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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO             

Commission File Number: 0-23245

 

PERDOCEO EDUCATION CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

36-3932190

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

231 N. Martingale Road

Schaumburg, Illinois

60173

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (847781-3600

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

PRDO

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.    Yes      No  

Number of shares of registrant’s common stock, par value $0.01, outstanding as of May 3, 2021: 70,439,842

 


 

PERDOCEO EDUCATION CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited)

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

2

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

3

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

4

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

 

 

 

Item 4.

Controls and Procedures

24

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

26

 

 

 

Item 1A.

Risk Factors

26

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 6.

Exhibits

26

 

 

SIGNATURES

28

 

 

 


 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

December 31,

 

(In Thousands, Except Share and Per Share Amounts)

 

2021

 

 

2020

 

ASSETS

 

(unaudited)

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

86,031

 

 

$

105,684

 

Restricted cash

 

 

4,000

 

 

 

4,000

 

Total cash, cash equivalents and restricted cash

 

 

90,031

 

 

 

109,684

 

Short-term investments

 

 

360,986

 

 

 

300,676

 

Total cash and cash equivalents, restricted cash and short-term investments

 

 

451,017

 

 

 

410,360

 

Student receivables, gross

 

 

82,592

 

 

 

84,599

 

Allowance for credit losses

 

 

(41,110

)

 

 

(39,917

)

Student receivables, net

 

 

41,482

 

 

 

44,682

 

Receivables, other

 

 

2,684

 

 

 

2,873

 

Prepaid expenses

 

 

10,023

 

 

 

8,209

 

Inventories

 

 

594

 

 

 

596

 

Other current assets

 

 

253

 

 

 

341

 

Total current assets

 

 

506,053

 

 

 

467,061

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $104,548 and $101,380

   as of March 31, 2021 and December 31, 2020, respectively

 

 

25,696

 

 

 

27,761

 

Right of use asset, net

 

 

42,425

 

 

 

44,773

 

Goodwill

 

 

118,312

 

 

 

118,312

 

Intangible assets, net of amortization of $5,011 and $4,178 as of March 31, 2021 and December 31, 2020, respectively

 

 

14,689

 

 

 

15,522

 

Student receivables, gross

 

 

3,970

 

 

 

3,533

 

Allowance for credit losses

 

 

(2,675

)

 

 

(2,230

)

Student receivables, net

 

 

1,295

 

 

 

1,303

 

Deferred income tax assets, net

 

 

35,584

 

 

 

40,351

 

Other assets

 

 

6,311

 

 

 

6,434

 

TOTAL ASSETS

 

$

750,365

 

 

$

721,517

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

$

9,677

 

 

$

9,789

 

Accounts payable

 

 

10,767

 

 

 

13,259

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

15,207

 

 

 

22,661

 

Advertising and marketing costs

 

 

11,643

 

 

 

10,249

 

Income taxes

 

 

6,627

 

 

 

1,402

 

Other

 

 

12,294

 

 

 

11,921

 

Deferred revenue

 

 

37,004

 

 

 

34,534

 

Total current liabilities

 

 

103,219

 

 

 

103,815

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

 

40,423

 

 

 

43,405

 

Other liabilities

 

 

18,378

 

 

 

18,390

 

Total non-current liabilities

 

 

58,801

 

 

 

61,795

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding

 

 

-

 

 

 

-

 

Common stock, $0.01 par value; 300,000,000 shares authorized; 87,795,103

   and 87,264,910 shares issued, 70,432,568 and 70,062,364 shares

   outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

878

 

 

 

873

 

Additional paid-in capital

 

 

662,485

 

 

 

658,423

 

Accumulated other comprehensive income

 

 

14

 

 

 

364

 

Retained earnings

 

 

173,088

 

 

 

142,335

 

Treasury stock, at cost; 17,362,535 and 17,202,546 shares as of March 31, 2021

   and December 31, 2020, respectively

 

 

(248,120

)

 

 

(246,088

)

Total stockholders' equity

 

 

588,345

 

 

 

555,907

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

750,365

 

 

$

721,517

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

For the Quarter Ended March 31,

 

