Perdoceo Education Corporation Reports Third Quarter and Year to Date 2021 Results

Perdoceo Education Corporation (NASDAQ: PRDO) today reported operating and financial results for quarter and year to date ended September 30, 2021.

Third Quarter 2021 Results as Compared to Prior Year Quarter

• Revenue increased 2.9 percent to $174.0 million, with growth at CTU being partially offset with a decline at AIU.
• Operating income increased 18.0 percent to $37.9 million while adjusted operating income increased 28.4 percent to $46.3 million.*
• Earnings per diluted share was $0.39 as compared to $0.56 while adjusted earnings per diluted share was $0.45 as compared to $0.35.*
• Total student enrollments at September 30, 2021 decreased by 0.9 percent, with CTU experiencing a 7.5 percent increase that was offset by an 11.6 percent decrease within AIU. Total student enrollments at CTU were positively impacted by the academic calendar redesign.
• Ended the quarter with $481.0 million in cash, cash equivalents, restricted cash and available-for-sale-short-term investments.

Year to Date 2021 Results as Compared to Prior Year to Date

• Revenue increased 3.3 percent to $533.2 million, with both CTU and AIU contributing to the growth.
• Operating income increased 7.2 percent to $114.4 million while adjusted operating income increased 13.4 percent to $133.5 million.*
• Earnings per diluted share was $1.19 as compared to $1.36 while adjusted earnings per diluted share was $1.29 as compared to $1.16.*

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

“During the quarter, we continued to focus on serving and educating our students while adjusting our processes and continuing to prioritize academic outcomes and retention of our students,” said Todd Nelson, President and Chief Executive Officer. “We also completed the acquisitions of DigitalCrafts and Hippo Education which expand our professional development and continuing education offerings, providing learners with valuable upskilling and reskilling opportunities.”

BUSINESS ACQUISTIONS

During the quarter ended September 30, 2021, the Company completed the acquisition of substantially all of the assets of DigitalCrafts (the “DigitalCrafts acquisition”) as of August 2, 2021 and the acquisition of Hippo Education LLC (the “Hippo acquisition”) as of September 10, 2021. DigitalCrafts helps provide individuals an opportunity in the technology area through reskilling and upskilling courses within the areas of web development, web design and cybersecurity. DigitalCrafts’ programs are now offered by AIU under the DigitalCrafts name. Hippo is a provider of continuing medical education and exam preparation for medical professionals with a quality technology platform and strong course content. Hippo’s program are now offered by CTU under the Hippo Education name. The acquisitions of DigitalCrafts and Hippo expand the Company’s professional development and continuing education offerings.

REVENUE

• For the quarter ended September 30, 2021, revenue of $174.0 million increased 2.9 percent compared to revenue of $169.1 million for the prior year quarter, with growth at CTU partially offset by a decline at AIU.

• For the year to date ended September 30, 2021, revenue of $533.2 million increased 3.3 percent compared to revenue of $516.2 million for the prior year to date, with both CTU and AIU contributing to growth.

		For the Quarter Ended September 30,												For the Year to Date Ended September 30,
Revenue ($ in thousands)		2021				2020				% Change				2021				2020				% Change
CTU (1)		$	104,788			$	98,985				5.9	%		$	312,645			$	302,766				3.3	%
AIU (2)			68,948				70,048				-1.6	%			219,648				213,279				3.0	%
Corporate and Other			262				93			NM					882				110			NM
Total		$	173,998			$	169,126				2.9	%		$	533,175			$	516,155				3.3	%

(1)		CTU’s results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.
(2)		AIU’s results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition and the acquisition of substantially all of the assets of Trident University International (the “Trident acquisition”) commencing on the March 2, 2020 date of acquisition.

TOTAL STUDENT ENROLLMENTS

• CTU’s total student enrollments increased 7.5 percent as of September 30, 2021 as compared to September 30, 2020 primarily due to the timing impact of the academic calendar redesign at CTU, while AIU’s total student enrollments decreased 11.6 percent.

		At September 30,
Total Student Enrollments (1)		2021				2020				% Change
CTU			25,800				24,000				7.5	%
AIU			16,800				19,000				-11.6	%
Total			42,600				43,000				-0.9	%

(1)

Total student enrollments do not include learners participating in non-degree professional development and continuing education programs.

OPERATING INCOME

• For the quarter ended September 30, 2021, operating income increased by 18.0 percent to $37.9 million as compared to the prior year quarter.

