Covista Inc. (CVSA) Q4 2013 Earnings Report, Transcript and Summary

Welcome to DeVry's Fourth Quarter and Year End Results Call. The host for today's call is Joan Bates, Senior Director of Investor and Media Relations. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joan Bates. Please go ahead.

Thank you, Yusef, and good afternoon, everyone. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer; Tim Wiggins, our Chief Financial Officer; and Pat Unzicker, our Vice President of Finance. I'll now paraphrase our Safe Harbor statement. This call will contain forward-looking statements. Actual results could differ materially from those expressed or implied. We undertake no obligation to publicly update or revise any such forward-looking statements. Please consult our most recent 10-K and 10-Q filings for a more complete description of factors that could affect our financial results. Telephone and webcast replays of today's call are available until September 4. To access the replay, please refer to today's press release for more information. And with that, I will now turn the call over to Daniel Hamburger.

Thanks, Joan, and thank you all very much for joining us today. In my remarks, I'll summarize our results for fiscal year 2013 and I'll provide segment highlights, ending with DeVry University and an update on the turnaround plan. After Tim and Pat provide a review of our financial results, I'll come back and share our vision for the future and then we'll open it up to questions. So total revenues for fiscal 2013 were $1.96 billion, down 5% from last year. Half of DeVry is DeVry University, where revenues continue to be down. The other half, Healthcare, International and Professional, is relatively strong. Our long-term formula of quality plus diversification equals growth is helping us as we work through the cyclical weakness in the United States. Our focus on quality drives student outcomes and lowers regulatory risks, and our diversification in high-growth career fields, degree levels and geographies, all that positions us for long-term growth. We manage costs aggressively in response to the drop in revenues and we've reduced our expenses over $100 million this year. While our net income from continuing operations and before discrete items was down 18%, we ended the year with a strong balance sheet and solid cash flow. With that overview, let me look to the segments and begin with Medical and Healthcare. Our revenues and earnings grew nicely. New student enrollment declined at DeVry Medical International, not due to the market demand, but because of turnover within enrollment management at Ross University Med School. This operational issue has been addressed and we're expecting solid enrollment for September. To accommodate the growth we expect, we're going to open a new building at American University of the Caribbean in January. This new building will house state-of-the-art simulation centers, labs and a new testing center. In recent months, we've expanded our medical school's clinical education affiliations as well. We've added location -- rotations at Winthrop University Hospital in New York; St. Joseph Mercy Oakland Hospital outside Detroit; and West Suburban Hospital outside Chicago. At Ross Medical School, students are now going to have 2 options for completing the foundations of medicine portion of their degree that's traditionally offered over 4 semesters. Students can now choose to complete this coursework over 5 semesters, which will help them better manage their course load and increase student success. This academic track was developed successfully by our Dean, Dr. Joe Flaherty, when he was the Dean at the University of Illinois Medical School. We go on to Chamberlain College of Nursing, where our strong enrollment growth kept pace with the overall market growth in fiscal 2013, despite challenges from increased competition. We were competing effectively, even with lower-priced state schools, students value the quality and the highly regarded degree associated with the Chamberlain name. During the fourth quarter, Chamberlain signed an agreement with Catholic Health Initiatives, CHI. The agreement expands access to Chamberlain's post-licensure programs to nurses across the CHI system. It's a big system that includes more than 75 hospitals and 40 long-term care facilities. Chamberlain has nearly 200 such agreements with hospital systems across the United States. Think about Chamberlain's campus expansions, which include both new campuses and expansions at existing sites where there's strong demand, while we're expanding our Atlanta and Chicago campuses, increasing capacity by about the size of 2 new campuses. In the meantime, we're laying the groundwork for 3 to 4 campus openings that should occur in fiscal 2015, pending approvals. Chamberlain recently received approval from the Higher Learning Commission, HLC, for our Family Nurse Practitioner, or FNP program. We're planning to launch that in September. Our market research indicates strong demand for FNPs. We continue our record of strong academic outcomes at Chamberlain, with an overall NCLEX first-time pass rate of 92% for calendar year 2012. Moving on to Carrington, where we're making good progress on our turnaround plan. As part of Carrington's plan, we're narrowing our program focus. We thus suspended recruiting for certain non-core programs, we did see slightly lower new student enrollment in the fourth quarter, but for the year as a whole, new student enrollment was up almost 18%, demonstrating our commitment to quality in the classroom and student outcomes. In addition, we've successfully improved enrollment trends through stronger brand awareness and a dedicated contact center. Next, let's go on to the International and Professional Education segment. Note the new segment name as we're in the process of divesting Advanced Academics to focus on growth in our core post-secondary education markets. I'll ask Tim to give a little more color on that decision when he speaks. DeVry Brasil revenues grew 78% this fiscal year in local currency, 59% in U.S. dollars, to come in just shy of $100 million this year. On July 1, we completed the acquisition of Faculdade Differential Integral, or Facid, which serves about 2,500 students and focuses on healthcare programs. Our business development team had been talking to the owners of Facid for over 3 years, and they agreed to sell to DeVry exclusively. DeVry was Facid's acquirer of choice because of our dedication to quality and to student outcome. What's really interesting about Facid is that along with the healthcare and the law programs that it offers, it's our first medical school in Brazil. We're very excited about the opportunities for synergies and best-practice sharing across our 3 medical schools. I'm pleased to report that Faculdade do Vale do Ipojuca, or Favip, which we acquired in late 2012, has exceeded the expectations of our acquisition plan. Favip is one of the fastest-growing institutions in Northern Brazil. And just to remind you, it offers degree programs in the areas of law, psychology, engineering and nursing. When you take it all together, we expect to serve more than 30,000 students at DeVry Brasil this fiscal