Perdoceo Education Corporation · NASDAQ:PRDO
Perdoceo Education — Career Education — Investor Day (April 2019)
107 slides from Perdoceo Education's investor day presentation, Apr 11, 2019
Slide 1: Exhibit 99.1
a A Exhibit 99.1
Slide 2: Cautionary Statements & Disclosures
CAUTIONARY STATEMENTS & DISCLOSURES This presentation contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business pr
Slide 3: Agenda
SPEAKER TOPIC Todd Nelson — President & CEO CEC Highlights General Industry Trends Strategic Initiatives M&A Update – Trident University Andrew Hurst — SVP, CTU University Overview Business Trends & Technology John Kline — SVP, AIU University Overview Business Trends & Technology BREAK Ashish Ghia —
Slide 4: Todd Nelson, Chief Executive Officer
TODD NELSON Chief Executive Officer Career Education Corporation CEC Highlights General Industry Trends Strategic Initiatives M&A Update
Slide 5: CEC Universities
CEC UNIVERSITIES Regionally Accredited Academic Institutions
Slide 6: Experienced Executive Management Team
EXPERIENCED EXECUTIVE MANAGEMENT TEAM WITH COMBINED INDUSTRY EXPERIENCE OF OVER 100 YEARS Todd Nelson Chief Executive Officer Andrew Hurst President Colorado Technical University Ashish Ghia Chief Financial Officer John Kline President American InterContinental University Jeffrey Ayers General Couns
Slide 7: CEC: A Quality Educational Services Provider
CEC: A QUALITY EDUCATIONAL SERVICES PROVIDER IMPROVING LIVES THROUGH EDUCATION Career Education Corporation operates two academic institutions: Regionally accredited by the Higher Learning Commission (HLC) Providing quality postsecondary education Serving a diverse, non-traditional student populatio
Slide 8: Regionally Accredited Academic Institutions
REGIONALLY ACCREDITED ACADEMIC INSTITUTIONS Primarily an online institution 2 campus locations Atlanta, GA Houston, TX Total Enrollments – 11,800(1) Degrees conferred – 141,000+ since 1970 Primarily an online institution 2 campus locations Aurora, CO Colorado Springs, CO Total Enrollments – 22,600(1
Slide 9: Our Goals and Guiding Principles
OUR GOALS AND GUIDING PRINCIPLES Guiding principles and underlying objectives that govern our operating framework: To be a leading provider of postsecondary education to non-traditional students Compliance with Regulations Core philosophy across our operating decisions Balance financial commitments
Slide 10: Transformation Journey
TRANSFORMATION JOURNEY QD) 181 Pecoo- Toon DevESTOR oaY 2010
Slide 11: Progress and Accomplishments
PROGRESS AND ACCOMPLISHMENTS 2018 WAS A WATERSHED YEAR FOR OUR COMPANY EXPERIENCED TEAM SCALABILITY STRONG BALANCE SHEET Motivated team that is focused on effectively and efficiently educating our students Shared services and support functions have achieved an optimized level of efficiency which is
Slide 12: How We Got Here: Our Transformation Plan
HOW WE GOT HERE: OUR TRANSFORMATION PLAN COMPLETE COMPLETE PRESENT FOCUS Teach-out/Divest Sanford Brown (SB) and Le Cordon Bleu ® (LCB) schools Improve operating efficiency through process re-engineering Invest in and grow University operations Transformation Plan initiated in 2015 – NOW COMPLETE
Slide 13: Transformation Enabled Focus on Regionally Accredited Institutions
Process re-engineering Investing in technology and student services Commitment to Education (responsible teach-out completion) Keeping our commitments to students while transforming the Company TRANSFORMATION ENABLED US TO FOCUS ON REGIONALLY ACCREDITED INSTITUTIONS Strong institutions with focus on
Slide 14: Financial Progress: 2014 to 2019
