Full year revenue increased 8.0% as University
Group total student enrollments grew by 6.4%
Perdoceo Education Corporation (NASDAQ: PRDO) today reported
operating and financial results for the quarter and year ended
December 31, 2019.
FOURTH QUARTER 2019 RESULTS AS
COMPARED TO THE PRIOR YEAR QUARTER
Financial Results
•
Revenue increased by 8.9 percent to $158.5
million as compared to $145.5 million with both universities
contributing to this growth
•
Operating income increased 58.6 percent to
$32.0 million as compared to $20.2 million
•
Adjusted operating income increased 16.3
percent to $34.6 million as compared to $29.7 million*
•
Earnings per diluted share of $0.38 as
compared to earnings per diluted share of $0.20
•
Adjusted earnings per diluted share of
$0.33 as compared to $0.30*
•
Ended the quarter with $294.2 million in
cash, cash equivalents and available-for-sale short-term
investments
Enrollment Metrics
•
CTU’s total student enrollments increased
4.4 percent supported by new student enrollment growth of 8.5
percent
•
AIU’s total student enrollments increased
10.2 percent supported by new student enrollment growth of 12.7
percent
FULL YEAR 2019 RESULTS AS COMPARED TO THE
PRIOR YEAR AND OTHER HIGHLIGHTS
- Revenue increased 8.0 percent to $627.7 million as compared to
$581.3 million, supported by total student enrollment growth at
both universities
- Operating income increased 21.3 percent to $86.5 million as
compared to $71.3 million
- Adjusted operating income increased 27.7 percent to $134.3
million as compared to $105.2 million*
- Earnings per diluted share of $0.97 as compared to earnings per
diluted share of $0.77
- Adjusted earnings per diluted share of $1.37 as compared to
$1.05*
- New student enrollments increased 14.6 percent contributing to
total enrollment growth of 6.4 percent; positively impacting these
trends was the academic calendar at AIU
- Operating and cost efficiencies continue to be re-invested in
student support functions, technology initiatives and data
analytics
- The Company expects the acquisition of Trident University
International to close in early March 2020
*See GAAP (U.S. generally accepted accounting principles) to
non-GAAP reconciliation attached to this press release
“We are excited to continue the journey of educating students
under our new name, Perdoceo, which in Latin means ‘to teach,
inform or instruct thoroughly,’” said Todd Nelson, President and
Chief Executive Officer. “Fourth quarter 2019 marked a positive
close to the year and we are proud to serve over 36,000 students
pursuing postsecondary studies across our academic institutions.
Fourth quarter results highlight the success of our operating
strategy that focuses on student experiences, retention and
academic outcomes, while making investments in technology and
leveraging data analytics to further support our students and
enhance their learning. Looking ahead, we remain committed to the
objective of sustainable and responsible growth, and look forward
to closing the Trident acquisition and its effective integration
into our operations.”
REVENUE
- For the quarter ended December 31, 2019, total revenue of
$158.5 million increased 8.9 percent compared to total revenue of
$145.5 million for the prior year quarter.
- For the year ended December 31, 2019, total revenue of $627.7
million increased 8.0 percent compared to total revenue of $581.3
million for the prior year.
- Both universities contributed to the revenue growth that has
been supported by positive student enrollment trends.
For the Quarter Ended December
31,
For the Year Ended December
31,
Revenue ($ in
thousands)
2019
2018
% Change
2019
2018
% Change
CTU
$
102,613
$
94,782
8.3
%
$
392,263
$
375,770
4.4
%
AIU
55,815
50,716
10.1
%
235,374
204,920
14.9
%
Total University Group
158,428
145,498
8.9
%
627,637
580,690
8.1
%
Corporate and Other (1)
23
7
NM
67
606
NM
Total
$
158,451
$
145,505
8.9
%
$
627,704
$
581,296
8.0
%
(1)
Corporate and Other includes closed
campuses which no longer meet the criteria to be reported as a
separate operating segment.
TOTAL AND NEW STUDENT ENROLLMENTS
- For the quarter ended December 31, 2019, new student
enrollments at CTU and AIU increased 8.5 percent and 12.7 percent,
respectively, as compared to the prior year quarter.
- As of December 31, 2019, CTU’s and AIU’s total student
enrollments increased 4.4 percent and 10.2 percent, respectively,
supported by new student enrollment growth of 7.0 percent and 26.6
percent, respectively, as compared to the prior year.
- Student enrollment growth was positively impacted by
investments in student support functions and consistent levels of
prospective student interest. Additionally, AIU’s full year new
student enrollments were positively impacted by the timing of its
academic calendar.
