Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Charles B. Edelstein - Co-Chief Executive Officer and Director

Joseph L. D'Amico - President and Chief Operating Officer

Brian L. Swartz - Chief Financial Officer and Senior Vice President of Finance

Beth Coronelli -

Gregory W. Cappelli - Co-Chief Executive Officer, Director and Chairman of Apollo Global Inc

Analysts

Trace A. Urdan - Wunderlich Securities Inc., Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Peter P. Appert - Piper Jaffray Companies, Research Division

Sara Gubins - BofA Merrill Lynch, Research Division

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

Suzanne E. Stein - Morgan Stanley, Research Division

Amy W. Junker - Robert W. Baird & Co. Incorporated, Research Division

Jeffrey M. Silber - BMO Capital Markets U.S.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

James Samford - Citigroup Inc, Research Division

Corey Greendale - First Analysis Securities Corporation, Research Division

Michael Tarkan - FBR Capital Markets & Co., Research Division

Patrick Elgrably - Crédit Suisse AG, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Apollo Group (APOL) Q4 2011 Earnings Call October 19, 2011 8:00 AM ET

Operator

Good morning, ladies and gentlemen, and welcome to the fourth quarter and 2011 fiscal year-end earnings release conference call. [Operator Instructions] This conference call is being recorded today, October 19, 2011, and may not be reproduced in whole or in part without permission from the company. There will be a replay of this call available through October 28, beginning approximately 2 hours after we conclude today. The replay number is (800) 642-1687 or (706) 645-9291 internationally. The conference ID for the replay is 12862966. I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Mrs. Coronelli, go ahead, please.

Beth Coronelli

Thank you. Thank you for joining us today to discuss our fourth quarter results. Participating on the call today are Chas Edelstein, Co-Chief Executive Officer; Greg Cappelli, Co-Chief Executive Officer and Chairman of Apollo Global; and Brian Swartz, Senior Vice President and Chief Financial Officer. Our President, Joe D'Amico, is also here and will be available during the Q&A portion of the call.

As we discuss our results today, unless noted otherwise, we will be comparing the fourth quarter of fiscal 2011, which ended August 31, 2011, to the fourth quarter of fiscal 2010. I'd also like to remind you that this conference call may contain forward-looking statements with respect to future performance, financial condition, regulatory compliance and other matters regarding the business of Apollo Group that involve risks and uncertainties. Various factors could cause actual results of the company to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed under risk factors and elsewhere in the company's most recent 10-K and subsequent 10-Q reports filed with the SEC and available on our website. The company disclaims any obligation to upgrade any forward-looking statements made during this call.

Additionally, during the call we may refer to non-GAAP financial measures which are intended to supplement, but not substitute for the most directly comparable GAAP measures. Our press release, which contains financial and other quantitative information to be discussed today is on our website, and we expect to file our 10-K for fiscal 2011 later this week. And with that, I will turn the call over to Chas.

Charles B. Edelstein

Okay. Thank you, Beth, and good morning, everyone. I'd like to start up this morning with a brief overview of our business and how we are positioning ourselves within the higher education sector. Then Greg will talk a bit about the key initiatives we've been working on and what we're seeing. And Brian will conclude with the results from the quarter in more detail and provide some commentary on outlook for the business.

The past year has been a time of considerable change within our sector and for our company. At Apollo, we set out an ambitious plan to implement leading-edge student protection to differentiate the University of Phoenix, our flagship institution, and expand our business thoughtfully beyond University of Phoenix. We are pleased by the progress we've made in fiscal 2011 in advancing these goals by, first, enhancing our student-centric approach to admissions with the elimination of all enrollment factors in our advisor evaluation and compensation system. Second, by implementing our free 3-week orientation program. Third, by launching the first class under our new learning platform. Fourth, advancing our adaptive learning capabilities. And fifth, connecting education to careers.

While some of these initiatives had an impact on our enrollments over the past year, we are pleased with the trends we have observed in the fourth quarter on a number of key operational metrics. For example, following the coaching and training we've provided to our admissions advisors, we've seen advisor effectiveness continue to recover, leading to improved new enrollment trends in the latter part of the fourth quarter. Also, we continue to see higher retention rates following the implementation of our orientation program and other initiatives. And finally, the mix of our student population has continued to shift away from Associates and toward bachelor level students, which we believe is having favorable benefits on our bad debts, our 90/10 ratio and cohort default rates over time.

As we move into the year ahead, we remain focused on several things. First, further differentiating University of Phoenix through investments in academics and the classroom experience. Next, integrating Carnegie Learning, and through its engine, accelerating our adaptive learning capabilities. Also, continuing to align our programs to prepare our students to meet the needs of today's employers. And finally, enhancing our efforts related to career services.

Now on the regulatory and compliance front, we maintain an active dialogue with policymakers in Washington to be sure we communicate the direction we are taking University of Phoenix. We also are making preparations for our upcoming HLC comprehensive evaluation in 2012, and we believe we are well prepared for these visits.

Lastly, let me say we remain focused on expanding along the lines of our core capabilities through opportunities in international markets and by leveraging those capabilities to help traditional postsecondary schools serve their markets more effectively. We're committed to using our extraordinary platform to lead exemplary change in the higher education sector. We believe the initiatives we've undertaken in 2011 and the innovations we continue to pursue will lead to improved student outcomes and improve student experience, and position our company for continued success while reducing risks to the business. With that, I'll turn the call over to Greg.

Gregory W. Cappelli

Thank you, Chas. Good morning, everybody. During the fourth quarter, we continue to execute on the key initiative that we set forth in 2011 on our strategy to further differentiate the University of Phoenix and to diversify the Apollo Group. Now one of our top initiatives this past year has been to better identify and attract students that are a good fit for the University of Phoenix. We've been focusing on trying to create a personal connection with students who will benefit and are most likely to succeed in our programs. It starts with our message to create awareness in our national ads to try to demonstrate how our students, if successful, drive change in their lives, individually, for their families and in their communities. We're telling the personal stories of our graduates both nationally and locally.

As we increased the quality of our student inquiries, making a personal connection with the potential students is critical. As an example, the Phoenix Prep Center, which was previously called the Visiting Student Center, helps prospective students with a personalized experience. Phoenix Prep supports self-awareness and assessment, helping students to understand their learning styles and academic strengths, and to find the right path to reach their goals through education. We are also connecting with students through social networking, including Phoenix Connect, that's our proprietary social network, while bringing our proud alumni back into the fold as well, a force of over 660,000. With over 100,000 graduates in 2011, this group of supporters continues to grow. We've held homecoming events in 76 cities in the past 6 weeks. I attended one just this past weekend. And listening to their personal stories, what many have had to overcome in their lives to get where they are today, some going all the way through a doctoral program, it's just unbelievable and clearly an invaluable asset to our university. We're actively engaging in ways we haven't in the past. Our alumni magazine, local events and social media outreach, engaging them to help connect students to the University and also our students to jobs. They are our biggest promoters. We are excited to now have over 30,000 alumni who have agreed to be mentors to our current students.

