Adtalem Global Education Inc.
Q3 2016 Earnings Call Transcript

Published: 6 May 2016

[Operator:]

Good afternoon, and welcome to the DeVry Education Group Third Quarter 2016 Results Conference Call. 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 over to Joan Walter. Please go ahead.

[Joan Walter:]

Thank you, Amy, 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 and Treasurer. 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 2015 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. We may refer to non-GAAP financial measures, which are intended to supplement, though 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 May 20. To access the replays, please refer to today's release for more information. With that, I'm happy to turning the call over to Daniel.

[Daniel M. Hamburger:]

Thanks, Joan. Good afternoon, everyone, and thank you for joining us. Our third quarter earnings were stronger than expected with solid academic performance and financial results coming in ahead of our plan. Our strategy of quality, plus diversification, plus long-term focus is driving favorable results at most of our institutions. While obviously that's not the case at DeVry University, we are continuing to maintain positive economics there. The year-over-year overall revenue decline was in large part the result of our strategy to reposition DeVry University amid a tough competitive environment, as well as some enrollment challenges at Carrington. The good news is we saw continued growth in Medical and Healthcare, as well as International and Professional Education, which, in this case, was aided by a strong quarter at our recently acquired Grupo Ibmec in Brazil. So with that headline summary, let's review our segment results, starting with Business, Technology and Management, which of course includes DeVry University and Keller Graduate School of Management. So while we're repositioning DeVry University, we expect further enrollment declines, but third quarter enrollments were a little lower than we would have liked. However, through our continued cost control initiatives, we were able to improve operating performance, and continue to generate positive cash flow. Enrollment is being impacted by a challenging competitive environment, and demand has declined as the unemployment rate has improved, especially among working adult students. And to illustrate this trend, here is one fact

[Timothy J. Wiggins:]

