Zovio (ZVOI) 20 Feb 202019 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Zovio Q4 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today Alanna Vitucci, Vice President of Corporate Communications. Thank you. Please go ahead madam.

afternoon. good and you Thank Zovio's fourth issued company's earnings was year site and today and full earlier the www.zovio.com. XXXX is at release quarter posted Web on

President today Joining the Officer. Kevin are and Financial Chief Andrew Royal, me Chief Executive call Clark, on and Officer; Founder,

meet ability make regarding and like would conversion to transition successfully new acquired approvals leverage obtain our future student education partnerships its to we enrollment and programs and and you company, be regarding integrate and timing revenue considered to ability education companies, of financial and XXXX the year that the growth, growth, an commentary our later. required our technology We may some forward-looking, and services other all ability grow services, close remind to statements of related to planned Ashford become fiscal to guidance, our to conditions today and all including and University statements ability EBITDA, impact, retention, acquisitions, and separation required on through

by uncertainties forward-looking are those These and of expressed risks materially performance could or to cause a actual in suggested number statements subject or from to statements. results forward-looking that differ the

future statements securities forward-looking except Please applicable note or of no of the to date presentation by only that these the required laws. and to these events speak of forward-looking information light new as update this extent obligation undertake we statements in

GAAP as GAAP. be and disclosures substitute these earnings of these will information financial reconciliations we Note not you measures, GAAP today, call certain U.S. a additional results. should considered to are financial intended non-GAAP measures In the for discuss regarding with that these our supplement measures release, On financial non-GAAP measures. will find also our including

on for with we Form today. refer our year report SEC December XX, our which the SEC filings, the filed XXXX, ended XX-K to earlier annual Please including

results. risk For that our affect the may a more detailed factors description of

visiting the our Investor SEC or site. obtain from copies by Web of Relations may You the section

Clark. it Zovio's pleasure this Andrew to is CEO, and At introduce time, my Founder, President

to year and quarter call. you, full fourth Zovio's Thank and Alanna, earnings welcome XXXX

call call On well results and questions. the developments. as we open to will our XXXX the discuss After your today, our other will as Kevin remarks, business I

AUNFP XXXX as As made said progress transitional year Ashford for profit times, XXXX. repositions of we an Ashford was intent into education entered In Zovio of technology a we the for services conversion letter a for in announced company. University's significant which as many long-term a not with a XX, January, have on we non-binding December the entity Zovio entity or on not to milestone profit and for we

they path for We choices to and higher separation accomplish education. very most the the right of for much to stakeholders students and embark protections a themselves that to conversion serve make puts objectives as they in to is all long-term place believe our appropriate on our view path

savings. These In second pursuing the actions focused the deliver XXXX areas. substantial Ashford, profitability primary actions half our we to three of were business, of that are cost addition core included in number of which of executing a the planned will conversion on optimizing

processes new efficiency and operational the fewer resources for in improve to implementing First, which internally. Ashford, our at resulted both Zovio need overall

and and a grants full combination Second, on through administrative tight of enhanced mix tuition more maintaining and significantly collection expense of were more are efforts debt control marketing a improving a very general students efforts And disciplined back favorable expenses. consistent. third, collection

to pillars. services XX actions three we will centered for XXXX to XX an total from be our expect reposition to cumulative on business these company As such, the as strategy main million. technology to million Long-term, savings the continues continue education

services educational deliver institutions corporate and of needs First, large-scale enterprises. education diverse and the that meet

third, And enhanced programs through our jobs. empower capabilities. on to offerings learners opportunities to employment capitalize middle in-demand connect skills Second, better services building with expand market our and to and

During made and these employers education pillars on solutions to with aspirations. institutions by deliver learners higher partnering substantial to progress help their XXXX, achieve we innovative personalized

TutorMe With with and new Division Continuing contributors Division. regard North web key Fullstack we of the addition, including certificates San added University' the cybersecurity University University several most the Fullstack, Digital and strategy. to development State to we've and recently to XXXX and the Continuing and Florida, University are partnerships In Professional of offer of Diego, during partnered Education through Louisiana Education

with part with launch our month an quarter. time cohort of new and University in San full partnership official the Diego second launched expected program web the this Further, time earlier a development

of We are remain XXXX. the enter we as with optimistic development and pleased Fullstack's pipeline institutional

addition more than fourth welcomed to With the California. institutional our added partnerships, two State schools St. of a University quarter, be continues ecosystem. Mary's and In TutorMe we Oregon to College XX new partners

