-- Revenue increases 16.9% year-over-year
-- Total Degreed Enrollment increases 11.4% year-over-year
-- Apollo secures five-year $500 million unsecured revolving
credit facility
PHOENIX--(BUSINESS WIRE)--Jan. 8, 2008--Apollo Group, Inc.
(Nasdaq: APOL) ("Apollo Group" or "the Company") today reported
unaudited financial results for the first quarter of fiscal 2008,
which ended November 30, 2007.
Unaudited First Quarter of Fiscal 2008 Results of Operations
Net income for the three months ended November 30, 2007, was
$139.9 million, or $0.83 per diluted share (169.3 million weighted
average diluted shares outstanding), compared to $113.9 million, or
$0.65 per diluted share (174.5 million weighted average diluted shares
outstanding) for the three months ended November 30, 2006. Before
giving effect to share-based compensation expense of $14.9 million in
the first quarter of fiscal 2008 and to share-based compensation
expense and special items of $12.1 million in the first quarter of
fiscal 2007, earnings per diluted share were $0.88 in the first
quarter of fiscal 2008, as compared to $0.69 in the first quarter of
fiscal 2007. (See the reconciliation of Generally Accepted Accounting
Principles ("GAAP") financial information to non-GAAP financial
information in the tables section of this press release.)
Consolidated revenues for the three months ended November 30,
2007, totaled $780.7 million, which represents a 16.9% increase over
the first quarter of fiscal 2007. Total Degreed Enrollment grew by
11.4% year-over-year to 325,000. Revenues in the first quarter of
fiscal 2008 also benefited from previously implemented selective
tuition price increases based on geographic areas and programs.
Commenting on the quarter, Brian Mueller, President of Apollo
Group, said, "We are pleased with our first quarter results as we
achieved double-digit revenue and enrollment growth for the third
consecutive quarter. Our investments in the business are proving very
effective and we again improved operating efficiencies as compared to
a year ago."
Mr. Mueller continued, "At the end of October we closed our
acquisition of Aptimus, and our marketing teams have been working
tirelessly over the past couple of months to transition our online
marketing activities in-house. We are pleased to report that the
transition is going smoothly. Over the next several months and
quarters, we will be implementing innovative marketing plans to more
effectively communicate with prospective students and other
constituents online."
Mr. Mueller concluded, "The demographic and economic
trends contributing to the rise of adult education over the past three
decades continue, and the emerging global marketplace expands the
opportunities even more. Apollo Global, our recently formed joint
venture with the Carlyle Group, will enable us to leverage our
significant academic and operational infrastructure related to higher
education and we look forward to capitalizing on the opportunities
that exist given the significant foreign demand for education. We are
optimistic about the future for Apollo Group and the credit agreement
announced today gives us further financial flexibility to execute on
our strategy to generate long-term value for our shareholders."
Instructional costs and services increased by $38.5 million to
$333.3 million, a 13.1% increase, for the three months ended November
30, 2007, from the three months ended November 30, 2006. As a
percentage of tuition and other revenue, net, instructional costs and
services declined to 42.7% versus 44.1% in the prior year quarter,
primarily as a result of decreases as a percentage of tuition and
other revenue, net, in employee compensation and related expenses and
classroom lease expenses and depreciation. This decrease was partially
offset by increases as a percentage of tuition and other revenue, net,
in bad debt expense and financial aid processing costs.
Bad debt expense as a percentage of tuition and other revenue,
net, increased in the first quarter of fiscal 2008 versus the first
quarter of fiscal 2007 primarily due to the continuing trend of
changes in the Company's enrollment mix to a higher percentage of
associate's degree students. When the Company is required to collect
outstanding balances directly from its students, students enrolled in
the associate's degree programs generally have higher write-offs,
based on the greater risk of default presented by the associate's
degree program's demographics, versus students enrolled in other
degree programs. Additionally, during the first quarter of fiscal
2008, the Company performed a review of the components of bad debt
expense and identified certain items that should have been classified
as discounts or refunds (reduction of tuition revenue) as opposed to
bad debt expense. No reclassification was made for prior periods as
the amounts were not material to prior period financial statements and
had no effect on reported net income. Had the Company not changed the
classification for these items in the first quarter of fiscal 2008,
the amounts reported for tuition and other revenue, net, and bad debt
expense would have been $5.1 million higher, and bad debt expense as a
percentage of tuition and other revenue, net, would have been 4.78%
versus 4.15%. For the first, second, third and fourth quarters of
fiscal 2007, the Company's reported bad debt expense as a percentage
of tuition and other revenue, net, would have been lower by 59, 82, 65
and 87 basis points, respectively, as a result of this
reclassification.