Thanks, Daniel. Good afternoon, everyone. I'll start with the overall financial results then go through our operating segments. In the third quarter of fiscal 2016, total revenue declined 3.2% to $474.2 million. A little more than half of the decrease was attributable to the impact of currency from Brazil. The remainder of the decrease was driven by the declining enrollment at DeVry University as well as enrollment challenges at Carrington. The declines were partially offset by growth in our other institutions. As Daniel noted, we're doing a good job of controlling what we can in a difficult environment. Total operating costs excluding special items for the third quarter were $414.4 million, down 4.4% from the prior year, and were a little better than our expectations. We were also pleased to see that net income excluding special items increased during the quarter. Net income of $45.6 million during the quarter resulted in earnings per share excluding special items of $0.71, better than expected. The effective income tax rate was 12.7% for the quarter. Excluding special items, our tax rate was 22% for the third quarter as a result of a shift toward more U.S.-sourced earnings. Now let's shift to our operating segment results. Business, Technology and Management revenue was down 23.3% to $156.4 million during the quarter. New undergraduate students in the March 2016 session declined 28%, while total undergraduate students declined 22%. On a same campus basis, new students declined a little less than 23% and total students declined 17%. The number of graduate course takers in the March 2016 session declined 20% compared to last year. We've been successfully reducing our costs in line with the revenue declines. We achieved cost reductions of approximately $48 million at DeVry University compared to the third quarter of last year. These reductions resulted in 102% cost recovery, which is up sequentially compared to 96% last quarter and represents our strongest quarter of cost recovery to-date. We expect cost management initiatives to continue in the fourth quarter, and have revised our cost savings target for the full year to at least $170 million from $150 million, as we remain committed to our goal of maintaining positive segment economics. The segment recorded operating income of $6.4 million for the quarter excluding special items. Medical and Healthcare segment revenue of $246.8 million was up almost 10% during the third quarter with growth again driven by strong enrollment trends at Chamberlain and continuing growth at DMI, more than offsetting the revenue decline from Carrington. Operating income excluding special items for the segment in the quarter was $52.8 million, representing an increase of 15.2% from the prior year. The increase was driven by operating leverage at Chamberlain and DMI. Chamberlain revenue grew 20.7% for the quarter, driven by continued demand for nursing degrees. In March, new student enrollments grew 12.1%, and total students grew 19.8%. These results are driven by continued success and strong demand in our post-licensure programs. At DMI, revenue grew 3.7% versus last year. At Carrington, revenue decreased 6.7% during the quarter. New student enrollment for the quarter declined 5.9%, and total enrollments declined 6% compared to the prior year. Carrington's certificate programs continued to grow, but not at the rate we expected. We had some operational issues that slowed enrollments in certain degree programs, and we experienced delays in approvals for some of our online and transplant programs. Turning to the International and Professional Education segment, revenue of $71.7 million increased 17.4% in the quarter. The decline of the Brazilian real as compared to the U.S. dollar reduced reported revenues by approximately $9 million. On a constant currency basis, revenue for the segment would have grown 31.7%. Operating income for the segment, excluding special items, was $4.6 million, equal to the prior year. At Becker, revenue was roughly flat compared to last year at $23.7 million. DeVry Brasil revenue increased 28.2% to $48.1 million. Excluding acquisitions and currency impacts, revenue would have increased 5.3%. As you can see in the enrollment table included in our results release, excluding Ibmec, new student enrollment increased 4.2% compared to last year, while total student enrollments increased 7.2%. Given the changing market conditions, we broadened the use of scholarships, which has resulted in revenue per student declining. This will impact margins in the near-term, but it's an important aspect of our strategy to maintain and grow our leadership position in Brazil. For DeVry Group as a whole in the fourth quarter of fiscal 2016, we expect a continuation of the revenue pattern we've seen, with a decrease of about 2% to 3%. Again, this is a result of declining revenue at DeVry University, and some near-term challenges at Carrington, which will offset revenue growth at all of DeVry's other institutions. We expect operating costs excluding special items in the fourth quarter to be down about 3% to 4% as a result of cost reductions at DeVry University offset somewhat by growth investments. We're seeing – as we see a mix shift toward more U.S.-sourced earnings, we expect the effective tax rate to be approximately 23%, excluding special items. With that, I'll now turn the call over to Pat, to talk more about our balance sheet and financial position. Pat?

[Patrick J. Unzicker:]

Thanks, Tim, and good afternoon, everyone. For the first nine months of fiscal 2016, our cash flow from operations was nearly $220 million. Our cash and cash equivalents were $330 million at March 31, down from $402 million last year. The decrease was the result of capital deployed for acquisitions, including, of course, Grupo Ibmec in December. This was partially offset by the sale of DeVry University's Fremont, California campus for nearly $25 million during the third quarter. We've continued to focus on managing our excess real estate. In the last year alone, we've reduced our footprint by 475,000 square feet. Now the sale of Fremont frees up capital that we can use to invest in academic quality and student services. Our net accounts receivable balance was $170 million, up 13.7% from the prior year due to DeVry Brasil acquisitions, and an extended reimbursement cycle from FIES. Our bad debt as a percentage of revenue remains one of the lowest in the industry at 2%, which compares favorably to 2.5% last year. Capital spending for the first nine months was $51 million compared to $64 million last year. We're now expecting capital spending for fiscal year 2016 to be in the range of $75 million to $80 million. We will continue to invest capital for the long term in infrastructure to support our quality and diversification strategies. As we've indicated on prior calls, we expect to incur additional restructuring charges in the fourth quarter of fiscal 2016. During the quarter, we invested approximately $8 million in share repurchases. We repurchased 401,000 shares, which represented a 21% increase compared to the second fiscal quarter. The average purchase price was $19.63. Now stepping back, our priorities for capital allocation include

[Daniel M. Hamburger:]

