Letter To Our Shareholders

Fellow Owners, Students, Colleagues and Friends:

In an economic environment that is improving but still presents significant challenges for higher education, DeVry Education Group’s strategy of quality + diversification + long-term focus continues to serve us well.

The biggest challenge we face—positioning DeVry University for growth—is largely driven by a two-tier US economy. While those in the upper half of income earners have seen the benefits of economic recovery, the lower half remains wary. Families who lost their homes during the subprime mortgage crisis, or whose members faced long-term unemployment, are reluctant to take on debt even to invest in themselves for the future. College enrollments are down nationwide at community colleges as well as at other public and private institutions; they are down even more among working adults age 25 and over, a significant part of the potential student pool for DeVry University and its Keller Graduate School of Management.(1)

Because we know that we cannot control the economic environment, our strategy is to control what we can in the near term. The results speak for themselves: DeVry Group is strong and stable despite these challenging times, with our Medical and Healthcare and International and Professional Education segments both posting growth in 2015 and DeVry University remaining in positive economic territory. Total postsecondary enrollments were up, driven by our diversification into healthcare and international institutions. And our strong balance sheet, coupled with our lack of debt, enabled us to enter into a new, secured revolving credit agreement that gives us up to $550 million of borrowing capacity—a key element of our capital structure as we pursue our growth initiatives. Our strategy and our successes differentiate DeVry Group from other private-sector educators that are struggling.

DeVry University's Plan for Growth

DeVry University’s plan to return the institution to growth includes three key near-term actions and four key investments to enhance our competitiveness.

Key Actions

1.

Changing the university's physical footprint by investing in a set of local markets where our competitive position is strongest and moving to an online-only model in 14 locations where many students are already studying online

2.

Continuing to reduce our cost structure by reducing facilities costs, and decreasing our national marketing spend by focusing on our strongest local markets

3.

Re-launching the university's brand with a new campaign emphasizing that DeVry University is Different. On Purpose.

Key Investments

1.

Using technology to differentiate DeVry University's teaching and service model, including our unique "connected classroom"

2.

Implementing a programmatic focus to better tailor our programs to students' needs

3.

Improving affordability by optimizing pricing and scholarship offerings

4.

Strengthening relationships with employers via an integrated career services and continuing education team we call "workforce solutions"

One of the clearest examples of our strategy’s success is the strength of our nursing programs. According to Georgetown University, nursing ranks as the fastest-growing health profession at all levels. Georgetown also projects a shortage of 200,000 nurses nationwide by 2020. State schools and community colleges are simply not able to meet the demand. In fact, more than 54,000 qualified applicants to BSN programs were turned away last year because of lack of capacity. Private-sector institutions like Carrington College and Chamberlain College of Nursing are helping to fill the gap.

Culture: Key to execution
We believe that both strategy and culture are critical to success, as execution of our strategy is driven by our strong culture. To illustrate, it was by creating a culture of compliance that we have executed a compliance strategy that has differentiated us from other private-sector institutions. Our culture of care is the driving force that brings our purpose to life. We continue to shape DeVry Group’s culture of Care, characterized by:

  • The excellent service and support we provide to help our students achieve their goals and reach their dreams.
  • Taking care of ourselves and our colleagues, enabling us to bring our best selves to work, so that we can take care of our students.
  • A sense of ownership and accountability for innovating new ways to serve students and colleagues.

Devry Group Purpose, Vision and Values

Purpose

Empower our students to achieve their educational and career goals.

Vision

To be the world's most extraordinary learning organization where students succeed and colleagues thrive.

Values

  • Teamwork: putting the team first
  • Energy: moving quickly, leading change
  • Accountability: ownership and integrity
  • Community: shared sense of responsibility and purpose
  • Heart: serving our students and each other with passion, respect and care

ACADEMIC, OPERATIONAL AND FINANCIAL HIGHLIGHTS
Total revenues of $1.9 billion were down 0.7 percent—a result impacted by the decline of the Brazilian real against the US dollar, without which revenues would have been up 1 percent for the year. Reported net income was $139.9 million versus $134.0 million in the prior year. Net income from continuing operations and excluding special items was $162.4 million versus $170.0 million last year. DeVry Education Group ended 2015 with a cash position of $353 million, down slightly from $358 million last year.

