(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 59-3551629 (I.R.S. Employer Identification No.) |
Large accelerated filer ☐ | Accelerated filer ☒ | |
Non-accelerated filer ☐ | Smaller reporting company ☒ | |
Emerging growth company ☐ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | ZVO | The Nasdaq Stock Market LLC |
As of June 30, 2019 | As of December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 104,617 | $ | 166,307 | |||
Restricted cash | 20,049 | 18,619 | |||||
Investments | 2,344 | 2,068 | |||||
Accounts receivable, net | 33,720 | 27,015 | |||||
Prepaid expenses and other current assets | 25,754 | 18,255 | |||||
Total current assets | 186,484 | 232,264 | |||||
Property and equipment, net | 28,496 | 16,860 | |||||
Operating lease assets | 26,261 | — | |||||
Goodwill and intangibles, net | 47,199 | 12,441 | |||||
Other long-term assets | 8,704 | 7,927 | |||||
Total assets | $ | 297,144 | $ | 269,492 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 83,886 | $ | 62,792 | |||
Deferred revenue and student deposits | 59,384 | 63,834 | |||||
Total current liabilities | 143,270 | 126,626 | |||||
Rent liability | 24,928 | 3,183 | |||||
Lease financing obligation | — | 8,634 | |||||
Other long-term liabilities | 6,556 | 3,435 | |||||
Total liabilities | 174,754 | 141,878 | |||||
Commitments and contingencies (see Note 15) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $0.01 par value: | |||||||
20,000 shares authorized; zero shares issued and outstanding at both June 30, 2019, and December 31, 2018 | — | — | |||||
Common stock, $0.01 par value: | |||||||
300,000 shares authorized; 65,628 and 65,289 issued, and 30,260 and 27,168 outstanding, at June 30, 2019 and December 31, 2018, respectively | 659 | 653 | |||||
Additional paid-in capital | 185,293 | 205,157 | |||||
Retained earnings | 405,753 | 429,992 | |||||
Treasury stock, 35,368 and 38,121 shares at cost at June 30, 2019, and at December 31, 2018, respectively | (469,315 | ) | (508,188 | ) | |||
Total stockholders' equity | 122,390 | 127,614 | |||||
Total liabilities and stockholders' equity | $ | 297,144 | $ | 269,492 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | $ | 107,495 | $ | 119,037 | $ | 217,259 | $ | 235,814 | |||||||
Costs and expenses: | |||||||||||||||
Instructional costs and services | 55,088 | 54,397 | 107,026 | 111,011 | |||||||||||
Admissions advisory and marketing | 44,810 | 39,875 | 93,882 | 88,069 | |||||||||||
General and administrative | 22,532 | 12,549 | 38,452 | 25,297 | |||||||||||
Legal settlement expense | — | 141 | — | 141 | |||||||||||
Restructuring and impairment expense | 5,394 | 2,729 | 5,423 | 2,570 | |||||||||||
Total costs and expenses | 127,824 | 109,691 | 244,783 | 227,088 | |||||||||||
Operating income (loss) | (20,329 | ) | 9,346 | (27,524 | ) | 8,726 | |||||||||
Other income, net | 297 | 282 | 896 | 532 | |||||||||||
Income (loss) before income taxes | (20,032 | ) | 9,628 | (26,628 | ) | 9,258 | |||||||||
Income tax benefit | (2,435 | ) | (5,452 | ) | (2,389 | ) | (7,132 | ) | |||||||
Net income (loss) | $ | (17,597 | ) | $ | 15,080 | $ | (24,239 | ) | $ | 16,390 | |||||
Income (loss) per share: | |||||||||||||||
Basic | $ | (0.58 | ) | $ | 0.56 | $ | (0.84 | ) | $ | 0.60 | |||||
Diluted | $ | (0.58 | ) | $ | 0.55 | $ | (0.84 | ) | $ | 0.60 | |||||
Weighted average number of common shares outstanding used in computing income (loss) per share: | |||||||||||||||
Basic | 30,215 | 27,170 | 28,706 | 27,167 | |||||||||||
Diluted | 30,215 | 27,348 | 28,706 | 27,491 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | |||||||||||||||||||
Shares | Par Value | Total | ||||||||||||||||||||
Balance at December 31, 2017 | 64,887 | $ | 649 | $ | 201,755 | $ | 426,356 | $ | (505,764 | ) | $ | 122,996 | ||||||||||
Adoption of accounting standards (Note 2) | — | — | — | (1,000 | ) | — | (1,000 | ) | ||||||||||||||
Stock-based compensation | — | — | 1,165 | — | — | 1,165 | ||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | 186 | 2 | (707 | ) | — | — | (705 | ) | ||||||||||||||
Stock repurchase | — | — | — | — | — | — | ||||||||||||||||
Net income | — | — | — | 1,310 | — | 1,310 | ||||||||||||||||
Balance at March 31, 2018 | 65,073 | $ | 651 | $ | 202,213 | $ | 426,666 | $ | (505,764 | ) | $ | 123,766 | ||||||||||
Stock-based compensation | — | — | 1,160 | — | — | 1,160 | ||||||||||||||||
Stock issued under employee stock purchase plan | 16 | — | 98 | — | — | 98 | ||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | 20 | — | (48 | ) | — | — | (48 | ) | ||||||||||||||
Stock repurchase | — | — | — | — | (2,424 | ) | (2,424 | ) | ||||||||||||||
Net income | — | — | — | 15,080 | — | 15,080 | ||||||||||||||||
Balance at June 30, 2018 | 65,109 | $ | 651 | $ | 203,423 | $ | 441,746 | $ | (508,188 | ) | $ | 137,632 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | |||||||||||||||||||
Shares | Par Value | Total | ||||||||||||||||||||
Balance at December 31, 2018 | 65,289 | $ | 653 | $ | 205,157 | $ | 429,992 | $ | (508,188 | ) | $ | 127,614 | ||||||||||
Stock-based compensation | — | — | 1,706 | — | — | 1,706 | ||||||||||||||||
Exercise of stock options | 6 | 1 | 59 | — | — | 60 | ||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | 284 | 2 | (757 | ) | — | — | (755 | ) | ||||||||||||||
Net loss | — | — | — | (6,642 | ) | — | (6,642 | ) | ||||||||||||||
Balance at March 31, 2019 | 65,579 | $ | 656 | $ | 206,165 | $ | 423,350 | $ | (508,188 | ) | $ | 121,983 | ||||||||||
Stock-based compensation | — | — | 3,596 | — | — | 3,596 | ||||||||||||||||
Stock issued under employee stock purchase plan | 29 | — | 96 | — | — | 96 | ||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | 20 | — | (51 | ) | — | — | (51 | ) | ||||||||||||||
Stock issued under acquisition | — | 3 | (24,513 | ) | 38,873 | 14,363 | ||||||||||||||||
Net loss | — | — | — | (17,597 | ) | — | (17,597 | ) | ||||||||||||||
Balance at June 30, 2019 | 65,628 | $ | 659 | $ | 185,293 | $ | 405,753 | $ | (469,315 | ) | $ | 122,390 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (24,239 | ) | $ | 16,390 | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Provision for bad debts | 7,525 | 11,872 | |||||
Depreciation and amortization | 4,198 | 3,533 | |||||
Deferred income taxes | 75 | 8 | |||||
