Apollo Group Executive Insights: Start Declines, Admissions Productivity

On Monday, Apollo Group Inc Class A (NASDAQ:APOL) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Start Declines

Sara Gubins – Bank of America-Merrill Lynch: I understand that August is a big month so this may be tough to tell, but I’m wondering if you think if we have seen the worst of the start declines on a comparable basis?

Gregory W. Cappelli – Director, Co-CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: The worst – the start declines on a comparable basis…

Sara Gubins – Bank of America-Merrill Lynch: Meaning the negative 5% on an underlying basis in the third quarter and the second quarter?

Gregory W. Cappelli – Director, Co-CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: Sara, we’d love to give you an answer on that. We are going to wait and see how really August comes in as to draw any conclusions here. We continue to have some weeks that are quite good and inspiring and others that are – could be better. So we’re just going to continue to work away with everything we’ve explained them on call and hopefully things will continue to improve.

Sara Gubins – Bank of America-Merrill Lynch: Secondly, we saw overall persistence levels come down for the first time in a while. We had expected that because we – I know you are seeing larger graduating classes coming through the system, could you talk about how long that might last and continue to impact student persistence?

Brian L. Swartz – SVP and CFO, Apollo Group, Inc.: The third quarter persistence I think is as the way you calculated, was down about 160 basis point give or take and most of that was due to higher grads and to a lesser degree attrition. Over the long-term we certainly expect persistence to improve and moderate with the impact of the graduates, but in the short-term we do expect a downward trend in persistence to continue because of those higher grads and attrition. So exactly when it will turn around or what it looks like over the next several quarters? We need to play that our and see how it goes, but that’s certainly our expectations going forward.

Admissions Productivity

Suzi Stein – Morgan Stanley: I don’t know how much detail you can give on this, but how much of the start volatility would you attribute to internal changes versus overall market demand or competition? I guess in addition to that just now that you’ve fully lapped the incentive comp changes, where do you think admissions productivity is relative to where it was before?

Gregory W. Cappelli – Director, Co-CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: Suzi, this is Greg, I’ll take the first part. I think obviously it’s a factor and a big factor of what we are experiencing in terms of the positioning, the changes and the direction that we are trying to point the University of Phoenix, as part of the volatility within the enrollment of the University of Phoenix. There’s others factors as well, I’m sure inside and outside factors, but it’s a combination and we are expecting ultimately for that positioning internally to pay dividends, not only for our students but our employees and certainly our shareholders as well going forward. Let me ask Joe to comment on your second question.

Joseph L. D’Amico – President, Apollo Group, Inc.: Yes, with respect to the enrollment counselor advisor productivity, we are actually very pleased with the progress being made there. So, we are making good progress. We are not back to where we were prior to all the changes, but we are approaching it.

Suzi Stein – Morgan Stanley: I know you don’t give specific numbers on this, but can you give us an idea of how in terms of percentages the starts coming from corporate partners has changed and kind of where you expect that to go?

Gregory W. Cappelli – Director, Co-CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: That continues to – it’s still small as a percentage overall, but it continues to grow faster than the other pieces of the business and we are excited about it.