Apollo Group, Inc
) reported adjusted earnings (excluding special items) of 52 cents
per share in the fourth quarter of fiscal 2012, comfortably
surpassing the Zacks Consensus Estimate of 49 cents. However, lower
revenues resulted in a 49% downslide from the prior-year earnings
of $1.02 per share.
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Apollo reported net revenue of $996.5 billion in fourth quarter
2012, down 11.0% from prior year quarter due to decline in net
revenue of University of Phoenix, owing to weak enrollment. The
Zacks Consensus Estimate for the quarter was $1.01 billion.
The University of Phoenix reported 13.8% fall in degreed enrollment
to 328,400 students in fourth quarter 2012. New enrollment (or new
degreed enrollment) at University of Phoenix declined 13.7% from
the prior-year quarter to 52,800. The company had anticipated the
decline in new enrollment. The decline was due to changing
regulatory requirements, an improving job market, robust
competition and a volatile economy.
In the fourth quarter of 2012, the company's Associates Degree
revenue was $237.7 million, down 26% y/y; Bachelor's Degree revenue
was $560.4 million, down 3.5% y/y, Master's Degree revenue declined
13% y/y to $152.2 million and Doctoral Degree revenue was $21.7
million, down 8.1% y/y.
Revenue per student increased 2% in fourth quarter 2012, owing to
pricing growth and enrollment mix shift towards higher revenue
generating, advanced degree-level programs.
Operating margin declined 1180 basis points to 9.0% in the quarter.
Adjusted operating margin (excluding restructuring and other
charges) was 10% in the quarter. Instructional and student advisory
cost increased to $455.6 million in fourth quarter 2012, up 4.7%
y/y. As a percentage of net revenue, costs increased 680 basis
points (bps) primarily due to the company's continuous investment
in technology in order to enhance student educational outcomes.
The company incurred marketing expenses of $180.3 million in fourth
quarter 2012, up 5.6% y/y. This as a percentage of net revenue
represents an increase of 290 basis points. Marketing expenses grew
owing to increase in brand building.
Apollo had cash and cash equivalents of $1.28 billion as of August
31, 2012, compared with $602.1 million as of May 31, 2012. The
company repurchased 2 million shares - worth $63.5 million - during
Apollo reported adjusted earnings of $3.56 for fiscal 2012, missing
the Zacks Consensus Estimate of $3.57 by a penny.
The company reported net revenue of $4.3 billion in fiscal 2012,
down 9.7% y/y due to 10.2% decline in net revenue of University of
Phoenix, owing to weak enrollment.
BPP Holdings Plc., a UK-based subsidiary of Apollo Global, provided
education and training to legal and finance professionals. BPP
Holdings was acquired by Apollo Global in July 2009. In fourth
quarter 2012, Apollo completed the sale of BPP Holdings Ltd for
$85.3 million and reported a sales gain of $26.7 million.
On October 12, 2012, the company bought the remaining 14.4%
non-controlling ownership in Apollo Group from The Carlyle Group
for $42.5 million in cash, in addition of a contingent payment
based on performance of BPP till August 31, 2017.
The company intends to design its programs to increase the
employability of its students. Also the company is coordinating
with 2,000 other companies to educate their workforce. The company
is receiving good response from this channel.
At the fourth quarter conference call, the company issued the net
revenue guidance range of $3.65 to $3.80 billion for fiscal 2013.
The company expects new degreed enrollment growth to become
positive some time in fiscal 2013. Adjusted operating income is
expected to be in the range of $525 to $575 million in fiscal 2013.
A peer of
), Apollo Group, Inc carries a Zacks #3 Rank in the near term (Hold
rating). We currently have a Neutral recommendation on Apollo
Overall, we like Apollo Group's dominant market position as well as
its continuous efforts to improve services and thereby student
experience and outcomes. The company is also undertaking
initiatives to improve operating efficiency and rationalize the
cost structure. However, choppy enrollment trend and possibility of
regulatory changes keep us on the sidelines.