PRDO - Earnings call transcript Q4 2017 | Perdoceo Education Corporation

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Operator

Good afternoon, and welcome to the Career Education Corporation’s Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sam Gibbons. Please go ahead.

Sam Gibbons

Phil. Thanks and joining everyone, you thank afternoon, us. for Good today Nelson, Ghia, President me Financial President on Chief Todd call the Officer. Chief Interim Ashish With and is Executive Finance and of Vice Officer; webcast being careered.com. is call conference live the section Investor within at Relations This cast also be contact you always our and available replay will web Relations Alpha support. IR on the can Group A site for Investor

currently of made by and performance the this that information today and to statements. these you expressed Exchange differ made risks me results, could that afternoon’s in and earnings Section and prospects and those assumptions defined opportunities remind to statements XXE These forward-looking include risks These available uncertainties remarks Securities statements Career Education, business materially Act. future implied cause on or are as Let actual from involve release based and in Securities for Career XX, identified report Securities and on to, those with filings Commission. any the uncertainties as factors and events, XX-K by year are limited the or the future Exchange to any include, or to Except Education’s forward-looking annual not and factors laws, expressly statements reflect obligation Company other the undertakes circumstances in ended but developments changed other update required Form reason. XXXX December those for no by or

measures. are Relations careered.com. the directly as accompany GAAP and available information GAAP measures, which to which today, be reconciliation supplement, quantitative to intended of other as call comparable contain non-GAAP financial earnings but slide Investor well section the within are financial today’s for addition, and which at discussed to measures, In substitute the refer to most non-GAAP remarks release today’s not presentation The and a

the So, with that, like Nelson. Todd? turn call over Todd to to I’d

Todd Nelson

and for in expectations. you today’s of ahead Good the quarter our I fourth by us thank on Sam. afternoon, everyone, results call. full-year which will and begin joining reviewing Thanks, came

detail, results before final financial in and remarks. I the XXXX more some closing outlook review then will Ashish provide

operation point full-year from and of for University well metrics, fourth and me results ongoing Group demonstrated responsible the results operating represent are sustainable out than to objective which the executed as better references and year. prior growth Let the our remainder by of our We quarter also and that, against today’s discussion, Corporate.

Our our effectively processes initiatives universities. student the and investments serving operations and able in interest student were at to prospective serve

At enrollment in For our just been by and help by and in to AIU Group, the student student CTU total the to are admissions to of increase in both year, growth. contributed total has Both X.X% enrollments a quarter. enrollment and within growth. as grew new as ended, growth supported increased the enrollments to to enrollments X.X%, X.X%, This the student new initiatives and second by quarter CTU, quarter this increased consecutive by University year intended increased XX.X% compared of serving investments to prior the processes field compared new programs. We experiences, intended advising our which outcomes and these improve positive are to and enrolled that investments. testament growth is year, and we before student and help enrollment operations, Throughout their functions impacts of invest the retention continued initiatives a complete -- and students have our after they study. believe prior

believe and will We graduation rates. outcomes result into that time trend stronger higher academic to retention in student improving over continue expect and attention of consistently this XXXX

as positively to enrollments, and And and were positively during student year increased growth of the These their year calls address investments. one technology of increased the prior new calendar we to total which enrollment X.X% as increased the XXXX, advisor the such the of redesign, impacted admissions invest As consecutive advising enrollment and enrollments of including quarter, these versus initiatives would further as a as support well At impacted new and students are growth of effectively XX.X% share driven use quarter, students AIU’s CTU. of of for who year. enrollment investments a quarter third and consecutive academic to as a new represent has quarter, the driven students. growth. result, growth and in sessions, by that positive This and demands the center prior enrollment us CTU those it’s acclimating representing admissions quarter to AIU’s of resources, to the prospective pleased expected the center we’re initiatives days by sessions total which advising versus increases the meet end to for quarter Phoenix as admissions during number for AIU, is second study. meaningful experience innovative their the represent in advising first investment. for AIU on transition focus programs quarter quarter and the CTU’s important as prior well first by expect phase Phoenix in third primarily primarily of compared