We continued to see strong growth in two segments: Medical and Healthcare, and International and Professional Education. Revenue in our Medical and Healthcare segment—DeVry Medical International (DMI), Chamberlain College of Nursing and Carrington College—grew nearly 12 percent in fiscal 2015, led by growth at Chamberlain and supported by a full year of positive economics at Carrington. This segment is now DeVry Group’s largest, and represents 45 percent of our revenue. Our International and Professional Education segment saw revenue growth of 13.5 percent (in local currency, revenue for this segment grew 29 percent). Revenue in our Business, Technology and Management segment—DeVry University and its Keller Graduate School of Management—was down 14.6 percent in fiscal 2015. We continued to focus on reducing our cost structure, and exceeded our cost reduction target of $100 million for the year. For each dollar of revenue lost in fiscal 2015, we were able to recover 87 cents in cost reductions.

In fiscal 2015, our institutions received national recognition that attests to their academic quality:

  • The Commission on Collegiate Nursing Education approved accreditation for two Chamberlain programs: Our Bachelor of Science in Nursing degree program was re-accredited for 10 years, and our new Doctor of Nursing Practice degree program received its initial grant of accreditation for five years.
  • Chamberlain’s president, Dr. Susan Groenwald, was inducted as a fellow of the American Academy of Nursing and the National League for Nursing in recognition of her contributions to the field of nursing.
  • Becker Professional Education was awarded accreditation by the Accrediting Council for Continuing Education & Training, enhancing Becker’s ability to reach to government agencies, the armed forces and international students.

Operationally, one of the highlights of fiscal 2015 was our continued progress in consolidating Carrington College into a single institution operating under one accrediting body. Carrington’s growth over the past year is a particularly strong achievement in light of the fact that other career colleges across the US are declining. The talented team who led Carrington’s turnaround is currently leading a similar effort at DeVry University.

FROM 2009 TO 2013

QUALITY + DIVERSIFICATION + LONG-TERM FOCUS = GROWTH
DeVry Group has long differentiated itself from its sector via our strategy: focusing on academic quality and strong student outcomes; diversifying our institutions and programs; and building our capacity to sustain quality and growth for the long term.

Quality: The foundation of our success
Quality means delivering career-focused education with strong outcomes for students—ensuring that they are learning, graduating, gaining employment in their fields of study and paying back their loans. It gives us a competitive advantage, because students want to attend schools with proven high-quality outcomes.

For example, we make sure prospective students know that:

  • Chamberlain College of Nursing students passed the National Council Licensure Examination on the first attempt in 2014 at a rate of 84.6 percent, on par with the national rate of 84.9 percent.
  • Students at American University of the Caribbean School of Medicine and Ross University School of Medicine achieved first-time pass rates on Step 1 of the United States Medical Licensing Exam in 2014 of 93 percent and 97 percent, respectively, versus 96 percent nationally.
  • AUC and Ross graduates earned 1,075 residency positions—the highest residency match rate in our history—at hospitals in the US and Canada, including prestigious teaching hospitals such as the Cleveland Clinic Florida and Rush University Medical Center in Chicago.
  • More than 90,000 candidates sat for the American Institute of Certified Public Accountants CPA exam in 2014. Of the fifty-nine who received the Elijah Watt Sells Award for top scorers—53 had prepared with Becker’s CPA Exam Review.
  • Carrington College graduated 67 percent of its students, a rate three times higher than the community-college average.

Our successes not only strengthen our position, but also differentiate DeVry Group institutions from others that are struggling—an important consideration for students who are being careful about where they make their investments in higher education. In our view, quality leads to growth: Investing in quality academic outcomes produces successful students, making our institutions more attractive to prospective students, enabling us to grow, and generating the resources to invest back into further quality and growth initiatives.

Diversification: Smart growth
DeVry Group’s strategy of diversifying across curriculum areas, degree levels and geographies helped to boost overall enrollment across our institutions during fiscal 2015.

To meet demand in fields like healthcare and business, we made targeted investments in new campuses, programs and acquisitions. For example, Chamberlain opened four new campuses this year. With 23,000 students and 21,000 alumni, Chamberlain’s nursing program is currently one of the largest in the US. Its success is attributable in large part to innovations like the Chamberlain Care Model for Student Success, a program that combined assessments and coaching to boost student retention.