Now from a branding and thought leadership perspective, we just completed a 4-state tour of Education Nation, that's our partnership with a fantastic team in NBC News. It ended in New York just last month. Education Nation allowed us to engage in an extremely important dialogue about the true state of education in this country with some of our highest-ranking policymakers, educators, administrators and business leaders from around the country. One of the most important areas we addressed is one you've heard us talk a great deal about the past couple of years, which is the workforce skills gap in this country. There is simply no right way to reconcile the fact that we have 9.1% unemployment in the U.S. today, even when there are over 3.2 million jobs before our very eyes with some the best companies in America simply can't fill because of the growing skills gap in this country. It's not acceptable, not now when we have so many issues to deal with in the U.S. At Apollo, we believe it's our responsibility to help close that gap. We have the platform, the will, and most importantly, the people to help get it done. The need to link education to careers touches all facets of our company and it's a critical connection to how we can help our students succeed. We're focused on aligning learning outcomes with student and employer needs.

The momentum also continues in our Workforce Solutions group as we help our corporate partners build a better educated, competitive and skilled workforce. Let me give you one quick example. In fact, a recent one. This is our collaboration with Emergency Medical Services Corporation. They're the nation's leader in providing emergency medical services. We work closely with the EMSC to enhance the Bachelor of Science in Healthcare Administration with a concentration on emergency services management. We were pleased to have the opportunity to work with EMSC and we're honored to be recognized by Chief Learning Officer magazine's Learning In Practice awards for this innovative partnership.

Another important area of focus this past year has been implementing leading-edge protections for our students. Over the past year, we worked hard to move to a student-centric advisement approach to admissions with a strong focus on our students achieving outcomes. Over a year ago, in fact on September 1, we better aligned the evaluation process and the compensation of our admission advisory teams to our students success by eliminating enrollment as a factor in the evaluation and compensation of our admissions teams. They're training, mentoring and realigning the requirements for our advisors who were very pleased with the progress the teams have made and commitment they've all shown to always put the student first to this process.

This meaningful change took a heavy initial toll on admission advisor effectiveness, but we are encouraged to see a continuing improving trend during the fourth quarter, and so far into 1Q. We've also worked hard to help students better understand and practice responsible borrowing, prior to making the decision to enroll in a University of Phoenix program, which has resulted in a lower percentage of our students borrowing the maximum amount of student financial aid, despite the fact that this decision is not ultimately ours to make.

We continue to receive very positive feedback from the University Orientation, a major initiative we launched last November which provides students an opportunity to experience our university before they enroll. We now have cohorts completing multiple classes. Similar to what we observed during the pilot, we are seeing a favorable impact on retention rates. We continue to see about 80% of the students in orientation going to enroll into our university. The 20% that choose not to enroll have not incurred any debt.

And finally, we are working hard to differentiate University of Phoenix and Apollo Group through an enhanced academic experience. Innovation is a driving force in our efforts to enhance our learning platform and expand opportunities for students on the go. Examples include: The integration of adaptive learning; the launch of a new app on Android powered phones; collaboration through Phoenix Connect, our academically focused social network; incorporation of real-time chat; and continued enhancements to our academic offerings, such as the Phoenix Lecture Series in which leading minds of our generation share their approaches to new modes of thinking required to meet the challenges ahead, along with game changing ideas.

Our current guest lecturers are Gary Hamel from the London Business School; Nicholas Negroponte, Founder of the MIT Media Lab and also Founder and Chairman of One Laptop per Child; and Harvard Business School Professor, Clayton Christiansen. This lecture series, available to all of our students, focuses on a new way of doing things and rethinking the manner in which we approach the 21st century.

Regarding adaptive learning, the Carnegie Learning acquisition which closed in early September, allows us to accelerate our efforts to incorporate adaptive learning into our academic platform and provide tools to help raise student achievement in math. Math is often an area of fundamental skills gap when students enter postsecondary education. If we can help our students succeed in math, we believe we can further improve retention and graduation rates. Right now, our primary focus is on integrating the Carnegie software curriculum into our math courses. With the Carnegie team expertise and technology, we're working to incorporate adaptive learning to individually address the student's developmental needs, while continuously assessing comprehension, resulting in a more effective learning experience.

Our curriculum and programs are designed to be relevant to our students' every day life, ensuring they have the skills needed to prepare them to be successful in today's workforce. We are squarely focused on doing the right things for our students, including enhancing our learning platform and their experience as we carry out our mission to create a world-class education to better position our students for personal and professional success.

Now in closing, fiscal 2011 has been one of the most unique and challenging year in Apollo's history. But in hindsight, it will also prove to be one of the most important and rewarding in our history. The regulatory bar has been raised. We implemented industry-leading student protections. Students are demanding greater access. They are demanding more choice, a modernized academic curriculum, enhanced with today's leading-edge technology. And we're responding.

We're also working on diversifying our business through Apollo Global and Apollo Education Services, where we've invested a substantial amount of talent because we believe opportunities are significant in both areas. For more than 35 years, we've been dedicated to innovation and providing greater access to higher education. Today, we believe our mission is more important than ever before as we're on a mission to help get America back to work, and the price of failure in this case is not an option.

So with that, I'll turn the call over to Brian. He's going to share more detail from our fourth quarter financial results, and also comment on our financial outlook for the year ahead. Brian?

Brian L. Swartz

Thank you, Greg, and good morning, everyone. I'd like to start by reviewing our fourth quarter results and then I'll spend a few minutes on our business outlook. During the fourth quarter, revenue decreased 11%. The decrease was primarily the result of a 19% decline in Degreed Enrollment at the University of Phoenix to roughly 381,000 students, which was partially offset in part by selective price increases and a positive mix shift to higher degree levels. New Degreed Enrollments were down approximately 33% this quarter, as compared to down 40% in the third quarter. Income from continuing operations was $189 million or $1.37 per share compared to income of $48 million or $0.32 per share in the year-ago quarter.