(In Thousands, Except Per Share Amounts)

 

2021

 

 

2020

 

REVENUE:

 

 

 

 

 

 

 

 

Tuition and fees

 

$

182,831

 

 

$

170,394

 

Other

 

 

807

 

 

 

600

 

Total revenue

 

 

183,638

 

 

 

170,994

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

28,974

 

 

 

26,911

 

General and administrative

 

 

110,045

 

 

 

103,529

 

Depreciation and amortization

 

 

4,002

 

 

 

2,639

 

Asset impairment

 

 

-

 

 

 

612

 

Total operating expenses

 

 

143,021

 

 

 

133,691

 

Operating income

 

 

40,617

 

 

 

37,303

 

 

 

 

 

 

 

 

 

 

OTHER INCOME:

 

 

 

 

 

 

 

 

Interest income

 

 

359

 

 

 

1,487

 

Interest expense

 

 

(109

)

 

 

(41

)

Miscellaneous income (expense)

 

 

142

 

 

 

(13

)

Total other income

 

 

392

 

 

 

1,433

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME

 

 

41,009

 

 

 

38,736

 

Provision for income taxes

 

 

10,245

 

 

 

9,604

 

INCOME FROM CONTINUING OPERATIONS

 

 

30,764

 

 

 

29,132

 

 

 

 

 

 

 

 

 

 

LOSS FROM DISCONTINUED OPERATIONS, net of tax

 

 

(11

)

 

 

(26

)

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

30,753

 

 

 

29,106

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE - BASIC:

 

$

0.44

 

 

$

0.42

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE - DILUTED:

 

$

0.43

 

 

$

0.41

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

Basic

 

 

70,149

 

 

 

69,839

 

Diluted

 

 

71,482

 

 

 

71,714

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

For the Quarter Ended March 31,

 

(In Thousands)

 

2021

 

 

2020

 

NET INCOME

 

$

30,753

 

 

$

29,106

 

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(129

)

 

 

(48

)

Unrealized loss on investments

 

 

(221

)

 

 

(839

)

     Total other comprehensive loss

 

 

(350

)

 

 

(887

)

COMPREHENSIVE INCOME

 

$

30,403

 

 

$

28,219

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

 

 

 

2


 

 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

(In Thousands)

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Income (Loss)

 

 

Retained Earnings

 

 

Total

 

BALANCE, January 1, 2021

 

 

87,265

 

 

$

873

 

 

 

(17,203

)

 

$

(246,088

)

 

$

658,423

 

 

$

364

 

 

$

142,335

 

 

$

555,907

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,753

 

 

 

30,753

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(129

)

 

 

-

 

 

 

(129

)

Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(221

)

 

 

-

 

 

 

(221

)

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,753

 

 

 

-

 

 

 

-

 

 

 

3,753

 

Common stock issued

 

 

530

 

 

 

5

 

 

 

(160

)

 

 

(2,032

)

 

 

309

 

 

 

-

 

 

 

-

 

 

 

(1,718

)

BALANCE, March 31, 2021

 

 

87,795

 

 

$

878

 

 

 

(17,363

)

 

$

(248,120

)

 

$

662,485

 

 

$

14

 

 

$

173,088

 

 

$

588,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

(In Thousands)

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Income (Loss)

 

 

Retained Earnings

 

 

Total

 

BALANCE, January 1, 2020

 

 

85,953

 

 

$

860

 

 

 

(15,802

)

 

$

(227,315

)

 

$

639,335

 

 

$

344

 

 

$

18,071

 

 

$

431,295

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,106

 

 

 

29,106

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48

)

 

 

-

 

 

 

(48

)

Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(839

)

 

 

-

 

 

 

(839

)

Treasury stock purchased

 

 

-

 

 

 

-

 

 

 

(1,284

)

 

 

(17,309

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,309

)

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,212

 

 

 

-

 

 

 

-

 

 

 

3,212

 

Common stock issued

 

 

256

 

 

 

2

 

 

 

(62

)

 

 

(687

)

 

 

411

 

 

 

-

 

 

 

-

 

 

 

(274

)

BALANCE, March 31, 2020

 

 