FINANCIAL PROGRESS: 2014 TO 2019 Progress while investing for long term success Commitment to Education – responsible teach-out completion Cumulative losses of ~$500M 2014 to 2018 Teach-outs initiated University growth and investments Total CEC – Operating Income (Loss) Teach-outs completed (1) Esti
Slide 15: Industry Overview
INDUSTRY OVERVIEW Q) 141 Peco To on DevESTOR oaY 2010
Slide 16: Online Postsecondary Education – Value Proposition
INDUSTRY OVERVIEW ONLINE POSTSECONDARY EDUCATION – VALUE PROPOSITION Growth in ‘blended learning’ online platform – well accepted Need for non-traditional classroom format – adult learners Advancement in innovative technology Source: BMO The Education Industry: 2018, p. 13 Increased earning potentia
Slide 17: Industry Outlook: Postsecondary Education Market
INDUSTRY OUTLOOK: POSTSECONDARY EDUCATION MARKET INFLECTION POINT EXPECTED IN 2021 Postsecondary enrollments projected to increase at 1.4% CAGR through 2026-2027 Per the National Center for Education Statistics (NCES), approximately 20 million students were enrolled in degree-granting postsecondary
Slide 18: Industry Outlook: Total U.S. Education Market
Career Education competes for market share in the postsecondary market INDUSTRY OUTLOOK: TOTAL U.S. EDUCATION MARKET $1.5T CHILDCARE K-12 POSTSECONDARY CORPORATE TRAINING EDUCATION TECHNOLOGY PUBLIC NOT-FOR-PROFIT Public Schools State Universities PRIVATE NOT-FOR-PROFIT Chesterbrook Academy Benet Ac
Slide 19: Market Share by Competitor
MARKET SHARE BY COMPETITOR MARKET SHARE OPPORTUNITY FOR AIU AND CTU (1) Source: BMO The Education Industry: 2018, p. 89 – except as otherwise noted Market share is calculated as a percentage of 1.18 million students attending private for-profit institutions (fall 2016), BMO The Education Industry: 2
Slide 20: Industry Growth Drivers
INDUSTRY OUTLOOK: INDUSTRY GROWTH DRIVERS CEC WELL POSITIONED WITHIN THE POSTSECONDARY EDUCATION LANDSCAPE Blended offerings (online/campus-based) Innovative technology (AI, intellipath® and Mobility) Mostly serving non-traditional, adult learners with opportunity to further penetrate and expand stu
Slide 21: Regulatory, Legal and Political Update
INDUSTRY OUTLOOK: REGULATORY, LEGAL AND POLITICAL UPDATE Regulatory Gainful Employment Borrower Defense to Repayment Attorney General Agreements Legal Cases Oregon Arbitrations Federal Trade Commission 2020 Elections
Slide 22: General Business Overview
GENERAL BUSINESS OVERVIEW Q) 221 Peco Toa on DevESTOR oaY 2010
Slide 23: CEC Operations Are Spread Across the United States
CEC OPERATIONS ARE SPREAD ACROSS THE UNITED STATES CTU COLORADO SPRINGS Colorado Springs, CO CTU AURORA Aurora, CO AIU HOUSTON Houston, TX AIU ATLANTA Atlanta, GA HEADQUARTERS Schaumburg, IL AIU SUPPORT CENTER Chandler, AZ CTU SUPPORT CENTER Tempe, AZ
Slide 24: Student Demographics
STUDENT DEMOGRAPHICS STUDENT DEMOGRAPHICS: NON–TRADITIONAL ADULT LEARNERS University Total Enrollments (as of December 31st, 2018) BY DEGREE TYPE BY SEGMENT BY CORE CURRICULA
Slide 25: Key Metrics for 2018
KEY METRICS FOR 2018 ENROLLMENT GROWTH DRIVEN BY INVESTMENTS IN TECHNOLOGY AND STUDENT-SERVING PROCESSES Estimated outlook is based on assumptions listed on slide 103 2018 and 2017 enrollments are as of December 31st See slides 104-107 for the GAAP to non-GAAP reconciliation Enrollment comparability
Slide 26: Admissions and Advising Center Investments
Graduation ADMISSIONS AND ADVISING CENTER INVESTMENTS School Admissions Student support processes and functions: Admissions Advising Academics Financial Aid REINVESTMENT FOR UNVERSITY GROWTH INVESTMENTS IN: Two new student support centers in Arizona Further enhancing our Illinois centers Graduation
