, Australia, Latin
America, Africa and Asia, as well as online throughout the
world.
For more information about Apollo Education Group, Inc. and its
subsidiaries, call (800) 990-APOL or visit the Company’s website at
www.apollo.edu.
Apollo Education Group, Inc. and
Subsidiaries Condensed Consolidated Statements of
Operations
(Unaudited)
Three Months EndedFebruary
28,
Six Months EndedFebruary
28,
(In thousands, except per share data)
2015
2014 2015 2014 Net
revenue $ 578,572 $ 672,754 $ 1,297,624 $ 1,520,902 Costs and
expenses: Instructional and student advisory 293,073 316,577
617,337 653,779 Marketing 127,421 139,272 256,214 273,101
Admissions advisory 57,840 53,121 114,925 102,819 General and
administrative 70,598 67,275 142,965 142,054 Depreciation and
amortization 34,819 37,465 71,223 73,803 Provision for
uncollectible accounts receivable 11,969 11,534 29,367 25,512
Restructuring and impairment charges 35,536 15,209 54,564 47,172
Acquisition and other related costs 1,742 13,005 4,961 13,005
Litigation charges 100 9,000 100 9,000
Total costs and expenses 633,098 662,458
1,291,656 1,340,245
Operating (loss) income
(54,526 ) 10,296 5,968 180,657 Interest income 740 599 1,329 1,167
Interest expense (1,739 ) (1,983 ) (3,401 ) (4,069 ) Other (loss)
income, net (1,146 ) 107 (2,431 ) 914
(Loss)
income from continuing operations before income taxes (56,671 )
9,019 1,465 178,669 Benefit from (provision for) income taxes
20,533 5,130 (5,134 ) (65,088 )
(Loss) income from
continuing operations (36,138 ) 14,149 (3,669 ) 113,581 Loss
from discontinued operations, net of tax — (1,972 ) —
(2,363 )
Net (loss) income (36,138 ) 12,177 (3,669 ) 111,218
Net loss attributable to noncontrolling interests 2,528
2,428 3,844 2,278
Net (loss) income
attributable to Apollo $ (33,610 ) $ 14,605 $ 175
$ 113,496 Earnings (loss) per share - Basic: Continuing
operations attributable to Apollo $ (0.31 ) $ 0.15 $ — $ 1.03
Discontinued operations attributable to Apollo — (0.02 ) —
(0.02 )
Basic (loss) income per share attributable to
Apollo $ (0.31 ) $ 0.13 $ — $ 1.01
Earnings (loss) per share - Diluted: Continuing operations
attributable to Apollo $ (0.31 ) $ 0.15 $ — $ 1.02 Discontinued
operations attributable to Apollo — (0.02 ) — (0.02 )
Diluted (loss) income per share attributable to Apollo $
(0.31 ) $ 0.13 $ — $ 1.00 Basic weighted
average shares outstanding 108,166 112,151 108,375 112,742 Diluted
weighted average shares outstanding 108,166 113,380 109,337 113,676
Apollo Education Group, Inc. and
Subsidiaries Condensed Consolidated Balance Sheets
(Unaudited)
As of ($ in thousands)
February 28,2015
August 31,2014
ASSETS Current assets: Cash and cash equivalents $ 566,078 $
1,228,813 Restricted cash and cash equivalents 224,987 224,135
Marketable securities 193,745 187,472 Accounts receivable, net
235,453 225,398 Prepaid taxes 55,113 34,006 Deferred tax assets
82,018 83,871 Other current assets 55,344 58,855
Total current assets 1,412,738 2,042,550 Marketable securities
75,096 87,811 Property and equipment, net 402,920 435,733 Goodwill
248,632 259,901 Intangible assets, net 167,768 189,365 Deferred tax
assets 50,400 37,335 Other assets 48,387 40,240
Total assets $ 2,405,941 $ 3,092,935
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
SHAREHOLDERS’ EQUITY Current liabilities: Short-term borrowings
and current portion of long-term debt $ 15,664 $ 609,506 Accounts
payable 72,294 63,907 Student deposits 262,387 280,562 Deferred
revenue 261,428 225,818 Accrued and other current liabilities
308,181 363,607 Total current liabilities 919,954
1,543,400 Long-term debt 45,157 47,590 Deferred tax liabilities
25,715 22,674 Other long-term liabilities 225,884 233,942
Total liabilities 1,216,710 1,847,606 Commitments and
contingencies
Redeemable noncontrolling interests 55,621
64,527 Shareholders’ equity: Preferred stock, no par value — —
Apollo Class A nonvoting common stock, no par value 103 103 Apollo
