Third quarter revenue increased 9.1% supported
by enrollment growth at both CTU and AIU
Perdoceo Education Corporation (NASDAQ: PRDO) today reported
operating and financial results for the quarter and year to date
ended September 30, 2020.
Third Quarter 2020
Results as Compared to the Prior Year Quarter
Financial Results
- Revenue increased by 9.1 percent to $169.1 million, with both
CTU and AIU contributing to the growth
- Operating income increased to $32.1 million as compared to
$24.3 million
- Adjusted operating income increased to $36.3 million as
compared to $34.0 million*
- Earnings per diluted share of $0.56 compared to earnings per
diluted share of $0.25
- Adjusted earnings per diluted share of $0.35 as compared to
$0.35*
- Ended the quarter with $367.7 million in cash, cash
equivalents, restricted cash and available-for-sale short-term
investments
Enrollment Metrics
- Total student enrollments at September 30, 2020 increased 17.2
percent. CTU’s total student enrollments increased 4.8 percent
while AIU’s total student enrollments increased 37.7 percent. AIU’s
total student enrollments were positively impacted by the
acquisition of substantially all of the assets of Trident
University International (the “Trident acquisition”) while also
experiencing underlying organic growth.
- New student enrollments increased 17.5 percent. New student
enrollments increased 5.2 percent within CTU and 29.4 percent
within AIU. AIU’s new student enrollments were positively impacted
by the Trident acquisition while also experiencing underlying
organic growth.
Year to Date 2020
Results as Compared to the Prior Year to Date
Financial Results
- Revenue increased by 10.0 percent to $516.2 million, with both
CTU and AIU contributing to the growth
- Operating income increased to $106.7 million as compared to
$54.4 million
- Adjusted operating income increased to $118.8 million as
compared to $99.8 million*
- Earnings per diluted share of $1.36 as compared to $0.59
- Adjusted earnings per diluted share of $1.17 as compared to
$1.04*
Enrollment Metrics
- New student enrollments increased 19.8 percent. New student
enrollments increased 8.8 percent within CTU and 33.1 percent
within AIU. AIU’s year to date new student enrollments were
positively impacted by the Trident acquisition while also
experiencing underlying organic growth.
* See GAAP (U.S. generally accepted accounting principles) to
non-GAAP reconciliation attached to this press release
“The year to date results underscore our commitment to student
experiences, retention and academic outcomes and I’m proud of the
entire Perdoceo team for their efforts to educate, serve and
support our students,” said Todd Nelson, President and Chief
Executive Officer. “Investments in data analytics and technology
across our academic platforms have enhanced student learning and
strengthened the efficiency and effectiveness of our student
support processes. Our financial position continues to strengthen
and we remain focused on executing against our objective of
sustainable and responsible growth.”
AIU SYSTEM
Effective November 5, 2020, AIU implemented a university system
model, the American InterContinental University System (the “AIU
System” or “AIU”), which is comprised of two universities: American
InterContinental University and Trident University International
(“Trident” or “TUI”). The system structure provides a new framework
for American InterContinental University and Trident to continue to
serve their unique student populations while benefitting from one
university system. Although both universities will operate under a
shared governance structure and have a common mission, the system
structure will allow each to retain its name and customize its
programs and instructional and student service models to the needs
of its unique student populations.
REVENUE
- For the quarter ended September 30, 2020, total revenue of
$169.1 million increased 9.1 percent compared to total revenue of
$155.0 million for the prior year quarter.
- For the year to date ended September 30, 2020, total revenue of
$516.2 million increased 10.0 percent compared to total revenue of
$469.3 million for the prior year to date.
- Both CTU and AIU contributed to the revenue growth supported by
organic enrollment growth as well as the Trident acquisition.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Revenue ($ in thousands)
2020
2019
% Change
2020
2019
% Change
CTU
$
98,985
$
96,038
3.1
%
$
302,766
$
289,650
4.5
%
AIU (1)
70,048
58,907
18.9
%
213,279
179,559
18.8
%
Total University Group
169,033
154,945
9.1
%
516,045
469,209
10.0
%
Corporate and Other
93
14
NM
110
44
NM
Total
$
169,126
$
154,959
9.1
%
$
516,155
$
469,253
10.0
%
(1)
AIU’s revenue for the quarter and year to
date ended September 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 September 30, 2020, CTU’s and AIU’s total student
enrollments increased 4.8 percent and 37.7 percent, respectively,
as compared September 30, 2019. AIU’s total student enrollments
were positively impacted by the Trident acquisition while also
experiencing underlying organic growth.
