Joan Walter - Senior Director-Investor & Media Relations Daniel M. Hamburger - President, Chief Executive Officer & Director Timothy J. Wiggins - Chief Financial Officer, Treasurer & Senior VP Patrick J. Unzicker - Chief Accounting Officer & Vice President-Finance.

Denny L. Galindo - Morgan Stanley & Co. LLC Sara Rebecca Gubins - Bank of America Merrill Lynch Paul L. Ginocchio - Deutsche Bank Securities, Inc. Peter P. Appert - Piper Jaffray & Co (Broker) Corey Greendale - First Analysis Securities Corp. Jeff M. Silber - BMO Capital Markets (United States) Jeff P. Meuler - Robert W. Baird & Co., Inc. (Broker).

Good day, and welcome to the Q4 and Year End DeVry Education Group Results Conference Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference call over to Ms.

Joan Walter, Senior Director of Investor Relations. Ms. Walter, the floor is yours, ma'am..

Thank you, Mike, and good afternoon, everyone. With me today from DeVry Education Group's leadership team are Daniel Hamburger, President and Chief Executive Officer; Tim Wiggins, our Chief Financial Officer; and Pat Unzicker, our Chief Accounting Officer.

I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of DeVry Education Group that involves risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied.

These factors are discussed under Risk Factors and elsewhere in our Quarterly Reports and Form 10-K for fiscal 2014 filed with the SEC and available on our website at www.devryeducationgroup.com. DeVry Group disclaims any obligation to update 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 our most directly comparable GAAP measures.

Our press release, which contains the financial and other quantitative information to be discussed today, as well as a reconciliation of non-GAAP to GAAP measures, is also available on our website. Telephone and webcast replays of today's call are available until September 15.

To access the replays, please refer to today's press release for information. And with that, I'll now turn the call over to Daniel..

Thanks, Joan, and thank you all very much for joining us today. As we reflect on fiscal 2015, DeVry Education Group continued to grow postsecondary enrollments, driven by our diversification into healthcare and international institutions, while making progress in repositioning DeVry University.

DeVry Group has the right strategy which is quality plus diversification plus long-term focus.

On our call today, I'll provide an update across institutions and then Pat will walk through the numbers and then I'll conclude with some thoughts on why we're confident that despite near-term challenges, we believe that our five-year strategic plan positions us to deliver strong student outcomes, attractive growth and significant value creations.

So let me begin the operations review by saying that we were disappointed with our fourth quarter earnings. Softer enrollments at DeVry University, currency impact in Brazil and a higher tax rate due to the mix of our domestic and international earnings, these were all contributing factors.

At the same time, we're no less confident in the future of DeVry Group, here's why. We see tremendous value to be unlocked at DeVry University once we complete its transformation. At DeVry Medical International, we took actions in fiscal 2015 to return to new student growth.

While the rate of growth slowed at Chamberlain in 2015, remember we're overlapping the introduction of two highly successful programs last year, and for fiscal 2016, we expect total enrollment growth in the mid-teens.

And even though we're seeing some challenges with the economy in Brazil, we're confident in the long-term prospects for growth given the growing middle class, low college participation rate and the quality of our programs. And so even with the challenges at DeVry University, we're taking a proactive approach to managing our expense structure.

We made good on our pledge to maintain positive economics as we work to reposition the University. So now, let's take a look at our segments, starting with Medical and Healthcare. These institutions have been a primary contributor to our diversification and growth strategy and witnessed a steady upward trend over the last few years.

In fiscal 2015, the segment grew nearly 12%. We believe that strong trends in healthcare bode well for future growth. Our Medical and Healthcare segment is now our largest. In fiscal 2015, it represented 45% of our revenue, more than 75% of our operating income excluding special charges.

Our strategy for Chamberlain includes opening two to three new campuses per year and deepening our partnerships with over 600 major hospitals and provider systems. In fiscal 2015, we opened four new campuses, exceeding our goal. These included Pearland, Texas; Troy, Michigan; Las Vegas, Nevada; and North Brunswick, New Jersey.

We are pleased with the initial success at all four of these new campuses, and each one exceeded our enrollment expectations. As we look forward to 2016, we expect to open three new campuses for which we have already received approvals for two. We plan to open an Irving, Texas campus in September and a Charlotte, North Carolina location in January.

We are currently seeking approval for a campus in Sacramento, California. As many of you are aware, we had strong response to our Family Nurse Practitioner program, the FNP. The response was so successful that we utilized clinical capacity earlier than planned.

So now I'm glad to report that we made progress in addressing this bottleneck and we are looking forward to continued growth in serving this strong market need for FNPs. We believe the demand for nursing education is growing driven by supply and demand imbalances for nurses educated at the bachelor's level and above.