Selling and promotional expenses increased by $21.5 million to
$176.9 million, a 13.8% increase, for the three months ended November
30, 2007, from the three months ended November 30, 2006. As a
percentage of tuition and other revenue, net, selling and promotional
expenses declined to 22.6% versus 23.3% in the prior year quarter,
primarily as a result of a decrease as a percentage of tuition and
other revenue, net, in Internet-based advertising costs, partially
offset by an increase as a percentage of tuition and other revenue,
net, in costs to support the Company's national branding campaign. The
Company's reduced advertising costs as a percentage of tuition and
other revenue, net, are being primarily driven by more efficient and
productive spending to acquire higher quality Internet-based leads. As
previously disclosed, the Company launched its national branding
campaign in January 2007 and continues to invest to support its image.
General and administrative ("G&A") expenses increased by $13.7
million to $51.3 million, a 36.4% increase, for the three months ended
November 30, 2007, from the three months ended November 30, 2006. As a
percentage of tuition and other revenue, net, G&A increased to 6.6%
versus 5.6% in the prior year quarter. Before giving effect to special
items primarily related to the stock option investigation and
restatement costs of $2.0 million in first quarter of fiscal 2007, G&A
expenses were $35.6 million for the three months ended November 30,
2006, or 5.3% of tuition and other revenue, net. The increase in G&A
as a percentage of tuition and other revenue, net, for the first
quarter of fiscal 2008 is primarily attributable to increases as a
percentage of tuition and other revenue, net, in salary and related
payroll costs due to higher employee headcount, share-based
compensation expense and legal costs.
Financial and Operating Metrics
Apollo Group reported the following unaudited financial data and
operating metrics for the first quarter of fiscal 2008:
Q1 2008
-------------
Revenues (in thousands)
--------------------------------------------------------
Degree Seeking Gross Revenues (1) $ 773,114
Less: Discounts and Refunds (35,083)
-------------
Degree Seeking Net Revenues (1) 738,031
Single Course/ Continuing Ed Revenues (1) 5,038
Other (2) 37,605
-------------
$ 780,674
=============
Revenue by Degree Type (in thousands) (1)
--------------------------------------------------------
Associates $ 218,642
Bachelors 360,324
Masters 179,414
Doctoral 14,734
Less: Discounts (35,083)
-------------
$ 738,031
=============
Degreed Enrollment (1) (3)
--------------------------------------------------------
Associates 114,300
Bachelors 137,800
Masters 67,300
Doctoral 5,600
-------------
325,000
=============
Degree Seeking Gross Revenues per Degreed Enrollment
--------------------------------------------------------
Associates $ 1,913
Bachelors 2,615
Masters 2,666
Doctoral 2,631
All degrees (after discounts) 2,271
New Degreed Enrollments (1) (4)
--------------------------------------------------------
Associates 33,700
Bachelors 20,700
Masters 12,200
Doctoral 800
-------------
67,400
=============
(1)Represents information for UPX and Axia College only.
(2)Represents revenues from IPD, CFP, WIU (excluding Axia college
which is included in (1)), Insight Schools and other.
(3)Represents individual students enrolled in our degree seeking
programs that attended a course during the quarter and did not
graduate as of the end of the quarter (includes Axia students
enrolled in WIU or UPX) (rounded to hundreds). Degreed Enrollments
include any student who graduated from one degree program and
started a new degree program (for example, a graduate of the
associate's degree program returns for a bachelor's degree or a
graduate of a bachelor's degree program returns for a master's
degree), as well as students who have been out of attendance for
greater than 12 months and return to a program.
(4)Represents individual students enrolled in our degree seeking
programs that attended a course at least once during the quarter
but did not attend a course in the last 12 months (includes Axia
students enrolled in WIU or UPX) (rounded to hundreds). New
Degreed Enrollments include any student who graduated from one
degree program and started a new degree program (for example, a
graduate of the associate's degree program returns for a
bachelor's degree or a graduate of a bachelor's degree program
returns for a master's degree), as well as students who have been
out of attendance for greater than 12 months and return to a
program.
