Apollo Education Group, Inc. (NASDAQ: APOL) (“Apollo” or the
“Company”) today reported financial results for the three months
ended November 30, 2015, with first quarter revenue of $586.0
million and a $0.53 diluted loss per share from continuing
operations, or $0.29 earnings per share excluding special
items.
“Apollo is taking the necessary steps to enhance long-term
shareholder value through a series of strategic actions which
include transforming University of Phoenix into a higher retaining,
more trusted provider of career relevant higher education,
continued expansion of our international network, and a commitment
to efficiency,” said Greg Cappelli, Chief Executive Officer, Apollo
Education Group. “The University of Phoenix team is implementing
major components of its transformational plan as quickly as
possible, and although this is having a near-term negative impact
on revenue, we believe speed of execution will help the University
return to stability more quickly. Apollo Global continues to expand
and grow its network through a combination of high quality
acquisitions and organic growth and is on-target for a record year.
Finally, we have committed to incremental cost reductions in order
to preserve our operating margin during this transformational
period.”
First Quarter 2016 Results of
Operations
Apollo Education Group reported net revenue for the first
quarter 2016 of $586.0 million, compared to $714.5 million for the
first quarter 2015. First quarter 2016 University of Phoenix New
Degreed Enrollment was 24,500 and Degreed Enrollment was 176,900,
compared to New Degreed Enrollment of 39,600 and Degreed Enrollment
of 227,400 for the prior year first quarter. Operating loss for the
first quarter 2016 was $45.2 million, compared to operating income
of $64.2 million for the first quarter 2015. The operating results
for the first quarter 2016 were significantly impacted by $73.4
million of goodwill impairment charges. Loss from continuing
operations attributable to Apollo Education Group for the first
quarter 2016 was $57.5 million, or $0.53 per share, compared to
income of $36.1 million, or $0.33 per share, for the prior year
first quarter.
Excluding special items, income from continuing operations
attributable to Apollo Education Group for the first quarter 2016
was $31.3 million, or $0.29 per share, compared to $49.9 million,
or $0.46 per share, for the first quarter 2015. Adjusted EBITDA was
$80.2 million for the first quarter 2016 compared to $118.5 million
for the first quarter 2015. (Special items and Adjusted EBITDA for
the respective periods are included in the reconciliation of GAAP
to non-GAAP financial information tables of this press
release.)
Balance Sheet and Cash
Flow
As of November 30, 2015, the Company’s unrestricted cash and
cash equivalents and marketable securities (including current and
noncurrent) totaled $755.7 million, compared to $794.2 million as
of August 31, 2015. The decrease was primarily attributable to cash
used in operating activities and capital expenditures during the
first quarter 2016.
Total debt outstanding (including short-term borrowings and the
current portion of long-term debt) was $43.3 million as of November
30, 2015.
Conference Call
Information
The Company will hold a conference call to discuss these
earnings results at 8:30 a.m. (ET), 6:30 a.m. (MT), today, Monday,
January 11, 2016.
Dial-In Numbers:877-292-6888
(Domestic)973-200-3381 (International)Conference ID: 13724699
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 January 22, 2016.
Dial-In Numbers:855-859-2056
(Domestic)404-537-3406 (International)Conference ID: 13724699
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, certificate and non-degree educational programs and
services, online and on-campus, principally to working learners in
the U.S. and abroad. 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 Ended
November 30,
(In thousands, except per share data)
2015
2014 Net
revenue $ 586,021 $ 714,525 Costs and expenses: Instructional
and student advisory 291,327 321,574 Marketing 93,802 126,883
Admissions advisory 34,188 57,085 General and administrative 70,326
71,823 Depreciation and amortization 27,394 33,631 Provision for
uncollectible accounts receivable 15,313 17,398 Restructuring and
impairment charges 97,823 18,748 Acquisition and other related
costs 1,097 3,219
Total costs and expenses
631,270 650,361
Operating (loss) income
(45,249 ) 64,164 Interest income 919 589 Interest expense (1,456 )
(1,662 ) Other loss, net (843 ) (1,290 )
(Loss) income from
continuing operations before income taxes (46,629 ) 61,801
Provision for income taxes (12,239 ) (27,054 )
(Loss) income
from continuing operations (58,868 ) 34,747 Loss from
discontinued operations, net of tax (3,259 ) (2,278 )
Net (loss)
income (62,127 ) 32,469
Net loss attributable to
noncontrolling interests 1,362 1,316
Net
(loss) income attributable to Apollo $ (60,765 ) $ 33,785
Earnings (loss) per share - Basic: Continuing operations
attributable to Apollo $ (0.53 ) $ 0.33 Discontinued operations
attributable to Apollo (0.03 ) (0.02 )
Basic (loss) income per
share attributable to Apollo $ (0.56 ) $ 0.31 Earnings
(loss) per share - Diluted: Continuing operations attributable to
Apollo $ (0.53 ) $ 0.33 Discontinued operations attributable to
Apollo (0.03 ) (0.02 )
Diluted (loss) income per share
attributable to Apollo $ (0.56 ) $ 0.31 Basic weighted
average shares outstanding 108,446 108,581 Diluted weighted average
shares outstanding 108,446 109,378
Apollo Education Group, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Unaudited)
As of ($ in thousands)
November 30,
2015
August 31, 2015 ASSETS Current assets: Cash
and cash equivalents $ 419,766 $ 503,705 Restricted cash and cash
equivalents 209,480 198,369 Marketable securities 257,012 194,676
Accounts receivable, net 214,379 198,459 Prepaid taxes 26,795
38,371 Other current assets 57,559 48,823 Assets of business held
for sale — 40,897 Total current assets 1,184,991
1,223,300 Marketable securities 78,874 95,815 Property and
equipment, net 351,602 370,281 Goodwill 173,012 247,190 Intangible
assets, net 137,452 143,244 Deferred taxes 89,190 92,105 Other
assets 31,457 29,129
Total assets $ 2,046,578
$ 2,201,064
LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY Current
liabilities: Short-term borrowings and current portion of long-term
debt $ 22,485 $ 14,080 Accounts payable 49,282 64,100 Student
deposits 239,946 245,470 Deferred revenue 187,830 186,950 Accrued
and other current liabilities 251,948 280,847 Liabilities of
business held for sale — 40,897 Total current
liabilities 751,491 832,344 Long-term debt 20,782 31,566 Deferred
taxes 7,928 7,729 Other long-term liabilities 169,661
172,452
Total liabilities 949,862 1,044,091
Commitments and contingencies
Redeemable noncontrolling
interests 9,702 11,915 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 (3,923,029 ) (3,928,419 ) Retained earnings 5,092,995
5,153,452 Accumulated other comprehensive loss (83,575 ) (80,579 )
Total Apollo shareholders’ equity 1,086,495 1,144,558
Noncontrolling interests 519 500
Total equity
1,087,014 1,145,058
Total liabilities, redeemable
noncontrolling interests and shareholders’ equity $ 2,046,578
$ 2,201,064
Apollo Education Group, Inc. and
Subsidiaries
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
Three Months Ended
November 30,
($ in thousands)
2015
2014 Operating activities: Net (loss)
income $ (62,127 ) $ 32,469 Adjustments to reconcile net (loss)
income to net cash (used in) provided by operating activities:
Share-based compensation 9,520 10,711 Excess tax benefits from
share-based compensation — (229 ) Depreciation and amortization
27,394 36,404 Accelerated depreciation included in restructuring
2,953 3,086 Impairment charges and loss on asset dispositions
73,393 972 Non-cash foreign currency loss, net 352 535 Provision
for uncollectible accounts receivable 15,313 17,398 Deferred income
taxes 3 2,938 Changes in assets and liabilities: Restricted cash
and cash equivalents (10,973 ) (3,298 ) Accounts receivable (32,899
) (50,331 ) Prepaid taxes 11,612 19,989 Other assets (9,915 )
(13,032 ) Accounts payable (14,690 ) 5,156 Student deposits (4,880
) (26,138 ) Deferred revenue 2,087 29,822 Accrued and other
liabilities (26,010 ) (48,153 )
Net cash (used in) provided by
operating activities (18,867 ) 18,299 Investing activities:
Purchases of property and equipment (14,456 ) (20,337 ) Purchases
of marketable securities (109,715 ) (59,490 ) Maturities and sales
of marketable securities 62,776 53,974 Other investing activities
(196 ) 405
Net cash used in investing activities
(61,591 ) (25,448 ) Financing activities: Payments on borrowings
(3,448 ) (596,789 ) Proceeds from borrowings 926 3,563 Share
repurchases (517 ) (20,064 ) Share reissuances — 217 Excess tax
benefits from share-based compensation — 229 Payment for contingent
consideration — (21,371 )
Net cash used in financing
activities (3,039 ) (634,215 ) Exchange rate effect on cash and
cash equivalents (442 ) (2,473 )
Net decrease in cash and cash
equivalents (83,939 ) (643,837 )
Cash and cash equivalents,
beginning of period 503,705 1,228,813
Cash and
cash equivalents, end of period $ 419,766 $ 584,976
Supplemental disclosure of cash flow and non-cash
information: Cash paid for income taxes, net of refunds $ — $ 3,214
Cash paid for interest 1,392 1,701 Restricted stock units vested
and released 1,430 5,499
Apollo Education Group, Inc. and
Subsidiaries
Segment Data and University of Phoenix
Operating Metrics
(Unaudited)
Three Months EndedNovember 30, ($ in
thousands)
2015
2014 Net revenue: University of
Phoenix: Degree seeking gross revenues(1) $ 523,590 $ 657,166 Less:
Discounts and other (70,468 ) (75,794 ) Degree seeking net
revenues(1) 453,122 581,372 Other revenues 9,495 11,481
Total University of Phoenix 462,617 592,853 Apollo Global
115,332 115,140 Other 8,072 6,532
Net revenue
$ 586,021 $ 714,525
Operating (loss) income:
University of Phoenix $ (17,504 ) $ 96,614 Apollo Global (2,335 )
(4,842 ) Other (25,410 ) (27,608 )
Operating (loss) income $
(45,249 ) $ 64,164
(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: (Rounded to
the nearest hundred, except per degreed enrollment)
Three Months Ended
November 30,
2015 2014
% Change Degreed Enrollment(1)
176,900 227,400 (22.2 )% New Degreed Enrollment(2) 24,500 39,600
(38.1 )% Average Degreed Enrollment(3) 183,800 230,500 (20.3 )%
Degree seeking net revenues per degreed enrollment $ 2,561 $ 2,557
(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)
Three Months Ended
November 30,
(In thousands, except per share data)
2015
2014 Net (loss)
income attributable to Apollo, as reported $ (60,765 ) $ 33,785
Less: Loss from discontinued operations, net of tax (3,259 ) (2,278
) (Loss) income from continuing operations attributable to Apollo
(57,506 ) 36,063
Special items: Restructuring and impairment
charges(1) 97,823 18,748 Acquisition and other related costs 1,097
3,219 Special items before income taxes 98,920 21,967
Less: income tax effects of special items (10,077 ) (8,124 )
Special items, net of income taxes 88,843 13,843
Income from continuing operations attributable to Apollo, excluding
special items $ 31,337 $ 49,906 Diluted (loss) income
per share from continuing operations attributable to Apollo, as
reported $ (0.53 ) $ 0.33 Diluted income per share from continuing
operations attributable to Apollo, excluding special items $ 0.29 $
0.46 Diluted weighted average shares outstanding 108,446 109,378
(1) During the first quarter of fiscal year 2016, we
recorded $73.4 million of goodwill impairment charges.
Reconciliation of Adjusted EBITDA to
Net (Loss) Income
Three Months Ended
November 30,
($ in thousands)
2015
2014 Adjusted EBITDA: University
of Phoenix $ 92,459 $ 129,614 Apollo Global 6,490 6,222 Other
(18,727 ) (17,364 )
Adjusted EBITDA 80,222 118,472 Less:
Special items before income taxes (see above table) 98,920 21,967
Less: Depreciation and amortization 27,394 33,631 Less: Interest
expense, net of interest income 537 1,073 Less: Provision for
income taxes 12,239 27,054 Plus: Loss from discontinued operations,
net of tax (3,259 ) (2,278 )
Net (loss) income, as reported
$ (62,127 ) $ 32,469
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 EBITDA” is earnings from continuing operations before
interest expense and interest income, income taxes, depreciation
and amortization, and special items. It is intended to provide an
indicator of our operating performance across time periods due to
the impact of amortization from acquisitions and other factors.
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 of the initiatives to transform
University of Phoenix into a more focused, higher retaining and
less complex institution, including the near-term impact on
enrollment; (iii) the impact of the Company’s ongoing restructuring
and cost-reduction initiatives; (iv) impacts from actions taken by
our regulators that could affect 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; (v) impact of changes in our business in order comply
with existing or new regulatory requirements; (vi) further delay in
the University’s pending recertification by the U.S. Department of
Education for participation in Title IV student financial aid
programs, or any limitations or qualifications imposed in
connection with any recertification; (vii) the impact of the U.S.
Department of Defense (“DoD”) action to place University of Phoenix
on probation in relation to participation in the DoD’s Tuition
Assistance Program for active duty military students; (viii) 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; (ix) unexpected changes in
University of Phoenix enrollment or student mix; and (x) 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
2015, and other filings with the Securities and Exchange Commission
which are available at www.apollo.edu.
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version on businesswire.com: http://www.businesswire.com/news/home/20160111005533/en/
Apollo Education Group, Inc.Investor Relations
Contact:Beth Coronelli, (312)
660-2059beth.coronelli@apollo.eduorMedia Contacts:Media
Relations Hotline, (602) 254-0086media@apollo.edu
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