ZVO - Earnings call transcript Q3 2021

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Operator

Good afternoon, again, and welcome to Zovio's Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Vickie Schray, Executive Vice President, Chief External Affairs Officer. Please go ahead.

Vickie Schray

Thank you, and good afternoon. earnings the issued company's XXXX is today quarter on posted website third release earlier was and Zovio's at www.zovio.com.

partners ability including except statements and the the statements new the required We make these or may and note year remainder forward-looking performance commentary to Chair; as These forward-looking expressed Royal, of by the that date statements we Executive on could CEO, the EBITDA, would Office our and cause regarding of President like later. forward-looking, statements. me to acquired call President, or statements differ risks and from or suggested the uncertainties university update George and we integrate are Joining or Kevin speak CEO; are Pernsteiner, light obligation presentation, to regarding of statements to Office guidance, and by financial and programs in applicable of Operations that of through Please securities some of this undertake events, these of of growth, extent leverage subject actual only ability other be Spohn, XXXX Chief future materially related today future fiscal no forward-looking results to a that the in services, CEO to remind and acquisition considered revenue Chris Board and and Vice to information of number those laws. forward-looking you the company, and grow Executive Vice today otherwise, successfully Interim Financial Officer. our

on measures we results. these U.S. intended be release, will measures. to not GAAP GAAP reconciliations these measures, today, information. find our that report annual SEC ended financial will the additional financial supplement are XX, with discuss affect for also results. On including XX, a substitute the financial today the filings, detailed earnings of for well ended SEC December Please regarding should as our that certain you on XX-Q the our XXXX, XXXX, Note filed non-GAAP year report may measures as for In factors quarter It including Form to risk our description considered of with these earlier refer disclosures a Form GAAP. quarterly for XX-K our the non-GAAP we our which more September call as

obtain introduce pleasure this SEC may At my or Investor visiting section is time, CEO, the copies from by our the to Relations our of it Pernsteiner. Interim You George website.

George Pernsteiner

welcome, the Earnings everyone, our Third $XX.X Call. XXXX, revenue incurred results XXXX and of a $X.XX revenue we and diluted with of loss Thank our share. or you, to Quarter loss per of other and $X.X million million net Starting for Vickie, third a quarter had

the $X loss which costs. by was our marketing non-GAAP Excluding of or per loss of $X.XX XXXX million for impacted net higher-than-expected and was non-GAAP items, a quarter third diluted share, legal

which Kevin striving forward. year, in While were detail performance our intact in-line will we overall, move improved expectations discuss we as we guidance with for the shortly. remains believe to are That revenues achieve said, our full more

the new Global Campus quarter, University at challenging. third the During remained enrollment of Arizona

a put saw we initiatives we student as a However, retention place number of into result stabilize. of

enrollment enrollment of mentioned, and was That and develop Zovio together two-day student last outcomes. student initiatives, enhance event support to new we the together, approve as we as a partners, we clear brought quarter, a path and in Summit improve leaders outcomes. successful As increase person and for to strong outlined UAGC to

re-enroll current plan students their military to on to out Our re-engage students. areas: studies, expanding stopped programs first, primary and had enable continue students to centered the who three and is grant aid University's to help

we have strong, commitment targeted to more of brand our partners. includes where further historically, maintaining the which and third, through credentials. finding superior students, building outreach outcomes corporate academic the Second, been And more new and and particularly greater student increasing military, upskilling enrollment stackable UAGC to and

While and with results. drive are to collaboratively it aggressively days these for working UAGC programs, remains we early

In to evaluate as of to drive coming soon and to we unchanged. new remains continued Zovio's focus together be refine will again area success. strategy fact, long-term initiatives develop as each well

We employers do meet of are will are. and learners services where To learners. needs we education that bringing education universities, diverse they opportunities to the this, deliver

we to are in-demand empower skills with In employment programs to addition, are expanding we better connect offerings and and our enhancing learners jobs. services, to our

important to and an are We our their Zovio role learners excited goals. holds for to enabling educational future ability advance for play in the what

Let for search me Executive Chief next provide an our Zovio's update Officer. on

and CEO focus an candidates, we the have believe to narrowed update Our search we will committee soon. few a has

to the impressed turn have who the let the for of to that, we quarter. Chris the company caliber We been on us, expressed the to and Spohn in by a the quality me come. trajectory interest call individuals With years work for have as run set to deliver value to shareholder many through over joining highlights growth