I'd like to highlight a number of items that had an impact on our fourth quarter results. First, in early August, we reached an agreement with the Arizona Department of Revenue regarding the apportionment of income for Arizona corporate income tax purposes. Based on this settlement, we have foregone prior refund claims of $52 million and have paid or will pay a total of $60 million, which was previously included in our unrecognized tax benefits. We have made the appropriate adjustments to our deferred taxes. And as a result, we realized a $43 million tax benefit during the quarter. The benefit includes state tax accrued throughout fiscal 2011. We have also worked with the state of Arizona and have an approval on an apportionment methodology through 2020. As a result of this settlement, we expect our tax rate to be approximately 40% in 2012, down roughly 150 basis points if we had not obtained the settlement.

Second, we realized a $7 million tax benefit associated with the closure of Meritus University. Third, during the fourth quarter, we implemented a real estate rationalization plan in Phoenix to streamline and better align our operations with our business strategies. The plan relates to 4-leased facilities and approximately 500,000 square feet. Our financial results this quarter include approximately $19 million of restructuring charges in relation to this plan. We anticipate there will be $15 million to $20 million of additional charges the first half of 2012 and we expect to realize $10 million to $15 million of annualized savings when this plan is complete.

Finally, in the fourth quarter, we recorded a $16 million credit primarily related to an agreement in principle with the plaintiff to settle the Policemen's Annuity and Benefit Fund of Chicago class-action lawsuit for a payment of $145 million. Excluding these items, as well as the other special items from the prior year that are detailed in our press release, income from continuing operations decreased 28% to $140 million. Our operating margin declined 450 basis points to 20.8%, and our EPS from continuing operations was $1.02 per share compared to $1.31 per share in 2010.

Next, I'd like to spend a minute discussing our fourth quarter operating expenses. We saw decreases in instructional and student advisory, marketing, admissions advisory and bad debt expense, while G&A and depreciation and amortization were up from the prior year. In instructional and student advisory, faculty costs were down associated with lower enrollments. This was partially offset by increases in compensation for student advisory and other costs to further enhance our academics and student experience. In marketing, we reduced our Internet spending as we focused on improving lead source effectiveness. The reduced Internet spending was partially offset by investing in long-term branding initiatives.

Our admissions advisory expense was lower related in part to the reduction enforced earlier in the year. Bad debt expense as a percentage of revenue was 3.5%, down 240 basis points from the prior year, as the result of the shift in the mix of our students, the implementation of orientation and improved collection rates. For 2012, we anticipate our bad debt expense as a percentage of revenue will be about the same as 2011. Finally, our G&A increased 200 basis points, which was primarily related to a $7 million nonrecurring cost to support the formation and independence of Nexus Research and Policy Center. We expect G&A in the first quarter of 2012 to decline by $10 million sequentially from the fourth quarter of 2011. Share-based compensation was $20 million in the fourth quarter and $70 million for the year. In fiscal 2012, we expect share-based comp to increase and be approximately $80 million to $85 million, primarily due to multiyear and retention equity awards granted during 2011.

Turning briefly to the balance sheet and cash flows. We continue to maintain a well-capitalized balance sheet. At the end of the fourth quarter, we had unrestricted cash and cash equivalents of $1.6 billion. Our outstanding debt was $599 million versus $584 million at the end of last year. During the fourth quarter, we temporarily borrowed the full amount of our $500 million credit facility. And subsequent to year end, we paid $390 million of that borrowing. Excluding Apollo Global, our days sales outstanding for the quarter decreased to 23 days from 30 days at the end of last year.

During the fourth quarter, we chose to make a change in the presentation of restricted cash and cash equivalents related to financial aid program funds in our statement of cash flows. We now classify these changes as cash flows from operating activities versus cash flows from investing activities. These restrictive funds are a core activity of our business operations and generally increase or decrease depending upon changes in student deposits. Since student deposits are included in cash flows from operating activities, we believe a more transparent presentation which will also include changes in these restrictive funds in the same category. These changes have no impact on our financial position and results of operations.

With this change in presentation, we now define free cash flow as cash flow from operations less capital expenditures. For fiscal year 2011, our free cash flow decreased by 15% to $735 million compared to $865 million in the prior year, primarily as the result of lower operating income. In the fourth quarter, we repurchased 7.7 million shares of stock for $357 million at an average price of $46 per share. During fiscal year 2011, we repurchased a total of 18.3 million shares or 12% of our total shares outstanding at the beginning of the year. These total year purchases were made for $776 million at an average price of $42 per share. At the end of the fourth quarter, we had approximately 700,000 remaining on our share repurchase authorization. However, subsequent to year-end, our board increase the authorization to $500 million.

Before I discuss our business outlook, I'd like to cover 3 additional topics. First, I am pleased to share that for fiscal 2011, the 90/10 percentage for University of Phoenix, excluding any impact from the temporary lead provisions, declined by 200 basis points in the prior year to 86%. The improvement is largely attributable to the shift in the mix of our students. Based on the current trends, we do not expect our 90/10 percentage for fiscal 2012 to exceed 90%.

Second, in our last call, we shared with you a new metric we believe is indicative of our retention rate trends for new enrollment at the University of Phoenix. We call this metric, average credits earned per students or ACEPS. As a reminder, our 26-week ACEPS metric measured the average number of credits earned by newly enrolled students over their first 26 weeks of attendance. This metric is for our undergraduate student population and is reported 2 quarters in arrears. Our 26-week ACEPS metric for our newly enrolled undergraduate students in the second quarter of fiscal 2011 was 12% higher than the prior year, which is on top of a 5% gain from the year before. The February 2011 quarter was the first quarter to fully reflect the impact of the University Orientation. The improvement seen in previous quarters was primarily the implementation of first-year sequence in February of 2010, which has now been partially anniversaried. It is important to remember that since ACEPS is a measure of year-over-year improvement, we would expect the rate of improvement to level off once our initiatives have been anniversaried.

Finally, as you will know, although we are releasing our earnings this morning, we have not yet filed our Form 10-K. We plan to file our Form 10-K later this week.

Now I'd like to spend a minute to provide some commentary on our business outlook. As Greg mentioned earlier, there are continued indications of positive trends in our new enrollments. We expect new enrollments to grow in the first quarter of 2012 on a year-over-year basis, breaking into single digits and remaining positive year-over-year in each quarter of 2012. Despite the resumption of growth in new enrollments and improving retention rates for new students, we continue to expect total enrollment and revenue growth rates to remain negative throughout 2012, as the result of a higher number of students graduating in 2012. Furthermore, we expect persistence for the whole student body to decline, reflecting the impact from graduating students and the overall portion of our student body shifting to newer students, who generally have lower retention rates than the more tenured students who are closer to graduation.