Learn traction Forbes. We with at are also gaining

consumer. across Learn courses XXX marketing, As name offers reminder, content business, media, It's a to the technology that than at has a categories leadership, skills-based more Forbes for platform self few. personal a finance, development, platform paced just social is strategy, like

total since subscription corporate August. in program and launched who over we a clients individuals of our have we Currently XXXX XX have subscribed

underscores growth this has offering. traction the strength far the small While base, thus built encouraged as been we're the of of off by it the

our run quarter let XXXX through fourth me that, With results. quickly

net of a quarter we and fourth million million $XX.X reported loss of diluted of $X.XX. a resulting loss $XX per XXXX, of of For revenue the share

$X.XX. as and separation fourth Excluding costs $XX.X of million loss $X.X restructuring tax million diluted costs of million and effect, acquisition of share our $X.X non-GAAP as quarter related transaction charges well impairment was per

of programs VA impact of the University received the application to not total Early State where to of The programs. their Affairs as a not the not Ashford's the by on date this enrollment. Agency will programs result XXXX. that a material Department in XX students majority X, represent were includes California Ashford's the approval significant of STEM State current new the approved four retroactive July did and number of week, VA and effective Ashford approval Approving California Veteran serving from The we announced includes

and review We to are enrolled. effective the the of the administrative closely working a final to currently the with complete programs the approval in veteran steps students include VA process

For quarter and to the was expected was in decline low percentage when a prior compared same by XXXX, the the of year. digits down as new enrollment fourth less quarter single than

As XX, prior of December retention XXXX over to XX.X%. the cohort year Ashford's basis XXX points annual reach increased

to education programs flourish well. continue Our partnership as

compared in ago. total As partnership XXXX, one XX% of XX% enrollment represented programs of education December the enrollments enrollments approximately total as of year XX, of approximately to the

their by enrollments as XX% new the support Further, is our in versus XX% with partners the of in Ashford to prior of XXXX. schools offered fourth corporate grew in partnership in quarter employees December of testament nearly a business school X% through XX, the enrollment represented the XX% Forbes approximately The business specifically programs and New University. enrollment enrollment in the total the education Forbes program sponsorship approximately of quality strength the and period. of year new

resulted debt-free programs of our programs from employees cash Forbes The and continues in our education has companies. outperform our to improvements in growth revenues our to can in partnership partner These expectations provide the corporate education non-title sources.

program December of funds its During XX, XX.X% XXXX, IV revenues derived University Title from cash the Ashford respectively. ended year

to we below derives While there calling all are proposed GI amount be the institution as and for, the still if Ashford's is funds, the now range. TA lawmakers growing to calculation federal bill of would were rate add over benefits some appropriate the debate and XX.XX

we a dynamic reminder lowers in population will which education student the a increase program revenue, is continue the as total this financial population, standpoint, experience From percentage this Zovio a net partnership to as an of as grows. student

education landscape we foundation great as have enter face in we to We evolving strides have streamlined made invested great non-profit Ashford right in the an are laying and in the the year a core position and conversion its strong business, we University pursue our a as as for technologies of technology status.

our significant is there to believe value stakeholders. for we result, a be created As

will call turn and to over Kevin the Royal our operating I financial to review results. Now

Thank you, Andrew.

higher lower offset weekly year-over-year. higher due the revenue and year. quarter of days $XX.X students million compared being primarily the fourth these partially period $XX.X taken to by and mix scholarships is due increase, increase million average to tuition in to more the For revenue XXXX students same enrollment additional the of courses as for well was FTG by The a FTG as prior

As of to was student compared XX,XXX XX, XXXX. enrollment XX,XXX XXXX, December XX, as total of December

instructional period. of quarter count. as services $XX.X and quarter to XX.X% costs compared million to were decrease the primarily the due comparable revenue of For revenue head of prior in or million revenue for percentage XXXX, XX.X% fourth The slight a of lower or fourth $XX.X was the year

expense debt which revenue period. primarily the the X.X% addressed. the debt XXXX Bad or due of have The to $X.X X% was been of operational for compared quarter of issues million prior expense quarter fourth comparable in $X.X to million increase bad or for revenue was fourth in

