PERDOCEO EDUCATION Corp - FORM 8-K - EX-99.2

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8-K - 8-K - PERDOCEO EDUCATION Corp	d815466d8k.htm
EX-99.1 - EX-99.1 - PERDOCEO EDUCATION Corp	d815466dex991.htm

CAREER EDUCATION CORPORATION

THIRD QUARTER 2014

INVESTOR CONFERENCE CALL

NOVEMBER 6, 2014

Reid Simpson

Senior Vice President & Chief Financial Officer

Scott Steffey

President & Chief Executive Officer

Exhibit 99.2

Cautionary Statements & Disclosures

This presentation contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934,

as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows,

performance and business prospects and opportunities, as well as assumptions made by, and information currently

available to, our management. We have tried to identify forward-looking statements by using words such as “projected,”

“believe,” “anticipate,” “will,” “expect,” “estimate,” “continue to” and similar expressions, but these words are not the

exclusive means of identifying forward-looking statements. These statements are based on information currently available

to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Item

1A,“Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013 that could cause our actual

growth, results of operations, financial condition, cash flows, performance and 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 such factors or any of the forward-looking statements to reflect future

events, developments, or changed circumstances or for any other reason.

Certain financial information is presented on a non-GAAP basis. The Company believes it is useful to present non-GAAP

financial measures which exclude certain significant items as a means to understand the performance of its ongoing

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 core business, 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 and that failure to report non-GAAP measures could result in a

misplaced perception that the Company's results have underperformed or exceeded expectations. The most directly

comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures are provided at the end of

this presentation, and this presentation (including the reconciliation) has been posted to our website.

Strengthen Academic Outcomes, Enhance Regulatory

Compliance and Simplify Business Model

Strengthen Academic Outcomes

•

Intellipath

adaptive learning tool is driving students to engage more in their

learning.

•

Significant increase in student pass rates.

Enhance Regulatory Compliance

•

Higher Learning Commission continued the regional accreditation of CTU and

AIU.

•

160 basis point improvement in 2011 consolidated cohort default rate (vs.

2010).

•

All of our 32 ACICS-accredited campuses not in teach-out reported placement

rates greater than the compliance threshold of 60 percent; 26 met or exceeded

the higher benchmark rate of 70 percent.

Simplify Business Model

•

Divested International Schools and consolidated Career College brands.

•

Opportunities to better integrate operations.

Sequential Improvement in Decline of Total Student

Enrollments -

University

‘13

‘14

’14

‘14

Total Student Enrollments -

University

31,300

32,500

32,400

33,900

30,600

(1) AIU had three start dates in 1Q 2014 and two start dates in 2Q 2014 which explains why there is a

spike in total enrollments in 1Q 2014 and a corresponding decrease in 2Q 2014. All other periods

each had two AIU start dates.

Total Student Enrollments –

University (Online Only)

28,300

28,700

28,600

30,200

28,600

(1) AIU had three start dates in 1Q 2014 and two start dates in 2Q 2014 which explains why there is a

spike in total enrollments in 1Q 2014 and a corresponding decrease in 2Q 2014. All other periods

each had two AIU start dates.

Total Student Enrollments –

Career Schools

19,200

17,900

19,100

16,600

20,100

(1) Culinary Arts had a shift in start dates as compared to the prior year, therefore Q3 2014 had an

additional start which was reflected in Q4 2013 in the prior year.

Reduce Organizational Cost Structure –

Progress Underway

$1,542

$1,272

Reduced by

$212 million

Operating Expenses ($ millions)

FY 2012 & FY 2013 data as reported in the Company’s 2013 10-K and based on schools that were in continuing operations at 12/31/13.

YTD 3Q 2013 and YTD 3Q 2014 data as reported in the Company’s 3Q 2014 10-Q and based on schools that were in continuing operations

at 9/30/14.

$899

$814

Reduced by

$80 million

Phase Down of Transitional School Campuses

(1) Taught out 3 campuses and announced 3 additional campuses for teach-out during 3Q 2014

Adjusted EBITDA –

Ongoing Operations

‘14

’14

‘15

ACTUALS

PROJECTED

Trailing Twelve Months Adjusted EBITDA

Numbers exclude significant items (including Transitional Schools) as disclosed in the Non-GAAP reconciliation at the end

of these slides.

Adjusted EBITDA –

Transitional & Discontinued Operations

‘14

’14

‘15

ACTUALS

PROJECTED

Numbers exclude significant items (including International segment) as disclosed in the Non-GAAP reconciliation at the

end of these slides.

Future Lease Obligations are Declining

(1)

Lease obligations are inclusive of rent payments but exclude operating expenses.

(2)

Amounts provided are for the full year of 2014.

(3)

Amounts provided are for executed sublease agreements.