Christopher Spohn

George. you, Thank

includes building Growth XXXX, the Growth Zovio's the program delivered by revenues TutorMe support institutions, career products Zovio new serve TutorMe, solutions strength and our their quarter to of perform help impressive meaningfully quarter one has Fullstack learning all $X of and ecosystem Further environments, existing Awards Learning most to The services Fullstack for third & aspirations & bridge and teachers. and to students, Best of of TutorMe for year-over-year. learners' demonstrating parents that and and Tech to upskill the to winners educate our growing and enterprises on to segment, of Zovio which Our Tools the for capabilities XXXX the employment Back-to-School. of million, education enhanced continued subsidiaries, Growth education In Excellence XX% employees. well. help their higher segment, provide Tech Zovio gap, the was identify education named the Learning launched

as underscores capacity in TutorMe We the this strength offering. recognized our it are thrilled of to have

the to to XXXX, live quarter in-demand well In students added hours data tech year-over-year. DevOps school addition, new leveraged the State. during quarter and University boot partners the seen to have boot strong Fullstack tech from In cybersecurity, training camps, maintaining count paying, added to also XX% universities tech that region. partnerships the camps Utah In TutorMe coding, momentum continued State partnership will and Utah over to the fill third new analytics with needed in an increase quarter, skills the agreements of State new quarter, Fullstack came to corporations XXX, online quarters. we The total to bringing the customer their usage year-over-year, specializing online. total partner equip over during XX% bring the in over partnership third third in districts, increased execute recent jobs of

these have to opportunities the about excited are offer. universities We

As quarter, of brings the XX to Fullstack third end of this new partnerships. the

focused added Additionally, partners. jobs, the create in evolving Fullstack. XXX new which qualified building landscape. employers to quarter the both in added we Advisory early is year, Advisory that skills September, Alliance seek Cyber TutorMe, TutorMe third and Fullstack At announced for partnerships year-to-date, the start over partnership total, expectations of soft and advancing our for we cybersecurity and today's we with Fullstack entry-level of X uniquely through the end curriculum new had Board, new a the partners Fullstack, In the for outlined to Fullstack's technical cyber on Security cybersecurity for graduates

for groups for to the Zovio Growth with outlook remains Our both continuing grow. pipeline strong,

our to Partners University Turning segment.

are UAGC As us enrollment successful. in-line finding but third in quarter that which George has our that we anticipated. remained had mentioned, we will are the said, students with UAGC tells most retention challenged, That year-over-year, what students believe those improved be

offering continues UAGC action programs support plan a organizations relationship. drive outcomes. a that with remains advance and to with our to mature, clients. clearly the initiatives student believe we We positioned of both that common and goals strong focused bring we well Zovio on relationship Our as enrollment, leaders will have advance to strong differentiated

robust and and platform that services clearly stage technology We the set have a diversified we institutions, value, of and growth. will for corporations learners

institutions pipeline services. student engagement build the to our likelihood success to continue many prove are student the of of an opportunities seeing with value through and enhance as in We attractive

Now, I call Kevin our the operating turn and will to results. to Royal review over financial

Kevin Royal

Thank you, Chris.

the revenue in $XX.X prior to million GAAP revenue primarily on was period is basis Edtech results business the a average increase the the Ashford shift in as segment University the to for model enrollment, well XXXX related of of as same lower quarter the at the compared Growth and revenues. the the by decrease for divestiture The $XXX.X Looking quarter, of year. an to Zovio third million and other offset partially

a As model December business a shifted of UAGC result reminder, significantly in our as XXXX. sale the

a estimated highlighting forma pro year, certain providing third in such, the GAAP quarter amounts to results the period. basis, be for XXXX comparability On will purposes, $XX.X were As for to I revenues to pro million. of related be the for forma the prior addition