Stock-based compensation | 5,302 | 2,325 | |||||
Noncash lease expense | 9,345 | — | |||||
Net gain on marketable securities | (203 | ) | (24 | ) | |||
Reassessment of lease charges | 558 | 1,227 | |||||
Loss on disposal or impairment of fixed assets | — | 334 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (8,579 | ) | (19,900 | ) | |||
Prepaid expenses and other current assets | (1,355 | ) | 1,828 | ||||
Other long-term assets | (684 | ) | 737 | ||||
Accounts payable and accrued liabilities | 7,086 | (10,588 | ) | ||||
Deferred revenue and student deposits | (7,000 | ) | (8,335 | ) | |||
Operating lease liabilities | (11,517 | ) | — | ||||
Other liabilities | (2,630 | ) | (8,624 | ) | |||
Net cash used in operating activities | (22,118 | ) | (9,217 | ) | |||
Cash flows from investing activities: | |||||||
Capital expenditures | (17,767 | ) | (1,291 | ) | |||
Purchases of investments | (74 | ) | (1,033 | ) | |||
Capitalized costs for intangible assets | (293 | ) | (470 | ) | |||
Cash paid in acquisition, net of cash acquired | (19,286 | ) | — | ||||
Sale of investments | — | 975 | |||||
Net cash used in investing activities | (37,420 | ) | (1,819 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from exercise of stock options | 60 | — | |||||
Proceeds from the issuance of stock under employee stock purchase plan | 96 | 98 | |||||
Tax withholdings on issuance of stock awards | (806 | ) | (753 | ) | |||
Repurchase of common stock | — | (2,424 | ) | ||||
Net cash used in financing activities | (650 | ) | (3,079 | ) | |||
Net decrease in cash, cash equivalents and restricted cash | (60,188 | ) | (14,115 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 190,584 | 205,526 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 130,396 | $ | 191,411 | |||
Supplemental disclosure of non-cash transactions: | |||||||
Purchase of equipment included in accounts payable and accrued liabilities | $ | 4,637 | $ | 323 | |||
Issuance of common stock for vested restricted stock units | $ | 2,628 | $ | 2,140 | |||
Consideration for acquisition in accounts payable and accrued liabilities | $ | 483 | $ | — | |||
Issuance of common stock for acquisitions | $ | 14,363 | $ | — | |||
Reconciliation of cash, cash equivalents, and restricted cash: | |||||||
Cash and cash equivalents | $ | 104,617 | $ | 171,596 | |||
Restricted cash | 20,049 | 19,815 | |||||
Long-term restricted cash | 5,730 | — | |||||
Total cash, cash equivalents and restricted cash | $ | 130,396 | $ | 191,411 |
As Reported | As Restated | As Reported | As Restated | ||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
Condensed consolidated statement of income (loss) data: | June 30, 2018 | June 30, 2018 | |||||||||||||
Revenue | $ | 120,834 | $ | 119,037 | $ | 238,865 | $ | 235,814 | |||||||
Instructional costs and services | $ | 53,986 | $ | 54,397 | $ | 110,848 | $ | 111,011 | |||||||
Total costs and expenses | $ | 109,280 | $ | 109,691 | $ | 226,925 | $ | 227,088 | |||||||
Operating income | $ | 11,554 | $ | 9,346 | $ | 11,940 | $ | 8,726 | |||||||
Income before income taxes | $ | 11,836 | $ | 9,628 | $ | 12,472 | $ | 9,258 | |||||||
Income tax benefit | $ | (5,395 | ) | $ | (5,452 | ) | $ | (7,056 | ) | $ | (7,132 | ) | |||
Net income | $ | 17,231 | $ | 15,080 | $ | 19,528 | $ | 16,390 | |||||||
Basic income per share | $ | 0.63 | $ | 0.56 | $ | 0.72 | $ | 0.60 | |||||||
Diluted income per share | $ | 0.63 | $ | 0.55 | $ | 0.71 | $ | 0.60 |
As Reported | As Restated | ||||||
Six Months Ended | |||||||
Condensed consolidated statement of cash flow data: | June 30, 2018 | ||||||
Net income | $ | 19,528 | $ | 16,390 | |||
Provision for bad debts | $ | 11,709 | $ | 11,872 | |||
Accounts receivable | $ | (21,376 | ) | $ | (19,900 | ) | |
Prepaid expenses and other current assets | $ | 1,904 | $ | 1,828 | |||
Deferred revenue and student deposits | $ | (9,910 | ) | $ | (8,335 | ) | |
Cash flows used in operating activities | $ | (9,217 | ) | $ | (9,217 | ) |
As Reported | As Restated | ||||||
Condensed consolidated statement of stockholders’ equity data: | June 30, 2018 | ||||||
Retained earnings | $ | 448,195 | $ | 441,746 | |||
Total stockholders’ equity | $ | 144,081 | $ | 137,632 |
Closing balance at December 31, 2018 | Adjustments due to ASC 842 | Opening balance at January 1, 2019 | |||||||||
Assets | |||||||||||
Prepaid and other current assets | $ | 18,255 | $ | (1,745 | ) | $ | 16,510 | ||||
Property and equipment, net | $ | 16,860 | $ | (8,634 | ) | $ | 8,226 | ||||
Operating lease assets (1) (2) | $ | — | $ | 25,165 | $ | 25,165 | |||||
Liabilities and stockholder’s equity | |||||||||||
Accounts payable and accrued liabilities | $ | 62,792 | $ | 13,177 | $ | 75,969 | |||||
Noncurrent operating lease liabilities (3) | $ | 3,183 | $ | 10,243 | $ | 13,426 | |||||
Lease financing obligation | $ | 8,634 | $ | (8,634 | ) | $ | — |
(1) | Represents the reclassification of prepaid rent to operating lease assets |
(2) | Represents capitalization of operating lease assets |
(3) | Represents recognition of operating lease liabilities; Previously disclosed as rent liability for the portion related to accrued rent. |
Estimated cash consideration for acquired assets | $ | 17,540 | ||
Estimated fair value of equity | 12,336 | |||
Preliminary fair value of contingent consideration payable | 3,250 | |||
Total estimated purchase price | $ | 33,126 |
Preliminary Purchase Price Allocation: | ||||
Cash and cash equivalents | $ | 585 | ||
Accounts receivable | 5,604 | |||
Prepaid and other assets | 665 | |||
Property and equipment | 167 | |||
Operating lease assets | 1,297 | |||
Intangible assets | 11,605 | |||
Other long-term assets | 20 | |||
Accounts payable and accrued liabilities | (496 | ) | ||
Deferred revenue | (2,350 | ) | ||
Long-term liabilities | (1,297 | ) | ||
Total identifiable net assets acquired | $ | 15,800 | ||
Deferred tax liability | (2,165 | ) | ||
Goodwill | 19,491 | |||
Total estimated purchase consideration | $ | 33,126 |
Estimated cash consideration for acquired assets | $ | 3,028 | ||
Estimated fair value of equity | 2,026 | |||
Total estimated purchase price | $ | 5,054 |
Preliminary Purchase Price Allocation: | ||||
Cash and cash equivalents | $ | 214 | ||
Accounts receivable | 46 | |||
Intangible assets | 1,730 | |||
Accounts payable and accrued liabilities | (35 | ) | ||
