Thank you, operator. Good afternoon, everyone and thank you for joining us for our second quarter 2024 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer, and Ashish Ghia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section at Perdoceoed.com. A webcast replay will also be available on our site, and you can always contact the Alpha IR Group for Investor Relations support. Let me remind you that this afternoon’s earnings release and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions made by and information currently available to Perdoceo Education and involve risks and uncertainties that could cause actual future results, performance, business prospects, and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo’s most recent annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Except as expressly required by the Securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments, or changed circumstances or for any other reason. In addition, today’s remarks refer to non-GAAP financial measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The earnings release that accompanies today’s call contains financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures, and is available within the Investor Relations page of the company’s website. With that, I’d like to turn the call over to Todd Nelson. Todd?
Thank you, Sam. Good afternoon, everyone and thank you for joining us for our second quarter 2024 earnings call. I’ll discuss some of the key business highlights through the second quarter, and then Ashish will review our operating and financial performance in more detail and discuss our outlook for the year. However, before we begin, I’d like to thank our faculty, student support staff, and all other employees for their ongoing commitment and hard work in serving and educating our students. We ended the first half of 2024 on a strong note regarding student retention and engagement. As a result, second quarter operating results came in ahead of our expectations discussed on the last earnings call, partially due to better-than-expected revenue results. Let me now review some of the key observations and general business highlights. We continue to experience high levels of student retention and engagement at both CTU and AIUS with student retention at multi-year highs. Our faculty and student support teams remain dedicated to educating and serving our students, and we anticipate that retention should continue to trend at these levels through the remainder of 2024. Quarter and year-to-date marketing and admission spends and prospective student inquiry generation was lower during the second quarter compared to 2023. Aided by data analytics, we continue to adjust marketing strategies to further improve our focus on identifying prospective students who are more likely to succeed at one of our universities, as well as comply and adapt to updated expectations from various federal agencies around prospective student outreach. We are also focused on enhancing the processes that support our corporate engagement programs. These programs are a key priority for our academic institutions, and we'll continue to invest in staff and technology to grow them efficiently and effectively. The Board of Directors just approved an 18.2% increase in the quarterly per share dividend amount of $0.13 per share payable on September 13th, 2024. This marks the first increase since our inaugural dividend payment on September 15th, 2023. Additionally, we continue to place an emphasis on utilizing technology to evaluate the academic experiences for our students and improve the efficiency and effectiveness of our institution's support for student functions. We view technology as a catalyst and differentiator for us to remain committed to making selective investments that deliver a more meaningful and relevant educational experience for our learners. Lastly, earlier this month, we were pleased to announce a definitive agreement to acquire the University of St. Augustine for Health Sciences. The university offers quality graduate health science degrees, primarily in physical therapy, occupational therapy, speech language pathology, and nursing, as well as continuing education programs. This acquisition marks Perdoceo's foray into health sciences and will further support and grow the diversification of our academic program offerings. Perdoceo is expected to pay approximately $142 million to $144 million in net cash at the time of closing. For the full year 2023, the university had revenues of approximately $170 million, operating income of approximately $35 million, and served roughly 4,500 graduate and postgraduate students. Perdoceo expects the transition to be immediately accretive to the company's adjusted operating income beginning in 2025. A quick note on the operating results. Second quarter results came in ahead of our expectations. We reported second quarter net income of $38.4 million, or $0.57 per diluted share, while adjusted earnings per diluted share, which includes certain significant and non-cash items, was $0.60, as compared to our outlook of $0.57 to $0.59. From a student enrollment perspective, total enrollments for the quarter end grew 14.7% at CTU compared to the prior year quarter end, driven by a positive timing impact of the academic calendar, as well as growth in corporate engagement programs. As previously discussed, AIUS reverted to normalized operations during the fourth quarter of 2023, and consistent with our expectations, the rate of decline in quarterly total enrollments has continued to moderate through the second quarter. Note, AIUS's total enrollment decline for the second quarter was 18.2%, as compared to a decline of 22.9% for the first quarter of 2024. Ashish will provide more details on these trends momentarily. In summary, we're pleased with the second quarter operating results and proud of our team's hard work and dedication. Our faculty and student support teams are working tirelessly to provide current and prospective students with quality academic and learning experiences with the goal of improving overall student retention and academic outcomes. With that said, I'd now like to turn the time over to Ashish for a deeper review of our operating and financial performance. Ashish?
