ZVO - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to Zovio's Second Quarter 2022 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 morning. earnings the issued company's XXXX is today, quarter on posted website second release earlier was and Zovio's at www.zovio.com.

statements the Kevin Officer. Please to or may be that speak statements on Executive of the remind regarding risks results day me no call and and and expressed make by Randy some are these of of a Joining today, we Hendricks, you materially only including regarding these enrollment, Officer; to differ that and that other and the statements. presentation, would Royal, from We Financial These those to future number considered statements Chief extent services, update by future except like could applicable to note and in law. today EBITDA, performance this of are the statements to student financial events, suggested in forward-looking and we light subject required obligation as XXXX forward-looking, revenue guidance, cause related fiscal forward-looking undertake statements securities commentary and actual or programs later. uncertainties retention, forward-looking Chief new university or year growth, the partners, information forward-looking

the XX, the on are and to for results. Please filings, refer these annual measures including XX-K year as ended time, XX, non-GAAP will in with the will SEC previously as ended well XX-Q these obtain intended with may days, our the of introduce detailed or description earnings CEO, measures, our risk Investor pleasure U.S. not GAAP report which that Form to for of our visiting results. the non-GAAP section find for factors copies our these quarter that the is also release, Form of you the more GAAP GAAP. Relations note Randy by for financial XXXX, additional will this SEC, today, a supplement to June from SEC filed financial affect On upcoming information, measures a call financial as with may we it report reconciliations substitute At including you quarterly be certain Please my the considered on website. discuss should XXXX, measures. Hendricks. In SEC, disclosures regarding the our our our December be our

Randy Hendricks

Vickie, we we you I'll early to you, up and our earnings to Of quarter services. OPM We agreement us to started. brief we the entered everyone, morning, and welcome, Campus we which get had to the an second provide that a have XXXX with give call. you appreciate into join as here few University university our announced This Thank Arizona used comments getting Global business, purchase

to areas business. unlocking in same comprehensive team time, pursue intent address a to taken announced reminder, value, underperforming review, actions divestitures. included and a potential evaluating our shareholder the alternatives business and have undertook several we at of aimed April, which As strategic At our the I

stemming of the for university's for California to future. bridge and to with May, financing. repay completed allowed pleased Court portion are of satisfy In agreement decision. Superior sale are reached about the proceeds This We and those $XX by to have a we UAGC, of a appeal TutorMe this while us the excited used decision the obligations million, from we

while growth alternatives. Fullstack and expansion exploring support Going Academy, simultaneously of forward, the Zovio continued will strategic

$XX.X we loss $X.X brief provide the a overview Now, million, revenue or In quarter. of net share. of and for million, $X.XX per had I'll results our a of diluted XQ,

per $XX.X diluted second or of $X.XX quarter net million was Excluding our non-GAAP certain the items, loss share. for XXXX

to These issues total financial to of second have quarter, we've experienced revenues. UAGC's or assistance. student for retaining has working is approximately related process worked UAGC military-affiliated quarter and recruiting students, Over which military that XX% accounts our due either through matters of the on significant the a past is had impact in population. through, challenges in This significant

the the Academy, XX% to second continued Fullstack grew to revenues by well We in perform quarter. business year-over-year. Turning

new Our offered. to growth strategy the our number with we the as quarter, upGrad second as Fullstack partnership our well includes XX, of university in adding partners increasing programs existing In continued India.

the second we New the our development Development had launched exciting Further, a developments we with I'll addition, web describe. number briefly Corporation. City Workforce during In cohort quarter, York which of for

launched First, allows part-time and which an female XX-week Fullstack full-time opportunity software and work students immersive development part-time program. program, a Hopper Academy take to Grace non-binary new the

experiences, exclusively the coding is to their context, advance students. and mentorship to women curriculum, non-binary personalized careers. program continuously the Grace technology for a program For offered Hopper boot From encourages women updating camp

our a XX-week a not be we launched provides software engineering new do previous program, experience. This program for pathway immersive Additionally, camps. foundation coding boot in that full-time creating have and prepares to students successful students a

is our to growth to help key graduation of addition XX the Fullstack, by and as jobs with recruiting are participating for with companies pleased openings We students. in we continue secure QX. with area our students partner This a job actively meaningful new events in after partners employers sharing and

our strong. to outlook continue have expectations Fullstack We high remains for and Academy,