We continue to responsibly manage our cost structure and we're successful with our goal to achieve an excess of $100 million in run rate savings in 2011, largely driven by the combination of lower bad debt expense and proactive management of our headcount. Since the end of last fiscal year, we have managed our headcount down as of the end of the fourth quarter by approximately 14%. Based on our current view and anticipated future trends in new enrollment, retention rates and expenses, our financial outlook for fiscal year 2012 is revenue of $4.1 billion to $4.3 billion, and operating income of $655 million to $780 million. The operating income outlook excludes any special charges, as well as the estimated $15 million to $20 million of additional restructuring charges related to the real estate rationalization program I mentioned earlier. You will note we have taken up our revenues slightly from our last outlook and adjusted our operating income to incorporate the acquisition of Carnegie Learning. With that, let me turn the call over to the operator so we can take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Sara Gubins with the Bank of America Merrill Lynch.

Sara Gubins - BofA Merrill Lynch, Research Division

In your release and in your prepared remarks, you talked about the start decline that you seen this year being mostly operational in nature. I don't disagree with that, but I'm wondering if you can give us any details on how you measure this? So maybe things like response rates to your ads or more metrics that you used to think about underlying demand trends.

Gregory W. Cappelli

Sara, this is Greg. I mean I think we made the comments we did because while there could be overall impacts from the industry, from macro, from a negative perception through the press at times throughout the year, we feel like a big portion of our operating results, and certainly, on the enrollment front has been from the major initiatives we've taken that I mentioned during my portion of our discussion. That being said, certainly, to your point, the environment for advertising, for lead generation has had impact throughout the year as well, and that's going to ebb and flow. There are certain things that we can't control within that. They're going to change from an industry in a macro perspective. You'll probably note in our financial that it's become less expensive for us this quarter to acquire a student. But again, part of that is structural on our part. Part of it is going to depend on where we are from a macro perspective within the industry. Does that help answer your question?

Sara Gubins - BofA Merrill Lynch, Research Division

It does, yes. And then just as a follow-up, more of a technical modeling question. But Brian, on student persistence, you mentioned that we should expect that to be down given larger graduating classes. Is it reasonable to think that, that should be down for every quarter of fiscal year 2012?

Brian L. Swartz

Yes. Sara, I mean we haven't been specific in terms of which quarter, but certainly, there will be significant pressure on it. I mean we will hit a peak in terms of number of graduates in fiscal 2012 and that will put significant pressure on that metric.

Gregory W. Cappelli

And that's one of the reasons why it's so important for us to track true retention in terms of the ACEPS that we're discussing obviously today.

Operator

Your next question comes from the line of Suzi Stein with Morgan Stanley.

Suzanne E. Stein - Morgan Stanley, Research Division

Can you just give us a little more detail on Carnegie Learning? And then maybe, I guess I didn't fully understand why the revenue number came up and the operating income number came down slightly. Was that mostly a result of Carnegie?

Gregory W. Cappelli

Why don't I take a -- you asked why, I'm sorry, was your question why we made the acquisition of Carnegie?

Suzanne E. Stein - Morgan Stanley, Research Division

No. My question was more of the change to the outlook for 2012, why change the outlook.

Gregory W. Cappelli

Okay. Understand. Brian?

Brian L. Swartz

Suzi, it's Brian. Let me try to summarize. We did take the revenue outlook up a bit. A couple of things there. One, part of that is related to Carnegie, it probably does have some level of revenue. It's relatively modest, but that's part of it. And then we obviously, in Q4, outperformed where we thought we would be a quarter ago with the enrollments down 33% versus what we said previously. In terms of the operating income, we're very cognizant of our expense levels. There are some critical items we want to continue to invest in and we absolutely expect that over time we'll achieve additional leverage with incremental revenue. But given everything that came out as part of the planning processes we went through in the last couple of months, we basically have more or less kept the outlook consistent with where it was before, adjusted for the Carnegie dilution that we talked about previously. So that's kind of the sense of where everything is. But it's very important to mention and although we might have some higher expense levels in fiscal '12 relative to where the revenue is going because of what happened in fiscal '11, over the long term and in the future, leverage is very important to us and we absolutely believe we can achieve that with time.

Suzanne E. Stein - Morgan Stanley, Research Division

Okay. And then can you just give us an idea of what percent of associate and what percent of bachelor students go through orientation?

Charles B. Edelstein

So we've said it's more than 50% of our new degree enrollments are going through orientation.

Gregory W. Cappelli

I think historically, it's probably a bit less than that now.

Brian L. Swartz

Yes, Suzi, it was 50% when we didn't have orientations. And now we have roughly 100 students coming in and 80 completing, so it's less than the 50% of new enrollments today because it's a different number you're comparing it to. But it's still a good percentage of our new enrollments.

Gregory W. Cappelli

Yes. Suzi, one of the important things there from our perspective to look at is, if you have over 24 credit hours, you're not required to go through orientation at this point. And we have more students from a mix perspective that are coming in with over 24 credit hours. From our perspective, that means that at this point, we're enrolling students that are more prepared than before and we'll just monitor that trend and see how it continues going forward.

Charles B. Edelstein

So of the total, today, it's closer to 40 than the 50 total new enrollments.

Suzanne E. Stein - Morgan Stanley, Research Division

Sorry, I don't want to take up too much time. Maybe I can just ask the question differently. Can you maybe just give us the percentage on bachelor students? I'm assuming most of the associate students go through, but can you give us a more clear understanding of what percent of the bachelor students would come in with fewer than 24 credits?

Gregory W. Cappelli

It's less than half, Suzi. We don't give out the exact percentages.

Operator

Your next question comes from the line of Andrew Steinerman with JPMorgan.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

I just wanted to revisit a point we were just talking about of how operating income outlook for fiscal year '12 came down $20 million. Is that $20 million fully explained by Carnegie?

Brian L. Swartz

Yes. Andrew, it's Brian. When we put out the Carnegie release, we had said at the time that it was $0.07 to $0.09 of EPS for fiscal '12. That was on a slightly a different share count than where we ended the quarter. So yes, it's roughly $20 million is the dilution from Carnegie.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Okay. Perfect. And so Carnegie is, as you thought at the time of the press release and it continues to be and it's the full explanation of the $20 million?

Brian L. Swartz

Yes. I mean the vast majority of it rounding for $1 million or $2 million, but yes.

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Great. Greg, you mentioned the career services in your opening remarks. Surely, that might be worth following up on. I know for a long time, you've had a view to get more into career services. But I think this is kind of the first time you really highlighted it.