Deferred revenue | (200 | ) | ||
Long-term liabilities | (3 | ) | ||
Total identifiable net assets acquired | $ | 1,752 | ||
Deferred tax liability | (260 | ) | ||
Goodwill | 3,562 | |||
Total estimated purchase consideration | $ | 5,054 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Tuition revenue, net | $ | 97,729 | $ | 107,795 | $ | 196,686 | $ | 215,001 | |||||||
Digital materials revenue, net | 6,201 | 6,638 | 13,058 | 12,666 | |||||||||||
Technology fee revenue, net | 3,094 | 4,058 | 6,525 | 7,085 | |||||||||||
Other revenue, net (1) | 471 | 546 | 990 | 1,062 | |||||||||||
Total revenue, net | $ | 107,495 | $ | 119,037 | $ | 217,259 | $ | 235,814 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Over time, over period of instruction | $ | 88,732 | $ | 102,868 | $ | 179,446 | $ | 205,171 | |||||||
Over time, full tuition grant (1) | 12,888 | 9,514 | 25,310 | 17,838 | |||||||||||
Point in time (2) | 5,875 | 6,655 | 12,503 | 12,805 | |||||||||||
Total revenue, net | $ | 107,495 | $ | 119,037 | $ | 217,259 | $ | 235,814 |
(1) | Represents revenue generated from the FTG program. |
(2) | Represents revenue generated from digital textbooks and other miscellaneous fees. |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Deferred revenue opening balance, January 1 | $ | 21,768 | $ | 22,001 | |||
Deferred revenue closing balance, June 30 | 24,009 | 24,388 | |||||
Increase (Decrease) | $ | 2,241 | $ | 2,387 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Asset impairment | $ | — | $ | 325 | $ | — | $ | 325 | |||||||
Student transfer agreement costs | (139 | ) | — | (139 | ) | — | |||||||||
Severance costs | 5,011 | 671 | 5,011 | 1,018 | |||||||||||
Lease exit and other costs | 522 | 1,733 | 551 | 1,227 | |||||||||||
Total restructuring and impairment expense | $ | 5,394 | $ | 2,729 | $ | 5,423 | $ | 2,570 |
Student Transfer Agreement Costs | Severance Costs | Lease Exit and Other Costs | Total | ||||||||||||
Balance at December 31, 2018 | $ | 1,503 | $ | 267 | $ | 2,864 | $ | 4,634 | |||||||
Restructuring and impairment expense | (139 | ) | 5,011 | 551 | 5,423 | ||||||||||
Payments and adjustments | (13 | ) | (1,121 | ) | (2,489 | ) | (3,623 | ) | |||||||
Balance at June 30, 2019 | $ | 1,351 | $ | 4,157 | $ | 926 | $ | 6,434 |
As of June 30, 2019 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual funds | $ | 2,344 | $ | — | $ | — | $ | 2,344 | |||||||
Contingent consideration | $ | — | $ | — | $ | 3,250 | $ | 3,250 |
As of December 31, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual funds | $ | 2,068 | $ | — | $ | — | $ | 2,068 |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Accounts receivable | $ | 43,563 | $ | 39,195 | |||
Less allowance for doubtful accounts | 9,843 | 12,180 | |||||
Accounts receivable, net | $ | 33,720 | $ | 27,015 |
Beginning Balance | Charged to Expense | Deductions (1) | Ending Balance | ||||||||||||
Allowance for doubtful accounts receivable: | |||||||||||||||
For the six months ended June 30, 2019 | $ | 12,180 | $ | 7,525 | $ | (5,188 | ) | $ | 9,843 | ||||||
For the six months ended June 30, 2018 | $ | 15,189 | $ | 11,872 | $ | (9,227 | ) | $ | 12,544 |
(1) | Deductions represent accounts written off, net of recoveries. |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Prepaid expenses | $ | 4,627 | $ | 5,445 | |||
Prepaid licenses | 6,398 | 5,840 | |||||
Prepaid income taxes | 198 | — | |||||
Income tax receivable | 4,241 | 5,044 | |||||
Prepaid insurance | 1,639 | 1,077 | |||||
Insurance recoverable | 911 | 723 | |||||
Other current assets | 7,740 | 126 | |||||
Total prepaid expenses and other current assets | $ | 25,754 | $ | 18,255 |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Buildings, build-to-suit | $ | — | $ | 10,434 | |||
Furniture and office equipment | 43,728 | 31,227 | |||||
Software | 7,652 | 7,517 | |||||
Leasehold improvements | 15,134 | 3,430 | |||||
Vehicles | 22 | 22 | |||||
Total property and equipment | 66,536 | 52,630 | |||||
Less accumulated depreciation and amortization | (38,040 | ) | (35,770 | ) | |||
Total property and equipment, net | $ | 28,496 | $ | 16,860 |
June 30, 2019 | |||||||||||
Definite-lived intangible assets: | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||
Capitalized curriculum costs | $ | 20,923 | $ | (19,365 | ) | $ | 1,558 | ||||
Purchased intangible assets | 29,185 | (8,670 | ) | 20,515 | |||||||
Total definite-lived intangible assets | $ | 50,108 | $ | (28,035 | ) | $ | 22,073 | ||||
Goodwill and indefinite-lived intangibles | 25,126 | ||||||||||
Total goodwill and intangibles, net | $ | 47,199 | |||||||||
December 31, 2018 | |||||||||||
Definite-lived intangible assets: | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||
Capitalized curriculum costs | $ | 21,076 | $ | (19,338 | ) | $ | 1,738 | ||||
Purchased intangible assets | 15,850 | (7,219 | ) | 8,631 | |||||||
Total definite-lived intangible assets | $ | 36,926 | $ | (26,557 | ) | $ | 10,369 | ||||
Goodwill and indefinite-lived intangibles | 2,072 | ||||||||||
Total goodwill and intangibles, net | $ | 12,441 |
Year Ended December 31, | ||||
Remainder of 2019 | $ | 2,665 | ||
2020 | 5,205 | |||
2021 | 4,015 | |||
2022 | 3,380 | |||
2023 | 3,300 | |||
Thereafter | 3,508 | |||
Total future amortization expense | $ | 22,073 |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Accounts payable | $ | 8,260 | $ | 5,313 | |||
Accrued salaries and wages | 11,918 | 7,807 | |||||
Accrued bonus | 3,596 | 8,147 | |||||
Accrued vacation | 6,042 | 7,929 | |||||
Accrued litigation and fees | 8,041 | 8,041 | |||||
Accrued expenses | 29,708 | 17,692 | |||||
Current leases payable | 14,035 | 5,768 | |||||
Accrued insurance liability | 2,286 | 2,095 | |||||
Total accounts payable and accrued liabilities | $ | 83,886 | $ | 62,792 |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Deferred revenue | $ | 24,009 | $ | 21,768 | |||
Student deposits | 35,375 | 42,066 | |||||
Total deferred revenue and student deposits | $ | 59,384 | $ | 63,834 |
As of June 30, 2019 | As of December 31, 2018 | ||||||
Uncertain tax positions | $ | 873 | $ | 865 | |||
Contingent consideration | 3,250 | — | |||||
Other long-term liabilities | 2,433 | 2,570 | |||||
Total other long-term liabilities | $ | 6,556 | $ | 3,435 |
