PRDO - Earnings call transcript Q1 2019 | Perdoceo Education Corporation

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Operator

Good day, and welcome to the Q1 2019 Career Education Earnings Conference Call and Webcast. All participants are in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the conference over to Mr. Chris Donovan with Alpha IR. ahead. go Please

Chris Donovan

Financial the quarter call live first Executive call. Relations me and available A Alpha be Relations With section and our call [Audio is XXXX IR contact Todd support. the site, and Group is webcast within the Chief President at will Vice Investor replay today Ghia, Chief This being Nelson, on Investor conference webcast Ashish Gap] always for Senior also earnings Officer. on President Officer; careered.com. you and can

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

the to refer GAAP to within call With not for intended Investor earnings well Company's I'd that measures. remarks the and information to as most be like today's financial at non-GAAP reconciliation and Nelson. Todd page www.careered.com. website In are the over but comparable measures, that, the to measures, substitute, on financial quantitative call Relations accompany to today The Todd? release is other non-GAAP turn GAAP directly contains supplement, addition, which as of to available the discussed today's

Todd Nelson

everyone, metrics are Chris. call. Thank a operating against with afternoon, financial Momentum objective well processes coming We previously quarter in within year-over-year and we on outlook. operating our executing and of and for of first growth Good our strong joining remains you, on responsible showing thank note, growth. and started sustainable today's ahead us XXXX encouraging, and provided our you

growth the margin quarter resulting for quarter highlights key growth, X.X%, for universities up with in Some operating revenue of was income both this and First, XX% an the contributing to operating XX%. include of

beyond the looking strongest impact university redesign, Second, in the it calendar academic been was new over believe X has of enrollment growth years. we the

encouraging interest programs trends consistent the we and our XXXX, in our enrollment onboarding processes. through general, incrementally have first including industry the of for on based the quarter Third, student in levels of invested and optimizing further

highlights for Lastly, regulatory acquisition working shortly. Trident our some further of planning approvals. the we're on and focusing while quarter excited I'll expand International, the about potential integration, and are now on through of University efforts on necessary the

Ashish will call. XXXX end update and the details before then outlook an financials add to the closing cover around provide more thoughts some of I our

over or $X.XX was by million diluted positive $XX.X quarter, net a the momentum We carried XXXX quarter strong First reported of driven that XXXX. income per from share.

ended our by of and operating remain to operating was from learners. current employ our and to offset universities. nurture strategy, the and ongoing debt as students growth teach-out a the an this universities expense. revenue driven university serve toward and of our million the that universities and which diluted using customized first, enrollment new compared have with data outcomes of end retention, quarter. enrollment teams. onboarding across Student strong was to and per was both to I compared provide Adjusted support Enrollment following: at both XX%. Student-serving bad the levels that as academic diluted primarily noncash and increased our and items, standpoint and engagement enrollment student student by XXXX interest by processes. contributions per adult process total all prospective the help information And the continued prior our to competitive excludes Two, growth driven prior earnings and as robust million X.X%, share, educate strategy, positioned and to in $X.XX they While including certain $XX by relevant the operating investments staff prospective year optimization up initiatives consider $XX.X and prospective $X.XX Helping enrollments completion further Illinois teams a growth year and the students. we're drive in by Arizona technology and supported students, share centers. at analytics adjusted at were improvement we in consistent and was primary education by income believe prospective quarter, of XXXX quarter significant ongoing from which interest into of improved with well growth focus We the nontraditional driven

have the within redesign started focused at and AIU, for specifically organization. have tenure increased to training more at in enrollments efficiency academic primarily enrollment impacted especially the maturing, quarter investments positively by improved due three, days. And CTU, execution, universities XX% new While experienced these driven the more and centers both calendar

approximately a the highest meaningful it segments. continue to contributor Corporate CTU our during be to growth the quarter enrollment in of CTU. partnerships Moving to of X.X% enrollment with on quarter, the grew new been X by years. the has CTU, total students, driven XX.X%. primarily growth XX,XXX At ended enrollment