were prior are the academic as estimated these quarter the be main expenses the period. third million compared $X or million XX.X% $XX.X for to the or an the a XX.X% be or For million revenue for quarter of quarter of basis, basis, revenue for be lower a XX.X% quarter as to university estimated due third estimated or these or third and revenue expenses third of These XXXX. to for lower XX.X% revenues period. in of the expenses year of of million pro cost the to of due the well quarter revenue were XXXX the compared Restructuring for million the items of revenue pro X.X% be to On third compared represent of expenses of XX.X% to were related the Counseling the services quarter but million to expenses revenue university compared forma impairment line a for of or or of costs for $XX.X of or prior million XX.X% a the to compared pro forma of revenue administrative as for $X.X prior $XX.X were levels, of $XX.X related expenses to prior were revenue. quarter revenue were the year. expenses comparable to revenue. for year forma sale third $XX.X support XXXX other prior $XX.X basis, or XXXX of million for as XXXX XXXX third overall as of On On revenues period comparable estimated XX.X% were On million million of services income basis, the million for to of XX.X% the of the on revenue revenue. XXXX of quarter Marketing $XX.X any the December have We XX.X% prior and XX.X% percentage statement or third discussed to these year. basis, revenue for reduction or $XX.X to period. related the higher compared were of Expenses pro to $X.X of XX.X% communication year. did $XX.X period. XXXX XX.X% million $XX.X of XXXX not revenue. or this were of the category million in for forma for for quarter XXXX, prior XXXX comparable or million in the technology of $XX.X the and expenses revenue prior the quarter $XX.X for charges General and compared or below as X.X% or and million of to and absolute quarter these XX.X% a third activity efforts corresponding lower third

During the XXXX, of recorded an we $XX,XXX. income expense of third quarter tax

quarter continue Our to third anticipate the effective before items XXXX of discrete we this for of for low the rate and year. trend single-digits, the was remainder tax

a income of net for compared net the year. per quarter loss is million $X.XX of As XXXX diluted $X.XX $X.X result, or share. share the million or net $X.X for third of was income of of net This quarter third loss diluted per prior to the

and $X.X of a of third quarter of $X.X costs non-GAAP share XXXX or the loss separation loss and the for for $X.XX million, other or The million, $X costs quarter net $X.XX of to and quarter non-GAAP $X.X of was conversion loss prior costs of third of XXXX of Our per million the for excludes net diluted million acquisition non-GAAP of the share year. $X.X income net per restructuring million. million diluted third compared of non-GAAP impairment income $X.X the

had unrestricted we to $XX.X as As XX, of of as XXXX, equivalents September December and million of compared cash $XX.X XX, cash million XXXX.

XX, to restricted at December XXXX. XXXX, had we million addition, cash In September $X.X of at as XX, $XX million compared

amount operating the cash XX, will year. offset of of by that XXXX, September the period $X had unrestricted expect million the million ended by become of expenditures provided during We used by during in comparison, $X.X prior capital provided compared change the was operating we was of during XXXX. cash partially activities activities year-to-date year. to changes in year-to-date the XX, period Capital period million remainder last By year-over-year There in were operating approximately same primarily XXXX. for $X.X million the in working ended restricted the cash as same the earnings, $XX.X by September accounts. for the driven cash million The activities the $XX.X period decrease in

grow and we the our be through beginning XXXX. decrease XX% we million align year, near-term. this revenues took will reduce XXXX. appropriately anticipate revenue EBITDA generating Growth segment the perspective, and an expect term, new our revenue in Zovio in XXXX more to consolidated to to $X loss to our of the in approximately actions between $X it For cost anticipate annually to structure at the business. EBITDA Longer we planned expectations of nature in segment's This and grow year-over-year XXXX with investment XX% from margins a profitable both Throughout million least

approximately cost original total compared Our $XX in spending year-to-date will plan forward reduction levels. to going yield savings annualized efforts million when

this total continue for non-GAAP phone to we ask to loss. range to consolidated breakeven open to questions. expect revenues EBITDA be will operator the I lines $XXX in our million XXXX, to be to slight of your For million $XXX Zovio the and time, At

Operator

[Operator Instructions].

first comes from Barrington Alex Your from Paris question Research.

Alexander Paris

bit you Couple questions of see to into enrollment. new on your little what I'm more UAGC. based glad at improve in prepared I'd like said follow-up dive comments. retention to a

the You I'm was said might example, wondering there in you And when challenged. it year-over-year positive? sequential it what improvement a decline? that? can color beyond For inflect was offer

Christopher Spohn

new part, we've seeing incremental We're the that about gains -- enrollment. answer latter Alex, this before again, on To calls. prior talked on

improve. downstream but If stronger the we you each at seeing them not there's quarter. builds the to and monitor quarters the quarters, three the the at a be, and quite where look conversions that again, gauge performance continually effect, measure and we we're compare level next to confidence that go we look as to prior back and look things we on of those -- a need momentum in of They're little there's and out improvements

Alexander Paris

Got you.