Operating lease assets: | ||||
Arizona | $ | 8,653 | ||
California | 7,738 | |||
Colorado | 8,799 | |||
Iowa | 170 | |||
New York | 589 | |||
Other | 312 | |||
Total | $ | 26,261 |
Operating lease liabilities: | ||||
Accounts payable and accrued liabilities | $ | 14,035 | ||
Rent liability | 24,928 | |||
Total | $ | 38,963 |
Operating lease costs | $ | 9,345 | ||
Short-term lease cost | 79 | |||
Variable lease costs (1) | 270 | |||
Less: Sub-lease income | (1,592 | ) | ||
Total net lease costs | $ | 8,102 |
(1) | Variable components of the lease payments such as utilities, taxes and insurance, parking and maintenance costs. |
Remainder of 2019 | $ | 9,827 | ||
2020 | 9,992 | |||
2021 | 6,494 | |||
2022 | 3,921 | |||
2023 | 2,750 | |||
2024 | 2,406 | |||
Thereafter | 15,304 | |||
Total minimum payments | $ | 50,694 | ||
Less: Interest (1) | (11,731 | ) | ||
Total net lease liabilities | $ | 38,963 |
(1) | Calculated using an appropriate interest rate for each individual lease. See the weighted-average discount rate noted below. |
Year Ended December 31, | ||||
2019 | $ | 20,382 | ||
2020 | 9,936 | |||
2021 | 6,460 | |||
2022 | 3,826 | |||
2023 | 2,726 | |||
Thereafter | 17,710 | |||
Total minimum payments | $ | 61,040 |
Weighted-average remaining lease term (in years): | |||
Operating leases | 5.9 years | ||
Weighted-average discount rate: | |||
Operating leases | 7.4 | % |
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 11,517 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Numerator: | |||||||||||||||
Net income (loss) | $ | (17,597 | ) | $ | 15,080 | $ | (24,239 | ) | $ | 16,390 | |||||
Denominator: | |||||||||||||||
Weighted average number of common shares outstanding | 30,215 | 27,170 | 28,706 | 27,167 | |||||||||||
Effect of dilutive options and stock units | — | 178 | — | 324 | |||||||||||
Diluted weighted average number of common shares outstanding | 30,215 | 27,348 | 28,706 | 27,491 | |||||||||||
Income (loss) per share: | |||||||||||||||
Basic | $ | (0.58 | ) | $ | 0.56 | $ | (0.84 | ) | $ | 0.60 | |||||
Diluted | $ | (0.58 | ) | $ | 0.55 | $ | (0.84 | ) | $ | 0.60 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Stock options | 1,973 | 2,847 | 1,987 | 2,859 | |||||||
RSUs and PSUs | 2,990 | 42 | 1,336 | 10 |
• | our ability to successfully convert Ashford University to a nonprofit California public benefit corporation and for Ashford University to separate from the Company, including meeting all required conditions and obtaining all required approvals; |
• | Ashford University's ability to continue to operate as an accredited institution subject to the requirements of the State of California, Department of Consumer Affairs, Bureau for Private Postsecondary Education (the “BPPE”); |
• | our ability to comply with the extensive and continually evolving regulatory framework applicable to us and Ashford University, including Title IV of the Higher Education Act of 1965, as amended (“Higher Education Act”), and its implementing regulations, the “defense to repayment” regulations, state laws and regulatory requirements, and accrediting agency requirements; |
• | projections, predictions and expectations regarding our business, financial position, results of operations and liquidity, and enrollment trends at Ashford University; |
• | our ability to obtain continued approval of Ashford’s programs for GI Bill benefits through the Iowa State Approving Agency (“ISAA”), the Arizona State Approving Agency (“ASAA”), or the California State Approving Agency for Veteran's Education (“CSAAVE”), and to prevent any disruption of educational benefits to Ashford’s veteran students; |
• | the ability of Ashford to continue participating in the U.S. Department of Defense Tuition Assistance Program for active duty military personnel and to prevent any disruption of educational benefits to Ashford’s active duty military students; |
• | the outcome of various lawsuits, claims and legal proceedings; |
• | initiatives focused on student success, retention and academic quality; |
• | expectations regarding the adequacy of our cash and cash equivalents and other sources of liquidity for ongoing operations; |
• | expectations regarding capital expenditures; |
• | our anticipated seasonal fluctuations in operational results; |
• | management's goals and objectives; and |
• | other similar matters that are not historical facts. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Consolidated Statement of Income Data: | |||||||||||||||
Revenue | $ | 107,495 | $ | 119,037 | $ | 217,259 | $ | 235,814 | |||||||
Operating income (loss) | $ | (20,329 | ) | $ | 9,346 | $ | (27,524 | ) | $ | 8,726 | |||||
Consolidated Other Data: | |||||||||||||||
Period-end enrollment (1) | 37,910 | 40,097 | 37,910 | 40,097 |
(1) | We define period-end enrollment as the number of active students on the last day of the financial reporting period. A student is considered active if the student has attended a class within the prior 15 days or is on an institutionally-approved break not to exceed 45 days, unless the student has graduated or provided notice of withdrawal, or for new students who have completed their third week of attendance, and posted attendance in the fourth week. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Costs and expenses: | |||||||||||
Instructional costs and services | 51.3 | 45.7 | 49.3 | 47.1 | |||||||
Admissions advisory and marketing | 41.7 | 33.5 | 43.2 | 37.3 | |||||||
General and administrative | 21.0 | 10.5 | 17.7 | 10.7 | |||||||
Legal settlement expense | — | 0.1 | — | 0.1 | |||||||
Restructuring and impairment expense | 5.0 | 2.3 | 2.5 | 1.1 | |||||||
Total costs and expenses | 119.0 | 92.1 | 112.7 | 96.3 | |||||||
Operating income (loss) | (19.0 | ) | 7.9 | (12.7 | ) | 3.7 | |||||
Other income, net | 0.3 | 0.2 | 0.4 | 0.2 | |||||||
Income (loss) before income taxes | (18.7 | ) | 8.1 | (12.3 | ) | 3.9 | |||||
Income tax benefit | (2.3 | ) | (4.6 | ) | (1.1 | ) | (3.1 | ) | |||
Net income (loss) | (16.4 | )% | 12.7 | % | (11.2 | )% | 7.0 | % |
Payments Due by Period | |||||||||||||||||||||||||||
(In thousands) | Total | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | ||||||||||||||||||||
Operating lease obligations | $ | 50,330 | $ | 9,775 | $ | 9,895 | $ | 6,399 | $ | 3,826 | $ | 2,726 | $ | 17,709 | |||||||||||||
