DeVry Earnings Call INSIGHTS: Scholarships, Enrollment Direction

On Thursday, DeVry, Inc. (NYSE:DV) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Scholarships

Sara Gubins – Bank of America Merrill Lynch: I wanted to start off by asking about scholarships and the increased level on the fourth quarter. Could you just talk about what drove that decision? Then, you mentioned that it’s not going to be higher next year. But I’m wondering if it might not be more helpful to ramp scholarships to try to drive new student growth?

A Closer Look: DeVry Inc Earnings Cheat Sheet>>

Daniel Hamburger – President and CEO: Well, thanks Sara, and well, we do intend to stand behind our students. I mean, I think over the mid to long-term, we continue to see the opportunity for tuition increases, but in the near-term given this economy we are going to stand behind our students both to protect persistence and to protect their share. I think it’s interesting that a recent Wall Street Journal article talked about how many schools are decreasing use of the scholarships because of their budget constraints. So, we are prepared to use our financial flexibility to do that. We took a pretty sizable increase in this past year and we think that a more modest increase in this new fiscal ’13 is going to do it. We are running a number of pilot programs to assess the impact. So we’re not going to roll that out in a broad-base way until we’ve assessed those pilots. That’s a very important part of how we operate, is to do the test and control and then roll it out in a bigger way. So, that’s our outlook, it’s a relatively modest increase from ’12 to ’13, but I wanted to add that because I know the sizable increase in the quarter, perhaps we could have done a better job of communicating that, took people by surprise and we acknowledge that, so we don’t view that as setting the trends or setting the pace for next year.

Sara Gubins – Bank of America Merrill Lynch: Then hopefully this is quick, but would it be possible with the new reporting structure to just help us map the six periods that you’re going to be reporting into the quarters?

Patrick J. Unzicker – VP and Controller: This is Pat. So, of the first two sessions of the year, July and September, you’ll have obviously both months July, July and August, that session, and then half of September in the first quarter, then you’d pick up the second half and the second quarter of September in the November session, and then for our third quarter, you would have all the January session and one month of March, then of course at the fourth quarter, you’d have the second half of March and both the months in the May session. So, we feel that this will give us the real perspective as an analyst or as an institutional investor, a much better alignment of our enrollments with how we report the quarterly revenue.

Enrollment Direction

James Samford – Citigroup: Thank you for the new enrollment detail and I guess my associate thanks you for all the modeling she is going to do this evening. But I wonder if I could stretch a little bit and see if you could provide us may be with a little bit more on sort of the direction of when – the direction of enrollment now to look for maybe next quarter, will the trends get worse before they get better or we have to trough at this point on to the new enrollment declines?

Daniel Hamburger – President and CEO: Yes. Overall I think it’s just too early to call the churn here for DeVry undergrad, Carrington, which is really where the focus is. This is not applying to the medical schools and DeVry Brasil and so forth. So I think we are probably going to see a similar kind of pattern something along the bottom, I don’t think it’s worse before it gets better but I think we are still going to be unhappy here in the fall. One thing I will remind us is that there is a bit of a lag effect that we saw in July and we will see it again in September. Those are our bigger high school, we recruit directly from high schools the traditional college aimed student and the seeds were sown for that back three quarters ago, when we were at pretty much the depth of the distractions and disruption from the adjustments to the new regulations. So there is a lag effect that we are feeling now on those periods. On the positive side we are seeing conversion rates improving which I think that really reflects well – that part of the stream of activity reflects well on the value proposition that students are seeing in our institutions so that they are inquiring and then they are converting to an application. But then the start rates, or the yield rate as some colleges might call it, that’s down, which I think is more a reflection of the consumer sentiment and the economy. So overall, similar patterns but we like what we’re seeing in terms of improving quality of inclusion and quality of conversion.

James Samford – Citigroup: Maybe a quick follow-up on Chamberlain, obviously you’ve invested a lot and growing that part of the business and yet sort of new students and I think that’s an aggregate, including all the new campuses is down year-over-year. How should we think about that direction? I would’ve thought that that would be the high demand segment and we’d see new student growth there.

Daniel Hamburger – President and CEO: We did see new student growth in the July session of 14.7%, and you’re pointing to the May, a slight decline of less than 1%. Just remember that May basically is not the campuses, it’s basically just the online. So we are growing to Chamberlain in total student from the 15% range. I do want to bridge there, it gives me the opportunity to just mention that Chamberlain is going to be transitioning its academic calendar and we’ll talk more about this in the first quarter, it’s nothing that’s going to impact, but we’ll sort of talk about it then but it’s going to go more towards the January, May and September timeframe for starts. So it won’t impact growth, it won’t impact anything other than a little bit of timing on a one-time basis.