Perdoceo Education Corporation Reports Third Quarter and Year to Date 2020 Results

About this update from Perdoceo Education Corporation

Third quarter revenue increased 9.1% supported by enrollment growth at both CTU and AIU SCHAUMBURG, Ill. --(BUSINESS WIRE)-- 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 intelli path ® 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 [email protected] Or Media: Perdoceo Education Corporation (847) 585-2600 [email protected] Source: Perdoceo Education Corporation

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