Second quarter revenue increased 12.5%
supported by enrollment growth across both universities
Perdoceo Education Corporation (NASDAQ: PRDO) today reported
operating and financial results for the quarter and year to date
ended June 30, 2020.
Second Quarter 2020
Results as Compared to the Prior Year Quarter
Financial Results
- Revenue increased by 12.5 percent to $176.0 million with both
universities contributing to the growth
- Operating income increased to $37.4 million as compared to $0.2
million
- Adjusted operating income increased to $41.7 million as
compared to $32.8 million*
- Earnings per diluted share of $0.40 compared to loss per
diluted share of $0.01
- Adjusted earnings per diluted share of $0.41 as compared to
$0.34*
- Ended the quarter with $345.8 million in cash, cash
equivalents, restricted cash and available-for-sale short-term
investments
Enrollment Metrics
- Total student enrollments increased 20.1 percent, supported by
new student enrollment growth at both universities. CTU’s total
student enrollments increased 4.0 percent while AIU’s total student
enrollments increased 52.7 percent.
- New student enrollments increased 45.3 percent with both
universities contributing to this growth. CTU experienced an
increase of 4.5 percent in new student enrollments while AIU’s new
student enrollments increased by 118.8 percent. AIU’s new student
enrollments were positively impacted by the acquisition of
substantially all of the assets of Trident University International
(the “Trident acquisition”) as well as approximately 50 percent
more enrollment days for the quarter.
Year to Date 2020
Results as Compared to the Prior Year to Date
Financial Results
- Revenue increased by 10.4 percent to $347.0 million with both
universities contributing to the growth
- Operating income increased to $74.7 million as compared to
$30.2 million
- Adjusted operating income increased to $82.5 million as
compared to $65.8 million*
- Earnings per diluted share of $0.80 as compared to $0.34
- Adjusted earnings per diluted share of $0.82 as compared to
$0.69*
Enrollment Metrics
- New student enrollments increased 21.3 percent with both
universities contributing to the growth. New student enrollments
increased 10.7 percent within CTU and 36.0 percent within AIU.
AIU’s year to date new student enrollments were positively impacted
by the Trident acquisition as well as underlying organic
growth.
* See GAAP (U.S. generally accepted accounting principles) to
non-GAAP reconciliation attached to this press release
“The health and well-being of our students, employees and
communities continue to be our priority and I am extremely proud of
our faculty and employees for their dedication and commitment
towards educating, serving and supporting our students during these
challenging times,” said Todd Nelson, President and Chief Executive
Officer. “We are further optimizing our technology, improving our
processes and providing the necessary tools and resources to our
employees so they can continue to effectively and efficiently serve
students even while working remotely. Although the pandemic has not
had a material impact on our operating results to date, we continue
to monitor the situation. Our balance sheet continues to
strengthen, and we are strategically investing in initiatives that
further enhance our students’ experiences, retention and academic
outcomes while executing against our strategy of sustainable and
responsible growth.”
REVENUE
- For the quarter ended June 30, 2020, total revenue of $176.0
million increased 12.5 percent compared to total revenue of $156.4
million for the prior year quarter.
- For the year to date ended June 30, 2020, total revenue of
$347.0 million increased 10.4 percent compared to total revenue of
$314.3 million for the prior year to date.
- Both universities contributed to the revenue growth which was
supported by year to date organic student enrollment growth as well
as the Trident acquisition.
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
Revenue ($ in thousands)
2020
2019
% Change
2020
2019
% Change
CTU
$
100,193
$
96,555
3.8
%
$
203,781
$
193,612
5.3
%
AIU (1)
75,835
59,873
26.7
%
143,231
120,652
18.7
%
Total University Group
176,028
156,428
12.5
%
347,012
314,264
10.4
%
Corporate and Other
7
13
NM
17
30
NM
Total
$
176,035
$
156,441
12.5
%
$
347,029
$
314,294
10.4
%
(1)
AIU’s revenue for the quarter and year to
date ended June 30, 2020 includes revenue associated with the
Trident acquisition commencing on the March 2, 2020 date of
acquisition.