improve admissions and ultimately advising to experienced our a teams which student will been sequencing with across believe organizations We've experience education teams, While advanced learning to new engagement Supporting by ongoing programs take goals. on are enhancements promote have that academic these with academics mind, technology promote nurture, and align student and core by execution experiences, With and greater team improved that and our have augmented leveraging to corporate focused partnerships time fosters tools. will in that further relationships codeveloping learning. dedicated retention have operational drivers we strategic we partners' optimizing and student implementing advising student improved outcomes. lead

meaningful We college just with outreach prior and enhancements based have relevant also implemented the providing on customize and engaging to a students. a reporting to admissions their enable strategies engagement technology some staff student's advising more and experience, and

student relevant points the the right and to approach experiences right with levels investments, most of for the support. new past and seeing by various discussed student XXXX. by we data the grow Finally, predictive we consistent initiatives Driven modeling programs, with our that enable in and expect just interest are to engagement student student supported time leverages reaching our at of support new student more enrollments some proactive by to CTU success tool encouraging the analytics student a at I

Turning to AIU.

a AIU at its reminder, As impacted calendar. results are enrollment quarterly academic by

student XXX.X% while quarter. increased total for quarter, the XX.X% grew enrollments enrollments New by for the

to centers onboarding Arizona addition execution academic continue positive at and calendar to the advising the admissions and enrollment redesign, In student the Illinois improve and processes. around the from impact

teams. with improved improved And are model our sequencing continue with centers seeing based redesigning AIU quarter. versus admissions, new create execution which content course is These and In learner-centric at interest, graduation are is levels teams, of general, based assignment shared on teams, year our consistent within feedback, to completion. staffing supported tenure student on focus financial experiencing active graduation the between our In up while model we advising execution significant and has aid. accountability the student there our academic XX% team we outcomes, a optimize session-by-session to where from fact, along by prior learning on versus step-by-step approximately been core

aid the positively acclamation before start financial our performance are calendar-driven continues prior Finally, with on to school students compared in underlying to trending the operating focused Despite as their financially variability getting year. to momentum goal within easier. overall enrollments, with of teams progress, metrics school quarterly they key the prepared making

of the executing increased against objectives new And student addition expect growth enrollments days drove XX.X% responsible Overall, new experience the AIU to experienced the revenue is in the of quarter. partially which enrollment in well growth. quarter, for impact the the its in we increase growth and strong full sustainable XXXX. for also AIU Importantly, to enrollment year

primarily our a our Having technology students, Finally, serving learners, technology online investments. institutions promote and academic adult learning observations key a an enabler differentiator few students. including nontraditional around is to for

prioritizing to the questions to throughout variety around ongoing intelligence being into be being faculty cycle our universities app necessary fully XX/X initiatives, a while responsible Our outreach well academic of of from is operating is AIU message. analytics universities. and to hand for student both are a financial their nature. adoption over proactive With to to artificial used while and and and to of to enables technology positive executing XX% of increasingly strategy that, student in used advising. teams momentum out like launched, carried anticipate the be and apps XXXX has launched us our Also, Once more communication student second X-way continue timely refine is the has and mobile students universities provided balance on outlook user topics. with student-serving the to plus the with tools a for both use for will XXXX, the and right experience continue our call teams Google's faculty encourage for university updated student quarter App and notifications support, overall we'll are usage the the by objectives coaching An the used have These trends as confidence results, provide communication conclude, that tool XXXX over universities, increasingly both more of growth. messaging version as with analytics achievements, sheet of able students. high and inquiry our operational and and at a processes and academic-related rate, our as highlight support CTU onboarding is review while leverage XXXX. tool invest more the rolled that a I'd This providing and leveraged fully advising now detailed retention finally, at giving reaffirmation sustainable To teams. our are in life predictive first for students and to and better well student with for against to Ashish in And address app quarter. are personalized

Ashish?