As of December 31,
Total Student
Enrollments
2019
2018
% Change
CTU
23,600
22,600
4.4
%
AIU
13,000
11,800
10.2
%
Total University Group
36,600
34,400
6.4
%
For the Quarter Ended December
31,
For the Year Ended December
31,
New Student
Enrollments
2019
2018
% Change
2019
2018
% Change
CTU
6,900
6,360
8.5
%
25,250
23,600
7.0
%
AIU
3,720
3,300
12.7
%
19,050
15,050
26.6
%
Total University Group
10,620
9,660
9.9
%
44,300
38,650
14.6
%
OPERATING INCOME (LOSS)
- For the quarter ended December 31, 2019, operating income of
$32.0 million increased 58.6 percent compared to $20.2 million for
the prior year quarter.
- For the year ended December 31, 2019, operating income of $86.5
million increased 21.3 percent compared to $71.3 million for the
prior year.
For the Quarter Ended December
31,
For the Year Ended December
31,
Operating Income
($ in thousands)
2019
2018
% Change
2019
2018
% Change
CTU (1)
$
36,872
$
31,061
18.7
%
$
108,602
$
111,623
-2.7
%
AIU (2)
4,977
4,555
9.3
%
16,413
8,176
100.7
%
Total University Group
41,849
35,616
17.5
%
125,015
119,799
4.4
%
Corporate and Other (3)
(9,836
)
(15,433
)
36.3
%
(38,553
)
(48,501
)
20.5
%
Total
$
32,013
$
20,183
58.6
%
$
86,462
$
71,298
21.3
%
(1)
The full year includes an expense of $18.6
million related to the FTC settlement.
(2)
The full year includes an expense of $11.4
million related to the FTC settlement.
(3)
Corporate and Other includes closed
campuses which no longer meet the criteria to be reported as a
separate operating segment. The following is a summary of the
operating losses related to the closed campuses which is included
within Corporate and Other for the quarters and years ended
December 31, 2019 and 2018, respectively (dollars in
thousands):
For the Quarter Ended December
31,
For the Year Ended December
31,
Operating Loss ($
in thousands)
2019
2018
% Change
2019
2018
% Change
Closed Campuses (4)
$
(1,004
)
$
(9,739
)
89.7
%
$
(13,805
)
$
(31,903
)
56.7
%
(4)
The full year 2019 operating loss related
to the closed campuses includes a legal settlement expense of $7.1
million for the Oregon arbitrations matter as compared to legal
settlement expenses of $5.0 million related to the multi-state AG
matter recorded during the quarter ended December 31, 2018 and $9.6
million related to the Surrett matter recorded during the full year
ended December 31, 2018.
ADJUSTED OPERATING INCOME
The Company believes it is useful to present non-GAAP financial
measures, which exclude certain significant and non-cash items, as
a means to understand the performance of its operations. (See table
below and the GAAP to non-GAAP reconciliation attached to this
press release for further details.)
- For the quarter ended December 31, 2019, adjusted operating
income of $34.6 million increased 16.3 percent compared to adjusted
operating income of $29.7 million for the prior year quarter.
- For the year ended December 31, 2019, adjusted operating income
of $134.3 million increased 27.7 percent compared to adjusted
operating income of $105.2 million for the prior year.
For the Quarter Ended December
31,
For the Year Ended December
31,
Adjusted
Operating Income ($ in thousands)
2019
2018
2019
2018
Total
Company:
Operating income
$
32,013
$
20,183
$
86,462
$
71,298
Depreciation and amortization
2,393
2,345
9,145
9,394
Lease expenses for vacated space (1)
177
2,642
1,630
8,416
Severance and related costs, net of
cancellations (2)
-
(443
)
-
1,455
Significant legal settlements (3)
-
5,000
37,100
14,595
Adjusted Operating Income --
Total Company
$
34,583
$
29,727
$
134,337
$
105,158
Increase (Decrease)
16.3
%
27.7
%
(1)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease
income.
(2)
Severance and related costs, net of
cancellations, include charges related to significant restructuring
actions during 2018, which were primarily recorded within the
University Group. These restructuring charges do not regularly
occur and are not considered part of ongoing operating results.
(3)
Significant legal settlements relate to
the FTC and the Oregon arbitrations matters recorded during 2019
and the multi-state AG and Surrett matters recorded during
2018.
NET INCOME AND EARNINGS PER DILUTED SHARE
For the quarter ended December 31, 2019, the Company
recorded:
- Net income of $27.5 million compared to net income of $14.1
million for the prior year quarter.
- Earnings per diluted share of $0.38 compared to earnings per
diluted share of $0.20 for the prior year quarter.
- Adjusted earnings per diluted share of $0.33 compared to
adjusted earnings per diluted share of $0.30 for the prior year
quarter. (See table below and the GAAP to non-GAAP reconciliation
attached to this press release for further details.)