TOTAL AND NEW STUDENT ENROLLMENTS
- As of June 30, 2020, CTU’s and AIU’s total student enrollments
increased 4.0 percent and 52.7 percent, respectively, as compared
to the prior year. AIU’s total student enrollments were positively
impacted by the Trident acquisition.
- For the quarter ended June 30, 2020, new student enrollments
increased 4.5 percent within CTU and 118.8 percent within AIU, in
each case as compared to the prior year quarter. AIU’s second
quarter new student enrollments were positively impacted by the
Trident acquisition as well as 50 percent more enrollment days in
the second quarter of 2020 as compared to the prior year
quarter.
- For the year to date ended June 30, 2020, new student
enrollments increased 10.7 percent within CTU and 36.0 percent
within AIU, in each case as compared to the prior year to date.
AIU’s year to date new student enrollments were positively impacted
by the Trident acquisition, as well as underlying organic new
student enrollment growth.
As of June 30,
Total Student
Enrollments
2020
2019
% Change
CTU
23,300
22,400
4.0
%
AIU (1)
16,800
11,000
52.7
%
Total
40,100
33,400
20.1
%
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
New Student
Enrollments
2020
2019
% Change
2020
2019
% Change
CTU
6,100
5,840
4.5
%
13,120
11,850
10.7
%
AIU (1)
7,110
3,250
118.8
%
11,720
8,620
36.0
%
Total
13,210
9,090
45.3
%
24,840
20,470
21.3
%
(1)
AIU’s total student enrollments as of June
30, 2020 and new student enrollments for the quarter and year to
date ended June 30, 2020 include enrollments related to the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
OPERATING INCOME (LOSS)
- For the quarter ended June 30, 2020, operating income increased
to $37.4 million compared to $0.2 million for the prior year
quarter.
- For the year to date ended June 30, 2020, operating income
increased to $74.7 million compared to $30.2 million for the prior
year to date.
- The prior year quarter and year to date operating income
included a $30.0 million expense related to a settlement with the
U.S. Federal Trade Commission (“FTC”).
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
Operating Income ($ in
thousands)
2020
2019
% Change
2020
2019
% Change
CTU (1)
$
33,076
$
12,113
173.1
%
$
67,695
$
41,804
61.9
%
AIU (2)
10,476
(4,217
)
348.4
%
19,852
4,095
384.8
%
Total University Group
43,552
7,896
451.6
%
87,547
45,899
90.7
%
Corporate and Other (3)
(6,184
)
(7,712
)
19.8
%
(12,876
)
(15,744
)
18.2
%
Total
$
37,368
$
184
NM
$
74,671
$
30,155
147.6
%
(1)
CTU’s operating income for the quarter and
year to date ended June 30, 2019 includes an $18.6 million expense
related to the FTC settlement.
(2)
AIU’s operating income for the quarter and
year to date ended June 30, 2020 includes results associated with
the Trident acquisition commencing on the March 2, 2020 date of
acquisition. Quarter and year to date ended June 30, 2019 operating
income includes an $11.4 million expense related to the FTC
settlement.
(3)
The following is a summary of the
operating losses related to closed campuses which are included
within Corporate and Other for the quarters and years to date ended
June 30, 2020 and 2019.
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
Operating Loss ($ in thousands)
2020
2019
% Change
2020
2019
% Change
Closed Campuses
$
(376
)
$
(1,774
)
78.8
%
$
(1,388
)
$
(4,586
)
69.7
%
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 June 30, 2020, adjusted operating income
of $41.7 million increased 27.2 percent compared to adjusted
operating income of $32.8 million for the prior year quarter.
- For the year to date ended June 30, 2020, adjusted operating
income of $82.5 million increased 25.4 percent compared to adjusted
operating income of $65.8 million for the prior year to date.
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
Adjusted
Operating Income ($ in thousands)
2020 (4)
2019
2020 (4)
2019
Total
Company:
Operating income
$
37,368
$
184
$
74,671
$
30,155
Depreciation and amortization
4,151
2,235
6,790
4,468
Asset impairment (1)
-
-
612
-
Lease expenses for vacated space (2)
202
392
419
1,158
Significant legal settlements (3)
-
30,000
-
30,000
Adjusted Operating Income --
Total Company
$
41,721
$
32,811
$
82,492
$
65,781
Increase (Decrease)
27.2
%
25.4
%
(1)
Asset impairment relates to a right of use
asset for one of the Company’s vacated facilities for which the
sublease income was deemed no longer recoverable.