Thank you, Pat. Before we conclude here, I'd like to mention that we recently renewed our partnership with the U.S. Olympic Committee, the USOC. We provide scholarships to Olympic and Paralympic athletes so that they can continue their education while they're training. To-date, so far we've had 241 members of the Team USA family who've enrolled in one of our programs, and 49 have completed their degrees so far. We anticipate more than 15 DeVry University student athletes will make the team and go to Rio. We'll also be sending students from our College of Engineering & Information Sciences to help the Olympic IT team deploy their IT systems that are needed to support the athletes. So these lucky students will walk away with hands-on, real-world career experience at one of the biggest events of the world. So before we open up the line for your questions, I'll summarize and let me do that by saying that you can think of DeVry Group in two parts, DeVry University, which is about one-third of our revenues, and less than 15% of our EBITDA, excluding special items. We're working our plan, and while it's taking longer than we'd like to stabilize enrollments in a very challenging environment, in the meantime, we continue to keep the University as a positive EBITDA contributor to the Group. The other two-thirds of our revenues are in Healthcare, Professional, and International Education, which are growing nicely. Overall, DeVry Group is differentiated from other post-secondary higher education providers by virtue of our quality, diversification, and long-term focus. And we have strong fundamentals. You can see that in our better-than-expected quarter and in our continued focus on quality student outcomes. Strong fundamentals and a long-term focus see organizations through regulatory issues and swings in the economy. For our fellow owners, there's opportunity and value in these strengths. We're confident that we have a strong team executing a strategy that'll deliver positive student outcomes and create significant value over the long-term. So now let's get your questions. Joan?

[Joan Walter:]

Great, Daniel. I'd now like to ask Amy to please give our callers the instructions to ask a question.

[Operator:]

The first question comes from Trace Urdan at Credit Suisse. Trace Adair Urdan - Credit Suisse Securities (USA) LLC (Broker) Thanks. Good afternoon.

[Daniel M. Hamburger:]

Hello. Trace Adair Urdan - Credit Suisse Securities (USA) LLC (Broker) I wanted to ask, kind of dive right into the Healthcare segment. You're obviously seeing such incredible strength in the nursing front, Daniel, and you outlined some positive sort of statistics about what's happening in nursing hiring. But in the medical assisting front, it just feels dead there. It's not just Carrington. I think other providers that share enrollment data in the medical assisting area are equally weak. And I wondered if you have any thoughts about that disconnect. Is there some kind of saturation in that part of the market, but higher demand with the higher end piece of it? Or what's going on there in your estimation and when do you think it'll change?

[Daniel M. Hamburger:]

Sure. Yeah, sure, Trace. Excellent question. I can understand why you'd ask that with that dichotomy within the healthcare world. But remember that the medical assisting certificates, basically these are certificates are at that shorter end of the market, that entry level, much, much more countercyclical, whereas nursing over the long-term we've seen has been fairly acyclical, really. And so, with the low unemployment environment, that's probably the biggest driver that we see. One observation that I would make and I don't have data on this. This is very anecdotal, but I'll just share the color since you're asking, and it's early. But the team is telling us here that, for Carrington, that more and more they're hearing from their employers – they're very close with the employers at the graduates -and the employers are saying, gosh, we're having a hard time finding these medical assistants or medical technicians, surgical technicians, pharm tech, those kind of programs, and are offering incentives to hire those folks. And, historically, as you know, having watched this industry for so long, that back end, if you will, finds its way to the front end. And so, no way to make a prediction there, but that's been the historical pattern. Trace Adair Urdan - Credit Suisse Securities (USA) LLC (Broker) Are there opportunities for you to partner with the larger employers to address those needs directly? I mean, I think that you guys have a reputation for being at the very high end on the quality spectrum. Have you had any discussions like that?