year. Becker Professional Education had a good year, grew about 4%, both organically and through acquisitions. Becker also signed new partner agreements with Deloitte Saudi Arabia and Deloitte India, an agreement with Grant Thornton in the United Arab Emirates. Becker is a very international organization. As planned, we also officially changed the name of Falcon Physician Reviews, which we had acquired, and changed that to Becker Professional Education, harmonizing our brand strategy there. Let me turn now to DeVry University. Clearly, we're facing challenges here. Some of you will remember that we had similar enrollment declines almost 10 years ago and we were successful in executing a turnaround plan. Well, we're confident we'll be successful again. That's because DeVry University's value proposition is fundamentally strong. It's a career-focused institution that provides exceptional service and support to students. A recent Gallup poll found that the factor adult Americans say is most important in selecting a college is the percent of graduates who find a good job. And this is what DeVry University does. The latest numbers are in, and DeVry University's employment statistics increased more than 90%. 90% of our graduates in the active job market are employed in their field of study within 6 months of graduation, and they're earning an average of over $43,500. That's higher than the median family household income of our students before they enrolled at DeVry University. Employers see value from DeVry University, as they repeatedly hire our graduates to fill their jobs. They send their existing employees to us for continuing education as well. New students from our corporate and government partnerships have grown more than 20%. Today, we have more than 400 agreements in place. We work with corporations, including Walmart, Xerox, Allstate and others. Three of our DeVry University campuses placed in the top 100 for return on investment in a ranking by PayScale, and they rated over 1,000 institutions. PayScale's report examined the return on investment given the cost situation and the payoff in lifetime earnings. And out of that, we have 3 in the top 100. Student satisfaction is high as well, as evidenced by high and increasing Net Promoter Scores. We were one of the first universities to use the NPS methodology, popularized by outstanding organizations like American Express and State Farm, who are well known for providing high levels of customer service. DeVry University's NPS is on par with these organizations. So our value proposition is strong, but our recent enrollment results at DeVry University are not where we want them to be. To improve our performance, we're executing a 5-point turnaround plan. One, further improve academic quality; two, align our cost structure with enrollment levels; three, regain enrollment growth; four, make targeted investments to drive future growth; and five, manage all the change while developing our team. I'd like to update you on points 2, 3 and 4 of this plan. In aligning our cost structure, we're managing aggressively in a challenging environment with the entire organization focused on increasing efficiencies. Near term, we're able to significantly reduce costs through staffing adjustments and by lowering variable costs. Midterm, we're optimizing our real estate footprint. For example, we consolidated locations within markets such as Atlanta, Chicago and L.A. where we have multiple campuses. Longer term, we're focusing on process redesign and restructuring, both to lower cost and to make them more variable, while at the same time improving service quality. How do you that? Well, one way is through centralizing areas by human resources and student finance to leverage scale efficiencies. Moving to regaining enrollment growth. The biggest factors depressing demand at DeVry University, as well as the overall education market in the U.S., continue to include prospective students' lack of confidence in the job market and in the ROI of college. The plan to increase enrollment starts with sharpening the communication of DeVry University's value proposition, which is educational quality, career outcomes and exceptional student support. We'll more aggressively communicate this value proposition, including new, more focused advertising. Our plan includes investing $20 million more in media spend in fiscal '14, increasing our weeks on air by about 50%, and we're funding this from other marketing areas, so our overall marketing spend will be flat. We recently increased a call to action campaign, providing a new Career Catalyst Scholarship of up to $20,000 for eligible students enrolling for the September session. And we're optimizing the DeVry University website to drive increased site visits and convert more of those inquiries to applications. We're seeing results from these efforts already. Affordability is top of mind for students, so we've frozen DeVry University tuition this year, and we're also making more strategic use of scholarships with 2 clear objectives: tracking new students and improving student persistence. The Career Catalyst Scholarship program achieve -- aims to achieve both. It is attractive to new students and it's been awarded in progressively higher amounts over a 3-year period to motivate retention. Our plan to regain enrollment growth also includes enhancing the effectiveness of our recruiting process. Part of this is via technology enhancements, which is new software to better coach our admissions advisers to respond to the unique needs of each individual student. In addition, we're optimizing our inquiry routing process to improve conversion rates from inquiry to application. And then Point 4 of our turnaround plan, making targeted investments to drive future growth. Currently investing in the development of new programs, such as new competency-based degree programs. For this program, this is going to help students who qualify, it will allow those students to complete their degree more quickly and at lower costs. Above all, quality drives everything we do. You may recall that last quarter, we announced DeVry University received reaffirmation of its institutional accreditation from the HLC, the Higher Learning Commission. Our investment in quality was again validated as DeVry University earned specialized accreditation of its business and accounting degree programs from the ACBSP, that's the Accreditation Council of Business Schools and Programs. DeVry University is 1 of just 9 institutions that have achieved separate accounting accreditations since the council began offering that in 2009. Our commitment to quality also gained Carrington confirmation of its accreditation, for the next 6 years, from the Western Association of Schools and Colleges, or WASC. As you can see, DeVry's institutions demonstrate if you deliver quality for students, you'll be recognized by accreditors and regulators. I'd also like to note that this year, DeVry University is celebrating the 40th anniversary of our Keller Graduate School of Management, which has graduated more than 50,000 students in its 4-decade history back in 1973. With that overview, let me turn it over to Tim for a discussion of the financial results.