For the year ended December 31, 2019, the Company recorded:
- Net income of $70.0 million compared to net income of $55.2
million for the prior year.
- Earnings per diluted share of $0.97 compared to earnings per
diluted share of $0.77 for the prior year.
- Adjusted earnings per diluted share of $1.37 compared to
adjusted earnings per diluted share of $1.05 for the prior year.
(See table below and the GAAP to non-GAAP reconciliation attached
to this press release for further details.)
For the Quarter Ended December
31,
For the Year Ended December
31,
2019
2018
2019
2018
Reported Earnings Per Diluted
Share
$
0.38
$
0.20
$
0.97
$
0.77
Pre-tax adjustments included in
operating expenses:
Lease expenses for vacated space (1)
-
0.04
0.02
0.12
Severance and related costs, net of
cancellations (2)
-
-
-
0.02
Significant legal settlements (3)
-
0.07
0.51
0.21
Total pre-tax adjustments
$
-
$
0.11
$
0.53
$
0.35
Tax effect of adjustments (4)
-
(0.01
)
(0.13
)
(0.07
)
Tax effect of change in settlement
deductibility (5)
(0.05
)
-
-
-
Total adjustments after tax
(0.05
)
0.10
0.40
0.28
Adjusted Earnings Per Diluted
Share
$
0.33
$
0.30
$
1.37
$
1.05
(1)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease
income.
(2)
Severance and related costs, net of
cancellations, include charges related to significant restructuring
actions during 2018, which were primarily recorded within the
University Group. These restructuring charges do not regularly
occur and are not considered part of ongoing operating results.
(3)
Significant legal settlements relate to
the FTC and Oregon arbitrations matters recorded during 2019 and
the multi-state AG and Surrett matters recorded during 2018.
(4)
The tax effect of adjustments was
calculated by multiplying the pre-tax adjustments with a tax rate
of 25.0%. This tax rate is intended to reflect federal and state
taxable jurisdictions as well as the nature of the adjustments. A
legal settlement of $5.0 million for the year ended December 31,
2018 related to the multi-state AG matter was not deductible for
tax purposes and therefore does not include a tax effect.
(5)
A legal settlement of $30.0 million
related to the FTC matter was an adjustment from operating income
during the second quarter of 2019 to calculate adjusted operating
income. However, only $6.7 million of this adjustment met the
criteria for tax deductibility during the second quarter. During
the fourth quarter of 2019, an additional $23.0 million related to
the FTC settlement met the criteria to be deductible for tax
purposes. This amount was previously considered a non-deductible
permanent item for tax purposes through September 30, 2019. As a
result, the tax benefit of the change in deductibility for the
$23.0 million is reflected during the fourth quarter of 2019 and
has been adjusted to fully reflect the proportional impact of the
tax non-deductibility on the second and third quarters of 2019. The
impact of the non-deductibility was not proportionally reflected in
the reported adjusted earnings per diluted share for the second and
third quarters of 2019 which would have decreased by $0.05 and
increased by $0.02, respectively. For the full year 2019,
approximately $29.7 million is now considered deductible for tax
purposes. The quarterly reversals and adjustments of the
proportional impacts of the non-deductibility has no effect for the
full year 2019.
BALANCE SHEET AND CASH FLOW
- For the quarter ended December 31, 2019, net cash used in
operating activities was $12.3 million compared to net cash
provided by operating activities of $38.7 million for the prior
year quarter. The fourth quarter of 2019 included a $30.0 million
payment to the U.S. Federal Trade Commission, which amount was
previously held in escrow and recorded as restricted cash.
- For the year ended December 31, 2019, net cash provided by
operating activities was $73.1 million compared to net cash
provided by operating activities of $57.0 million for the prior
year.
- As of December 31, 2019 and December 31, 2018, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments totaled $294.2 million and $229.2 million,
respectively.
- During the fourth quarter of 2019, the Company repurchased 0.2
million shares of its common stock in open market transactions at
an aggregate cost of $3.9 million. The average price per share was
$16.49. As of December 31, 2019, $46.1 million remained available
under our previously authorized stock repurchase program.
For the Quarter Ended December
31,
For the Year Ended December
31,
Selected Cash
Flow Items ($ in thousands)
2019
2018
% Change
2019
2018
% Change
Net cash (used in) provided by operating
activities
$
(12,306
)
$
38,692
-131.8
%
$
73,085
$
56,987
28.2
%
Capital expenditures
$
1,954
$
2,780
-29.7
%
$
5,174
$
6,732
-23.1
%
OUTLOOK
The Company is providing the following outlook, subject to the
key assumptions identified below. Please see the GAAP to non-GAAP
reconciliation for adjusted operating income and adjusted earnings
per diluted share attached to this press release for further
details. This outlook reflects the Company’s expectation of growth
in new and total student enrollments at both universities for 2020.