[Daniel M. Hamburger:]

We have. That fits into what I mentioned

[Daniel M. Hamburger:]

Not a real change. And, unfortunately I can't give you a lot of gory details. I'll apologize in advance for what may seem like not the greatest responsive answer to your question. But, yes, Ross, that school could be in the zone or not pass. And what's interesting is we have fantastic student outcomes. So whereas this so-called gainful employment metric is supposed to predict that a graduate will struggle to pay their loans back because of the debt to income ratio, the actual cohort default rate at Ross Vet School most years is between 0% and 1%. So the actual loan payment performance seems to trump the so-called predicted ratio. And it just seems to us that when you've got that kind of performance, that excellent performance, that seems to be a program that does provide gainful employment to its graduates. And so, we think with those kinds of fundamental values that there should be solutions that can be found. And we're continuing to pursue those with the regulators and other policymakers in a very collaborative fashion, so we have that kind of dialogue. At the same time, we see operational things that we can do, to continue to do what we need to do in the vet school. Just as a note, the first set of GE measures are not scheduled to be published until January of 2017, and the eligibility for student loans, if they were in effect, wouldn't happen until January of 2108. So we still have some time here. We have a number of options, and we'll keep you posted for sure. Trace Adair Urdan - Credit Suisse Securities (USA) LLC (Broker) Okay. Thank you.

[Daniel M. Hamburger:]

Thanks.

[Operator:]

The next question is from Peter Appert at Piper Jaffray.

[Peter P. Appert:]

Thanks. Good afternoon.

[Daniel M. Hamburger:]

Hi, Peter.

[Peter P. Appert:]

Daniel, you outlined some interesting initiatives and programs to try to get DVU on the right track, and I think that's consistent with what you've talked about for the last couple of quarters. Not meant as criticism, but just observation, it doesn't seem like it's really having much traction yet, in terms of the performance of DVU from the start perspective. So what are you looking at in terms of metrics that gives you some confidence that we're going to see an inflection? And do you think we could see that inflection, not necessarily getting positive, but maybe getting meaningfully less negative in fiscal 2017, for example?

[Daniel M. Hamburger:]

Sure. That's a great question. And some of the metrics that we look at are

[Timothy J. Wiggins:]

Yeah, 102%.

[Daniel M. Hamburger:]

...102% cost recovery enables us to do that, and let those three strategies I outlined take effect.

[Peter P. Appert:]

That's helpful. Thank you. Actually, that brings up an interesting point for Tim, perhaps. You've done such yeomanlike work here in 2016, and I'm always nervous that maybe there is nothing left to do. So as we think ahead, how much room is there left for continued movement on the cost front?

[Timothy J. Wiggins:]

Yeah, it's – yeah, seemingly, it gets harder, but our actual recovery is getting better. So I guess necessity is the mother of invention, right? So I got to credit the team at DeVry University. They are rethinking how they approach the students that are using technology. Daniel mentioned some of the innovations that we've come up with that help. And, Peter, we believe that we can maintain those positive segment economics as we go forward. We have pretty good visibility into FY 2017, and we feel good about doing that. And we'll continue to work with the team to find more effective and efficient ways to deliver that quality education. So, for now, we continue to produce the right kind of results in that area and we've got good visibility to 2017. Not saying it's easy, but we've got a path toward it.

[Peter P. Appert:]

Got it. And the, Tim, one other thing, on the – I think Daniel mentioned a somewhat more generous scholarship program at DVU. Does that have some measurable implications in terms of how we should be thinking about revenue per student?

[Timothy J. Wiggins:]

I'm going to let, Pat – Pat has got some insights on that, Peter.

[Patrick J. Unzicker:]

Good question, Peter. The revenue per student undergraduate at DeVry University for the third quarter was down about 0.8%, so just under a full percentage point compared to last year. That was in line with our expectations. Looking forward to the fourth quarter, we'd see a little more pressure on revenue per student, probably down about 1.5%, and that would probably continue perhaps down in the 1.5% to 2% range as we move into FY 2017. A couple of factors that are influencing it and Daniel's remarks noted our strategic use of scholarships, and then, we also have a very positive response in the marketplace from our students on our medical billing and coding, and of course that has a lower credit hour. So the confluence of those two, as we continue to get an increased mix of our medical billing and coding students, as well as the more strategic use of scholarships, we think we'll see year-over-year pressure moving next year in the 1.5% to 2% range.