Class B voting common stock, no par value 1 1 Additional paid-in
capital — — Apollo Class A treasury stock, at cost (3,965,057 )
(3,936,607 ) Retained earnings 5,152,466 5,143,949 Accumulated
other comprehensive loss (54,574 ) (27,320 ) Total Apollo
shareholders’ equity 1,132,939 1,180,126 Noncontrolling interests
671 676
Total equity 1,133,610
1,180,802
Total liabilities, redeemable noncontrolling
interests and shareholders’ equity $ 2,405,941 $
3,092,935
Apollo Education Group,
Inc. and Subsidiaries Condensed Consolidated Statements of
Cash Flows
(Unaudited)
Six Months EndedFebruary
28,
($ in thousands)
2015 2014 Operating
activities: Net (loss) income $ (3,669 ) $ 111,218 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Share-based compensation 21,914 22,510 Excess tax
benefits from share-based compensation (236 ) — Depreciation and
amortization 71,223 73,803 Accelerated depreciation included in
restructuring 4,272 4,316 Loss (gain) on asset dispositions and
impairment charges, net 21,228 (1,984 ) Non-cash foreign currency
loss, net 1,362 596 Provision for uncollectible accounts receivable
29,367 25,512 Deferred income taxes (10,434 ) (6,255 ) Changes in
assets and liabilities, excluding the impact of acquisitions and
disposition: Restricted cash and cash equivalents (1,002 ) (24,165
) Accounts receivable (51,199 ) (6,469 ) Prepaid taxes (21,440 )
15,230 Other assets (3,771 ) (11,445 ) Accounts payable 7,870
(11,454 ) Student deposits (15,873 ) 17,409 Deferred revenue 47,821
32,881 Accrued and other liabilities (42,320 ) (48,219 )
Net
cash provided by operating activities 55,113 193,484 Investing
activities: Purchases of property and equipment (43,310 ) (58,119 )
Purchases of marketable securities (109,544 ) (227,978 ) Maturities
and sales of marketable securities 113,651 105,237 Acquisitions,
net of cash acquired (21,166 ) (94,937 ) Other 467 3,446
Net cash used in investing activities (59,902 )
(272,351 ) Financing activities: Payments on borrowings (599,925 )
(619,268 ) Proceeds from borrowings 4,515 — Share repurchases
(38,718 ) (72,237 ) Share reissuances 995 1,793 Excess tax benefits
from share-based compensation 236 — Payment for contingent
consideration (21,371 ) —
Net cash used in financing
activities (654,268 ) (689,712 ) Exchange rate effect on cash
and cash equivalents (3,678 ) 34
Net decrease in cash and
cash equivalents (662,735 ) (768,545 )
Cash and cash
equivalents, beginning of period 1,228,813 1,414,485
Cash and cash equivalents, end of period $ 566,078
$ 645,940 Supplemental disclosure of cash flow and
non-cash information: Cash paid for income taxes, net of refunds $
37,346 $ 70,868 Cash paid for interest 3,514 3,911 Restricted stock
units vested and released 6,255 7,104 Unsettled share repurchases
1,600 —
Apollo Education
Group, Inc. and Subsidiaries Segment Data and University of
Phoenix Operating Metrics
(Unaudited)
Three Months EndedFebruary
28,
Six Months EndedFebruary 28, ($ in thousands)
2015 2014 2015
2014 Net revenue: University of Phoenix: Degree
seeking gross revenues(1) $ 542,139 $ 642,994 $ 1,199,305 $
1,440,734 Less: Discounts and other (64,159 ) (58,136 ) (139,953 )
(120,697 ) Degree seeking net revenues(1) 477,980 584,858 1,059,352
1,320,037 Other revenues 9,789 9,223 21,270
18,907 Total University of Phoenix 487,769 594,081 1,080,622
1,338,944 Apollo Global 81,100 68,634 196,240 159,793 Other 9,703
10,039 20,762 22,165
Net revenue
$ 578,572 $ 672,754 $ 1,297,624 $ 1,520,902
Operating (loss) income: University of Phoenix $
1,350 $ 86,682 $ 94,861 $ 270,155 Apollo Global (27,541 ) (40,004 )
(32,383 ) (37,787 ) Other (28,335 ) (36,382 ) (56,510 ) (51,711 )
Operating (loss) income $ (54,526 ) $ 10,296 $ 5,968
$ 180,657 (1) Represents revenue from tuition
and other fees for students enrolled in University of Phoenix
degree programs or certificate programs of at least 18 credits in
length with some course applicability into a related degree
program.