Slide 27: CTU Quarterly Enrollment Trends
CTU QUARTERLY ENROLLMENT TRENDS INVESTMENTS IN OUR IL AND AZ STUDENT SUPPORT CENTERS AND PROGRESS WITH CORPORATE PARTNERSHIPS | Presenter: Todd Nelson
Slide 28: AIU Quarterly Enrollment Trends
AIU QUARTERLY ENROLLMENT TRENDS LONG TERM TRENDS ARE EXPECTED TO BE POSITIVE DRIVEN BY INCREASED EFFICIENCY WITHIN AZ AND IL SUPPORT CENTERS | Presenter: Todd Nelson Quarterly enrollment comparability impacted by timing of the academic calendar redesign at AIU
Slide 29: Strategic Priorities
STRATEGIC PRIORITIES QD) 21 Peco To on DevESTOR oaY 2010
Slide 30: Strategic Priorities
STRATEGIC PRIORITIES QUALITY ACADEMIC OUTCOMES INCREASE SHAREHOLDER VALUE Enroll Educate Graduate Optimize Enrollment Processes Enhance Retention & Engagement Leverage Scalable Shared Services Utilize Technology as a Differentiator Invest in High ROI Projects
Slide 31: Strategic Priorities Driving Growth
STRATEGIC PRIORITIES DRIVING GROWTH TACTICAL ENABLERS THAT SUPPORT OUR STRATEGIC PRIORITIES OPTIMIZE ENROLLMENT PROCESSES Geographic / operational diversification Enhanced orientation and first class experience Admissions support with focused training and development Diversified student demographics
Slide 32: AIU and CTU Brands
AIU AND CTU BRANDS HOW ARE AIU and CTU ALIKE and DIFFERENT? Potential for faster growth and margin expansion Regionally accredited Scalable shared services Blended learning: online and campus-based Non-traditional students: Adult learners Shared best practices Variety of Program offerings: Diversity
Slide 33: M&A Update – Trident University
M&A UPDATE – TRIDENT UNIVERSITY
Slide 34: M&A Update: Trident University Summary
M&A UPDATE: TRIDENT UNIVERSITY SUMMARY PURCHASE AGREEMENT TO ACQUIRE THE ASSETS OF TRIDENT UNIVERSITY For-profit online postsecondary education institute serving ~4,000 students Degrees offered include Doctorate, Master’s, Bachelor’s and Associate degrees and certificates Focus on business, educatio
Slide 35: Strategic Advantages
STRATEGIC ADVANTAGES Optimal allocation of capital at reasonable valuations (positive ROI) Increases the depth and breadth of CEC’s program offerings: Master’s and Doctorate Quality brand diversification Strong leadership expected to continue Expertise in organic lead generation – ability to share b
Slide 36: Andrew Hurst, President of CTU
University Overview Business Trends & Technology ANDREW HURST President of CTU SVP at Career Education Corporation
Slide 37: The Student Journey
THE STUDENT JOURNEY er esooc aro test invEston DAY 209
Slide 38: Our Mission – CTU
©) 81 Pesenectosen tt —— OUR MISSION —— COLORADO TECHNICAL UNIVERSITY'S MISSION IS TO PROVIDE INDUSTRY RELEVANT HIGHER EDUCATION TO A DIVERSE STUDENT POPULATION THROUGH INNOVATIVE TECHNOLOGY AND EXPERIENCED FACULTY, ENABLING THE PURSUIT OF PERSONAL AND PROFESSIONAL GOALS. od INVESTOR DAY
Slide 39: CTU Priorities
CTU PRIORITIES CTU IS COMMITTED TO FIVE PRIORITIES: Continue to grow and evolve the student population Expand our academic leadership position Leverage technology to enhance student experiences and promote overall student success Deepen institutional commitment to the community Elevate employee sati
Slide 40: CTU Financial Overview
CTU FINANCIAL OVERVIEW +1.2% INCREASE IN REVENUE +6.7% INCREASE IN NEW ENROLLMENTS +5.6% INCREASE IN ADJUSTED OPERATING INCOME(1) +2.3% INCREASE IN TOTAL ENROLLMENTS Key Metrics 2018 vs PY 2014 – 2018 REVENUE CAGR ~3% Adjusted operating income of $117.4 million and $111.2 million for the years ended
