Perdoceo Education Corporation Reports Fourth Quarter and Full Year 2019 Results

Full year revenue increased 8.0% as University Group total student enrollments grew by 6.4%

Perdoceo Education Corporation PRDO today reported operating and financial results for the quarter and year ended December 31, 2019.

FULL YEAR 2019 RESULTS AS COMPARED TO THE PRIOR YEAR AND OTHER HIGHLIGHTS

• Revenue increased 8.0 percent to $627.7 million as compared to $581.3 million, supported by total student enrollment growth at both universities
• Operating income increased 21.3 percent to $86.5 million as compared to $71.3 million
• Adjusted operating income increased 27.7 percent to $134.3 million as compared to $105.2 million*
• Earnings per diluted share of $0.97 as compared to earnings per diluted share of $0.77
• Adjusted earnings per diluted share of $1.37 as compared to $1.05*
• New student enrollments increased 14.6 percent contributing to total enrollment growth of 6.4 percent; positively impacting these trends was the academic calendar at AIU
• Operating and cost efficiencies continue to be re-invested in student support functions, technology initiatives and data analytics
• The Company expects the acquisition of Trident University International to close in early March 2020

*See GAAP (U.S. generally accepted accounting principles) to non-GAAP reconciliation attached to this press release

"We are excited to continue the journey of educating students under our new name, Perdoceo, which in Latin means ‘to teach, inform or instruct thoroughly,'" said Todd Nelson, President and Chief Executive Officer. "Fourth quarter 2019 marked a positive close to the year and we are proud to serve over 36,000 students pursuing postsecondary studies across our academic institutions. Fourth quarter results highlight the success of our operating strategy that focuses on student experiences, retention and academic outcomes, while making investments in technology and leveraging data analytics to further support our students and enhance their learning. Looking ahead, we remain committed to the objective of sustainable and responsible growth, and look forward to closing the Trident acquisition and its effective integration into our operations."

REVENUE

• For the quarter ended December 31, 2019, total revenue of $158.5 million increased 8.9 percent compared to total revenue of $145.5 million for the prior year quarter.

• For the year ended December 31, 2019, total revenue of $627.7 million increased 8.0 percent compared to total revenue of $581.3 million for the prior year.

• Both universities contributed to the revenue growth that has been supported by positive student enrollment trends.

TOTAL AND NEW STUDENT ENROLLMENTS

• For the quarter ended December 31, 2019, new student enrollments at CTU and AIU increased 8.5 percent and 12.7 percent, respectively, as compared to the prior year quarter.

• As of December 31, 2019, CTU's and AIU's total student enrollments increased 4.4 percent and 10.2 percent, respectively, supported by new student enrollment growth of 7.0 percent and 26.6 percent, respectively, as compared to the prior year.

• Student enrollment growth was positively impacted by investments in student support functions and consistent levels of prospective student interest. Additionally, AIU's full year new student enrollments were positively impacted by the timing of its academic calendar.

OPERATING INCOME (LOSS)

• For the quarter ended December 31, 2019, operating income of $32.0 million increased 58.6 percent compared to $20.2 million for the prior year quarter.

• For the year ended December 31, 2019, operating income of $86.5 million increased 21.3 percent compared to $71.3 million for the prior year.

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 table below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

• For the quarter ended December 31, 2019, adjusted operating income of $34.6 million increased 16.3 percent compared to adjusted operating income of $29.7 million for the prior year quarter.

• For the year ended December 31, 2019, adjusted operating income of $134.3 million increased 27.7 percent compared to adjusted operating income of $105.2 million for the prior year.

NET INCOME AND EARNINGS PER DILUTED SHARE

For the quarter ended December 31, 2019, the Company recorded:

• Net income of $27.5 million compared to net income of $14.1 million for the prior year quarter.
• Earnings per diluted share of $0.38 compared to earnings per diluted share of $0.20 for the prior year quarter.
• Adjusted earnings per diluted share of $0.33 compared to adjusted earnings per diluted share of $0.30 for the prior year quarter. (See table below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

For the year ended December 31, 2019, the Company recorded:

• Net income of $70.0 million compared to net income of $55.2 million for the prior year.
• Earnings per diluted share of $0.97 compared to earnings per diluted share of $0.77 for the prior year.
• Adjusted earnings per diluted share of $1.37 compared to adjusted earnings per diluted share of $1.05 for the prior year. (See table below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