(2)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease income for
closed campuses.
(3)
Significant legal settlements relate to
the FTC matter recorded during 2019.
(4)
2020 results include the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
NET INCOME AND EARNINGS PER DILUTED SHARE
For the quarter ended June 30, 2020, the Company recorded:
- Net income of $28.2 million compared to net loss of $0.6
million for the prior year quarter.
- Earnings per diluted share of $0.40 compared to loss per
diluted share of $0.01 for the prior year quarter.
- Adjusted earnings per diluted share of $0.41 compared to
adjusted earnings per diluted share of $0.34 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 to date ended June 30, 2020, the Company
recorded:
- Net income of $57.3 million compared to net income of $24.2
million for the prior year to date.
- Earnings per diluted share of $0.80 compared to earnings per
diluted share of $0.34 for the prior year to date.
- Adjusted earnings per diluted share of $0.82 compared to
adjusted earnings per diluted share of $0.69 for the prior year to
date. (See table below and the GAAP to non-GAAP reconciliation
attached to this press release for further details.)
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
2020 (7)
2019 (8)
2020 (7)
2019
Reported Earnings Per Diluted
Share
$
0.40
$
(0.01
)
$
0.80
$
0.34
Pre-tax adjustments included in
operating expenses:
Amortization (1)
0.02
-
0.02
-
Asset impairment (2)
-
-
0.01
-
Lease expenses for vacated space (3)
-
0.01
0.01
0.02
Significant legal settlements (4)
-
0.41
-
0.41
Total pre-tax adjustments
$
0.02
$
0.42
$
0.04
$
0.43
Tax effect of adjustments (5)
(0.01
)
(0.02
)
(0.02
)
(0.03
)
Tax effect of change in settlement
deductibility (6)
-
(0.05
)
-
(0.05
)
Total adjustments after tax
0.01
0.35
0.02
0.35
Adjusted Earnings Per Diluted
Share
$
0.41
$
0.34
$
0.82
$
0.69
(1)
Amortization amounts relate to
definite-lived intangible assets associated with the Trident
acquisition.
(2)
Asset impairment relates to a right of use
asset for one of the Company’s vacated facilities for which the
sublease income was deemed no longer recoverable.
(3)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease income for
closed campuses.
(4)
Significant legal settlements relate to
the FTC matter recorded during 2019.
(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.
(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 of 2019.
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 reflected during the fourth
quarter of 2019 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 originally 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. The second quarter and year to date ended June 30,
2019 now reflect this adjustment. For the full year 2019,
approximately $29.7 million was considered deductible for tax
purposes. The quarterly reversals and adjustments of the
proportional impacts of the non-deductibility had no effect for the
full year 2019.
(7)
2020 results include the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
(8)
As a result of a reported net loss for the
quarter ended June 30, 2019, potential common stock equivalents
were excluded from the reported diluted common shares outstanding
calculation. The above adjustments resulted in a positive adjusted
earnings per diluted share and as a result potential common stock
equivalents were added to basic common shares outstanding to
determine the dilutive share impact.
BALANCE SHEET AND CASH FLOW
- For the quarter and year to date ended June 30, 2020 net cash
provided by operating activities was $60.6 million and $109.4
million, compared to $40.5 million and $53.4 million for the
respective prior year periods.
- As of June 30, 2020 and December 31, 2019, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments totaled $345.8 million and $294.2 million,
respectively.
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
Selected Cash Flow Items ($ in
thousands)
2020
2019
% Change
2020
2019
% Change
Net cash provided by operating
activities
$
60,596
$
40,469
49.7
%
$
109,364
$
53,414
104.7
%
Capital expenditures
$
2,424
$
929
160.9
%
$
3,439
$
1,408
144.2
%
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.
The outlook reflects the Company’s expectation of achieving
growth in new and total student enrollments at both universities
for the full year 2020. Further, for the third quarter of 2020, the
Company expects growth in new student enrollments as compared to
the prior year quarter for both universities, with the number of
AIU’s enrollment days for the third and fourth quarters of 2020
relatively comparable to the respective prior year periods.