The associate degree market for nursing continues to grow as well, which helps Carrington and drives future demand for our RN to BSN program. There's an aging population, and expanded need for nurses with advanced degrees to provide primary care. These are all factors driving nursing growth.

Moving on to DeVry Medical International and what we've been doing to improve student recruiting. We've made organizational changes and operational improvements to the recruiting process. We have done a better job at brand positioning as well.

Let me emphasize, AUC and Ross have strong brands, however, we've needed to make adjustments to respond to changing market conditions. For example, we've been more aggressive in our use of social media and digital channels to drive better attendance and conversion for our information seminars.

DMI had strong academic results to report this quarter as well. In this year's residency match, AUC and Ross Med had the highest total residency placement in our history, 1,075. Our two-year match rates at these institutions for 2013 and 2014 grads were 87% and 89%, respectively.

We are confident these medical schools will continue to attract students as long as they achieve this kind of academic success. So the strategy is working, and we're pleased to report new student growth of 11% and that our improvements are positioning us for growth in our September class. So finally, in this segment, Carrington College.

A highlight of fiscal 2015 was consolidating our two institutions into one Carrington College and standardizing programs across our network of 18 campuses.

This was part of executing the turnaround strategy that enabled us to grow revenues in a difficult market, improve our operating results, and return to positive economics at the institutional level. We are now shifting from turnaround to growth mode, and the Carrington team is focused on several growth opportunities.

For example, we just launched a hybrid, onsite and online pilot within the Dental Assisting certificate program. Also, Carrington recently started enrolling students for new, fully online programs such as Medical Administrative Assistant. These are being offered a certificate with a degree completion option.

Moving on to our International and Professional Education segment. The three acquisitions we completed in Brazil during fiscal 2015, FMF, FACI, and Damásio, contributed to our solid growth. By almost every measure, academic results, enrollment results, student satisfaction, colleague engagement, we had our best year ever in Brazil.

You may be wondering how changes to the PS student loan program may impact our enrollments. For context, consider that for most of our history, the majority of our revenues have been from students who self-pay. PS was only first introduced in 2009 and didn't get into full swing until 2011.

In recent years, PS has come to represent just about one-third of our revenues and we've been proactive about managing the PS level including making diversifying acquisitions such as Damásio, which has small exposure to PS.

Even with the changes, we still think we can grow our new enrollments organically in fiscal 2016, about flat in the first half of the year, and most of the growth with the second half's larger class.

We expect revenue growth north of the 20% range in local currency, and beyond organic growth, we have proven to be an effective acquirer and continue to develop a strong pipeline of high quality acquisitions.

At Becker Professional Education, we've begun to see headwinds shift to small tailwinds in our core CPA program, overcoming the past few quarters' shortfalls. While the number of CPA test takers was down in the market overall, our fiscal year enrollment was up 5%. We expect to see growth continue in the future.

Quality is strategy number one for DeVry Group and Becker CPA exemplifies this strategy. Last year, more than 90,000 people took the CPA exam, and of those 90,000 candidates, only 59 were awarded the prestigious Elijah Watt Sells Award. Of those 59, 53 prepared with Becker's CPA Exam Review.

Since 2005, more than 90% of Watt Sells Award winners prepared with Becker. Now lastly, I'd like to walk you through the progress of our transformation strategy at DeVry University.

As announced last quarter, the strategy comprises both urgent near-term actions to improve our results and maintain positive economics and transformational investments to increase our competitiveness and differentiation over the long-term. I think the team has done an excellent job of executing on the near-term strategies.

We're moving 14 locations to an online-only model, and this reduction of our campus footprint is freeing up significant resources to differentially invest in the remaining local markets. We're reducing our cost structure in other areas as well.

For example, even as we increase spend in those local markets, we'll reduce overall marketing spend by about $35 million. In total, we project more than $125 million in reduced cost structure in fiscal 2016. And we've relaunched the DeVry University brand. Our new communications campaign emphasizes how DeVry University is Different. On Purpose.

We're emphasizing what DeVry University is known for, which is careers and care. Several of the investors I've spoken with have commented on our Different. On Purpose campaign. While it was just launched in July, we're seeing very early signs of success.

For the last couple of years, we've seen brand awareness indicators flipping but with the launch of this campaign, we've now seen an uptick in both brand recognition and memorability. So, we're encouraged by the early results of the combination of our programmatic and local focus supported by our strong brand.

Having executed on these significant near-term aspects of the turnaround plan, now our focus is squarely on executing our strategies to transform DeVry University. Here we're differentiating our teaching and service model.

As an example of that, students tell us they want to attend class when it's convenient for them, and many attend online for the schedule flexibility. Yet, online is mainly asynchronous, and students also want more connection with their professor and with their fellow students.

So what if you could combine schedule flexibility across dozens of campuses with real-time connection? This is the insight that led us to partner with Cisco to invent a new Connected Classroom learning experience.