Other contractual obligations | 44,821 | 9,562 | 13,161 | 7,017 | 5,152 | 4,929 | 5,000 | ||||||||||||||||||||
Uncertain tax positions | 873 | — | 873 | — | — | — | — | ||||||||||||||||||||
Total | $ | 96,024 | $ | 19,337 | $ | 23,929 | $ | 13,416 | $ | 8,978 | $ | 7,655 | $ | 22,709 |
Exhibit | Description | ||
10.1 | |||
31.1 | |||
31.2 | |||
32.1 | |||
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 7, 2019, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018; (ii) the Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2019 and 2018; (iii) the Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018; (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018; and (v) the Notes to Condensed Consolidated Financial Statements. |
ZOVIO INC | |
August 7, 2019 | /s/ KEVIN ROYAL |
Kevin Royal Chief Financial Officer (Principal financial officer and duly authorized to sign on behalf of the registrant) |
Preferred Home Sale Program | Buyer Value Option program. Must participate with the Provider’s home sale program. Includes full service professional marketing assistance at no additional cost. No tax assistance. |
Or | |
Alternative Home Sale Program (Direct Reimbursement of Closing Costs) | Direct reimbursement of closing costs. Tax assisted. |
New Home Purchase Closing Costs | Reimbursement of normal and customary non-recurring buyer paid closing costs. |
Mortgage Coordination Assistance | Access to local and national lenders who offer competitive products with the benefit of having new home purchase closing costs direct billed. (no tax assistance) |
Household Goods Transportation | Full service with professional pack and full unpack. No maximum weight limits. Includes special handling of goods as needed. |
Household Goods Concierge | Includes concierge service with Provider management on-site, maid service for professional organization and putting items away. |
Household Goods Storage | Up to 90 days. |
Auto Transportation | One car per licensed driver. |
Home Finding Trip | Two trips up to eight days combined. Includes lodging, rental car, airfare or mileage reimbursement, reasonable and customary meal expenses according to Company travel policy. |
Home Finding Assistance | Home finding program through Provider for reimbursement of closing costs. (no tax assistance) |
Final Move | Airfare or mileage reimbursement, rental car and reasonable and customary meal expenses while en route according to Company travel policy. |
Return Trips | Airfare or mileage reimbursement only. Can be used every other weekend while in temporary living. |
Temporary Living (accommodation only) | 90 nights in fully furnished service apartment (including weekly housekeeping). Includes VIP meet and greet service and welcome grocery pack. |
Miscellaneous Relocation Assistance | One month base salary, not to exceed $10,000, paid net of taxes. (no tax assistance) |
Duplicate Housing Assistance | Up to three months duplicate housing assistance not to exceed $20,000, cannot be used at the same time while in Temporary Living. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Zovio Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ ANDREW S. CLARK | ||
Andrew S. Clark President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Zovio Inc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ KEVIN ROYAL | ||
Kevin Royal Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ ANDREW S. CLARK | ||
Andrew S. Clark President and Chief Executive Officer (Principal Executive Officer) |
/s/ KEVIN ROYAL | ||
Kevin Royal Chief Financial Officer (Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 02, 2019 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ZOVIO INC | |
Entity Central Index Key | 0001305323 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Current Reporting Status | No | |
Entity Shell Company | false | |
Entity Interactive Data Current | No | |
Entity Common Stock, Shares Outstanding | 30,259,905 |
Condensed Consolidated Balance Sheets - Parenthetical - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' equity: | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 65,628,000 | 65,289,000 |
Common stock, shares outstanding | 30,260,000 | 27,168,000 |
Treasury stock, shares at cost | 35,368,000 | 38,121,000 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenues | $ 107,495 | $ 119,037 | $ 217,259 | $ 235,814 |
Costs and expenses: | ||||
Instructional costs and services | 55,088 | 54,397 | 107,026 | 111,011 |
Admissions advisory and marketing | 44,810 | 39,875 | 93,882 | 88,069 |
General and administrative | 22,532 | 12,549 | 38,452 | 25,297 |
Legal settlement expense | 0 | 141 | 0 | 141 |
Restructuring and impairment expense | 5,394 | 2,729 | 5,423 | 2,570 |
Total costs and expenses | 127,824 | 109,691 | 244,783 | 227,088 |
Operating income (loss) | (20,329) | 9,346 | (27,524) | 8,726 |
Other income, net | 297 | 282 | 896 | 532 |
Income (loss) before income taxes | (20,032) | 9,628 | (26,628) | 9,258 |
Income tax benefit | (2,435) | (5,452) | (2,389) | (7,132) |
Net income (loss) | $ (17,597) | $ 15,080 | $ (24,239) | $ 16,390 |
Income (loss) per share: | ||||
Earnings Per Share, Basic (in dollars per share) | $ (0.58) | $ 0.56 | $ (0.84) | $ 0.60 |
Earnings Per Share, Diluted (in dollars per share) | $ (0.58) | $ 0.55 | $ (0.84) | $ 0.60 |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ (17,597) | $ 15,080 | $ (24,239) | $ 16,390 |
Weighted average number of common shares outstanding used in computing income (loss) per share: | ||||
Basic (in shares) | 30,215 | 27,170 | 28,706 | 27,167 |
Diluted (in shares) | 30,215 | 27,348 | 28,706 | 27,491 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (17,597) | $ 15,080 | $ (24,239) | $ 16,390 |
Earnings Per Share, Basic (in dollars per share) | $ (0.58) | $ 0.56 | $ (0.84) | $ 0.60 |
Other comprehensive income, net of tax: | ||||
Unrealized gains on investments | $ 0 | $ 0 | $ 0 | $ 0 |
Comprehensive income (loss) | $ (17,597) | $ 15,080 | $ (24,239) | $ 16,390 |