Gregory W. Cappelli

Yes. Andrew, I mean for a long time, I think what we did was what many universities did historically, which is to explain that we are a university. That's where most of our focus is, on teaching and learning and really not spending a whole lot of time on careers. That's changed. I mean, the world has changed, the job base has changed. This late summer, we had a very good operations and planning offsite, and in that, literally, the #1 objective that came out of that was the need to do more in the career services. So we are investing in that. That doesn't mean that we're setting up a large placement organization within the Apollo Group and University of Phoenix. What it means is, from early on, touch points with our students, we're going to be helping them get organized to think about their career, think about where they want to be, understand what they're going to need to do to position themselves to get a job, to present themselves in the right way and to have the greatest chance of being successful in that. So there's a lot that's going into this. There's partnerships that we're working on at the Apollo Group level. The workforce solutions group is tied into it because they're working with hundreds and hundreds of corporations now around the U.S. So we're excited about it. It is something that you're going to be hearing more about and that we're investing in.

Operator

Your next question comes from the line of Jerry Herman would Stifel, Nicolaus.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

First question is just about your guidance on starts and the indication that you'd be positive for the year and basically throughout the year. Could you guys help us with some of the timing issues in the first part of the year in particular, maybe to help from the initiatives being lapped here in this first quarter and some clarity on that, just in terms of what might do and especially in the first half?

Brian L. Swartz

Yes. Jerry, with respect to the first quarter specifically, so we had a stronger fourth quarter than we expected. Some of that will be reflected in the first quarter. We do expect the first quarter to kind of break into the single-digit area. And one thing to keep in mind is that our reported new enrollment growth rate in Q1 will actually be more favorable than kind of what the organic growth rate is, principally because the prior year has less than 90 days of new enrollments. We've rolled out University Orientation November 1 of last year and this year has a full 90 days. So that is certainly impacting Q1 from kind of an apples-to-apples comparison. Once we're beyond Q1, we should, for the most part, be on a comparable basis year-over-year. And as I mentioned earlier, we do expect the new enrollment to grow in every quarter year-over-year in fiscal '12.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

And that implies a strengthening organic type of growth rate because of that timing issue, correct?

Brian L. Swartz

That's right. Beyond Q1, it would all be apples to apples, so yes.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

And then just one quick follow-up, can you guys give us some indication of the military contribution and corporate reimbursement contribution to revenue flow in 2011 in rough terms?

Brian L. Swartz

Yes. Jerry, we don't break it out in detail. I mean when we file our 10-K, you'll get some kind of the annual updated guidance in terms of how our revenues breakout, what percentage of OP. And actually just to give you a few numbers, if it's helpful, of Apollo's revenues, about 91% of the revenues are University of Phoenix. As I mentioned, that the 90/10 percent at the University of Phoenix level, 86% of those 91% are Title IV funds, and we'll have some further breakdowns in the 10-K recording what type of Title IV funds. But we won't break it out in detail by military. We haven't historically done that and you won't see that later this week.

Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division

But any dispute with the Harkin documents that were floated?

Gregory W. Cappelli

No. I think that information is out there. You can certainly do what you want with it. We haven't commented on it or studied it that closely. Obviously, military is an important area for us, Jerry. And some of our actually best-performing students, so we're proud of them. And again, historically, we've not broken out areas of various programs other than what you see in the degree granting areas. So that's what we have to say about it for now.

Operator

Your next question comes from the line of Jeff Silber with BMO Capital Markets.

Jeffrey M. Silber - BMO Capital Markets U.S.

I just wanted to go back to the military focus. I know it's relatively small but you did mention it was important. We had announcement yesterday from the Marine Corps about them cutting their tuition assistance. I know it's only been a day old, but I'm just wondering what your thoughts are about that? Do you think that you'll be cutting your tuition for your military students not only in the Marines but across the board if the other branches announce something similar?

Brian L. Swartz

Yes, Jeff. I mean we're obviously looking at those announcements as well. And I will mention that the Marine Corps is a very modest or a small part of our business. That's all we can say at this point.

Jeffrey M. Silber - BMO Capital Markets U.S.

All right. I tried. Let me ask another one then. In terms of the prepared remarks about some of the pressures going on, competition wasn't necessarily discussed. I was wondering if you can give us a little bit more color specifically about competition in the not-for-profit sector.

Gregory W. Cappelli

I think it's tough. I mean, we worry about competition every day. I think that there are obviously more schools than ever before that are offering online programs. You see them advertising all over the place. I was on a United flight the other day and there were probably 60 advertisements for nonprofit schools in the magazine, in the in-flight magazine. But so many of you know well on our favorite airlines. So look, we take competition both in the for-profit and the nonprofit sector very, very seriously. I think, Jeff, that's one of the reasons why you've heard us take a look at our overall organization over the past couple of years and think about what made us into how we've had successes over the past decades and what we need to do and how we need to be positioned to have success again. Now I can tell you one of the things that we've got tens of thousands of employees and faculty. I believe people are very well focused on what we need to do in order to do the right things for students. We're very focused on how to get America back on track in terms of the skills gap, so people are excited about that. And from a technology perspective, we know that education is changing before our eyes. We know in 5 years, it's not going to be the same as it is today. Just like today, there's people working on their iPads and Android devices that we didn't have 5 years ago. So we want to be out in front of that. We want to help more people have access, but we'd want them to do it for the right reasons at the right time. And we're going to be using and incorporating technology along with certainly traditional academics and teachers in order to do that. So from a competitive perspective, we are trying, as I've said in my remarks, to differentiate the University of Phoenix and the Apollo Group, and stand out and offer something that some of the competitors simply are not or cannot, at this point or into the future. That's how we think about it. Does that help?

Jeffrey M. Silber - BMO Capital Markets U.S.

Yes. It does. If I can sneak in a quick numbers question. In terms of share count guidance for the first quarter or for the year, I would expect that with all the share buybacks you did, that the count would have been a little bit lower at the end of the year. Can you give us some guidance for that?

Brian L. Swartz

Yes. What you see in the press release is the weighted average shares outstanding during the year. So I believe the end of year share counts are closer to about 131 million. You'll see it in the 10-K when we file it later this week, but I think that's the right number use going into fiscal '12.

Operator

Your next question comes from the line of Gary Bisbee with Barclays Capital.

Gary E. Bisbee - Barclays Capital, Research Division

A couple of mentions, I think maybe Greg and Brian, both of better targeting and attracting the students you want, and then you said you're seeing more students come in with 24 or more credits. I guess can you help us understand sort of how you've achieved this and how much more room is there to go in these efforts? And I guess what I'm ultimately getting at is, could we actually see the marketing and admissions advisory expenses for new students start level off or maybe even improve next year? Is that likely to continue to go against you?