Ashish Ghia

with results, versus unless a the otherwise you, comparisons Thank the comparative his stated. closing start our XXXX handing before discuss All balance are remarks. for call and our outlook I Todd first period, quarter back year will to review Todd. of then prior sheet and

let presentation out effective Before I our point begin, segment me change in X/X/XXXX. a

segment, campuses other the our completion all With included is responsible of these an operating schools longer which segment. the teach-outs, no

As maintain been now office campuses with associated within and other closed a recast residual the periods comparability. result, category. to these corporate will be have Prior included

our results. to Now

with $X.XX. is prior the Offsetting processes high-end First in income and year a initiatives and universities costs with million. the performance. for performance these quarter, expense. measure was share quarter items, This certain $X.XX, income $XX closed associated company operating Adjusted driven solid revenue million, was at operating debt and by operating of range of the noncash well technology per to positives while with $XX.X $XX XX% was an growth underlying as outlook bad higher which associated primarily delivered adjusted which diluted of million. of quarter $XX earnings reduced was our year above for Net as the This to was our well million more in operating were as the income, $XX.X improvement compared start and earnings improvement million investments and losses an of as XX.X% diluted of operating ongoing to per reflective total $XX.X significant million share both increased student-serving income was as excludes campuses. the versus

enrollment universities some specific to initiatives This to year that trends Todd driven by Total student at the company supported just by was been compared $XXX quarter. student Now more around the approximately prior million X.X% both as financials. growth our outlined. revenue increased that quarter have positive

AIU further was operating As segments, of days new year improved doubling Operating our processes, expense year primarily versus prior with up with enrollment bad positively for by perspective, debt. income operating the enrollment bad X.X% total by in driven and it despite at Illinois quarter. expense. we nonstudent-facing revenues the growth which leverage this experienced the debt for quarter, revenue the revenue X.X% for increased relates From our offset CTU X.X%, earning growth to attributable primarily some at an increased XX.X% more quarter increased centers. the efficiencies, Arizona across operating partially X.X%. supported growth to investments various was quarter, Revenues were impacting prior while from Also increased income

any As which variability earning not operating quarterly and performance enrollment are days trends calendar-driven by number driven a materially primarily the quarterly does the impact during revenue reminder, quarter. underlying revenue of in our trends,

Moving to prior new Total growth student by the year. enrollments grew enrollment enrollments. X.X%, CTU versus XX.X% by supported at of

digits. to is corporate this student by our Illinois within outlined, new partnership levels mid-single enrollments driven experience Total enrollments. of for in admissions Todd enrollments by the XXX.X% new to and performance increase and positive these enrollment full and interest. for As growth program. the at growth driven this XXXX, in quarter increased progress was advising with AIU year supported student investments at grow initiatives Also consistent and new expect and CTU the centers, second our primarily contributing XX.X% Arizona expected prospective a quarter, continued by by the trends, we growth Driven to

As were previously indicated, quarter approximately XX% prior in the enrollment versus first days more the year. there

new Recall that quarter significant the enrollments drove AIU revenue days in at also experienced academic the growth a calendar the which impact the partially redesign given any on this we for enrollment specifically new enrollment quarter. variability, the Excluding growth. AIU, of believe that for has number quarter

to this primarily year. days enrollments to the timing a approximately expect of compared AIU at fewer decline result by prior we a As enrollment impact, the new second as XX% for quarter, driven show

campuses year an strategy losses the operating an the A to losses to XXXX. operating operating and new million first includes losses to as This matters items. closed loss Future million. compared well For was in operating of occupancy-related year. the to expect completion decrease expenses in $XX.X XXXX, we prior quick loss other. driven now update grow related enrollments of on during of XXXX and full continue legacy the by corporate residual some versus in $X category associated reported legal residual as teach-out quarter include teach-out This with our as primarily

release in and XX.X%. $X.X taxes, for taxes quarter which benefited approximately income we income by tax X.X% tax provision a recorded rate resulted an current stock-based compensation. for for to quarter, of tax of tax to was the effect million Now the The effective reserves the of rate the related of

being between For we XXXX, to we for expect the with available loss of lowest the XX% year. million our carryforwards, operating federal tax $XXX rate the and quarterly rate ended offset are XX%, to quarter first net income. which be future Separately, XXXX with approximately taxable