Unaudited Balance Sheet
As of November 30, 2007, the Company's cash, cash equivalents, and
marketable securities, excluding restricted cash, totaled $590.5
million as compared to $392.7 million as of August 31, 2007. At
November 30, 2007, days sales outstanding ("DSO") remained consistent
with the prior year at 35 days and declined from 38 days at August 31,
2007. The decrease in DSO since August 31, 2007, is primarily due to a
reduction in the percentage of current (less than 90 days old)
receivables as a result of improvements in the Company's front-end
collection process. The reclassification of bad debt expense discussed
above did not affect the Company's DSO. Deferred revenue at November
30, 2007, decreased slightly to $160.0 million from $167.3 million at
August 31, 2007, and increased from $132.0 million at November 30,
2006. The increase from the prior year quarter is principally due to
increased revenue.
Credit Facility
Apollo Group announced today that it has entered into a syndicated
five-year $500 million credit agreement. The agreement is an unsecured
revolving credit facility that will be used for general corporate
purposes including acquisitions and stock buybacks. The facility has
an expansion feature for an aggregate principal amount of up to $250
million. The bank facility provides a multi-currency sub-limit
facility for borrowings in certain specified foreign currencies up to
$300 million.
Conference Call Information
The Company will hold a conference call to discuss these earnings
results at 5:00 PM Eastern, 3:00 PM Phoenix time, today, Tuesday,
January 8, 2008. The call may be accessed by dialing (877) 292-6888
(domestic) or (706) 634-1393 (international). The conference ID number
is 27318003. A live webcast of this event may be accessed by visiting
the Company's website at: www.apollogrp.edu. A replay of the call will
be available on the website or at (706) 645-9291 (conf. ID # 27318003
until January 18, 2008).
Annual Report Availability
Apollo Group filed its 2007 10-K with the Securities and Exchange
Commission on October 29, 2007. The Company's 2007 Annual Report,
which includes the 10-K, has been posted on the Company's website and
is available at http://www.apollogrp.edu/Investor/AnnualReports.aspx.
A paper copy of this document is available to shareholders upon
request at no charge. To receive a hard copy of the 2007 Annual
Report, please send an email to investor.relations@apollogrp.edu, or
telephone the Company at 800-990-APOL.
About Apollo Group, Inc.
Apollo Group, Inc. has been an education provider for more than 30
years, providing academic access and opportunity to students through
its University of Phoenix, Institute for Professional Development,
College for Financial Planning, Western International University,
Insight Schools and Apollo Global. It also owns Aptimus, a provider of
innovative digital media solutions. The Company's distinctive
educational programs and services are provided at the high school,
college and graduate levels at 256 locations in 40 states and the
District of Columbia; Puerto Rico; Alberta and British Columbia,
Canada; Mexico and the Netherlands, as well as online, throughout the
world.
For more information about Apollo Group, Inc. and its
subsidiaries, call (800) 990-APOL or visit Apollo on the company
website at: www.apollogrp.edu.
Forward-Looking Safe Harbor
Statements in this press release regarding Apollo Group's business
outlook, future financial and operating results, Degreed Enrollment
and New Degreed Enrollment, and overall future 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 results may differ materially from those
projected in such statements due to various factors. For a discussion
of the various factors that may cause actual results to differ
materially from those projected, please refer to the risk factors and
other disclosures contained in Apollo Group's previously filed Form
10-K, Forms 10-Q, and other filings with the Securities and Exchange
Commission.
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of
-------------------------
November 30, August 31,
($ in thousands) 2007 2007
------------ ------------
Assets:
Current assets
Cash and cash equivalents $ 542,128 $ 339,319
Restricted cash 298,754 296,469
Marketable securities, current portion 30,324 31,278
Accounts receivable, net 187,551 190,912
Deferred tax assets, current portion 51,186 50,885
Other current assets 21,124 16,515
------------ ------------
Total current assets 1,131,067 925,378
Property and equipment, net 376,102 364,207
Marketable securities, less current portion 18,017 22,084
Goodwill 66,671 29,633
Deferred tax assets, less current portion 89,016 80,077
Other assets 35,861 28,484
------------ ------------
Total assets $ 1,716,734 $ 1,449,863
============ ============
Liabilities and Shareholders' Equity:
Current liabilities
Accounts payable $ 44,624 $ 80,729
Accrued liabilities 105,418 103,651
Current portion of long-term liabilities 21,057 21,093
Income taxes payable 66,416 43,351
Student deposits 329,862 328,008
Current portion of deferred revenue 159,724 167,003
------------ ------------
Total current liabilities 727,101 743,835
Deferred revenue, less current portion 237 295
Long-term liabilities, less current portion 123,498 71,893
------------ ------------
Total liabilities 850,836 816,023
------------ ------------
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value - -
Apollo Group Class A nonvoting common stock,
no par value 103 103
Apollo Group Class B voting common stock, no
par value 1 1
Additional paid-in capital - -
Apollo Group Class A treasury stock, at cost (1,370,036) (1,461,368)
Retained earnings 2,237,492 2,096,385
Accumulated other comprehensive loss (1,662) (1,281)
------------ ------------
Total shareholders' equity 865,898 633,840
------------ ------------
Total liabilities and shareholders' equity $ 1,716,734 $ 1,449,863
============ ============
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
November 30,
------------------
2007 2006
--------- --------
(in thousands, except per share amounts)
Revenues:
Tuition and other, net $780,674 $667,786
--------- --------
Costs and expenses:
Instructional costs and services 333,289 294,755
Selling and promotional 176,909 155,435
General and administrative 51,281 37,615
--------- --------
Total costs and expenses 561,479 487,805
--------- --------
Income from operations 219,195 179,981
Interest income and other, net 9,650 6,432
--------- --------
Income before income taxes 228,845 186,413
Provision for income taxes 88,980 72,539
--------- --------
Net income $139,865 $113,874
========= ========
Earnings per share:
Basic income per share $ 0.84 $ 0.66
========= ========
Diluted income per share $ 0.83 $ 0.65
========= ========
Basic weighted average shares outstanding 167,036 173,122
========= ========
Diluted weighted average shares outstanding 169,289 174,521
========= ========
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
November 30,
---------------------
2007 2006
---------- ----------
($ in thousands)
Cash flows provided by (used in) operating
activities:
Net income $ 139,865 $ 113,874
Adjustments to reconcile net income to net cash
provided by operating activities:
Share-based compensation 14,924 10,146
Excess tax benefits from share-based
compensation (13,165) (1,030)
Depreciation and amortization 18,113 17,191
Amortization of marketable securities discount
and premium, net 21 56
Provision for uncollectible accounts receivable 32,385 23,114
Deferred income taxes (2,665) (11,521)
Changes in assets and liabilities, excluding
the impact of acquisitions:
Accounts receivable (26,760) (46,044)
Other assets (4,229) (3,945)
Accounts payable and accrued liabilities (29,657) (11,680)
Income taxes payable 84,791 65,175
Student deposits 1,854 2,833
Deferred revenue (7,368) (4,297)
Other liabilities (271) (980)
---------- ----------
Net cash provided by operating activities 207,838 152,892
---------- ----------
Cash flows provided by (used in) investing
activities:
Additions to property and equipment (18,873) (13,788)
Additions related to new headquarters (5,241) (11,397)
Acquisitions, net of cash acquired (47,033) (15,079)
Purchase of marketable securities including
auction-rate securities (396,660) (356,275)
Maturities of marketable securities including
auction-rate securities 401,660 371,261
Increase in restricted cash (2,285) (16,065)
---------- ----------
Net cash used in investing activities (68,432) (41,343)
---------- ----------
Cash flows provided by (used in) financing
activities:
Issuance of Apollo Group Class A common stock 50,848 4,349
Excess tax benefits from share-based
compensation 13,165 1,030
---------- ----------
Net cash provided by financing activities 64,013 5,379
---------- ----------
Effect of exchange rate gain (loss) on cash and
cash equivalents (610) 173
---------- ----------
Net increase in cash and cash equivalents 202,809 117,101
Cash and cash equivalents, beginning of period 339,319 309,058
---------- ----------
Cash and cash equivalents, end of period $ 542,128 $ 426,159
========== ==========
Supplemental disclosure of non-cash investing and
financing activities
Credits received for tenant improvements $ 1,634 $ 458
Purchases of property and equipment included in
accounts payable $ 6,207 $ 4,608
Settlement of liability-classified awards
through the issuance of treasury stock $ 16,340 $ -
Apollo Group, Inc. and Subsidiaries
Detailed Expense Tables
(Unaudited)
% of Revenues
------------------
Instructional costs and Three Months Three Months
services Ended November 30, Ended November 30, % Change
------------------ ------------------ --------
2007 vs.
