Educational services provider Apollo Group, Inc. (APOL) Monday reported a sharp decline in second-quarter profit, reflecting lower revenues and increase in marketing costs. Quarterly revenues were hurt by a fall in enrollment. However, the company forecast fiscal revenues in line with analysts' expectations. In pre-market trading, the shares are up about 8 percent.
In the quarter, University of Phoenix Degreed Enrollment was 300,800, down 15.5 percent from last year, and New Degreed Enrollment fell 20.1 percent to 38,900.
Net income attributable to the company plunged to $13.53 million or $0.12 per share from $63.88 million or $0.51 per share last year. Income from continuing operations was $0.49 per share in the second quarter 2012.
Results for the just concluded quarter included restructuring and other charges of $44.1 million and $6.4 million of credits associated with the favorable resolution of certain legal matters. Excluding items, adjusted earnings from continuing operations were $0.34 per share, while it totaled $0.57 per share last year.
On average, 17 analysts polled by Thomson Reuters expected earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.
The company attributed the decrease in income from continuing operations to lower enrollment and an increase in marketing costs primarily due to higher advertising expense, which was partially offset by a reduction in certain costs related to its restructuring activities and lower bad debt expense.
Net revenue for the quarter dropped to $834.37 million from $962.68 million, but came above analysts' estimate of $822.80 million.
On March 22, Apollo's board approved a share repurchase authorization of up to $250 million. There is no expiration date on the repurchase authorization.
Looking ahead, Greg Cappelli, chief executive officer of the company said, "Higher education is rapidly evolving as workforce demands and technological innovations drive change in our global economy."
For the fiscal year 2013, the company sees net revenues to be between $3.65 billion and $3.75 billion and operating income of $500 to $550 million, excluding special items. Analysts expect revenues of $3.73 billion for the year.
In addition, Apollo expects its restructuring activities to favorably impact annual operating expenses by at least $350 million in fiscal year 2014, when compared to fiscal year 2012. This is a $50 million increase in anticipated savings from its previous outlook.
APOL closed Friday's regular trading at $17.04 on the Nasdaq. In the pre-market activity, the shares are up 8.27 percent.
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