Slide 41: CTU Diversified Student Enrollment and Program Mix
CTU DIVERSIFIED STUDENT ENROLLMENT AND PROGRAM MIX ENROLLMENT DEMOGRAPHICS ACCREDITATIONS Total enrollments 22,600(1) Enrollment trends were positive in 2018 ENROLLMENTS TOTAL ENROLLMENTS(1) 2015–2019 Higher Learning Commission hlcommision.org Total enrollments are as of December 31st for each year
Slide 42: CTU Locations
CTU LOCATIONS – TWO CAMPUSES AND THREE SUPPORT CENTERS 22,600 Students / 799 Full Time Employees AURORA, CO CAMPUS COLORADO SPRINGS, CO CAMPUS TEMPE, AZ SUPPORT CENTER SCHAUMBURG, IL SUPPORT CENTER (Golf Building) SCHAUMBURG, IL SUPPORT CENTER (CSC Building)
Slide 43: Grow and Evolve the Student Population
GROW AND EVOLVE THE STUDENT POPULATION CTU IS GROWING AND EVOLVING THE STUDENT POPULATION ON MULTIPLE FRONTS: Grow base population through enrollment optimizations Diversify program mix (Nursing, STEM) Increase corporate partnerships HIGHLIGHT ON CORPORATE PARTNERSHIPS: Reach potentially high-perfor
Slide 44: McDonald's Strategic Alliance
McDONALD’s STRATEGIC ALLIANCE 2nd Strategic Grant added 3rd Strategic Grant added 1st Strategic Grant added Launched in July 2014 with a standard grant In January 2017, added the CTU Program for McDonald’s Students with an increased grant July 2018, launched the McDonald’s Commitment Grant for McOpC
Slide 45: Academic Leadership Position
ACADEMIC LEADERSHIP POSITION U.S. NEWS & WORLD REPORT BEST ONLINE PROGRAMS 2019 Fifth consecutive year CTU programs have been ranked Bachelor’s and Bachelor’s Veterans programs badge eligible Other Programs ranked: Graduate Business, Graduate Computer Science / Information Technology, Graduate Crimi
Slide 46: Supporting Students Through Technology
MOBILE SUPPORTING STUDENTS THROUGH TECHNOLOGY intellipath® CIVITAS
Slide 47: Mobile First University
MOBILE FIRST UNIVERSITY MOBILE APP USAGE IS HIGH AT BOTH UNIVERSITIES Adoption rate 89% by active student population Opt-in rate 92% for push notifications LEVERAGING MOBILE MOMENTS FOR STUDENT ENGAGEMENT “Nudge” push notifications “Achieve success this session!” Timely push notifications to curated
Slide 48: Competitive Landscape: App Features
COMPETITIVE LANDSCAPE APP FEATURES CTU AIU DeVry Strayer Phoenix Capella Ashford WGU Student ID X X X Ebooks X X X Discussion board X X X X X Lecture/chat X X X Grades X X X X X X X Email X X X X Messenger X X X Assignments/Tasks X X X X X Degree progress X X X X X X X Contacts X X X X X X X Financi
Slide 49: Competitive Landscape: App Ratings
CTU AIU Devry Strayer Phoenix Capella Ashford WGU App Store ratings 4.5 4.4 3.8 4.5 2.0 3.4 2.8 3.6 # reviews 85 30 10 192 143 37 21 172 Google Play ratings 4.0 3.4 3.5 3.3 4.1 3.3 4.0 4.8 # reviews 3,290 1,719 806 99 7,970 551 2,197 2,546 Last updated 4/19 4/19 2/19 12/18 2016 3/18 9/18 3/19 COMPET
Slide 50: Leader in Adaptive Learning
LEADER IN ADAPTIVE LEARNING Helping students prepare for success by offering a personalized learning system to build stronger study habits LEARNING MAP Virtual Campus Navigation Classroom Navigation Getting Started Success In and Out of the Classroom Support Teams Learning Support Connections Are Yo
Slide 51: CTU Fast Track
CTU FAST TRACK™ ADVANTAGES OF CTU FAST TRACK: Students can save up to 30% on tuition Students can graduate up to 30% earlier Students can test out of college classes CTU Fast Track is offered at no additional cost Fast Track leverages our intellipath® adaptive platform A series of mini modules desig
Slide 52: Leveraging Predictive Analytics for Student Success