- For the quarter ended September 30, 2020, new student
enrollments increased 5.2 percent within CTU and 29.4 percent
within AIU, in each case as compared to the prior year quarter.
AIU’s third quarter new student enrollments were positively
impacted by the Trident acquisition while also experiencing
underlying organic growth.
- For the year to date ended September 30, 2020, new student
enrollments increased 8.8 percent within CTU and 33.1 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 while also experiencing underlying
organic growth.
As of September 30,
Total Student
Enrollments
2020
2019
% Change
CTU
24,000
22,900
4.8
%
AIU (1)
19,000
13,800
37.7
%
Total
43,000
36,700
17.2
%
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
New Student
Enrollments
2020
2019
% Change
2020
2019
% Change
CTU
6,840
6,500
5.2
%
19,960
18,350
8.8
%
AIU (1)
8,680
6,710
29.4
%
20,400
15,330
33.1
%
Total
15,520
13,210
17.5
%
40,360
33,680
19.8
%
(1)
AIU’s total student enrollments as of
September 30, 2020 and new student enrollments for the quarter and
year to date ended September 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 September 30, 2020, operating income
increased to $32.1 million compared to $24.3 million for the prior
year quarter.
- For the year to date ended September 30, 2020, operating income
increased to $106.7 million compared to $54.4 million for the prior
year to date.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Operating Income ($ in
thousands)
2020
2019
% Change
2020
2019
% Change
CTU (1)
$
32,993
$
29,926
10.2
%
$
100,688
$
71,730
40.4
%
AIU (2)
5,513
7,341
-24.9
%
25,365
11,436
121.8
%
Total University Group
38,506
37,267
3.3
%
126,053
83,166
51.6
%
Corporate and Other (3)
(6,432
)
(12,973
)
NM
(19,308
)
(28,717
)
NM
Total
$
32,074
$
24,294
32.0
%
$
106,745
$
54,449
96.0
%
(1)
CTU’s operating income for the year to
date ended September 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 September 30, 2020 includes results associated
with the Trident acquisition commencing on the March 2, 2020 date
of acquisition. Operating income for the year to date ended
September 30, 2019 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. Legal settlement expense of $7.1
million related to the Oregon arbitration matter was included in
the operating loss for closed campuses for the quarter and year to
date ended September 30, 2019.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Operating Loss ($ in thousands)
2020
2019
% Change
2020
2019
% Change
Closed Campuses
$
(369
)
$
(8,215
)
95.5
%
$
(1,757
)
$
(12,801
)
86.3
%
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 September 30, 2020, adjusted operating
income of $36.3 million increased 7.0 percent compared to adjusted
operating income of $34.0 million for the prior year quarter.
- For the year to date ended September 30, 2020, adjusted
operating income of $118.8 million increased 19.1 percent compared
to adjusted operating income of $99.8 million for the prior year to
date.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Adjusted Operating Income ($ in
thousands)
2020 (4)
2019
2020 (4)
2019
Total
Company:
Operating income
$
32,074
$
24,294
$
106,745
$
54,449
Depreciation and amortization
3,995
2,284
10,785
6,752
Asset impairment (1)
-
-
612
-
Lease expenses for vacated space (2)
270
295
689
1,453
Significant legal settlements (3)
-
7,100
-
37,100
Adjusted Operating Income --
Total Company
$
36,339
$
33,973
$
118,831
$
99,754
Increase (Decrease)
7.0
%
19.1
%
(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 and Oregon arbitration matters 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 September 30, 2020, the Company
recorded:
- Net income of $39.9 million compared to net income of $18.2
million for the prior year quarter.
- Earnings per diluted share of $0.56 compared to earnings per
diluted share of $0.25 for the prior year quarter.
- Adjusted earnings per diluted share of $0.35 for both the
current quarter and 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 September 30, 2020, the Company
recorded:
- Net income of $97.2 million compared to net income of $42.5
million for the prior year to date.
- Earnings per diluted share of $1.36 compared to earnings per
diluted share of $0.59 for the prior year to date.