2014

(2)

2015

2016

2017

2018

2019

2020

Thereafter

Total

Gross operating lease obligations

(1)

Ongoing operations

61,024

60,148

55,194

46,199

45,203

35,389

43,985

347,142

Transitional & Discontinued operations

38,024

31,541

24,045

21,357

14,122

6,516

2,863

138,468

Total gross operating lease obligations

99,048

91,689

79,239

67,556

59,325

41,905

46,848

485,610

Sublease income

Ongoing operations

2,245

4,227

2,936

2,812

2,466

1,821

1,068

17,575

Transitional & Discontinued operations

1,145

4,737

4,510

4,190

145

14,727

Total sublease income

3,390

8,964

7,446

7,002

2,611

1,821

1,068

32,302

Net operating lease obligations

Ongoing operations

58,779

55,921

52,258

43,387

42,737

33,568

42,917

329,567

Transitional & Discontinued operations

36,879

26,804

19,535

17,167

13,977

6,516

2,863

123,741

Total net contractual lease obligations

95,658

82,725

71,793

60,554

56,714

40,084

45,780

453,308

(3)

Strong Cash Position

(1) Balances presented above are quarter end balances and include both Continuing and Discontinued Operations.

In (000’s)

(2) The increase in 4Q 2013 is attributed to proceeds from the sale of the Company’s International segment.

$363,099

(2)

Reconciliation of GAAP to Non-GAAP Items

Adjusted EBITDA

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Q3 2013

Ongoing Operations:

Pre-tax loss from continuing operations

(44,787)

(31,984)

(39,930)

(43,458)

(54,989)

Transitional Schools operating loss

11,390

9,642

8,259

12,944

10,099

Interest (income) expense, net

(120)

(177)

(25)

Loss (gain) on sale of business

(68)

Depreciation and amortization

(3)

11,950

12,554

13,029

13,661

13,990

Stock-based compensation

(3)

950

1,020

1,341

1,580

1,713

Legal settlements

(3) (4)

1,600

5,850

17,000

300

14,396

7,403

3,050

11,513

(226)

(879)

(606)

(2,924)

1,184

(8,588)

Adjusted EBITDA--Ongoing Operations

(2)

(15,035)

(821)

(12,008)

1,850

(16,136)

Adjusted EBITDA per diluted share

(0.22)

(0.01)

(0.18)

0.03

(0.24)

Memo: Advertising Expenses

(3)

69,875

56,224

69,379

56,077

70,936

Pre-tax (loss) income from discontinued operations

(2,065)

(12,726)

(17,993)

117,272

(21,712)

Transitional Schools operating loss

(11,390)

(9,642)

(8,259)

(12,944)

(10,099)

Loss (gain) on sale of business

(8)

311

(130,109)

International Schools operating (income) loss

(7)

(11,434)

7,608

Interest (income) expense, net

(51)

(21)

Depreciation and amortization

(8)

1,191

1,840

2,402

2,765

2,961

Legal settlements

(8)

225

(7)

3,933

(3,485)

1,436

3,099

5,766

(3,092)

Adjusted EBITDA--Transitional and Discontinued Operations

(2)

(15,435)

(18,730)

(20,758)

(24,802)

(24,283)

Adjusted EBITDA per diluted share

(0.23)

(0.28)

(0.31)

(0.37)

(0.36)

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS

(1)

(In thousands, except per share amounts)

Insurance recovery

Asset impairments

(3) (5)

Unused space charges

(3) (6)

Asset impairments

(8)

Unused space charges

(6) (8)

Transitional Schools and Discontinued Operations:

Reconciliation of GAAP to Non-GAAP Items –

con’t

(1)

(2)

(3)

(4)

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Q3 2013

CTU

(900)

1,300

Career Colleges

200

300

Culinary Arts

2,000

3,000

15,500

Corporate & Other

(400)

3,750

Total

1,600

5,850

17,000

300

(5)

(6)

(7)

(8)

The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its ongoing 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 ongoing 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 and that failure to report non-GAAP measures could result in a misplaced perception that the Company's results have underperformed or

exceeded expectations.

We believe Adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not

give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We also present Adjusted EBITDA because we believe it is frequently used by securities

analysts, investors and other interested parties as a measure of performance. In evaluating Adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments presented

above. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted EBITDA has

limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income (loss), operating income (loss), 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 our liquidity.

Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides 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.

Management assesses results of operations for ongoing operations, which excludes Transitional Schools, separately from Transitional Schools. As schools within the Transitional Schools segment are fully taught-out,

these schools will be recast as components of Discontinued Operations. As a result, management views adjusted EBITDA from ongoing operations separately from Transitional Schools and Discontinued Operations

to assess results and make decisions. Accordingly, Transitional Schools operating loss is added back to pre-tax loss from continuing operations and subtracted from pre-tax loss from discontinued operations.

Quarterly amounts relate to ongoing operations, which excludes Transitional Schools.

Legal settlement amounts are net of insurance recoveries and are recorded within the following segments:

Asset impairments primarily relate to impairment charges within Culinary Arts of $1.5 million, $7.4 million and $10.7 million which were recorded during the third quarter of 2014, second quarter of

2014 and third quarter of 2013, respectively, and within Career Colleges of $12.8 million and $2.9 million recorded during the third quarter of 2014 and the fourth quarter of 2013, respectively.

Unused space charges represent the net present value of remaining lease obligations less an estimated amount for sublease income as well as the subsequent accretion of these charges.

The International Schools segment was sold during the fourth quarter of 2013. As such, management excludes operations from the International Schools when assessing results and trends of Transitional Schools and

Discontinued Operations.

Quarterly amounts relate to Transitional Schools and Discontinued Operations, excluding International.

End of Presentation

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