Zovio (ZVOI) 3 Aug 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Zovio Q2 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn your conference over to your speaker today, Alanna Vitucci, our VP of Corporate Communications. Thank you. ahead. go Please

good was and the second XXXX quarter website Thank earlier afternoon. today release issued www.zovio.com. on and earnings at you, Zovio's is company's posted

revenue and and future our these financial or update statements forward-looking in differ that, no later. statements presentation except integrate this XXXX services, securities partnerships the light President the uncertainties to today and to Joining abilities of be the the statements Officer. meet events, Please considered on required the today regarding laws. of of We acquisitions, through and Ashford remind guidance, statements our to Kevin to are by programs These to to the these applicable to year and those to actual other and to statements. from in our speak new approvals a an Financial transition all to successfully note timing by Chief suggested new forward-looking forward-looking date like and become conditions forward-looking, as extent undertake company, companies, student that Andrew ability Royal, expressed forward-looking leverage or me including cause Chief ability required do information Executive call risks education retention, all only and obligation to required enrollment to University may or ability are Clark, services so, you of on we performance would our planned grow statements and growth, commentary fiscal plans that and obtain of related and Officer; current make close education materially our results subject EBITDA, Founder, and regarding number on future could growth, acquired some we regarding technology

to XX-K refer of non-GAAP release, disclosures these you our be these measures, our discuss ended In will XX, we risk with as to today, for reconciliations On on June XXXX, and financial the Form also non-GAAP year including results. regarding on filed XX, December that substitute our information more Form GAAP. should our that, of financial GAAP SEC the well U.S. a the certain the call results. our Please quarter as earlier quarterly annual Note the additional are financial find today, not for these we for description detailed measures. GAAP supplement may intended measures as will with report our earnings XXXX, including report considered filings, SEC affect for a XX-Q which factors ended measures

Investor You SEC or section may visiting Clark. the time, President obtain website. is and my Founder, from CEO, the At Andrew pleasure our to Relations by this Zovio's introduce copies of it

objectives. After the our on to quarter, of will me of agreement with definitive announced discuss Arizona Ashford Since to review status with education transition to higher our the nonprofit financial of the bear have welcome and process. This Earlier announced and and a in the to the Two exciting key some XXXX return entity Ashford its students solid been world XXXX I their earnings this we name of we our a in expectations. the advancement University in meet other of technology Global will The let providing acquire XXXX. to company. class to online morning fully news I the University to signing backgrounds Zovio details morning. Arizona the intent Arizona we historical steadfast high-quality the be we will touch opportunities But more education this before announced of quickly which University for services new create provide from on Alanna, educational University. my affordable, achieve results this University concludes, that you, quarter had will a call. a years Kevin will then, flexible for diverse comments. institution of second nonprofit highlights access Thank Campus I operating our a quarter We After of closing day monumental second Kevin metrics. the life is held offer a ago to and quarter,

of for work Ashford of pleased unanimous this are transaction. support University's endeavor. in to Board thank this leadership have We Trustees want this We and to opportunity their Board Ashford's hard Trustees take to its for of

agreement, will [ph] Arizona transaction those will Ashford solutions year and the with are the of of the to by Campus University universities We online the providing Global assets. excited and lives, responsibility University. of relating to services that Under of higher educate are, meet University the high University We needs United number of terms of of end will Arizona designee, the the Campus The education communities. and accessible, educational University to acquire University, innovative innovative professions, at re-granting institutional of excellent to students. students Arizona Arizona learning assets Arizona University platforms a in comprising XX the Campus specific commitment is to by won where incredibly States, University partner in they of growing accrediting the and affordable, pursuing close acquisition one AAU of on time expand students of approval to mandate University meet certain quality, Carnegie anticipate Global designated of subject to the will technology support Global to liabilities original provide the access land-grant State by their for provide the the individuals of to programs while Arizona the and advancement and of assume to swaps. with vision research turning expand the support classes Ashford Ashford Ashford's for a in education. Ashford's increasingly their same to diverse all

way education – has close the there will learners sometime determination COVID-XX the have We but rapidly the after and be The with to also changing by the accelerated the the in Education, Department access transaction. pandemic. been of was been only conversations come onset of of

we that educational opportunities classes time. underrepresented with a students on land-grant universities one with expand who Arizona's of Campus a student are and are University student's are classes University students and in of students as online they Arizona institution ever their education necessity. or for and nontraditional ever learn expanding potential meet will seek will Global are If online access or XX,XXX learning and Now, diverse, and students in nontraditional population most and online With it the full virtual wherever with educational students Arizona The educators parents veterans continue clearer to students who an of promise high-quality geographic focus all as delivering is such University be inclusivity or Nation's skills. to underrepresented growing heritage need success. the to of worked to are on formats. new who reach journey focused serving those embracing learning Campus and United now will of of States be flexible approximately innovative across of advance combined will their Global the pathways than

Zovio the and to will coupled into provide bolster learning data that improves students education provide will technology further of will and a long-term strategic agreement This, for For allow will delivering Under student of the transformation of to us analytics company. education Global education our University complete which student to services the strategic individual our technology world-class Arizona uses online Zovio our services under deep its agreement continue to enterprise engagement advanced University Global the personalized experiences service long-term Arizona Zovio expertise innovative services of continue transaction Campus. to provide Campus. likelihood enhances success. with personalized success this

will a can services Arizona pursue technology strong foundation Global agreement other University institutions, growth and Campus corporations our services addition, diversified create we from the In learners. strategic and to providing of with which

world or Our University step and education to the platform ensures Arizona person's designed great learner are. they a a Campus. they path complicate because for This higher competing is events of forward meet never Zovio life Global to are where obligations

solid results. the mentioned to turning quarter, I as our results we Now for delivered

we revenue quarter of million million second income diluted of XXXX of net the For share. $XXX.X $X.X reported or per $X.XX and

of income $X.XX second or our items non-GAAP million quarter $X was non-GAAP diluted Excluding net share. XXXX per for the

in ahead of our XXXX. of for expectations second well quarter the New enrollment came

As a to XX.X% down compared the new year. prior by when enrollment percentage the same was quarter of

remained team as combination increased the in expected new demand cohorts the the and focused a we rising of new efficiency to new has of staffing which team of coaches. enquiries dedication energized the our proud through incredibly to us improvement meet has than flow better our usher welcomed and supported quarter as experienced I enabled and process and am steady of During the several enquiries advisors enrollment. of improved

quarter in improve XX XX, cohort the of expect low remainder as to Ashford's of of XXXX. the As annual Further, year enrollment increasing growth points we look XXXX. prior third to to single-digit continued to XX.X% June we new to the reach year, over return the basis retention

discussed quarter, during of the pandemic quarter. As COVID-XX partnership the our as a was last program education challenged result

total quarter second ago. represented enrollments compared of the nearly For to these students enrollments XX% total of of XX% year approximately one

reimbursement scale we some line pandemic, reinstating partners with this surrounding of the with cost spending certain and tuition While in trend a partners their programs programs uncertainties large has result to had stabilized cutting corporate the as programs.

of of of after we our substantial remains moderate quarters anticipate growth, do velocity this coming While an new enrollments aspect from important quarters. this new to group enrollment in the growth many

up-skill strategy ecosystem Learn@Forbes, bridge at gain this forward. support in year building is communicated Our existing Learn@Forbes but that not Fullstack, service the the their a proving one, [ph], software well our enterprises State with most will Zovio quarter their University higher the our by traction propel meaningfully Oklahoma, and Tech, aspirations strategy than of that people. San and remained Ed added on continues educate four momentum. help University partnerships and/or and to are new Both employment and all important TutorMe career expanded pipeline and more TutorMe institutional in gap capabilities offering Caltech, of on right Fullstack services education assets, education all focused enhancing José only Virginia ago including and the to as institutions, their a learners' and we to solid. More to gaining

continue are for we to increased up-skill, professionals our to experienced opportunities and for students look seeing As offerings. opportunity

students prepare boot to online coding jobs designed prepare continued to seeking to With XX-week defense and are Both and outperform. extension to these constantly coding jobs workforce. Virginia's For emerging ecosystem and example, in has cyber Zovio's wonderful tech new Virginia actions security technical in experienced will for agencies technology security camps Tech the a skills disruption to security embracing have talent, policy been teach boot professionals participants for makers cyber more and cyber and camps industry. offer them

double nearly university expectations. our initial a Fullstack In fact, as quarter strong of partners revenue delivering expect the the of adding by has end and had many XXXX we well well expectations. our TutorMe versus partnerships new ahead

explosive second XXX historically slower As of demand online of had quarter summer hit months, respectively, TutorMe In and the as which Further, classes partners. the which increasingly partner increased customer increased year-over-year university XXX% the has is XXXX, quarter more second are global end pandemic the States. during driving online and accelerated than usage COVID-XX supported the students tutoring growth the pandemic taking for United college XXX% services. of usage the as

Connect students following addition, McGraw-Hill college session, to on to expanding is offer exposing successful today. XXXX, TutorMe McGraw-Hill's more its in TutorMe McGraw-Hill a million tutoring free a Connect, with the XX-minute program relationship In than using students platform X.X pilot

As be support and remain ensure blended TutorMe normal is engaged virtual that collaboration to learners as shifts students, seek brining environment continues students McGraw-Hill an online TutorMe need but the offering before now environment that the between and to the learning ongoing we many in pandemic, was for today. they throughout the in and the receive is new for are their COVID-XX the essential important pandemic. learning

from subscribers self of paced consumer, increased for had XXXX. pull. platform XX% At quarter subscribers strong content XXXX a the skill-based attracted first nearly the the which a second active As Learn@Forbes of the we end at quarter

and offering this encouraged platform. a We enthusiastic significantly base ahead the this Learn@Forbes. for about be We strategy very to place expand for subscriber success putting in remain continued the are prospects by of to

brief our prepared for trend, making clear are a COVID-XX Before Higher education turn go provide at forward be strategy. increasingly challenges has this all on The forefront the this to me significant that our virtual normal. shift. I not of call over it let world will the everyone, is for accelerated new Kevin, pandemic presented but update institutions

unemployed and long-terms At on Zovio be students the prove leverage Now credible. could these positioned for than online learning the more and pillars. is robust, employed trends is engaging strategy, will not but which providing ever, to execute that an our up-skill. workforce platform to time better same main three not opportunities is only seeking centered

services education the learners. Universities, scale of meets the deliver large First, needs diverse and and that employers

company. Second, empower learners through in technology services the We and the market trends right of announcement building capitalize our team believe education, needs in-demand on middle to and we next same and employment opportunities the connect future Today's programs at third, and to offering offerings marks with secular the enhanced education expanding services an have as skills learners. broader Zovio's jobs. in our expand the our addressable that higher while to time market to capabilities, chapter meet to better address

the for opportunities for We Zovio. ahead incredibly are excited

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

Thank you, Andrew.

is to $XX.X XXXX. operating and revenue labor compared of was information for the percentage cost $XXX.X of were the or $XXX.X compared of and was in revenue was period. bad year. quarter revenue, or debt driven in revenue services $X.X XX, $XX.X or The period. enrollment, XX.X% of million to year-over-year by the million For decreased lower begin costs, June same The and quarter for the Net expense. providing period second primarily the second the partially me financial revenue, of increase and of an rates quarter comparable second million in by ended expense compared by million XX.X% million prior for related year-over-year, revenue as year-over-year bad XXXX some Revenue in comparable cost of key year Let X.X% for XXXX to a a the of debt average decline prior a prior instructional for decrease XXXX to tuition X.X% or decrease in of $X.X the quarter offset primarily