Further, for the first quarter of 2020, the Company expects growth
in CTU’s new student enrollments as compared to the prior year
quarter. AIU’s first quarter new student enrollments, however, are
expected to decline due to 31 percent less enrollment days in the
first quarter of 2020 as compared to the prior year quarter,
although this decline is expected to be more than offset with new
student enrollment growth in the second quarter which has
approximately 50 percent more enrollment days than the prior year
quarter. The Company expects that AIU’s enrollment days for the
third and fourth quarters of 2020 will be relatively comparable to
the respective prior year periods.
Total Company Outlook
For Quarter Ending March
31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020
2019
2020
2019
Operating Income
$34.0M - $35.5M
$30.0M
$135.5M - $140.5M
$86.5M
Adjusted Operating Income
$37.5M - $39.0M
$33.0M
$147.0M - $152.0M
$134.3M
Earnings Per Diluted Share
$0.37 - $0.39
$0.35
$1.43 - $1.48
$0.97
Adjusted Earnings Per Diluted Share
$0.38 - $0.40
$0.36
$1.44 - $1.49
$1.37
Operating income, which is the most directly comparable GAAP
measure to adjusted operating income, and earnings per diluted
share may not follow the same trends stated in the outlook above
because of adjustments made for certain significant and non-cash
items such as lease expenses for vacated space offset with any
sublease income as well as depreciation, amortization, asset
impairment charges, significant restructuring charges and
significant legal settlements. The operating income, adjusted
operating income, earnings per share, adjusted earnings per share
and enrollment outlook provided above for 2020 are based on the
following key assumptions and factors, among others: (i)
prospective student interest in the Company’s programs remains
consistent with recent experience, (ii) initiatives and investments
in student-serving operations continue to positively impact
enrollment trends within the University Group, (iii) no material
changes in the current legal or regulatory environment, and
excludes legal and regulatory liabilities and other related impacts
which are not probable and estimable at this time, and any impact
of new or proposed regulations, including the “borrower defense to
repayment” regulations, (iv) no significant operating impacts from
the settlements with the U.S. Federal Trade Commission and state
attorneys general or other legal or regulatory matters, (v) no
material changes in the estimated amount of compensation expense
that could be impacted by changes in the Company’s stock price,
(vi) earnings per diluted share outlook assumes an effective income
tax rate of approximately 25% for the first quarter and 26% for the
full year, (vii) any future impact from the Company’s stock
repurchase program is excluded, and (viii) any results of
operations from Trident University are excluded. Although these
estimates and assumptions are based upon management’s good faith
beliefs regarding current and future circumstances and actions that
may be undertaken, actual results could differ materially from
these estimates. In addition, decisions we make in the future as we
continue to evaluate diverse strategies to enhance shareholder
value may impact the outlook provided above.
CONFERENCE CALL INFORMATION
Perdoceo Education Corporation will host a conference call on
Wednesday, February 19, 2020 at 5:30 p.m. Eastern time to discuss
its fourth quarter and full year 2019 results and 2020 outlook.
Interested parties can access the live webcast of the conference at
www.perdoceoed.com in the Investor Relations section of the
website. Participants can also listen to the conference call by
dialing 1-844-378-6484 (domestic) or 1-412-542-4179
(international). Please log-in or dial-in at least 10 minutes prior
to the start time to ensure a connection. An archived version of
the webcast will be accessible for 90 days at www.perdoceoed.com in
the Investor Relations section of the website.
ABOUT PERDOCEO EDUCATION CORPORATION
Perdoceo’s academic institutions offer a quality postsecondary
education primarily online to a diverse student population, along
with campus-based and blended learning programs. The Company’s two
regionally accredited universities – Colorado Technical University
(“CTU”) and American InterContinental University (“AIU”) – provide
degree programs through the master’s or doctoral level as well as
associate and bachelor’s levels. Both universities offer students
industry relevant and career-focused degree programs that are
designed to meet the educational needs of today’s busy adults. CTU
and AIU continue to show innovation in higher education, advancing
new personalized learning technologies like their
intellipath® learning platform and using data analytics and
technology to support students and enhance learning. Perdoceo is
committed to providing quality education that closes the gap
between learners who seek to advance their careers and employers
needing a qualified workforce.
A listing of university locations and web links to Perdoceo
institutions can be found at www.perdoceoed.com.
