EX-99.1 2 apol-ex991.htm EXHIBIT 99.1 APOL - EX99.1 - Nov 30 2014 - Earnings Release


Exhibit 99.1
Apollo Education Group, Inc.
News Release
Apollo Education Group, Inc. Reports First Quarter Fiscal Year 2015 Results
Phoenix, January 8, 2015 - Apollo Education Group, Inc. (NASDAQ: APOL) today reported financial results for the three months ended November 30, 2014, with first quarter revenue of $719.1 million and diluted earnings per share from continuing operations of $0.31 per share, or $0.44 per share excluding special items.
“Apollo Education Group is committed to leading the positive transformation of higher education to more effectively connect students’ education with their career aspirations,” said Greg Cappelli, Chief Executive Officer, Apollo Education Group. “Our strategy is designed to provide an outstanding student experience through innovative and engaging curriculum delivered with a focus on meeting the needs of today’s busy working learners. We also are dedicated to helping employers identify, recruit and develop a more skilled workforce globally.”
First Quarter 2015 Results of Operations
Apollo Education Group (the “Company”) reported net revenue for the first quarter 2015 of $719.1 million, compared to $848.1 million for the first quarter 2014. First quarter 2015 University of Phoenix New Degreed Enrollment was 39,600, down 5.0% from first quarter 2014, and Degreed Enrollment decreased 13.5% to 227,400, compared to the same period from the prior year. Operating income for the first quarter 2015 was $60.5 million, compared to $170.4 million from the prior year first quarter. Income from continuing operations attributable to Apollo Education Group for the first quarter 2015 was $33.8 million, or $0.31 per share, compared to $99.3 million, or $0.87 per share from the prior year first quarter.
Excluding special items, operating income was $82.7 million for the first quarter 2015, compared to $202.3 million for the first quarter 2014, and income from continuing operations attributable to Apollo Education Group for the first quarter 2015 was $47.8 million, or $0.44 per share, compared to $119.1 million, or $1.05 per share, for the first quarter 2014. (Special items for the first quarter 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 November 30, 2014, the Company’s unrestricted cash and cash equivalents and short-term marketable securities totaled $790.7 million, compared to $1.4 billion as of August 31, 2014. The decrease was primarily attributable to $593.2 million of net payments on borrowings, $34.5 million paid for contingent consideration, $20.3 million for capital expenditures, $20.1 million of share repurchases (which includes $2.0 million of share repurchases for tax withholding requirements on restricted stock units). 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 $62.9 million as of November 30, 2014.
Business Outlook
The Company offers the following outlook for fiscal year 2015 based on the business trends observed during the first quarter of fiscal year 2015, as well as management’s current expectations of future trends.
•
Net revenue of $2.74 to $2.80 billion; and
•
Operating income of $250 to $290 million, excluding the impact of special items.



The Company also provides the following outlook for the second quarter of fiscal year 2015.
•
Net revenue of $580 to $595 million; and
•
Operating loss of $25 to $35 million, excluding the impact of special items
Apollo Global, Inc.
On December 4, 2014, the Company’s wholly-owned subsidiary, Apollo Global, Inc., acquired a 75% interest in Sociedade Técnica Educacional da Lapa S.A., which provides postsecondary educational programs in Brazil under the name Faculadade da Educacional da Lapa (“FAEL”) for an initial cash purchase price of R$73.8 million (equivalent to USD $28.9 million on the acquisition date), plus a future contingent payment. FAEL is focused on providing blended learning offerings in the high-demand knowledge fields, including business, education, and technology and supports the Company’s strategy to diversify and expand its global operations.
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, Thursday, January 8, 2015.
Dial-In Numbers:
877-292-6888 (Domestic)
973-200-3381 (International)
Conference ID: 36402608
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 16, 2015.
Dial-In Numbers:
855-859-2056 (Domestic)
404-537-3406 (International)
Conference ID: 36402608
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 Income
(Unaudited)
 
Three Months Ended
November 30,
 
(In thousands, except per share data)
2014
 
2013
Net revenue
$
719,052

 
$
848,148

Costs and expenses:
 
 
 
Instructional and student advisory
324,264

 
337,202

Marketing
128,793

 
133,829

Admissions advisory
57,085

 
49,698

General and administrative
72,367

 
74,779

Depreciation and amortization
36,404

 
36,338

Provision for uncollectible accounts receivable
17,398

 
13,978

Restructuring and other charges
19,028

 
31,963

Acquisition costs and contingent consideration charges
3,219

 
—

Total costs and expenses
658,558

 
677,787

Operating income
60,494

 
170,361

Interest income
589

 
568

Interest expense
(1,662
)
 
(2,086
)
Other (loss) income, net
(1,285
)
 
807

Income from continuing operations before income taxes
58,136

 
169,650

Provision for income taxes
(25,667
)
 
