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10 / 2020 article

Zovio Inc Reports Third Quarter 2020 Results

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CHANDLER, Ariz., Oct. 28, 2020 /PRNewswire/ -- Zovio Inc (NASDAQ: ZVO), an education technology services company, today announced its results for the three and nine months ended September 30, 2020.

"We delivered a strong third quarter of 2020 with a return to low-single digit new enrollment growth and a 320 basis point improvement in student retention, the highest level since the second quarter of 2016. Additionally, our subsidiaries - Fullstack, TutorMe and [email protected] - saw further momentum with new partnerships, increased usage and increases in subscriptions, respectively. As we near year end, we continue to target the closing of the sale of Ashford University to University of Arizona, marking our final step in Zovio's evolution to a world-class education technology services company. Our innovative, flexible and data-driven solutions will undoubtedly enhance our clients' efforts throughout the students life cycle, while at the same time allowing learners to achieve superior outcomes. We are optimistic as we look to our future, and believe there remains a significant value creation opportunity for all of our stakeholders," commented Andrew Clark, Founder, President and Chief Executive Officer.

Financial Results for the Three Months Ended September 30, 2020

Revenue for the three months ended September 30, 2020 was $102.2 million, compared with revenue of $104.3 million for the three months ended September 30, 2019.

Operating income for the three months ended September 30, 2020 was $0.7 million, compared with operating loss of $7.8 million for the three months ended September 30, 2019.

Net income for the three months ended September 30, 2020 was $1.1 million, compared with net loss of $7.6 million for the three months ended September 30, 2019.

Diluted income per share for the three months ended September 30, 2020 was $0.03, compared with diluted loss per share of $0.25 for the three months ended September 30, 2019.

The Company recognized an income tax benefit of approximately $0.4 million for the three months ended September 30, 2020, compared with an income tax benefit of $0.1 million for the three months ended September 30, 2019.

Non-GAAP Financial Results for the Three Months Ended September 30, 2020

Non-GAAP operating income for the three months ended September 30, 2020 was $2.9 million, compared with non-GAAP operating loss of $1.9 million for the three months ended September 30, 2019. Non-GAAP operating income for the three months ended September 30, 2020 excludes restructuring and impairment expense of $0.2 million, separation transaction costs of $1.5 million and acquisition costs of $0.5 million. Non-GAAP operating loss for the three months ended September 30, 2019 excludes restructuring and impairment expense of $2.5 million, and separation transaction costs of $1.0 million and acquisition costs of $2.5 million.

Non-GAAP net income for the three months ended September 30, 2020 was $2.9 million, compared with non-GAAP net loss of $1.6 million for the three months ended September 30, 2019. Non-GAAP net income for the three months ended September 30, 2020 excludes restructuring and impairment expense of $0.2 million, separation transaction costs of $1.5 million, acquisition costs of $0.5 million and an income tax benefit of approximately $0.4 million. Non-GAAP net loss for the three months ended September 30, 2019 excludes restructuring and impairment expense of $2.5 million, separation transaction costs of $1.0 million, acquisition costs of $2.5 million, as well as income tax expense of $0.1 million.

Non-GAAP diluted income per share for the three months ended September 30, 2020 was $0.09, compared with non-GAAP diluted loss per share of $0.05 for the three months ended September 30, 2019.

Financial Results for the Nine Months Ended September 30, 2020

Revenue for the nine months ended September 30, 2020 was $304.0 million, compared with revenue of $321.5 million for the nine months ended September 30, 2019.

Operating loss for the nine months ended September 30, 2020 was $4.6 million, compared with operating loss of $35.4 million for the nine months ended September 30, 2019.

Net income for the nine months ended September 30, 2020 was $8.3 million, compared with net loss of $31.8 million for the nine months ended September 30, 2019.

Diluted income per share for the nine months ended September 30, 2020 was $0.26, compared with diluted loss per share of $1.09 for the nine months ended September 30, 2019.

The Company recognized an income tax benefit of $12.9 million for the nine months ended September 30, 2020, compared with an income tax benefit of $2.5 million for the nine months ended September 30, 2019.