Except for the historical and present factual information
contained herein, the matters set forth in this release, including
statements identified by words such as “believe,” “will,” “expect,”
“continue,” “outlook,” “remain,” “look forward to,” “should” and
similar expressions, are forward-looking statements as defined in
Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are based on information currently available to us
and are subject to various assumptions, risks, uncertainties and
other factors that could cause our results of operations, financial
condition, cash flows, performance, business prospects and
opportunities to differ materially from those expressed in, or
implied by, these statements. Except as expressly required by the
federal securities laws, we undertake no obligation to update or
revise such factors or any of the forward-looking statements
contained herein to reflect future events, developments or changed
circumstances, or for any other reason. These risks and
uncertainties, the outcomes of which could materially and adversely
affect our financial condition and operations, include, but are not
limited to, the following: declines in enrollment or interest in
our programs; our continued compliance with and eligibility to
participate in Title IV Programs under the Higher Education Act of
1965, as amended, and the regulations thereunder (including the
90-10, financial responsibility and administrative capability
standards prescribed by the U.S. Department of Education), as well
as applicable accreditation standards and state regulatory
requirements; the impact of recently effective and recently adopted
“borrower defense to repayment” regulations; rulemaking by the U.S.
Department of Education or any state or accreditor and increased
focus by Congress and governmental agencies on, or increased
negative publicity about, for-profit education institutions (in
particular as these risks and uncertainties may be exacerbated
leading up to and following the 2020 U.S. presidential election);
the operating impact of the settlements with the FTC and state
attorneys general; the success of our initiatives to improve
student experiences, retention and academic outcomes; the ability
of our student admissions and advising centers to achieve
anticipated operating performance; our ability to successfully
complete the acquisition of Trident University International and
integrate its business into AIU’s operations; increased
competition; the impact of management changes; and changes in the
overall U.S. economy. Further information about these and other
relevant risks and uncertainties may be found in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2019 and
its subsequent filings with the Securities and Exchange
Commission.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(In thousands)
December
December 31,
2019
2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents,
unrestricted
$
108,687
$
32,394
Restricted cash
-
337
Short-term investments
185,488
196,428
Total cash and cash equivalents,
restricted cash and short-term investments
294,175
229,159
Student receivables, net
55,018
28,751
Receivables, other, net
1,381
2,567
Prepaid expenses
7,299
7,771
Inventories
576
763
Other current assets
1,936
437
Total current assets
360,385
269,448
NON-CURRENT ASSETS:
Property and equipment, net
26,006
30,048
Right of use asset, net
50,366
-
Goodwill
87,356
87,356
Intangible assets, net
7,900
7,900
Student receivables, net
1,244
942
Deferred income tax assets, net
60,169
81,628
Other assets
5,639
4,993
Assets of discontinued operations
81
178
TOTAL ASSETS
$
599,146
$
482,493
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Lease liability - operating
$
11,784
$
-
Accounts payable
11,533
9,195
Accrued expenses:
Payroll and related benefits
27,616
24,530
Advertising and marketing costs
10,479
9,300
Income taxes
1,376
1,472
Other
16,375
19,668
Deferred revenue
24,647
32,351
Liabilities of discontinued operations
3
536
Total current liabilities
103,813
97,052
NON-CURRENT LIABILITIES:
Lease liability - operating
52,391
-
Deferred rent obligations
-
12,745
Other liabilities
11,647
17,493
Total non-current liabilities
64,038
30,238
STOCKHOLDERS' EQUITY:
Preferred stock
-
-
Common stock
860
852
Additional paid-in capital
639,335
628,295
Accumulated other comprehensive income
(loss)
344
(298
)
Accumulated earnings (deficit)
18,071
(52,946
)
Treasury stock
(227,315
)
(220,700
)
Total stockholders' equity
431,295
355,203
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
599,146
$
482,493
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
(In thousands, except per share
amounts and percentages)
For the Quarter Ended December
31,
2019
% of
Total
Revenue
2018
% of
Total
Revenue
REVENUE:
Tuition and fees
$
157,758
99.6
%
$
144,809
99.5
%
Other
693
0.4
%
696
0.5
%
Total revenue
158,451
145,505
OPERATING EXPENSES:
Educational services and facilities
24,949
15.7
%
25,460
17.5
%
General and administrative
99,096
62.5
%
97,517
67.0
%
Depreciation and amortization