BALANCE SHEET AND CASH FLOW

• For the quarter ended December 31, 2019, net cash used in operating activities was $12.3 million compared to net cash provided by operating activities of $38.7 million for the prior year quarter. The fourth quarter of 2019 included a $30.0 million payment to the U.S. Federal Trade Commission, which amount was previously held in escrow and recorded as restricted cash.
• For the year ended December 31, 2019, net cash provided by operating activities was $73.1 million compared to net cash provided by operating activities of $57.0 million for the prior year.
• As of December 31, 2019 and December 31, 2018, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled $294.2 million and $229.2 million, respectively.
• During the fourth quarter of 2019, the Company repurchased 0.2 million shares of its common stock in open market transactions at an aggregate cost of $3.9 million. The average price per share was $16.49. As of December 31, 2019, $46.1 million remained available under our previously authorized stock repurchase program.

OUTLOOK

The Company is providing the following outlook, subject to the key assumptions identified below. Please see the GAAP to non-GAAP reconciliation for adjusted operating income and adjusted earnings per diluted share attached to this press release for further details. This outlook reflects the Company's expectation of growth in new and total student enrollments at both universities for 2020. Further, for the first quarter of 2020, the Company expects growth in CTU's new student enrollments as compared to the prior year quarter. AIU's first quarter new student enrollments, however, are expected to decline due to 31 percent less enrollment days in the first quarter of 2020 as compared to the prior year quarter, although this decline is expected to be more than offset with new student enrollment growth in the second quarter which has approximately 50 percent more enrollment days than the prior year quarter. The Company expects that AIU's enrollment days for the third and fourth quarters of 2020 will be relatively comparable to the respective prior year periods.

Operating income, which is the most directly comparable GAAP measure to adjusted operating income, and earnings per diluted share may not follow the same trends stated in the outlook above because of adjustments made for certain significant and non-cash items such as lease expenses for vacated space offset with any sublease income as well as depreciation, amortization, asset impairment charges, significant restructuring charges and significant legal settlements. The operating income, adjusted operating income, earnings per share, adjusted earnings per share and enrollment outlook provided above for 2020 are based on the following key assumptions and factors, among others: (i) prospective student interest in the Company's programs remains consistent with recent experience, (ii) initiatives and investments in student-serving operations continue to positively impact enrollment trends within the University Group, (iii) 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" regulations, (iv) no significant operating impacts from the settlements with the U.S. Federal Trade Commission and state attorneys general or other legal or regulatory matters, (v) no material changes in the estimated amount of compensation expense that could be impacted by changes in the Company's stock price, (vi) earnings per diluted share outlook assumes an effective income tax rate of approximately 25% for the first quarter and 26% for the full year, (vii) any future impact from the Company's stock repurchase program is excluded, and (viii) any results of operations from Trident University are excluded. Although these estimates and assumptions are based upon management's good faith beliefs regarding current and future circumstances and actions that may be undertaken, actual results could differ materially from these estimates. In addition, decisions we make in the future as we continue to evaluate diverse strategies to enhance shareholder value may impact the outlook provided above.

CONFERENCE CALL INFORMATION

Perdoceo Education Corporation will host a conference call on Wednesday, February 19, 2020 at 5:30 p.m. Eastern time to discuss its fourth quarter and full year 2019 results and 2020 outlook. Interested parties can access the live webcast of the conference at www.perdoceoed.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 1-844-378-6484 (domestic) or 1-412-542-4179 (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.perdoceoed.com in the Investor Relations section of the website.

ABOUT PERDOCEO EDUCATION CORPORATION

Perdoceo's academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. The Company's two regionally accredited universities – Colorado Technical University ("CTU") and American InterContinental University ("AIU") – provide degree programs through the master's or doctoral level as well as associate and bachelor's levels. Both universities offer students industry relevant and career-focused degree 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 new 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.

A listing of university locations and web links to Perdoceo institutions can be found at www.perdoceoed.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," "continue," "outlook," "remain," "look forward to," "should" 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 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 effective and recently adopted "borrower defense to repayment" regulations; 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 (in particular as these risks and uncertainties may be exacerbated leading up to and following the 2020 U.S. presidential election); the operating impact of the settlements with the FTC and state attorneys general; 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; our ability to successfully complete the acquisition of Trident University International and integrate its business into AIU's operations; 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, 2019 and its subsequent filings with the Securities and Exchange Commission.