Non-GAAP Financial Results for the Nine Months Ended September 30, 2020

Non-GAAP operating income for the nine months ended September 30, 2020 was $7.9 million, compared with non-GAAP operating loss of $10.6 million for the nine months ended September 30, 2019. Non-GAAP operating income for the nine months ended September 30, 2020 excludes restructuring and impairment expense of $3.4 million, separation transaction costs of $5.6 million and net acquisition costs of $3.4 million, which includes income relating to contingent consideration revaluation. Non-GAAP operating loss for the nine months ended September 30, 2019 excludes restructuring and impairment expense of $7.9 million, separation transaction costs of $5.0 million, acquisition costs of $11.7 million, other non-GAAP costs of $0.2 million.

Non-GAAP net income for the nine months ended September 30, 2020 was $7.7 million, compared with non-GAAP net loss of $9.4 million for the nine months ended September 30, 2019. Non-GAAP net income for the nine months ended September 30, 2020 excludes restructuring and impairment expense of $3.4 million, separation transaction costs of $5.6 million, net acquisition costs of $3.4 million, which includes income relating to contingent consideration revaluation, and an income tax benefit of $13.0 million. Non-GAAP net loss for the nine months ended September 30, 2019 excludes restructuring and impairment expense of $7.9 million, separation transaction costs of $5.0 million, acquisition costs of $11.7 million, other non-GAAP costs of $0.2 million, as well as an income tax benefit of $2.4 million.

Non-GAAP diluted income per share for the nine months ended September 30, 2020 was $0.24, compared with non-GAAP diluted loss per share of $0.32 for the nine months ended September 30, 2019.

Balance Sheet and Cash Flow

As of September 30, 2020, the Company had combined cash and cash equivalents of $86.6 million, compared with combined cash and cash equivalents of $69.3 million as of December 31, 2019.

The Company had $20.1 million of cash provided by operating activities during the nine months ended September 30, 2020, compared with $38.2 million of cash used in operating activities during the nine months ended September 30, 2019.

Student Enrollment

Total student enrollment at the Company's academic institution was 34,623 students at September 30, 2020, compared with total student enrollment of 36,349 at September 30, 2019.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP diluted income (loss) per share, EBITDA and Adjusted EBITDA. These non-GAAP measures exclude restructuring and impairment expense, separation transaction costs, acquisition costs, other non-GAAP costs, as well as certain income tax adjustments, as applicable. These non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and are not based on a comprehensive set of accounting rules. Management believes non-GAAP financial measures are useful in providing investors with an understanding of how specific line items in the consolidated statements of income (loss) are affected by items that may not be indicative of the operating results of the Company's core business. To the extent that other companies use similar methods in calculating and reporting non-GAAP operating results, the Company believes provision of supplemental non-GAAP financial information allows for a meaningful comparison of the Company's performance against the performance of other companies. The Company further believes that these non-GAAP financial measures provide useful information regarding its ongoing operating activities and business trends related to its results of operations, as well as a meaningful comparison with historical financial results. The Company's management and board of directors utilize these non-GAAP financial measures, together with the Company's financial statements prepared in accordance with GAAP, in developing operating budgets and evaluating the Company's performance. These non-GAAP financial measures are intended to supplement GAAP financial information, and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Refer to the accompanying tables for a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Earnings Conference Call and Webcast

Zovio Inc will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today to discuss its latest financial results and recent highlights. The dial-in number for callers in the United States is (877) 395-6119, and the dial-in number for other callers is (647) 689-5537. The access code for all callers is 7494114. A live broadcast of the call will also be available on the Company's website at http://ir.zovio.com.

About Zovio Inc

Zovio Inc (NASDAQ: ZVO) is an education technology services company that partners with higher education institutions and employers to deliver innovative, personalized solutions to help learners and leaders achieve their aspirations. The Zovio network, which includes Fullstack Academy, TutorMe, and [email protected], leverages its core strengths and applies its technology and capabilities to priority market needs. Using advanced data and analytics, Zovio identifies the most meaningful ways to enhance the learner experience and deliver strong outcomes for higher education institutions, employers, and learners. Zovio's purpose is to help everyone be in a class of their own. For more information, visit www.zovio.com.