LEVERAGING PREDICTIVE ANALYTICS FOR STUDENT SUCCESS Evolving to Provide Proactive Outreach & Precise Advising to Influence Student Experience and Success Focusing our efforts to predict students’ needs and provide them with the relevant services Achieving this goal through the development of prescri
Slide 53: Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY MILITARY RECOGNITION Purple Heart University by the Military Order of the Purple Heart (MOPH) CCME Institution Award Military Times Best Colleges: 2018 List U.S. News and World Report MILITARY COMMUNITY PARTNERSHIPS The Elizabeth Dole Foundation Hire Our Heroes Yellow
Slide 54: John Kline, President of AIU
University Overview Business Trends & Technology JOHN KLINE President of AIU SVP at Career Education Corporation
Slide 55: The Student Journey
THE STUDENT JOURNEY @ airmen sane iiisron wav 2019
Slide 56: Our Mission – AIU
@) sree sin tie ——— OUR MISSION AMERICAN INTERCONTINENTAL UNIVERSITY'S. MISSION IS TO PROVIDE FOR THE VARYING EDUCATIONAL NEEDS OF A CAREER-ORIENTED, CULTURALLY DIVERSE AND GEOGRAPHICALLY DISPERSED STUDENT BODY WITH THE GOAL OF PREPARING STUDENTS ACADEMICALLY, PERSONALLY, AND PROFESSIONALLY. INVESTO
Slide 57: AIU Priorities
AIU PRIORITIES | Presenter: John Kline AIU’S TRANSFORMATION DRIVEN BY FOUR KEY PRIORITIES: Invest in student-serving functions and processes Provide authentic, personalized student service experiences Leverage technology to deliver quality student experiences and academic outcomes Create a sense of
Slide 58: AIU Financial Overview
AIU FINANCIAL OVERVIEW +3.4% INCREASE IN REVENUE +11.7% GROWTH IN TOTAL ENROLLMENTS +35.3% INCREASE IN ADJUSTED OPERATING INCOME(1) +6.6% GROWTH IN NEW ENROLLMENTS 2016 – 2018 ~3% REVENUE CAGR Full Year 2018 vs PY Nine months (Jan to Sep) 2018 vs PY(2) Adjusted operating income of $13.7 million and
Slide 59: AIU Diversified Student Enrollment and Program Mix
AIU DIVERSIFIED STUDENT ENROLLMENT AND PROGRAM MIX Total enrollments 11,800(1) Enrollments trends were positive in 2018 ENROLLMENT DEMOGRAPHICS ACCREDITATIONS *Timing of academic calendar redesign impacts YOY enrollment comparability ENROLLMENTS TOTAL ENROLLMENTS(1) 2015–2019 Higher Learning Commiss
Slide 60: AIU Locations
AIU LOCATIONS: TWO CAMPUSES AND TWO SUPPORT CENTERS SCHAUMBURG, IL SUPPORT CENTER (CSC Building) ATLANTA, GA CAMPUS HOUSTON, TX CAMPUS CHANDLER, AZ SUPPORT CENTER 11,800 Students / 732 Full Time Employees
Slide 61: AIU: Growth Driven by Four Core Components
AIU: GROWTH DRIVEN BY FOUR CORE COMPONENTS MARKETING AI and MACHINE LEARNING STUDENT SERVICES ACADEMIC OPERATIONS
Slide 62: Marketing
MARKETING Identify Student Interest Serve Student Interest Enrollment Optimization Digital Video Programmatic Display Affiliate Marketing Organic & Paid Social Media Paid Search Organic Search Media Bid Automation Landing Page Testing Media Mix Lead Scoring Student Analytics: Student + Media + Admis
Slide 63: Robust Nurture Strategy
ROBUST NURTURE STRATEGY HELPS TO ENROLL, RETAIN AND SUPPORT EACH STUDENT STUDENT INQUIRIES Concerted strategies across all touchpoints to provide a holistic experience to prospective students to guide their decision process STUDENTS GRADUATES APPLICANTS MARKETING Reminder messaging about upcoming se
Slide 64: Marketing Economics
MARKETING ECONOMICS IMPROVED EFFICIENCY IN MARKETING EXPENDITURES (1) University Yearly Change of Key Marketing Efficiency Components Measured as % change from 2015 Predictive modeling to identify prospective students with the best chance of succeeding at AIU/CTU Cutting Edge Ad-Tech Bid management
Slide 65: The Role of AI in the Student Journey