Directional microphones, telepresence video technology, two-way interactive smartboards, all combining so that students in multiple locations feel connected. The student experience is far beyond prior generations of video-enabled classrooms.

I'm pleased with how our team is applying technology in new and innovative ways, and they are excited to show you this differentiating technology live at our upcoming Investor Day.

Through our programmatic focus, we're ensuring each program is designed to best meet the needs of that program's students and employers and that we better communicate the value proposition of each program. Where we're further along in this process, we're seeing better results.

We identified an area of strength in healthcare information and added a new certificate program in Medical Billing and Coding alongside our Associates in Health Information Technology. The program is stackable, allowing students to seamlessly continue with their Associates degree.

In addition, the program is more affordable, with lower tuition and a complimentary course built in. In May and July combined, we enrolled more than 700 new students into this program. We also remain intently focused on further strengthening our workforce solutions partnerships with America's leading employers.

At present, we have more than 7,300 students from leading organizations like Comcast, Best Buy, Target, AT&T. So in sum, we're taking these actions to maintain positive segment economics and to transform DeVry University for the future.

By restructuring the University's footprint, we're more focused on the markets and programs where we have the strongest competitive position, supported by a strong university brand.

And we're placing the institution on a path for growth by differentiating our teaching and service model, enhancing and launching new programs, and deepening our employer relationships. We have the right strategy and the right team in place, some of the same leaders who oversaw the successful turnaround at Carrington.

Many shareholders have told us there's tremendous value to be unlocked at DeVry University as we return to growth. We agree, and we're deeply committed to realizing that academic and economic value. So with that review of the operations, let me turn it over to Tim..

Thanks, Daniel, and good afternoon, everyone. I'll start with an overall view of the financial results, then go through our reporting segments. In the fourth quarter of fiscal 2015, revenue from continuing operations declined 2.5% to $473 million.

For the full year, revenue from continuing operations decreased by approximately $13 million, or 0.7%, to $1.910 billion. The decrease was driven by the continued decline in enrollment at DeVry University and weakness in the Brazilian reais as compared to the U.S. dollar. This was partially offset by growth in our medical and healthcare institutions.

Note that without the currency impact, total revenue in the fourth quarter would've been up nearly 2% and would have grown 1% for the full year. Total cost from continuing operations, excluding special charges, for the fourth quarter were $425 million, down 0.2% from last year.

For the full year, cost excluding special items totaled $1.708 billion, down 0.2% compared to last year. We reported GAAP net income of $29.9 million for the fourth quarter and $139.9 million for the full year. This resulted in diluted GAAP earnings per share of $0.46 for the quarter and $2.14 for the full year.

Net income from continuing operations and excluding special items was $37.2 million during the fourth quarter, which resulted in earnings per share from continuing operations and excluding special items of $0.57.

For the full year, net income from continuing operations and excluding special items was $162.4 million, resulted in diluted earnings per share of $2.49. Our effective income tax rate from continuing operations was 5.9% for the quarter and 12.1% for the full year.

Our non-GAAP tax rate, excluding special charges, was 19.1% for the fourth quarter and 17.7% for the full year, higher than we'd expected due to the mix of domestic and international earnings. With that overview, let's now shift to our operating segment results.

Starting with the Medical and Healthcare segment, revenue of $214.1 million was up 8% during the fourth quarter. Segment revenue was up 11.7% for the full year to $859.5 million, driven by growth across the segment, led by Chamberlain.

Operating income, excluding special items, for this segment in the quarter was $31.2 million, representing a decrease of 10.3% from the prior year. The decrease reflects the significant investments we made to expand Chamberlain's campus footprint. For the full year, segment operating income grew 6.6% to $153.4 million.

Chamberlain revenue grew almost 21% for the quarter. In May, new student enrollment grew 2% and total students grew almost 22%. For July, new students grew 5.5% and total students grew nearly 24%. This is on top of very strong post-licensure growth in both sessions last year.

Looking to fiscal 2016, we expect mid-teens growth in total enrollment revenue and earnings for Chamberlain. Carrington revenue grew almost 1% during the quarter and just over 2% for the full year. Carrington reduced total expenses by 4% for the year.

In the quarter, new students grew by nearly 57% as a result of an extra start at the end of the fourth quarter. Total students increased by 2%. On a full-year basis, new student enrollment grew 12.8% and total enrollment grew 0.2%.

Carrington achieved positive economics at the institutional level for each quarter of the year, and I'm really proud of the hard work by Team Carrington this year. Turning to the International and Professional Education segment, revenue of $83.3 million increased 15.5% in the quarter.