Gregory W. Cappelli

Gary, let me answer the initial part of that, and then I'd like to ask Joe to comment as well on more of the marketing area. In general, part of it is, we're dealing within an industry that's changing and the dynamics around the advertising world as well. Part of it is, as you know, is we have been making adjustments ourselves to how we're trying to attract students into the University of Phoenix, with our advertising both in a national level and the local level, how we're organizing and dealing with third-party affiliates, which as we've said before, we're reorganizing internally for ourselves. So yes, I think the reflection of the students that we're getting is somewhat due to what we're doing internally in order to try to achieve our goals. And why don't I let Joe comment a little bit more on the marketing piece as well?

Joseph L. D'Amico

Sure. Thanks, Greg. I think also, our ads as you will see are targeting students in a different way now. We're talking about the things that differentiate the University of Phoenix from our competition. And I think that's attracting a different type of student, maybe a more committed learner to us. The other thing is from the advertising perspective, we continue to get more efficient as we learn more and figure out how to manage basically the competition and the space which, of course, there's significant competition for the key search terms as you know. So we're getting better at that and better at our conversion.

Gary E. Bisbee - Barclays Capital, Research Division

Okay. And then the follow-up question would be, you mentioned for the second quarter in a row, I guess, that the admissions rep productivity is improved somewhat. Can you give us a sense how much below the level of what's prior to the comp changes we are? And is this something that could be an incremental positive in fiscal '12, or if you sort of gotten the easy gains back to a normalized level to date?

Joseph L. D'Amico

Well, we've continued to see improvement in the productivity, if you will. We hope that, that will continue. But we've made significant gains from 1 year ago.

Operator

Your next question comes from the line of Brandon Dobell from William Blair.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Guys, I wanted to focus on ACEPS for a second. Any way you can give us any more color in terms of the impact of mix as opposed to apples to apples improvements in, let's say, associates or bachelors credit retention. So are you seeing better than that improvement from associates, but the bachelors mix is helping, too? I'm just trying to get some more color in terms of the dynamics within that number.

Gregory W. Cappelli

Brian, you're looking for a breakdown in terms of the level of degree granting student of how they're retaining versus the entire piece as the whole?

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Right, right.

Gregory W. Cappelli

Okay. Brian, do want to comment on that?

Brian L. Swartz

Yes. Brandon, I mean, we actually, we focused more -- we don't look at it necessarily by degree level, we're looking at the whole undergraduate population together. So I mean, I don't have specific data right in front of me in terms of breaking down how much of the 12% improvement right now was driven by associates or bachelors. But we're obviously very happy with what we've seen. The 12% improvement is really driven in the current period by the full impact of the University Orientation in Q2. In Q1, below the 12% we released last quarter, it did not have a full quarter impact of the University Orientation. And that's on top of, and I already mentioned this, but just for clarity, a 5% gain in Q2 of the prior year, and a lot of that was driven in part by the first year sequence rollout in the last month of the second quarter of fiscal '10, February of 2010. So we are seeing the incremental improvements here. As we look forward and we think about ACEPS, obviously, we're really driving to continuously see that go up. But once we anniversary a lot of these initiatives, the structural change does take place and it's just harder to achieve the same level of growth.

Gregory W. Cappelli

Yes. And there have been improvements in both areas, Brandon.

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Okay. And my follow-up, you mentioned that, it sounds like the pace of graduations will be largest in fiscal '12. Any sense of how you guys are thinking about the deceleration in graduations, if you look out past 2012, is it a steep slope or do you think it's a gradual drop off as you work from '12 to '13 to '14? I'm just trying to get a sense of how you guys are seeing the pace of those impact persistence.

Charles B. Edelstein

Brandon, it's Chas. It will really depend on the rate of growth in the new enrollments as well as how the retention curve plays out. So we've given you some indication of what direction we expect those to go. But those out-year graduation rates would be too soon to peg.

Operator

Your next question comes from the line of Amy Junker from Robert W. Baird.

Amy W. Junker - Robert W. Baird & Co. Incorporated, Research Division

Could you just maybe talk about how you measure the perception of the University of Phoenix brand in the market? And given the changes, the operational changes you've made and focus on alumni outreach, have you seen any measurable positive effects to the U of P brand?

Gregory W. Cappelli

Amy, this is Greg. As far as giving our data, we don't have specific data to release at this point, although our teams are certainly working on that and continually trying to get feedback. What I can tell you is, we certainly feel a difference from a year ago. A year ago, things were very difficult from that perspective. It feels to us like it's getting better, and it's getting better -- and we have a long way to go. But I think the initiatives we put in place, the work that our teams have done, we care so much about our name, our brand, our reputation and being known for doing the right things for students, that I believe that it's improving. In fact, we all do. Now hopefully, we'll have some data to provide to you in the future. Some statistics about that. We know that the brand name recognition is very high, but at this point, we can't give you exact statistics about what it means to people versus the prior year.

Operator

Your next question comes from the line of Peter Appert from Piper Jaffray.

Peter P. Appert - Piper Jaffray Companies, Research Division

So I think, Greg, you mentioned selective price increases in the fourth quarter. Just some more color on what you're doing from a pricing standpoint and how that might flow through in 2012?

Gregory W. Cappelli

Let me have Joe take that.

Joseph L. D'Amico

Well, we look at our pricing on a quarterly basis and we monitor what our competition is doing. And we look at this from our value that we're delivering to the students. So we're not making any predictions at this point as to what we're going to do next year with price increases. But we are obviously looking closely at it. And we have to take into account what's going on with military and the like and take that into consideration as well.

Brian L. Swartz

Peter, it's Brian. Peter, just to give you a few data, you might know this, but in this past July, the 1st of July, we did do our kind of annual tuition price changes and this year's average was 3% to 5% generally speaking, so call it 4%, mix will obviously impact that. But at least that gives you some perspective in terms of what we just recently announced and how it might impact revenue per student in fiscal '12.

Peter P. Appert - Piper Jaffray Companies, Research Division

So were there further price adjustments, though, in the fourth quarter specifically?

Brian L. Swartz

No. July 1 is when we did it. Obviously, that's in the fourth quarter, but we talked about it on the last call at end of June.

Joseph L. D'Amico

Obviously impacting year-over-year quarterly comparisons.

Gregory W. Cappelli

When you look at it carefully, we study it every quarter as Joe said, and we'll look at it again in the spring. And I think it's fair to say that we certainly don't expect the pricing power of the industries had in the past 2 decades necessarily to continue. And it could, but we're not going to expect that. And two, that's one of the reasons why we're looking at the efficiency of the organization as well going forward.

