Career Education Corporation Reports Results for Third Quarter and Year to Date 2018

University Group total enrollments grew 5.8% primarily driven by new enrollment growth of 39.0% for the quarter

Career Education Corporation CECO today reported operating and financial results for the third quarter and year to date ended September 30, 2018.

YEAR TO DATE 2018 HIGHLIGHTS

• Total company operating income of $51.1 million as compared to $23.4 million in the prior year to date, with the improvement primarily driven by the substantial completion of teach-outs
• University Group revenue increased 1.9 percent or $8.0 million as compared to the prior year to date, driven by total enrollment growth at both AIU and CTU
• University Group new student enrollments increased 6.6 percent as compared to the prior year to date

"University Group student enrollments continue to experience growth that we believe is primarily driven by organic investments aimed at improving student onboarding and learning experiences and improved execution within our operating processes," said Todd Nelson, President and Chief Executive Officer. "Momentum within the student inquiry and application process remains encouraging and our ongoing investments in technology and student-serving operations are working well to serve the demand we are experiencing."

REVENUE

For the quarter and year to date ended September 30, 2018, total revenue was $145.7 million and $435.8 million representing an increase of 0.5 percent and a decrease of 3.9 percent, respectively, compared to total revenue of $145.0 million and $453.3 million for the prior year quarter and year to date ended September 30, 2017, respectively. The decrease for the current year to date was driven by declining revenues within our teach-out campuses. As of September 30, 2018, there are two campuses remaining which are expected to complete their teach-outs during the fourth quarter of 2018.

Total revenue for the University Group was $145.6 million and $435.2 million representing an increase of 2.9 percent and 1.9 percent, respectively, for the quarter and year to date ended September 30, 2018 as compared to the prior year periods.

TOTAL AND NEW STUDENT ENROLLMENTS

Total student enrollments grew 5.8 percent for the University Group, on an aggregate basis, as of September 30, 2018 as compared to the prior year driven by new student enrollment growth. For the third quarter and year to date 2018, new student enrollments for the University Group increased 39.0 percent and 6.6 percent, respectively, as compared to the prior year periods.

CTU's new student enrollments increased 9.0 percent and 6.6 percent for the current quarter and year to date, respectively, as compared to the prior year periods. AIU's new student enrollments increased 96.8 percent and 6.6 percent for the current quarter and year to date, respectively, as compared to the prior year periods. The increase in AIU's new student enrollments for the current quarter was primarily driven by the timing impacts of the academic calendar redesign. Both AIU and CTU's student enrollment increases were positively impacted by improved execution within our operating processes and investments at our admissions and advising centers in Arizona and Illinois.

OPERATING INCOME (LOSS)

For the quarter and year to date ended September 30, 2018, the Company recorded operating income of $19.3 million and $51.1 million, respectively, compared to operating income of $4.5 million and $23.4 million for the quarter and year to date ended September 30, 2017, respectively. The improvement in operating income performance is primarily driven by substantial completion of the campus teach-outs.

ADJUSTED OPERATING INCOME

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

As shown in the table below, adjusted operating income for the total company was $25.8 million and $75.4 million for the quarter and year to date ended September 30, 2018, respectively, as compared to $15.5 million and $46.0 million in the respective prior year periods.

NET INCOME AND EARNINGS PER SHARE

For the quarter and year to date ended September 30, 2018, the Company recorded net income of $14.9 million and $41.1 million, respectively, compared to net income of $3.0 million and $12.5 million for the quarter and year to date ended September 30, 2017, respectively.

The Company recorded diluted earnings per share ("EPS") of $0.21 and $0.58 for the quarter and year to date ended September 30, 2018, respectively, as compared to $0.04 and $0.18 for the prior year quarter and year to date, respectively. Adjusted diluted earnings per share was $0.25 and $0.76 for the quarter and year to date ended September 30, 2018, respectively, as compared to $0.10 and $0.28 for the prior year quarter and year to date, respectively.

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities was $3.5 million and $5.1 million for the quarters ended September 30, 2018 and 2017, respectively. For the year to date ended September 30, 2018, net cash flows provided by operating activities was $18.3 million as compared to net cash used of $29.1 million for the year to date ended September 30, 2017. The current quarter and year to date cash flow includes significant legal settlement payments of $13.1 million and $17.1 million, respectively, as compared to $32.0 million in the prior year to date.