$XX.X XXXX period. costs of marketing Admissions, due advisory head the advertising to expenses were to of $XX.X decreased million of comparable and and fourth lower or count for XX.X% a revenue lower for as the spend. or of These revenue revenue XX.X% million percentage compared quarter

expenses fourth was as professional a conversion separation of compared were cost associated period. XXXX higher well and or the the the revenue additional and million driven revenue $XX.X as and The in for comparable General XX.X% with dollars percentage for revenue increase million $XX administrative of to or by quarter fees. primarily of XX.X% of Ashford as

charges and primarily in $X quarter XXXX and fourth We related the the year. $XX.X to of goodwill, compared restructuring in relocation quarter The recorded expense. charges impairment of prior fourth fourth million impairment restructuring and as the in quarter the of severance, million of to XXXX impairment

diluted of the compared the a or $X.XX loss prior for loss diluted loss in fourth $XX a per XXXX loss was $XX.X the share period net for year. or of $X.XX million of per Net quarter same of with share million

the share diluted or to $X.XX million loss non-GAAP period of loss net loss The of million per the XXXX $X.X for loss prior of of share diluted per non-GAAP or for $X.XX was in a fourth a quarter net a same $X.X year. the compared

$XXX.X the was ended year XX, XXXX. is revenue ended to December year due quarter, XX, primarily full Regarding million December for for results, weekly the to the year-over-year. full the the lower $XXX.X year Similar with compared decrease enrollment XXXX, revenue average of million

or share per the of XXXX, share diluted per non-GAAP loss for per net net XXXX, non-GAAP or income net with for share the Net share December million $X.XX year was lost ended year Non-GAAP year diluted for XX, diluted $XX million of income ended ended diluted $X.XX compared XXXX. or December net ended or per $XX.X million compared $X.XX $X.XX December December the $XX.X XX, loss $X.X of income million the of non-GAAP XX, of XXXX. income loss XX, was full-year with for

million $XX.X full during for ended used the months activities the related to December of XX tax XXXX, in used operating XX, XXXX. primarily period comparison, XX, benefit operating which cash the December The cash in tax company million benefits. same ended XXX,XXX in XXXX, $X.X Income year activities during by was the discrete of company

expenditures ended the are XXXX in Capital the for new XX year. was last facility December compared due our $XX million Chandler, to increase XXXX, as Arizona. comparable in $X.X primarily to period million headquarters The in months XX,

As million and $XXX.X to of December of cash combined December compared XXXX. equivalence cash had $XX.X XX, the XX, XXXX, as company of million as

outlook, to Turning planned during of guidance provided January. our in the we the reaffirming credit our XXXX are conversion, letter our that full call given was year and

closing believe we X versus date. a at the to XXXX As appropriate half viewpoint using most first from half a reminder, second a June look that it's

first We are the guidance XXXX quarter for will the quarter by of also seasonality. impacted including be as

the first includes $X the $XX three in million to million range expect per breakeven range of in breakeven, cash which months quarter of revenues negative in EBITDA million projected adjusted of to ending $XX of negative adjusted range we range the negative $XX financial to or $XX consolidated EPS share, negative million million to EBITDA in XXXX deliver X% results, of the to of of $X.XX approximately margins the adjusted For to $X.XX

$XXX million. one million financial For the deliver expect the X% Zovio post-conversion, first $XX half and million to $XXX the months or we of Adjusted range to approximately adjusted consolidated million in EBITDA of of revenues in margins includes month of X%. $X to to range of five EBITDA XXXX which

cash ending $XX EPS of Adjusted and million $XX the to range in $X.XX range the of to $X.XX million. in

million, margins of EBITDA half revenues $XXX $XX in the post-conversion, of $X.XX, $XX EPS $XX million or million Adjusted adjusted the in $XX the XX%. ending the For X% range Zovio of to and to million of to range million. $X.XX range second approximately cash deliver to expect million in of to the which represents XXXX in $XXX EBITDA range we adjusted of to

year EBITDA full of $XX in the for adjusted to or the of range X% the $XXX million result, XXXX, approximately million to million of EBITDA a we $XXX range in the adjusted As to in of $XX of expect and EPS to range million, X% revenues $X.XX. $X.XX adjusted margins

to the low quarter guidance high in year high the financial expected regard enrollment down With range at new mid end, new flat first the enrollment, is assumes of end. to our new be Further, enrollment high the at single single negative for to new a digits. enrollment digits to

quarter While enrollment be down digits. new single second expected flat mid is to to