[Daniel M. Hamburger:]

Actually, if I can jump in, Peter – it's Daniel – I would say, it's another metric that you were asking about before. I think I mentioned that the scholarship did have a nice impact on our start rate, and that's very important for us to see. So we're encouraged by that, and we're just rolling it out. So we're hopeful that we can see increased impact from the use of the scholarship. And the other thing about it that's so nice is it's structured to encourage positive academic performance and persistence. So the whole structure of it just seems to fit us very well.

[Peter P. Appert:]

Yeah, understood. Thank you.

[Daniel M. Hamburger:]

Good.

[Operator:]

The next question is from Sara Gubins at Bank of America.

[David J. Chu:]

Hi. This is David Chu for Sara Gubins. Just a clarification question

[Daniel M. Hamburger:]

No. The start rate, I think, was what I was talking about. As I was mentioning, from the scholarship, we saw an increase in the start rate. So that's the percentage of students who have applied and then been accepted to University, who then ultimately go and start. That rate had a lift of about 10%.

[David J. Chu:]

Okay.

[Daniel M. Hamburger:]

If you want to look the start – yeah, the starts themselves are in the chart in the press release. You can see the exact data on that.

[David J. Chu:]

Right. Got it, got it. Okay. That's helpful. And can you discuss what you saw in terms of demand for undergrad for the month of April?

[Daniel M. Hamburger:]

Yeah. I think as we – it's a little early, we don't have a lot of visibility going forward, that we'll be reporting that for April would flow into our May session. And so we'll be reporting that next quarter.

[David J. Chu:]

Okay. Okay. And, Tim, increasing your cost saving targets, in like what areas are you able to find these additional savings?

[Timothy J. Wiggins:]

Well, it's really across the board. We look at, for example, not filling open positions for our colleagues. We're looking at real estate optimization. We're looking at a whole series of costs around IT and kind of the overhead, all the factors. So, I mean in the past, when we think about the full year, it's about 50% staffing, 25% real estate and other, and then the balance 25% is in marketing.

[David J. Chu:]

Okay. Great. And just lastly, it sounds like you have some visibility into fiscal 2017. I mean, should we see an acceleration in operating profit or just some margin expansion for BTM, or should we just think of it as maybe like flat at this point?

[Timothy J. Wiggins:]

Yeah, I think that's a safer bet. We anticipate continued total enrollments to decline. It takes over a year from the time new starts go positive before you get to total enrollments positive, so we know that our total student numbers will be down next year. And so, we're really kind of turning around that very single digit break-even mark, and wouldn't expect any real leverage. Really the trick is to keep it positive. We hope to get the leverage when we get the enrollments going positive.

[Daniel M. Hamburger:]

And a little bit more room on the EBITDA side, which we tried to give you a little bit of insight into that a few minutes ago.

[David J. Chu:]

Got it. Okay. Thank you very much.

[Daniel M. Hamburger:]

Thanks.

[Operator:]

The next question is from Denny Galindo at Morgan Stanley.

[Denny L. Galindo:]

Hi, there. Thanks for taking my questions.

[Daniel M. Hamburger:]

Sure, Denny.

[Denny L. Galindo:]

Moving – on the Medical and Healthcare margin, it looks like it came in a little bit better than we had thought for the quarter. This is usually the seasonally high quarter. Any kind of advanced look on how this will trend next year? Should it still continue to come down a little bit due to kind of new campus openings or is this kind of the right level for that to stabilize at?