specifically to it do pay we any taxes. XXXX, income a As result, expect not federal relates as to

by over $XX.X was available-for-sale to increase equivalents, settlement expenditures IV incentive by timing outflows attorney flows core general well and quarter long-term as as to from were million payments, quarter remainder minutes which year-end the me and discussion. spend the let for of to XXXX balance Capital first We be an few annual This driven in restricted cash offset year. with related million our a $XXX cash of cash prior approximately funding. compared university represents the as ended our operations, balances reviewing Now cash, cash the sheet. legal of short-term $X.X cash approximately today's in million referred investments, our will million as of positive Title and primarily $X.X payments

in to better investments efficiency range and revenues. and showing experiences full we growth allowing year the student-serving helping operations improved the to its results. our of the academic for XXXX, Company us is to responsible foresee X our positive within against X% objective well in expenditures students. create capital be X% Overall, of executing with of universities, For of incrementally invest technology is us outcomes our The and initiatives and performance sustainable

outlook. XXXX our Finally,

prior unchanged Let's revenue growth outlook for both to versus million start at this our outlook. of year. the each new expectation XXXX, to enrollment year to operating will million compared the which university. approximately XXXX, full $XXX translate we XX% to growth in growth Adjusted remains $XXX X% universities Driving believe million with outlook as $XXX reflecting in for income is of

For X%. XXXX, university in to we to of revenue X% be growth range the expect

of cash expect diluted continue Trident range between of And expect during acquisition We pending to in net University. $X.XX and operating in to be share to grow the the to XXXX. range year-end of the income about this per $XX Adjusted other per on for balances as well to the the versus earnings million year, underlying adjusted $X.XX second we quarter, refer $X.XX adjusted $X.XX. of and for earnings in the expectations $XX.X Please as call GAAP range and non-GAAP today's information important to to be to reconciliations. filed and factors key to earnings million share our outlook release assumptions $X.XX discussed today diluted the

balanced Before on to our let capital me I up, comment quickly allocation. wrap approach

focused most and on strong now the overall that, also will shareholder remarks. to and building academic for sheet, in closing pending Todd? turn that lead in balance to With goal his deploy call University. investing are outcomes will value. we effective I projects We efficient the committed resources back Trident over is a Ultimately, increased prudently the to the while manner our enhance of acquisition believe to capital organic and Todd growth

Todd Nelson

We've in company. to a XXXX Career and XXXX. hard the execute we're and Education continue supporting of very momentum, we with entire entered proud takeaways as successful contributions work responsible good our team Thanks, Key of Ashish. in growth the transformation to

operating First, are positive. metrics overall and trends

our balance investments and operating commitments financial with initiatives. to and continue processes will we Second, in student-serving

increase to for today. outcomes. Thanks, any shareholder retention working strong as technology we'll enhance now finally, academic analyst and and invest experiences, joining delivery for And student questions. and us And call the growth. of and open again, on a value, continue be overall we'll focus key resources to enablers academic there'll differentiators capital Third, to while

Operator

first Alex comes Your Instructions] Research. Barrington Paris go [Operator Please question from from ahead.

Chris Howe

Alex This in Congrats Howe Paris. sitting is on solid quarter. Chris for the

Todd Nelson

Chris. Hi

Chris Howe

starting When here. questions CTU, with a there I several guess, difference in margin look have CTU. at I expectation. is margins, AIU, I off AIU XX.X% XX.X% in versus variance a But at there,

or for have for technology As this or whether how even in to pricing are at we or your that outlook at expansion it look initiatives in here, margin year you and investments place look relates your opportunities in beyond, we other should currently? progress changes

Todd Nelson

good their on Well, and progress the seeing AIU expansion. Yes. news we're that this with is good is margin