THE ROLE OF AI IN THE STUDENT JOURNEY In school student support Predictive models with machine learning to assist and focus on at risk students. On-demand classroom assistance Support students’ queries about the course module, lesson plans, assignments, and deadlines Prospective students AI driven v
Slide 66: Key Features of AIU's Virtual Assistant
KEY FEATURES OF AIU’s VIRTUAL ASSISTANT ARTIFICIAL INTELLIGENCE (AI) AND MACHINE LEARNING Average response time Dialogflow: 600msec Overall user query: ~3sec Concurrent query handling 600 queries per minute ~85% accuracy Correctly answer user queries available in chat logs (results are based on 10K
Slide 67: Student-Serving Processes and Initiatives
STUDENT-SERVING PROCESSES AND INITIATIVES GRADUATION TEAM MODEL Collaborative support “The entire experience is more positive…to be able to discuss our student’s situations with coaches and admissions advisors and figure out how to best serve the student.“ —GRAD TEAM MEMBER AIU STUDENT FINANCIAL AID
Slide 68: Higher Learning Commission – Accreditation History
2014 Comprehensive evaluation conducted in 2014 HLC visiting team and Institutional Action Council (IAC) reaffirmed AIU met HLC’s criteria of accreditation Visit concluded with a request for interim reporting Details of HLC and its accrediting process can be found at https://www.hlcommission.org/com
Slide 69: Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY War Dogs Not-for-Profit, Online 9th Annual CESF Golf Tournament (Over $150,000 raised!) Atlanta’s 3rd Annual Red Nose Day United Food Bank, Chandler (7,129 water bottles collected!) Atlanta’s North Fulton Community Charities Packages for Patriots, Online Support more
Slide 70: Ashish Ghia, Chief Financial Officer
ASHISH GHIA Chief Financial Officer Career Education Corporation Financial Overview Long Term Goals Capital Allocation
Slide 71: CEC: Investment Thesis
CEC: INVESTMENT THESIS Includes cash, cash equivalents, restricted cash, and available-for-sale short-term investments Based on the stock price as of March 29, 2019 and the midpoint of our 2019 Adjusted Operating Income and Adjusted Diluted EPS outlook WHY INVEST IN CAREER EDUCATION CORPORATION STRO
Slide 72: Financial Overview
FINANCIAL OVERVIEW 121A ci DevESTOR oaY 2010
Slide 73: Admissions and Advising Center Investments
Graduation ADMISSIONS AND ADVISING CENTER INVESTMENTS CEC started re-investing for University growth beginning 2017 Student support processes and functions: Admissions Advising Academics Financial Aid School Admissions 2017 2018 2019 Estimate Jun Dec Jun Dec Dec 90 130 240 260 330 Future investments
Slide 74: 2018 Financial Snapshot
Slides 104-107 contain a GAAP to non-GAAP reconciliation of adjusted operating income Estimated outlook based on assumptions listed on slide 103 YOY comparability impacted by timing of the academic calendar redesign Partially driven by the 60.0% increase in enrollment days for the quarter EXECUTING
Slide 75: Financial Overview: Ongoing Operations
FINANCIAL OVERVIEW: ONGOING OPERATIONS Growth driven by student support initiatives and technology investments Growth driven by student initiatives and investments INVESTMENTS IN: Two new student support centers in Arizona Further enhancing our Illinois centers Graduation teams Training and developm
Slide 76: Enrollment Metrics: University Group
ENROLLMENT METRICS: UNIVERSITY GROUP New Enrollments Trends à Growth ENROLLMENT DAYS: In general, enrollment days attributable to any given quarter are the available days during which a prospective student can apply to start school in that quarter AIU quarterly comparability impacted by the academic