86,209

 

 

$

862

 

 

 

(17,148

)

 

$

(245,311

)

 

$

642,958

 

 

$

(543

)

 

$

47,177

 

 

$

445,143

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

For the Quarter Ended March 31,

 

(In Thousands)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

30,753

 

 

$

29,106

 

Adjustments to reconcile net income to net

 

 

 

 

 

 

 

 

cash provided by operating activities:

 

 

 

 

 

 

 

 

Asset impairment

 

 

-

 

 

 

612

 

Depreciation and amortization expense

 

 

4,002

 

 

 

2,639

 

Bad debt expense

 

 

13,719

 

 

 

12,862

 

Compensation expense related to share-based awards

 

 

3,753

 

 

 

3,212

 

Deferred income taxes

 

 

4,767

 

 

 

9,468

 

Changes in operating assets and liabilities

 

 

(12,286

)

 

 

(13,131

)

Net cash provided by operating activities

 

 

44,708

 

 

 

44,768

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of available-for-sale investments

 

 

(126,009

)

 

 

(111,753

)

Sales of available-for-sale investments

 

 

64,408

 

 

 

52,893

 

Purchases of property and equipment

 

 

(1,042

)

 

 

(1,015

)

Business acquisition

 

 

-

 

 

 

(34,065

)

Net cash used in investing activities

 

 

(62,643

)

 

 

(93,940

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

314

 

 

 

413

 

Purchase of treasury stock

 

 

-

 

 

 

(17,309

)

Payments of employee tax associated with stock compensation

 

 

(2,032

)

 

 

(687

)

Net cash used in financing activities

 

 

(1,718

)

 

 

(17,583

)

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(19,653

)

 

 

(66,755

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period

 

 

109,684

 

 

 

108,687

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period

 

$

90,031

 

 

$

41,932

 

 

 

 

 

 

 

 

 

 

Supplemental non-cash disclosure:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts placed in escrow during the period to secure indemnification obligations from business acquisition

 

$

-

 

 

$

4,000

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

4


 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. DESCRIPTION OF THE COMPANY

Perdoceo’s academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. Our accredited institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIU”) provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Our universities offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIU continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to support students and enhance learning. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021.

The unaudited condensed consolidated financial statements presented herein include the accounts of Perdoceo Education Corporation and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

         Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across two reporting segments: CTU and AIU.

            

3. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting guidance adopted in 2021

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions, including the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also simplify the accounting for income taxes by requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. For all public business entities, ASU 2019-12 is effective for annual periods and interim periods beginning after December 15, 2020. We have evaluated and adopted this guidance effective January 1, 2021. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

5


4. FINANCIAL INSTRUMENTS

Investments consist of the following as of March 31, 2021 and December 31, 2020 (dollars in thousands):

 

 

 

March 31, 2021

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

 

 

 

 

Cost

 

 

Gain

 

 

(Loss)

 

 

Fair Value

 

Short-term investments (available for sale):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

139

 

 

$

1

 

 

$

-

 

 

$

140

 

Non-governmental debt securities

 

 

354,136

 

 

 

145

 

 

 

(208

)

 

 

354,073

 

Treasury and federal agencies

 

 

6,770

 

 

 

5

 

 

 

(2

)

 

 

6,773

 

Total short-term investments (available for sale)

 

$

361,045

 

 

$

151

 

 

$

(210

)

 

$

360,986

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

Gross Unrealized

 

 

 

 

 

 

 

Cost

 

 

Gain

 

 

(Loss)

 

 

Fair Value

 

Short-term investments (available for sale):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

 

$

139

 

 

$

1

 

 

$

-

 

 

$

140

 

Non-governmental debt securities

 

 

288,578

 

 

 

331

 

 

 

(176

)

 

 

288,733

 

Treasury and federal agencies

 

 

11,799

 

 

 

6

 

 

 

(2

)

 

 

11,803

 

Total short-term investments (available for sale)

 

$

300,516

 

 

$

338

 

 

$

(178

)

 

$

300,676

 

 

In the table above, unrealized holding gains (losses) relate to short-term investments that have been in a continuous unrealiz