XXXX, this normal For of in $XX on we letter that XXXX Contemplated in costs XX% to the securing million. stage indications capital cash the to unrestricted the is will million guidance annual hand result the be Department to the of and basis. credit discussions, required expect the $XX have of XX% an is in as by total we're that And continue range while with in anticipate levels we of financing in on expenditure associated with would a range of this early U.S. Education.

Now the I will comments. call back for his to closing Andrew over turn

Thank you, Kevin.

sustainability services has a as we we long-term an remain education technology foundation to ensuring As success. University reposition many said focused company, strong times, on support have Ashford we while Zovio its and

a to including in clear the a that to priority and applying our will have strengths, company learner market capabilities leverage education retention, best-in-class place technology We be services core recruitment, experience. our while strategy and technologies needs,

and value of all long-term will We our believe our through for we create stakeholders. meaningful priorities investments, and execution growth strategic the continued

this time, the ask your At phone for questions. operator our open to lines I'll

Your Instructions] first from Paris question the of comes Alex [Operator from Research. line Barrington

Your open. line is

XXXX. into it. jumping to year to Glad us I'm have behind transition looking optimistically the right and forward

mid New than digit have would expected this from was single had less better new in the student decline. It we outcome in single improving differently and low be The fourth decline. in quarter? sequentially than student enrollment digit the was thought result enrollment you in done third the quarter. a to What the decline

you're on happy I'm question and sure. our a Yes, little to the answer end, Alex. muffled

of a of So, reduced the things, approximately XX% in to basis. the quarter I advisors we that understand when by enrollment on think one the is important back year-over-year Alex number third and

in QX to So, fourth of a basis quarter. 'XX. the reduction year-over-year 'XX And about in on of that QX to XX% increased

actually of would the around there's on a which marketing terms of that that enrollments asking to which -- analytics new So, equal the our I to was for the recruiting the number think the efficiencies, you're you dramatic group. our middle that an quarter almost going we the have last some workforce our tells in reorganization we done attribute as of half in that workforce question in is, of year I'm and gain same year, digital our strategy, admissions prior

of you were negative digits. I thought just But, see can digits. And down described, negative the the why single important we We the we'd annualize productivity as 'XX, so, round that you single surprised having dramatic middle and what we guided in as in we a about that's a and we workforce that only 'XX, were all corner gain you before into be of low change that mid pleasantly down think from in XXXX. we're

range still year. XX% significant have And very we effectively the year, first workforce half that some back fewer terms XX% similar enrollment half the of the in that is the gains in advisors. of And of in so in pretty

we're more then the why a because doing first so we're with a year. new in workforce. more But, get way out negative less. of And of the quarter And a we did in that's we in will workforce kind terms gains of around lot to that lap how continue half I'm enrollments the lot second much that of guided the we again, to uncertain

to So year-over-year have then of helped numbers. your it's very comparable expect question. answer and you similar kind That

would to second and think setting the a in increase without to kind enrollment on new comment that half, efficiency, yourself productivity, QX Yes, reasonable for new while to increased year? easier QX, get I full comps And in doubt. of the growth growth enrollment positive for, you in up flat student you it'd assume you're be didn't

Yes.

for year said always I recall our But view that to, still growth in back slightly and full flat that's the You'll and of we for be better quarter, better would growth to be it year. view. have would And for to maybe flat new the second think being us -- mid had half the bit expect in XXXX it we to enrollment than of enrollments it last in fact be We quarter the that at mid digits. single new year, a in flat enrollment we the quarter first low maybe negative course, equal potentially have actually the could single we little to or the year. seeing prior a low new although

second recall the I in changes to have those can guys you. about quarter Got been tell first maybe How you what quarter, in received talking course. definitely third them? changes in about us the but the in, you

new would surprise enrollments a kind received course. difference, that if rates, make bit can look they've are to enhancements continuing the matriculation having those is understand also is Zovio upside in little concert to of tell with what the in I been the university that in closely attribute further year-over-year continuing have curriculum you for well, quarter. at to a basis, the on We're the improved So I improvements our which our to a fourth which we negative the

done, but they seen wouldn't I that ones made they're already initially, positive a we've that say the So impact.

