Apollo Education Group, the parent company of The University of Phoenix, announced its fourth-quarter earnings Thursday morning, and things don’t look great for the for-profit college.
The company reported a loss of $US18.5 million, after reporting a profit of $US29.8 million in the same period a year earlier. Apollo also missed earnings, reporting earnings-per-share of $US0.17 versus analyst estimates of $US0.18.
Following news that Apollo was suspended from recruiting military students by the Department of Defence (DoD), Chief Executive Officer of Apollo, Greg Cappelli, acknowledged the company is operating through a challenging environment.
Apollo’s earnings for the quarter dropped 51% to $US18.73 million compared with $US38.15 million in the fourth quarter of 2014, and its revenue dropped 13.8% to $US600.29 million compared to $US696.07 million in the fourth quarter 2014.
“No institution is completely insulated from mistakes,” Capelli said on the call, referencing recent monitoring by federal agencies. But he said the company was cooperating fully and taking appropriate action to address all concerns.
Capelli also walked through some of the initiatives the school will undertake to strengthen the company, including growing its international operations, focusing effort on non-degree certificates and boot camps, and transforming the school to become “smaller but better.”
That last point is important to note as UoP continues to experience declining enrollment — down to 190,700 from 233,500 for degree programs — and is criticised for producing graduates who are unprepared for the workforce.
Capelli said the school will focus on ensuring that graduates develop the skills necessary to excel in jobs after graduation.
It’s also a significant business model change, and one that is a subtle nod to looming issues Apollo will need to address over a federal mandate called the 90/10 rule.
The rule prohibits for-profit colleges from deriving more than 90% of their revenue from federal student aid.
Military funds, however, are not counted as federal student aid. That poses a problem for UoP, which is barred from military recruitment for the time being.
UoP needs to address two simultaneous issues: how to attract students who are not paying with federal funding now that they can’t actively recruit military personnel, and how to ensure they don’t breach their 90/10 threshold.
Capelli is suggesting major changes to the way the business will look and operate, and it’s not yet clear if he will be able to pull it off.
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