For the full year, segment revenue increased 13.5% to $258.8 million. The decline in the Brazilian reais as compared to the U.S. dollar reduced our reported revenues. Without this currency effect, revenue for our International and Professional Education segment would've grown 43% in the fourth quarter and 29% for the full year.

The segment's operating income excluding special items was $18.8 million during the quarter, down $1.7 million, reflecting the impact of foreign currency in Brazil and the increased investments. For the full year, operating income excluding special items decreased 9.9% or $4.2 million to $38.7 million, primarily reflecting impacts of currency.

Without the impact of currency, segment operating income would have grown 12% in the quarter and 7% for the full year. At Becker, revenue increased 3.1% in the quarter but declined 2.9% for the full year.

The full year decline reflects the result of softness early in the year due to lower numbers of CPA Exam candidates, a trend which has since started to abate as we picked up momentum in the back half of the year. Revenue at DeVry Brasil grew 24% in the quarter and almost 27% for the full year.

The increase at DeVry Brasil was driven both by the acquisitions of FMF, FACI, and Damásio as well as organic enrollment growth. Within the Business, Technology and Management segment, revenue was down 18.3% to $176.4 million during the quarter, driven by continued declines in the May session at DeVry University.

For the full year, revenue declined 14.6%, $794.2 million. In July, on a same-campus basis, new student enrollments declined 13% and total students declined 8.7%. As Daniel mentioned, we're transitioning from our prior national marketing strategy to a new local market focus and at the same time, reducing our campus footprint by 25%.

These are big changes. While the local marketing program gains traction and we transition through the teach-outs, we expect that near-term new student enrollments would be under even greater pressure.

As a result, we continue to focus on reducing our cost structure and we're on track to achieve our target of at least $125 million in cost savings in 2016. We remain committed to maintaining positive segment economics for fiscal 2016. The segment recorded an operating loss of $1.9 million for the seasonally weak quarter excluding special items.

The loss reflects lower enrollments and an increase in marketing spend versus prior year to support the transformation strategy. For the full year, operating income declined $15.6 million to $14.9 million excluding special items, while generating $55 million in free cash flow.

The team did a good job of controlling expenses, exceeding the cost reduction target of $100 million for the year. For every dollar of lost revenue in fiscal 2015, we were able to recover $0.87 in cost reductions. Now turning to the outlook for the first quarter in fiscal 2016, we expect first quarter revenue to decrease about 5%.

The decrease is a result of continued weakness in the Brazilian reais and declining revenue at DeVry University, which offsets revenue growth at all our other institutions. We expect operating costs to be down 2% to 3% versus prior year as a result of cost reductions at DeVry University, offset somewhat by growth investments.

These investments include new campuses at Chamberlain and recent acquisitions in Brazil. For the full year, revenue is expected to be down about 5% and earnings before special items to be flat to slightly up year-over-year. We expect our effective income tax rate from operations will be 18% to 19% before special items.

As most of you know, gainful employment regulations became effective July 1. Last quarter, we spoke about the options we had for addressing any programs that might not pass the test.

We continue to refine our analysis and action plans and have now reduced the estimated revenue impact from the $12 million we mentioned previously to a $5 million to $6 million range. We expect the impact to be about $4 million 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. Cash flow from operations for the year was $203 million. Our cash and cash equivalents were $353 million at June 30, down slightly from last year.

Our net accounts receivable balance was $139.2 million, up about 5% from the prior year primarily due to the impact of extended payments from our PS program in Brazil. Our bad debt as a percentage of revenue is lower than most, and for the year, we brought it down further to 2.5% compared to 2.7% last year.

Our capital spending for the full year was $88.7 million, an increase of $9.4 million with 90% invested in our medical and healthcare and international institutions.

The third tenet of the DeVry Group strategy is long-term focus, and we will continue to invest our owners' capital for the long term in infrastructure to support our academic quality and diversification strategies. Now we're targeting to keep our capital spending for fiscal year 2016 to be about flat, roughly in the range of $90 million.

We continued our cost reduction efforts during the fourth quarter, resulting in a $12.4 million pre-tax restructuring charge relating to workforce reductions and real estate optimization, primarily at DeVry University. We also recorded a $1.8 million pre-tax charge related to Becker's Eastern European and Russian operations.

We expect to incur additional restructuring charges in fiscal year 2016 as we continue to execute our transformation strategy for DeVry University. During the fiscal year, we returned approximately $50 million to shareholders through a combination of share repurchases and dividends.

We repurchased 220,000 shares during the fourth quarter at an average price of $32.88. This share repurchase activity represents an approximate 20% increase sequentially.

We are confident that our strong financial position and cash flow generation during fiscal year 2015 will give us the flexibility to support our strategy, and we look forward to providing you with more detail at our Investor Day. Now let met turn the call back over to Daniel..