Thanks, Daniel, and good afternoon, everyone. Before I walk through the enrollment and financial results in detail, let me give you a bit of a roadmap of what impacted the fourth quarter. It was a change in classification in 3 discrete items. In the fourth quarter, we decided to divest Advanced Academics, thus, it's now classified as held-for-sale. We recorded a $14.7 million restructuring charge of workforce reductions and real estate consolidations. We booked a noncash goodwill and intangible asset impairment charge of $57 million for Carrington Colleges and we recorded a benefit of $4.4 million during the fourth quarter as a result of an adjustment to an earnout accrual for the acquisition of ATC. As mentioned in today's press release, we're in the process of divesting Advanced Academics. That means this institution's results are reported as held-for-sale in our income statement. During the fourth quarter, AAI generated about $4 million of revenue and incurred an operating loss of $18.9 million. The operating loss included approximately $10 million of reserve adjustments primarily related to disputed accounts receivable and a $4.8 million impairment driven by the sale process. DeVry's revenue from continuing operations in the fourth quarter was $480 million. For comparison purposes to last year in your models, if you include revenue generated by AAI in the quarter of about $4 million, revenue would have been down 4.3%, in line with expectations. Second, we recorded a $14.7 million pretax charge for restructuring activities. During the fourth quarter, we recorded $8.7 million of severance related to a workforce reduction that will impact about 450 colleagues. While these decisions were difficult, they were necessary for the long-term success of DeVry. The balance of the charge came primarily from real estate consolidation activities. During fiscal 2013, we consolidated 8 campuses and 3 administrative offices. Third, we recorded a $57 million noncash, pretax impairment charge at Carrington Colleges. During the quarter, we narrowed our program focus, which had a negative impact on new student enrollments. As such, we updated Carrington's near- and long-term projections, which resulted in a lower estimated fair value. Going into the first quarter and into next year at Carrington, we still expect positive enrollment growth, just at more moderate levels. And fourth, we had a $4.4 million benefit from the reversal of an earnout accrual related to our acquisition of ATC International. Adjusting for the 3 discrete items and the $14.8 million of adjustments at Advanced Academics, total expenses in the fourth quarter of $446 million declined about 2% from the prior year and were in line with our expectations. In fiscal 2013, we were keenly focused on increasing efficiencies and creating value throughout the entire organization. We began the fiscal year with a target of $50 million in savings and value creation opportunities, and I'm pleased to say we've ended the year achieving a total of $107 million in cost reductions at our institutions in transition, including Advanced Academics. And we've made good progress in making our cost model more variable. Stepping back and looking at the year as a whole, we're pleased that we've been able to continue to fund investments in our growing healthcare, in international institutions and to reduce cost in our institutions in transition. Moving on to the detailed financial results. Fourth quarter total revenues from continuing operations were $480 million. For the year, revenues were $1.96 billion, down about 5%. In the fourth quarter, revenues for our institutions in transition, DeVry University and Carrington, were $287 million, down 15% versus the prior year. This was partially offset by our growing institutions, where revenues increased 18% or $193 million. The acquisitions of Falcon, FBV and Favip continue to contribute positively to these results. Excluding the 3 discrete items I mentioned earlier, which total $67 million, total operating cost for the quarter were $438 million, declining 3.7% compared to last year. For the full year, again, excluding discrete items, total costs were about $1.7 billion, down about 2% when compared to last year. During the fourth quarter, cost -- total cost excluding discrete items at our institutions in transition were down 10% from nearly $34 million versus a year ago period. This was driven by our expense management and from lower cost that vary directly with enrollment levels, including adjunct faculty and bad debt. We expect total cost to be up slightly in the first quarter, driven by a shift of advertising spend at DeVry University, largely related to letting students know about our Career Catalyst Scholarship. We also anticipate higher seasonal spending to support 2 session starts at DeVry University, Keller and Chamberlain in the first quarter versus one in the fourth quarter. Total fourth quarter cost excluding discrete items at our growing institutions increased 14%, which was less than revenue growth of 18%, demonstrating our disciplined approach to cost management. Cost of Educational Services decreased about 1% during the quarter. Costs were down at our institutions in transition by 9.4% year-over-year. This was partially offset by a 19.2% increase in costs at our growing