- Adjusted earnings per diluted share of $1.17 compared to
adjusted earnings per diluted share of $1.04 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
September 30,
For the Year to Date Ended
September 30,
2020 (8)
2019
2020 (8)
2019
Reported Earnings Per Diluted
Share
$
0.56
$
0.25
$
1.36
$
0.59
Pre-tax adjustments included in
operating expenses:
Amortization (1)
0.01
-
0.02
-
Asset impairment (2)
-
-
0.01
-
Lease expenses for vacated space (3)
-
-
0.01
0.02
Significant legal settlements (4)
-
0.10
-
0.52
Total pre-tax adjustments
$
0.01
$
0.10
$
0.04
$
0.54
Tax effect of adjustments (5)
-
(0.02
)
(0.01
)
(0.06
)
Tax effect of change in settlement
deductibility (6)
-
0.02
-
(0.03
)
Release of valuation allowance
(7)
(0.22
)
-
(0.22
)
-
Total adjustments after tax
(0.21
)
0.10
(0.19
)
0.45
Adjusted Earnings Per Diluted
Share
$
0.35
$
0.35
$
1.17
$
1.04
(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 and Oregon arbitration matters 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.
There is no tax effect applied to the adjustment related to the
release of the valuation allowance as this is an adjustment for
income tax.
(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 third quarter of 2019.
The impact of the non-deductibility was not proportionally
reflected in the originally reported adjusted earnings per diluted
share which would have increased by $0.02 for the quarter ended
September 30, 2019 and decreased $0.03 for the year to date ended
September 30, 2019. The third quarter and year to date ended
September 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)
This relates to the release of a valuation
allowance in the amount of $16.0 million as a result of the current
determination that it is more likely than not that the Company will
utilize its deferred tax assets associated with the portion of the
foreign tax credit carryforward supported by an Overall Domestic
Loss account balance.
(8)
2020 results include the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
BALANCE SHEET AND CASH FLOW
- For the quarter and year to date ended September 30, 2020, net
cash provided by operating activities was $32.4 million and $137.8
million, compared to $32.0 million and $85.4 million for the
respective prior year periods.
- As of September 30, 2020 and December 31, 2019, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments totaled $367.7 million and $294.2 million,
respectively.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Selected Cash Flow Items ($ in
thousands)
2020
2019
% Change
2020
2019
% Change
Net cash provided by operating
activities
$
32,389
$
31,977
1.3
%
$
137,753
$
85,391
61.3
%
Capital expenditures
$
4,040
$
1,812
123.0
%
$
7,479
$
3,220
132.3
%
OUTLOOK
The Company is providing the following updated 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 CTU and AIU for
the fourth quarter and full year 2020.
Total Company Outlook
For Quarter Ending December
31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020
2019
2020
2019
Operating Income
$30.8M - $32.3M
$32.0M
$137.5M - $139.0M
$86.5M
Adjusted Operating Income
$35.2M - $36.7M
$34.6M
$154.0M - $155.5M
$134.3M
Earnings Per Diluted Share
$0.33 - $0.34
$0.38
$1.69 - $1.71
$0.97
Adjusted Earnings Per Diluted Share
$0.34 - $0.35
$0.33
$1.51 - $1.53
$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 fourth
quarter and approximately 15% for 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, November 5, 2020 at 5:30 p.m. Eastern time to discuss
third 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
regionally accredited institutions – Colorado Technical University
(“CTU”) and the American InterContinental University System (“AIU”)
– provide degree programs through the master’s or doctoral level as
well as associate and bachelor’s levels. Our 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; 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)
September 30,
December 31,
2020
2019
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents,
unrestricted
$
58,120
$
108,687
Restricted cash
4,000
-
Short-term investments
305,610
185,488