Chamberlain enrollments, particularly FNP, DeVry Medical International enrollments, Carrington College reaching positive economics, DeVry University showing early indicators of success in local and programmatic focus, DeVry Brasil completing three acquisitions and Becker enrollment picking up the pace as we enter fiscal 2016.

So as we see the trends in healthcare, professional and international continuing to produce growth, we feel good that we have the right plan at DeVry University and all the hard work is going to pay off.

Before opening up the call to your questions, I'd like to provide some additional comments regarding our upcoming Investor Day next month, which will be held on Wednesday, September 16, at the Chicago campus of Chamberlain College of Nursing and DeVry University.

We think that the time is right to host an Investor Day because we're growing increasingly confident in the growth and value creation potential of DeVry Group, and we want to share our confidence with you and give you the opportunity to hear that in more depth and from more of our management team.

We recognize that the last few years have been challenging. At the same time, we've continued to build a stronger, more diversified DeVry Group. While that journey still has remaining steps, we're confident that our hard work and our strategic plan position the organization for growth. We recently updated our five-year strategic plan out to 2020.

To summarize, our strategy is quality plus diversification plus long-term focus equals growth. Quality is strategy number one, and students are attracted to a nursing college with great NCLEX results, a university with excellent employment outcomes, medical schools with terrific results on the medical boards, and so forth.

Our diversification in healthcare, professional and international education has positioned us as one of the strongest organizations in our industry, and we're investing for the long term in organic growth, in core capabilities, such as our workforce solutions to build closer relationships with our hundreds of employers, and in continuing to build DeVry Group's culture of care.

Looking out to 2020, we're also excited about the economics of executing this plan. Continued growth in both Medical and Healthcare and our Professional and International segments combined with stabilization and very modest growth expectations for DeVry University should generate solid future growth and leverage.

And for DeVry Group as a whole, we believe we can achieve organic revenue growth in the mid-single-digit range and EBITDA growth in the low teens range over this five-year planning horizon.

We're looking forward to sharing deeper detail for that vision at a segment and an institutional level at our Investor Day next month, and we hope to see many of you there. So with that, we're eager to take your questions.

Joan?.

Thank you. I'd like to ask, Mike, if you could please give participants the instructions to ask a question. And let me just say that in response to feedback we've received and in order to get to as many of your questions as possible, we ask that everyone limit themselves to one question and perhaps a follow up.

And if you have additional questions, just please jump back into the queue.

Mike?.

Thank you, ma'am. We will now begin the question-and-answer session. At this time we will just pause momentarily to assemble our roster. The first question we have comes from Denny Galindo of Morgan Stanley. Please go ahead..

Hi. Good afternoon..

Hi, Denny..

Thanks for taking my question..

Sure..

Yes, first one on guidance, just a little clarification there.

Could you give us an idea of what you're expecting from DeVry University for that full-year down 5% revenue?.

Sure, Denny, it's Tim. One of the places to go to get some sense of that without providing specific institutional guidance is the $125 million of expense reduction, the minimum, and I would overlay that with our goal to maintain positive segment economics. So we had a $15 million segment margin there.

I think that margin will be down this year, but we're still very much focused on making it positive. So it gives you a sense of the kind of revenue decline that we're expecting at DeVry University..

Okay. Because most of that expense would come straight out of DeVry University, is what you're saying..

Exactly. That $125 million is DeVry University..

Okay. That's helpful. And then shifting gears, on gainful employment, you did mention that were some gainful employment adjustments you made. I think most people think of that as meaning DeVry University, but we've recently had some questions on the impact in DeVry International Medical in terms of gainful employment.

And I was wondering if you could give us a little background on maybe what the average student is taking out in terms of debt, what their income is and if there's going to be any gainful employment impact on that DeVry International Medical piece..

Okay. Thanks for that. And I don't have the figures for debt per student from DeVry Medical International in front of me.

But I would say that we do have more of a focus on the vet school than the medical schools, and interestingly when you step back, it's kind of an example where the regulation doesn't fit and has unintended consequences on a high-quality program like Ross Vet, where we have fantastic student outcomes, employment outcomes, student loan default rate many years is close to zero or even some years is zero.

And so given this fundamental value, we think there are solutions here. And I would also point out that the first set of so-called gainful employment measures are not scheduled to be published until January 2017 and then any consequence of that, if there is any, wouldn't be until January of 2018.

And so the bottom line is we've got time and we've got options, and we're in the process of analyzing all those options and we'll keep you posted..

But most of it does seem like the vet is the only place there might be some adjustments at this point?.

The other place was some programs at DeVry University in Carrington, and last time we spoke we had talked about a $12 million range for mostly student tuition grants, and those impact revenues, not an expense line. That's a little bit of what's behind the revenue commentary.

But we've taken that down now to the $5 million or $6 million range, and we've got new data, new information on how that's going to be rolled out, which enabled us to update that and find some solutions which take that number down from what was $12 million now to only $5 million or $6 million..