[Patrick J. Unzicker:]

Denny, this is Pat. And yes, as you point out, the third fiscal quarter is the seasonally high quarter in terms of our operating income margin for the Medical and Healthcare segment. So we would expect seasonally it would trend downward into the fourth quarter, but we would expect some margin improvement compared to the fourth quarter of prior year. Stepping back on your question, as we look at FY 2017, probably flattish, net-net, so probably right around 18% or so, kind of similar to what we did last year, and comparable to probably what we'll do for the full year this year.

[Denny L. Galindo:]

Okay. That's helpful. And then, secondly, it seems like there's a market for educational institutions with declining enrollments, double-digit, a lot of potential bidders. At what point would you consider exploring alternatives for DeVry University? And how do you weigh the tradeoff between kind of looking at doing something with it now or letting starts continue to fall at kind of this double-digit rate for the next couple of years?

[Daniel M. Hamburger:]

Well, we're certainly mindful of all of our options here, and we'll continue to look at those. The direction you're going is not our plan right now. So we think we've got a plan to continue to create academic and economic value at DeVry University in particular and all our institutions for that matter. At the same time, there's nothing that's sacrosanct here. And we look at all the options. So – and that's something that we continue to get guidance from, from our board as well. And so, we'll keep you posted.

[Denny L. Galindo:]

And then along similar lines, are there opportunities to kind of accelerate some of the changes you're undergoing at DeVry University through acquiring someone else that might also be struggling, but might have an interesting program or an interesting asset to kind of invest or to accelerate that change? Or is that not something you'd look at?

[Daniel M. Hamburger:]

Yeah, that is something that a lot of those opportunities come across the desk. We also see opportunities to help out. We've seen some other institutions that have failed or closed or shut down, and many of those transfer students have come over to DeVry University or to Carrington College. That's actually – it's been an opportunity, the people who are in charge of looking at those things, public policy people or their consultants know us, and we have a good reputation. So we're often get on the list of the institutions that they call to see if we can help out. So that's there. From an acquisition perspective, I would just reiterate what I said before, which is, our priority is really in Professional and International Education, and that's where you've seen us allocating capital such as the acquisition that we made of Grupo Ibmec in December.

[Denny L. Galindo:]

And then one last one. There's a Wall Street Journal article on paying for clinical clerkships slots in New York. But can you discuss your policy on playing for these clerkships? And is this getting hard to find enough slots to keep growing at DeVry International? And maybe if you can comment on kind of the regional distribution of where your graduates end up going? That would be helpful as well?

[Daniel M. Hamburger:]

Sure. And there's I think two pieces of your question, just to unpack that because you said graduates. So the clerkships is the third year and fourth year of medical school or the last three semesters of vet school. So that's why there's still a student. Those are the, what we call, clerkships. I guess back in the old days, used to call them internships. They call them clerkships. And then you mentioned graduates, that's when they graduate and then they go on for – in the medical world, go on for residency. In the veterinary world, they generally go straight into practice. There's some residencies. So, in each case, we're feeling pretty good about how our students and our graduates are doing in those areas. The article that you talked about, I'm not sure I saw that one, but I know the issue. People have asked about providing resources. I can't understand why there's an issue. It seems to make perfect sense that if we are sending our students to a teaching hospital that we would partner with that hospital to provide the resources to teach those students. And we also provide resources in some cases to help build simulation centers or do other things that help that hospital serve its community. That's a good thing. So those hospitals that we work with, some of whom we've worked with for decades actually, really view us very positively as a partner in medical education. Then, of course, once our students complete a clerkship in their third year or fourth year with a teaching hospital, oftentimes they'll put that hospital on the list for their residency match or that hospital may put them on. And that's what the whole match is about. So once they get to know each other, it works out really well for meeting their workforce needs and we become a workforce solutions provider. And so, in March, we saw the residency match, the real March Madness as opposed to the basketball. This is one that really counts, making sure we've got the doctors we need. And we saw our two U.S. serving medical schools put more than 1,000 new residents into the match system. I think our two together are probably the single largest provider of new physicians to the U.S. residency system. So we feel pretty good about what DeVry Medical International is doing, and think it'll continue to serve those students in that societal need for the future.