Forward-Looking Statements

This news release may contain forward-looking statements which are not statements of historical fact and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding management's intentions, hopes, beliefs or expectations, and statements regarding the Company's outlook for the remainder of 2020 and beyond. These forward-looking statements are based on current information and expectations and are subject to various risks and uncertainties. The Company's actual performance or results may differ materially from those expressed in or suggested by such statements due to various factors, including, without limitation: our ability to successfully transition to being an education technology services company, our ability to complete the sale and separation of Ashford University, and the success of our strategies with respect to student initiatives.

Additional information on factors that could cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements is included from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 20, 2020, the Company's quarterly reports on Form 10-Q and the Company's current reports on Form 8-K which are available at www.zovio.com. You should not place undue reliance on any forward-looking statements. Forward-looking statements are made on the basis of management's good faith beliefs, expectations and assumptions regarding future events based on information available at the time such statements are made. Forward-looking statements speak only as of the date they are made. The Company assumes no obligation to update or revise any forward-looking statements to reflect actual results or any changes in assumptions, expectations or other factors affecting such forward-looking statements, except to the extent required by applicable securities laws.

Contact: Alanna Vitucci
[email protected]
858 668 2586 x11636


 

ZOVIO INC

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(In thousands, except per share amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019









Revenue

$

102,166



$

104,251



$

303,978



$

321,510


Costs and expenses:








Instructional costs and services

44,929



51,406



136,184



158,432


Admissions advisory and marketing

41,620



40,838



122,155



134,720


General and administrative

14,779



17,389



46,765



55,841


Restructuring and impairment expense

184



2,467



3,430



7,890


Total costs and expenses

101,512



112,100



308,534



356,883


Operating income (loss)

654



(7,849)



(4,556)



(35,373)


Other income (expense), net

39



144



(62)



1,040


Income (loss) before income taxes

693



(7,705)



(4,618)



(34,333)


Income tax expense (benefit)

(428)



(147)



(12,906)



(2,536)


Net income (loss)

$

1,121



$

(7,558)



$

8,288



$

(31,797)










Income (loss) per share:








Basic

$

0.03



$

(0.25)



$

0.26



$

(1.09)


Diluted

$

0.03



$

(0.25)



$

0.26



$

(1.09)


Weighted average number of common shares
outstanding used in computing income (loss) per
share:








Basic

32,646



30,263



31,711



29,230


Diluted

34,015



30,263



32,342



29,230


 

ZOVIO INC

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)



September 30,
2020


December 31,
2019

ASSETS




Current assets:




Cash and cash equivalents

$

86,628



$

69,280


Restricted cash

26,633



23,257


Investments

1,339



2,502


Accounts receivable, net

39,709



34,951


Prepaid expenses and other current assets

20,145



20,524


Total current assets

174,454



150,514


Property and equipment, net

31,431



34,294


Operating lease assets

21,482



18,615


Goodwill and intangibles, net

40,597



44,419


Other long-term assets

3,118



2,296


Total assets

$

271,082



$

250,138






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

67,845



$

68,160


Deferred revenue and student deposits

59,554



55,284


Total current liabilities

127,399



123,444


Rent liability

25,106



22,409


Other long-term liabilities

4,323



5,347


Total liabilities

156,828



151,200


Total stockholders' equity

114,254



98,938


Total liabilities and stockholders' equity

$

271,082



$

250,138


 

ZOVIO INC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)



Nine Months Ended
September 30,


2020


2019

Cash flows from operating activities:




Net income (loss)

$

8,288



$

(31,797)


Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:




Provision for bad debts

9,845



10,508


Depreciation and amortization

8,749



7,171


Deferred income taxes

6



67


Stock-based compensation

6,086



8,730


Noncash lease expense

8,546



14,287


Net loss (gain) on marketable securities

47



(216)