2,393
1.5
%
2,345
1.6
%
Total operating expenses
126,438
79.8
%
125,322
86.1
%
Operating income
32,013
20.2
%
20,183
13.9
%
OTHER INCOME:
Interest income
1,662
1.0
%
1,213
0.8
%
Interest expense
(42
)
0.0
%
(358
)
-0.2
%
Miscellaneous expense
(33
)
0.0
%
(29
)
0.0
%
Total other income
1,587
1.0
%
826
0.6
%
PRETAX INCOME
33,600
21.2
%
21,009
14.4
%
Provision for income taxes
6,066
3.8
%
7,034
4.8
%
INCOME FROM CONTINUING
OPERATIONS
27,534
17.4
%
13,975
9.6
%
(Loss) income from discontinued
operations, net of tax
(18
)
0.0
%
96
0.1
%
NET INCOME
27,516
17.4
%
14,071
9.7
%
OTHER COMPREHENSIVE LOSS, net of
tax:
Foreign currency translation
adjustments
89
3
Unrealized gain on investments
(131
)
(30
)
Total other comprehensive loss
(42
)
(27
)
COMPREHENSIVE INCOME
$
27,474
$
14,044
NET INCOME PER SHARE - BASIC:
Income from continuing operations
$
0.39
$
0.20
(Loss) income from discontinued
operations
-
-
Net income per share
$
0.39
$
0.20
NET INCOME PER SHARE -DILUTED:
Income from continuing operations
$
0.38
$
0.20
(Loss) income from discontinued
operations
-
-
Net income per share
$
0.38
$
0.20
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
70,263
69,765
Diluted
72,078
71,583
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME AND
COMPREHENSIVE INCOME
(In thousands, except per share
amounts and percentages)
For the Year Ended December
31,
2019
% of
Total
Revenue
2018
% of
Total
Revenue
REVENUE:
Tuition and fees
$
625,056
99.6
%
$
578,545
99.5
%
Other
2,648
0.4
%
2,751
0.5
%
Total revenue
627,704
581,296
OPERATING EXPENSES:
Educational services and facilities
101,944
16.2
%
109,897
18.9
%
General and administrative
430,153
68.5
%
390,707
67.2
%
Depreciation and amortization
9,145
1.5
%
9,394
1.6
%
Total operating expenses
541,242
86.2
%
509,998
87.7
%
Operating income
86,462
13.8
%
71,298
12.3
%
OTHER INCOME:
Interest income
6,392
1.0
%
3,539
0.6
%
Interest expense
(167
)
0.0
%
(681
)
-0.1
%
Miscellaneous income
335
0.1
%
196
0.0
%
Total other income
6,560
1.0
%
3,054
0.5
%
PRETAX INCOME
93,022
14.8
%
74,352
12.8
%
Provision for income taxes
22,428
3.6
%
18,561
3.2
%
INCOME FROM CONTINUING
OPERATIONS
70,594
11.2
%
55,791
9.6
%
Loss from discontinued operations, net of
tax
(612
)
-0.1
%
(610
)
-0.1
%
NET INCOME
69,982
11.1
%
55,181
9.5
%
OTHER COMPREHENSIVE INCOME (LOSS), net
of tax:
Foreign currency translation
adjustments
(41
)
(100
)
Unrealized gain (loss) on investments
683
(34
)
Total other comprehensive income
(loss)
642
(134
)
COMPREHENSIVE INCOME
$
70,624
$
55,047
NET INCOME (LOSS) PER SHARE -
BASIC:
Income from continuing operations
$
1.01
$
0.80
Loss from discontinued operations
(0.01
)
(0.01
)
Net income per share
$
1.00
$
0.79
NET INCOME (LOSS) PER SHARE -
DILUTED:
Income from continuing operations
$
0.98
$
0.78
Loss from discontinued operations
(0.01
)
(0.01
)
Net income per share
$
0.97
$
0.77
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
70,088
69,598
Diluted
72,085
71,482
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
For the Year Ended December
31,
2019
2018
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
69,982
$
55,181
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense
9,145
9,394
Bad debt expense
43,454
31,940
Compensation expense related to
share-based awards
9,274
5,614
Loss on disposition of asset
14
-
Deferred income taxes
21,556
17,863
Changes in operating assets and
liabilities:
Student receivables, gross
(33,697
)
(10,541
)
Allowance for doubtful accounts
(36,326
)
(29,646
)
Other receivables, net
1,189
(1,286
)
Inventories, prepaid expenses, and other
current assets
(1,180
)
3,053
Deposits and other non-current assets
(489
)
711
Accounts payable
2,320
698
Accrued expenses and deferred rent
obligations
5,066
(35,448
)
Deferred tuition revenue
(7,704
)
9,454
Right of use asset and lease liability
(9,519
)
-
Net cash provided by operating
activities
73,085
56,987
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of available-for-sale
investments
(449,367
)
(309,784
)
Sales of available-for-sale
investments
462,325
275,024
Purchases of property and equipment
(5,174
)
(6,732
)
Other
(85
)
-
Net cash provided by (used in) investing
activities
7,699
(41,492
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Purchase of treasury stock
(3,875
)
-
Issuance of common stock
1,774
1,682
Payments of employee tax associated with
stock compensation
(2,740
)
(3,345
)
Net cash used in financing activities
(4,841
)
(1,663
)
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES ON CASH AND CASH EQUIVALENTS:
13
-
NET INCREASE IN CASH AND CASH
EQUIVALENTS
75,956
13,832
CASH AND CASH EQUIVALENTS, beginning of
the period
32,731
18,899
CASH AND CASH EQUIVALENTS, end of the
period
$
108,687
$
32,731
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Quarter Ended December
31,
2019
2018
REVENUE:
CTU
$
102,613
$
94,782
AIU
55,815
50,716
Total University Group
158,428
145,498
Corporate and Other (1)
23
7
Total
$
158,451
$
145,505
OPERATING INCOME (LOSS):
CTU
$
36,872
$
31,061
AIU
4,977
4,555