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

Kevin Royal

Randy. you, Thank

that decrease only compared the the relative enrollment, second date. TutorMe partially revenue that Looking subsidiary, in at The by the was Zovio the and the revenues. through May increase average the sold growth lower was related segment in for on an included year. period revenues XXXX, to for prior such, are $XX.X million, quarter XX, offset to as for $XX.X million XXXX is same to primarily of the quarter, results the

partially million, debt, million offset bad lower prior due to revenue in costs an XX.X% second Technology this Academic were category year revenue, to or comparable And Expenses by of on quarter XXXX, are the Services $XX.X employee period. For XX.X% $XX.X absolute for the overall of fees. license compared lower or and basis

comparable General expenses recognize the judgment second primarily and in were million or general, professional fees. well quarter, quarter of absolute expenses Legal the and in XX.X% revenues decreases for due California to as for support due the in million, services and quarter for as were to The the facilities related year comparable between brought The to of associated quarter of overall of are were compared the XXXX on decrease decrease absolute $X.X by $XX.X revenue, for revenues the the or year basis, an a million, for cost million, $X.X to amounts Counseling or Marketing were of on expenses employee revenue, as of $XX.X of year-over-year. periods were decrease for $X.X communication second expenses period. employee and costs and second previously that or administrative judgment. in revenue and million, XX.X% appealing between or the second decreases the case million, million, were costs primarily XXXX of advertising primarily of between higher disclosed overall $XX.X compared an year were attorney periods overall However, period. on represent decreases costs. due and to revenue, percentage prior basis, to XXXX periods period. lower costs. XX.X% revenue, The to with the XX.X% due to XX.X% in an compared the prior the absolute XX.X% of employee revenue, prior basis, $XX.X comparable of or

to paid As with of XX.X mentioned, UAGC into them. minimum yesterday, owed million, XXXX, UAGC that In effective all servicing XX, we payment Randy on with entered an assets related sale, to we connection to July agreement includes sell final business. which the the that residual

addition, this UAGC over sale, and connection In million assets. leased we various the take term which facility rent $XX payments. in remaining eight had years to with has in Chandler, will Arizona, a In of reevaluate approximately

by of year the or million which UAGC of $XX.X of expense. million the second result, There quarter XXXX, $X.X XXXX was and gain for comparable sale transactions recorded prior we The on This on loss to a during restructuring recorded the a quarter net expense million, net on during of gains million year such $X.X As sale the no expense as $XX.X for impairment restructuring is million, impairment the sale compared $XX.X TutorMe the of were gain period. offset period. losses assets. included within of and prior the impairment second

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

the sale prior loss per loss year. for million, for loss $XX.X net second $XX.X excludes, $X.X gain $X.X other diluted or million, costs non-GAAP non-GAAP The second net non-GAAP share share transactions the to or a million, a of of $X.XX non-GAAP quarter $XX.X XXXX million, loss was of for the restructuring of net second $X.X of of charges million, million legal of loss diluted Our of $X.XX $X.X and expense quarter of of acquisition compared and the quarter million. costs per net of XXXX the impairment on

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

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

operating $XX.X XX, change primarily million quarter, I questions as million activities used BlueToad prior $XX.X we same well the million the payment the to XXXX. in By the ask in comparison, activities time, the used At second operating period the by loan in of the changes $XX.X ended in driven lines accounts was year. term June accrued The interest, periods settlement, phone There in cash presented. cash three-year including during full, working for our with During open operator activities in in used year-to-date for legal repaid during as this Capital. the your capital was will operating in of cash year-over-year we

Operator

question Your Instructions] Research. first with Paris Alex Barrington [Operator comes from

Alex Paris

Hi. taking my for questions. Thanks

comments, like had I strategic the or it you so be led I yourselves projections. will sold, could could is to to think your Randy, it of speak, integrate, well been me an this Academy able and the company's divest vertically we news. but First what have contract? contract Of a review financial UAGC the in sell wondering, on realize in that as Arizona military decision to that since off, process right? Is not that I'm to alluded to XXth, the sold. knew to Fullstack within challenges prepared impact sounds be as UAGC Obviously, April be involved University the unexpected and

Randy Hendricks

our Campus. we Global looked for added have Good business. at Arizona to Of time to And divestiture yes, prior University is we the would arrangement definitely thinking military Thanks assistance, information financial of the morning on related the contract. enough there looked with morning, get earnings decision a this capital to discussed as the we've capital at to and of isn't an a Alex. and projections joining our about client, part overall and to we challenges contract time take get on profitable with perspective, capital as the to shared profitable our that From that. it us. OPM That calls, of do And just related to

And that best made felt in company, believe, we decision interest decision an the really our so, also and for our work the in positions, business, the to potential of university future. shareholders, terms was strategic the for employees, bright in we with that and do a was a I the our suitors this client best collaboratively of our approach OPM

we looked went a at contract. profitable at as for position is that we capital strategic into correct the get as it to looked OPM all a and the we your were would time wasn't to our That take So, framing various But thinking that in business. do to something alternatives

Alex Paris

we of that part And is could Understood. is this Academy, the review in subsidiary in left decision, Fullstack of what XX% well, quarter, doing the that strategic revenues at point? be given sold that are which with future. the still

of of cash can UAGC, cash been You or about the beyond that was has million the transaction $XX.X what XX? is the cash to you now is what at have cash UAGC cash June or prior year, and What end the of divestiture What closed? say - then expenses.

