Perdoceo Education (PRDO) - 2021 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Perdoceo reported $359.2 million in revenue and $57.4 million net income for H1 2021, with total assets at $786.4 million and operating cash flow at $82.7 million Condensed Consolidated Balance Sheets Total assets increased to $786.4 million as of June 30, 2021, driven by a rise in cash and investments to $480.7 million, with equity growing to $613.6 million Condensed Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total cash, cash equivalents, restricted cash and short-term investments | $480,653 | $410,360 | | Total current assets | $549,145 | $467,061 | | Total assets | $786,419 | $721,517 | | Total current liabilities | $117,772 | $103,815 | | Total liabilities | $172,807 | $165,610 | | Total stockholders' equity | $613,612 | $555,907 | Condensed Consolidated Statements of Income (Unaudited) Q2 2021 revenue slightly decreased to $175.5 million, with net income at $26.6 million, while YTD revenue increased to $359.2 million and net income remained stable at $57.4 million Financial Performance Summary (in thousands USD, except per share data) | Metric | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $175,539 | $176,035 | $359,177 | $347,029 | | Operating Income | $35,962 | $37,368 | $76,579 | $74,671 | | Net Income | $26,649 | $28,167 | $57,402 | $57,273 | | Net Income Per Share - Diluted | $0.37 | $0.40 | $0.80 | $0.80 | Condensed Consolidated Statements of Cash Flows (Unaudited) Net cash from operating activities decreased to $82.7 million for H1 2021, with $94.3 million used in investing and $6.8 million in financing, resulting in an $18.3 million net cash decrease Year-to-Date Cash Flow Summary (in thousands USD) | Cash Flow Activity | YTD Ended June 30, 2021 | YTD Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $82,745 | $105,364 | | Net cash used in investing activities | ($94,303) | ($101,531) | | Net cash used in financing activities | ($6,783) | ($16,984) | | Net decrease in cash, cash equivalents and restricted cash | ($18,341) | ($13,151) | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's CTU and AIU segments, Q2 2021 revenue trends, a $5.4 million stock repurchase, and the $16.25 million DigitalCrafts acquisition - The company operates through two main reporting segments: Colorado Technical University (CTU) and the American InterContinental University System (AIU)[16][20] - On August 2, 2021, the company acquired DigitalCrafts for an initial $16.25 million cash consideration, with potential contingent payments of up to $2.5 million in 2024[79][80] - During Q2 2021, the company repurchased 0.4 million shares for approximately $5.4 million, with $22.9 million remaining available under the stock repurchase program as of June 30, 2021[72] Q2 2021 Revenue by Segment (in thousands USD) | Segment | Q2 2021 Revenue | Q2 2020 Revenue | | :--- | :--- | :--- | | CTU | $102,035 | $100,193 | | AIU | $73,223 | $75,835 | | Corporate and Other | $281 | $7 | | Total | $175,539 | $176,035 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a slight Q2 2021 revenue and operating income decrease, attributed to student enrollment behavior changes, despite a 7.5% overall enrollment growth and strong liquidity of $480.7 million - Q2 2021 financial results showed a decrease in revenue and operating income, influenced by student enrollment declines due to deferrals or pauses in academic programs[92][93] - Total student enrollments increased by 7.5% as of June 30, 2021, with CTU enrollment growing 14.2% and AIU enrollment decreasing 1.8%[94][95] - The company faces regulatory uncertainty, including potential new Department of Education rules on borrower defense to repayment, the 90-10 rule, and gainful employment[86][87][107] Adjusted Operating Income Reconciliation (in thousands USD) | Description | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Operating income (GAAP) | $35,962 | $37,368 | | Depreciation and amortization | $3,913 | $4,151 | | Legal fee expense related to certain matters | $2,416 | $22 | | Adjusted Operating Income (Non-GAAP) | $42,291 | $41,541 | Consolidated Results of Operations Q2 2021 consolidated revenue decreased 0.3% to $175.5 million, while YTD revenue grew 3.5% to $359.2 million, with operating income falling 3.8% to $36.0 million Q2 2021 vs Q2 2020 Operating