Okay. Thanks for taking my question..

Thanks..

Next we have Sara Gubins, Bank of America Merrill Lynch..

Hi. Thanks. Good afternoon..

Hi, Sara..

On a same-campus basis for DeVry University, the release mentioned that new starts were down 13% in July and total enrollment was down a little less than 9%.

Is that similar to recent patterns when you exclude those 14 campuses that you're shutting, or has it either been improving or getting worse? And could you talk to us about how underlying retention is trending?.

Okay. Well, let's see, taking that in terms of retention, I think retention has been – give me one second here. Yes, over the last couple of sessions here – make sure I get this – here we go, session to session, undergraduate persistence was improved in July. If you measure over the last, say, trailing six sessions, it was down slightly.

So better in the last – the run rate in the last period. And I would say that persistence is a very important part of the transformation strategy for DeVry University. We think we have strong opportunity here.

And a lot of the transformation projects that we've been talking about are aimed very squarely at improving student persistence, things like a new faculty advising model.

And the teaching and learning model that I mentioned, the Connected Classroom, that provides better schedule availability and helps students get the course they want when they want it, which is one of the underlying drivers of persistence. So we expect to see improvements based on that investment.

In terms of the other – I think it's just we don't have enough data, Sara, to really give you a sense. It's going to be choppy here. I think what we're looking at is really a shift from what was more of a national strategy, national marketing strategy, to much more of a local media investment. And so you've got those lines are shifting around.

But it takes time to build the local based on the pilots that we've done. And so it will be a little while I think before those lines cross, and it's early here. As you heard Tim mention, for September we expect that we'll be sequentially worse, while we expect the teach outs to anniversary, the local marketing to then kick in.

So it's more of a back half of the year where we expect to see that improvement..

Okay, great. And just quickly, the 14 campuses that you're closing, have those now been closed? Are you starting to see the impact? I'm guessing yes, given that you gave us the same campus basis. And I think if that's correct, you had talked about thinking that the majority of those students might stay as they – might shift online.

I'm wondering if you've seen that..

Sure, Sara. So we are in the process of closing those markets. So there's 14 markets where we're going to serve through a online presence only and about another six campuses where we're still going to be in the market with a physical presence, but consolidating within that market.

So when it's all said and done, we'll reduce our campus footprint by about 25% going from about 80 plus campuses today down to around 60 or so.

With respect to those markets where we'll be serving either online-only or consolidating, we've ended admitting new students to those on-site locations, so that's where we're going to see some of that choppiness that both Tim and Daniel have expressed.

And then in terms of cost student transference and students where we are closing, students certainly have an option and we're encouraging them to complete their degree with DeVry University through online, and those transference rates are at our expectations..

Thank you..

Next we have Paul Ginocchio of Deutsche Bank..

Great. Just a follow up from Sara's question.

What percentage of the enrollment are those 20 campuses that you're talking about?.

It's about 11% of our total student enrollments at DeVry University..

Great. And then just on Brazil, you talked about it growing 20% in local currency next year. How many points of that is organic versus acquired? Thank you..

For this year anyways, the growth rate is about two-thirds was acquisition and one-third organic. That will start to moderate out as we move into next year because we'll be anniversarying FMF, which we acquired October 1, and of course FACI January 1 and Damásio February 1.

So that'll probably shift out to be about 50/50 for the first half of this year, and then obviously by January 1 or February 1 we'll keep completely anniversary those acquisitions..

Great. Thank you..

Thanks..

Peter Appert, Piper Jaffray..

Thanks. So, Tim, you mentioned I think it was $35 million in marketing save out of the $125 million. Can you give us any color on the other components of that? I'm asking this in the context of trying to understand if you have any flexibility to dial that up or down depending on how the enrollment numbers are going..

I'll let Pat answer the first part and then I'll give you a sense of dial up, dial down..

Peter, of the $125 million projected expense reduction within DeVry University for fiscal 2016, about half of that will come through staffing, a quarter through marketing, which is $35 million that Tim referenced and Daniel, and then the remaining quarter through real estate and other..

Thank you..

So, Peter, some of the expenses obviously vary with enrollments. And so for disappointed enrollments, we'll see some benefit there, but then we will go back to the drawing board if we're disappointed in the enrollments and look at our campus footprint again, look at our marketing spend. We kind of go back.

We do believe there's additional opportunity, if we have to, to make additional cuts there. And we've got this target of maintaining positive segment economics, both operating income and cash flow. We've got a bit more room on the cash flow. I mentioned that DeVry University generated $55 million of free cash flow last year.

So we're very focused on that. We've obviously got our fingers crossed that the local marketing program will work and work quickly, but we'll just have to see how the year plays out. But we will continue to work on that if we need to..