• For the year to date ended September 30, 2021, operating income increased by 7.2 percent to $114.4 million as compared to the prior year to date.

		For the Quarter Ended September 30,												For the Year to Date Ended September 30,
Operating Income ($ in thousands)		2021				2020				% Change				2021				2020				% Change
CTU (1)		$	41,217			$	32,993				24.9	%		$	112,758			$	100,688				12.0	%
AIU (2)			8,334				5,513				51.2	%			28,875				25,365				13.8	%
Corporate and Other			(11,690	)			(6,432	)			-81.7	%			(27,193	)			(19,308	)			-40.8	%
Total		$	37,861			$	32,074				18.0	%		$	114,440			$	106,745				7.2	%

(1)		CTU’s results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.
(2)		AIU’s results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition and the Trident acquisition commencing on the March 2, 2020 date of acquisition.

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 September 30, 2021, adjusted operating income of $46.3 million increased 28.4 percent compared to adjusted operating income of $36.1 million for the prior year quarter.

• For the year to date ended September 30, 2021, adjusted operating income of $133.5 million increased 13.4 percent compared to adjusted operating income of $117.7 million for the prior year to date.

		For the Quarter Ended September 30,								For the Year to Date Ended September 30,
Adjusted Operating Income ($ in thousands)		2021				2020				2021				2020
Operating income		$	37,861			$	32,074			$	114,440			$	106,745
Depreciation and amortization (1)			3,887				3,995				11,802				10,785
Legal fee expense related to certain matters (2)			4,583				4				7,241				167
Adjusted Operating Income (3)		$	46,331			$	36,073			$	133,483			$	117,697
Increase (Decrease)			28.4	%							13.4	%

(1)		Amortization for acquired intangible assets relates to definite-lived intangible assets associated with the Trident, DigitalCrafts and Hippo acquisitions.
(2)		Legal fee expense associated with (i) responses to the Department of Education (“the Department”) relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.
(3)		The Company began adjusting for legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts, during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. Also, the Company no longer adjusts operating income for expenses related to the vacated facilities at closed campuses as these expenses are expected to be immaterial. Prior period amounts were recast for these items to maintain comparability.

NET INCOME AND EARNINGS PER DILUTED SHARE

For the quarter ended September 30, 2021, the Company recorded:

• Net income of $27.8 million compared to $39.9 million for the prior year quarter.
• Earnings per diluted share of $0.39 compared to $0.56 for the prior year quarter.
• Adjusted earnings per diluted share of $0.45 compared $0.35 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 September 30, 2021, the Company recorded:

• Net income of $85.2 million compared to $97.2 million for the prior year to date.
• Earnings per diluted share of $1.19 compared to $1.36 for the prior year to date.
• Adjusted earnings per diluted share of $1.29 compared to $1.16 for the prior year to date. (See table below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

		For the Quarter Ended September 30,								For the Year to Date Ended September 30,
		2021				2020				2021				2020
Reported Earnings Per Diluted Share		$	0.39			$	0.56			$	1.19			$	1.36
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets (1)			0.01				0.01				0.03				0.02
Legal fee expense related to certain matters (2)			0.06				-				0.10				-
Tax effect of adjustments (3)			(0.01	)			-				(0.03	)			-
Release of valuation allowance (4)			-				(0.22	)			-				(0.22	)
Adjusted Earnings Per Diluted Share (5)		$	0.45			$	0.35			$	1.29			$	1.16

(1)		Amortization for acquired intangible assets relates to definite-lived intangible assets associated with the Trident, DigitalCrafts and Hippo acquisitions.
(2)		Legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.
(3)		The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25.0%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.
(4)		The release of a valuation allowance in the amount of $16.0 million was a result of the determination during the period that it was more likely than not that the Company would utilize its deferred tax assets associated with the portion of the foreign tax credit carryforward supported by an overall domestic loss account balance.
(5)		The Company began adjusting for legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts, during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. Also, the Company no longer adjusts operating income for expenses related to the vacated facilities at closed campuses as these expenses are expected to be immaterial. Prior period amounts were recast for these items to maintain comparability.