(70,218
)
Income from continuing operations
32,469

 
99,432

Loss from discontinued operations, net of tax
—

 
(391
)
Net income
32,469

 
99,041

Net loss (income) attributable to noncontrolling interests
1,316

 
(150
)
Net income attributable to Apollo
$
33,785

 
$
98,891

Earnings (loss) per share - Basic:
 
 
 
Continuing operations attributable to Apollo
$
0.31

 
$
0.88

Discontinued operations attributable to Apollo
—

 
(0.01
)
Basic income per share attributable to Apollo
$
0.31

 
$
0.87

Earnings per share - Diluted:
 
 
 
Continuing operations attributable to Apollo
$
0.31

 
$
0.87

Discontinued operations attributable to Apollo
—

 
—

Diluted income per share attributable to Apollo
$
0.31

 
$
0.87

Basic weighted average shares outstanding
108,581

 
113,326

Diluted weighted average shares outstanding
109,378

 
113,960




Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
As of
($ in thousands)
November 30,
2014
 
August 31,
2014
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
584,976

 
$
1,228,813

Restricted cash and cash equivalents
226,921

 
224,135

Marketable securities
205,687

 
187,472

Accounts receivable, net
251,518

 
225,398

Prepaid taxes
13,917

 
34,006

Deferred tax assets
76,968

 
83,871

Other current assets
61,229

 
58,855

Total current assets
1,421,216

 
2,042,550

Marketable securities
73,560

 
87,811

Property and equipment, net
418,088

 
435,733

Goodwill
248,932

 
259,901

Intangible assets, net
173,786

 
189,365

Deferred tax assets
36,137

 
37,335

Other assets
50,569

 
40,240

Total assets
$
2,422,288

 
$
3,092,935

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
Current liabilities:
 
 
 
Short-term borrowings and current portion of long-term debt
$
15,902

 
$
609,506

Accounts payable
68,405

 
63,907

Student deposits
252,448

 
280,562

Deferred revenue
248,887

 
225,818

Accrued and other current liabilities
285,105

 
363,607

Total current liabilities
870,747

 
1,543,400

Long-term debt
46,990

 
47,590

Deferred tax liabilities
19,093

 
22,674

Other long-term liabilities
235,053

 
233,942

Total liabilities
1,171,883

 
1,847,606

Commitments and contingencies


 


Redeemable noncontrolling interests
58,229

 
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
(3,947,352
)
 
(3,936,607
)
Retained earnings
5,179,412

 
5,143,949

Accumulated other comprehensive loss
(40,618
)
 
(27,320
)
Total Apollo shareholders’ equity
1,191,546

 
1,180,126

Noncontrolling interests
630

 
676

Total equity
1,192,176

 
1,180,802

Total liabilities, redeemable noncontrolling interests and shareholders’ equity
$
2,422,288

 
$
3,092,935






Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended
November 30,
($ in thousands)
2014
 
2013
Operating activities:
 
 
 
Net income
$
32,469

 
$
99,041

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Share-based compensation
10,711

 
11,973

Excess tax benefits from share-based compensation
(229
)
 
—

Depreciation and amortization
36,404

 
36,338

Accelerated depreciation included in restructuring
3,086

 
2,806

Loss on asset dispositions and write-offs
972

 
—

Non-cash foreign currency loss (gain), net
535

 
(1,099
)
Provision for uncollectible accounts receivable
17,398

 
13,978

Deferred income taxes
2,938

 
4,738

Changes in assets and liabilities:
 
 
 

Restricted cash and cash equivalents
(3,298
)
 
(26,438
)
Accounts receivable
(50,331
)
 
(11,148
)
Prepaid taxes
19,989

 
64,469

Other assets
(13,032
)
 
(11,190
)
Accounts payable
5,156

 
(8,835
)
Student deposits
(26,138
)
 
(805
)
Deferred revenue
29,822

 
8,076

Accrued and other liabilities
(48,153
)
 
(53,007
)
Net cash provided by operating activities
18,299

 
128,897

Investing activities:
 
 
 
Purchases of property and equipment
(20,337
)
 
(34,366
)
Purchases of marketable securities
(59,490
)
 
(146,333
)
Maturities and sales of marketable securities
53,974

 
57,412

Other
405

 
—

Net cash used in investing activities
(25,448
)
 
(123,287
)
Financing activities:
 
 
 
Payments on borrowings
(596,789
)
 
(615,925
)
Proceeds from borrowings
3,563

 
—

Share repurchases
(20,064
)
 
(16,871
)
Share reissuances
217

 
796

Excess tax benefits from share-based compensation
229

 
—

Payment for contingent consideration
(21,371
)
 
—

Net cash used in financing activities
(634,215
)
 