Just year, decline and greatest QX decline the sequential improvement clear, the was in to was the be in there earlier in year-over-year and QX?

Christopher Spohn

Yes.

Alexander Paris

think other Great. you think into is When that things do begging put you question, And then, which when your that for guidance. Summit based on on the place, -- based you meeting, if but of that? do I enrollment offer time. know wondering that growth? seeing mid new start we was I wouldn't I takes it expect student will some next year, this on color you some before any could

Christopher Spohn

fact progress CEO would we that on the the have for we the to to search, remarks, you we on our alluded not remarks. seeing like as guidance -- we're and have said, before guidance CEO Alex, provided new XXXX. In board Yes. in George our provide we've good

Alexander Paris

new overview Clark, comments. And you question. kind my Great. CEO to since Okay. end, late seven what year-end? been the close former your suggested we'll then. Do which a of to getting that It's assume next CEO in I we're think the before company would is me that leads the have in you six, left March. Andrew, months named

George Pernsteiner

narrowed it's in hope. those with and very done, focus personnel action but that committee not it's done. pleased That caliber to candidates, the the quality of a I individuals, any until very few and as is my know has the we're

say. as I could hopeful, but that's very I'm as much So

Alexander Paris

the Army What's suppose. space challenges going that in that. have portal? That's student change the talked companies I that. impact general on from the Great. obviously, And enrollment University. with just And back about the been on workflow, some then, UAGC. at with any or now? Other Military impact new on brand have has military you in I Ashford appreciate of their Tuition a enrollment secondarily, strength fine. had negative And has Assistance had had that the historic

Christopher Spohn

I'll latter Yes. take first, Alex. the

starting same and to experience Our the with the brand the Army connection I and have experienced. military. us been the reach one started probably we other out to the a to you we're point the had couple providing We little haven't strong line marketing military, preventing where to channel. about as particular in think, a respect the very impact relationship begin bit mentioned had are, a things we that a little a Ashford has institutions a of at see prior little to There's stronger. more With -- strong of in And brand very with and that now with that that resurgence of to military. that go done

help resolved steps through additional I taken. we're compliance the coming hoping some some -- seeing recruitment the just the think from resources a to we're a as the volume go get of in you side those some And facilitate as of re-engagement stronger to result new of in. stuff. had growing that with we've anticipate coming quarters. that's we that We've that But

Alexander Paris

for And question That's great. then final me.

cash the cash given come expect produced third that fact of and another would the million equivalents in year-end flow equivalents? couple by seasonally. million comfort year-end. level that And about $XX you your you quarter, as into cash Given positive Is expect cash out in you of still and restricted to cash

Kevin Royal

still level. we're comfortable Alex, Yes, that with

Operator

coming line comes question from Research. the Wuilloud from of Thierry Your next Water Tower

Thierry Wuilloud

quarter Growth maybe a us for guided always some little had, on or went there any give a than questions any you that. growth particular completely there track is Again, seasonality was not growth -- a or bit the there? to just can I some but different business Is up. little to, it seasonality the bit Zovio XX% are George, and over Chris is it of and but lower color that growth round maybe Kevin is on that Alex you You even?

Christopher Spohn

Yes, months with tend to growth particular, imagine, Thierry, so can be the seasonality as there business. In summer you is TutorMe, the slower. in

we and strong will very for QX. So track they have projections are on our growth a

Thierry Wuilloud

good Okay. That's hear. to

XX affecting the was COVID the environment, this we've this a I on so months in you wondering and and had or on. vaccination if the With experience students of about for any your on or and on year general and your some more color on how so, of COVID talked last it's more terms interest on? bit appetite thoughts students just enrolling you to enrollment business, in give us could so impact Over Just new business? impact of

Christopher Spohn

Looking staffing for are the some that from at we've been Thierry, standpoint, we much in cadence, it a pretty same time.