BALANCE SHEET AND CASH FLOW

• For the quarter ended September 30, 2021, net cash provided by operating activities was $61.5 million, compared to net cash provided by operating activities of $32.4 million during the prior year quarter.
• At September 30, 2021 and December 31, 2020, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled $481.0 million and $410.4 million, respectively.
• During the quarter ended September 30, 2021, the Company paid $56.9 million in the aggregate related to the DigitalCrafts and Hippo acquisitions.
• The Company’s stock repurchase program, which was set to expire on December 31, 2021, has been extended to February 28, 2022. As of September 30, 2021, approximately $22.9 million was available under the stock repurchase program to repurchase outstanding shares of common stock.

		For the Quarter Ended September 30,												For the Year to Date Ended September 30,
Selected Cash Flow Items ($ in thousands)		2021				2020				% Change				2021				2020				% Change
Net cash provided by operating activities		$	61,461			$	32,389				89.8	%		$	144,206			$	137,753				4.7	%
Business acquisitions, net of cash acquired		$	56,947			$	5,754			NM				$	56,947			$	39,819				43.0	%
Capital expenditures		$	3,217			$	4,040				-20.4	%		$	6,276			$	7,479				-16.1	%

OUTLOOK

The Company is providing the following updated 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.

	Total Company Outlook
	For Quarter Ending December 31,			For the Year Ending December 31,
	OUTLOOK	ACTUAL		OUTLOOK	ACTUAL
	2021	2020		2021	2020
Operating Income	$26.4M - $29.4M	$36.2M		$140.9M - $143.9M	$142.9M
Depreciation and amortization	$5.1M	$4.0M		$16.9M	$14.8M
Legal fee expense related to certain matters (1)	$2.0M	$1.1M		$9.2M	$1.3M
Adjusted Operating Income (2)	$33.5M - $36.5M	$41.3M		$167.0M - $170.0M	$159.0M
Earnings Per Diluted Share	$0.26 - $0.29	$0.38		$1.45 - $1.48	$1.74
Amortization of acquired intangible assets	$0.03	$0.01		$0.06	$0.04
Legal fee expense related to certain matters (1)	$0.03	$0.01		$0.13	$0.02
Tax effect of adjustments	($0.02)	-		($0.04)	($0.02)
Release of valuation allowance	-	-		-	($0.22)
Adjusted Earnings Per Diluted Share (2)	$0.30 - $0.33	$0.40		$1.60 - $1.63	$1.56

(1)		Legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.
(2)		The Company began adjusting for legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts, during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. Also, the Company no longer adjusts operating income for expenses related to the vacated facilities at closed campuses as these expenses are expected to be immaterial. Prior period amounts were recast for these items to maintain comparability.

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 significant legal settlements and legal fees for certain matters. The operating income, adjusted operating income, earnings per share and adjusted earnings per share outlook provided above for 2021 are based on the following key assumptions and factors, among others: (i) prospective student interest for online postsecondary academic programs remains consistent with recent industry trends, (ii) no significant impact of new or proposed regulations, including the “borrower defense to repayment” regulations, or other adverse changes in the legal or regulatory environment, (iii) no significant operating impacts from the settlements with the U.S. Federal Trade Commission and state attorneys general or other legal or regulatory matters, (iv) no significant future operating or financial impacts relating to the COVID-19 pandemic, (v) earnings per diluted share outlook assumes an effective income tax rate of approximately 29.0% for the fourth quarter and 26.25% for the full year, and (vi) any future impact from the Company’s stock repurchase program is 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 the Company makes in the future as it continues to evaluate diverse strategies to enhance stockholder value may impact the outlook provided above.

CONFERENCE CALL INFORMATION

Perdoceo Education Corporation will host a conference call on Thursday, November 4, 2021 at 5:30 p.m. Eastern time to discuss third quarter and year to date 2021 results and 2021 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 accredited institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIU”) – provide degree programs from the associate through doctoral level as well as non-degree professional development and continuing education offerings. Perdoceo’s 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. For more information, please visit 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,” “focused on,” “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 various versions of “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; the success of our initiatives to improve student experiences, retention and academic outcomes; our continued eligibility to participate in educational assistance programs for veterans or other military personnel; increased competition; the impact of management changes; and changes in the overall U.S. economy which may continue to be impacted by the COVID-19 pandemic. 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, 2020 and its subsequent filings with the Securities and Exchange Commission.