Results (in thousands USD) | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $175,539 | $176,035 | -0.3% | | Operating Income | $35,962 | $37,368 | -3.8% | | Pretax Income | $35,969 | $38,461 | -6.5% | | Net Income | $26,649 | $28,167 | -5.4% | - General and administrative expenses increased by 1.2% in Q2 2021, driven by rises in advertising and marketing, admissions costs, and administrative expenses[116] - Bad debt expense for Q2 2021 was $12.4 million (7.1% of revenue), a slight increase from $12.3 million (7.0% of revenue) in Q2 2020[119] Segment Results of Operations CTU segment revenue grew 1.8% to $102.0 million with a 14.2% enrollment rise, while AIU revenue fell 3.4% to $73.2 million due to a 1.8% enrollment decrease, and Corporate segment loss widened Q2 2021 Segment Performance (in thousands USD) | Segment | Revenue | % Change | Operating Income | % Change | Operating Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | CTU | $102,035 | 1.8% | $35,398 | 7.0% | 34.7% | | AIU | $73,223 | -3.4% | $9,218 | -12.0% | 12.6% | | Corporate and other | $281 | NM | ($8,654) | 39.9% | NM | Total Student Enrollments at June 30 | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | CTU | 26,600 | 23,300 | 14.2% | | AIU | 16,500 | 16,800 | -1.8% | | Total | 43,100 | 40,100 | 7.5% | Liquidity, Financial Position and Capital Resources The company maintained a strong financial position with $480.7 million in cash and investments, $82.7 million in H1 2021 operating cash flow, and an undrawn $50.0 million credit facility - As of June 30, 2021, the company held $480.7 million in cash, cash equivalents, restricted cash, and short-term investments[135] - Net cash from operating activities for YTD 2021 was $82.7 million, a decrease from $105.4 million in YTD 2020, primarily due to timing of Title IV funding and tax payments[140] - The capital allocation strategy prioritizes organic growth investments, evaluating acquisitions, and share repurchases to enhance stockholder value[137] - The company has an undrawn $50.0 million revolving credit facility maturing in January 2022[136] Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure to interest rate changes is limited due to a conservative investment policy, with no material impact expected from a 10% rate change and no outstanding variable-rate borrowings - The company's interest rate risk is limited due to its investment policy focused on capital preservation and liquidity[152] - A hypothetical 10% change in interest rates would not materially impact future earnings, fair values, or cash flows[153] - As of June 30, 2021, there were no outstanding borrowings under the company's variable-rate revolving credit facility[154] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during Q2 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[156] - No material changes occurred during Q2 2021 that affected the company's internal control over financial reporting[157] PART II—OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 8, 'Contingencies,' of the financial statements - Information regarding legal proceedings is detailed in Note 8, "Contingencies," of the financial statements[162] Risk Factors Readers are referred to the Annual Report on Form 10-K for a detailed discussion of the company's risk factors - Readers are referred to Part I, Item 1A "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2020, for a discussion of risk factors[163] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 440,052 shares for approximately $5.4 million in Q2 2021 under its $50.0 million stock repurchase program, with $22.9 million remaining available Issuer Purchases of Equity Securities (Q2 2021) | Period | Total Shares Purchased (Plan) | Average Price Paid per Share | Approx. Value Remaining ($M) | | :--- | :--- | :--- | :--- | | April 1 - April 30, 2021 | - | $- | $28.2 | | May 1 - May 31, 2021 | 273,578 | $12.06 | $24.9 | | June 1 - June 30, 2021 | 166,474 | $12.45 | $22.9 | - The Board of Directors approved a stock repurchase program of up to $50.0 million, expiring on December 31, 2021[167] Exhibits This section lists exhibits filed with the Form 10-Q, including management certifications and XBRL data files - The Exhibit Index lists all documents filed as part of the report, including management certifications and Inline XBRL documents[168][171]