Reassessment of lease charges



558


Loss (gain) on disposal or impairment of fixed assets

38




Changes in operating assets and liabilities:




Accounts receivable

(14,513)



(13,517)


Prepaid expenses and other current assets

219



(306)


Other long-term assets

(821)



(336)


Accounts payable and accrued liabilities

(12)



(1,170)


Deferred revenue and student deposits

4,269



(11,923)


Operating lease liabilities

(8,173)



(17,377)


Other liabilities

(2,468)



(2,922)


   Net cash provided by (used in) operating activities

20,106



(38,243)


Cash flows from investing activities:




Capital expenditures

(2,587)



(26,956)


Purchases of investments

(702)



(102)


Capitalized costs for intangible assets

(199)



(454)


Cash paid in acquisition, net of cash acquired



(19,286)


Sale of investments

1,818




   Net cash used in investing activities

(1,670)



(46,798)


Cash flows from financing activities:




Proceeds from exercise of stock options



60


Proceeds from the issuance of stock under employee stock purchase plan

112



96


Borrowings from long-term liabilities

2,682




Tax withholdings on issuance of stock awards

(400)



(810)


Repurchase of common stock

(106)




   Net cash provided by (used in) financing activities

2,288



(654)


Net increase (decrease) in cash, cash equivalents and restricted cash

20,724



(85,695)


Cash, cash equivalents and restricted cash at beginning of period

92,537



190,584


Cash, cash equivalents and restricted cash at end of period

$

113,261



$

104,889


 

ZOVIO INC

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

(In thousands, except per share amounts)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

Operating Income (Loss) Reconciliation:








GAAP operating income (loss)

$

654



$

(7,849)



$

(4,556)



$

(35,373)


Restructuring and impairment expense

184



2,467



3,430



7,890


Separation transaction costs

1,478



951



5,574



4,959


Acquisition costs, net

546



2,484



3,425



11,707


Other non-GAAP costs







238


Non-GAAP operating income (loss)

$

2,862



$

(1,947)



$

7,873



$

(10,579)










Net Income (Loss) Reconciliation:








GAAP net income (loss)

$

1,121



$

(7,558)



$

8,288



$

(31,797)


Restructuring and impairment expense

184



2,467



3,430



7,890


Separation transaction costs

1,478



951



5,574



4,959


Acquisition costs, net

546



2,484



3,425



11,707


Other non-GAAP costs







238


Income tax impact, non-GAAP

(412)



94



(13,034)



(2,415)


Non-GAAP net income (loss)

$

2,917



$

(1,562)



$

7,683



$

(9,418)










Diluted Income (Loss) Per Share Reconciliation:








GAAP diluted income (loss) per share

$

0.03



$

(0.25)



$

0.26



$

(1.09)


Restructuring and impairment expense

0.01



0.08



0.11



0.27


Separation transaction costs

0.04



0.03



0.17



0.17


Acquisition costs, net

0.02



0.09



0.10



0.40


Other non-GAAP costs







0.01


Income tax impact, non-GAAP

(0.01)



0.00



(0.40)



(0.08)


Non-GAAP diluted income (loss) per share

$

0.09



$

(0.05)



$

0.24



$

(0.32)


 

ZOVIO INC

Reconciliation of GAAP to Non-GAAP Financial Measures (continued)

(Unaudited)

(In thousands)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2020


2019


2020


2019

Adjusted EBITDA Reconciliation:








GAAP net income (loss)

$

1,121



$

(7,558)



$

8,288



$

(31,797)


Interest expense (income), net

(39)



(126)



62



(819)


Income tax expense (benefit)

(428)



(148)



(12,906)



(2,537)


Depreciation and amortization

2,864



2,974



8,749



7,171


EBITDA

3,518



(4,858)



4,193



(27,982)


Restructuring and impairment expense

184



2,467



3,430



7,890


Separation transaction costs

1,478



951



5,574



4,959


Acquisition costs

(285)



1,652



929



10,043


Other non-GAAP costs







238


Adjusted EBITDA

$

4,895



$

212



$

14,126



$

(4,852)


 

SOURCE Zovio