University of Phoenix Enrollment Data:
Three Months EndedFebruary
28,
Six Months EndedFebruary
28,
(Rounded to the nearest hundred, except per degreed enrollment)
2015 2014 % Change
2015 2014 % Change Degreed
Enrollment(1) 213,800 250,300 (14.6 )% Average Degreed
Enrollment(3) 224,900 260,800 (13.8 )% New Degreed Enrollment(2)
28,300 32,500 (12.9 )% Degree seeking net revenues per degreed
enrollment $ 2,236 $ 2,337 (1) Represents students enrolled
in a degree program who attended a credit bearing course during the
quarter and had not graduated as of the end of the quarter;
students who previously graduated from one degree program and
started a new degree program in the quarter (e.g., a graduate of an
associate’s degree program returns for a bachelor’s degree); and
students participating in certain certificate programs of at least
18 credits with some course applicability into a related degree
program. (2) Represents new students and students who have been out
of attendance for more than 12 months who enroll in a degree
program and start a credit bearing course in the quarter; students
who have previously graduated from a degree program and start a new
degree program in the quarter; and students who commence
participation in certain certificate programs of at least 18
credits with some course applicability into a related degree
program. (3) Represents the average of quarterly Degreed Enrollment
from the beginning to the end of the respective periods.
Apollo Education Group, Inc. and
Subsidiaries Reconciliation of GAAP Financial Information to
Non-GAAP Financial Information
(Unaudited)
Consolidated
Financial Information Reconciliation
Three Months EndedFebruary
28,
Six Months EndedFebruary
28,
(In thousands, except per share data)
2015
2014 2015 2014 Operating (loss)
income $ (54,526 ) $ 10,296 $ 5,968 $ 180,657 (Loss) income from
continuing operations before income taxes $ (56,671 ) $ 9,019 $
1,465 $ 178,669 Benefit from (provision for) income taxes $ 20,533
$ 5,130 $ (5,134 ) $ (65,088 ) Net (loss) income attributable to
Apollo $ (33,610 ) $ 14,605 $ 175 $ 113,496 Loss from discontinued
operations, net of tax — 1,972 — 2,363
(Loss) income from continuing operations attributable to Apollo $
(33,610 ) $ 16,577 $ 175 $ 115,859 Diluted (loss) income per share
from continuing operations attributable to Apollo $ (0.31 ) $ 0.15
$ — $ 1.02
Special items: Restructuring and impairment
charges $ 35,536 $ 15,209 $ 54,564 $ 47,172 Acquisition and other
related costs 1,742 13,005 4,961 13,005 Litigation charges 100
9,000 100 9,000 Special items before
income taxes 37,378 37,214 59,625 69,177 Less: income tax effects
of special items (14,128 ) (9,508 ) (22,358 ) (21,648 ) Tax benefit
from Internal Revenue Service settlement — (10,176 ) —
(10,176 ) Special items, net of income tax $ 23,250 $
17,530 $ 37,267 $ 37,353
Excluding special
items: Operating (loss) income $ (17,148 ) $ 47,510 $ 65,593 $
249,834 (Loss) income from continuing operations before income
taxes $ (19,293 ) $ 46,233 $ 61,090 $ 247,846 Benefit from
(provision for) income taxes $ 6,405 $ (14,554 ) $ (27,492 ) $
(96,912 ) (Loss) income from continuing operations attributable to
Apollo $ (10,360 ) $ 34,107 $ 37,442 $ 153,212 Diluted (loss)
income per share from continuing operations attributable to Apollo
$ (0.10 ) $ 0.30 $ 0.34 $ 1.35
Apollo Global
Financial Information Reconciliation
Three Months EndedFebruary
28,
Six Months EndedFebruary
28,
($ in thousands)
2015
2014 2015 2014 Apollo Global operating loss:
$(27,541
) $ (40,004 ) $ (32,383 ) $ (37,787 ) Depreciation and amortization
9,678
9,007 20,149 15,366 Acquisition and other related costs
1,012
12,997 2,698 12,997 Restructuring and impairment charges
43
304 101 1,567
Adjusted Apollo Global
Operating Loss (1), (2)
$(16,808
) $ (17,696 ) $ (9,435 ) $ (7,857 ) (1) Excluding losses
from Open Colleges, Adjusted Apollo Global Operating Loss would
have been $13.5 million and $12.1 million for the three months
ended February 28, 2015 and 2014, respectively. The Adjusted Apollo
Global Operating Loss would have been $3.2 million and $2.2 million
for the six months ended February 28, 2015 and 2014, respectively.