institutions. Student services and administrative expense decreased 7.3% as compared with the prior year. Cost at our institutions in transition were down 13.2%, largely reflecting our cost reduction initiatives to match enrollment levels. Cost at our other institutions were flat compared with the year ago quarter. We reported a net loss of $32 million for the quarter and net income of $107 million for the year. Earnings per share from continuing operations and excluding discrete items was $0.54 this quarter and $2.86 for the year. Our effective income tax rate was 25.5% for the quarter. We expect that our effective income tax rate from operations for fiscal year 2014 will be in the 13% to 16% range, which reflects an increased proportion of international sourced income. With that overview, let's now shift to our operating segment results. Starting with the Medical and Healthcare segment, revenues of $171 million was up 13.9% in the fourth quarter. For the year, revenue was $672 million, up 9.9%. Medical and Healthcare revenues have grown at a 32% compound annual growth rate since 2008 and now represents just over 1/3 of DeVry revenue. Excluding discrete items, earnings for the Medical and Healthcare segment in the quarter of $28 million increased 98% from the prior year, driven by a continued operating income growth at DeVry Medical International and Chamberlain, and a significant narrowing of the operating loss at Carrington. At Chamberlain, as you may remember, our fiscal third quarter marked the completion of Chamberlain's campus-based realignment from the July, November, March sessions to a more traditional academic calendar, which is September, January, May. As a result, calendar transition artificially made the May session look better and the July session look worse than they actually were. To help you better understand the impact, we broke out online and on-site new student enrollment results in today's release. At Carrington, as we noted on last quarter's call, we didn't expect to continue achieving the large enrollment gains you've seen over the past few quarters. New student enrollment was slightly negative this quarter as we narrowed our program focus. Turning to the International and Professional Education segment, revenue of $61 million increased 21.6% in the quarter. For the year, revenue of $197 million increased 25.8%. At DeVry Brasil, revenue increased 55% this quarter, driven by the acquisitions of FBV and Favip, as well as organic growth. We continue to explore growth opportunities in Brazil, both through organic expansion into new programs and locations, as well as through acquisitions. Given our decision to divest Advanced Academics, it's no longer part of this reporting segment. Excluding discrete items, segment earnings of $18 million increased 25.9% during the quarter versus the prior year, driven by increased operating leverage within DeVry Brasil and Becker. For the year, segment earnings were $47 million, up 22.3%, excluding discrete items. And finally, within the Business, Technology and Management segment, revenues of $248 million were down 17.7% during the quarter versus the prior year. Revenues of $1.1 billion were down 15.9% for the year. DeVry University experienced a challenging quarter, with new student enrollment down 19% in May and down 25% in July. Total student enrollment was down more than 18% in May and 16% in July. Based on what we're seeing today, we expect September new student enrollment to be better than July, but still down likely in the mid-teens. DeVry University undergraduate revenue per student was down just over 0.5 percentage point in the fourth quarter and down 1.4% for the year. The decrease for the year was primarily driven by higher scholarships and aid and higher mix of students from our corporate and military channels. Excluding discrete items, total segment expenses for the fourth quarter decreased 10.8% as compared to the year ago period and 9.1% for the year. For the quarter, excluding discrete items, the segment generated a loss of $900,000, compared to $22 million of operating income last year. This was driven by the revenue decline and resulting margin compression. Note that our fourth quarter is our -- is seasonally our lowest. Segment earnings were $99 million, down 51.9% for the full year. Looking at fiscal 2014, we expect all of our institutions to grow revenue except DeVry University. But the decline in revenues at DeVry University will more than offset the growth expected at all other institutions. So we expect total revenue will be down for the year. We expect total cost and expenses to be down again at our institutions in transition in 2014. Total cost and expenses for DeVry University and Carrington were just under $1.175 billion in fiscal 2013. We expect to further reduce these costs by $60 million in fiscal 2014. In total, cost reductions at institutions in transition are expected to be offset by cost increases at the growing institutions, so we expect fiscal 2014 cost and expenses to be similar to fiscal 2013 levels. As part of the $60 million savings goal, we anticipate an additional restructuring charge related to a voluntary separation program occurring in the first quarter. I'll now turn the call over to Pat to talk more about our balance sheet and financial position. Pat?

