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Apollo Education Group, Inc. Reports Fourth Quarter and Fiscal Year 2016 ResultsApollo Education Group, Inc. (NASDAQ: APOL) ("Apollo" or the "Company") today reported financial results for the three months and fiscal year ended August 31, 2016, with fourth quarter revenue of $492.5 million and diluted earnings per share from continuing operations of $0.20, or $0.21 excluding special items. "We operate in a challenging and competitive market, but we continue to execute on our strategic plan which is centered on achieving successful student outcomes," said Greg Cappelli, Chief Executive Officer of Apollo Education Group. "During our fourth quarter, domestically, University of Phoenix made solid progress on its transformational plan, including student progression and satisfaction, new student enrollment trends, and a more efficient operating structure. Internationally, despite the impact of Brexit in the UK and other challenges, we continue to grow and now serve over 175,000 students at Apollo Global. At Apollo Education Group, we have worked to align our cost base with our enrollment levels, maintained a strong cash position, and continued our focus on improving efficiency to promote long-term organizational strength and the ability to reinvest. While we're encouraged by our progress, we must sustain and build upon our current efforts in order to return to long-term growth." Fourth Quarter 2016 Results of Operations Apollo Education Group reported net revenue for the fourth quarter 2016 of $492.5 million compared to $600.3 million for the fourth quarter 2015. Fourth quarter 2016 University of Phoenix New Degreed Enrollment was 19,400 and Degreed Enrollment was 142,500, compared to New Degreed Enrollment of 26,500 and Degreed Enrollment of 190,700 for the prior year fourth quarter. Operating income for the fourth quarter 2016 was $28.5 million, compared to an operating loss of $5.0 million for the fourth quarter 2015. Income from continuing operations attributable to Apollo Education Group for the fourth quarter 2016 was $22.3 million, or $0.20 per share, compared to a loss of $10.2 million, or $0.09 per share, for the prior year fourth quarter. Excluding special items, income from continuing operations attributable to Apollo Education Group for the fourth quarter 2016 was $23.0 million, or $0.21 per share, compared to $18.7 million, or $0.17 per share, for the fourth quarter 2015. Adjusted EBITDA was $61.1 million for the fourth quarter 2016 compared to $54.1 million for the fourth 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.) Fiscal Year 2016 Results of Operations Net revenue for fiscal year 2016 totaled $2.1 billion, compared to $2.6 billion in fiscal year 2015. In fiscal year 2016, University of Phoenix Average Degreed Enrollment was 165,600, compared to 214,500 for the prior year period. Operating loss for fiscal year 2016 was $65.6 million compared to operating income of $114.9 million in the prior year period. Loss from continuing operations attributable to Apollo Education Group for fiscal year 2016 was $74.9 million, or $0.69 per share, compared to income of $52.9 million, or $0.49 per share, for fiscal year 2015. Excluding special items, income from continuing operations attributable to Apollo Education Group for fiscal year 2016 was $63.3 million, or $0.58 per share, compared to $120.5 million, or $1.10 per share, for fiscal year 2015. Adjusted EBITDA was $222.0 million for fiscal year 2016 compared to $322.6 million for fiscal year 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 August 31, 2016, the Company's unrestricted cash and cash equivalents and marketable securities (including current and noncurrent) totaled $680.7 million, compared to $794.2 million as of August 31, 2015. The decrease was primarily attributable to $97.3 million paid to acquire Career Partner GmbH and $73.1 million for capital expenditures, which was partially offset by $45.1 million of cash provided by operations. Total debt outstanding (including short-term borrowings and the current portion of long-term debt) was $90.8 million as of August 31, 2016. Subsequent to August 31, 2016, the Company repaid the $30 million drawn on its principal revolving credit facility. Business Outlook Due to the pending merger transaction announced February 8, 2016, the Company is not providing an updated financial outlook at this time. Conference Call Information In light of the pending merger, the Company will not be hosting an investor conference call following the issuance of its fiscal year 2016 fourth quarter earnings press release. About Apollo Education Group, Inc. Apollo Education Group, Inc. is a private education provider serving students since 1973. Through its subsidiaries, Apollo Education Group offers undergraduate, graduate, certificate and nondegree educational programs and services, online and on-campus, principally to working adults 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.
(1) During the first quarter of fiscal year 2016, we recorded $73.4 million of goodwill impairment charges.
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. 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 timing of the completion of the previously announced pending merger transaction with AP VIII Queso Holdings, L.P., an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, an entity unrelated to Apollo Education Group; (ii) the inability to complete the merger due to the failure to satisfy customary and other conditions to completion of the merger, including receipt of required regulatory approvals; (iii) the risk that regulatory agencies impose restrictions, limitations, costs, divestitures or other conditions in connection with providing regulatory approval of the merger; (iv) the outcome of pending or potential litigation or governmental investigations; (v) disruptions resulting from the proposed merger making it more difficult for Apollo Education Group to maintain relationships with its students, customers, employees, suppliers and strategic partners; (vi) competitive responses to the proposed merger; (vii) unexpected costs, liabilities, charges or expenses resulting from the merger; (viii) the inability to obtain, renew or modify permits in a timely manner, or comply with government regulations; (ix) the impact of the U.S. Department of Education gainful employment regulations on University of Phoenix enrollment and the associated expenses we may incur in connection with any programs rendered ineligible to participate in Title IV programs; (x) the inability to retain key personnel of Apollo Education Group or its subsidiaries; (xi) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require Apollo Education Group to pay a termination fee; (xii) unexpected expenses or other challenges in integrating acquired businesses, student, consumer or regulatory impact arising from consummation of such acquisitions, and unexpected changes or developments in the acquired businesses; (xiii) diversion of management's attention from ongoing business concerns; (xiv) limitations placed on Apollo Education Group's ability to operate its business by the merger agreement; (xv) the impact of increased competition from traditional public universities and proprietary educational institutions; (xvi) 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; (xvii) the impact of Apollo Education Group's ongoing restructuring and cost-reduction initiatives; (xviii) 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, including the recent requirement that all substantial changes be approved by the U.S. Department of Education in advance; (xix) further delay in University of Phoenix'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; (xx) 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; (xxi) changes in regulation of the U.S. education industry and eligibility of proprietary schools to participate in U.S. Federal student financial aid programs, including without limitation the proposed regulations governing discharge of student loans and requirements for state authorization; (xxii) changes in University of Phoenix's enrollment or student mix; (xxiii) the impact on student enrollments of the announcement of the proposed merger and general economic conditions; (xxiv) the impact of third party claims that Apollo Education Group's products and services infringe their intellectual property rights; and (xxv) fluctuations in non-U.S. currencies that could impact reported operating results of foreign subsidiaries, including the recent significant fluctuations in the British pound sterling associated with the U.K. referendum to exit the European Union. 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 2016, filed with the Securities and Exchange Commission (the "SEC") on October 20, 2016 and other filings with the SEC which are available at www.apollo.edu. The cautionary statements referred to above also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by Apollo Education Group or persons acting on Apollo Education Group's behalf. Apollo Education Group undertakes no obligation to publicly update or revise any forward-looking statements for any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, Apollo Education Group cannot guarantee future results, events, levels of activity, performance, or achievements.
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