Nature of Business |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Zovio Inc (the “Company”), formerly known as Bridgepoint Education, Inc., is a Delaware corporation, and is an education technology services company that partners with higher education institutions and employers to deliver innovative, personalized solutions to help learners and leaders achieve their aspirations. Its wholly owned subsidiary, Ashford University®, is a regionally accredited academic institution, which delivers programs primarily online. Ashford University offers associate’s, bachelor’s, master’s and doctoral programs. On April 1, 2019, the Company acquired Fullstack Academy, Inc (“Fullstack”) and on April 3, 2019, the Company acquired TutorMe.com, Inc. (“TutorMe”), which became wholly-owned subsidiaries of the Company. The operating results of Fullstack and TutorMe subsequent to the acquisition dates have been included in the Company's condensed consolidated results of operations. For further information regarding the acquisitions, refer to Note 3, “Business Combinations” to the condensed consolidated financial statements. |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Unaudited Interim Financial Information The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission (“SEC”) on March 12, 2019. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. Restatement of Previously Issued Condensed Consolidated Financial Statements Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2018, the Company determined that such financial statements had errors related to: (i) revenue for the Corporate Full Tuition Grant (“FTG”) program portion of our student contracts which was misstated due to allowances that had not been properly determined and computational errors, which also resulted in misstatements in accounts receivable and its provision for bad debts, deferred revenue and student deposits, and the related income tax impact; and (ii) a misstatement in the adjustment to beginning retained earnings as of January 1, 2018 as a result of the incorrect adoption of ASU 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification Topic 606 (“ASC 606”) as it relates to the FTG program, resulting in a decrease of $2.2 million from the amount previously reported of $3.2 million to $1.0 million, as restated. As a result, the Company has restated the accompanying condensed consolidated financial statements for the three and six months ended June 30, 2018 from amounts previously reported to correct these matters. Management considers the restatement to be immaterial. The following tables present a summary of the impact of the restatement corrections and other immaterial adjustments on the condensed consolidated statement of income (loss), the condensed consolidated statement of cash flows and the condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2018. The following tables are presented in thousands, except per share data:
Comprehensive Income (Loss) The Company has no components of other comprehensive income (loss), and therefore, comprehensive income (loss) equals net income (loss). Leases In accordance with ASU 2016-02, Leases (ASC 842) (“ASC 842”), leases are evaluated and classified as either operating or finance leases. The Company does not have any finance leases. The Company’s operating leases are included in operating lease assets, accounts payable and accrued liabilities, and noncurrent lease liabilities on the condensed consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on information available at the date of adoption in calculating the present value of its existing lease payments. The incremental borrowing rate is determined using the U.S. Treasury rate adjusted to account for the Company’s credit rating and the collateralized nature of operating leases. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line method over the term of the lease. Leased property and equipment meeting certain criteria are capitalized as finance lease assets, and the present value of the related lease payments is recognized as a finance lease liability on the condensed consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter. Business Combinations The Company uses the acquisition method of accounting for business combinations. This method requires the use of significant estimates, assumptions and judgments in the determination of the estimated fair value of assets acquired and liabilities assumed in order to properly allocate the purchase price at the acquisition date. The estimates, assumptions and judgments are based in part on historical experience, industry data, information obtained from the management of the acquired companies and assistance from independent third-party appraisal firms. Examples of critical estimates include assigning values to the acquired identifiable intangible assets and valuing contingent consideration and earnout liabilities. For further information regarding the acquisitions, refer to Note 3, “Business Combinations” to the condensed consolidated financial statements. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update 2018-15 (“ASU 2018-15”), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Specifically, ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract and which costs to expense. This guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted. Entities are permitted to apply a retrospective or a prospective transition approach to adopt the guidance. The Company early adopted ASU 2018-15 during the period ended March 31, 2019, on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements. The Company adopted ASU 2016-02, Leases (ASC 842), as of January 1, 2019, using the modified retrospective approach. The Company elected the ‘comparatives under ASC 840 option’ as a transitional practical expedient, which allows the Company to initially apply the new lease requirements at the effective date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. It also allows the Company to report comparative periods in the financial statements under previous GAAP under ASC 840, Leases (“ASC 840”). The Company also elected the ‘package of practical expedients’ permitted under the transition guidance, which allowed the Company to (i) carry forward the historical lease classification, (ii) forgo reassessment of whether any expired or existing contracts contain leases, and (iii) forgo reassessment of whether any previously unamortized initial direct costs continue to meet the definition of initial direct costs under ASC 842. The Company did not, however, elect