Kevin Royal

this Alex, Kevin. Yes, is

had So, the we million - $XX just as stated, at over June we XX.

UAGC that from that July, have but of $XX.X sale the made to terms outlined of the the we in payment During would million. that would have grown slightly, we've then,

as we And cash would left fund losses and amount. that be business. work with would that's by declined the what So, Fullstack forward roughly that grow to we of have move to

Alex Paris

cash be, of $XX So, million-ish? as would today,

Kevin Royal

That's right.

in and And that running what future so, we've from to months. as business, some, we liabilities to we that, stranded need got refer pay UAGC will associated the liabilities, with

Alex Paris

Can you quantify that for it liabilities? stranded least ballpark or at

Kevin Royal

month, that. we Yes. the be I don't have to those, but able out have we'll as close

Alex Paris

Okay.

So, we Are and in and of a EBITDA in Fullstack, the revenue give the given in the the of second cash, willing for $XX operations and $XX million ongoing for million XXXX to growth have Fullstack. Fullstack you or value outlook it quarter?

Kevin Royal

We're careful as point expectations really this guidance strategic time, the evaluating of the we this given face. time respect go to We've we uncertainty in performance, to through set give at that prepared to challenges not face, been not Alex. that alternatives, our we with

Alex Paris

Okay.

private I've is my yours. accurate know estimate. valuations. estimated been on worth that's that market on I or a That's basis not, sum So, And but the Academy parts not $XX my That's of if million. based don't Fullstack feeling that's

gain? it, what gain. the be I'm it'd to were million you tax big a get on you for assuming selling If Fullstack, be up implication would the if wound $XX

Kevin Royal

would tax do carry-forwards net it use news loss significant be XX% could gain. that a that that have The to of good So, operating we offset gain. we is

to in offset, net again, let's say that entire can $XX gain. gain you of situation XX% being taxable, be of where to So, due operating that the million the a the on carry-forwards $XX loss ended roughly - utilize taxed you we would million up

Alex Paris

with guess you in it? last the some would at All it mean, that the on or you strategic for completion Fullstack Academy. keep this be whether the the right. what's I regard bushel timetable last point, making What for review be I that's sell one decision, guess, thing of I timeline would - me the

Randy Hendricks

of public on come in decision Alex, the We’ll three. comprehensive businesses. three Fullstack days, talked operate the cost we'll the at XX But we XX divested to we bullish future our mean, lower a decision over run Alex. come also within it's in strategic We're about, and looked review days. company next terms that two very to Randy. of that a on for we've I have We've of all Academy. how next on realistic that rate, will the a we're now

Alex Paris

Okay.

last in unexpected primarily decision in just downturn to thing to summary. UAGC, enrollment I OPM guess the by the related driven to an UAGC, The sort So, business military. of is divest

challenges best contract with liabilities the thing. associated as months prior of and was at sort But best were your disappointing, be potential probably like to provisions response the for like this have decision that the indemnifications ago. thinking, that but three about of greater past months on talked And and issue sounds like say, Some seems would VA been ago, or shareholders, be it the the the shareholders of we sort Any probably thing, several this the good over would employees. impact University that - P&L in good make-whole from transaction. it this would - Campus. than this It assuming gets such, that expectation and although of for a the your result Of for comment out I'm as Arizona employees be UAG it of juncture. Global it your decision for Zovio they'll take gets under that? so, is

Randy Hendricks

I military think It's to certainly well, in in around challenges to We have get it arrangement. shareholders top mind we the summarized the Alex. a related programs. strategic of yes, of and terms referenced you financial And setbacks you've profitable our assistance make. unfortunate time the decisions to - very

far shareholders, and employees, our stakeholders. all make we we is it so, best felt all of to at And for the yes, and that this looked by decision client,

Alex Paris

for on All review. Well, balance the the right. and good you thank that, of strategic luck

Randy Hendricks

Alex. Thank you,

Operator

call I concludes will This our turn Randy any instructions]. remarks. for the over closing to session. Hendricks now [Operator question-and-answer

Randy Hendricks

your continued everyone. and for support our you, in your Zovio, Thank you thank participation, to like company. today, your joining all interest interest and in We'd us of

Zovio (ZVOI) 1 Aug 222022 Q2 Earnings call transcript