Thanks for that, Tim. And then on that last point, do you guys have any – I'm looking for evidence, the shift in the DeVry University marketing strategy is working.

Any metrics you can look at in terms of leading indicators that would suggest that the local ad strategy is actually driving better inquiries or something else you look at?.

Yes. I would say that we are seeing, in terms of the dynamic with inquiries, applications, conversions, I think you're kind of getting at, I think the team is doing a terrific job in the process of advising prospective students who inquire, and therefore, the conversion rate, or the percentage of inquiries to applications, is actually up.

So that's good. So the prospective student who talks to us, who visits the campus, et cetera, they like what they see and that application rate is up. The issue is more at the earlier stage of the process. The inquiries are not where we'd like them to be, which we're addressing with the new marketing strategy.

And there we have seen some interesting early results. We ran a technology campaign in Columbus, for example, that focused on our Cyber Security Programming offering and it highlighted local technology employers.

It included an event that we call Hack Your Future, and so you kind of get practice hacking your way into a system, and it drew hundreds of attendees and we saw some lift in applications. So it's very early. It takes time for these things to germinate and work their way through the system.

And I would say – so that's the bad news is the top of the process, the early part of the funnel. The good news is it's a more efficient model, sort of fewer, more qualified inquiries; fewer, more qualified applications and more efficient process for our staff to handle and process those students through the process..

Peter, this is Tim. One thing that gives me some comfort as we look at this program is that we're significantly increasing spend in those markets that we've targeted, and so what we're trying to do is lift our share-of-voice, which we think just wasn't where it needed to be given our presence in those markets.

So I think given it's certainly a tough environment, but I'm confident that that will create lift in those local markets along with a lot of the other things that we're doing..

Great. Thank you..

Next we have Corey Greendale, First Analysis..

Hey. Good afternoon..

Hello, Corey..

First, just a clarifier on the guidance. For the fiscal 2016 guidance of earnings being flat, you're talking about EPS or operating income? I'm asking because of the moving tax rate. I just want to clarify what number you mean..

EPS..

Okay. And then, Daniel, when you're talking about – and I know we'll talk a lot more about this at the Investor Day, but the long-term guidance, I just want to understand what year you're starting from.

So you're talking about mid-single-digit organic growth starting from fiscal 2015, so you incorporating a down year and even with that you're going to get five-year mid-single-digit organic growth or just can you clarify that?.

We are saying 2016 to 2020. So 2016, 2017, 2018, 2019, 2020, that's five-year, second half of the decade five-year strategic plan horizon, that's what we're talking about..

And from where we sit now, do you think 2016 is the bottom on both revenue and bottom line?.

Yeah. We think we can return to growth at DeVry University over that timeframe. There's a process of moving through that, and then sustain the growth with everything else, and given the makeup now with 75%-plus of the earnings coming from Medical and Healthcare, obviously, you can see the dynamics there. So yeah, that's what we're talking about..

Yeah. And then maybe I'm going over my two questions, but I'll make this quick.

For Tim, on DeVry University, what is the assumption of the cadence of cost savings? Does it kind of come down immediately in Q1 and stay there, or more gradually? And could you help us with modeling revenue per student for Brazil given the moving pieces between currency and seasonality and the acquisitions?.

That one we'll probably have to take offline. A lot of the expense reductions for DeVry University were implemented in the last month or – well couple of months, right. So it's front-end loaded, and it's a commitment to deliver $125 million less cost in 2016 compared to 2015..

All right. Thank you..

Jeff Silber, BMO Capital Markets..

Thanks so much. Just wanted to circle back to the campus footprint closures.

Can you tell us just in terms of a timeline, will all those students be taught out this year? Or will there be some potential impact in fiscal 2017 as well?.

With respect to the students, depending on the remaining credit hours required, certainly that could go beyond this fiscal year. It's our anticipation that the significant majority of the locations we'll have vacated them by the end of this calendar year, so 12/31 of 2015 there may be a location or two that goes out into FY 2016..

Calendar year 2016..

Or calendar year 2016..

Okay, great. That's helpful. And I'll ask a revenue per student question. But I'm going to ask about the DeVry University. What should we be expecting gets incorporated into your guidance, and can you talk about the level of scholarships you plan on implementing this year? Thanks..

Sure. Great question.

For DeVry University undergraduate revenue per student, Jeff, for the first quarter of 2016, so it'll likely be down in the 5% to 6% range, and that's going to be impacted in part by our tuition grants for gainful employment, and then for the balance of the year, quarters two, three, and four, our revenue per student will likely be down around 4%.

Just to put some context around that during FY 2015, revenue per student was off in the 1% to 2% range. I think for the fourth quarter of 2015, it was off about 0.5%. So you can see the delta there; even pulling out the impact of gainful employment, we'll be up about 300 basis points or so, driven by our scholarships.