As of September 30, 2018 and December 31, 2017, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled $193.0 million and $180.1 million, respectively.

OUTLOOK

The Company currently expects the following results, subject to the key assumptions identified below (see the GAAP to non-GAAP reconciliation for adjusted operating income (loss) attached to this press release for further details):

Financial Outlook:

• Full year 2018 - total company:
  • Operating income in the range of $71.0 million to $76.0 million
  • Adjusted operating income in the range of $101.0 million to $106.0 million
• Fourth quarter 2018 - total company:
  • Operating income in the range of $19.9 million to $24.9 million
  • Adjusted operating income in the range of $25.6 million to $30.6 million
• Year end 2018 cash, cash equivalents, restricted cash and short-term investments ("cash balances") to be in the range of $215 million to $220 million.
• Operating income and adjusted operating income and ending cash balances for the total company to grow in 2019 as compared to 2018.

University Group Outlook:

• CTU:
  • New student enrollments for the fourth quarter of 2018 are expected to grow as compared to the prior year quarter.
• AIU:
  • Primarily driven by the academic calendar redesign, new student enrollments at AIU are expected to significantly decline in the fourth quarter of 2018 followed by significant growth in the first quarter of 2019, which will more than offset the decline in the fourth quarter of 2018.
  • Fourth quarter and full year revenue growth for 2018.

Operating income, which is the most directly comparable GAAP measure to adjusted operating income, may not follow the same trends stated in the outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations for vacated space less an estimated amount for sublease income and subsequent adjustments as well as depreciation, amortization, asset impairment charges, severance and related costs as a result of significant restructuring actions and significant legal settlements. The operating income and adjusted operating income, enrollment, revenue and cash outlook provided above for 2018 and 2019 are based on the following key assumptions and factors, among others: (i) prospective student interest in the Company's programs continues to trend in line with recent experiences, (ii) initiatives and investments in student-serving operations continue to positively impact enrollment trends within the University Group, (iii) achievement of anticipated recovery rates for our real estate obligations in line with our current expectations, (iv) no material changes in the current legal or regulatory environment, and excludes legal and regulatory liabilities and other related impacts which are not probable and estimable at this time, and any impact of new or proposed regulations, including the "borrower defense to repayment" and gainful employment regulations and any modifications thereto, and (v) no material changes in the estimated amount of compensation expense that could be impacted by changes in the Company's stock price. Although these estimates and assumptions are based upon management's good faith beliefs regarding current events and actions that may be undertaken in the future, actual results could differ materially from these estimates.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Thursday, November 1, 2018 at 5:30 p.m. Eastern time to discuss its third quarter and year to date 2018 results. Interested parties can access the live webcast of the conference call and the related presentation materials at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 844-378-6484 (domestic) or 412-542-4179 (international). Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website.

ABOUT CAREER EDUCATION CORPORATION

Career Education's academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and blended learning programs. The Company's two universities – American InterContinental University ("AIU") and Colorado Technical University ("CTU") – provide degree programs through the master's or doctoral level as well as associate and bachelor's levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today's busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath^® learning platform. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of University Group campus locations and web links to these institutions can be found at www.careered.com.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as "believe," "will," "expect," "estimate," "continue," "outlook," "trend" and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various assumptions, risks, uncertainties and other factors that could cause our results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update or revise such factors or any of the forward-looking statements contained herein to reflect future events, developments or changed circumstances, or for any other reason. These risks and uncertainties, the outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment or interest in our programs; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the gainful employment, 90-10, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education), as well as applicable accreditation standards and state regulatory requirements; the impact of recently issued "borrower defense to repayment" regulations and any modifications thereto; rulemaking by the U.S. Department of Education or any state or accreditor and increased focus by Congress and governmental agencies on, or increased negative publicity about, for-profit education institutions; our ability to successfully defend litigation and other claims brought against us; the success of our initiatives to improve student experiences, retention and academic outcomes; the ability of our student admissions and advising centers to achieve anticipated operating performance; increased competition; the impact of management changes; and changes in the overall U.S. economy. Further information about these and other relevant risks and uncertainties may be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and its subsequent filings with the Securities and Exchange Commission.

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