[Denny L. Galindo:]

That's it for me. Thanks.

[Daniel M. Hamburger:]

Yeah, good. I tried to parse the two pieces out there for you. Okay.

[Operator:]

Next question is from Jeff Meuler at Robert W. Baird.

[Nick J. Nikitas:]

Yeah, thanks. This is Nick on for Jeff. Just looking at Chamberlain. I think you guys said – well, I know you said 12% was the new students growth for the quarter, but did you guys give an organic, like a same campus number if you strip out the new campus locations?

[Patrick J. Unzicker:]

Sure. Good question. In this start, it was only post-licensure, so there were no campus starts. Just from an enrollment perspective, we have campus starts in the month of May, September, and January and then we have post-licensure starts every six weeks. So we would have July, September, November, January, March, and May. So the 12% is a good apples-to-apples number.

[Nick J. Nikitas:]

Okay. Great. Thanks. And then just Chamberlain performance has continued to be really solid. New enrollment has kind of decelerated a little bit over the past few starts, though. So just looking forward, do you guys think it should stabilize here around in the low-teens rate or just how should we think about that over the next few quarters?

[Daniel M. Hamburger:]

Yeah, I'll jump in. The way I think about it, Nick, is that of course as Chamberlain gets larger, as any institution gets larger or any organization or company gets larger, the law of large numbers starts to kick in, and the percentages will be a little bit lower. We like Chamberlain's strategy of having both on ground pre-licensure and online post-licensure programs. They reinforce each other and give us a strategic advantage. Many students tell us in the post-licensure world that they really look for a – I'll say it the way they say it – "a real nursing school." They feel that a nursing school that has pre-licensure on-campus programs is a real nursing school. And Chamberlain's being around for over 125 years gives that sense of solidity as well. So we just think that there's going to be continued supply/demand imbalance there in the world of nursing. And therefore we see continued growth. And we haven't given a specific number on that, but it gives you a sense of how we're thinking about it, I hope.

[Nick J. Nikitas:]

Okay, yeah, thanks. And then just one last one for me. You guys mentioned the increased scholarships within DV Brasil. Is that just primarily related to the FIES changes or any other competitive dynamics that are going on there?

[Daniel M. Hamburger:]

Yes, it is a little bit more competitive there. Overall demand is not as strong as it was, just given the economy, the political situation and so forth. And so we're focused, as Tim said, in the long-term and preserving and enhancing our share and our stature there. One interesting fact about the FIES, and it's F-I-E-S for those following along. It's a Portuguese acronym, for the student loan system there. For those who've been following, we had an Investor Day last fall. And Carlos Filgueiras, who we call Degas, he's the president of DeVry Brasil, he said that he expected that while the government was going to cut the number of FIES contracts in half, and people heard that and got a little bit concerned, at the same time, the government was going to prioritize those towards high quality institutions and we've got strong academic outcomes, and I think I mentioned some of those. And on the Northeast where we're strong, and in healthcare and engineering where we're strong. And as a result, we expected to sort of double our share of contracts. So sort of double the share, half the number of contracts resulting in a neutral impact on the number of FIES contracts. And that's just what we saw. So I'm feeling really good about the team that we have in DeVry Brasil. They've really got their finger on the pulse and doing what needs to be done to enhance educational opportunities down there in Brazil.

[Nick J. Nikitas:]

Okay. Thanks for taking the questions.

[Daniel M. Hamburger:]

Thank you.

[Joan Walter:]

Okay, I think we can wrap it up. So we'd like to thank everyone for your questions and remind you that our next results call is scheduled for August 23, when we announce our fiscal 2016 fourth quarter and year-end results. We'd like to thank you for your continued support of DeVry Education Group.

[Operator:]

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