Total Company Outlook
For Quarter Ending September
30,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020
2019
2020
2019
Operating Income
$31.0M - $32.0M
$24.3M
$135.0M - $139.0M
$86.5M
Adjusted Operating Income
$35.0M - $36.0M
$34.0M
$151.0M - $155.0M
$134.3M
Earnings Per Diluted Share
$0.33 - $0.34
$0.25
$1.44 - $1.48
$0.97
Adjusted Earnings Per Diluted Share
$0.34 - $0.35
$0.35
$1.48 - $1.52
$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, (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
significant operating or financial impacts from the COVID-19
pandemic beyond known costs which have been incorporated in the
outlook, (vi) earnings per diluted share outlook assumes an
effective income tax rate of approximately 26% for the third
quarter and the full year, and (vii) any future impact from the
Company’s stock repurchase program is 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 the Company makes in the
future as it continues 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
Thursday, August 6, 2020 at 5:30 p.m. Eastern time to discuss
second quarter and year to date 2020 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
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,” “focused on,” “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 various versions of “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 U.S. Federal Trade Commission
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 functions to achieve
anticipated operating performance; our continued eligibility to
participate in educational assistance programs for veterans or
other military personnel; the impact of the global COVID-19
pandemic; difficulties with integrating the assets of Trident
University International 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
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
June 30,
December 31,
2020
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents,
unrestricted
$
91,536
$
108,687
Restricted cash
4,000
-
Short-term investments
250,265
185,488
Total cash and cash equivalents,
restricted cash and short-term investments
345,801
294,175
Student receivables, net
35,597
55,018
Receivables, other
1,459
1,381
Prepaid expenses
9,843
7,299
Inventories
570
576
Other current assets
791
1,936
Total current assets
394,061
360,385
NON-CURRENT ASSETS:
Property and equipment, net
28,335
26,006
Right of use asset, net
48,854
50,366
Goodwill
118,312
87,356
Intangible assets, net
17,189
7,900
Student receivables, net
1,158
1,244
Deferred income tax assets, net
41,361
60,169
Other assets
5,829
5,720
TOTAL ASSETS
$
655,099
$
599,146
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Lease liability - operating
$
11,785
$
11,784
Accounts payable
11,909
11,533
Accrued expenses:
Payroll and related benefits
16,334
27,616
Advertising and marketing costs
11,289
10,479
Income taxes
1,919
1,376
Other
18,656
16,378
Deferred revenue
38,538
24,647
Total current liabilities
110,430
103,813
NON-CURRENT LIABILITIES:
Lease liability - operating
48,675
52,391
Other liabilities
17,310
11,647
Total non-current liabilities
65,985
64,038
STOCKHOLDERS' EQUITY:
Preferred stock
-
-
Common stock
863
860
Additional paid-in capital
646,849
639,335
Accumulated other comprehensive income
941
344
Retained earnings
75,344
18,071
Treasury stock
(245,313
)
(227,315
)
Total stockholders' equity
478,684
431,295
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
655,099
$
599,146
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share
amounts and percentages)
For the Quarter Ended June
30,
2020
% of Total Revenue
2019