the ‘hindsight’ practical expedient to reassess the lease term for existing leases. Additionally, the Company does not have land easements, therefore, practical expedients pertaining to land easements are not applicable to the Company. For the accounting policy practical expedients, the Company elected the short-term lease exemption, under which any lease less than 12 months is excluded from recognition on the balance sheet. The Company elected not to recognize right of use assets and lease liabilities for short term leases, which has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Additionally, the Company elected the non-separation of lease and non-lease components, and as a result, the Company does not need to account for lease components (e.g., fixed payments including rent) separately from the non-lease components (e.g., common-area maintenance costs). Upon adoption of ASC 842, the Company recorded right-of-use assets of approximately $25.2 million, with corresponding operating lease liabilities of approximately $31.8 million, respectively, with an offset to accounts payable and accrued liabilities and other long-term liabilities of approximately $8.4 million to eliminate accrued rent and an offset to prepaid and other current assets of $1.7 million on the consolidated balance sheet as of January 1, 2019. The Company also derecognized an existing construction-in-process of approximately $8.6 million, with a corresponding debt obligation of the same amount for an asset under construction in build-to-suit lease arrangements. However, when the Company completed the related build-to-suit construction in April 2019, the Company recognized a right-of-use asset and lease liability on its balance sheet for the associated lease. There was no adjustment to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and the other transition practical expedients elected by the Company. Adoption of the standard impacted the Company’s previously reported results on January 1, 2019, as follows (in thousands):
The standard did not materially impact the Company’s consolidated net earnings and had no material impact on the condensed consolidated statement of cash flows. For further information regarding leases, refer to Note 10, “Lease Obligations” to the condensed consolidated financial statements. In June 2018, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The update requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The update requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The update is effective for SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt this standard on January 1, 2020, and does not believe the adoption of ASU 2016-13 will have a material impact on the Company’s consolidated financial statements. |
Business Combinations (Notes) |
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Business Combination | Business Combinations Acquisition of FullStack Academy, Inc. On April 1, 2019, the Company acquired Fullstack, a coding academy headquartered in New York, by acquiring all of the outstanding shares, pursuant to an Agreement and Plan of Reorganization (the “Fullstack Merger Agreement”). As of March 31, 2019, Fullstack had a carrying value of approximately $7.1 million of assets, excluding goodwill. At the closing of the Fullstack acquisition, the equityholders of Fullstack received consideration consisting of $17.5 million in cash (less purchase price adjustments of approximately $2.0 million, plus third-party expenses of approximately $2.0 million), and an aggregate of approximately 2,443,260 shares of the Company’s common stock, subject to escrow adjustments. Additionally, under the Fullstack Merger Agreement, the equityholders of Fullstack will be entitled to receive up to 2,250,000 shares of the Company’s common stock (the “Fullstack Contingent Consideration”). The Fullstack Merger Agreement contains an employee incentive retention pool of up to $5.0 million in cash, payable at times over a two-year period. The assets and liabilities of Fullstack will be recorded on the Company’s condensed consolidated balance sheets at their preliminary estimated fair values as of April 1, 2019, the acquisition date. Fullstack’s results of operations will be included in the Company’s condensed consolidated statements of income (loss) from that date. Fullstack recognized revenue of $2.4 million, had an operating loss of $4.0 million, and net loss of $4.0 million for the three months ended June 30, 2019. For the three and six months ended June 30, 2019, the Company recorded acquisition-related expenses of $0.3 million and $0.9 million, respectively, in general and administrative on the condensed consolidated statement of income (loss), associated with the Fullstack acquisition. The Company accounts for business combinations using the acquisition method of accounting. The following table summarizes the preliminary purchase price, as well as the preliminary allocation of the purchase price relating to the assets and liabilities purchased (in thousands):
The fair value of the consideration to be paid exceeded the fair value of the net assets acquired and liabilities assumed, resulting in goodwill being recorded. Goodwill arising from the acquisition consists largely of future performance expected to be generated from new university and student relationships. None of the goodwill recognized is expected to be deductible for income tax purposes. The above purchase price and purchase price allocation are preliminary and subject to future revision as the acquired assets and liabilities assumed are dependent upon the finalization of the related valuations. The fair values assigned to assets acquired and liabilities assumed for Fullstack are based upon managements best estimates and assumptions as of the reporting date, and are considered preliminary pending finalization of the valuations pertaining to tax liabilities assumed, including the calculation of deferred tax assets and liabilities. The fair value of the common shares issued as part of the consideration paid was determined on the basis of the closing market price of the Company’s shares on the acquisition date, and also incorporated a discount for lack of marketability rates for various holding periods. The Fullstack Contingent