Peter P. Appert - Piper Jaffray Companies, Research Division

Got it. So Brian, as I think about the average revenue per student then in 2012, just as follow-up question, so mix is an issue, discounting is an issue, any guidance in terms of what the net realization might look like?

Brian L. Swartz

Well, I mean let me just give you a little color, perhaps it'll be helpful. And then when we look at Q4, our revenue per student was up about 9%. The components to that, generally, and that's for all the 3 levels, the components of that were generally 5 in price, 2 in mix and 2 in just more attendance of students, you can refer to that as retention or however you want to do it, but it's more students that are taking more classes. As we think about '12, the price will be a little bit lower. The July of 2010 price increase was 4% to 6%, the one we just increased is 3% to 5%, so it's slightly lower as we go into '12. And then the meeting nights attendance improvement that we experienced in fiscal '11, we feel really good about that. I mean, we would certainly like to get further improvement as we go into fiscal '12. My sense is it won't be at the same level given some of the initiatives we did in fiscal '11 and you can see derivative data on that on ACEPS and other things we talked about. So we'd like to get some level of increase in retention or meeting nights and continued positive mix. Exactly where it all falls out, we'll have to see.

Operator

Your next question comes from the line of Paul Ginocchio with Deutsche Bank.

Paul Ginocchio - Deutsche Bank AG, Research Division

Just on the marketing expense though, that was actually down year-on-year, I think that was the first time I've ever seen that. Was there something else unusual besides the cutback on the Internet spend or is this something we should expect going forward.

Charles B. Edelstein

Well, the prior year was much higher, so we had made the significant investments last year. So when you looked at that, you need to take that into consideration. But we're constantly looking at our marketing costs, our efficiency, and obviously, the affiliate network. We continue to prune and make sure we're using the best affiliates. So there's a lot of emphasis on that. And we've also done a lot of thought leadership marketing as well with Education Nation and other similar kinds of things.

Gregory W. Cappelli

It's such an important area for us, Paul, because again, as someone else brought up before, the mix of students is also related to how we structure and use data internally in our marketing and technology area to drive that. So as I said before, some of that's going to depend on more macro issues and a good chunk of it is to what we're specifically doing within that area and department ourselves.

Paul Ginocchio - Deutsche Bank AG, Research Division

Great. And just as a follow-up on the newly announced repurchase authorization. There's not a time line on that, you haven't put any constraints on that, have you?

Brian L. Swartz

No. We did it. We did receive the increase to $500 million from our board subsequent to year end. And I'm glad you mentioned that. I might have said in my prepared remarks $700 million was left. It's actually $700,000 was left on the repurchase of the end of August 2011, and then subsequent to year end, our board increased that authorization to $500 million. And there's no limitation placed on it by the board.

Operator

Your next question comes from the line of Trace Urdan with Wunderlich Securities.

Trace A. Urdan - Wunderlich Securities Inc., Research Division

As you guys look at, and moving into positive growth in fiscal '12, I'm wondering if you have -- as a function of having gone through everything that you've been through now a philosophy about what the right kind of level, sustainable level of start growth is? And then maybe as a corollary to that, have you developed a perspective of putting into place the new, sort of structure among the enrollment counselors as to what productivity should look like for an enrollment counts? Or I mean, is it even a goal to get back to the productivity level you had before or have you sort of -- do you have a perspective on those questions at this point?

Charles B. Edelstein

It's Chas. On the last part of your question, what can it be. I think that as we you look around our system, we see obviously a variety of productivity around the system. And from my perspective, there is enough evidence to say there is no reason it couldn't go back to where it was before and beyond in many places where you see that the training has taken hold or people really have hit their stride in this area. They understand that we're just releasing authority in their heart and they're just looking for a new way to do it and express it. So I see signs that are very positive in terms of what the potential of this new process is, and feel really good about that long-term.

Gregory W. Cappelli

Trace, I think the first part of your question is a very thoughtful one. We think a lot about it as well. We think about when the recession hit in '08 and there were just waves of people that were sort of panicking and their hearts were in the right place and they were trying to do the right thing. But they didn't necessarily understand, to the full extent, we needed them to work. They were going to have to put in to be successful in the university. And I think that process that we put in place both on the front-end with the way we hold enrollment advisors accountable and the way we compensate them now through orientation, we're really recruiting a lot of people into orientation. So there is a natural governor there that wasn't there before. Now there are 2/3 of the labor force without a bachelors degree. There's 3.2 million jobs that aren't being filled. There's a lot of people that need education. But from my perspective, at Apollo Group and University of Phoenix, it's much more structured in terms of entering the University than it was before. So that's going to be part of the process. And again, we may start ultimately fewer numbers of students than we did in the past at the peak. But hopefully, the result will be they'll stay longer. The ones that aren't with us will not have incurred debt as they did in the past. So we feel much better about the entire overall process, and about the mission of the university.

Operator

Your next question comes from the line of Patrick Elgarbly from Credit Suisse.

Patrick Elgrably - Crédit Suisse AG, Research Division

You mentioned good productivity trends in Q4 and Q1 to date. I'm wondering if that's more the result of working through an incentive comp and other changes, or are you starting to see an improvement in underlying demand?

Joseph L. D'Amico

Well, this is Joe. We're seeing good results from our counselors. And also, I think great results from our marketing efforts, getting better leads and we're converting those leads more efficiently and more effectively. I mean we're not seeing a big increase, if you will, in demand, but it's stable.

Patrick Elgrably - Crédit Suisse AG, Research Division

Okay. And I'm wondering if you can give any more color on where you see opportunities to offset some of the negative operating leverage we may see given the expected revenue decline next year.

Joseph L. D'Amico

I would say that the key for us now is, I feel like we're in more of an execution mode than a change mode for the most part. We still have change that we're going through and we still have things that we want to get accomplished to differentiate the University. But we're really into an execution mode, and what we're finding now is our people are coming up with ideas that are going to create efficiencies. Those efficiencies will result in better service to our students at a lower cost. We also continue to invest in the IT in all of our systems. And those are going to pay -- those investments will pay dividends certainly over the medium to long-term.

Brian L. Swartz

Patrick, this is Brian. And just to add to that, too, too, and in my prepared remarks I obviously mentioned this. But we are looking at various opportunities, one of them being our real estate. And we did make some, or I made some comments about our rationalization plan at Phoenix just to help streamline our utilization of space. And as we look at other parts of the business, as Joe mentioned, over time, we absolutely think there's some opportunities there.

