UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-23245

 

PERDOCEO EDUCATION CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-3932190
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1750 E. Golf Road Schaumburg, Illinois	60173
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (847) 781-3600

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PRDO	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

Number of shares of registrant’s common stock, par value $0.01, outstanding as of July 31, 2023: 65,609,555

PERDOCEO EDUCATION CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	31
Item 6.	Exhibits	32
SIGNATURES		33

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
(In Thousands, Except Share and Per Share Amounts)	2023			2022
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents, unrestricted	$	140,533		$	109,408
Restricted cash		9,476			9,476
Total cash, cash equivalents and restricted cash		150,009			118,884
Short-term investments		428,104			399,315
Total cash and cash equivalents, restricted cash and short-term investments		578,113			518,199
Student receivables, gross		81,484			81,197
Allowance for credit losses		(39,162	)		(38,646	)
Student receivables, net		42,322			42,551
Receivables, other		6,896			3,457
Prepaid expenses		12,524			8,411
Inventories		2,875			1,904
Other current assets		664			597
Total current assets		643,394			575,119
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $59,219 and $54,238    as of June 30, 2023 and December 31, 2022, respectively		24,257			26,038
Right of use asset, net		23,105			26,156
Goodwill		244,114			243,540
Intangible assets, net of amortization of $20,456 and $15,981 as of June 30, 2023 and December 31, 2022, respectively		49,089			53,564
Student receivables, gross		5,077			6,345
Allowance for credit losses		(3,893	)		(4,495	)
Student receivables, net		1,184			1,850
Deferred income tax assets, net		21,638			24,613
Other assets		6,889			6,488
TOTAL ASSETS	$	1,013,670		$	957,368
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease liability-operating	$	5,695		$	6,555
Accounts payable		15,361			13,518
Accrued expenses:
Payroll and related benefits		27,291			40,306
Advertising and marketing costs		6,385			8,977
Income taxes		16,041			7,814
Other		23,008			14,621
Deferred revenue		66,914			71,590
Total current liabilities		160,695			163,381
NON-CURRENT LIABILITIES:
Lease liability-operating		24,357			27,286
Other liabilities		36,186			40,856
Total non-current liabilities		60,543			68,142
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding		-			-
Common stock, $0.01 par value; 300,000,000 shares authorized; 90,016,490    and 89,396,192 shares issued, 65,609,555 and 67,175,485 shares    outstanding as of June 30, 2023 and December 31, 2022, respectively		900			894
Additional paid-in capital		688,805			684,183
Accumulated other comprehensive loss		(5,621	)		(5,447	)
Retained earnings		436,996			347,839
Treasury stock, at cost; 24,406,935 and 22,220,707 shares as of June 30, 2023    and December 31, 2022, respectively		(328,648	)		(301,624	)
Total stockholders' equity		792,432			725,845
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,013,670		$	957,368

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
(In Thousands, Except Per Share Amounts)	2023			2022			2023			2022
REVENUE:
Tuition and fees, net	$	184,520		$	165,896		$	377,839		$	347,223
Other		2,044			1,788			4,323			3,420
Total revenue		186,564			167,684			382,162			350,643
OPERATING EXPENSES:
Educational services and facilities		32,748			27,269			66,599			55,357
General and administrative		100,588			101,332			213,274			207,628
Depreciation and amortization		4,369			4,909			9,524			9,791
Asset impairment		765			228			1,335			228
Total operating expenses		138,470			133,738			290,732			273,004
Operating income		48,094			33,946			91,430			77,639
OTHER INCOME:
Interest income		4,531			1,094			8,349			1,427
Interest expense		(96	)		(99	)		(191	)		(202	)
Miscellaneous income (expense)		22,074			(226	)		22,068			(315	)
Total other income		26,509			769			30,226			910
PRETAX INCOME		74,603			34,715			121,656			78,549
Provision for income taxes		19,930			8,948			32,499			20,704
NET INCOME		54,673			25,767			89,157			57,845
NET INCOME PER SHARE - BASIC:	$	0.81		$	0.38		$	1.32		$	0.84
NET INCOME PER SHARE - DILUTED:	$	0.80		$	0.37		$	1.30		$	0.83
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		67,421			68,341			67,328			68,542
Diluted		68,533			69,182			68,512			69,376

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
(In Thousands)	2023			2022			2023			2022
NET INCOME	$	54,673		$	25,767		$	89,157		$	57,845
OTHER COMPREHENSIVE LOSS, net of tax:
Foreign currency translation adjustments		(3	)		(164	)		23			(245	)
Unrealized loss on investments		(1,497	)		(1,469	)		(197	)		(2,833	)
Total other comprehensive loss		(1,500	)		(1,633	)		(174	)		(3,078	)
COMPREHENSIVE INCOME	$	53,173		$	24,134		$	88,983		$	54,767

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock				Treasury Stock								Accumulated Other
(In Thousands)	Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Loss			Retained Earnings		Total
BALANCE, April 1, 2023		89,924	$	899		(22,446	)	$	(304,648	)	$	686,719	$	(4,121	)	$	382,323	$	761,172
Net income		-		-		-			-			-		-			54,673		54,673
Foreign currency translation		-		-		-			-			-		(3	)		-		(3	)
Unrealized loss on investments, net of tax		-		-		-			-			-		(1,497	)		-		(1,497	)
Treasury stock purchased		-		-		(161	)		(1,914	)		-		-			-		(1,914	)
Treasury stock acquired upon sale of asset		-		-		(1,800	)		(22,086	)		-		-			-		(22,086	)
Share-based compensation expense		-		-		-			-			2,021		-			-		2,021
Common stock issued		92		1		-			-			65		-			-		66
BALANCE, June 30, 2023		90,016	$	900		(24,407	)	$	(328,648	)	$	688,805	$	(5,621	)	$	436,996	$	792,432
	Common Stock				Treasury Stock								Accumulated Other
(In Thousands)	Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Loss			Retained Earnings		Total
BALANCE, April 1, 2022		89,264	$	893		(20,485	)	$	(282,333	)	$	677,311	$	(1,541	)	$	284,050	$	678,380
Net income		-		-		-			-			-		-			25,767		25,767
Foreign currency translation		-		-		-			-			-		(164	)		-		(164	)
Unrealized loss on investments, net of tax		-		-		-			-			-		(1,469	)		-		(1,469	)
Treasury stock purchased		-		-		(1,117	)		(11,842	)		-		-			-		(11,842	)
Share-based compensation expense		-		-		-			-			1,900		-			-		1,900
Common stock issued		95		1		-			(2	)		189		-			-		188
BALANCE, June 30, 2022		89,359	$	894		(21,602	)	$	(294,177	)	$	679,400	$	(3,174	)	$	309,817	$	692,760
	Common Stock				Treasury Stock								Accumulated Other
(In Thousands)	Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Loss			Retained Earnings		Total
BALANCE, January 1, 2023		89,396	$	894		(22,221	)	$	(301,624	)	$	684,183	$	(5,447	)	$	347,839	$	725,845
Net income		-		-		-			-			-		-			89,157		89,157
Foreign currency translation		-		-		-			-			-		23			-		23
Unrealized loss on investments, net of tax		-		-		-			-			-		(197	)		-		(197	)
Treasury stock purchased		-		-		(221	)		(2,729	)		-		-			-		(2,729	)
Treasury stock acquired upon sale of asset		-		-		(1,800	)		(22,086	)		-		-			-		(22,086	)
Share-based compensation expense		-		-		-			-			4,315		-			-		4,315
Common stock issued		620		6		(165	)		(2,209	)		307		-			-		(1,896	)
BALANCE, June 30, 2023		90,016	$	900		(24,407	)	$	(328,648	)	$	688,805	$	(5,621	)	$	436,996	$	792,432
	Common Stock				Treasury Stock								Accumulated Other
(In Thousands)	Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Loss			Retained Earnings		Total
BALANCE, January 1, 2022		88,724	$	887		(19,976	)	$	(276,895	)	$	674,242	$	(96	)	$	251,972	$	650,110
Net income		-		-		-			-			-		-			57,845		57,845
Foreign currency translation		-		-		-			-			-		(245	)		-		(245	)
Unrealized loss on investments, net of tax		-		-		-			-			-		(2,833	)		-		(2,833	)
Treasury stock purchased		-		-		(1,480	)		(15,670	)		-		-			-		(15,670	)
Share-based compensation expense		-		-		-			-			4,316		-			-		4,316
Common stock issued		635		7		(146	)		(1,612	)		842		-			-		(763	)
BALANCE, June 30, 2022		89,359	$	894		(21,602	)	$	(294,177	)	$	679,400	$	(3,174	)	$	309,817	$	692,760

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Year to Date Ended June 30,
(In Thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	89,157		$	57,845
Adjustments to reconcile net income to net
cash provided by operating activities:
Asset impairment		1,335			228
Gain on sale of asset		(22,086	)		-
Depreciation and amortization expense		9,524			9,791
Bad debt expense		18,927			24,379
Compensation expense related to share-based awards		4,315			4,316
Deferred income taxes		2,975			(557	)
Changes in operating assets and liabilities		(37,927	)		(41,223	)
Net cash provided by operating activities		66,220			54,779
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(159,183	)		(330,797	)
Sales of available-for-sale investments		132,325			134,964
Purchases of property and equipment		(3,612	)		(6,765	)
Business acquisition		-			(7,000	)
Net cash used in investing activities		(30,470	)		(209,598	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		313			849
Purchase of treasury stock		(2,729	)		(15,670	)
Payments of employee tax associated with stock compensation		(2,209	)		(1,612	)
Release of cash held in escrow		-			(3,986	)
Net cash used in financing activities		(4,625	)		(20,419	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		31,125			(175,238	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period		118,884			325,178
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period	$	150,009		$	149,940

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE COMPANY

Perdoceo’s accredited academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. The Company’s academic institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIUS” or “AIU System”) – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter and year to date ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.

The unaudited condensed consolidated financial statements presented herein include the accounts of Perdoceo Education Corporation and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across two reporting segments: CTU and AIUS.

3. BUSINESS ACQUISITION

On December 1, 2022, the Company acquired substantially all of the assets of Coding Dojo.

Founded in 2013, Coding Dojo offers computer programming and general technology upskilling and reskilling development opportunities supported by its quality technology platform and in-demand courses including software development, data science and cybersecurity. Coding Dojo is reported within the CTU segment. The preliminary purchase price of $62.7 million includes an initial $52.8 million cash payment funded with cash from operations as well as an estimate of the initial fair value of contingent consideration of $12.7 million and estimated post-closing working capital adjustments. Pursuant to the purchase agreement, a portion of the post-closing contingent consideration payment will be made in early 2024, with the remainder to be paid in early 2025 up to total maximum payments of $15.0 million, with the final payment amounts to be based upon achievement of certain financial metrics. Additionally, pursuant to the terms of the acquisition agreement, $7.5 million of the initial cash payment was set aside in escrow accounts to secure indemnification obligations of the seller after closing and fund any post-closing working capital adjustments and is reflected as restricted cash on our unaudited condensed consolidated balance sheets.

The preliminary purchase price of $62.7 million was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $79.1 million and assumed liabilities of $16.3 million as of December 1, 2022. Intangible assets acquired include customer relationships with an estimated fair value of approximately $1.3 million and an estimated useful life of 1 year, a trade name with an estimated fair value of approximately $5.1 million and an estimated useful life of 10 years and developed technology with an estimated fair value of $6.0 million and an estimated useful life of 5 years. Based on our preliminary purchase price allocation, we have recorded goodwill of $60.0 million. Goodwill reflects the revenue growth opportunities following the acquisition. Substantially all of this goodwill balance will not be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the fair values of acquired assets and liabilities, as well as the fair value of contingent consideration, are finalized.

5

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of December 1, 2022 (dollars in thousands):

(Preliminary)	Coding Dojo
Assets:	December 1, 2022
Student receivables, net	$	5,171
Prepaid and other assets		408
Property, equipment and ROU assets		1,121
Intangible assets subject to amortization
Trade name		5,100
Customer relationships		1,260
Developed technology		6,030
Goodwill		59,979
Total assets acquired	$	79,069
Liabilities:
Accounts payable and other accrued liabilities		2,664
Deferred revenue		12,451
Deferred tax liability, net		1,221
Total liabilities assumed	$	16,336
Net assets acquired	$	62,733

The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. Pro forma financial information relating to the Coding Dojo acquisition is not presented because the acquisition is not deemed material to the Company.

4. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting guidance not yet adopted

In June 2022, the FASB issued Accounting Standards Update ("ASU") No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. For all public business entities, ASU 2022-03 is effective for annual periods and interim periods beginning after December 15, 2024; early adoption is permitted. We are currently evaluating this guidance and believe the adoption will not significantly impact the presentation of our financial condition, results of operations and disclosures.

5. FINANCIAL INSTRUMENTS

Investments consist of the following as of June 30, 2023 and December 31, 2022 (dollars in thousands):

	June 30, 2023
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Non-governmental debt securities	$	217,884	$	-	$	(2,751	)	$	215,133
Treasury and federal agencies		215,761		-		(2,790	)		212,971
Total short-term investments (available for sale)	$	433,645	$	-	$	(5,541	)	$	428,104

	December 31, 2022
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	3,016	$	-	$	(22	)	$	2,994
Non-governmental debt securities		222,575		37		(2,880	)		219,732
Treasury and federal agencies		179,068		6		(2,485	)		176,589
Total short-term investments (available for sale)	$	404,659	$	43	$	(5,387	)	$	399,315

6

In the table above, unrealized holding gains (losses) relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than one year.

Our non-governmental debt securities primarily consist of corporate bonds, certificates of deposit and commercial paper. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities.

Fair Value Measurements

FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2023, we held investments that are required to be measured at fair value on a recurring basis. These investments (available for sale) consist of non-governmental debt securities and treasury and federal agencies securities. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

All of our available for sale investments were measured under Level 2 as of June 30, 2023 and December 31, 2022. Additionally, money market funds of $31.8 million and $40.1 million included within cash and cash equivalents on our condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively, were measured under Level 1. Federal agency debt securities of $7.0 million included within cash and cash equivalents on our unaudited condensed consolidated balance sheets as of June 30, 2023 were measured under Level 2.

Equity Method Investment

Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, represents an international investment in a private company. As of June 30, 2023, our investment in an equity affiliate equated to 30.7%, or $1.2 million.

During the quarters ended June 30, 2023 and 2022, we recorded less than $0.1 million of loss and approximately $0.2 million of loss, respectively, and during the years to date ended June 30, 2023 and 2022, we recorded less than $0.1 million of loss and $0.3 million of loss, respectively, related to our equity affiliate within miscellaneous income (expense) on our unaudited condensed consolidated statements of income.

We make periodic operating maintenance payments to our equity affiliate. The total fees recorded during the quarters and years to date ended June 30, 2023 and 2022 were as follows (dollars in thousands):

	Maintenance Fee Payments
For the quarter ended June 30, 2023	$	414
For the quarter ended June 30, 2022	$	394
For the year to date ended June 30, 2023	$	845
For the year to date ended June 30, 2022	$	827

Credit Agreement

On September 8, 2021, the Company and the subsidiary guarantors thereunder entered into a credit agreement with Wintrust Bank N.A. (“Wintrust”), in its capacities as the sole lead arranger, sole bookrunner, administrative agent and letter of credit issuer for the lenders from time to time parties thereto. The credit agreement provides the Company with the benefit of a $125.0 million senior secured revolving credit facility. The $125.0 million revolving credit facility under the credit agreement is scheduled to mature on September 8, 2024. So long as no default has occurred and other conditions have been met, the Company may request an increase in the aggregate commitment in an amount not to exceed $50.0 million. The loans and letter of credit obligations under the credit agreement are secured by substantially all assets of the Company and the subsidiary guarantors.

The credit agreement and the ancillary documents executed in connection therewith contain customary affirmative, negative and financial maintenance covenants. The Company is required to maintain unrestricted cash, cash equivalents and short-term investments in domestic accounts in an amount at least equal to the aggregate loan commitments then in effect. Acquisitions to be undertaken by the Company must meet certain criteria, and the Company’s ability to make restricted payments, including payments in connection with a repurchase of shares of our common stock, is subject to an aggregate maximum of $100.0 million per fiscal year. Upon the occurrence of certain regulatory events or if the Company’s unrestricted cash, cash equivalents and short term investments are less

7

than 125% of the aggregate amount of the loan commitments then in effect, the Company is required to maintain cash in a segregated, restricted account in an amount not less than the aggregate loan commitments then in effect. The credit agreement also contains customary representations and warranties, events of default, and rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments and realize upon the collateral securing the obligations under the credit agreement.

Under the credit agreement, outstanding principal amounts bear annual interest at a fluctuating rate equal to 1.0% less than the administrative agent’s prime commercial rate, subject to a 3.0% minimum rate. A higher rate may apply to late payments or if any event of default exists.

As of June 30, 2023 and December 31, 2022, there were no outstanding borrowings under the revolving credit facility.

6. REVENUE RECOGNITION

Disaggregation of Revenue

The following tables disaggregate our revenue by major source for the quarters and years to date ended June 30, 2023 and 2022 (dollars in thousands):

	For the Quarter Ended June 30, 2023								For the Quarter Ended June 30, 2022
	CTU (3)		AIUS (4)		Corporate and Other		Total		CTU		AIUS		Corporate and Other		Total
Tuition, net (1)	$	112,864	$	63,136	$	-	$	176,000	$	94,828	$	63,083	$	-	$	157,911
Technology and miscellaneous fees		5,420		3,100		-		8,520		4,921		3,064		-		7,985
Total tuition and fees, net		118,284		66,236		-		184,520		99,749		66,147		-		165,896
Other revenue (2)		1,008		826		210		2,044		712		773		303		1,788
Total revenue	$	119,292	$	67,062	$	210	$	186,564	$	100,461	$	66,920	$	303	$	167,684
	For the Year to Date Ended June 30, 2023								For the Year to Date Ended June 30, 2022
	CTU (3)		AIUS (4)		Corporate and Other		Total		CTU		AIUS		Corporate and Other		Total
Tuition, net (1)	$	230,862	$	129,781	$	-	$	360,643	$	201,755	$	128,534	$	-	$	330,289
Technology and miscellaneous fees		10,843		6,353		-		17,196		10,545		6,389		-		16,934
Total tuition and fees, net		241,705		136,134		-		377,839		212,300		134,923		-		347,223
Other revenue (2)		2,079		1,768		476		4,323		1,309		1,529		582		3,420
Total revenue	$	243,784	$	137,902	$	476	$	382,162	$	213,609	$	136,452	$	582	$	350,643

__________________

(1)Tuition includes revenue earned for all degree-granting programs as well as revenue earned for non-degree and professional development programs.

(2)Other revenue primarily includes contract training revenue and miscellaneous non-student related revenue.

(3)CTU includes revenue related to an acquisition completed on December 1, 2022.

(4)AIUS includes revenue related to an acquisition completed on July 1, 2022.

Performance Obligations

Our revenue, which is derived primarily from academic programs taught to students who attend our universities, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our universities and are reflected net of scholarships and tuition discounts. Our universities charge tuition and fees at varying amounts, depending on the university, the type of program and specific curriculum. Our universities bill students a single charge that covers tuition, certain fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed separately to students. These fees are generally earned over the applicable term and are not considered separate performance obligations. We generally bill student tuition upon enrollment for our non-degree professional development programs and recognize the tuition as revenue on a straight-line basis over the length of the offering.

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Other revenue, which primarily consists of contract training revenue and miscellaneous non-student related revenue, is billed and recognized as goods are delivered or services are performed.

Our institutions’ academic year is generally at least 30 weeks in length but varies both by institution and program of study and is divided by academic terms. Academic terms are determined by regulatory requirements mandated by the federal government and/or applicable accrediting body, which also vary by university and program. Academic terms are determined by start dates, which vary by university and program and are generally 8-12 weeks in length. Our non-degree professional development programs are available via subscription –based access for up to 52 weeks or online courses which are generally 12-18 weeks in length.

Contract Assets

For each term, the portion of tuition and fee payments received from students but not yet earned is recorded as deferred revenue and reported as a current liability on our condensed consolidated balance sheets, as we expect to earn these revenues within the next year. A contract asset is recorded for each student for the current term for which they are enrolled for the amount charged for the current term that has not yet been received as payment and to which we do not have the unconditional right to receive payment because the student has not reached the point in the student’s current academic term at which the amount billed is no longer refundable to the student. On a student by student basis, the contract asset is offset against the deferred revenue balance for the current term and the net deferred revenue balance is reflected within current liabilities on our condensed consolidated balance sheets. For certain of our institutions, students are billed as they enroll in courses, including courses related to future periods. Any billings for future periods would meet the definition of a contract asset as we do not have the unconditional right to receive payment as the course has not yet started. Contract assets related to future periods are offset against the respective deferred revenue associated with the future period.

Due to the short-term nature of our academic terms, the contract asset balance which exists at the beginning of each quarter will no longer be a contract asset at the end of that quarter, with the exception of the contract assets associated with future periods. The decrease in contract asset balances are a result of one of the following: it becomes a student receivable balance once a student reaches the point in a student’s academic term where the amount billed is no longer refundable to the student; a refund is made to withdrawn students for the portion entitled to be refunded under each institutions’ refund policy; we receive funds to apply against the contract asset balance; or a student makes a change to the number of classes they are enrolled in which may cause an adjustment to their previously billed amount. As of the end of each quarter, a new contract asset is determined on a student by student basis based on the most recently started term and a student’s progress within that term as compared to the date at which the student is no longer entitled to a refund under each institution’s refund policy. Contract assets associated with future periods remain as contract assets until the course begins and the student reaches the point in that course that they are no longer entitled to a refund.

The amount of deferred revenue balances which are being offset with contract assets balances as of June 30, 2023 and December 31, 2022 were as follows (dollars in thousands):

	As of
	June 30, 2023			December 31, 2022
Gross deferred revenue	$	104,703		$	107,200
Gross contract assets		(37,789	)		(35,610	)
Deferred revenue, net	$	66,914		$	71,590

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Deferred Revenue

Changes in our deferred revenue balances for the quarters and years to date ended June 30, 2023 and 2022 were as follows (dollars in thousands):

	For the Quarter Ended June 30, 2023									For the Quarter Ended June 30, 2022
	CTU			AIUS			Total			CTU			AIUS			Total
Gross deferred revenue, April 1	$	42,372		$	23,460		$	65,832		$	39,343		$	28,507		$	67,850
Revenue earned from prior balances		(32,859	)		(19,609	)		(52,468	)		(33,358	)		(23,850	)		(57,208	)
Billings during period(1)		148,118			74,318			222,436			88,990			76,034			165,024
Revenue earned for new billings during the period		(85,425	)		(46,627	)		(132,052	)		(66,391	)		(42,297	)		(108,688	)
Other adjustments		496			459			955			273			234			507
Gross deferred revenue, June 30	$	72,702		$	32,001		$	104,703		$	28,857		$	38,628		$	67,485
	For the Year to Date Ended June 30, 2023									For the Year to Date Ended June 30, 2022
	CTU			AIUS			Total			CTU			AIUS			Total
Gross deferred revenue, January 1	$	67,245		$	39,955		$	107,200		$	64,674		$	49,045		$	113,719
Revenue earned from prior balances		(58,404	)		(32,495	)		(90,899	)		(55,433	)		(38,066	)		(93,499	)
Billings during period(1)		248,130			127,450			375,580			175,611			124,609			300,220
Revenue earned for new billings during the period		(183,301	)		(103,639	)		(286,940	)		(156,867	)		(96,857	)		(253,724	)
Other adjustments		(968	)		730			(238	)		872			(103	)		769
Gross deferred revenue, June 30	$	72,702		$	32,001		$	104,703		$	28,857		$	38,628		$	67,485

______________

(1)Billings during period includes adjustments for prior billings.

Cash Receipts

Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment plans, employer reimbursement, Veterans’ Administration and other military funding and grants, private and institutional scholarships and cash payments, as well as private loans. Cash receipts from government related sources are typically received during the current academic term. We typically receive funds after the end of an academic term for students who receive employer reimbursements. Students who have not applied for any type of financial aid generally set up a payment plan with the university and make payments on a monthly basis per the terms of the payment plan.

If a student withdraws from one of our academic institutions prior to the completion of the academic term, we refund the portion of tuition and fees already paid that, pursuant to our refund policy and applicable federal and state law and accrediting agency standards, we are not entitled to retain. Generally, the amount to be refunded to a student is calculated based upon the percent of the term attended and the amount of tuition and fees paid by the student as of their withdrawal date. In certain circumstances, we have recognized revenue for students who have withdrawn that we are not entitled to retain. We have estimated a reserve for these limited circumstances based on historical evidence for each in the amount of $2.5 million as of June 30, 2023 and December 31, 2022. Students are typically entitled to a partial refund until approximately halfway through their term. Pursuant to each university’s policy, once a student reaches the point in the term where no refund is given, the student would not have a refund due if withdrawing from the university subsequent to that date.

7. STUDENT RECEIVABLES

Student receivables represent funds owed to us in exchange for the educational services provided to a student. Student receivables are reflected net of an allowance for credit losses at the end of the reporting period. Student receivables, net, are reflected on our condensed consolidated balance sheets as components of both current and non-current assets.

Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment plans, employer reimbursement, Veterans’ Administration and other military funding and grants, private and institutional scholarships and cash payments, as well as private loans. Cash receipts from government related sources are typically received during the current academic term. We typically receive funds after the end of an academic session for students who receive employer reimbursements. Students who have not applied for any type of financial aid or students whose financial aid may not fully cover the cost of their tuition and fees generally set up a payment plan with the institution and make payments on a monthly basis per the terms of the payment plan. For those balances that are not received during the academic term, the balance is typically due within the current

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academic year which is approximately 30 weeks in length. Generally, a student receivable balance is written off once a student is out of school and it reaches greater than 90 days past due.

Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trend analysis and comparing estimated and actual performance.

We have an immaterial amount of student receivables that are due greater than 12 months from the date of our condensed consolidated balance sheets. As of June 30, 2023 and December 31, 2022, the amount of non-current student receivables under payment plans that are longer than 12 months in duration, net of allowance for credit losses, was $1.2 million and $1.9 million, respectively.

Allowance for Credit Losses

We define student receivables as a portfolio segment under ASC Topic 326 – Financial Instruments – Credit Losses. Changes in our current and non-current allowance for credit losses related to our student receivable portfolio in accordance with the guidance under ASU 2016-13 for the quarters and years to date ended June 30, 2023 and 2022 were as follows (dollars in thousands):

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
	2023			2022			2023			2022
Balance, beginning of period	$	43,944		$	43,657		$	43,141		$	39,255
Provision for credit losses		8,170			10,664			18,927			24,379
Amounts written-off		(9,608	)		(11,258	)		(20,136	)		(21,522	)
Recoveries		549			723			1,123			1,674
Balance, end of period	$	43,055		$	43,786		$	43,055		$	43,786

Fair Value Measurements

The carrying amount reported in our condensed consolidated balance sheets for the current portion of student receivables approximates fair value because of the nature of these financial instruments as they generally have short maturity periods. It is not practicable to estimate the fair value of the non-current portion of student receivables, since observable market data is not readily available, and no reasonable estimation methodology exists.

8. LEASES

We lease most of our administrative and educational facilities under non-cancelable operating leases expiring at various dates through 2032. Lease terms generally range from five to ten years with one to four renewal options for extended terms. In most cases, we are required to make additional payments under facility operating leases for taxes, insurance and other operating expenses incurred during the operating lease period, which are typically variable in nature.

We determine if a contract contains a lease when the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Upon identification and commencement of a lease, we establish a right of use (“ROU”) asset and a lease liability.

Quantitative information related to leases is presented in the following table (dollars in thousands):

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	For the Quarter Ended June 30, 2023			For the Year to Date Ended June 30, 2023
Lease expenses (1)
Fixed lease expenses - operating	$	1,638		$	3,334
Variable lease expenses - operating		380			961
Sublease income (2)		(189	)		(500	)
Total lease expenses	$	1,829		$	3,795
Other information
Gross operating cash flows for operating leases (3)	$	(2,717	)	$	(5,583	)
Operating cash flows from subleases (3)	$	196		$	488
	For the Quarter Ended June 30, 2022			For the Year to Date Ended June 30, 2022
Lease expenses (1)
Fixed lease expenses - operating	$	2,695		$	5,462
Variable lease expenses - operating		1,079			1,894
Sublease income (2)		(269	)		(545	)
Total lease expenses	$	3,505		$	6,811
Other information
Gross operating cash flows for operating leases (3)	$	(4,263	)	$	(8,818	)
Operating cash flows from subleases (3)	$	279		$	553
	As of June 30, 2023			As of June 30, 2022
Weighted average remaining lease term (in months) – operating leases		60			67
Weighted average discount rate – operating leases		4.8	%		4.8	%

__________________

(1)Lease expense and sublease income represent the amount recorded within our unaudited condensed consolidated statements of income. Variable lease amounts represent expenses recognized as incurred which are not included in the lease liability. Fixed lease expenses and sublease income are recorded on a straight-line basis over the lease term and therefore are not necessarily representative of cash payments during the same period.

(2)Historically, for certain of our leased locations we have vacated the facility and have fully or partially subleased the space. As of June 30, 2023, we no longer have any subleased locations.

(3)Cash flows are presented on a consolidated basis and represent cash payments for fixed and variable lease costs.

9. OTHER INTANGIBLE ASSETS

On June 30, 2023, the Company entered into a non-cash asset purchase agreement with Le Cordon Bleu International B.V. ("LCBI"), a company incorporated in The Netherlands, to sell Perdoceo's outright rights to the Le Cordon Bleu ("LCB") brand, trade names and rights for North America in exchange for 1.8 million outstanding shares of Perdoceo's stock. The fair value of the 1.8 million shares received was $22.1 million, resulting in a non-cash gain on sale of asset of $22.1 million recorded within other miscellaneous income (expense) on our unaudited condensed consolidated statements of income with the offset being recorded as an addition to treasury stock on our condensed consolidated balance sheet.

10. CONTINGENCIES

An accrual for estimated legal fees of $3.2 million and $1.7 million at June 30, 2023 and December 31, 2022, respectively, is presented within other current liabilities on our condensed consolidated balance sheets.

We record a liability when we believe that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that was previously accrued and make adjustments as further information develops, circumstances change or contingencies are resolved. Significant judgment is required to determine both probability and the estimated amount. We may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (1) if the damages sought are indeterminate; (2) if the proceedings are in early stages; (3) if there is uncertainty as to the outcome of pending appeals, motions or settlements; (4) if there are

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significant factual issues to be determined or resolved; and (5) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

United States of America, ex rel. Fiorisce LLC v. Perdoceo Education Corporation, Colorado Technical University, Inc. and American InterContinental University, Inc. On July 19, 2023, we became aware of an amended complaint filed in the U.S. District Court for the District of Colorado on May 19, 2023. The original complaint was filed under seal on February 25, 2021 by a former employee of Colorado Technical University through a limited liability company, on behalf of herself, any other interested parties affiliated with the LLC and the federal government. On July 18, 2023, the district court ordered the complaint unsealed and we were notified that the U.S. Department of Justice (DOJ) had declined to intervene in the action earlier this year on February 3, 2023. The company had previously received a Civil Investigative Demand on April 8, 2022 from the DOJ and had been cooperating with the DOJ in its review. After the federal government declined to intervene in this case, the relator elected to pursue the litigation on behalf of the federal government. If she is successful, she would receive a portion of the federal government’s recovery. The amended complaint alleges violations of the False Claims Act related to the company’s compliance with federal financial aid credit hour requirements in connection with its use of its learning management system. Relator claims that defendants’ conduct caused the government to make payments of federal funds to defendants which the government would not have made if not for defendants’ alleged violation of the law. Relator seeks treble damages plus civil penalties and attorneys’ fees.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on information available to us at present, we cannot reasonably estimate a range of potential loss, if any, for this action. Accordingly, we have not recognized any liability associated with this action.

We receive from time-to-time requests from state attorneys general, federal and state government agencies and accreditors relating to our institutions, to specific complaints they have received from students or former students or to student loan forgiveness claims which seek information about students, our programs, and other matters relating to our activities. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal action or claims of non-compliance. We are subject to a variety of other claims, lawsuits, arbitrations and investigations that arise from time to time out of the conduct of our business, including, but not limited to, matters involving prospective students, students or former students, alleged violations of the Telephone Consumer Protection Act, both individually and on behalf of a putative class, and employment matters. Periodically matters arise that we consider outside the scope of ordinary routine litigation incidental to our business. While we currently believe that these matters, individually or in aggregate, will not have a material adverse impact on our financial position, cash flows or results of operations, these matters are subject to inherent uncertainties, and management’s view of these matters may change in the future. Were an unfavorable outcome to occur in any one or more of these matters, there exists the possibility of a material adverse impact on our business, reputation, financial position and cash flows.

Contingent Consideration for Business Acquisitions

We have an accrual for contingent consideration amounts related to the Coding Dojo acquisition in the aggregate fair value amount of $13.7 million as of June 30, 2023, of which $1.0 million was recorded during the current quarter within operating expense on our unaudited condensed consolidated statements of income as a result of an adjustment to the fair value of the liability during the current quarter. Pursuant to the acquisition agreement, post-closing contingent consideration payments are expected to be paid in January 2024 and January 2025, based upon the achievement of certain financial metrics, with an aggregate maximum for the two payments of $15.0 million. The determination of the estimated fair value of contingent consideration requires significant estimates and assumptions, and as such, this fair value measurement is categorized as Level 3 per ASC Topic 820. These estimates and assumptions primarily include, but are not limited to, operating cash flow projections, discount rate and volatility rate. Due to the inherent uncertainty involved in deriving those estimates, actual results could differ from those estimates.

11. INCOME TAXES

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following is a summary of our provision for income taxes and effective tax rate:

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
(Dollars in Thousands)	2023			2022			2023			2022
Pretax income	$	74,603		$	34,715		$	121,656		$	78,549
Provision for income taxes	$	19,930		$	8,948		$	32,499		$	20,704
Effective rate		26.7	%		25.8	%		26.7	%		26.4	%

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As of March 31, 2023, a valuation allowance of $22.5 million was maintained with respect to our foreign tax credits not supported by an Overall Domestic Loss (“ODL”) account balance, equity investment, available for sale short-term investments and state net operating losses. Due to an increase in the cumulative unrealized holding loss on available for sale short-term investments that is reflected in total other comprehensive loss, the deferred tax asset and valuation allowance with respect to this item was increased from $1.0 million to $1.3 million during the current quarter. After considering both positive and negative evidence related to the realization of the deferred tax assets, we have determined that it is necessary to continue to maintain a $22.2 million valuation allowance against our non-ODL supported foreign tax credits, equity investment, available for sale short-term investments and state net operating losses as of June 30, 2023.

The effective tax rate for the quarter and year to date ended June 30, 2023 was impacted by a $5.3 million unfavorable discrete adjustment related to the $22.1 million gain on the sale of the LCB trademark, which was taxed at 24.1%. The effective tax rate for the quarter and year to date ended June 30, 2023 also includes the tax effect of stock-based compensation and the release of previously recorded tax reserves, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2022 was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves. The net effect of these discrete items decreased the effective tax rate for the prior year quarter and year to date by 1.2% and 0.3%, respectively.

We estimate that it is reasonably possible that the gross liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $7.0 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter and year to date ended June 30, 2023 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of June 30, 2023, we had accrued $2.9 million as an estimate for reasonably possible interest and accrued penalties.

Our tax returns are routinely examined by federal, state and local tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service has completed its examination of our U.S. income tax returns through our tax year ended December 31, 2014.

12. SHARE-BASED COMPENSATION

Overview

The Perdoceo Education Corporation Amended and Restated 2016 Incentive Compensation Plan (the “2016 Plan”) became effective (as the Career Education Corporation 2016 Incentive Compensation Plan) on May 24, 2016, and the amendment and restatement of the 2016 Plan became effective on June 3, 2021, upon its approval by the Company’s stockholders. Under the 2016 Plan, Perdoceo may grant to eligible participants awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, annual incentive awards, and substitute awards, which generally may be settled in cash or shares of our common stock. The vesting of all types of awards is subject to possible acceleration in certain circumstances. If a plan participant terminates employment for any reason other than by death or disability during the vesting period, the right to unvested awards is generally forfeited.

Restricted Stock Units

For the quarters ended June 30, 2023 and 2022, the Company granted less than 0.1 million restricted stock units in each period which are not “performance-based” and which have a grant-date fair value of approximately $0.7 million and $0.8 million, respectively. For the years to date ended June 30, 2023 and 2022, the Company granted approximately 0.4 million restricted stock units in each period which are not "performance-based" and which have a grant-date fair value of approximately $5.9 million and $3.7 million, respectively.

For the years to date ended June 30, 2023 and 2022, the Company granted approximately 0.3 million and 0.4 million restricted stock units, respectively, which are “performance-based” and which have a grant-date fair value of approximately $4.1 million and $4.0 million, respectively. The performance-based restricted stock units are subject to performance conditions which are determined at the time of grant and typically cover a three-year performance period. These performance conditions may result in all units being forfeited even if the requisite service period is met.

All restricted stock units granted in 2023 and 2022 are to be settled in shares of our common stock.

Stock Options

There were no stock options granted during each of the quarters or years to date ended June 30, 2023 and 2022.

Share-Based Compensation Expense

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Total share-based compensation expense for the quarters and years to date ended June 30, 2023 and 2022 for all types of awards was as follows (dollars in thousands):

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,
Award Type	2023		2022		2023		2022
Stock options	$	-	$	-	$	-	$	89
Restricted stock units settled in stock		2,017		1,897		4,308		4,220
Total share-based compensation expense	$	2,017	$	1,897	$	4,308	$	4,309

As of June 30, 2023, we estimate that total compensation expense of approximately $19.0 million will be recognized over the next four years for all unvested share-based awards that have been granted to participants. This amount excludes any estimates of forfeitures.

13. STOCK REPURCHASE PROGRAM

On January 27, 2022, the Board of Directors of the Company approved a stock repurchase program for up to $50.0 million which commenced March 1, 2022 and expires September 30, 2023. On July 27, 2023, the Board of Directors of the Company extended the expiration date of the program to September 30, 2024. The other terms of this stock repurchase program are consistent with the Company’s previous stock repurchase program which expired February 28, 2022.

The timing of purchases and the number of shares repurchased under the program will be determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. Repurchases will be made in open market transactions, including block purchases, conducted in accordance with Rule 10b-18 under the Exchange Act as well as may be made pursuant to trading plans established under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The stock repurchase program does not obligate the Company to purchase shares and the Company may, in its discretion, begin, suspend or terminate repurchases at any time, without any prior notice.

During the quarters ended June 30, 2023 and 2022, we repurchased approximately 0.2 million shares and 1.1 million shares of our common stock, respectively, for approximately $1.9 million at an average price of $11.88 per share during the quarter ended June 30, 2023 and $11.8 million at an average price of $10.60 per share during the quarter ended June 30, 2022. During the years to date ended June 30, 2023 and 2022, we repurchased approximately 0.2 million shares and 1.5 million shares of our common stock, respectively, for approximately $2.7 million at an average price of $12.35 during the year to date ended June 30, 2023 and for approximately $15.7 million at an average price of $10.59 during the year to date ended June 30, 2022.

As of June 30, 2023, approximately $24.1 million was available under our authorized stock repurchase program to repurchase outstanding shares of our common stock. Shares of stock repurchased under the program are held as treasury shares. These repurchased shares have reduced the weighted average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

14. WEIGHTED AVERAGE COMMON SHARES

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive common shares outstanding is computed using the Treasury Stock Method and reflects the additional shares that would be outstanding if dilutive stock options were exercised and restricted stock units were settled for common shares during the period.

The weighted average number of common shares used to compute basic and diluted net income per share for the quarters and years to date ended June 30, 2023 and 2022 were as follows (shares in thousands):

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,
	2023		2022		2023		2022
Basic common shares outstanding		67,421		68,341		67,328		68,542
Common stock equivalents		1,112		841		1,184		834
Diluted common shares outstanding		68,533		69,182		68,512		69,376

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For the quarters and years to date ended June 30, 2023 and 2022, certain unexercised stock option awards are excluded from our computations of diluted earnings per share, as these shares were out-of-the-money and their effect would have been anti-dilutive. The anti-dilutive options that were excluded from our computations of diluted earnings per share were 0.3 million shares for each of the quarters and years to date ended June 30, 2023 and 2022.

15. SEGMENT REPORTING

Our segments are determined in accordance with FASB ASC Topic 280—Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment is comprised of an accredited postsecondary education institution that offers a variety of academic programs. As of June 30, 2023, our two segments are:

♦ Colorado Technical University (CTU) is committed to providing quality and industry-relevant higher education to a diverse student population through innovative technology and experienced faculty, enabling the pursuit of personal and professional goals. CTU is focused on serving adult, non-traditional students seeking career advancement, as well as addressing employer’s needs for a well-educated workforce. CTU offers academic programs in the career-oriented disciplines of business and management, nursing, healthcare management, computer science, engineering, information systems and technology, project management, cybersecurity and criminal justice. Students pursue their degrees through fully-online programs, local campuses and blended formats, which combine campus-based and online education. As of June 30, 2023, students enrolled at CTU represented approximately 68% of our total enrollments. Approximately 97% of CTU’s students are enrolled in programs offered fully online. Students at CTU's ground-based campuses take both in-person and virtual classes.

♦ The American InterContinental University System (AIUS or AIU System) is committed to providing quality and accessible higher education opportunities for a diverse student population, including adult and other non-traditional learners and the military community. AIUS places emphasis on the educational, professional and personal growth of each student. AIUS offers academic programs in the career-oriented disciplines of business studies, information technologies, education, health sciences and criminal justice. Students pursue their degrees through fully-online programs, local campuses and blended formats, which combine campus-based and online education. As of June 30, 2023, students enrolled at AIUS represented approximately 32% of our total enrollments. Approximately 97% of AIUS’ students are enrolled in programs offered fully online. Students at AIUS' ground-based campus take both in-person and virtual classes.

Summary financial information by reporting segment is as follows (dollars in thousands):

	For the Quarter Ended June 30,
	Revenue										Operating Income (Loss)
	2023		% of Total			2022		% of Total			2023			2022
CTU (1)	$	119,292		64.0	%	$	100,461		59.9	%	$	40,451		$	33,008
AIUS (2)		67,062		35.9	%		66,920		39.9	%		17,078			10,733
Corporate and Other		210		0.1	%		303		0.2	%		(9,435	)		(9,795	)
Total	$	186,564		100.0	%	$	167,684		100.0	%	$	48,094		$	33,946

	For the Year to Date Ended June 30,
	Revenue										Operating Income (Loss)
	2023		% of Total			2022		% of Total			2023			2022
CTU (1)	$	243,784		63.8	%	$	213,609		60.9	%	$	84,141		$	76,034
AIUS (2)		137,902		36.1	%		136,452		38.9	%		29,081			20,256
Corporate and Other		476		0.1	%		582		0.2	%		(21,792	)		(18,651	)
Total	$	382,162		100.0	%	$	350,643		100.0	%	$	91,430		$	77,639

	Total Assets as of  (3)
	June 30, 2023		December 31, 2022
CTU	$	263,381	$	247,510
AIUS		189,398		185,943
Corporate and Other		560,891		523,915
Total	$	1,013,670	$	957,368

(1)CTU results of operations include the Coding Dojo acquisition commencing on the December 1, 2022 date of acquisition.

(2)AIUS results of operations include the CalSouthern acquisition commencing on the July 1, 2022 date of acquisition.

(3)Total assets are presented on a condensed consolidated basis and do not include intercompany receivable or payable activity between institutions and corporate and investments in subsidiaries.

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16. SUBSEQUENT EVENTS

In August 2023, the Board of Directors of the Company adopted a dividend policy. Pursuant to this policy, the Board of Directors of the Company intends to pay quarterly dividends, commencing in respect of (and following) the Company’s quarter ended June 30, 2023. On August 3, 2023, the Board of Directors of the Company declared the first quarterly dividend under the dividend policy of $0.11 per share, which will become payable on September 15, 2023 for holders of record as of September 1, 2023. Any decision to pay future cash dividends will, however, be made solely by the Board of Directors of the Company and depend on the Company’s available retained earnings, financial condition and other relevant factors.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion below and other items in this Quarterly Report on Form 10-Q contain “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “plan,” “may,” “should,” ”will,” “continue to,” “focused on” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022 that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Among the factors that could cause actual results to differ materially from those expressed in, or implied by, our forward-looking statements are the following:

•declines in enrollment or interest in our programs;

•our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the 90-10, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education (the “Department”)), as well as applicable accreditation standards and state regulatory requirements;

•the impact of various versions of “borrower defense to repayment” regulations;

•rulemaking by the Department or any state or accreditor and increased focus by Congress and governmental agencies on, or increased negative publicity about, for-profit education institutions;

•the success of our initiatives to improve student experiences, retention and academic outcomes;

•our continued eligibility to participate in educational assistance programs for veterans and other military personnel;

•increased competition;

•our ability to pay dividends on our common stock and execute our stock repurchase program;

•the impact of management changes; and

•changes in the overall U.S. economy.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:

•Overview

•Consolidated Results of Operations

•Segment Results of Operations

•Summary of Critical Accounting Policies and Estimates

•Liquidity, Financial Position and Capital Resources

OVERVIEW

Our accredited academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. The Company’s academic institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIUS” or “AIU System”) – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

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Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across two reporting segments: CTU and AIUS.

Regulatory Environment and Political Uncertainty

We operate in a highly regulated industry, which has significant impacts on our business and creates risks and uncertainties. In recent years, Congress, the Department, states, accrediting agencies, the Consumer Financial Protection Bureau, the Federal Trade Commission, state attorneys general and the media have all scrutinized the for-profit postsecondary education sector. Congressional hearings and roundtable discussions were held regarding various aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. A group of influential U.S. senators, consumer advocacy groups and some media outlets have strongly and repeatedly encouraged the Department, the Department of Defense and the Department of Veterans Affairs and its state approving agencies to take action to limit or terminate the participation of institutions such as ours in existing tuition assistance programs. In addition, targeted loan relief to student borrowers is a stated priority for the Department, and consumer advocacy groups and others are focusing their lobbying and other efforts relating to student debt forgiveness on for-profit colleges and universities, encouraging loan discharge applications and complaints by former students.

The current administration, as well as Congress, are pursuing significant legislative, regulatory and administrative actions affecting our business. A loss or material reduction in Title IV Programs or the amount of student financial aid for which our students are eligible would materially impact our student enrollments and profitability and could impact the continued viability of our business as currently conducted.

We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K to learn more about our highly regulated industry and related risks and uncertainties, in addition to the MD&A in our 2023 Quarterly Reports on Form 10-Q.

Note Regarding Non-GAAP measures

We believe it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.

We believe certain non-GAAP measures allow us to compare our current operating results with respective historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We believe the items we are adjusting for are not normal operating expenses necessary to run our business. In evaluating the use of non-GAAP measures, investors should be aware that in the future we may incur expenses similar to the adjustments presented below. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. A non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

2023 Second Quarter Overview

During the quarter ended June 30, 2023 ("current quarter"), we experienced continued improvement in student retention and engagement at both of our academic institutions supported by the various operating changes and student initiatives that we have undertaken over the past several years.

Total student enrollments decreased 5.2% at June 30, 2023 as compared to June 30, 2022, primarily driven by a decrease at AIUS of 14.2% while total student enrollments remained relatively flat at CTU. The decrease in total student enrollments for AIUS was primarily driven by certain operational changes made during the current year within admissions, outreach and enrollment processes for prospective students. These changes were made to ensure compliance with any anticipated or final regulatory changes. We believe these changes are only necessary for the short term and expect to return to normalized levels of operations within our admissions and enrollment processes during the fourth quarter. At CTU, improved student retention and student enrollment growth in

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corporate partnerships for the current quarter end as compared to the prior year quarter end were offset with a negative timing impact from the academic calendar redesign.

We believe that student retention and engagement have improved, in part, due to an increased focus on enrolling students who we believe will be more likely to succeed at one of our institutions as well as changes we have made to better serve and onboard new learners in a more efficient and effective manner. Additionally, federal aid initiatives implemented by the current administration simplified processes for students to receive the financial support needed to continue their education, thus leading to improved retention and engagement. As a result, we expect full year revenue to be slightly higher as compared to 2022, resulting from recent acquisitions, the academic calendar redesign at CTU and underlying organic improvements in student retention and engagement. However, total student enrollments at the end of 2023 are expected to be lower as compared to year end 2022, primarily due to the academic calendar redesign at CTU as well as operational changes at AIUS.

We believe investments in technology positively impact student experiences and academic outcomes and we remain committed to investing in and upgrading technology to further enhance academic experiences for our students. We believe technology is an enabler and differentiator for us and we will continue to leverage data analytics and machine learning to provide our students with a more relevant and meaningful experience. Over the past two years we have committed to various investments in this area and will continue to invest, as appropriate, through the remainder of 2023.

During the current quarter the Company entered into a non-cash asset purchase agreement with Le Cordon Bleu International B.V. ("LCBI"), a company incorporated in The Netherlands, to sell Perdoceo's outright rights to the Le Cordon Bleu ("LCB") brand, trade names and rights for North America in exchange for 1.8 million outstanding shares of Perdoceo's stock. The fair value of the 1.8 million shares received was $22.1 million, resulting in a non-cash gain on sale of asset of $22.1 million recorded within other miscellaneous income (expense) on our unaudited condensed consolidated statements of income with the offset being recorded as an addition to treasury stock on our condensed consolidated balance sheet.

Financial Highlights

Revenue for the quarter ended June 30, 2023 increased by 11.3% or $18.9 million as compared to the prior year quarter, driven by an increase in revenue at CTU. The improvement in revenue at CTU for the current quarter was driven both by an increase in organic total student enrollments as well as a positive timing impact from the academic calendar as the current quarter had more revenue-earning days as compared to the prior year quarter. CTU's academic calendar redesign may impact the comparability of revenue-earning days and enrollment results in any given quarter, with the impact on revenue and total student enrollments not necessarily having the same magnitude or directional impact. Additionally, revenue for the current quarter was benefited by the acquisitions completed in 2022 that were not part of the comparative prior year quarter.

Operating income for the current quarter increased by 41.7% to $48.1 million as compared to operating income of $33.9 million in the prior year quarter. The increase in operating income for the current quarter was primarily due to the increase in revenue as well as decreased advertising and bad debt expenses.

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $55.2 million for the current quarter as compared to $41.9 million for the prior year quarter.

Adjusted operating income and adjusted earnings per diluted share for the quarters and years to date ended June 30, 2023 and 2022 is presented below (dollars in thousands, unless otherwise noted):

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	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
Adjusted Operating Income	2023			2022			2023			2022
Operating income	$	48,094		$	33,946		$	91,430		$	77,639
Depreciation and amortization (1)		4,369			4,909			9,524			9,791
Legal fee expense related to certain matters (2)		2,709			3,087			7,328			5,434
Adjusted Operating Income	$	55,172		$	41,942		$	108,282		$	92,864
	For the Quarter Ended June 30,						For the Year to Date Ended June 30,
Adjusted Earnings Per Diluted Share	2023			2022			2023			2022
Reported Earnings Per Diluted Share	$	0.80		$	0.37		$	1.30		$	0.83
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets (1)		0.03			0.02			0.07			0.05
Legal fee expense related to certain matters (2)		0.04			0.05			0.11			0.08
Gain on sale of intangible asset (3)		(0.32	)		-			(0.32	)		-
Total pre-tax adjustments	$	(0.25	)	$	0.07		$	(0.14	)	$	0.13
Tax effect of adjustments (4)		0.06			(0.02	)		0.03			(0.03	)
Total adjustments after tax		(0.19	)		0.05			(0.11	)		0.10
Adjusted Earnings Per Diluted Share	$	0.61		$	0.42		$	1.19		$	0.93

(1)Amortization relates to definite-lived intangible assets associated with acquisitions.

(2)Legal fee expense associated with (i) responses to the Department of Education (the "Department") relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.

(3)Non-cash gain associated with the sale of the LCB tradename in exchange for outstanding shares of Perdoceo's stock.

(4)The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.

Regulatory Updates

Legislative Action and Recent Department Regulatory Initiatives

On July 6, 2023, in response to the Supreme Court’s decision to block the current administration’s plan to provide broad student loan forgiveness to borrowers with certain federal student loans, the U.S. Department of Education ("Department") issued a notice of its intent to establish a negotiated rulemaking committee aimed at opening an alternative path to debt relief “for as many borrowers as possible,” using the Secretary of Education's authority under the Higher Education Act ("HEA"). The notice announced a virtual public hearing that was held on July 18, 2023 and solicited written comments from stakeholders. The Department intends to finalize the issues to be addressed through rulemaking, begin the negotiated rulemaking sessions this fall, and complete this rulemaking “as quickly as possible.” The Department has also taken other actions to further prioritize and enact targeted loan relief to federal student loan borrowers, including its announcement on July 15, 2023 to provide 804,000 student loan borrowers with $39 billion in automatic loan forgiveness as a result of fixes it deemed necessary to income driven repayment plans.

Negotiated Rulemakings

The Department is currently engaged in a number of negotiated rulemakings that are at various stages of the process.

On March 24, 2023, the Department published a notice of intent to convene one or more committees, which may include a subcommittee, to develop proposed regulations pertaining to the following topics:

•The Federal TRIO programs

•The Secretary's recognition of accrediting agencies

•Institutional eligibility, including State authorization

•Return of Title IV funds

•Cash management

•Third-party servicers and related issues

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•The definition of “distance education” as it pertains to clock hour programs and reporting for students who enroll primarily online

The Department has yet to move forward with any of these topics. We continue to closely monitor the Department’s rulemaking agenda, but we are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.

On May 16, 2023, the Department rescinded the Dear Colleague Letter that significantly expanded its interpretation of the types of service providers that qualify as participating in the administration of Title IV funds under the definition of a “Third Party Servicer.” The Department stated that it plans to publish revised guidance with an effective date at least six months after its publication. We are unable to determine the potential impact that revised guidance may have on our business at this time.

On May 19, 2023, the Department published a Notice of Proposed Rulemaking ("NPRM") for the following rules:

•Gainful Employment ("GE")

•Financial Value Transparency ("FVT")

•Financial Responsibility

•Administrative Capability

•Certification Procedures

•Ability to Benefit ("ATB")

The proposed FVT regulation, which was not presented to the negotiated rulemaking committee, seeks to establish a framework that would increase the quality and availability of information provided directly to students about the costs, sources of financial aid, and outcomes of students enrolled in all eligible programs. FVT disclosures would apply to all Title IV eligible programs offered by all institutions (except for approved prison education programs and comprehensive transition and postsecondary programs) and use the same debt to earnings and earnings premium metrics as the GE framework. While the FVT regulations do not contemplate penalties or sanctions as under the GE rule, the regulations would require that current and prospective students be provided relevant disclosures and acknowledge when an educational program is associated with a high debt burden.

The Department accepted public comments on the NPRM through June 20, 2023. Following review of these public comments, the Department issues final regulations, which, if published by November 1, 2023, would take effect on July 1, 2024. We are closely monitoring the negotiated rulemaking process but are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.

State Regulation

CTU and AIUS participate in the State Authorization Reciprocity Agreement ("SARA"), which is an agreement among member states, districts, and territories establishing national standards for interstate postsecondary distance education. SARA allows institutions to enroll students in distance education programs in each SARA member state without seeking authorization in each state. On March 1, 2023 and June 7, 2023, SARA’s coordinating body, the National Council for State Authorization Reciprocity Agreements ("NC-SARA"), held public policy forums to seek input on potential changes to NC-SARA policies. In addition to the public policy forums, written comments were accepted through May 17, 2023. On July 5, 2023, NC-SARA published revised policy proposals. Several of the proposals would make significant operational changes to the current reciprocity standards, including, but not limited to, allowing states to impose their own education-specific requirements on out-of-state institutions, expanding consumer protections to allow states to limit or condition participation of institutions based on “risk profile,” expanding state authority to deny or revoke institutional participation based on investigations, and modifying requirements for provisional status. NC-SARA’s regional compacts will vote on each proposal presented by September 1, 2023. Proposals must be approved by each of the four compacts in order to be considered by the NC-SARA board of directors. The board will review and vote on the proposals approved by the compacts by October 25, 2023. We cannot predict whether NC-SARA will adopt any of these proposals. The adoption of certain proposals could materially limit or severely condition the ability of our institutions to offer distance education programs in certain states.

Institutional Accreditation

On July 21, 2023, the Higher Learning Commission informed CTU that it had acted at its meeting on July 17, 2023 to continue CTU's accreditation, with its next reaffirmation of accreditation scheduled for 2032-2033.

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CONSOLIDATED RESULTS OF OPERATIONS

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the quarters and years to date ended June 30, 2023 and 2022 (dollars in thousands):

	For the Quarter Ended June 30,															For the Year to Date Ended June 30,
	2023			% of Total Revenue			2022			% of Total Revenue			2023 vs 2022 % Change			2023			% of Total Revenue			2022			% of Total Revenue			2023 vs 2022 % Change
TOTAL REVENUE	$	186,564					$	167,684						11.3	%	$	382,162					$	350,643						9.0	%
OPERATING EXPENSES
Educational services and facilities (1)		32,748			17.6	%		27,269			16.3	%		20.1	%		66,599			17.4	%		55,357			15.8	%		20.3	%
General and administrative: (2)
Advertising and marketing		25,836			13.8	%		30,426			18.1	%		-15.1	%		57,131			14.9	%		63,224			18.0	%		-9.6	%
Admissions		23,325			12.5	%		23,699			14.1	%		-1.6	%		49,313			12.9	%		46,443			13.2	%		6.2	%
Administrative		43,257			23.2	%		36,543			21.8	%		18.4	%		87,903			23.0	%		73,582			21.0	%		19.5	%
Bad debt		8,170			4.4	%		10,664			6.4	%		-23.4	%		18,927			5.0	%		24,379			7.0	%		-22.4	%
Total general and administrative expense		100,588			53.9	%		101,332			60.4	%		-0.7	%		213,274			55.8	%		207,628			59.2	%		2.7	%
Depreciation and amortization		4,369			2.3	%		4,909			2.9	%		-11.0	%		9,524			2.5	%		9,791			2.8	%		-2.7	%
Asset impairment		765			0.4	%		228			0.1	%	NM				1,335			0.3	%		228			0.1	%	NM
OPERATING INCOME		48,094			25.8	%		33,946			20.2	%		41.7	%		91,430			23.9	%		77,639			22.1	%		17.8	%
PRETAX INCOME		74,603			40.0	%		34,715			20.7	%		114.9	%		121,656			31.8	%		78,549			22.4	%		54.9	%
PROVISION FOR INCOME TAXES		19,930			10.7	%		8,948			5.3	%		122.7	%		32,499			8.5	%		20,704			5.9	%		57.0	%
Effective tax rate		26.7	%					25.8	%								26.7	%					26.4	%
NET INCOME	$	54,673			29.3	%	$	25,767			15.4	%		112.2	%	$	89,157			23.3	%	$	57,845			16.5	%		54.1	%

(1)Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, and costs of educational supplies and facilities, such as rents on leased facilities. Also included in educational services and facilities expense are rents on leased administrative facilities, such as our corporate headquarters, and costs of other goods and services provided by our campuses, including costs of textbooks and laptop computers.

(2)General and administrative expense includes operating expenses associated with, including salaries and benefits of personnel in, corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.

Revenue

The current quarter and year to date revenue increased by 11.3% or $18.9 million and 9.0% or $31.5 million, respectively, as compared to the prior year periods, driven by increases in revenue within both CTU and AIUS. The current quarter and year to date increase in revenue benefitted by the acquisitions completed in 2022 that were not part of the comparative prior year periods. The increase in CTU's revenue for the current quarter and current year to date also had a positive timing impact from the academic calendar redesign.

Educational Services and Facilities Expense (dollars in thousands)

	For the Quarter Ended June 30,					For the Year to Date Ended June 30,
	2023		2022		2023 vs 2022 % Change	2023		2022		2023 vs 2022 % Change
Educational services and facilities:
Academics & student related	$	30,233	$	22,883	32.1%	$	61,356	$	46,577	31.7%
Occupancy		2,515		4,386	-42.7%		5,243		8,780	-40.3%
Total educational services and facilities	$	32,748	$	27,269	20.1%	$	66,599	$	55,357	20.3%

The educational services and facilities expense for the current quarter and year to date increased by 20.1% or $5.5 million and 20.3% or $11.2 million, respectively, as compared to the prior year periods. Academics and student related costs increased by 32.1% or $7.4 million and 31.7% or $14.8 million for the current quarter and year to date, respectively, as compared to the prior year periods, primarily driven by the full quarter and year to date expense associated with the 2022 acquisitions as compared to no expense in the prior year periods. Occupancy expense for the current quarter and year to date improved by 42.7% or $1.9 million and 40.3% or $3.5 million, respectively, as compared to the prior year periods, driven by decreases associated with exited leased facilities.

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General and Administrative Expense (dollars in thousands)

	For the Quarter Ended June 30,					For the Year to Date Ended June 30,
	2023		2022		2023 vs 2022 % Change	2023		2022		2023 vs 2022 % Change
General and administrative:
Advertising and marketing	$	25,836	$	30,426	-15.1%	$	57,131	$	63,224	-9.6%
Admissions		23,325		23,699	-1.6%		49,313		46,443	6.2%
Administrative		43,257		36,543	18.4%		87,903		73,582	19.5%
Bad debt		8,170		10,664	-23.4%		18,927		24,379	-22.4%
Total general and administrative expense	$	100,588	$	101,332	-0.7%	$	213,274	$	207,628	2.7%

The general and administrative expense for the current quarter decreased by 0.7% or $0.7 million and increased by 2.7% or $5.6 million for the current year to date, as compared to the prior year periods. The current quarter improvement was primarily driven by lower advertising and marketing, bad debt and admissions expenses, which more than offset the increase in administrative expense. The year to date increase was driven by increases in administrative and admissions expenses as compared to the prior year period, which were partially offset by decreases in advertising and marketing and bad debt expenses.

Advertising and marketing expense for the current quarter and year to date decreased by 15.1% or $4.6 million and 9.6% or $6.1 million, respectively, as compared to the prior year periods, as a result of adjustments to our marketing processes related to identifying prospective student interest within both AIUS and CTU as well as operational changes made within AIUS during the current year.

Admissions expense for the current quarter decreased by 1.6% or $0.4 million and increased by 6.2% or $2.9 million for the current year to date, as compared to the prior year periods. The current quarter improvement was driven by decreased expenses within AIUS as a result of operational changes made during the current year. The year to date increase was primarily impacted by a full period of expense associated with the 2022 acquisitions as compared to no expense in the prior year period.

Administrative expense for the current quarter and year to date increased by 18.4% or $6.7 million and 19.5% or $14.3 million, respectively, as compared to the prior year periods. The current quarter and year to date increases were primarily due to the 2022 acquisitions, as mentioned above, along with increased legal fees within Corporate and Other for the current year to date.

Bad debt expense incurred by each of our segments during the quarters and years to date ended June 30, 2023 and 2022 was as follows (dollars in thousands):

	For the Quarter Ended June 30,															For the Year to Date Ended June 30,
	2023			% of Segment Revenue			2022			% of Segment Revenue			2023 vs 2022 % Change			2023			% of Segment Revenue			2022			% of Segment Revenue			2023 vs 2022 % Change
Bad debt expense:
CTU	$	4,571			3.8	%	$	5,990			6.0	%		-23.7	%	$	11,696			4.8	%	$	13,175			6.2	%		-11.2	%
AIUS		3,604			5.4	%		4,682			7.0	%		-23.0	%		7,239			5.2	%		11,233			8.2	%		-35.6	%
Corporate and Other		(5	)	NM				(8	)	NM			NM				(8	)	NM				(29	)	NM			NM
Total bad debt expense	$	8,170			4.4	%	$	10,664			6.4	%		-23.4	%	$	18,927			5.0	%	$	24,379			7.0	%		-22.4	%

Bad debt expense improved by 23.4% or $2.5 million and 22.4% or $5.5 million for the current quarter and current year to date, respectively, as compared to the prior year periods. AIUS' bad debt expense decreased by 23.0% or $1.1 million and 35.6% or $4.0 million, respectively, for the current quarter and current year to date as compared to the prior year periods. CTU's bad debt expense improved by 23.7% or $1.4 million and 11.2% or $1.5 million, respectively, for the current quarter and year to date, as compared to the prior year periods.

We continue to expect quarterly fluctuations in bad debt expense. We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. Our student support teams have maintained their focus on financial aid documentation collection and are counseling students through the Title IV financial aid process so that they are better prepared to start school. Additionally, federal aid initiatives simplified processes for students to receive the financial support needed to continue their education. We have also focused on emphasizing employer-paid and other direct-pay education programs such as corporate partnerships as students within these programs typically have lower bad debt expense associated with them.

Operating Income

Operating income increased by 41.7% or $14.1 million and 17.8% or $13.8 million for the current quarter and year to date, respectively, as compared to the prior year periods. The current quarter and year to date increase was primarily driven by the increased revenue along with lower advertising and bad debt expenses as compared to the prior year periods.

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Provision for Income Taxes

For the current quarter and year to date, we recorded a provision for income taxes of $19.9 million, reflecting an effective tax rate of 26.7% and $32.5 million, reflecting an effective tax rate of 26.7%, respectively, as compared to a provision for income taxes of $8.9 million, reflecting an effective tax rate of 25.8% and $20.7 million, reflecting an effective tax rate of 26.4% for the respective prior year periods.

The effective tax rate for the quarter and year to date ended June 30, 2023 was impacted by a $5.3 million unfavorable discrete adjustment related to the $22.1 million gain on the sale of the LCB trademark, which was taxed at 24.1%. The effective tax rate for the quarter and year to date ended June 30, 2023 also includes the tax effect of stock-based compensation and the release of previously recorded tax reserves, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2022 was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves. The net effect of these discrete items decreased the effective tax rate for the prior year quarter and year to date by 1.2% and 0.3%, respectively. For the full year 2023, we expect our effective tax rate to be between 26.5% to 27.5%.

SEGMENT RESULTS OF OPERATIONS

The following tables present unaudited segment results for the reported periods (dollars in thousands):

	For the Quarter Ended June 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN
	2023		2022		% Change			2023			2022			% Change			2023			2022
REVENUE:
CTU (1)	$	119,292	$	100,461		18.7	%	$	40,451		$	33,008			22.5	%		33.9	%		32.9	%
AIUS (2)		67,062		66,920		0.2	%		17,078			10,733			59.1	%		25.5	%		16.0	%
Corporate and other		210		303		-30.7	%		(9,435	)		(9,795	)		-3.7	%	NM			NM
Total	$	186,564	$	167,684		11.3	%	$	48,094		$	33,946			41.7	%		25.8	%		20.2	%

	For the Year to Date Ended June 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN
	2023		2022		% Change			2023			2022			% Change			2023			2022
REVENUE:
CTU (1)	$	243,784	$	213,609		14.1	%	$	84,141		$	76,034			10.7	%		34.5	%		35.6	%
AIUS (2)		137,902		136,452		1.1	%		29,081			20,256			43.6	%		21.1	%		14.8	%
Corporate and other		476		582		-18.2	%		(21,792	)		(18,651	)		16.8	%	NM			NM
Total	$	382,162	$	350,643		9.0	%	$	91,430		$	77,639			17.8	%		23.9	%		22.1	%

_________________

(1)CTU’s results of operations include the Coding Dojo acquisition commencing on the December 1, 2022 date of acquisition.

(2)AIUS’ results of operations include the CalSouthern acquisition commencing on the July 1, 2022 date of acquisition.

	TOTAL STUDENT ENROLLMENTS
	As of June 30,
	2023		2022		% Change
CTU		25,900		26,000		-0.4	%
AIUS		12,100		14,100		-14.2	%
Total		38,000		40,100		-5.2	%

Total student enrollments do not include learners participating in: a) non-degree seeking and professional development programs, and b) degree seeking, non-Title IV, self-paced programs at our universities. Total student enrollments represent students who are active as of the last day of the reporting period. Active students are defined as those students who are considered in attendance by participating in class related activities during the previous two weeks.

CTU. Current quarter and year to date revenue increased by 18.7% or $18.8 million and 14.1% or $30.2 million, respectively, as compared to the prior year periods. The increase in revenue reflects underlying organic growth and was benefitted by a positive timing impact of the academic calendar as well as the 2022 acquisition which was not part of the comparative prior year periods. Total student enrollments remained relatively flat at June 30, 2023 as compared June 30, 2022 due to a negative timing impact that offset underlying organic growth driven by improved student retention. CTU’s academic calendar redesign may impact the comparability of

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revenue-earning days and enrollment results in any given quarter, with the impact on revenue and total student enrollments not necessarily having the same magnitude or directional impact.

Current quarter and year to date operating income for CTU increased by 22.5% or $7.4 million and 10.7% or $8.1 million, respectively, as compared to the prior year periods driven by the increase in revenue discussed above as well as decreased bad debt and occupancy expenses.

AIUS. Current quarter and year to date revenue increased by 0.2% or $0.1 million and 1.1% or $1.5 million, respectively, as compared to the prior year periods driven by the 2022 acquisition which was not part of the comparative prior year periods. Excluding the 2022 acquisition, revenue would have declined. Total student enrollments declined by 14.2% at June 30, 2023 as compared to June 30, 2022 driven by the operating changes made during the current year discussed above within "2023 Second Quarter Overview".

Current quarter and year to date operating income for AIUS increased by 59.1% or $6.3 million and 43.6% or $8.8 million, respectively, as compared to the prior year periods driven by lower advertising and marketing, occupancy and bad debt expenses as compared to the prior year periods as well as the increase in revenue.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current quarter decreased by 3.7% or $0.4 million as compared to the prior year quarter, driven by lower occupancy expense. The year to date operating loss increased by 16.8% or $3.1 million as compared to the prior year period, primarily as a result of increased legal fee expense.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Summary of Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. Note 2 “Summary of Significant Accounting Policies” of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 also includes a discussion of these and other significant accounting policies.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of June 30, 2023, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $578.1 million. Restricted cash as of June 30, 2023 was $9.5 million and relates to amounts held in escrow accounts to secure post-closing indemnification obligations of the sellers pursuant to recent acquisitions. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We expect to continue to generate cash during the remainder of 2023. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments, quarterly dividends payments and potential acquisitions through at least the next 12 months primarily with cash generated by operations and existing cash balances.

We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) investing in organic projects at our universities, in particular technology-related initiatives which are designed to benefit our students, and (ii) evaluating diverse strategies to enhance stockholder value, including acquisitions that further extend the depth and breadth of our educational offerings, share repurchases and quarterly dividend payments. Ultimately, our goal is to deploy resources in a way that drives long term stockholder value while supporting and enhancing the academic value of our institutions.

On January 27, 2022, the Board of Directors of the Company approved a stock repurchase program for up to $50.0 million which commenced March 1, 2022 and expires September 30, 2023. On July 27, 2023, the Board of Directors of the Company extended the expiration date of the program to September 30, 2024. The timing of purchases and the number of shares repurchased under the program will be determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. Share repurchases will remain a part of our capital allocation strategy. Since the March 1, 2022 inception date, the Company repurchased approximately 2.3 million shares for $25.9 million, of which approximately 0.2 million shares were repurchased for $1.9 million during the quarter ended June 30, 2023.

On September 8, 2021, the Company and the subsidiary guarantors thereunder entered into a credit agreement with Wintrust Bank N.A. (“Wintrust”), in its capacities as the sole lead arranger, sole bookrunner, administrative agent and letter of credit issuer for the lenders from time to time parties thereto. The credit agreement provides the Company with the benefit of a $125.0 million senior secured revolving credit facility. The $125.0 million revolving credit facility under the credit agreement is scheduled to mature on September 8, 2024. So long as no default has occurred and other conditions have been met, the Company may request an increase in the aggregate commitment in an amount not to exceed $50.0 million. The loans and letter of credit obligations under the credit agreement are secured by substantially all assets of the Company and the subsidiary guarantors.

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The credit agreement and the ancillary documents executed in connection therewith contain customary affirmative, negative and financial maintenance covenants. The Company is required to maintain unrestricted cash, cash equivalents and short-term investments in domestic accounts in an amount at least equal to the aggregate loan commitments then in effect. Acquisitions to be undertaken by the Company must meet certain criteria, and the Company’s ability to make restricted payments, including payments in connection with a repurchase of shares of our common stock, is subject to an aggregate maximum of $100.0 million per fiscal year. Upon the occurrence of certain regulatory events or if the Company’s unrestricted cash, cash equivalents and short term investments are less than 125% of the aggregate amount of the loan commitments then in effect, the Company is required to maintain cash in a segregated, restricted account in an amount not less than the aggregate loan commitments then in effect. The credit agreement also contains customary representations and warranties, events of default, and rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments and realize upon the collateral securing the obligations under the credit agreement. As of June 30, 2023, there were no amounts outstanding under the revolving credit facility.

The discussion above reflects management’s expectations regarding liquidity; however, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on timing or our ability to receive Title IV Program funds, or any requirement to post a significant letter of credit to the Department, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student enrollments which could be impacted by external factors. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Sources and Uses of Cash

Operating Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows provided by operating activities totaled $66.2 million and $54.8 million, respectively. The increase in net cash flows provided by operating activities for the current year to date as compared to the prior year to date was driven by increased operating income.

Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, private loans and grants, institutional payment plans, private and institutional scholarships and cash payments.

For further discussion of Title IV Program funding and other funding sources for our students, see Item 1, “Business - Student Financial Aid and Related Federal Regulation,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.

Investing Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows used in investing activities totaled $30.5 million and $209.6 million, respectively.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash outflow of $26.9 million and $195.8 million for the years to date ended June 30, 2023 and 2022, respectively.

Capital Expenditures. Capital expenditures decreased to $3.6 million for the year to date ended June 30, 2023 as compared to $6.8 million for the year to date ended June 30, 2022. Capital expenditures represented approximately 0.9% and 1.8% of total revenue for the years to date ended June 30, 2023 and 2022, respectively. For the full year 2023, we expect capital expenditures to be approximately 1.5% of revenue.

Financing Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows used in financing activities totaled $4.6 million and $20.4 million, respectively. Payments to repurchase shares of our common stock were $2.7 million for the year to date ended June 30, 2023 and $15.7 million for the year to date ended June 30, 2022. The prior year to date included a $4.0 million payment to release the escrow associated with the Trident acquisition.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $2.2 million and $1.6 million for the years to date ended June 30, 2023 and 2022, respectively.

Changes in Financial Position

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Selected condensed consolidated balance sheet account changes from December 31, 2022 to June 30, 2023 were as follows (dollars in thousands):

	June 30,			December 31,
	2023			2022			% Change
ASSETS
CURRENT ASSETS:
Receivables, other		6,896			3,457			99	%
Prepaid expenses		12,524			8,411			49	%
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Payroll and related benefits		27,291			40,306			-32	%
Income taxes		16,041			7,814			105	%
STOCKHOLDERS' EQUITY
Treasury stock		(328,648	)		(301,624	)		9	%

Receivables, other: The increase is primarily related to adjustments associated with the Dojo acquisition.

Prepaid expenses: The increase is driven by timing of prepayments for annual invoices, which are typically paid in the first half of the year and amortized by the end of a year.

Payroll and related benefits: The decrease is driven by annual incentive compensation payments typically made during the first quarter of the year.

Income taxes: The increase primarily relates to amounts owed with respect to estimated payments of federal and state income tax for 2023.

Treasury stock: The increase is primarily driven by the non-cash sale of the LCB trade name in exchange for 1.8 million outstanding shares of Perdoceo stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial market risks, primarily changes in interest rates. We use various techniques to manage our interest rate risk. We have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available for sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we use asset managers who conduct initial and ongoing credit analysis on our investment portfolio and monitor that investments are in compliance with our investment policy. Despite the investment risk mitigation strategies we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline.

Interest Rate Exposure

Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At June 30, 2023, a 10% increase or decrease in interest rates applicable to our investments or borrowings would not have a material impact on our future earnings, fair values or cash flows.

Under the credit agreement, outstanding principal amounts bear annual interest at a fluctuating rate equal to 1.0% less than the administrative agent’s prime commercial rate, subject to a 3.0% minimum rate. A higher rate may apply to late payments or if any event of default exists. As of June 30, 2023, we had no outstanding borrowings under this facility.

Our financial instruments are recorded at their fair values as of June 30, 2023 and December 31, 2022. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates applicable to our investments or borrowings is not significant.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We completed an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q (“Report”) under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities

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Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the rules and forms provided by the U.S. Securities and Exchange Commission (“SEC”), and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Note 10 “Contingencies” to our unaudited condensed consolidated financial statements is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, Item 1A “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 23, 2022.

Dividends on our common stock are only payable if declared by the Board of Directors of the Company and permitted by Delaware law.

We declared our first quarterly cash dividend in the third quarter of 2023. We may in the future pay cash dividends to our stockholders but our Board of Directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely. Our declaration and payment of future cash dividends are subject to the final determination by our Board of Directors that (i) the dividend will be made in compliance with laws applicable to the declaration and payment of cash dividends, including Delaware law, and (ii) the payment of dividends remains in our best interests, which determination will be based on a number of factors, which may include the impact of changing laws and regulations, economic conditions, our results of operations and/or financial condition, including our earnings and cash flows, capital spending plans, the ability to satisfy financial covenants and other factors considered relevant by the Board of Directors. There can be no assurance our Board of Directors will approve the payment of cash dividends in the future. Any discontinuance of the payment of a dividend or changes to the amount of a dividend compared to prior dividends could cause our stock price to decline.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 27, 2022, the Board of Directors of the Company approved a stock repurchase program which authorizes the Company to repurchase up to $50.0 million of the Company’s outstanding common stock. See Note 13 “Stock Repurchase Program” to our unaudited condensed consolidated financial statements for further information.

The following table sets forth information regarding purchases made by us of shares of our common stock on a monthly basis during the year to date ended June 30, 2023:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
December 31, 2022								$	26,840,200
January 1, 2023—January 31, 2023		-		$	-		-		26,840,200
February 1, 2023—February 28, 2023		-			-		-		26,840,200
March 1, 2023—March 31, 2023		225,154			13.43		59,920		26,023,778
April 1, 2023—April 30, 2023		-			-		-		26,023,778
May 1, 2023—May 31, 2023		161,074			11.88		161,074		24,107,027
June 1, 2023—June 30, 2023		1,800,000	(3)		12.27		-		24,107,027
Total		2,186,228					220,994

(1)Includes 165,234 shares delivered back to the Company for payment of withholding taxes from employees for vesting restricted stock units pursuant to the terms of the Perdoceo Education Corporation Amended and Restated 2016 Incentive Compensation Plan.

(2)On January 27, 2022, the Board of Directors of the Company approved a stock repurchase program of up to $50.0 million (the "2022 Repurchase Program") which commenced on March 1, 2022 and expires on September 30, 2023. On July 27, 2023, the Board of Directors of the Company extended the expiration date of the 2022 Repurchase Program to September 30, 2024.

(3)On June 30, 2023, the Company entered into a non-cash asset purchase agreement with Le Cordon Bleu International B.V. ("LCBI"), a company incorporated in The Netherlands, to sell the Company’s outright rights to the Le Cordon Bleu ("LCB")

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brand, trade names and rights for North America in exchange for 1.8 million outstanding shares of the Company’s common stock. The fair value of the 1.8 million shares of the Company’s common stock repurchased was approximately $22.1 million. These shares were not repurchased under the 2022 Repurchase Program. See Note 9 “Other Intangible Assets” to our unaudited condensed consolidated financial statements for further information.

Item 5. Other Information

Rule 10b5-1 Plan Elections

Todd Nelson, Executive Chairman of the Board, entered into a pre-arranged stock trading plan on May 9, 2023. Mr. Nelson’s plan provides for the sale between August 9, 2023 and April 30, 2024 of up to 569,836 shares of the Company’s common stock owned by Mr. Nelson, or which Mr. Nelson has the right to acquire under outstanding vested stock options and upon the vesting of restricted stock units that will vest prior to April 30, 2024.

Andrew Hurst, President and Chief Executive Officer, entered into a pre-arranged stock trading plan on May 9, 2023. Mr. Hurst’s plan provides for the sale between August 17, 2023 and February 29, 2024 of up to 46,510 shares of the Company’s common stock owned by Mr. Hurst, or which Mr. Hurst has the right to acquire under outstanding vested stock options.

John Kline, Senior Vice President – American InterContinental University System, entered into a pre-arranged stock trading plan on May 12, 2023. Mr. Kline’s plan provides for the sale between August 15, 2023 and May 13, 2024 of up to 22,000 shares of the Company’s common stock owned by Mr. Kline, or which Mr. Kline has the right to acquire under outstanding vested stock options.

Each of the trading plans was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, and the Company’s policies regarding transactions in Company securities

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Item 6. Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the “Exhibit Index,” which is attached hereto and incorporated by reference herein.

	INDEX TO EXHIBITS
Exhibit Number	Exhibit	Incorporated by Reference to:
*10.1	2023 Annual Incentive Plan	Exhibit 10.1 to our Form 8-K/A filed on March 13, 2023
+10.2	Notice Regarding Payment of Dividend Equivalents on Restricted Stock Units
+10.3	Notice Regarding Payment of Dividend Equivalents on Deferred Stock Units
+31.1	Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
+31.2	Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
+32.1	Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
+32.2	Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
+101.INS	Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
+101.SCH	Inline XBRL Taxonomy Extension Schema Document
+101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
+101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
+101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
+101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
+104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL (included in Exhibit 101)
	____
	* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-Q
	+Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PERDOCEO EDUCATION CORPORATION
Date: August 3, 2023	By:	/s/ ANDREW H. HURST
		Andrew H. Hurst President and Chief Executive Officer (Principal Executive Officer)
Date: August 3, 2023	By:	/s/ ASHISH R. GHIA
		Ashish R. Ghia Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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