Thank you, Todd. I will review the second quarter results and then discuss our balance sheet and 2024 outlook before handing the call back to Todd for his closing remarks. Please note, all comparisons I discuss are versus the comparative prior year period, unless otherwise stated. Please also note that the total student enrollment numbers that I discuss or any enrollment trends that I refer to exclude learners pursuing non-degree seeking professional development programs and degree-seeking non-title IV self-paced programs at our universities. Let us begin with an overview of our operating results. Net income for the second quarter was $38.4 million or $0.57 per diluted share compared to $54.7 million or $0.80 per diluted share. Adjusted earnings per diluted share, which we believe is more indicative of the underlying operating performance, was $0.60 as compared to $0.61. Second quarter operating income of $46 million was $2.1 million lower as compared to the prior year quarter. Adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes certain significant and non-cash items, was $50.9 million for the second quarter as compared to $55.2 million. As expected, revenue for the quarter was lowered by $19.8 million, which was mostly offset with $17.7 million of lower expenses. This expected decrease in revenue was primarily due to the prior year operational changes at AIU System as well as changes being made within our professional development offerings at CTU. Operating expenses during the second quarter were lower within marketing, admissions, and bad debt, as well as lower legal expenses related to the borrower defense to repayment applications. Additionally, we also realized cost savings from right-sizing processes and operations that support our professional development offerings at CTU as we focus on delivering academic programs more effectively and efficiently and investing in student processes that we believe will further enhance the overall value proposition of our academic institutions. Please also note that while legal expenses related to borrower defense repayment applications were lower during the quarter, they are excluded when calculating adjusted operating income. Overall, on a year-to-date basis, total operating expenses were $48 million lower compared to the prior year, while revenue was $47.2 million lower. Second quarter revenue of $166.7 million decreased 10.6% compared to $186.6 million in the prior year quarter. This revenue decline was expected and partially due to the lagged impact on revenue at AIU System from operational changes made in the prior year. For the second half of 2024, CTU's academic calendar will remain relatively consistent and the delayed impact on revenue at AIU System will significantly lessen. As a result, we expect revenue to grow in the fourth quarter, which will mostly offset the expected decline in the third quarter. A note on student enrollments. Total student enrollments at CTU increased by 14.7% as of June 30th, as compared to the prior year quarter end, driven by a positive timing impact from year-to-date enrollment day comparability versus prior year, as well as growth in our corporate engagement programs. Please note, ignoring this positive impact from the year-to-date enrollment day comparability, we believe total enrollments as of June 30th would still show growth for CTU. At AIU System, total student enrollments at June 30th, as expected, were lower by 18.2% versus the prior year quarter end. As a reminder, marketing and student enrollment activities have reverted to normalized levels beginning the fourth quarter of 2023, and we expect to show further progress towards achieving total enrollment growth, with enrollments expected to be relatively flat for the third quarter and experience double-digit growth by year-end. Now to our segment results. Second quarter revenue at CTU decreased by 5.4% to $112.8 million, primarily due to changes within our professional development offerings. Revenue days were also lower for CTU's degree programs. However, growth in corporate engagements and high levels of student retention and engagement mostly helped offset the impact from lower revenue days. Operating income was $42.9 million for the quarter, as compared to $40.5 million. Lower expenses within admissions and marketing, as well as right-sizing the cost structure to align with the simplified professional development offerings, more than offset the decline in revenue. At AIU System, second quarter revenue was $53.7 million or 19.9% lower than the prior year quarter, which was in line with our expectations, due to the continuing lag impact from the operational changes we discussed last year. Operating income was $12.9 million versus $17.1 million in the prior year quarter, as the revenue decline was only partially offset with lower operating expenses. Please note that some of this expense favorability will reverse in the second half as AIU System maintains normalized operations. Moving on to corporate and other, the operating loss for the second quarter was $9.8 million, as compared to $9.4 million in the prior year quarter. The increase was primarily due to costs associated with M&A activity, partially offset by lower legal fees associated with the borrower defense to repayment applications. Now to income taxes. For the second quarter, we recorded a provision for income taxes of $14.6 million, which reflects accruals for the federal and state corporate net income tax, resulting in an effective tax rate of 27.5%. The effective tax rate for the quarter reflects favorable discrete items related to the tax effect of stock-based compensation and the release of previously recorded tax results, as well as the tax effect of certain M&A expenses, which are considered non-deductible for tax purposes. As a result, we now expect our full year 2024 effective tax rate to be between 26.5% and 27.5%. Now to our balance sheet and liquidity. For the year-to-date ended June 30th, 2024, net cash flows from operations were $93 million versus $66.2 million in the prior year-to-date. The increase in year-to-date cash flows from operations was primarily driven by timing differences between the cash inflows related to our academic session start date as compared to revenue earned from