% of Total Revenue
REVENUE:
Tuition and fees
$
175,499
99.7
%
$
155,779
99.6
%
Other
536
0.3
%
662
0.4
%
Total revenue
176,035
156,441
OPERATING EXPENSES:
Educational services and facilities
28,676
16.3
%
25,350
16.2
%
General and administrative
105,840
60.1
%
128,672
82.2
%
Depreciation and amortization
4,151
2.4
%
2,235
1.4
%
Total operating expenses
138,667
78.8
%
156,257
99.9
%
Operating income
37,368
21.2
%
184
0.1
%
OTHER INCOME:
Interest income
1,011
0.6
%
1,592
1.0
%
Interest expense
(43
)
0.0
%
(40
)
0.0
%
Miscellaneous income
125
0.1
%
45
0.0
%
Total other income
1,093
0.6
%
1,597
1.0
%
PRETAX INCOME
38,461
21.8
%
1,781
1.1
%
Provision for income taxes
10,272
5.8
%
2,302
1.5
%
INCOME (LOSS) FROM CONTINUING
OPERATIONS
28,189
16.0
%
(521
)
-0.3
%
Loss from discontinued operations, net of
tax
(22
)
0.0
%
(38
)
0.0
%
NET INCOME (LOSS)
28,167
16.0
%
(559
)
-0.4
%
NET INCOME (LOSS) PER SHARE -
BASIC:
Income (loss) from continuing
operations
$
0.41
$
(0.01
)
Loss from discontinued operations
-
-
Net income (loss) per share
$
0.41
$
(0.01
)
NET INCOME (LOSS) PER SHARE
-DILUTED:
Income (loss) from continuing
operations
$
0.40
$
(0.01
)
Loss from discontinued operations
-
-
Net income (loss) per share
$
0.40
$
(0.01
)
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
69,094
70,105
Diluted
70,900
70,105
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Quarter Ended June
30,
2020
2019
NET INCOME (LOSS)
$ 28,167
$ (559)
OTHER COMPREHENSIVE INCOME (LOSS), net
of tax:
Foreign currency translation
adjustments
53
35
Unrealized gain on investments
1,431
371
Total other comprehensive income
1,484
406
COMPREHENSIVE INCOME (LOSS)
$
29,651
$
(153
)
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share
amounts and percentages)
For the Year to Date Ended
June 30,
2020
% of Total Revenue
2019
% of Total Revenue
REVENUE:
Tuition and fees
$
345,893
99.7
%
$
313,007
99.6
%
Other
1,136
0.3
%
1,287
0.4
%
Total revenue
347,029
314,294
OPERATING EXPENSES:
Educational services and facilities
55,587
16.0
%
51,677
16.4
%
General and administrative
209,369
60.3
%
227,994
72.5
%
Depreciation and amortization
6,790
2.0
%
4,468
1.4
%
Asset impairment
612
0.2
%
-
0.0
%
Total operating expenses
272,358
78.5
%
284,139
90.4
%
Operating income
74,671
21.5
%
30,155
9.6
%
OTHER INCOME:
Interest income
2,498
0.7
%
3,032
1.0
%
Interest expense
(84
)
0.0
%
(82
)
0.0
%
Miscellaneous income
112
0.0
%
271
0.1
%
Total other income
2,526
0.7
%
3,221
1.0
%
PRETAX INCOME
77,197
22.2
%
33,376
10.6
%
Provision for income taxes
19,876
5.7
%
8,709
2.8
%
INCOME FROM CONTINUING
OPERATIONS
57,321
16.5
%
24,667
7.8
%
Loss from discontinued operations, net of
tax
(48
)
0.0
%
(435
)
-0.1
%
NET INCOME
57,273
16.5
%
24,232
7.7
%
NET INCOME PER SHARE - BASIC:
Income from continuing operations
$
0.82
$
0.35
Loss from discontinued operations
-
-
Net income per share
$
0.82
$
0.35
NET INCOME PER SHARE - DILUTED:
Income from continuing operations
$
0.80
$
0.34
Loss from discontinued operations
-
-
Net income per share
$
0.80
$
0.34
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
69,467
69,972
Diluted
71,350
71,782
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Year to Date Ended
June 30,
2020
2020
NET INCOME
$
57,273
$
24,232
OTHER COMPREHENSIVE INCOME, net of
tax:
Foreign currency translation
adjustments
5
(17
)
Unrealized gain on investments
592
770
Total other comprehensive income
597
753
COMPREHENSIVE INCOME
$
57,870
$
24,985
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year to Date Ended
June 30,
2020
2019
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