Total University Group
41,849
35,616
Corporate and Other (1)
(9,836
)
(15,433
)
Total
$
32,013
$
20,183
OPERATING MARGIN (LOSS):
CTU
35.9
%
32.8
%
AIU
8.9
%
9.0
%
Total University Group
26.4
%
24.5
%
Corporate and Other (1)
NM
NM
Total
20.2
%
13.9
%
(1)
Corporate and Other includes closed
campuses which no longer meet the criteria to be reported as a
separate operating segment. Operating losses related to the closed
campuses were $1.0 million and $9.7 million for the quarters ended
December 31, 2019 and 2018, respectively. The prior year quarter
operating loss for the closed campuses includes a legal settlement
expense of $5.0 related to the multi-state AG matter.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Year Ended December
31,
2019
2018
REVENUE:
CTU
$
392,263
$
375,770
AIU
235,374
204,920
Total University Group
627,637
580,690
Corporate and Other (1)
67
606
Total
$
627,704
$
581,296
OPERATING INCOME (LOSS):
CTU (2)
$
108,602
$
111,623
AIU (3)
16,413
8,176
Total University Group
125,015
119,799
Corporate and Other (1)
(38,553
)
(48,501
)
Total
$
86,462
$
71,298
OPERATING MARGIN (LOSS):
CTU (2)
27.7
%
29.7
%
AIU (3)
7.0
%
4.0
%
Total University Group
19.9
%
20.6
%
Corporate and Other (1)
NM
NM
Total
13.8
%
12.3
%
(1)
Corporate and Other includes closed
campuses which no longer meet the criteria to be reported as a
separate operating segment. Operating losses related to the closed
campuses were $13.8 million and $31.9 million for the years ended
December 31, 2019 and 2018, respectively. The current year
operating loss includes a legal settlement expense of $7.1 million
related to the Oregon arbitrations matter as compared to $5.0
million related to the multi-state AG matter and $9.6 million
related to the Surrett matter in the prior year.
(2)
The full year includes an expense of $18.6
million related to the FTC settlement.
(3)
The full year includes an expense of $11.4
million related to the FTC settlement.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1)
(In thousands, unless otherwise
noted)
For the Quarter Ended December
31,
For the Year Ended December
31,
ACTUAL
ACTUAL
Adjusted
Operating Income
2019
2018
2019
2018
Total
Company
Operating income
$
32,013
$
20,183
$
86,462
$
71,298
Depreciation and amortization
2,393
2,345
9,145
9,394
Lease expenses for vacated space (2)
177
2,642
1,630
8,416
Severance and related costs, net of
cancellations (3)
-
(443
)
-
1,455
Significant legal settlements (4)
-
5,000
37,100
14,595
Adjusted Operating Income -- Total
Company
$
34,583
$
29,727
$
134,337
$
105,158
For the 1st Quarter Ending
March 31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020
2019
2020
2019
Total
Company
Operating income
$34M - $35.5M
$
29,971
$135.5M - $140.5M
$
86,462
Depreciation and amortization
2.7
2,233
9.8
9,145
Lease expenses for vacated space (2)
0.8
766
1.7
1,630
Significant legal settlements (4)
-
-
-
37,100
Adjusted Operating Income -- Total
Company
$37.5M - $39M
$
32,970
$147M - $152M
$
134,337
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1) (cont’d)
For the Quarter Ended December
31,
For the Year Ended December
31,
2019
2018
2019
2018
Reported Earnings Per Diluted
Share
$
0.38
$
0.20
$
0.97
$
0.77
Pre-tax adjustments included in
operating expenses:
Lease expenses for vacated space (2)
-
0.04
0.02
0.12
Severance and related costs, net of
cancellations (3)
-
-
-
0.02
Significant legal settlements (4)
-
0.07
0.51
0.21
Total pre-tax adjustments
$
-
$
0.11
$
0.53
$
0.35
Tax effect of adjustments (5)
-
(0.01
)
(0.13
)
(0.07
)
Tax effect of change in settlement
deductibility (6)
(0.05
)
-
-
-
Total adjustments after tax
(0.05
)
0.10
0.40
0.28
Adjusted Earnings Per Diluted
Share
$
0.33
$
0.30
$
1.37
$
1.05
For the 1st Quarter Ending
March 31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020
2019
2020
2019
Reported Earnings Per Diluted
Share
$0.37 - $0.39
$
0.35
$1.43 - $1.48
$
0.97
Pre-tax adjustments included in
operating expenses:
Lease expenses for vacated space (2)
0.01
0.01
0.02
0.02
Significant legal settlements (4)
-
-
-
0.51
Total pre-tax adjustments
$
0.01
$
0.01
$
0.02
$
0.53
Tax effect of adjustments (5)
-
-
(0.01
)
(0.13
)
Total adjustments after tax
0.01
0.01
0.01
0.40
Adjusted Earnings Per Diluted
Share
$0.38 - $0.40
$
0.36
$1.44 - $1.49
$
1.37
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1) (cont’d)
(1)
The Company believes it is useful to
present non-GAAP financial measures which exclude certain
significant and non-cash items as a means to understand the
performance of its operations. As a general matter, the Company
uses non-GAAP financial measures in conjunction with results
presented in accordance with GAAP to help analyze the performance
of its operations, assist with preparing the annual operating plan,
and measure performance for some forms of compensation. In
addition, the Company believes that non-GAAP financial information
is used by analysts and others in the investment community to
analyze the Company’s historical results and to provide estimates
of future performance.
