Career Education Corporation Reports Results for Second Quarter and Year to Date 2019

Second quarter revenue increased 10.1% while University Group total student enrollments grew 5.4%

Career Education Corporation CECO today reported operating and financial results for the quarter and year to date ended June 30, 2019.

"We are pleased with the overall financial and operating progress made thus far," said Todd Nelson, President and Chief Executive Officer. "Our year to date results have been supported, in part, by our continued focus on student outreach and engagement while maintaining our investments in technology and student-serving operations. Looking ahead, we will continue to leverage data and analytics to support student learning and engagement while executing against our strategic priority of sustainable and responsible growth and pursuing investments that support long term value creation for all stakeholders."

REVENUE

• For the quarter ended June 30, 2019, total revenue of $156.4 million increased 10.1 percent compared to total revenue of $142.0 million for the prior year quarter.
• For the year to date ended June 30, 2019, total revenue of $314.3 million increased 8.3 percent compared to total revenue of $290.1 million for the prior year to date.
• Both universities contributed to the revenue growth for the second quarter and year to date primarily as a result of underlying enrollment trends as well more revenue-earning days at AIU.

TOTAL AND NEW STUDENT ENROLLMENTS

• For the quarter ended June 30, 2019, new student enrollments increased 7.0 percent for CTU as compared to the prior year quarter. AIU's new student enrollments were relatively flat as compared to the prior year quarter and were negatively impacted by approximately 17 percent less enrollment days due to the academic calendar redesign.

• As of June 30, 2019, CTU's and AIU's total student enrollments increased 3.2 percent and 10.0 percent, respectively, supported by new student enrollment growth of 10.5 percent and 52.6 percent, respectively for the year to date ended June 30, 2019 as compared to the prior year to date. AIU's year to date new student enrollments were positively impacted by the timing effect of the academic calendar redesign.

• Prospective student interest supported by our investments in the admissions and advising centers in Illinois and Arizona contributed to growth for the second quarter and year to date ended June 30, 2019.

OPERATING INCOME (LOSS)

• For the quarter ended June 30, 2019, operating income of $0.2 million decreased 98.4 percent compared to operating income of $11.3 million for the prior year quarter.
• For the year to date ended June 30, 2019, operating income of $30.2 million decreased 5.3 percent compared to $31.8 million for the prior year to date.
• The current quarter and year to date University Group operating income included a reserve of $30.0 million related to the FTC settlement.

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 June 30, 2019, adjusted operating income of $32.8 million increased 37.9 percent compared to adjusted operating income of $23.8 million for the prior year quarter.
• For the year to date ended June 30, 2019, adjusted operating income of $65.8 million increased 32.5 percent compared to adjusted operating income of $49.6 million for the prior year to date.

NET INCOME AND EARNINGS PER DILUTED SHARE

For the quarter ended June 30, 2019, the Company recorded:

• Net loss of $0.6 million compared to net income of $8.8 million for the prior year quarter.
• Loss per diluted share of ($0.01) compared to earnings per diluted share of $0.12 for the prior year quarter.
• Adjusted earnings per diluted share of $0.39 compared to adjusted earnings per diluted share of $0.23 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 to date ended June 30, 2019, the Company recorded:

• Net income of $24.2 million compared to net income of $26.3 million for the prior year to date.
• Earnings per diluted share of $0.34 compared to earnings per diluted share of $0.37 for the prior year to date.
• Adjusted earnings per diluted share of $0.74 compared to adjusted earnings per diluted share of $0.51 for the prior year to date. (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 June 30, 2019, net cash provided by operating activities was $40.5 million compared to net cash provided by operating activities of $3.7 million for the prior year quarter.
• For the year to date ended June 30, 2019, net cash provided by operating activities was $53.4 million compared to net cash provided by operating activities of $14.8 million for the prior year to date.

As of June 30, 2019 and December 31, 2018, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled $280.2 million and $229.2 million, respectively.

OUTLOOK

The Company raised its adjusted operating income outlook and updated its other full year outlook in addition to providing a third quarter outlook. The third quarter and full year 2019 outlook is subject to the key assumptions identified below (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):

Financial Outlook:

• Full year 2019 - total company:
  • Revenue growth of approximately 4.0 percent to 5.0 percent
  • Operating income in the range of $77.0 million to $81.0 million
  • Adjusted operating income in the range of $118.0 million to $122.0 million
  • Earnings per diluted share in the range of $0.80 to $0.84
  • Adjusted earnings per diluted share in the range of $1.20 to $1.24
• Third quarter 2019 - total company:
  • Operating income in the range of $23.5 million to $24.5 million
  • Adjusted operating income in the range of $26.0 million to $27.0 million
  • Earnings per diluted share and adjusted earnings per diluted share in the range of $0.23 to $0.25

University Group Enrollment Outlook:

• CTU:
  • New student enrollments for the full year 2019 are expected to show growth as compared to the prior year.

  • New student enrollments for the third quarter of 2019 are expected to be relatively flat as compared to the prior year. Third quarter student enrollment trends will be moderated by a strong prior year comparative performance period, during which new student enrollments were 9 percent higher as compared to the third quarter of 2017.

• AIU:

  • New student enrollments for the third quarter and full year 2019 are expected to show growth as compared to the prior year, with the number of enrollment days in the third quarter relatively comparable to the prior year pursuant to the academic calendar.

• University Group:

  • New student enrollments are expected to increase approximately 8 percent to 10 percent for the full year 2019 as compared to the prior year.

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 revenue, operating income, adjusted operating income, earnings per share, adjusted earnings per share and enrollment outlook provided above for 2019 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 and any modifications thereto, (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 or the Company's assessment of the probable outcome of performance conditions relating to performance-based compensation, (vi) earnings per diluted share outlook assumes an effective income tax rate of approximately 32% for the third quarter and 30% for the full year, and (vii) 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

Career Education Corporation will host a conference call on Wednesday, August 7, 2019 at 5:30 p.m. Eastern time to discuss its second quarter and year to date 2019 results. Interested parties can access the live webcast of the conference at www.careered.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.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 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 predominantly serve students online with 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. 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 locations and web links to Career Education 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," "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 "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; 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; 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, 2018 and its subsequent filings with the Securities and Exchange Commission.