2007 2006 2007 2006 2006
--------- -------- --------- -------- --------
($ in millions)
Employee compensation
and related expenses $ 113.8 $ 104.0 14.6% 15.6% 9.4%
Faculty compensation 65.7 57.5 8.4% 8.6% 14.3%
Classroom lease
expenses and
depreciation 52.0 51.0 6.7% 7.6% 2.0%
Other instructional
costs and services 44.7 40.6 5.6% 6.0% 10.1%
Bad debt expense 32.4 23.1 4.2% 3.5% 40.3%
Financial aid
processing costs 19.6 14.7 2.5% 2.2% 33.3%
Share-based
compensation 5.1 3.9 0.7% 0.6% 30.8%
--------- -------- --------- --------
Instructional costs and
services $ 333.3 $ 294.8 42.7% 44.1% 13.1%
========= ======== ========= ========
% of Revenues
------------------
Selling and promotional Three Months Three Months
expenses Ended November 30, Ended November 30, % Change
------------------ ------------------ --------
2007 vs.
2007 2006 2007 2006 2006
--------- -------- --------- -------- --------
($ in millions)
Enrollment counselors'
compensation and
related expenses $ 89.0 $ 75.7 11.4% 11.3% 17.6%
Advertising 71.1 65.3 9.1% 9.8% 8.9%
Other selling and
promotional expenses 16.1 13.3 2.0% 2.0% 21.1%
Share-based
compensation 0.7 1.1 0.1% 0.2% -36.4%
--------- -------- --------- --------
Selling and promotional
expenses $ 176.9 $ 155.4 22.6% 23.3% 13.8%
========= ======== ========= ========
% of Revenues
------------------
General and
administrative Three Months Three Months
expenses Ended November 30, Ended November 30, % Change
------------------ ------------------ --------
2007 vs.
2007 2006 2007 2006 2006
--------- -------- --------- -------- --------
($ in millions)
Employee compensation
and related expenses $ 19.9 $ 15.3 2.5% 2.3% 30.1%
Share-based
compensation 9.1 5.2 1.2% 0.8% 75.0%
Legal, audit, and
corporate insurance 5.7 2.9 0.7% 0.4% 96.6%
Administrative space
and depreciation 5.9 5.1 0.8% 0.8% 15.7%
Other general and
administrative
expenses 10.7 9.1 1.4% 1.3% 17.6%
--------- -------- --------- --------
General and
administrative
expenses $ 51.3 $ 37.6 6.6% 5.6% 36.4%
========= ======== ========= ========
The following special items are included in general and administrative
expenses:
Three Months
Ended November 30,
-------------------
($ in millions) Line item included
2007 2006 in above
------------------- -------------------
Stock option investigation/ Other general and
financial statement administrative
restatement $ - $ 2.0 expenses
--------- ---------
Subtotal $ - $ 2.0
========= =========
Reconciliation of GAAP financial information to non-GAAP financial
information
Three Months Ended
November 30,
-------------------
2007 2006
--------- ---------
(in millions, except per share amounts)
Net income as reported $ 139.9 $ 113.9
--------- ---------
Reconciling items:
Share-based compensation 14.9 10.1
Special items - 2.0 (1)
--------- ---------
14.9 12.1
Less: tax effects (5.8) (4.8)
--------- ---------
9.1 7.3
--------- ---------
Net income adjusted to exclude share-based
compensation expense and special items $ 149.0 $ 121.2
========= =========
Diluted weighted average shares outstanding 169.3 174.5
========= =========
Diluted income per share adjusted to exclude
share-based compensation expense and special
items $ 0.88 $ 0.69
========= =========
(1) The $2.0 million charge for the three months ended November 30,
2006 represents costs related to the stock option investigation and
restatement.
CONTACT: Apollo Group, Inc.
Allyson Pooley, 312-660-2025 (Investor Relations)
allyson.pooley@apollogrp.edu
Janess Pasinski, 480-557-1719 (Investor Relations)
janess.pasinski@apollogrp.edu
Ayla Dickey, 480-557-2952 (Media)
ayla.dickey@apollogrp.edu
SOURCE: Apollo Group, Inc.