to as a revenue driven charges the from the to efficiencies, XXXX percentage comparable experienced and or million of was of decrease million period. year, an expenses the The well or in improvement well or expense. $XX.X XX% revenue, marketing the in FTG Restructuring and as second have lease expense of due We impairment XXXX prior were compared of second compared for bad as $XX.X lower prior increased XX.X% for student advisory operational Admissions, debt population. to were of XX.X% exit quarter to for revenue advertising expenses $X.X costs $X.X percentage million revenue as due XX.X% period. as for and General charges decrease million facilities revenue, labor prior the for administrative costs of as compared of the labor to to comparable wages or of primarily as million decreased for or of by comparable second and $XX.Xmillion spend. decreases of quarter of and a lower quarter and costs acquisition XXXX or prior as quarter $XX.X These the second for benefits the XXXX the in or revenue, of X.X% well severance X% in relate The revenue costs costs. revenue, period.

second of recognized tax we million income XXXX, quarter expense. of During $X.X the

share for Our for to rate diluted digits, million XXXX effective low $X.XX net of was second income of the net share. to for Net income was or a quarter of the of loss of this This and single is year. second XXXX. we of million quarter for per $X.XX tax trend diluted the remainder anticipate loss prior quarter or $XX.X the per net compared continue XXXX $X.X of second the

the of quarter second separation impairment income diluted non-GAAP diluted to income the revaluation or the $X.X $X loss and The non-GAAP for non-GAAP second primarily second XXXX share compared and share of quarter for the restructuring of net million income million, year. million XXXX net conversion $X.X the charge of excludes million. was $X.X $X.X net per of of of million, contingent prior and relating consideration $X.XX net of $X.XX per loss Our or for costs quarter to income

Capital June change year. by we By XXXX. operating million of million The used in period of as as activities in activities during June equivalents and earnings, we XX, partially our December $X.X activities the working $XX.X is as cash consistent million As compared the of operating accounts ended period $XX.X operating with second XX, offset We XX, million of receivable driven last cash the period year-over-year were to was expenditures the of compared by cycles, XXXX, to growth same year-to-date million XX, capital. provided year-to-date XXXX. $XX had the June had for changes in the of by business cash increased The XX, $XX.X in quarter XXXX. The and cash the as December primarily period our during were XXXX. $XX.X prior million XX net of in $X.X XXXX compared million XXXX increase by provided cash balance same grant tuition $XX.X of million, to enrollment comparison, the in of combined June for full ended year. the

I of his over the closing University. affiliation specified an will we Arizona. and of turn back of University of today me comments, agreement overview liabilities assume entity campus the a will the of definitive Arizona Andrew announced provide nonprofit University the with Before University Global call formed to the for briefly Arizona let Ashford purchase operated certain that in assets and be with of

in capital payment to XX $XX.X make Campus assets million is the Global University with receive Arizona Following specific to in Global of Zovio Global amount amount University The transaction, as of the agreement of have as University, Arizona The Arizona will of University of of will Global institutional of pay terms University cost. become the renewals Zovio Global Campus will and the the initial the Arizona assets. direct of the the Arizona well of into close in a those Services XXXX, Campus will agreement, of years and Ashford purchase Zovio Arizona in liabilities of working expected cash. annual Campus by At relating Campus for the University include revenue, University Strategic of year Under of University consideration assume Arizona acquired Global cash. Services term Zovio certain Campus. cash of transaction will of $XX.X asset the Strategic Global comprising the $X. which with million will enter closing University end and XX.X% the will acquire assets Ashford an reimbursement closing at Campus agreement. X XX, of

In terms of of transaction, year, given to believe a the it view date view. of our outlook the rest appropriate the is for the most from expected our results we consolidated closing

noted we XXXX. digit to the of Andrew to in third As quarter enrollment return new expect in growth comments, his low single

Beyond quarter, the XXXX. for new guidance expectations we will enrollment providing be third for not financial

the XXXX, range million, to Arizona total the this For margin revenues the XXXX. million transaction our digits. non-GAAP $XXX in the high the of by we of of in with EBITDA University be completion assumes anticipate single end $XXX to note of and successful Please