(2) Open Colleges’ educational offerings generally extend beyond
one year and the associated revenue is recognized over the
contractual period that students are provided access to complete
their program, or the time period it takes students to complete
their program, as applicable. However, Open Colleges’ operating
costs are period costs that are expensed as incurred and a
substantial portion are incurred before, or soon after, the
students begin their programs. Accordingly, as a result of Open
Colleges’ enrollment growth, service model, and cost structure,
Apollo Global’s operating results are negatively impacted in the
near term. However, these factors do not have the same adverse
impact on cash flows generated from Open Colleges. Additionally,
Apollo Global’s deferred revenue has increased substantially
following the Open Colleges’ acquisition, and we expect its
deferred revenue to continue to increase. Apollo Global’s deferred
revenue was approximately $177 million and $115 million as of
February 28, 2015 and 2014, respectively.
Use of Non-GAAP Financial
Information
The Company’s non-GAAP financial measures are intended to
supplement, but not substitute for, the most directly comparable
GAAP measures. Management uses, and chooses to disclose to
investors, these non-GAAP financial measures because: (i) such
measures provide an additional analytical tool to clarify the
Company’s results from operations and help to identify underlying
trends in its results of operations; (ii) as to the non-GAAP
earnings measures, such measures help compare the Company’s
performance on a consistent basis across time periods; and (iii)
these non-GAAP measures are employed by the Company’s management in
its own evaluation of performance and are utilized in financial and
operational decision-making processes, such as budgeting and
forecasting. Exclusion of items in the non-GAAP presentation should
not be construed as an inference that these items are unusual,
infrequent or non-recurring. Other companies, including other
companies in the education industry, may calculate non-GAAP
financial measures differently, limiting their usefulness as a
comparative measure across companies.
Adjusted Apollo Global Operating Loss excludes depreciation and
amortization and certain other items and is intended to provide an
indicator of Apollo Global’s operating performance across time
periods due to the impact of acquisitions.
Forward-Looking Statements Safe
Harbor
Statements about Apollo Education Group and its business in this
release which are not statements of historical fact, including
statements regarding Apollo Education Group’s future strategy and
plans and commentary regarding future results of operations and
prospects, are forward-looking statements and are subject to the
Safe Harbor provisions created by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on
current information and expectations and involve a number of risks
and uncertainties. Actual plans implemented and actual results
achieved may differ materially from those set forth in or implied
by such statements due to various factors, including without
limitation: (i) the impact of increased competition from
traditional public universities and proprietary educational
institutions; (ii) the impact on retention from the technical
challenges experienced in implementing the new University of
Phoenix online student classroom; (iii) the costs and effectiveness
of University of Phoenix initiatives to improve student retention,
improve student outcomes and demonstrate a compelling and cost
effective relationship between a student’s education and career;
(iv) changes in law or regulation affecting the University of
Phoenix’s eligibility to participate in or the manner in which it
participates in U.S. federal and state student financial aid
programs, including the recent Department of Education regulations
relating to gainful employment, future changes that may be included
in the reauthorization of the federal Higher Education Act and the
Department of Education’s proposed regulation relating to state
authorization; (v) any adverse impact on University of Phoenix’s
business arising from the Notice sanction imposed by the
University’s principal accreditor, and any associated impact on the
University’s pending recertification by the U.S. Department of
Education for participation in Title IV student financial aid
programs; (vi) the impact of the Company’s ongoing restructuring
and cost-reduction initiatives; (vii) the impact of any reduction
in financial aid available to students, including active and
retired military personnel, due to the U.S. government deficit
reduction proposals, debt ceiling limitations, budget sequestration
or otherwise; (viii) changes in University of Phoenix enrollment or
student mix; and (ix) unexpected expenses or other challenges in
integrating acquired businesses, consumer or regulatory impact
arising from consummation of such acquisitions, and unexpected
changes or developments in the acquired businesses. For a
discussion of the various factors that may cause actual plans
implemented and actual results achieved to differ materially from
those set forth in the forward-looking statements, please refer to
the risk factors and other disclosures contained in Apollo
Education Group’s Form 10-K for fiscal year 2014, and other filings
with the Securities and Exchange Commission which are available at
www.apollo.edu.
Apollo Education Group, Inc.Investor Relations
Contacts:Beth Coronelli,
312-660-2059beth.coronelli@apollo.eduorErin Kelly,
602-557-3830erin.kelly@apollo.eduorMedia Contact:Media
Relations Hotline, 602-254-0086media@apollo.edu
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