57,273
$
24,232
Adjustments to reconcile net income to net
cash provided by operating activities:
Asset impairment
612
-
Depreciation and amortization expense
6,790
4,468
Bad debt expense
25,187
23,141
Compensation expense related to
share-based awards
6,503
2,406
Deferred income taxes
19,262
9,213
Changes in operating assets and
liabilities
(6,263
)
(10,046
)
Net cash provided by operating
activities
109,364
53,414
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of available-for-sale
investments
(209,846
)
(296,666
)
Sales of available-for-sale
investments
145,819
265,743
Purchases of property and equipment
(3,439
)
(1,408
)
Business acquisition
(38,065
)
-
Other
-
9
Net cash used in investing activities
(105,531
)
(32,322
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock
1,014
180
Purchase of treasury stock
(17,309
)
-
Payments of employee tax associated with
stock compensation
(689
)
(2,562
)
Net cash used in financing activities
(16,984
)
(2,382
)
NET (DECREASE) INCREASE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(13,151
)
18,710
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, beginning of the period
108,687
32,731
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, end of the period
$
95,536
$
51,441
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Quarter Ended June
30,
2020
2019
REVENUE:
CTU
$
100,193
$
96,555
AIU (1)
75,835
59,873
Total University Group
176,028
156,428
Corporate and Other (2)
7
13
Total
$
176,035
$
156,441
OPERATING INCOME (LOSS):
CTU (3)
$
33,076
$
12,113
AIU (1) (4)
10,476
(4,217
)
Total University Group
43,552
7,896
Corporate and Other (2)
(6,184
)
(7,712
)
Total
$
37,368
$
184
OPERATING MARGIN (LOSS):
CTU (3)
33.0
%
12.5
%
AIU (1) (4)
13.8
%
-7.0
%
Total University Group
24.7
%
5.0
%
Corporate and Other (2)
NM
NM
Total
21.2
%
0.1
%
(1)
AIU’s revenue and operating income for the
quarter ended June 30, 2020 include results associated with the
Trident acquisition commencing on the March 2, 2020 date of
acquisition.
(2)
Corporate and Other includes results of
operations for closed campuses. Operating losses related to closed
campuses were $0.4 million and $1.8 million for the quarters ended
June 30, 2020 and 2019, respectively.
(3)
$18.6 million of expense related to the
FTC settlement was recorded within CTU during the quarter ended
June 30, 2019.
(4)
$11.4 million of expense related to the
FTC settlement was recorded within AIU during the quarter ended
June 30, 2019.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Year to Date Ended
June 30,
2020
2019
REVENUE:
CTU
$
203,781
$
193,612
AIU (1)
143,231
120,652
Total University Group
347,012
314,264
Corporate and Other (2)
17
30
Total
$
347,029
$
314,294
OPERATING INCOME (LOSS):
CTU (3)
$
67,695
$
41,804
AIU (1) (4)
19,852
4,095
Total University Group
87,547
45,899
Corporate and Other (2)
(12,876
)
(15,744
)
Total
$
74,671
$
30,155
OPERATING MARGIN (LOSS):
CTU (3)
33.2
%
21.6
%
AIU (1) (4)
13.9
%
3.4
%
Total University Group
25.2
%
14.6
%
Corporate and Other (2)
NM
NM
Total
21.5
%
9.6
%
(1)
AIU’s revenue and operating income for the
year to date ended June 30, 2020 include results associated with
the Trident acquisition commencing on the March 2, 2020 date of
acquisition.
(2)
Corporate and Other includes results of
operations for closed campuses. Operating losses related to closed
campuses were $1.4 million and $4.6 million for the years to date
ended June 30, 2020 and 2019, respectively.
(3)
$18.6 million of expense related to the
FTC settlement was recorded within CTU during the year to date
ended June 30, 2019.