Well, thanks, Tim. And good afternoon, everyone. Our liquidity and financial position continue to remain solid. Cash flow from operations for the full year was $264 million. Our cash and marketable securities balance was $200 million at June 30, 2013, compared to $177 million last year. Our net accounts receivable balance was about $140 million versus $93 million last year. The higher accounts receivable balance was a result of a change in timing and the receipt of federal financial aid. Those funds were subsequently received in July. Capital spending for the full year was $112 million versus $125 million spent last year. Our capital spending was down because of our continued focus on prudent capital deployment and because we delayed a couple of projects. Fiscal '14, we expect total capital spending to be similar -- to be in a similar range. During the quarter, we repurchased over 185,000 shares of our common stock for about $5.5 million or an average of $29.87 per share . For the full year, we repurchased about 2.2 million shares at $53.9 million or 24 point -- $24.47 per share. Our share repurchases were significantly lower this past quarter, as we paused the program in mid-May to conserve capital. As we've stated in the past, our rate of repurchases will modulate from time to time as we retain financial flexibility to pursue growth and diversification opportunities. Overall, our financial position and cash flow generation give us the flexibility to reinvest in quality and growth. Now let me turn the call back over to Daniel.

Okay, thanks, Pat. Before we open it up to questions, I'd like to just spend a minute to share our vision for the future. We have a strong plan to turn around our near-term results. Where does that take us long term and what's that going to look like? DeVry's long-term vision focuses on 3 areas united by a single theme, which is career-oriented education. The first area is U.S. business and technology education. There's a large and growing need for skilled employees in these kinds of fields, and DeVry University excels at filling that need. And we also focus on students who value extraordinary service and support that DeVry University provides. This combination of careers and support results in high levels of graduate employment and in student satisfaction. The second area is Healthcare. We've been building our capabilities in healthcare education since 2003 when we acquired Ross University. With workforce shortages in many healthcare fields, DeVry's institutions serve the need where the need is greatest, which is in primary care physicians, nurses, medical assistants. As the population ages, market data shows that these workforce needs will only grow. And then the third area is International and Professional Education and Educational Services, clearly leverage DeVry's capability in global markets. In Brazil, we serve 30,000 students in areas of high demand, in medicine, business, engineering and law. We're also a leader in global professional education, with Becker providing services in 55 countries. We envision further growth in outsourced Educational Services, sharing our decades of expertise with other universities, associations and corporations. DeVry is differentiated, the only publicly held group that operates medical schools or veterinary school, is one of largest nursing schools in the United States, and complemented by a growing international presence. Increasingly, our students are enrolling across institutions, with Carrington grads going to Chamberlain to attain bachelor's degrees, Becker students dual enrolling in Keller programs, Chamberlain students co-sitting in DeVry University classes and DeVry Brasil students studying at our U.S. institutions. Diversification mitigates risk and enables DeVry to weather economic cycles better than our peers over the long term. And diversification also helps us to attract the best talent, as our colleagues have better career opportunities across DeVry's family of institutions. DeVry's combination of quality plus diversification is helping us as we work through the cyclical weakness in the U.S., and we remain confident that we're very well positioned for long-term growth in career-oriented education. Think back, just a decade ago, DeVry comprised DeVry University and Becker Professional Education. We served under 100,000 students. Today, we serve more than 160,000 students through a dozen institutions offering diverse educational services in high-demand fields. Our revenues are nearly $2 billion today versus $680 million 10 years ago. It's quite an achievement, and when we take a step back, we think our name should reflect who we are today. So when we file our preliminary proxy next month, you'll see that we're proposing a name change. Our current name, DeVry Inc., has been around for decades. And for most of that time, DeVry Inc. was DeVry University. Many people don't realize that DeVry is such a diverse family of institutions. We think a change can better communicate this. And after researching various options, we decided on DeVry Education Group. We kept DeVry because our research showed that DeVry has very high name recognition and wanted to keep that equity, included "Education" because that's what we're all about, and the word "Group" reflects our diversity of operations. It's more appropriate than "Inc." for a family of educational institutions. One place you will see the impact of the name change is at collocations. Our potential students can see the many career paths available through our global family of institutions. We think the name DeVry Education Group better reflects the diversified organization that we have become. To wrap up, I'd like to thank all DeVry colleagues for their hard work in fiscal 2013, and most of all, for their dedication to DeVry's purpose to empower our students to achieve their educational and career goals. Now we're very happy to take your questions.

Yusef, if you could please give those who are in the queue the instructions for asking questions, we'd appreciate it.

[Operator Instructions] Our first question comes from Corey Greendale from First Analysis.

When I heard you were changing your name, I was hoping you'd do something to honor your heritage and go with maybe like Norm Levine, Inc. or something like that.

Yes, and we looked at Taylor Colleges, couple of those. And we already have Keller, of course. So...

Anyway. So I was hoping you can elaborate on the Career Catalyst Scholarship. How are you going to be communicating that to prospective students in your marketing? How does that differ from the scholarships that you've been offering?

Sure. We'll, we're communicating it via media, as well as online and digital, social. You may have seen some of the new television commercials, that's part of what we mean when we say media, and our increased investment there. It is going well and generating excitement out there, and so we're encouraged. How is it different? It differs in a couple of ways. It is focused, both on attracting new students, but also, sort of 2-in-1, also helping to encourage students to stay in school, retain and graduate, in that it offers increasing levels of scholarship in each year that the student stays in school. So it's $5,000, $7,000, $8,000 to get to the $20,000. And of course, at DeVry University, you can get a 4-year bachelor's degree in just 3 years, so it's sort of key to that part of the value proposition of speed to the degree as well. And it's part of the holistic scholarship strategy, where we could -- when we step back and look, we had scholarships, what we needed to tighten the scholarship strategy. There were just too many programs and we're really consolidating our firepower and consolidating the dollars behind these 2 objectives of attracting new students and helping students persist and graduate, and the Career College -- Career Catalyst Scholarship is focused on both.

Can you help us think what the year-over-year impact will be in terms of revenue per student and the dollar increase in scholarships versus fiscal '13?

Sure. Corey, it's Tim. Good question. Let me give you a couple of things, a couple of data points. At DeVry University undergrad, for the year, our revenue per student was down about 1.4%. And so if you think about, really there's 4 things that impact revenue per student: First is tuition; secondly is credit hour load/full-time pricing; third is scholarships and aid; and fourth is channel. When we think about what happened in fiscal '13, what we saw is that scholarships and aid were up in absolute dollars and the percent of revenue, up about a little over 1%. We also saw an increase in channel where we have special pricing, and so that impacted it. And then tuition and full-time/credit hours kind of washed each other out. So what you really saw there was the impact of increased scholarships. As we look at fiscal '14, we think that the scholarship aid, and we're kind of combining those 2 together, will be about the same in absolute dollars. But given that we expect lower revenues, it'll increase as a percent of revenue. So we're looking at a decline of revenue per student next year in kind of the 1.5% to 2% range, and that's all predicated on how this Career Catalyst Scholarship goes and kind of keeping an eye on what's going on around us. So I think those are some ways that I think about it. Hopefully that will give you some further insight.

