Revenue at DeVry University decreased 20.8%, or $25.1 million, to $95.7 million in the first quarter of fiscal year 2018 compared to the year-ago quarter as a result of decreases in undergraduate and graduate enrollment.
DeVry University enrollment declines have reduced revenue by approximately 50% since fiscal year 2014.
New student enrollment declines will continue to drive down total student enrollment, which will result in revenue declines on the magnitude of the percentage declines in total students. To address the issue of declining enrollment,
DeVry University is focused on implementing management’s transformation strategy, which includes both near-term actions to stabilize enrollments and maintain positive economics and longer-term investments to increase competitiveness and differentiation.
In response, management has focused on increasing cost efficiencies and has reduced costs by approximately 50% over this time period through the following methods:
Management made the decision to close or consolidate certain DeVry University campuses while balancing the potential impact on enrollment and student satisfaction. Since the beginning of fiscal year 2014, DeVry University has closed 40 campus locations and completed additional campus size reductions. This resulted in fiscal year 2017 facility costs that were approximately $34 million, which is 46% lower compared to fiscal year 2014.
As of the commencement of the September 2017 session, DeVry University operates 59 locations and management continues to evaluate campus performance. In September 2017, DeVry University management announced the closure of eight additional campus locations to be completed in early calendar year 2018.
Management has made the decision to sell the DeVry University owned facility in Pomona, California, and is intending to remain in this market in a smaller leased space. Management is also currently renegotiating leases in several other markets to reduce space and lower future operating costs.
Optimizing course scheduling to better utilize classrooms and faculty and simplifying program offerings. The average class size at DeVry University has increased from historical levels of 17 students to 21.9 students in the September 2017 session.
Adjusting staffing and management structure within DeVry University. Total full-time faculty and administrative headcount at DeVry University decreased from 2,595 in fiscal year 2014 to 1,101 in fiscal year 2017. Direct cost of instruction labor costs were approximately $160 million, or 61%, lower in fiscal year 2017 compared to fiscal year 2014. This process of adjusting staffing costs will continue in the near-term as management continually evaluates staffing needs based on enrollment trends. This may result in future staff reductions as well as management realignment. Adtalem home office administration costs have also been reduced and will continue to be evaluated based on the need to support a smaller DeVry University organization. Home office costs allocated to DeVry University declined approximately 16% in the first quarter of fiscal year 2018 compared to the year-ago quarter.
Managing advertising expenditures. In fiscal year 2017, management reduced advertising expense by approximately $19 million, or 15%, compared to the prior year. Advertising expense declined by approximately 20%, or $7 million, in the first quarter of fiscal year 2018 compared to the year-ago quarter and is expected to decline throughout fiscal year 2018 but at a slower rate.