in days in the step the cause out new number revised started a all prospects. activities. about of Additionally, want only Overall, AIU’s enrollment students future I’m map turnaround years due take redesign ongoing pleased do two but performance. quarterly experienced AIU content experience, and more providing to for that navigate in excited it streamline underlying to enrollment to has characteristic point academic given system other road launched learning our not quarter. AIU’s new varying enrollment of two and I making management years that by was easier any with stabilization growth. for of The minute an efforts course trends will now also variability offers a ago quarter completing calendar the step consecutive a them fourth by

student instance, new of quarter. decrease to enrollments in year For first XX% quarter compared XXXX approximately to prior the we expect as the

growth such on of rolling a new by than we be basis student reflect growth. However, three-quarter student to enrollments offset enrollments expect and quarters second more the in we that expect XXXX, new in decrease third to

several while undertaking initiatives on Our on universities focus and investments. changes new have to refining continued and operational executing

has the overall orientation as to as they of overall initiatives revised Turnover and models, development. encourage within and be our now multiyear service accountability we the prepare training continues With advising which quality is accountability enhance and between their admissions several for the improved start ultimately advisor to and our of enhanced students. we improving There and has operating at our the and manager stronger benefiting function student to more experience student coordination believe functions experiences, our engagement. has admissions due lows to levels and goal such This on-boarding at students staff elevated school.

comes and training, resulted within investments facility approximately to more overall in the of in which and and student-oriented Increased for in model their student retention. helps to in that they functions advising, AIU advising to and student personalizes also team begin us, in student team student we and the we increased financial due on a engagement fully relevant during execution of investments to increase improves after we engage and education. similar structure. prepare and increased graduate a experiences and ultimately has and positively student-facing believe continued the focus improved and enhance our admissions advising to operating this focus and believe use an aligning transitioned staffing it begin is structure communication to personalized two which retention. students Technology student interaction. retention CTU increase is in students key impacted process model as faculty between retention graduate services and enabler dialog aid a Our our results have it learning overall Simultaneously, we believe and Recall engagement groups, accountability an school, as have experiences XXXX to technology is with educate admissions when on-boarding, and differentiator resulted structure student processes. and focused XX% improved leverage while

prioritized. Let technology that few have investments me discuss a we initiative

courses and First, outcomes. increase enhanced general learning believe our adaptive this academic expand just is platform award-winning we our beyond students to learning their continue helping education and

has uses and coaching provide the focus student in service the and each modeling fashion, of organization, will in Second investment we reactive analytics a proactive in of retention and been timely a predictive make an relevant most right type to tool to that CTU approach. retention key our XXXX, at versus

in of and continue mobile to Adoption platform. mobile our has invest students to grown students our progressively our majority expand we capabilities. subscribed the Third, amongst XXXX with our now through

are support key at which and momentum and XXXX we their academic to to fourth to operations also XXXX which operating operating in access Overall, universities faculty and to growth our quarter learning progress XXXX the the faculty will were our and the in growth making remain of should staffing support entering and new with sustainable send ways invest in outlook This innovate mobile with and feature all reminders ability communicate at technology application, through continue easier launched positive regularly universities beyond. their added metrics We’ll and appropriately futures we roster the class mobile in while and student materials, and trends New pleased gives our support messages assignments our and in the responsible believe while it into further application. students. universities.

I’ll brief comment our teach-outs. Finally, on provide a

our complete end their remaining we campuses. of XXXX, to had less a of the than As XXX at students education teach-out

obligations estate of campuses experiences, strategy to with completion to and initiatives student work intended associated our objectives our teach-out teach-out concerning allocate our to and up largely achieving campuses, incremental are remaining and of to academic real student and these resources further growth outcomes. Most the remains further responsible teams teach-out Our technology improving frees retention complete. investments and importantly, the diligently optimize towards

around hand sheet more Ashish balance our for Now, call detailed review with to I that, will a results, over and outlook. the

Ashish?