Yes, and just one last quick one for me and I'll turn it over. In your view, Daniel, is debt sensitivity, price sensitivity really the issue? So in other words, do you think that by offering sort of more generous scholarships, that should pretty meaningfully impact the enrollment numbers? Or how do you think about that?

We think that there is some sensitivity today -- in today's world right now. Again, the Career Catalyst Scholarship is not the reason to go to DeVry University. The reason to go to DeVry University is for the value proposition, careers and the support. The reason to think about going now is the -- a little bit of help here, and that's why we call it the Catalyst. It's a catalyst to get you on your way towards your career. So that's kind of how we think about it.

Our next question comes from Trace Urdan with Wells Fargo.

Just following up on that line. Is the -- when the student enrolls with this scholarship, are they guaranteed that the program will stay with them during the time that they're enrolled?

Yes. That's right, Trace.

And does it apply to students who are reenrolling for a second or third year?

It has to be new -- yes, new students.

New students.

Exactly. New students qualify.

Okay. And is it your expectation that it has been introduced in time to have an impact in the fall term?

Yes. We do think that it will help us out in September.

Okay. And are there any other sort of distinctions that are made in awarding of the scholarship? Are there differences by program area or any other dimension to it that is worth mentioning?

It's for undergraduate. DeVry University, so it's not the -- well, actually, no, there is graduate as well. There are -- you have to qualify, so there's...

Is it need-based?

It's not need-based. It's merit-based. You have to have certain test scores. You have to -- that's really it, it's really based on test scores. So -- but it's not differentiated -- I hear where you're going, Trace. It's not differentiated by program. We've looked at that and we actually did a technology program scholarship previously, and so we're open to that and we'll continue to test that. But this particular Career Catalyst is across all programs.

Okay, understood. And then there was a ton of data in the release and also in your prepared remarks. So I apologize if this is in here somewhere and I've just missed it. But can you tell us what the acquired revenues were in the quarter for the new school in Brazil and the acquired operating income as well?

Trace, this is Pat. Facid was acquired on July 1, 2013, so there was no impact in the fourth quarter of this past fiscal year. Obviously, we'll -- that will be consolidated in our results starting now at this first quarter of the current fiscal year. We are overlapping one acquisition from Brazil, which would be Favip, which we acquired in August of 2012. And that's impacted -- positively impacted revenue about 150 basis points in the quarter.

Okay. And what -- Pat, what about operating income, can you...?

It was accretive, but we don't break that out.

Sure. And it sure is nice to have an acquisition start on July 1, so it's nice and clean for everybody, good for your model.

Our next question comes from Peter Appert with Piper Jaffray.

So Daniel, I'm just trying to understand better to the extent I can the weakness in, or the continuing weakness, in DeVry University. Can you give us any color in terms of maybe enrollment trends by programmatic offering and whether there's some big disparities there?

Okay. That was supposed to be Trace's question, but it's good that you asked it. We really didn't see a difference in technology versus business to any great degree. So nothing to report there. There are a few programs we're excited about. Accounting is a bright spot. Electronics engineering, network systems administration. I would say that the other dimension you have in July is -- historically, was a little bit more high school relative to -- or direct out of high school, traditional college aid student, relative to the working adult. And given that we found that some of the metros just were not as effective. Part of our restructuring program last year was to pull back, so we are -- we're still focused on the high school student and serving them. We're still committed to that. We still see great opportunities long term. But for the near term, we're in turnaround mode, so it's a time to pull back a little bit there. And so that probably disproportionately impacted July a little bit.

Okay. And then 2 other questions. One, the consolidation of campuses, did -- can you quantify the impact that, that might have had, if any, on the enrollments? And then unrelated to all this, the specific decision to pause repurchases in the fourth quarter, what was behind that, please?

In the campus consolidation, we were -- consolidating campuses primarily in very close geographic regions, either from a lease that would expire that we chose not to renew, or some where we did lease buyouts, where you saw the charge. But pretty small. We didn't expect -- don't expect much impact there. In the buybacks, so as we said, as we've laid out our capital allocation strategy in the past, is to reinvest in the core, acquisitions, share repurchases and dividends, and we would modulate that from time to time. Quite frankly, we were trying to target a cash balance of around $200 million. We wanted to end there to position us well as we moved into fiscal '14, so that was also a driver of our -- of the decision to pause the program.

Is this -- should I read into that then perhaps an expectation that you've got something coming up relatively soon from an M&A standpoint?

Well, obviously, Peter, we have a longstanding practice of not commenting on that. But I think as Pat said, we would just want to retain financial flexibility to continue to pursue growth and diversification opportunities.

Our next question comes from Sara Gubins with Bank of America Merrill Lynch.

Just to confirm, you're not planning to spend more in scholarships next year. It's really that you're consolidating other types of programs with this. So if that's right, is the thought really that you'll get more efficiency out of better communicating this program as to -- as opposed to actually more dollars?

Yes. So Sara, it's Tim. Yes, the dollars of scholarship at DeVry, which is kind of where we're really focused, will be similar. And as I mentioned, given the declined -- declining revenue, it will be an increase as a percent. But we're moving money between scholarships and aid. And you're exactly right, we're trying an approach to have fewer ways to really reach out to students and put more emphasis on them. So the Career Catalyst really is a strategic focus. We'll see how that plays out here in the September class.

And could you remind us how much you spent on scholarships in fiscal '13?