Joseph L. D'Amico

Yes. Including the financial aid where there could be some opportunities both for better process and for cost savings going forward.

Operator

Your next question comes from the line Mike Tarkan with FBR.

Michael Tarkan - FBR Capital Markets & Co., Research Division

I guess this is more of a philosophical question, but with regard to continued price increases across the overall industry, and I'm not talking just for-profits but traditional institutions as well. And when you layer in rising student debt levels and a really challenging job market, how do you guys view, I guess, the sustainability of those tuition increases overall? I mean, if tuition rates are going up more than 2x the rate of inflation, is there a certain point where costs of getting a degree just outweigh the potential benefits, assuming we don't get job recovery anytime soon?

Charles B. Edelstein

Mike, it's Chas. I think that with regard to the return on a degree, the data that we see and that we calculate still shows that to be one of the strongest investments you can make in yourself. So I don't worry that there's not going to be a good return on a quality education. I do think that we're likely in the industry to see less pricing power over the next 20 years as compared to the past 20 years, and that probably is a good thing for what we can deliver in terms of accessibility to students as long as we have the industry. I mean, it has the funds to be able to invest in innovations and the things that make the learning experience really better.

Gregory W. Cappelli

Yes. And the other thing I would point out, and you're right, there has been massive price increases for some schools around the country, particularly in the traditional areas. They maybe starting off at a lower base, but obviously, with everything that's happening economically, we've seen in our own state, price is up 15% to 25%, 27%, for some of the traditional schools. So there is a wide range and issues that are going to play into each state, their budget and their own plans. In the past, I think you've seen universities like ours look at that data and use that to make decisions. And we'll probably base a lower portion of our decision on price increases on that going forward, and more on what we can do technologically, what we think is the right thing to do for our students and what we think is the best way to be competitive in the industry going forward.

Operator

Your next question comes from the line of James Samford with Citigroup.

James Samford - Citigroup Inc, Research Division

Just wanted to focus really quickly on the master's side of the business. It looks like it probably hasn't turned the corner quite as nicely as the associate, et cetera. What are you seeing right now at the master's level in terms of overall competition or how you're thinking about that filtering into your outlook for next year?

Gregory W. Cappelli

This is Greg. I'll take the initial on that and then I think Joe wants to comment as well. Look, we're not pleased with where Master's is right now. I will say that the primary focus for us, and we've said this in the last 3 or 4 quarters, was going to be on bachelor's for us, which is historically been a very key and important area for us, and we're seeing improvement there, obviously. Master's is an area that is extremely competitive. Many, many traditional schools in the country have an advertised master's programs. They have night school. They do it online. So it's just a more competitive area, but that doesn't mean we can't get back to being very, very competitive in that area. And we are going to be shifting more focus on the master's. But I will say, in fairness to our team internally, we've asked them to focus more of their attention on the bachelor's area. Joe, you want to add to that?

Joseph L. D'Amico

Yes. We're actually rolling out our new classroom of the future and the new platform in the Masters program. And the early feedback from our students is incredibly positive as they compare their experience that they had in the very first pilot to the previous experience in the classroom. And we combine that with, I think, our Phoenix Lecture Series, our focus on content. I think it's going to help both our master's and our doctoral programs in the future. I think we have a more thoughtful student obviously coming into the Master's area, they are looking for the returns. And if we execute on our strategy here, execute on the differentiation, I feel pretty confident that we will again grow master's. That's going to take a bit though, so we have some work to do there. And I agree with Greg's comments as well. We're not happy with it, but we've had other things we needed to focus on first to create the base for growth.

James Samford - Citigroup Inc, Research Division

Understandable. If I could just add a quick follow-up on just international trends in the U.K., anything that we can think about in terms of growth opportunities there or other international markets?

Gregory W. Cappelli

I would stay a stability is the word. We saw a lot over the past couple of years because of the economy is reflecting what we've been through here as well. You look at what the base business of BPP, for example, and there was a lot of turmoil there in terms of the market and the conditions, but it's stabilized. Very pleased with the management team led by Tim Daniels, that's in place at global. I think they're focus on the right things, I think they're focused on the right markets for the right reasons. They put some great people in positions, and I'm more optimistic that global is going to have some good things to say in the coming years ahead.

Operator

Your next question comes from the line of Corey Greendale with First Analysis.

Corey Greendale - First Analysis Securities Corporation, Research Division

I wanted to go back to the ACEPS metric for a second. So you did see a nice year-over-year improvement there. Given that you did have the full impact of orientation, I had expected to be up more year-over-year this quarter than it was last quarter, and I think it was up the same amount 12% both quarters. Can you just comment on that and what might have offset the impact from orientation?

Brian L. Swartz

Well, yes, and we've talked a little bit about this, Cory. But in February of 2010, so the last month of the second quarter of prior year, I guess 2 years ago, we're in fiscal '12 now, we have rolled out what we referred to as first year sequence and we actually got a very nice retention improvement in there which we're seeing actually in the prior year. And so that's partially anniversaried in the second quarter of 2011, and obviously impacted Q1 of 2011, which University Orientation did not, for the most part. So that's what you're seeing. Those 2 initiatives themselves are what really drove the benefits both the prior year and the current year.

Corey Greendale - First Analysis Securities Corporation, Research Division

Okay. And then on a similar topic, with bad debt, so you're seeing nice improvements. I understand the comps get tougher on bad debt, but given that you do have -- with each passing quarter a bigger portion of your population have gone through the orientation program, why wouldn't you continue to see at least some modest improvement in bad debt in future quarters?

Brian L. Swartz

Well, we absolutely could. I mean we got dramatic improvement in fiscal '11. A part of that was the rollout of orientation. And we've also done a lot of things in the process area that drive higher collection rates, which I've certainly mentioned and talked in more length about in prior calls. So we think based on what we're looking at fiscal '12, we think it will be, as a percentage of revenue, relatively consistent with what we had in 2011. It could be better, and obviously we're driving for that. But that's what we contemplate as of today.

Operator

There appears to be no further questions. I'll turn it back over for any closing comments.

Gregory W. Cappelli

Well, thanks, operator. On behalf of our management team and all of our employees, our faculty, academics, we are so grateful to the hard work that all of our employees have put in. This has been an incredibly challenging and also rewarding year for Apollo Group and University of Phoenix. And we especially want to thank those in our organization that have worked so hard to help us get where we are today. I think the future is bright for us. We know there's a lot of hard work still to go, but we're excited about the future. So thank you, everybody, for joining us and we look forward to talking to you again soon.

Brian L. Swartz

Bye now.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Apollo Group's CEO Discusses Q4 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts