PHOENIX--(BUSINESS WIRE)--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.
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Apollo Education Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) |
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Three Months Ended
November 30, |
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| (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 | |||||||||||||||
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Apollo Education Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) |
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| As of | |||||||||||||||||
| ($ in thousands) |
November 30, 2015 |
August 31, 2015 |
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| 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 | |||||||||||||
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Apollo Education Group, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) |
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Three Months Ended
November 30, |
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| ($ 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 | |||||||||||||||
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Apollo Education Group, Inc. and Subsidiaries Segment Data and University of Phoenix Operating Metrics (Unaudited) |
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Three Months Ended November 30, |
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| ($ 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 | ||||||||||||
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| (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, |
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| 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 | |||||||||||||||||
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(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. |
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(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. |
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(3) |
Represents the average of quarterly Degreed Enrollment from the beginning to the end of the respective periods. |
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Apollo Education Group, Inc. and Subsidiaries Reconciliation of GAAP Financial Information to Non-GAAP Financial Information (Unaudited) |
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Three Months Ended
November 30, |
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| (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 | |||||||||||||||
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| (1) | During the first quarter of fiscal year 2016, we recorded $73.4 million of goodwill impairment charges. | ||
Reconciliation of Adjusted EBITDA to Net (Loss) Income
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Three Months Ended November 30, |
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| ($ 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.