retention, a of we've taking seen the hybrid result a of as staff where we COVID. Arizona. in, here have office, engagement the of level work have same new to especially environment about respect coming advantage enrollment in and student With We

softening I that's those and that back toward to uptick a have re-engage a also we've come as we regular that parents bit two little think their students routine. work in on people think back-to-school. retention with we've I just saw challenge students a a re-entry, student week to said, have dropped was and But But uptick a an little and slight to great. that getting of seen And completing we've or degree. going seen been of decided

prospective making decisions. -- monitor, the as students is how it's in to continue we'll So operations, affecting pandemic's affecting how everybody business

Thierry Wuilloud

and year geographical And then earlier on. so on us this initiatives? any military, We talked gave the you re-engaging finally, a color challenges other bit with some about Okay. of

enrollment other there doing If you that you're positively going that military, are go you've we different, beyond that forward? are learned, -- if any impacting elements

Christopher Spohn

just Yes, there out. one we is rolled

work military. done the with we've some So

in the level done One has in work us the light with that militaries. credit. that ones to -- graduate military. and other of competitive that's think with here, the happened put put terms that more the We've a reduced that more I us, is recently institutions and cost just of the I per we've think, competitory And

well that, to with -- for or going about we're We're we get degree take, military, an degree. here bachelor's in, early. beyond looking advanced weeks anticipate give but those it's that's So the their to three bode

Operator

question Your from from comes next Securities. Greg Gibas Northland

Gregory Gibas

interest trends region or shifts you're First, seeing changes wondering or new there's any or still on that on geographic any if if in based front? that's stabilized if

Christopher Spohn

to We've good talked a Greg, question. that bit. little

shift geographic Nevada certainly sense would Texas. new of students the our we've bit because in Arizona, which As in in name. the from said, A California, we've prospective seen make -- little some West, and

So about seen we've there's a -- in shift state. steady that that is

We haven't we beyond initial spike spike when brand. had the the new seen we launched that it

make to at want look with decisions of we'll that, monitor go sure school, -- making -- we're students make as they the geographically. where to So how that continue go we're to people we about sure aligned

that needs important and things to So we're them. addressing their are

Gregory Gibas

follow-up Great. the comments And particular. UAGC if with I in could on retention

I then, then like talked about said sounds stabilized it think it was also you And improved and you it sequentially. year-over-year. improving it

Just notable to, is year-over-year? guess, the degree pretty I improvement? of it And trying sequentially that understand or

Christopher Spohn

get -- strategy all is then risk, this now made most to deployed and have that of helpful. taken continue Just they've are that strategic meet initiatives and very our to they've past UAGC, adjustments and in we at to we've our in -- are contact to, And been are, We've from that some those with have know where again, struggling there standpoint, that that a our that I with, them. think, at at their I quarter, of that percentage. we some be they our with risk. academic drop we I might they steps students adjust tweak on that a The can't services, at that's faculty And and identify think fact look some some helped especially risk. over partner, students working

seen on that. an we've improvement So

the them as back re-entry on program, and little we've degree. to earlier of should toward get the their looking them students calibration at track So working students. more And and side alluded how re-engage the well with retaining then to best I that time when's out they've we're that done we when a some stepped on

served So of three spoke have our effort. And those retention students better the I think to things consequently, a that combination has well.

Gregory Gibas

Last Zovio business. Great. for Growth one Okay. me on the

any Just the acceleration new you're positive end negative and seems with of you of I quarter partners had It over now XXX. you're interest Fullstack or either demand wondering seeing there in or think like TutorMe? last or at an for if changes XXX TutorMe?

So the -- is on that demand interest? just or and acceleration confirming any comments

Christopher Spohn

we both continue think, very those have, think areas. in I to I a pipeline good of

quarter to And so, we're got think some build I close we had meeting what to good as we think we on -- out we've going roll the I stated previously. think I And 'XX, that. momentum into

those success to the success. had think same we've So in expect I areas continue and we to have

Operator

over today's call. call I any closing remarks. to presenters That the now will for the concludes turn

Christopher Spohn

Well, for in interest today's of your we'd and Thank to callers you. Zovio their in thank today's like for participation call. all

Operator

Ladies gentlemen, this for Thank you concludes conference your and today's call. participation.

You may now disconnect.

Zovio (ZVOI) 28 Oct 212021 Q3 Earnings call transcript