(4)
$11.4 million of expense related to the
FTC settlement was recorded within AIU during the year to date
ended June 30, 2019.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1)
(In thousands, unless otherwise
noted)
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
ACTUAL
ACTUAL
Adjusted
Operating Income
2020 (8)
2019
2020 (8)
2019
Total
Company
Operating income
$
37,368
$
184
$
74,671
$
30,155
Depreciation and amortization (2)
4,151
2,235
6,790
4,468
Asset impairment (3)
-
-
612
-
Lease expenses for vacated space (4)
202
392
419
1,158
Significant legal settlements (5)
-
30,000
-
30,000
Adjusted Operating Income -- Total
Company
$
41,721
$
32,811
$
82,492
$
65,781
For the Quarter Ending
September 30,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020 (8)
2019
2020 (8)
2019
Total
Company
Operating income
$31.0M - $32.0M
$
24,294
$135.0M - $139.0M
$
86,462
Depreciation and amortization (2)
3.8M
2,284
14.5M
9,145
Asset impairment (3)
-
-
0.6M
-
Lease expenses for vacated space (4)
0.2M
295
0.9M
1,630
Significant legal settlements (5)
-
7,100
-
37,100
Adjusted Operating Income -- Total
Company
$35.0M - $36.0M
$
33,973
$151.0M - $155.0M
$
134,337
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1) (cont’d)
For the Quarter Ended June
30,
For the Year to Date Ended
June 30,
ACTUAL
ACTUAL
2020 (8)
2019 (9)
2020 (8)
2019
Reported Earnings Per Diluted
Share
$
0.40
$
(0.01
)
$
0.80
$
0.34
Pre-tax adjustments included in
operating expenses:
Amortization (2)
0.02
-
0.02
-
Asset impairment (3)
-
-
0.01
-
Lease expenses for vacated space (4)
-
0.01
0.01
0.02
Significant legal settlements (5)
-
0.41
-
0.41
Total pre-tax adjustments
$
0.02
$
0.42
$
0.04
$
0.43
Tax effect of adjustments (6)
(0.01
)
(0.02
)
(0.02
)
(0.03
)
Tax effect of change in settlement
deductibility (7)
-
(0.05
)
-
(0.05
)
Total adjustments after tax
0.01
0.35
0.02
0.35
Adjusted Earnings Per Diluted
Share
$
0.41
$
0.34
$
0.82
$
0.69
For the Quarter Ending
September 30,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020 (8)
2019
2020 (8)
2019
Reported Earnings Per Diluted
Share
$0.33 - $0.34
$
0.25
$1.44 - $1.48
$
0.97
Pre-tax adjustments included in
operating expenses:
Amortization (2)
0.01
-
0.04
-
Asset impairment (3)
-
-
0.01
-
Lease expenses for vacated space (4)
-
-
0.01
0.02
Significant legal settlements (5)
-
0.10
-
0.51
Total pre-tax adjustments
$
0.01
$
0.10
$
0.06
$
0.53
Tax effect of adjustments (6)
-
(0.02
)
(0.02
)
(0.13
)
Tax effect of change in settlement
deductibility (7)
-
0.02
-
-
Total adjustments after tax
0.01
0.10
0.04
0.40
Adjusted Earnings Per Diluted
Share
$0.34 - $0.35
$
0.35
$1.48 - $1.52
$
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)
Amortization amounts relate to
definite-lived intangible assets associated with the Trident
acquisition.
(3)
Asset impairment relates to a right of use
asset for one of the Company’s vacated facilities for which the
sublease income was deemed no longer recoverable.
(4)
Lease expenses for vacated space include
both fixed and variable lease costs offset with sublease income for
closed campuses.
(5)
Significant legal settlements relate to
the FTC and Oregon arbitrations matters recorded during 2019.
(6)
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.
(7)
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 reflected during the fourth quarter of 2019 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 originally 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. The second quarter and
year to date ended June 30, 2019 as well as the third quarter of
2019 now reflect this adjustment. For the full year 2019,
approximately $29.7 million was considered deductible for tax
purposes. The quarterly reversals and adjustments of the
proportional impacts of the non-deductibility had no effect for the
full year 2019.
(8)
2020 results include the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
(9)
As a result of a reported net loss for the
quarter ended June 30, 2019, potential common stock equivalents
were excluded from the reported diluted common shares outstanding
calculation. Due to the adjustments above resulting in a positive
adjusted earnings per diluted share calculation, potential common
stock equivalents were added to basic common shares outstanding to
determine the dilutive share impact.
For the Quarter Ended June 30,
2019
Diluted common
shares outstanding (shares in thousands)
Reported diluted common shares
outstanding
70,105
Common stock equivalents
1,929
Adjusted diluted common shares
outstanding
72,034
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005937/en/
Investors: Alpha IR Group Brooks Hamilton or Chris Hodges
(312) 445-2870 PRDO@alpha-ir.com
Or
Media: Perdoceo Education Corporation (847) 585-2600
media@perdoceoed.com
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