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

has Thank world take education position of for student quality high services technology you, of our final to students. University Kevin. education Arizona a as day company. providing class a we steps as towards Today the an classes all important is XXX-year centered, record of Zovio, solidifying

delivered learning deep world Arizona delivering will experience, institution strong Campus It will empowered excellence centered to solutions by committed be a personalized each Arizona will esteemed online of experience. the be success. University The institution Zovio's Our that's to Global experience a class student's of Global it with student grant this on. be establishes foundation knowledge, on campus land of and depth an to individual as learning University partnership expertise, with innovative build by mission created

increasingly will Campus turn journey. education, to their higher to them of be platforms students in for positioned the meet they As University are online Arizona Global wherever educational

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

believe partnership outlook offering, our a most network online. within and disruptors in by ask growth ever, Zovio trends execution increasingly more strong importantly, of well higher and the take operator advantage and lines its creation. long-term which the this reflected team, as and higher results rapidly high to questions. the to attractive and your quarter Learn@Forbes, expanded to education for well Zovio Fullstack, and is strength offerings. deliver TutorMe second an flexible, growing positioned of industry including I'll and With At optimistic open as education, robust, is accelerated support value phone for now university trends than I Recent have our Our our time, continue growth

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

scenarios, transaction I'll student with announcement lot of of Good know, sort the morning, question. of of get looking university of spin-off did I were or to You just of new University of the expected University, University better Arizona? university. guys. Congratulations the last Lee start transaction on wanted questions, How the of morning happen this different Arizona of enrollment. at year than conversion couple a the with but another to a the picture and bigger obviously, sale one a you

and In latter Why additional why So is superior come outcome? went the this about with it color? did it did your come How obviously, just about? add a we here. words,

thank morning, you. sure. Yes, Good Alex and

us, Alex this be know, probably public next days. that we before XX, XX of we conversion became and convinced universities, to was it So acquiring a those as universities discussions began the And, University then with best variety to over that Ashford, of course the way in increasingly the of just Arizona we that, just And interested March was, it a to private obvious the go. and continue we we of schools had examined in pandemic. you lot as institutions, made public possibilities

to lot be Just like to beneficial a visionary, frankly, institution There to and university faculty, and the the is that even Ashford of outstanding students, doing, was public was universities to is land so grant leadership. public aren't affiliated a staff, an to quite they're alumni. doing with it that things

And to so, University Arizona of the the Ashford of unanimously sale of Trustees in Ashford Campus. Board fact supported Global

a So for We has a it Zovio. fantastic to it added From a couldn't of perspective, institution the really have its for and stakeholders. one. all superior then the Alex, was excited being more benefit our be to and again, outcome of work outcome university And of chance for wonderful partners the be highly public partner we with partner other will with in begin respected work them, a universities. terms a then services being other in fantastic to such to, future, that foundational will institution to provide just other

mean, agree, I me get I No, don't wrong.

with a the University, this and think is a University I great great outstanding tie-up an of Arizona partner.

a that transaction that and in I Purdue it is how alike this it Kaplan. did with Now different? lot or correct how Am looks is like assumption the

Arizona in is say that accredited continues difference of World to conversion the be nonprofit some was is contractually. Ashford it going the mean regards in I University the Campus WASC University with that I Yes, remain would the entity a alike big case. to freestanding

entity entity, being of Ashford Campus nonprofit named they the or the than University buying assets the a So, acquiring have University. formed World assets that is and Arizona of

structure they standing - leadership received Ashford a continue be governance of that faculty will Board be separate it go they the has will as a So accredited as with But when well institution then a WASC the - will and free standing it away. to name Trustees. free approval,

you'll said, one that out From I'd thought contractual we approached we actually. a So standpoint, that's emulate. to and really we A that Purdue-Kaplan big say, similarly, the different a model little recall Purdue. was difference it than

years. XX.X% initial of revenue agreement is our we're the course of term of where So seven reimbursed years. share the term expenses is for leads. was XX produce direct just And The XX.X% is then