expected where other the is all items, over instructional one dispersed? services, cost in million in terms savings gears. of 'XX, The G&A more than it to cost that come equally or Shifting line three, was million marketing, kind of across does in $XX of Great. $XX 'XX

So the fall disproportionate savings in across of more will We costs Alex so it is labor's spend instructional there. services, all money three. amount and

have also savings We in roughly facility year-over-year. $X million

spread over that's other the as travel or over that all categories. so consulting expenses would miscellaneous well. fall fair then, a of And three amount And type three

And of expected? with for those that then, should million at associated charges you implemented savings in second said example, $X think 'XX of some you quarter second I you that in Kevin, yield realize one you the any XXXX, did quarter, changes excluding that, that savings point,

Yes, we certainly did.

in terms $XX we And over up equally four XXXX have Okay. year-over-year versus is that spread and the additional then savings of million to -- quarters?

would Yes, it's I not but think that it way. to it be. mean, about perfect, I think it's fine

Okay. million I the $XX reductions you a is had think $XX.X you result impairment? call And on difference, cost restructuring that if would restructuring then forecasted QX charge, And charge. goodwill an what in these had million

a there what the originally planned reduction more were we reductions No. bit than completed. had once was

million $XX Does that that million included in $XX mean savings or to forecast? more the is

No, number just that's gave in included the we call. this out that on

Yes.

in four those of us Fullstack, of at Learn TutorMe, LSU. you last think good. contribution Most idea, I'm us of impressed both Forbes, during recently and actual TutorMe you're each estimate institutional few Fullstack sort XXXX? ownership Can XXXX questions. first these. you Okay, Then, at businesses some notably, in of give with revenue up of most of and I year idea, relationships for sort the give an some Fullstack, or your being performance a of these XXXX to Can profit

in not Alex. disclosed that's past, the Yes, we've that information

are say We Yes. very pleased both of we with acquisitions. Alex separately, out I those will don't but them break

university first expect I approximately Fullstack now. above As XX pipeline and and it a mentioned, has I you that fantastic, think And the announcements in TutorMe partners. probably there's are had several done XX university It's the on in quarter. others would I partners got has know four

with And doing. we're how they're really so pleased

I given are universities Okay. colleges separation, And all your that new or you this the for you then now, presenting question, able services at tech for last and have out you've received point? offerings there approvals guess ed to and conversion been

no. short is think the answer I

We haven't formal been a presenting out there those. in capacity

them. people from might and interest capabilities informal that to help our curious how able field to are continue be about We we

business should the -- one and university for to completed, two number have second, year, reaching the things of the conversion are cultivate the a really first potential objectives here more university. cultivating to enrollment and first half new out approach I anticipate half we clients. in the those goals of taking of development once which and return in a to Our diligent formally us beginning happen back And year the the both growth would meaning of

focus respect? these might for And services? could are on efforts you you're of universities, of there types other remind What in and any partners us colleges your types contemplating who you marketing that

it pursuing kind to talking we're all Well, for student population. online universities if programs about are providing and adult their of depends that technology degree services

population, will strong students a in interested we're that that adult I to XX,XXX brands it, students in want X,XXX grow to online. kind think regional of have and I kind of meaningfully of population call already kind university the

it's if make we're online or ecosystem those institution. as side utilize vice Fullstack to there's has degree an share we other inroads, versa Obviously, subsidiaries. Zovio opportunities making where tell for that TutorMe different that we're there you it's TutorMe and can offering the those Fullstack I or profile on with relationships introductions able a will to

guys. great. the color very I Okay, that's appreciate helpful. Thank Well, additional you.

Alex. you, Thank

the back any Clark for further call this I'd to turn at no closing Mr. are over time. questions There comments.

and in Thank callers your of today's you. today. for your call for all on participation to the We'd Zovio like thank interest

That concludes conference call. today's

may You disconnect. now