Fiscal '13, we had talked to you about something in the low-50s for DeVry total and we were slightly above that, I think mid-50s. And that's just scholarships, but we're also -- there are other ways that we entice students to come with us, and that includes aid, it includes our special pricing for channel and also for the full-time discount. But for the total scholarships across the system, it was a little higher than we had last told you, which was the low-50s and came in around mid-50s.

Okay, and then as we take out Advanced Academics in prior quarters out of revenue and cost for modeling purposes, is there any seasonality in revenue or cost that we should try to take it out of historical for 2013?

There's been a little bit. Generally, the first quarter of the year for Advanced Academics, the revenue was a little lighter in that you don't have the full benefit. The school session starts kind of September -- August, September, as well as advertising tends to be a little bit higher in the first quarter of the fiscal year, then kind of even from there on out.

Okay. And then last, Daniel, in your discussion about thinking about the future, you mentioned towards the end you might consider doing more outsourced services. Could you talk about where you are in this process? What kind of capabilities you're thinking about and if that's something that might be launched soon?

Yes, we do it now. It's already launched. For example, the National Association of Realtors, which is the largest trade association in the United States, with about 1.1 million members, one of the key parts of their value proposition to their members is member education. They wanted to launch a master's in real estate. They actually created a realtor university, it's going to be an accredited university, and look for a partner to help them get that launched. And after talking to many different potential partners, we're pleased to say they selected DeVry. And in terms of the capabilities that you asked about, the capabilities we have are actually pretty impressive, if I can say so myself. We have 1,500, 1,700 people. We serve about 500,000 course takers a year in online programs. So we have capabilities of instructional design, of the technology, the hosting, the student services, helping to recruit and manage faculty, student services, financial aid. So there's a whole sort of value chain of capabilities. And of course, we always set up the online capabilities here as a center of excellence to serve DeVry University and Keller and Chamberlain and Carrington, Ross, et cetera. So it's always been set up that way, but there's no reason we can't serve other institutions who are not part of the DeVry Education Group proper, and that's what we were talking about.

Our next question comes from Jason Anderson with Stifel. Jason P. Anderson - Stifel, Nicolaus & Co., Inc., Research Division: Just a question back on the scholarships. In regards to the Career Catalyst, I believe it requires 9 credit hours or continuing 9 credit hours. Is that above your average course load?

It's a little bit -- yes, it does require that level of enrollment, that's right. And I think that is slightly above the average, the course load.

It's really designed for full-time students. That's really the program. So we have a mix of part-time and full-time students today. So this one is really designed to stimulate students to come and to come in a full-time capacity, where we think it gives them the best value prop to get the special pricing for full-time, to get done quicker. So it's really to encourage folks to come and work through quickly. That's where they get the benefit of this Catalyst Scholarship. Jason P. Anderson - Stifel, Nicolaus & Co., Inc., Research Division: And do you have any figures, like on the average, or I guess, percent of students on scholarship, either across all your scholarships? Or what you would expect on this one? And maybe what the average scholarship might be per -- or maybe what you expect to be per student?

Sure, we've got that.

Yes, so with respect to DeVry University undergraduate, average award is about $3,600 per year, so think of that, that's $600 per 6 session or $1,800 per a typical semester. And then about 1 in 4 of our undergrad students receive a scholarship. Jason P. Anderson - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And just a little bit more, I mean, you mentioned the $50 million over 3 years, I'm just wondering if you could give us some more color on how you came up with that? And if you'd -- maybe if you have early success here with this as you -- you see you might have in September, would you consider increasing, I'd -- I guess I would think that the retention benefits and maybe some increase in course load might help more than pay for the revenue reduction?

Yes. Exactly, Pete -- I mean, Jason, that's what we're hoping for, that's what we're expecting to see. And so we want to take a look at the results after this class sits and then go from there and see if it makes sense to continue the program or expand it. And we'll keep you posted. Jason P. Anderson - Stifel, Nicolaus & Co., Inc., Research Division: Great. And if I could sneak in one more. On your corporate channel, you mentioned the special pricing or the discount. Have you -- would you mind being able to disclose that to us? I'm sorry, remind us if you already have, I apologize.

I don't think that -- I'm not sure if we have or not, but they can range in the 10% area. For very large organizations, it can be more than that, where there's a large number of students coming your way.

I was going to say, Jason, a couple of things. One, the Career Catalyst is designed in September. It's targeted at about 25% of our students. And the second thing is in that channel, we also have military, which has a significantly lower price for the active military folks. Those are some other things to keep in mind.

Our next question comes from Paul Ginocchio with Deutsche Bank.

Just on the revenue per student, when you're talking down a couple of points for 2014, fiscal '14, was that just for DeVry or was that the entire organization?

That's DeVry University undergraduate. We would expect, for example, to have increased revenue per student at the medical schools, where we have some pricing, Chamberlain College of Nursing, up slightly.

But for DeVry in the first fiscal '14 quarter, will you be down more than that because of the scholarship?

No.

Okay. And then, I'm just kind of looking at the BMT division. Is that going to be breakeven or low-single-digit margin in fiscal '14 roughly?