Slide 77: Admissions and Marketing Process Efficiencies
ADMISSIONS AND MARKETING PROCESS EFFICIENCIES Creating efficiencies in marketing channels—analytics and execution Student enrollment and orientation Focused execution within student support functions Corporate partnerships AIU Cost per New Enrollment vs PY(1) CTU Cost per New Enrollment vs PY (1) Ti
Slide 78: Shared Services – Process Re-engineering
Branding Creative services Digital marketing Data analytics Legal Compliance HR and Recruiting Executive Office Board of Directors Treasury and Audit Accounting and Reporting Tax, Risk and Real Estate Corporate Finance Software and Licenses Network and Infrastructure New Software Development and Sup
Slide 79: Balance Sheet and Cash
BALANCE SHEET AND CASH STRONG BALANCE SHEET AND OPERATING CASH FLOWS Total CEC – Changes in Cash(1) (2) Total CEC – Cash Balance(1) as of 12/31 Includes cash, cash equivalents, restricted cash, and available-for-sale short-term investments Slides 104-107 contain a GAAP to non-GAAP reconciliation of
Slide 80: Long Term Financial Goals
LONG TERM FINANCIAL GOALS 221 pecor: Aen ci DevESTOR oaY 2010
Slide 81: Strategic Priorities
STRATEGIC PRIORITIES QUALITY ACADEMIC OUTCOMES INCREASE SHAREHOLDER VALUE Enroll Educate Graduate Optimize Enrollment Processes Enhance Retention & Engagement Leverage Scalable Shared Services Utilize Technology as a Differentiator Invest in High ROI Projects
Slide 82: Long Term Financial Goals
LONG TERM FINANCIAL GOALS TOTAL CEC 2018 Results 2019 Outlook(1) 2022 GOALS(2) Revenue $581M ~3-4% Mid-single digit 4-yr CAGR Adjusted Operating Income(3) $105M $114-$119M High-single – double digit 4-yr CAGR Adjusted Operating Income(3)(4) Margins 18% ~19% - 20% ~over 22% New Enrollments 38,650 ~3-
Slide 83: Capital Allocation
CAPITAL ALLOCATION #21 peco: Ase ci DevESTOR oaY 2010
Slide 84: Capital Allocation – Baseline Context
CAPITAL ALLOCATION –BASELINE CONTEXT BASELINE CONTEXT WACC ~14%(1) 2018 ROIC ~17%(2) 2018 Ending Cash Balance $229M 2019 Adjusted Operating Income Outlook(3)(4) $114 – $119M VS Or Using capital asset pricing model and adjusted for small cap premium, key inputs used include a risk free rate of 2.7%,
Slide 85: Creating Shareholder Value
CREATING SHAREHOLDER VALUE Cash and Investment Balances Base / Academic Capital Excess Cash Maximize Return Invest in High ROI projects Organic Investments Student-serving operations Marketing and technology Curriculum and course content Inorganic Investments M&A Hybrid OPM Return of Capital
Slide 86: Trident University Key Deal Terms
TRIDENT UNIVERSITY KEY DEAL TERMS Asset purchase price: $35M - $44M 2018 Revenue(1): $46M 2018 EBITDA(1): $9M Different niche: Master’s and Doctorate Regulatory approvals: HLC / ED Expected close: by end of 2019 subject to necessary regulatory approvals Positive ROI NEXT STEPS Post merger integratio
Slide 87: CEC Versus Peers
CECO VERSUS PEERS CECO STILL TRADING AT A DISCOUNT TO PEERS, DESPITE BUSINESS OUTPERFORMING Source: Calculated by S&P Global Market Intelligence One of the Stronger Balance Sheets in the Industry… …With Improving Operating Earnings … …and Strong Return on Invested Capital in 2018…. …Yet Below Averag
Slide 88: Investor Outreach
INVESTOR OUTREACH 28 Pecnro: Aen ci DevESTOR oaY 2010
Slide 89: Stock Return Performance
STOCK RETURN PERFORMANCE CEO appointment LCB teach-out commitment Transformation complete Trident announcement A B C D Source: FactSet FDS Queries as of 3/1/2019
Slide 90: Four Years of Increasing Institutional Investments