Total cash and cash equivalents,
restricted cash and short-term investments
367,730
294,175
Student receivables, net
37,554
55,018
Receivables, other
2,711
1,381
Prepaid expenses
7,825
7,299
Inventories
616
576
Other current assets
418
1,936
Total current assets
416,854
360,385
NON-CURRENT ASSETS:
Property and equipment, net
28,808
26,006
Right of use asset, net
47,050
50,366
Goodwill
118,312
87,356
Intangible assets, net
16,356
7,900
Student receivables, net
1,155
1,244
Deferred income tax assets, net
49,284
60,169
Other assets
5,932
5,720
TOTAL ASSETS
$
683,751
$
599,146
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Lease liability - operating
$
11,013
$
11,784
Accounts payable
12,856
11,533
Accrued expenses:
Payroll and related benefits
19,350
27,616
Advertising and marketing costs
12,495
10,479
Income taxes
2,378
1,376
Other
11,100
16,378
Deferred revenue
29,303
24,647
Total current liabilities
98,495
103,813
NON-CURRENT LIABILITIES:
Lease liability - operating
46,273
52,391
Other liabilities
17,312
11,647
Total non-current liabilities
63,585
64,038
STOCKHOLDERS' EQUITY:
Preferred stock
-
-
Common stock
865
860
Additional paid-in capital
650,990
639,335
Accumulated other comprehensive income
603
344
Retained earnings
115,284
18,071
Treasury stock
(246,071
)
(227,315
)
Total stockholders' equity
521,671
431,295
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
683,751
$
599,146
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share
amounts and percentages)
For the Quarter Ended
September 30,
2020
% of Total Revenue
2019
% of Total Revenue
REVENUE:
Tuition and fees
$
168,471
99.6
%
$
154,291
99.6
%
Other
655
0.4
%
668
0.4
%
Total revenue
169,126
154,959
OPERATING EXPENSES:
Educational services and facilities
27,562
16.3
%
25,318
16.3
%
General and administrative
105,495
62.4
%
103,063
66.5
%
Depreciation and amortization
3,995
2.4
%
2,284
1.5
%
Total operating expenses
137,052
81.0
%
130,665
84.3
%
Operating income
32,074
19.0
%
24,294
15.7
%
OTHER INCOME:
Interest income
737
0.4
%
1,698
1.1
%
Interest expense
(42
)
0.0
%
(43
)
0.0
%
Miscellaneous (expense) income
(14
)
0.0
%
97
0.1
%
Total other income
681
0.4
%
1,752
1.1
%
PRETAX INCOME
32,755
19.4
%
26,046
16.8
%
(Benefit from) provision for income
taxes
(7,206
)
-4.3
%
7,653
4.9
%
INCOME FROM CONTINUING
OPERATIONS
39,961
23.6
%
18,393
11.9
%
Loss from discontinued operations, net of
tax
(21
)
0.0
%
(159
)
-0.1
%
NET INCOME
39,940
23.6
%
18,234
11.8
%
NET INCOME PER SHARE - BASIC:
Income from continuing operations
$
0.58
$
0.26
Loss from discontinued operations
-
-
Net income per share
$
0.58
$
0.26
NET INCOME PER SHARE -DILUTED:
Income from continuing operations
$
0.56
$
0.25
Loss from discontinued operations
-
-
Net income per share
$
0.56
$
0.25
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
69,167
70,142
Diluted
71,016
72,142
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Quarter Ended
September 30,
2020
2019
NET INCOME
$
39,940
$
18,234
OTHER COMPREHENSIVE LOSS, net of
tax:
Foreign currency translation
adjustments
123
(113
)
Unrealized (loss) gain on investments
(461
)
44
Total other comprehensive loss
(338
)
(69
)
COMPREHENSIVE INCOME
$
39,602
$
18,165
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
September 30,
2020
% of Total Revenue
2019
% of Total Revenue
REVENUE:
Tuition and fees
$
514,364
99.7
%
$
467,298
99.6
%
Other
1,791
0.3
%
1,955
0.4
%
Total revenue
516,155
469,253
OPERATING EXPENSES:
Educational services and facilities
83,149
16.1
%
76,995
16.4
%
General and administrative
314,864
61.0
%
331,057
70.5
%
Depreciation and amortization
10,785
2.1
%
6,752
1.4
%
Asset impairment
612
0.1
%
-
0.0
%
Total operating expenses
409,410
79.3
%
414,804
88.4
%
Operating income
106,745
20.7
%
54,449
11.6
%
OTHER INCOME:
Interest income
3,235
0.6
%
4,730
1.0
%
Interest expense
(126
)
0.0
%
(125
)
0.0
%
Miscellaneous income
98
0.0
%
368
0.1
%
Total other income
3,207
0.6
%
4,973
1.1
%
PRETAX INCOME
109,952
21.3
%
59,422
12.7
%
Provision for income taxes
12,670
2.5
%
16,362
3.5
%
INCOME FROM CONTINUING
OPERATIONS
97,282
18.8
%
43,060
9.2
%
Loss from discontinued operations, net of