Well, a couple of data points. At the segment level, our peak margins were over 20%, kind of the low to mid-20s. We're working really hard to drive cost out and we think, in a kind of a more stable environment, that trough margin should be in the high single digits. So we aren't going to get there in fiscal '14, because we know it takes a while to get the cost out and we're seeing these declines. So depending on the year it goes out, I think you're in the right ballpark. We did have a segment loss in the fourth quarter. We'll have lower revenues in the first quarter, which is unusual for DeVry University, by the way. But just given the rollout of what's happening here, you ought to be thinking about that in your models. So those are some things for you to consider.

Great. And just some housekeeping questions. You were kind enough to give us the Carrington losses for fiscal '13 a year ago. Can you update us for fiscal '14? Then just 2 more. I thought the AU expansion was going to be for September. Has it been pushed back to January on that campus -- that building opening? And then finally, can you just remind us the exposure to the high school channel in July and what it would be in September? And any -- I guess, obviously, high school was weaker than overall, but it was materially weaker than DeVry undergrad new enrollment or not that much weaker?

Okay. I'll try to play traffic cop on this multipart question, very creatively done, which I would say AUC, yes. We're thinking fall, but our Dean felt that it was appropriate to push that back to the January session to make sure -- absolutely sure that the facility is ready for students and we trust her judgment on that. It will be able to accommodate our students for September, so that was the reason for pushing that back to January. In terms of high school students, I don't have a number for you in terms of the percentage of the class, but it's not a big percentage.

Are you talking about in July? Here's what I think about it. If you go back a couple of years, our high school in July represented about 1/3 of our new students. If you fast forward to the next year, it was about 25%. If you look at it this year, it was about a 6%. So it's been declining.

And on Carrington, if you look at it on a fully allocated home office cost basis, the number that we would have provided last year for fiscal year '12 would have been in the low-30s and narrowing that loss to the mid-20s in fiscal '13 on a fully allocated basis.

And excluding discrete items.

And excluding discrete, exactly.

Our next question comes from Tim Connor with William Blair.

Where does enrollment counselor headcount stand for DeVry undergrad and Keller versus the same point last year?

It's really down. It's down. I don't have the number. Well, we haven't broken that out in terms of specific numbers, but there are fewer here today than they were a year ago, yes.

Okay. And then I'll kind of follow up on, on a previous question. But it seems like even up until earlier this year, you thought you might get back to the positive starts growth in DeVry undergrad. And you mentioned the lack of confidence in the job market, but it seems like the path really diverged from where you thought it went. So was there anything else or was there any single catalyst that took you from there to here?

Tim, I can tell you what's changed is the environment. And looking around, not just DeVry's universities, certainly not just private sector, but it's really bled now over to institutions in -- across United States, particularly non-healthcare. And I think we've all seen articles a couple of weeks ago in New York Times talking about that, I just saw St. Mary's College in Maryland and Loyola University in New Orleans down 1/3. We're hearing a little noise on the line here. Let me check, can you hear me? [Technical Difficulty] So it's really the kind of a tale of 2 economies out there. The top half of the economy is doing really well, and many others are really suffering. And so I think there's that less -- the decreased confidence in the job market, in the return on investment and going to college. Why should I go to college? I'm not sure that jobs are there. Now the ironic thing is we know the data shows that's not true. The data shows that the returns on education are very high, some economists say higher than they've ever been before. We've run through all the facts and figures. It sort of feels like the cycle is coming back in that the employers are very much coming after our graduates. And so at some point, that's got to cycle through the front end. We haven't seen that yet. I would say in the near term, based on what we're seeing today, we would expect September new students to be certainly better than what we saw in July. So probably still a decrease, could be double digits, but not in that 20% range that we saw in July.

Our next question comes from Jeff Meuler with Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: I jumped on late, so sorry if I missed this. But what was the Advanced Academics' operating loss in the quarter? I know that there were several pieces to their loss, but what was just the operating loss?

Yes, if you adjust for the impairment and the other charges, it was about $8.2 million. So if you take the 3 discrete items off our -- the face of our income statement, it was $505 million of expenses less $67 million. Then if you add back the $8 million of operating loss, it gets you to where we think you ought to be in terms of comparing with your model. That's expenses of, what is it, Pat, $445 million?

$446 million.

$446 million. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then would you guys be willing to give an approximate run rate for what Brazil EBITDA, including all of the acquisitions is, including the new one from July 1, but what the Brazilian EBITDA run rate for you guys is? And I know in the past, you said that on an after-tax basis, the profitability was similar to the core. But not quite sure when you said that, so I'm not quite sure what we should imply from that for what an EBITDA or an after-tax margin is. And I'm asking this because, obviously, the Brazilian equity markets are putting much different multiples on the Brazilian publicly traded private sector schools than what the U.S. are. So just to the extent to which investors would want to do a bit of a sum of the parts, I was hoping you could give us some color there.

Well, a couple of thoughts. We're not going to give it you right now. But a couple of data points. One is that they exceeded $100 million of revenue this year. And you recall, maybe 5, 6 months ago, we talked about them hitting $90 million. So they had a good acceleration. If you take a look at our disclosures in our filings, you'll see that there's a minority interest line. And so if you just look up the percent of the ownership that the minorities have, and you back into what their earnings are. So try that.

Okay, Yusef, I think we're going to have to wrap it up.

Okay. Well, listen, I -- this is Daniel again. I'd like to thank everyone for your questions as we wrap up the year. Our next results call is scheduled for October 24, when we announce fiscal '14 first quarter results. Thanks, everyone, for your continued support of DeVry.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.