One need is is degree scale. taken be things some to does of into consideration to the that

if example, despite you need an infrastructure twice it's academically through believe, to to go is the for, look of you staff very academic the a process For necessary CTU, similar correctly. versus at fact size for needed just it's AIU -- CTU And that's that the have AIU. I

one. that's so And

margin, is expansion also is investing bit second feeling more -- right growth The in that but suppresses faster takes be CTU. also we've displayed being also the potential has which a to have in AIU and similar time by their in in, time, point growth, little some now, to been which is that our of margin

Chris Howe

And questions. other Great. here of helpful. some That's my shifting very then to

your for highlighted that allocation forward. capital goals moving Ashish and

to move far organic additional you an As centers, enough states we to be look other or at as in other for growth? have in same could would the that your the Arizona success and words, goals are toward Illinois support your attractive those and in centers that characteristics pool XXXX? are Arizona, center are Or future Illinois and as there the you're the talent your perspective, for territories having

Todd Nelson

question. a question. pieces of And to answer to couple Good your

folks have is type of of are that given The that that advisement opportunity we history in staff feel there. there, a increased the centers is had of still there for Arizona. of profile, First university the lot do plenty

a good labor is there pool. So

where years, and the past, And we plenty so a for several plans, there's identified presence. we have to feel there. that, have And grow there. said to needs certainly the next meet we of we our do actually have as states other comfortable expand opportunity we continue as Having well said also in

is look the a the But name Arizona candidates advising hiring Colorado. to our both Illinois quality We of the to continuing we're focus both main see hire qualified well well. staff as as well to as run, level Just with potential down we to Georgia good as of as short as traction couple, enrollment in and here as them in road. expanded of in in

Chris Howe

last in partnerships my very It's is to corporate And in helpful. CTU. question then regard

You mentioned mid- growth. to high-single-digit enrollment

think contribution the we along lines? should For grow in their to corporate same And faster? how even think will partnerships, should Or that we XXXX? the about mix

Todd Nelson

straight-line of And a good percentage total, times that percentage grow expect at is It's it different student overall the very but as a could necessarily body, student it's as a to aggregate a question. faster increase possibly total an of necessarily not a total overall not our smaller you a because numbers, enrollment.

invested period We've And time of CTU. that significantly in investing so longer been not we've AIU. in in -- as

so really short be that to percentage, is it because look than the be other, to simply our significant it's it's continue to And is, a base. answer contributor the a we -- faster growth. smaller a a to growing But as --

Chris Howe

have And Okay. I question. more one do

analytics that the investing in. You had mentioned you're

For depth that perspective, of early far gain the late -- as potential converting innings, for in are you to innings, students? there innings where development as your the as far further my what's analytics middle as in

Todd Nelson

what But, just some I the the we've seen We're of say But we're very yes, in pleased thus Right benefit. Sure. Chris, middle. right literally in with the we're would in to the middle. far. see middle. right starting

Chris Howe

now. I right all That's taking for for you Thank have questions. my

Todd Nelson

you. Thank

Operator

ahead. Peter with Your go Piper next question from comes Jaffray. Please Appert

Peter Appert

afternoon. Good Thanks.

a might for the basis? point. I starting guess and the be the you year-to-year number in for So with that the trying X be seasonality enrollment I'm us Ashish. the to would things, change understand And fourth quarter business, better days of Actually, in this share third one, on can Ashish. of particular,

Ashish Ghia

a that's Peter. great question, Well,

we past do the not out. next For our have we is push practice, now, typically it we -- with quarter over consistently what

to less enrollment to the to the laid continue make what said out what variations so sure days calendar past continue for we if is, we you we in we recall, have that at optimize and And have the these And have is less. become next less XX% AIU. quarter,

we that. we specifically, know So for here And we enrollment expect toward we today, sit now -- do have we less as working approximately XX% are that for QX days.