tax
(69
)
0.0
%
(594
)
-0.1
%
NET INCOME
97,213
18.8
%
42,466
9.0
%
NET INCOME PER SHARE - BASIC:
Income from continuing operations
$
1.40
$
0.62
Loss from discontinued operations
-
(0.01
)
Net income per share
$
1.40
$
0.61
NET INCOME PER SHARE - DILUTED:
Income from continuing operations
$
1.36
$
0.60
Loss from discontinued operations
-
(0.01
)
Net income per share
$
1.36
$
0.59
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic
69,366
70,029
Diluted
71,267
71,901
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Year to Date Ended
September 30,
2020
2019
NET INCOME
$
97,213
$
42,466
OTHER COMPREHENSIVE INCOME, net of
tax:
Foreign currency translation
adjustments
128
(130
)
Unrealized gain on investments
131
814
Total other comprehensive income
259
684
COMPREHENSIVE INCOME
$
97,472
$
43,150
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year to Date Ended
September 30,
2020
2019
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
97,213
$
42,466
Adjustments to reconcile net income to net
cash provided by operating activities:
Asset impairment
612
-
Depreciation and amortization expense
10,785
6,752
Bad debt expense
36,706
32,028
Compensation expense related to
share-based awards
9,735
3,922
Deferred income taxes
11,339
16,265
Changes in operating assets and
liabilities
(28,637
)
(16,042
)
Net cash provided by operating
activities
137,753
85,391
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of available-for-sale
investments
(333,767
)
(418,156
)
Sales of available-for-sale
investments
213,576
382,022
Purchases of property and equipment
(7,479
)
(3,220
)
Business acquisition
(39,819
)
-
Other
-
9
Net cash used in investing activities
(167,489
)
(39,345
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock
1,925
1,326
Purchase of treasury stock
(17,862
)
-
Payments of employee tax associated with
stock compensation
(894
)
(2,692
)
Net cash used in financing activities
(16,831
)
(1,366
)
NET (DECREASE) INCREASE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
(46,567
)
44,680
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, beginning of the period
108,687
32,731
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, end of the period
$
62,120
$
77,411
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Quarter Ended
September 30,
2020
2019
REVENUE:
CTU
$
98,985
$
96,038
AIU (1)
70,048
58,907
Total University Group
169,033
154,945
Corporate and Other (2)
93
14
Total
$
169,126
$
154,959
OPERATING INCOME (LOSS):
CTU
$
32,993
$
29,926
AIU (1)
5,513
7,341
Total University Group
38,506
37,267
Corporate and Other (2)
(6,432
)
(12,973
)
Total
$
32,074
$
24,294
OPERATING MARGIN (LOSS):
CTU
33.3
%
31.2
%
AIU (1)
7.9
%
12.5
%
Total University Group
22.8
%
24.1
%
Corporate and Other (2)
NM
NM
Total
19.0
%
15.7
%
(1)
AIU’s revenue and operating income for the
quarter ended September 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 $8.2 million for the quarters ended
September 30, 2020 and 2019, respectively, which included $7.1
million of legal settlement expense related to the Oregon
arbitration matter for the quarter ended September 30, 2019.
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except
percentages)
For the Year to Date Ended
September 30,
2020
2019
REVENUE:
CTU
$
302,766
$
289,650
AIU (1)
213,279
179,559
Total University Group
516,045
469,209
Corporate and Other (2)
110
44
Total
$
516,155
$
469,253
OPERATING INCOME (LOSS):
CTU (3)
$
100,688
$
71,730
AIU (1) (4)
25,365
11,436
Total University Group
126,053
83,166
Corporate and Other (2)
(19,308
)
(28,717
)
Total
$
106,745
$
54,449
OPERATING MARGIN (LOSS):
CTU (3)
33.3
%
24.8
%
AIU (1) (4)
11.9
%
6.4
%
Total University Group
24.4
%
17.7
%
Corporate and Other (2)
NM
NM
Total
20.7
%
11.6
%
(1)
AIU’s revenue and operating income for the
year to date ended September 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 $1.8 million and $12.8 million for the years to date
ended September 30, 2020 and 2019, respectively, which included
$7.1 million of legal settlement expense related to the Oregon
arbitration matter for the year to date ended September 30,
2019.