$XX.X front to would as pay up We of terminate they the Arizona a rights. if They us did this part years are ability revenue for providing have seven arrangement. the trailing they termination and University after to the XX-months million of terminate

just contractual well. sense there, So similarities it I have on from of to to that a emulate full front but there's lot Purdue-Kaplan the standpoint. then in there's We it we similarities a ways made tried of as improve in list a me, tried the there's, don't that and to

of separation it It direct Ashford also a the conversion great. University, what contract Yes, it's it too cetera. outlines that XX.X% had reimbursement have with had it looks doesn't broad different just the et look And we costs the similar to you about been and talked fairly would surviving looks before. from entity.

think It's independent, approved itself, an is the Yes, than renamed being similar particularly very going I conversion. From accreditor can to as at to is Arizona. freestanding the that's only institution for think piece, an or and what unto conversion had the viewed that's well, that already institution Really only change that's a to is an freestanding rather accreditor is accreditor different an it I be of independent addition it's And the with much University that's correct. it be is different. that affiliated looking which piece what important good. the the and not as very standpoint, positive it too

a from Arizona a is brand University a from prospective brand heck And exactly. a it's just but that of of Right, forward. going - not to heck then wasn’t, of perspective, a Ashford a student

institution, Chandler. impressive, fantastic office really in and it headquartered Again, wonderful how brand, couldn't fantastic we great happier. they're there's it's reputation. Yes, we're was just the leadership, in And now that, be the Zovio from more it just perspective,

kind right company the just frosting state Arizona, in headquartered with partner so one of institutions of that cake. traded up able was on publicly there to the premier of in the public So, Arizona,

been years, again transaction. yes. very Oh pleased long It's the but on two congratulations I'm Well, a with the outcome.

on what's year-end, the requisite or approvals you as before that more if really say you for got it closing date, quickly, be end? Now, your by the just could focus

do could that that, creditor Yes, upon process occurs. that no, of their mean expeditiously with year-end. going and to It's University Arizona be before of kind and be that the theoretically Ashford it really work how I dependent the and

So, could we the be felt the than no earlier, but of end later I year. think comfortable saying,

consolidate to model no XXXX but enrollment different Zovio so, and consider to for guidance half student ‘XX, half in words, to the the QX, new for a in second guidance financial then with XXXX. and we first beginning the hence look look like Zovio comments Kevin's a little going guidance, other is And regard in should will

Yes, that's correct.

Okay, great. but time And was second expected. than better outcome the hog the of quarter then much a student to lastly, I be in want don't too enrollment new here,

get like an if that correctly? think decline in decline XX% more I and that modeled heard was I we XX%

precise, Yes be yes. XX.X% to

third And growth what And the than to owe expected owe in do better you do you performance point to? inflection quarter? in their enrollment the that what student

were quarter. with we negative XX. our to We to really in had the we've, pleased so guided XX new performance Yes, negative enrollment

XX. that negative You had commented just you a

So we come to what two outperformed that. it main were items. down really has Really to

seeing tremendously. because to as of a XXX, well data we ability job performed in First them, really, really steps moved unfortunately our our the tremendously tremendous, to was first in a call the but just didn't make can't effective outperformance XXX to the in quarter XXX% the quarter and off is pandemic. hiring, just foremost We about driven that to bunch with was the distribution talked at data wonderful analytics some enrollments. you we was just I a new brought attribute which modeling especially increase order about earnings a we're is such demand. about predictive you and significant saw on some in a resources decisions took and have strong, in And we quarter, team gives serve data really we the confidence in saw of the able as demand our remotely, doing be say proud our on last of that. team that I Alex around use enough into We significant. resources. begin of demand operational of in execution, work employees execution to inquiries And of so it workforce of lot processes thing put of site now perhaps really the us And and demand beyond place, new grow over a third see I to demand our and But Zovio. the now, new team. least There an that the

I'll there. call much, Thank congratulations follow-up it leave later. you a I'll have with you well, very again. and Great

Alex. you, thank Yes,

back for are further the the I'll questions. call no There over comments. presenters closing to turn

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

wonderful That a and conference you for everyone concludes today's joining have call. Thank day.