Ashish Ghia

XXXX Todd Todd. you, and with sheet, balance conclude start a back with comments. closing his finally our XXXX of before Today, the call discuss our for review and handing results, operating will to I our Thank outlook

to within year investments by student contributed initiatives retention trends. compared by the increased revenue Also AIU. enrollments. overall quarter the Phoenix advising X% the quarter. driven enrollment This by $XXX.X in compared For various new prior and in redesign quarterly enrollments new as total X.X%, as center to growth as million year academic driven prior initiatives at trend University the XX.X%, well the quarter, Group and of calendar just to growth total improvement Fourth supported growth University including admissions was was quarter and Group grew enrollment ended, that by operating the by our serving as contributing to the to primarily the

operating versus the $XX X.X% for respectively prior Adjusted an included growth to compares reflects prior performance operating $XX.X for and was $XXX.X revenue in the in Operating loss $XX.X the legal approximately For from that in structure. the $XX.X XX% million. a trends from year year $XXX.X recall respectively $XX.X million ongoing driven Also, year and quarter of as by settlement to which results retention, fourth enrollment full-year, ongoing new the XX%, quarter million in an operations operating well enrollment favorable year. These ongoing operations which full-year, fourth The operating periods. was and continued to in $XX.X efficiencies quarter in efficiency were and million, the and of the the million, full-year, million income as million the compared growth benefited prior increased as improved our within income of costs of improving million operating improvement marketing prior periods. our trends. income for

teach-outs. to Moving our

an fourth as quarter represents quarter. As an the than expected, operating the million operating XXXX, of to of in losses $XX.X in to of loss XX% which declined year prior million compared improvement $XX.X more

primarily to operations. For by expenses prior as these compared as approximately the driven was an These full-year, of down campuses reduced million wind are their operating the improvements year. $XX.X improvement XX% loss

Now, as substantial $X.X million with will quarter $XXX.X driven year which operations. let the by cash by cash third increase short-term was cash during the Net restricted million quarter, sheet. by teach-outs the improvement provided an operations compared me sale by to $X.X XXXX, the increase be year the cash, operating in of address of during driven the over We cash cash efficiency ended today’s This million and as in our to ongoing referred provided discussion. of The cash million used increase and performance. primarily the the of balances available completion for ongoing quarter. improved balance of for equivalents, represents with was operations of prior remainder $X.X investments, of primarily

payments the used of legal made cash the during net as cash $XX compared full-year, $X.X provided to million to of with of settlement million the the year in quarter For was cash million prior the current increase XXXX. attributable $XX.X year the usage net primarily in for first

obligations These on we lease component with discussed, obligations large previously focused teach-out our and of been As have structure the a cash our cost usage. have lease campuses. associated been optimizing

pleased been in some well initial by cases, reducing arrangements, last entering termination which in years sublease the progress lease outlay. buyout have the We few as made into did obligations cash over or with arrangements, an require as early these securing

remaining optimization lease approximately efforts XXXX lease will below previous levels, XXXX our liabilities natural XX% driven explorations. by Our be or a our

to be ultimate goal continue be immaterial. reducing in area, savings our opportunistic we this obligations, from with the may of incremental While further hereon

on While me taxes. let on a the sheet, income balance few minutes spend

the January Tax tax the the and rate revaluation net net a Effective million $XX.X tax comprehensive to $XXX year. of income which unrecognized XXX.X% future prior offset Also, recorded positions XXXX, federal be year-ended we $XX.X taxable Cuts effective tax of reduced of income loss known tax effectively federal reducing X, charge This at XXXX, Act. and state a million operating which XXXX, for an a payments. assets in as tax the rate of will corporate year. Jobs in as For million any legislation, resulted a net for of provision tax federal XX% in XX% result included as used to of deferred the years between tax the the we had related carry-forwards the is end compared

periods the a in million and the expenditures prior $X.X in increases our year fourth in our the admissions million capital new growth and compares This full-year. million reflecting centers investments quarter Finally, for with selective $X.X respective million and universities including were the advising in $X.X to $X.X Phoenix.