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
		September 30,				December 31,
		2021				2020
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, unrestricted		$	266,400			$	105,684
Restricted cash			5,195				4,000
Short-term investments			209,391				300,676
Total cash and cash equivalents, restricted cash and short-term investments			480,986				410,360
Student receivables, net			42,485				44,682
Receivables, other			1,900				2,873
Prepaid expenses			8,078				8,209
Inventories			1,178				596
Other current assets			2,517				341
Total current assets			537,144				467,061
NON-CURRENT ASSETS:
Property and equipment, net			25,838				27,761
Right of use asset, net			38,793				44,773
Goodwill			162,692				118,312
Intangible assets, net			34,109				15,522
Student receivables, net			1,350				1,303
Deferred income tax assets, net			30,413				40,351
Other assets			6,080				6,434
TOTAL ASSETS		$	836,419			$	721,517
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease liability - operating		$	10,036			$	9,789
Accounts payable			12,650				13,259
Accrued expenses:
Payroll and related benefits			22,764				22,661
Advertising and marketing costs			10,749				10,249
Income taxes			3,565				1,402
Other			17,596				11,921
Deferred revenue			57,051				34,534
Total current liabilities			134,411				103,815
NON-CURRENT LIABILITIES:
Lease liability - operating			37,732				43,405
Other liabilities			18,891				18,390
Total non-current liabilities			56,623				61,795
STOCKHOLDERS' EQUITY:
Preferred stock			-				-
Common stock			879				873
Additional paid-in capital			670,497				658,423
Accumulated other comprehensive (loss) income			(3	)			364
Retained earnings			227,506				142,335
Treasury stock			(253,494	)			(246,088	)
Total stockholders' equity			645,385				555,907
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	836,419			$	721,517

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts and percentages)
		For the Quarter Ended September 30,
		2021				% of Total Revenue				2020				% of Total Revenue
REVENUE:
Tuition and fees		$	172,595				99.2	%		$	168,471				99.6	%
Other			1,403				0.8	%			655				0.4	%
Total revenue			173,998								169,126
OPERATING EXPENSES:
Educational services and facilities			25,961				14.9	%			27,562				16.3	%
General and administrative			106,289				61.1	%			105,495				62.4	%
Depreciation and amortization			3,887				2.2	%			3,995				2.4	%
Total operating expenses			136,137				78.2	%			137,052				81.0	%
Operating income			37,861				21.8	%			32,074				19.0	%
OTHER (EXPENSE) INCOME:
Interest income			154				0.1	%			737				0.4	%
Interest expense			(572	)			-0.3	%			(42	)			0.0	%
Miscellaneous expense			(116	)			-0.1	%			(14	)			0.0	%
Total other (expense) income			(534	)			-0.3	%			681				0.4	%
PRETAX INCOME			37,327				21.5	%			32,755				19.4	%
Provision for (benefit from) income taxes			9,557				5.5	%			(7,206	)			-4.3	%
INCOME FROM CONTINUING OPERATIONS			27,770				16.0	%			39,961				23.6	%
Loss from discontinued operations, net of tax			(1	)			0.0	%			(21	)			0.0	%
NET INCOME			27,769				16.0	%			39,940				23.6	%
NET INCOME PER SHARE - BASIC:		$	0.40							$	0.58
NET INCOME PER SHARE -DILUTED:		$	0.39							$	0.56
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			70,089								69,167
Diluted			71,466								71,016
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		For the Quarter Ended September 30,
(In Thousands)		2021								2020
NET INCOME		$	27,769							$	39,940
OTHER COMPREHENSIVE LOSS, net of tax:
Foreign currency translation adjustments			(74	)							123
Unrealized gain (loss) on investments			51								(461	)
Total other comprehensive loss			(23	)							(338	)
COMPREHENSIVE INCOME		$	27,746							$	39,602