The Company believes adjusted operating
income and adjusted earnings per diluted share allow it to analyze
and assess its operations and compare current operating results
with the operational performance of other companies in its industry
because it does not give effect to potential differences caused by
items it does not consider reflective of underlying operating
performance, such as restructuring charges and significant legal
settlements. In evaluating adjusted operating income and adjusted
earnings per diluted share, investors should be aware that in the
future the Company may incur expenses similar to the adjustments
presented above. The presentation of adjusted operating income and
adjusted earnings per diluted share should not be construed as an
inference that the Company's future results will be unaffected by
expenses that are unusual, non-routine or non-recurring. Adjusted
operating income and adjusted earnings per diluted share have
limitations as an analytical tool, and should not be considered in
isolation, or as a substitute for net income, operating income,
earnings per diluted share, or any other performance measure
derived in accordance and reported under GAAP or as an alternative
to cash flow from operating activities or as a measure of
liquidity.
Non-GAAP financial measures, when viewed
in a reconciliation to corresponding GAAP financial measures,
provide an additional way of viewing the Company’s results of
operations and the factors and trends affecting the Company’s
business. Non-GAAP financial measures should be considered as a
supplement to, and not as a substitute for, or superior to, the
corresponding financial results presented in accordance with
GAAP.
(2)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease
income.
(3)
Severance and related costs, net of
cancellations, include charges related to significant restructuring
actions during 2018, which were primarily recorded within the
University Group. These restructuring charges do not regularly
occur and are not considered part of ongoing operating results.
(4)
Significant legal settlements relate to
the FTC and Oregon arbitrations matters recorded during 2019 and
the Surrett and multi-state AG matters recorded during 2018.
(5)
The tax effect of adjustments was
calculated by multiplying the pre-tax adjustments with a tax rate
of 25.0%. This tax rate is intended to reflect federal and state
taxable jurisdictions as well as the nature of the adjustments. A
legal settlement of $5.0 million for the multi-state AG settlement
recorded during the year ended December 31, 2018 was not deductible
for tax purposes and therefore does not include a tax effect.
(6)
A legal settlement of $30.0 million
related to the FTC matter was an adjustment from operating income
during the second quarter of 2019 to calculate adjusted operating
income. However, only $6.7 million of this adjustment met the
criteria for tax deductibility during the second quarter. During
the fourth quarter of 2019, an additional $23.0 million related to
the FTC settlement met the criteria to be deductible for tax
purposes. This amount was previously considered a non-deductible
permanent item for tax purposes through September 30, 2019. As a
result, the tax benefit of the change in deductibility for the
$23.0 million is reflected during the fourth quarter of 2019 and
has been adjusted to fully reflect the proportional impact of the
tax non-deductibility on the second and third quarters of 2019. The
impact of the non-deductibility was not proportionally reflected in
the reported adjusted earnings per diluted share for the second and
third quarters of 2019 which would have decreased by $0.05 and
increased by $0.02, respectively. For the full year 2019,
approximately $29.7 million is now considered deductible for tax
purposes. The quarterly reversals and adjustments of the
proportional impacts of the non-deductibility has no effect for the
full year 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200219005965/en/
Investors: Alpha IR Group Chris Hodges or Brooks Hamilton
(312) 445-2870 PRDO@alpha-ir.com
Or
Media: Perdoceo Education Corporation (847) 585-2600
media@perdoceoed.com
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