continue enrollments operating that I ongoing within our spend review advertising ‘XX. experienced outlook, context XXXX’s performance our over performance efficiencies outlook the with year. total to and than in Before me let ‘XX We actual expected for better in drove our for growth

the teach-outs an expected operating our managed lease efficient losses obligations teach-outs. also our and and responsible in for We reducing significantly effective, manner,

academic us objective The functions create sustainable surveying of responsible performance student outcomes executing some further and Company provide of As of were provide and million the than The the income a million, operating invest let of outlook. operating our is our of current around of campuses the driven me also mind, teach-out XXXX’s operations range and outlook XX two against these outlook. high improved ongoing the to in its within details efficiency of year. our million, and in range $XX growth. four Primarily to adjusted adjusted ahead year-end better $XXX adjusted students. XXX losses was well our end $XXX.X result, balances million that $XXX.X outlook of three Slides us by significantly results, our universities, $XX for color and full-year to were cash for XXXX for came in With around losses. operations will experiences the operating presentation is the our helping in allowing million operating our better some outlook above while for at our

total million. prior in range income million approximate XXXX. to which operating $XX be the levels adjusted XXX be to into the with Company XX% an of expect year continued income increase $XXX from range operations represents operating Further, to million, adjusted ongoing in of to expected $XXX is from growth We

million XXXX. $XXX in XXXX We to at be anticipated million $XXX the expect of cash year-end to with range balances continued growth in XX, December

income three regarding also some first versus in our result point the in and sheet quarter our prior years. dollars our associated operating also four expectations provide me of we the XXXX. campuses, cash continued expect Let for flows to more teach-out additional the Slides information out with now to decreases balance obligation our due that operating

of operations $XX estimated and operating be $X range range We income four, million, expect losses XXXX, to On adjusted to $XX to campuses. Company ongoing the be to to in of adjusted of total the adjusted operating for from to range an provided million in have income $XX million slide related of million $XX $XX teach-out million. we million our the operating

of at As six, at summary like at teach-out also may in AIU. have to On our there the are key that driven impact some remind the the had remaining than scheduled we a results, calendar XXXX. our everyone outlook. their by less campuses, programs would timing we end slide operating our Todd of complete variability students to from the contained within assumptions in of I XXXX, expenses XXX redesign the mentioned, our who and be impacts quarterly initiatives including our of varying ongoing provided

seven will have of back slides done items. past, reconciliations to I closing With as his GAAP our the non-GAAP the over provide we to Finally, presentation, comments. through call for in Todd, nine, in turn Todd? that,

Todd Nelson

year complete remain faculty this in investments, process, commitments have this our increasing students, made has student the XXXX focus with I’m support, a for our and and employees objectives the $XX Company our priority. the of against retention as our to students improving our teach-outs initiatives. Throughout of Company technology Ashish. and approximately loss outlook improving XXXX, our and million XXXX. have model to been a Thanks, of as the since stock outcomes. $XXX continue for of to of been to our and as advancement None possible dedication from represents well execute pleased our the growth shift operating for XXXX an we million progress profit million transition operating successful we holders. of within and would from operating academic as very $XX and we restructurings,

and financial in technology, course structure contributing Phoenix improvements redesign will we student objectives growth. new within admissions commitment. are and operating for to and investments content, operations, a support all in and advising centers effective of better to of and balance our our and with Going student student to measured forward, made engagement services our continue approach efficient take Operational responsible

confident expectations long-term joining now performance for Group we potential will And today. of both any University questions. in and remain our us with the call and is tracking in universities. the the you we Our proposition Thank value open for again line academic analyst

Operator

[Operator Please Instructions] question with first Jaffray. The Appert Peter comes go ahead. Piper from

Peter Appert

Thank you.

the in impressive. programmatic call particular of is terms that would you Any of out? start strength Todd, areas number So, areas very

Todd Nelson

What was sorry, your question? last Peter. part I’m of the

Peter Appert

what’s to driving understand programmatic areas, trying terms program… start Just in improvement of the new