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts and percentages)
		For the Year to Date Ended September 30,
		2021				% of Total Revenue				2020				% of Total Revenue
REVENUE:
Tuition and fees		$	530,230				99.4	%		$	514,364				99.7	%
Other			2,945				0.6	%			1,791				0.3	%
Total revenue			533,175								516,155
OPERATING EXPENSES:
Educational services and facilities			83,467				15.7	%			83,149				16.1	%
General and administrative			323,466				60.7	%			314,864				61.0	%
Depreciation and amortization			11,802				2.2	%			10,785				2.1	%
Asset impairment			-				0.0	%			612				0.1	%
Total operating expenses			418,735				78.5	%			409,410				79.3	%
Operating income			114,440				21.5	%			106,745				20.7	%
OTHER (EXPENSE) INCOME:
Interest income			835				0.2	%			3,235				0.6	%
Interest expense			(961	)			-0.2	%			(126	)			0.0	%
Miscellaneous (expense) income			(9	)			0.0	%			98				0.0	%
Total other (expense) income			(135	)			0.0	%			3,207				0.6	%
PRETAX INCOME			114,305				21.4	%			109,952				21.3	%
Provision for income taxes			29,121				5.5	%			12,670				2.5	%
INCOME FROM CONTINUING OPERATIONS			85,184				16.0	%			97,282				18.8	%
Loss from discontinued operations, net of tax			(13	)			0.0	%			(69	)			0.0	%
NET INCOME			85,171				16.0	%			97,213				18.8	%
NET INCOME PER SHARE - BASIC:		$	1.21							$	1.40
NET INCOME PER SHARE -DILUTED:		$	1.19							$	1.36
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			70,179								69,366
Diluted			71,649								71,267
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		For the Year to Date Ended September 30,
(In Thousands)		2021								2020
NET INCOME		$	85,171							$	97,213
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments			(175	)							128
Unrealized (loss) gain on investments			(192	)							131
Total other comprehensive (loss) income			(367	)							259
COMPREHENSIVE INCOME		$	84,804							$	97,472

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
		For the Year to Date Ended September 30,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	85,171			$	97,213
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment			-				612
Depreciation and amortization expense			11,802				10,785
Bad debt expense			36,360				36,706
Compensation expense related to share-based awards			11,287				9,735
Deferred income taxes			9,938				11,339
Changes in operating assets and liabilities			(10,352	)			(28,637	)
Net cash provided by operating activities			144,206				137,753
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments			(269,739	)			(333,767	)
Sales of available-for-sale investments			357,280				213,576
Purchases of property and equipment			(6,276	)			(7,479	)
Business acquisitions, net of acquired cash			(56,947	)			(39,819	)
Net cash provided by (used in) investing activities			24,318				(167,489	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock			793				1,925
Purchase of treasury stock			(5,372	)			(17,862	)
Payments of employee tax associated with stock compensation			(2,034	)			(894	)
Net cash used in financing activities			(6,613	)			(16,831	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			161,911				(46,567	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period			109,684				108,687
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period		$	271,595			$	62,120

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION (In thousands, except percentages)
		For the Quarter Ended September 30,
		2021				2020
REVENUE:
CTU (1)		$	104,788			$	98,985
AIU (2)			68,948				70,048
Corporate and Other			262				93
Total		$	173,998			$	169,126
OPERATING INCOME (LOSS):
CTU (1)		$	41,217			$	32,993
AIU (2)			8,334				5,513
Corporate and Other			(11,690	)			(6,432	)
Total		$	37,861			$	32,074
OPERATING MARGIN (LOSS):
CTU (1)			39.3	%			33.3	%
AIU (2)			12.1	%			7.9	%
Corporate and Other		NM				NM
Total			21.8	%			19.0	%

(1)		CTU’s results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.
(2)		AIU’s results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition.

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION (In thousands, except percentages)
		For the Year to Date Ended September 30,
		2021				2020
REVENUE:
CTU (1)		$	312,645			$	302,766
AIU (2)			219,648				213,279
Corporate and Other			882				110
Total		$	533,175			$	516,155
OPERATING INCOME (LOSS):
CTU (1)		$	112,758			$	100,688
AIU (2)			28,875				25,365
Corporate and Other			(27,193	)			(19,308	)
Total		$	114,440			$	106,745
OPERATING MARGIN (LOSS):
CTU (1)			36.1	%			33.3	%
AIU (2)			13.1	%			11.9	%
Corporate and Other		NM				NM
Total			21.5	%			20.7	%

(1)		CTU’s results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.
(2)		AIU’s results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition and the Trident acquisition commencing on the March 2, 2020 date of acquisition.