(3)
$18.6 million of expense related to the
FTC settlement was recorded within CTU during the year to date
ended September 30, 2019.
(4)
$11.4 million of expense related to the
FTC settlement was recorded within AIU during the year to date
ended September 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
September 30,
For the Year to Date Ended
September 30,
ACTUAL
ACTUAL
Adjusted
Operating Income
2020 (9)
2019
2020 (9)
2019
Total
Company
Operating income
$
32,074
$
24,294
$
106,745
$
54,449
Depreciation and amortization (2)
3,995
2,284
10,785
6,752
Asset impairment (3)
-
-
612
-
Lease expenses for vacated space (4)
270
295
689
1,453
Significant legal settlements (5)
-
7,100
-
37,100
Adjusted Operating Income -- Total
Company
$
36,339
$
33,973
$
118,831
$
99,754
For the Quarter Ending
December 31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020 (9)
2019
2020 (9)
2019
Total
Company
Operating income
$30.8M - $32.3M
$
32,013
$137.5M - $139.0M
$
86,462
Depreciation and amortization (2)
4.2M
2,393
15.0M
9,145
Asset impairment (3)
-
-
0.6M
-
Lease expenses for vacated space (4)
0.2M
177
0.9M
1,630
Significant legal settlements (5)
-
-
-
37,100
Adjusted Operating Income -- Total
Company
$35.2M - $36.7M
$
34,583
$154.0M - $155.5M
$
134,337
PERDOCEO EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1) (cont’d)
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
ACTUAL
ACTUAL
2020 (9)
2019
2020 (9)
2019
Reported Earnings Per Diluted
Share
$
0.56
$
0.25
$
1.36
$
0.59
Pre-tax adjustments included in
operating expenses:
Amortization (2)
0.01
-
0.02
-
Asset impairment (3)
-
-
0.01
-
Lease expenses for vacated space (4)
-
-
0.01
0.02
Significant legal settlements (5)
-
0.10
-
0.52
Total pre-tax adjustments
$
0.01
$
0.10
$
0.04
$
0.54
Tax effect of adjustments (6)
-
(0.02
)
(0.01
)
(0.06
)
Tax effect of change in settlement
deductibility (7)
-
0.02
-
(0.03
)
Release of valuation allowance
(8)
(0.22
)
-
(0.22
)
-
Total adjustments after tax
(0.21
)
0.10
(0.19
)
0.45
Adjusted Earnings Per Diluted
Share
$
0.35
$
0.35
$
1.17
$
1.04
For the Quarter Ending
December 31,
For the Year Ending December
31,
OUTLOOK
ACTUAL
OUTLOOK
ACTUAL
2020 (9)
2019
2020 (9)
2019
Reported Earnings Per Diluted
Share
$0.33 - $0.34
$
0.38
$1.69 - $1.71
$
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)
-
-
-
0.51
Total pre-tax adjustments
$
0.01
$
-
$
0.06
$
0.53
Tax effect of adjustments (6)
-
-
(0.02
)
(0.13
)
Tax effect of change in settlement
deductibility (7)
-
(0.05
)
-
-
Release of valuation allowance
(8)
-
-
(0.22
)
-
Total adjustments after tax
0.01
(0.05
)
(0.18
)
0.40
Adjusted Earnings Per Diluted
Share
$0.34 - $0.35
$
0.33
$1.51 - $1.53
$
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.
There is no tax effect applied to the adjustment related to the
release of the valuation allowance as this is an adjustment for
income tax.
(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 third quarter of 2019. The impact of the
non-deductibility was not proportionally reflected in the
originally reported adjusted earnings per diluted share which would
have increased by $0.02 for the quarter ended September 30, 2019
and decreased $0.03 for the year to date ended September 30, 2019.
The third quarter and year to date ended September 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.
(8)
This relates to the release of a valuation
allowance in the amount of $16.0 million as a result of the current
determination that it is more likely than not that the Company will
utilize its deferred tax assets associated with the portion of the
foreign tax credit carryforward supported by an Overall Domestic
Loss account balance.
(9)
2020 results include the Trident
acquisition commencing on the March 2, 2020 date of
acquisition.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006165/en/
Investors: Alpha IR Group Wyatt Turk 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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