Global diversification is another way we maintain strong enrollments; today, approximately a quarter of DeVry Group’s revenues come from outside the US. We continue to expand in Brazil, with three fiscal 2015 acquisitions, including Faculdade Martha Falcão in Manaus, Faculdade Ideal in Belém and Damásio Educacional, a countrywide leader in legal education and bar-exam preparation that currently serves more than 50,000 students. Today, DeVry Brasil comprises 11 institutions with 17 campuses and more than 220 learning centers in Brazil, serving more than 90,000 students. By nearly every measure—academic results, enrollment results, student satisfaction and colleague engagement—fiscal 2015 was our best year ever in Brazil.

International students are also an increasing presence in our US institutions, coming from countries such as China, India, Saudi Arabia and Vietnam. We currently serve more than 1,000 international students and plan to triple that number over the next five years. At Ross University School of Veterinary Medicine, we have broadened our clinical rotation partnerships to hospitals outside the US, with students now able to take clinicals in Australia and a similar program beginning soon in Ireland.

Long-term focus: Investing in the future

Investing in the future of DeVry Group means building and investing in the infrastructure and capabilities that support our growth, including:

  • Process excellence that makes us more efficient and improves service to our students.
  • Strategic marketing capabilities so that we know and serve our students better than anyone else.
  • Workforce solutions, including partnerships with large employers to help them meet their workforce needs. In fiscal 2015, we served more than 7,300 students from employers that included Walmart, Verizon, and the US government; we see these partnerships as a driver of future growth.
  • Educational innovation that improves teaching, learning and student persistence. For example, current students told us they like both the convenience of online classes and the interaction with peers and professors offered by onsite classes—so in partnership with Cisco Systems, we invented the DeVry University Connected Classroom. Leading-edge telepresence technology enabled us to create a virtual classroom where students from multiple locations can attend a class at the same time, turning more than 60 physical locations into one virtual campus.

FROM 2009 TO 2013

COLLEAGUES LEAD THE WAY
While we face continuing challenges at DeVry University, I see our team working incredibly hard on our plan to stabilize enrollments and position the university to compete more effectively. And all over DeVry Group, I see our colleagues putting in tremendous effort as we expand our healthcare, professional and international institutions, leveraging our strong financial position. I want to thank all of them for their work as we continue to improve DeVry Group’s performance.

Sadly, in fiscal 2015 we lost one of those who worked the hardest for our success. This year’s annual report is dedicated to the memory of Dr. Connie Curran, who joined our board in 2003 and was elected board chair in 2013. She passed away in November 2014. Her vision and experience in board governance were tremendous assets to DeVry Group; with her death, we lost an inspiring woman and a wonderful leader, and we miss her enormously.

Christopher Begley assumed the board chairmanship in late 2014. A board member since 2011, he is the founding CEO of Hospira Inc. and brings our board substantial experience as a senior executive in the healthcare industry and as a boardroom leader. Our board also welcomed new member James D. White, chairman, president and CEO of Jamba, Inc., the owner and franchisor of Jamba Juice stores. His strong operational, marketing and leadership skills, as well as his governance experience, align well with the needs of our board.

Another new addition to the DeVry Group family in fiscal 2015 was Lisa M. Sodeika, senior vice president of external relations and regulatory affairs. Lisa succeeds Sharon Thomas Parrott, who retired after a 33-year career with our organization. Sharon was the critical force behind the development of our regulatory and compliance infrastructure and led the effort to develop DeVry University’s Advantage Academy, the dual-degree high school that we pioneered with Chicago Public Schools.

We are fortunate to have such a talented team in place at all levels of DeVry Group. They are the key to the long-term growth we foresee, driven by the worldwide demand for career-focused education. The global economy needs skilled employees, particularly in the healthcare and technology sectors where our institutions excel. Because we are able to attract and retain discerning, motivated students, we have the opportunity to help solve the growing global talent shortage of professionals such as nurses, doctors, engineers and accountants. And we have the opportunity to make a meaningful impact for our students, many of whom are the first in their families to go to college or professional school.

Thank you for your continued support.


Daniel Hamburger
President and CEO
DeVry Education Group

CEO

(1) Source: IPEDs data and The Parthenon Group