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1) (In thousands, unless otherwise noted)
		For the Quarter Ended September 30,								For the Year to Date Ended September 30,
		ACTUAL								ACTUAL
Adjusted Operating Income		2021				2020				2021				2020
Operating income		$	37,861			$	32,074			$	114,440			$	106,745
Depreciation and amortization (2)			3,887				3,995				11,802				10,785
Legal fee expense related to certain matters (3)			4,583				4				7,241				167
Adjusted Operating Income (4)		$	46,331			$	36,073			$	133,483			$	117,697
		For the Quarter Ending December 31,								For the Year Ending December 31,
		OUTLOOK				ACTUAL				OUTLOOK				ACTUAL
		2021				2020				2021				2020
Operating income		$26.4M - $29.4M				$	36,189			$140.9M - $143.9M				$	142,934
Depreciation and amortization (2)		$5.1M					4,001			$16.9M					14,786
Legal fee expense related to certain matters (3)		$2.0M					1,129			$9.2M					1,296
Adjusted Operating Income (4)		$33.5M - $36.5M				$	41,319			$167.0M - $170.0M				$	159,016

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1) (cont’d)
		For the Quarter Ended September 30,								For the Year to Date Ended September 30,
		ACTUAL								ACTUAL
		2021				2020				2021				2020
Reported Earnings Per Diluted Share		$	0.39			$	0.56			$	1.19			$	1.36
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets (2)			0.01				0.01				0.03				0.02
Legal fee expense related to certain matters (3)			0.06				-				0.10				-
Total pre-tax adjustments		$	0.07			$	0.01			$	0.13			$	0.02
Tax effect of adjustments (5)			(0.01	)			-				(0.03	)			-
Release of valuation allowance (6)			-				(0.22	)			-				(0.22	)
Total adjustments after tax			0.06				(0.21	)			0.10				(0.20	)
Adjusted Earnings Per Diluted Share (4)		$	0.45			$	0.35			$	1.29			$	1.16
		For the Quarter Ending December 31,								For the Year Ending December 31,
		OUTLOOK				ACTUAL				OUTLOOK				ACTUAL
		2021				2020				2021				2020
Reported Earnings Per Diluted Share		$0.26 - $0.29				$	0.38			$1.45 - $1.48				$	1.74
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets (2)			0.03				0.01				0.06				0.04
Legal fee expense related to certain matters (3)			0.03				0.01				0.13				0.02
Total pre-tax adjustments		$	0.06			$	0.02			$	0.19			$	0.06
Tax effect of adjustments (5)			(0.02	)			-				(0.04	)			(0.02	)
Release of valuation allowance (6)			-				-				-				(0.22	)
Total adjustments after tax			0.04				0.02				0.15				(0.18	)
Adjusted Earnings Per Diluted Share (4)		$0.30 - $0.33				$	0.40			$1.60 - $1.63				$	1.56

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1) (cont’d)
(1)		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. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its operations, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company’s historical results and to provide estimates of future performance.
		The Company believes adjusted operating income and adjusted earnings per diluted share allow it to analyze and assess its operations and compare current operating results with the operational performance of other companies in its industry because it does not give effect to potential differences caused by items it does not consider reflective of underlying operating performance, such as amortization for acquired intangible assets, significant legal settlements and legal fee expense related to certain matters. In evaluating adjusted operating income and adjusted earnings per diluted share, investors should be aware that in the future the Company may incur expenses similar to the adjustments presented above. The presentation of adjusted operating income and adjusted earnings per diluted share should not be construed as an inference that the Company's future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted operating income and adjusted earnings per diluted share have limitations as an analytical tool, and should not be considered in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of liquidity.
		Non-GAAP financial measures, when viewed in a reconciliation to corresponding GAAP financial measures, provide an additional way of viewing the Company’s results of operations and the factors and trends affecting the Company’s business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP.
		Results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition, the Hippo acquisition commencing on the September 10, 2021 date of acquisition and the Trident acquisition commencing on the March 2, 2020 date of acquisition.
(2)		Amortization for acquired intangible assets relate to definite-lived intangible assets associated with the Trident, DigitalCrafts and Hippo acquisitions.
(3)		Legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.
(4)		The Company began adjusting for legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts, during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. Also, the Company no longer adjusts operating income for expenses related to the vacated facilities at closed campuses as these expenses are expected to be immaterial. Prior period amounts were recast for these items to maintain comparability.
(5)		The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25.0%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments. There is no tax effect applied to the adjustment related to the release of the valuation allowance as this is an adjustment for income tax.
(6)		The release of a valuation allowance in the amount of $16.0 million was a result of the determination during the period that it was more likely than not that the Company would utilize its deferred tax assets associated with the portion of the foreign tax credit carryforward supported by an overall domestic loss account balance.

 

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