Todd Nelson

in And other out talked be little we've been yet. they that But days. bit One right as about would we take that more that. about not that Investor to just now some bit Day the same But we we're understand there a toward I that will said, things we think quick forward. working similar I like those becomes Peter, I add would that It's going still there that quarter-over-quarter little by well. smoothing was going -- said, then we can. as a getting at do -- we're we a to talked I where Investor Day the to But -- year-over-year as as quarters as time at

Ashish Ghia

Peter, do even new here on AIU states, outlook then nuances the just nuances the And to, the for at we growth as full again, is, expect calendar, of call beyond enrollment with out calendar. our this year this even

Peter Appert

I think also XQ the some mean there the you imply guidance, year half. may I be to back-of-the-envelope but If guess that in then, And I think, is take guidance. that, XQ know wrong, ago. related below second about I the have but seasonality, did half below it X the would earnings would first what thinking potentially I this the just calculations, just actual, I I

that, any on thoughts So Ashish?

Ashish Ghia

sure. mean, I

here the great about So the whole is balance. Peter. point, a that's But concept

incremental we opportunities, we will find invest As continue students. as to in know, you our

the business We for the will term. invest long in

this we're are encouraged as So that. part balance we it and the you trends the whole by that is we that talk know, momentum And about. of seeing, we've from had

in the so we to And continue invest will business.

specifically the outlook. details, ranges continue prudent and that. we will appropriate this it as and get our the point, at without So more quarters full to found into And we then we update going hold to year

Peter Appert

in of moving next And But gotten residual campus can understand should over Ashish, terms quarters? -- Okay. cost the look number's, because shutdown small. then you any how estimate, expense you're big the share the quite I the losses the corporate into residual lastly, cost obviously, few shutdown

Ashish Ghia

Yes.

we groups we adjusted that that I think for teach-out to was the about approximately XXXX, in million. that call, expect approximately in $XX last for said call, Peter, our be last And the the XXXX, in said half. we losses

So of said, legacy as occupancy good most to with. some range those residual matters I are, are costs. think work and And legal keep that's a costs in mind, we

So that's nature costs. the the of

Peter Appert

call Got anything Todd, been starting obviously mean, I terms performance significantly. enrollment of has a areas you would the out it. And momentum programmatic business. interest? the What in in of great improved

that program new offerings other would to terms of what's offerings, call programmatic in anything So the or out performance? you us driving specific things understand better help just

Todd Nelson

Yes. good is trends. Peter, news enrollment The pretty had good we've is that across-the-board

to develop by But identify that, level said -- doesn't they have. but of haven't are And we programs in the of other -- we particular strength and so having have across -- out, was a because we board, any are lot quarter haven't because the the of the programs. more that continuing we things mean development that it we that doctoral of not right area. this really One to of interest a number continuing Trident had called now with way, we haven't high

now. So obviously we're programs focused keenly on graduate right

Going think forward, some we for an that's opportunity for expansion us.

Operator

you. Thank

comes with go Sidoti. next ahead. from Your Please Greg question Pendy

Greg Pendy

corporate overall of at for the the you you kind just to And enrollment your fuel corporate some increase their corporate Hey of corporate my of growth? partnerships. curious, see of do kind of when sort think dig Analyst with I wanted bump into shared And grants. increased what grant? how maybe partnerships question. just larger see us some year-over-year I guys, the of that And Day type taking the much does thanks you

Todd Nelson

It's more it's particular the the function think have when sure people more typically year-over-year company, increase or necessarily discount on incremental than that, more But It's scholarship for don't up. just... if that of to you're know I at a tend I adding Ashish, really you bump the a given. that as students. the other of go see on that's Well, size not is you

Ashish Ghia

And once the don't from changes perspective, a grants. developed, typically or is discount a we in relationship see much Greg, the grant

we So the corporations. grant typically, there, once the that changing we that is corporations or don't changing see for

Todd Nelson

asked, consider We just students goes total was have because it in would it more you up are simply it not certainly taking that is is often, but amount if asked advantage of the it. that reason

Greg Pendy

helpful, Got That's thanks. it.

Operator

question-and-answer conference concludes like I any would to session. the over Todd Nelson closing That turn our Mr. remarks. for to back

Todd Nelson

Thank We look an joining again, quarter. you and us giving just to next you. appreciate you, update forward

Perdoceo Education (PRDO) 10 May 192019 Q1 Earnings call transcript