So we'll be piloting some scholarships to further address the affordability of overall college education, and again, our continued use of our strategic scholarship program to ensure that we are attracting students to help them achieve their goals and then of course, to help students continue to persist..

All right. Great. Thank you so much..

And one last question on there, a little more context, revenue per student is also being slightly impacted by our very positive Medical Billing & Coding Certificate. That comes at a lower credit hour -.

Cost per credit hour..

Cost per credit hour..

Got it. Okay. Thanks again..

The next question we have comes from Jeff Meuler of Baird..

Yes. Thank you. You guys discussed DVU same campus enrollment trends. Can you give a sense for at Chamberlain, if I look kind of at like full year 2015, what was same campus new enrollment growth? I'm just trying to get a sense for how much of the growth is being driven by the campus openings versus how much underlying same campus growth there is..

Yeah, okay.

You're right, that's an important question because I think some people have sort of missed that when they have seen the new – the difference between the new student growth at Chamberlain and then that much bigger total student growth, you're on to obviously the dynamic that you get that total student growth as you are filling up those new campuses or as you are filling up the ranks of a new program such as FNP or DNP.

So, Pat, do you have any color on that?.

Sure. Color on that, so our campuses at Chamberlain that are mature, meaning that they've been open for a period of at least three years, total revenues there grew very nicely, in the mid-teen range, and then our developing campuses would have more than doubled during that period of time.

So our total campus-based revenues grew in the low 20% range in FY 2015. And just to remind you, put some context around that, in terms of Chamberlain's total mix of revenues, about 45% is being generated from our BSN or our campus-based programs, with the remaining 55% coming from our post-licensure online programs..

Okay.

And if you look at the online programs plus I think you referred to them as the mature campuses, those in existence for three or more years, what would the operating margins or EBITDA margins, however you want to say it, for Chamberlain be? So what are steady-state Chamberlain operating margins?.

Maybe I'll answer it in this context. So our overall Medical and Healthcare margin was right around 17.9% or 18% for the year, and Chamberlain on a standalone or fully allocated basis is just slightly ahead of that operating segment margin..

Okay. Thank you..

Right. Of course, within your – you've got DMI and the growth that we're starting to see there come back..

Good..

Next we have Paul Ginocchio of Deutsche Bank..

Okay. Great..

Hey. Thanks for taking my follow up. I just wanted to ask about PMI, plus 11% on new enrollment, so it looks like you've got it fixed. Can you just break that out versus Vet versus Medical, AUC versus Ross and what changed to get that new enrollment higher? Thanks..

more social, more digital. It's not just radio. Radio's still there, but you've got to supplement that and you've got to follow up with different technologies in different ways. And so by doing that, we've improved the results and of course, that goes hand-in-hand with the academic results because students see those residency match rates.

That has been very important for us, and all of that was what was behind the May number of 11%.

We don't expect to see that as a long-term trend because 11% is a little bit of a catch-up for making up for lost time, but we think we can still – we're in good shape here for September, and long-term, see continued low single-digit enrollment growth over the long term..

So – great.

So September 2015, you think low single-digit off that 842 new enrollment?.

No. I'm saying we're still kind of catching up for lost time here, so it could be better, and we're feeling good about September. I'm just saying from a long-term, I get back to that sort of five-year, long-term average, we think that's a more prudent way to forecast, and if we do a little bit better sometime than long-term trend, great.

I just wouldn't want to say, you know, that double-digit is a long-term trend..

Great.

And there doesn't seem to be much difference between AUC and Ross in terms of growth, or is that wrong?.

No, there's a little bit more at AUC.

Do you want to comment on that, Pat?.

Yeah, a little more at AUC historically, but the improvement that we saw in the May session was largely at Ross Med, and Ross Vet's performance on new student enrollments has been very consistent..

Thank you..

That's good. We do see increasing international opportunity as well for international students. Most of our history has been U.S.

and Canada, but we've had more and more interest from international students coming to the schools, and I think that will probably show up a little bit more at AUC than at Ross on the margin, but also at the vet school, I should hasten to add there; a lot of international interest in our vet program. Thank you..

At this time, it appears that we have no further questions. We'll go ahead and conclude our question-and-answer session. I would now like to turn the conference call back over to Ms. Joan Walter of Investor Relations. Ms. Walter, the floor is yours, ma'am..

Thanks, Mike. We'd like to thank everyone for your questions today. Our next quarterly results call is scheduled for October 22 when we'll announce our fiscal 2016 first quarter and September enrollment. Thank you for your continued support of DeVry Education Group..

And we thank you, ma'am, and to the rest of the management team for your time, also. The conference call is now concluded. At this time you may disconnect your lines. Again, we thank you for your participation. Take care, and have a great day..