those sessions. We ended the quarter with $675.2 million of cash, cash equivalents, restricted cash, and available-for-sale short-term investments. This represents an increase of approximately $71 million since the end of last year. Through the year-to-date ended June 30th, we have returned $21.4 million of cash to our shareholders in the form of dividend payments and share repurchases and paid approximately $25 million in estimated federal and state income taxes. Capital expenditures for the second quarter were approximately $0.8 million or 0.5% of revenue. As a reminder, for full year 2024, we foresee capital expenditures to be approximately one and 0.5% of revenues. Before I share the updated outlook, let me take a minute to discuss capital allocation. Today, we are pleased to announce that consistent with our dividend policy and commitment to make it an increasing part of our capital allocation strategy, on July 31st, the Board of Directors approved an 18.2% increase in the quarterly per share dividend to $0.13 per share for the second quarter 2024, which will be payable on September 13th, 2024, to the holders of record of Perdoceo's common stock at the close of business on September 1st, 2024. Future quarterly dividend payments are expected to be paid out of free cash flows for the relevant year, subject to Board approval and the company's available retained earnings, financial condition, and other relevant factors. Subject to the requirements just mentioned, we continue to expect that quarterly dividend payments will be an integral and growing part of our balanced capital allocation strategy. Now, let me spend a minute to review some details regarding our agreement to acquire St. Augustine. Perdoceo is expected to pay approximately $142 million to $144 million in net cash at the time of closing for 100% ownership, which includes an estimate for cash, debt, and working capital based on the closing balance sheet. Note that the deal has been negotiated on a debt-free, cash-free basis, and the net cash payment at closing could vary from the above range based on actual working capital adjustments. As Todd mentioned, we expect the acquisition to be immediately accretive to our adjusted operating income beginning in 2025. Our balanced capital allocation strategy also prioritizes investments in organic projects, in particular technology-related initiatives designed to benefit our students, and maintaining a strong balance sheet while also evaluating diverse strategies to enhance stockholder value, including acquisitions. Now, let us discuss our outlook for 2024. Based on better-than-expected performance in the first half, we now expect full-year 2024 adjusted operating income to range between $179 million and $190 million, as compared to the previously provided range of $175 million to $190 million, and the 2023 adjusted operating income of $174.9 million. Adjusted earnings per diluted share is expected to range between $2.13 and $2.25 versus $2.10 in 2023. For the third quarter of 2024, we expect adjusted operating income to be in the range of $45 million to $47 million, as compared to $47.2 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.52 and $0.50 per diluted share versus $0.64 in the third quarter of 2023. This outlook reflects our current belief that the high levels of student retention and engagement we experienced over the past few quarters, partly supported by the positive impact from various federal student aid initiatives, will continue to persist through the remainder of 2024. Full-year revenue at CTU is expected to be lower than 2023, primarily due to simplification of our professional development offerings. Full-year 2024 revenue days for CTU's degree programs will be lower compared to the prior year. However, growth in our corporate engagement programs and high levels of student retention and engagement are expected to more than offset the impact from lower revenue days and also support total enrollment growth for year-end 2024. At AIU System, revenue is expected to be below 2023 levels due to the lag impact from lower beginning total enrollments. As AIU System continues to operate with normalized levels of marketing and admissions while also experiencing strong levels of student retention and engagement, we expect total student enrollments to experience double-digit growth versus the prior year-end as we exit the year, and AIU System to be able to mostly offset the lag impact from the 2023 operational changes by year-end and, in fact, experience revenue growth in the fourth quarter. As a general reminder, CTU's academic calendar may impact the comparability of revenue earning days and enrollment results in any given quarter and year, but not necessarily in the same magnitude or direction. On a full-year basis, CTU will have lower revenue earning days in 2024, which disproportionately impacted the first half of 2024 when compared to the prior year. Also, the lag impact from lower beginning total enrollments at AIU System more acutely impacted the first half of 2024. Finally, the second half of 2023 included certain one-time non-recurring charges related to our previous acquisitions. As disclosed in our most recent Form 10-K, the Department of Education has recently gone through and continues to go through additional negotiated rulemaking processes while also updating interpretations and providing new guidance on various other topics. While we continue to monitor and evaluate these rulemaking initiatives, as well as new or updated guidance coming from the Department, any further operational changes that are necessary to ensure compliance with the Department's rules and interpretations could have an impact on the outlook I just presented. Our 2024 outlook also assumes selective investments in technology, data analytics, academics, and student support processes. We believe these investments have been successful in positively impacting academic outcomes and student experiences. We'll also continually evaluate the size and resources of our academic institutions or pre-engagement teams. Please refer to our earnings release filed today for important information about the key assumptions and factors underlying this discussion from today's call, as well as the GAAP to non-GAAP reconciliations.