Todd Nelson

is, Yes. to to our I news combine ability think is. that’s think overall then to us been is continuing that invest that our programs again I really it several-year of Programmatic, to themselves, the process. effectiveness market. advertising improve you that, the think I opportunities forward, has improve mean, a the allowed process the going admissions take from good advantage of And what this and the I in in with the that

I we’re going think again, encouraged by So, forward, demand. the

so, again, think we in that. place to optimistic about on I the right And quite forward. we’re what we’re have seeing execute going people

Peter Appert

a not introductions of of driving So, story new program were really the the terms start part inflection? in

Todd Nelson

we really year’s was meaningful contributed any to -- continue new But to say Well, -- process. over development And in I program growth, be have any that going again new contributed will by of size call a and time tend programs be continue big although I any as product development. to that we to initially, -- to you those But, a this some attribute robust that’s again, would particular one amount out really growth would But, contribution. know, just wouldn’t one build new momentum. this get you I say very-focused program. -- program, that I had small forward I on don’t program

Peter Appert

process a expected? in cash obviously so talk, than cash your capital are turnaround that use, far now is higher the about given little for flow and use, you balance the along Can Todd, bit priorities you

Todd Nelson

question. Sure, a good

objective. The And our demand. foremost of your based is end question, result, think to as we business first front earlier a continue the I in and number is, that on see good one investing part

we the centers advisement would student continue And be year. our and to to right go so, Phoenix main again focus have we this been

is differentiation just to us an resources, to as continue that that devote as classroom. we the the teaching, also, earlier, -- but we development think market really grow enabler also money not right not have but in gain experience to the hope again learning continue to said learning and enhances is it to to do as model, share the right to we program only gain we I well We because technology the our want will technology allow belief

So, to investments. say, I those the are short-term have

-- the as be shareholders think well. I and at looking beyond of to capital the that way hopefully obviously best very the would objectives that, deploy and support our we would are carefully

Peter Appert

is M&A basis? focused increasing significant So, n then on go a or a forward

Todd Nelson

to very students. responsible to mean, focusing I will I’d which those think and again you it’s Yes. I of I us look overall responsible feel for that think, add if at overall long-term and those it’s area I where opportunities. consistent you quality But to us say, at those again, again, on the support can to say should it and programs strategy think, But, growth, we would our high benefit things. of look want wouldn’t for market but is -- and they that no, support we certainly responsible strategy, again our

Peter Appert

questions spending that? And rate can then, help on capital tax with us around thoughts Ashish. guidance couple And you in for then just Specific ‘XX, of for the ‘XX?

Ashish Ghia

Sure.

expenditures. between to Let of X% will through would revenues. capital capital Typically, I me go expenditures range say X% the

So, that’s at. very look range good to

we rate state some tax far plus as know, add tax is As the the as rate you new XX%, -- goes, taxes. we have

a would between So, XX% XX%. next be rate safe year to for anywhere

Peter Appert

cash not bit little and correct? tax, standpoint that is what paying some we’re anything guess, from any I from since doesn’t you other really are matter NOLs really Is it actually with seems Which there to the companies. relative -- a high hearing actually

Ashish Ghia

correct because have $XXX we million is NOL. do now for That Yes. of

new there in changes mind around However, some stock keep compensation. is

year, in if percentage us this inside, that’s you points look costs X at So, our tax that rate.

giving into range. that you So, a I’m just number. all the and basically, taking should account be that But,

Peter Appert

to losses still XXXX Okay. there XXXX, in leases et some is zero And residual Ashish, then go or in teach-out cetera? from expense then, the

Ashish Ghia

be that they stuff should ongoing they might little. there very out. of I Materially mean, all materially some leases like be utilities kind but should some and be down,

Operator

Okay. This Instructions] Todd closing conference our Nelson [Operator turn to over like I question back answer would and for session. any concludes the to remarks.

Todd Nelson

call. as we forward our appreciate said I Well, Thank again. call look earlier, again, next do joining to quarter. And the you we for us you,

Operator

The conference you concluded. presentation. has now Thank today’s for attending

You disconnect. may now

Perdoceo Education (PRDO) 21 Feb 182017 Q4 Earnings call transcript