Don’t Miss: Which President is the King of the Fiscal Squeeze? Class A Earnings Call Insights: Second Half Outlook and Elaboration On Grants

Apollo Group (NASDAQ:APOL) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Second Half Outlook

Peter Appert – Piper Jaffray: Hi, Brian I was temporarily distracted there at the very end, you would said in the last call — positive starts in the second half. Is that still the expectation?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: Hi, Peter, this is Greg. We’re doing everything we can to return University of Phoenix back to growth as far as exactly the time we’re not commenting on that right now. We hope it sooner rather than later. We’re in the middle of repositioning the brand as you know and positioning ourselves with less reliance on affiliates and others. So what we’re very focused on is making sure that we get our most competitive product at the University of Phoenix into the marketplace as soon as possible and you’ll recall some of the comments that I made upfront in the call suggests some of the things that we’re doing to try to get there. So at this point, we’re focused less on the exact date and when we’ll return to growth in the start number and ensuring we hit our deadlines internally to get our best product offering for University of Phoenix into the marketplace. We are working very, very hard to do that. It doesn’t mean it couldn’t happen by the end of the year, but we’re just not focused on that date right now.

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Peter Appert – Piper Jaffray: the second quarter’s start performance at least relative to Street expectations, I guess, was maybe a little bit weaker than anticipated. How did it compare with your expectations?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: From our expectations, it’s probably a little weaker than we had gone into the quarter hoping for, some of that’s dependent on exactly the timing of spend, again a little bit less than we probably would’ve done. There is timing involved with that. We did see some good signs on the brand from third-party organizations that are measuring the effectiveness of what we’re trying to do with our brand, but not a ton different from our expectations. It’s a market that is difficult right now to deal with. We are doing that. We are just very focused internally on the University of Phoenix making sure we’ve engineered the best products for our students and trying to get that into the marketplace along with the changes that we are making to the brand. That’s everything from the education to careers initiative, the initiatives with our corporate partners, which are continue to grow, and we’re doing well with and growing in that area. There is a number of very good things are taking place, we’re just focused on execution in those areas.

Peter Appert – Piper Jaffray: Last thing, Greg, the change in the COO spot, do you envision a change in the definition of that role as a result?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: We haven’t had a Chief Operating Officer. We have had a President, but I do envision Chief Operating Officer that’s instrumental helping me operationalize the strategy at the Apollo Group.

Peter Appert – Piper Jaffray: That’s the reason for the change?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: No, well, the reason for the change is that Joe is stepping down from that position. He’s been in it a number of years and elected to take on a new position, but we’re excited for him in that role and also excited to be bringing on capability in the that I think will be helpful to us…

Elaboration On Grants

Jeff Meuler – Robert W. Baird & Company: If you could just comment on the grants. It sounded like in your commentary you were talking about a shift in the timing of the grants, but it also – if I had my numbers right, it sounds like maybe the back half is going to be a little bit lighter in terms of percentage of revenue. Could you just confirm that? Is it that you feel that you’re being more efficient as you do the grants in a more targeted fashion and what’s driving that?

Brian L. Swartz – SVP and CFO, Apollo Group, Inc.: Jeff, it’s Brian, the answer is yes to both of your questions. So on the initial comments that we made on the last call, we did expect the financial impact from the grant program to be bigger than what we expect it to be today for the full year. For the second quarter, it was less. It impacted the second quarter by about $5 million, which is less than we had thought. After coming out of some of the pilots on some of the grant programs, we realized a more targeted approach versus a broad-based grant program was more effective with the students and so we are going to rollout more of those, but they will be in a more targeted fashion. For the full year impact, we don’t expect it to impact us as much as we did when we were on the January call.

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Jeff Meuler – Robert W. Baird & Company: You also reduced your second half expectations, correct?

Brian L. Swartz – SVP and CFO, Apollo Group, Inc.: The impact on revenue per student will not be as severe as it was, because those dollars are less than they were, but financially our revenue and operating income outlook is still the same for the full year.

Jeff Meuler – Robert W. Baird & Company: Then in terms of acquisitions, I guess, how large of acquisition would you guys consider and if you could just run through your perspective on what are the key leverage points that you talked about rolling out online offerings in Mexico and BPP and if you could just kind of talk what are the key leverage points between having the University of Phoenix along with international operations versus what you all have to replicate?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: This is Greg. We don’t really comment on the size of acquisitions. I think what we’ve done in the past is or what we’ve said in the past is we have a team that is studying organizations throughout the world in key markets that we believe are going to be good markets for the Apollo Group. The timing of doing anything in those countries depends on finding the right organization, the right management team, which is critical, the political environment in that country. We’ve done both acquisitions and also startups as you can see from our India operations. So we continue to look at a number of different markets and your team is active in discussions. Anything that we do as I have said in the past, we need to feel comfortable can create long-term value for our shareholders whether it’s a startup or an acquisition, so that’s how we think about the world (indiscernible) and then I’m sorry. Did you say – was your question — your second part of the question on the University of Phoenix internationally?

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Jeff Meuler – Robert W. Baird & Company: No. The second part of the question was just what do you feel are the key points that are leverageable in the model between University of Phoenix aren’t having international operations as a part of it and what do you have to replicate?

Gregory W. Cappelli – Director, CEO, Apollo Group, Inc.; Chairman, Apollo Global, Inc.: I understand. We’ve done that actually. There are many things that the global team has been able to leverage from the University of Phoenix. There are programs, types of programs that we have in Mexico that were originally developed up here in the United States. Interestingly, also the Mexican operations have also been able to deliver that’s originally were – excuse me our pilot, the type of classroom that I talked about was rolled out and is now being piloted in Great Britain. That is actually, it’s a good question, because the key to having real long-term success in global is to leverage a Global Knowledge network where they are sharing not only in curriculum, but ideas in the way that they deliver that curriculum, whether its faculty or others or technology or whatnot and that collaboration is actually happening quite effectively right now.

Don’t Miss: Which President is the King of the Fiscal Squeeze?