FOUR YEARS OF INCREASING INSTITUTIONAL INVESTMENTS Source: FactSet FDS Queries as of 3/1/2019
Slide 91: Todd Nelson – Vision for the Future
TODD NELSON President & Chief Executive Officer Career Education Corporation Vision for the Future Closing Remarks
Slide 92: Strategic Priorities
STRATEGIC PRIORITIES QUALITY ACADEMIC OUTCOMES INCREASE SHAREHOLDER VALUE Enroll Educate Graduate Optimize Enrollment Processes Enhance Retention & Engagement Leverage Scalable Shared Services Utilize Technology as a Differentiator Invest in High ROI Projects
Slide 93: Hybrid OPM Model
Internal Universities (AIU / CTU) The recent agreement to purchase Trident University International (TUI) allows CEC to validate its ‘Hybrid OPM’ strategy at minimal cost ‘HYBRID OPM’ MODEL: Leverage scalable shared services and student support infrastructure to evaluate concept Future CEC – ‘Hybrid
Slide 94: Potential Transition to Hybrid OPM Model
POTENTIAL TRANSITION TO ‘HYBRID OPM’ MODEL SERVICES PROVIDED: Technology Marketing Corporate Functions (HR, Legal, Finance) Financial Aid Regulatory PROVIDED TO: AIU CTU Ongoing refinements of service infrastructure for scalability and efficiencies TODAY (2019): Shared Services Model FUTURE: ‘ Hybri
Slide 95: Inorganic Accelerators: M&A and Hybrid OPM
INORGANIC ACCELERATORS: M&A AND ‘HYBRID OPM’ POTENTIAL UPSIDE TO OUR 2022 FINANCIAL GOALS(1) 2018 Actual 2019 Outlook 2022 Potential Adjusted Operating Income M&A (Trident) ‘Hybrid OPM’ not to scale Technology and student-serving initiatives (2) Goals and potential are based on the assumptions liste
Slide 96: Focus on 2019 and Beyond
FOCUS ON 2019 AND BEYOND COMPLETE COMPLETE PRESENT FOCUS Teach-out/Divest Sanford Brown (SB) and Le Cordon Bleu ® (LCB) schools Improve operating efficiency through process re-engineering Invest in and grow University operations Transformation Plan initiated in 2015 – now complete
Slide 97: Key Risks
KEY RISKS External / Industry Internal Execution in student support operations Technology as an enabler Geographic expansion / diversification Organic growth opportunities Talent acquisition & hiring Industry trends Legal matters Federal Trade Commission (FTC) Oregon arbitrations Regulatory Politica
Slide 98: Closing Remarks and Key Takeaways
CLOSING REMARKS AND KEY TAKEAWAYS SUSTAINABLE ENROLLMENT MOMENTUM Investment in student-serving processes and initiatives ACQUISITION OF TRIDENT UNIVERSITY Increases the depth and breadth of our program offerings TECHNOLOGY & INNOVATION An enabler across all our strategies to improve academic outcom
Slide 99: CEC: Investment Thesis
CEC: INVESTMENT THESIS WHY INVEST IN CAREER EDUCATION CORPORATION STRONG BALANCE SHEET / PROFITABILITY 2019 adjusted operating income outlook: $114M-$119M(1)(2) Capital allocation prioritizes high ROIC project: ROIC > Cost of Capital Increased cash flow from operations Acquisition of Trident Univers
Slide 100: Q&A
Q&A
Slide 101: Thank You
THANK YOU
Slide 102: Appendix
APPENDIX ® « DevESTOR oaY 2010
Slide 103: Outlook Assumptions
OUTLOOK ASSUMPTIONS Achievement of the outlook and long term goals included within these slides is based on the following key assumptions and factors, among others: Prospective student interest in the Company’s programs continues to trend in line with recent experiences Initiatives and investments i
Slide 104: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS
Slide 105: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS
Slide 106: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS
Slide 107: GAAP to Non-GAAP Reconciliations
GAAP TO NON-GAAP RECONCILIATIONS