(632,000
)
Exchange rate effect on cash and cash equivalents
(2,473
)
 
35

Net decrease in cash and cash equivalents
(643,837
)
 
(626,355
)
Cash and cash equivalents, beginning of period
1,228,813

 
1,414,485

Cash and cash equivalents, end of period
$
584,976

 
$
788,130

Supplemental disclosure of cash flow and non-cash information:
 

 
 

Cash paid for income taxes, net of refunds
$
3,214

 
$
—

Cash paid for interest
1,701

 
1,891

Restricted stock units vested and released
5,499

 
5,113






Apollo Education Group, Inc. and Subsidiaries
Segment Data and University of Phoenix Operating Metrics
(Unaudited)
 
Three Months Ended
November 30,
(In thousands, except enrollment data)
2014
 
2013
Net revenue:
 
 
 
University of Phoenix:
 
 
 
Degree seeking gross revenues(1)
$
657,166

 
$
797,740

Less: Discounts and other
(75,794
)
 
(62,561
)
Degree seeking net revenues(1)
581,372

 
735,179

Other revenues
11,481

 
9,684

Total University of Phoenix
592,853

 
744,863

Apollo Global
115,140

 
91,159

Other
11,059

 
12,126

Net revenue
$
719,052

 
$
848,148

Operating income (loss):
 
 
 
University of Phoenix
$
93,511

 
$
183,473

Apollo Global
(4,842
)
 
2,217

Other
(28,175
)
 
(15,329
)
Operating income
$
60,494

 
$
170,361

University of Phoenix Enrollment Data:
 
 
 
Degreed Enrollment(2)
227,400

 
263,000

Average Degreed Enrollment(3)
230,500

 
266,000

New Degreed Enrollment(4)
39,600

 
41,700

Degree seeking net revenues per degreed enrollment
$
2,557

 
$
2,795

 
(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.
(2) 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 the 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.
(3) Represents the average of quarterly Degreed Enrollment from the beginning to the end of the respective periods.
(4) 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.




Apollo Education Group, Inc. and Subsidiaries
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
(Unaudited)
Consolidated Financial Information Reconciliation
Three Months Ended
November 30,
(In thousands, except per share data)
2014
 
2013
Operating income
$
60,494

 
$
170,361

Income from continuing operations before income taxes
$
58,136

 
$
169,650

Provision for income taxes
$
25,667

 
$
70,218

Effective income tax rate
44.1
%
 
41.4
%
Net income attributable to Apollo
$
33,785

 
$
98,891

Loss from discontinued operations, net of tax
—

 
391

Income from continuing operations attributable to Apollo
$
33,785

 
$
99,282

Diluted income per share from continuing operations attributable to Apollo
$
0.31

 
$
0.87

Special items:
 
 
 
Restructuring and other charges
$
19,028

 
$
31,963

Acquisition costs and contingent consideration charges
3,219

 
—

Special items before income taxes
22,247

 
31,963

Less: income tax effects of special items
(8,230
)
 
(12,140
)
Special items, net of income tax
$
14,017

 
$
19,823

Excluding special items:
 
 
 
Operating income
$
82,741

 
$
202,324

Income from continuing operations before income taxes
$
80,383

 
$
201,613

Provision for income taxes
$
33,897

 
$
82,358

Effective income tax rate
42.2
%
 
40.8
%
Income from continuing operations attributable to Apollo
$
47,802

 
$
119,105

Diluted income per share from continuing operations attributable to Apollo
$
0.44

 
$
1.05

Apollo Global Financial Information Reconciliation
Three Months Ended
November 30,
($ in thousands)
2014
 
2013
Apollo Global operating (loss) income:
$
(4,842
)
 
$
2,217

Depreciation and amortization
10,471

 
6,359

Acquisition costs and contingent consideration charges
1,686

 
—

Restructuring and other charges
58

 
1,263

Adjusted Apollo Global Operating Income(1), (2)
$
7,373

 
$
9,839

(1) Excluding losses from Open Colleges, Adjusted Apollo Global Operating Income would have been $10.4 million for the three months ended November 30, 2014.
(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’ rapid 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, perhaps rapidly, as Open Colleges continues to grow. Apollo Global’s deferred revenue was approximately $172 million and $85 million as of November 30, 2014 and 2013, 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 Income (Loss) excludes depreciation and amortization and certain other items and is intended to provide a meaningful 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 changes that may be included in the reauthorization of the federal Higher Education Act and the proposed Department of Education regulations relating to gainful employment and 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 restructuring 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.



Investor Relations Contacts:
Beth Coronelli, (312) 660-2059
beth.coronelli@apollo.edu
Erin Kelly, (602) 557-3830
erin.kelly@apollo.edu
Media Contact:
Media Relations Hotline, (602) 254-0086
media@apollo.edu