Consideration will become issuable, subject to the terms and conditions of the Fullstack Merger Agreement. Of the total contingent 2,250,000 shares, (i) 1,250,000 are based upon final determination of the achievement of certain employee retention and is being expensed over the retention period, (ii) 500,000 shares are based upon revenue performance in 2019 and 2020, earning on a sliding scale, in the event that the revenues for Fullstack are between $25.0 million and $35.0 million, and (iii) 500,000 shares are based upon contract performance milestones in 2019 and 2020, earned on a sliding scale, in the event that Fullstack obtains between 4 and 8 new university contracts. The fair value of the performance based Fullstack Contingent Consideration arrangements was estimated by applying a Monte Carlo simulation, based upon the result of forecast information. These measures are based upon significant inputs that are not observable by the market, and are therefore deemed to be Level 3 inputs. At each subsequent reporting date, the Company will remeasure the contingent consideration and recognize any changes in value. If the probability of achieving the performance target significantly changes from what was initially anticipated, the change could have a significant impact on the Company’s financial statements in the period recognized. Acquisition of TutorMe.com, Inc. On April 3, 2019, the Company acquired TutorMe, a provider of on-demand tutoring and online courses, headquartered in California, by acquiring all of the outstanding shares, pursuant to an Agreement and Plan of Reorganization (the “TutorMe Merger Agreement”). As of March 31, 2019, TutorMe had a carrying value of approximately $0.6 million of assets, excluding goodwill. At the closing of the TutorMe acquisition, in exchange for all outstanding shares of TutorMe capital stock and other rights to acquire or receive capital stock of TutorMe, the Company (i) paid a total of approximately $2.8 million in cash, subject to certain purchase price adjustments, (ii) issued a total of 309,852 shares of the Company’s common stock, and (iii) assumed all issued and outstanding options of TutorMe (the “Assumed Options”), of which a total of 231,406 shares of the Company’s common stock are underlying the Assumed Options that are subject to certain time-based vesting requirements and a total of 79,199 shares of the Company’s common stock are underlying the Assumed Options that are subject to certain performance-based vesting requirements. In addition, as part of the transactions contemplated by the TutorMe Merger Agreement, the Company (x) paid a total of approximately $1.2 million in cash to certain service providers of TutorMe as a transaction bonus and (y) issued a total of 293,621 PSUs to certain continuing service providers of TutorMe pursuant to the Company’s 2009 Stock Incentive Plan (as amended) and a form restricted stock unit agreement. The assets and liabilities of TutorMe will be recorded on the Company’s condensed consolidated balance sheets at their preliminary estimated fair values as of April 3, 2019, the acquisition date. TutorMe’s results of operations will be included in the Company’s condensed consolidated statements of income (loss) from that date. TutorMe recognized revenue of $0.2 million, had an operating loss of $0.7 million, and net loss of $0.7 million for the three months ended June 30, 2019. For the three and six months ended June 30, 2019, the Company recorded acquisition-related expenses of $0.3 million and $0.6 million, respectively, in general and administrative on the condensed consolidated statement of income (loss), associated with the TutorMe Acquisition. The Company accounts for business combinations using the acquisition method of accounting. The following table summarizes the preliminary purchase price, as well as the preliminary allocation of the purchase price relating to the assets and liabilities purchased (in thousands):
The fair value of the consideration to be paid exceeded the fair value of the net assets acquired and liabilities assumed, resulting in goodwill being recorded. Goodwill arising from the acquisition consists largely of future performance expected to be generated from new university and student relationships, as well as the developed technology. None of the goodwill recognized is expected to be deductible for income tax purposes. The above purchase price and purchase price allocation are preliminary and subject to future revision as the acquired assets and liabilities assumed are dependent upon the finalization of the related valuations. The fair values assigned to assets acquired and liabilities assumed for TutorMe are based upon managements best estimates and assumptions as of the reporting date, and are considered preliminary pending finalization of the valuations pertaining to tax liabilities assumed, including the calculation of deferred tax assets and liabilities. The fair value of equity includes the common shares issued as part of the consideration paid was determined on the basis of the closing market price of the Company’s shares on the acquisition date, which also incorporated a discount for lack of marketability rates for various holding periods. |
Revenue Recognition |
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Revenue Recognition | Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. The Company performs this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances. The Company’s contracts with customers generally include multiple performance obligations, which it identifies by assessing whether each good and service promised in the contract is distinct. For each performance obligation, the Company allocates the transaction price, including fixed and variable consideration, on the basis of the relative standalone selling prices of each good and service in the contract, which is determined using observable prices. The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
(1) Primarily consists of revenues generated from services such as graduation fees, transcript fees, and other miscellaneous services. The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
The Company operates under one reportable segment. The Company generates the majority of its revenue from tuition, technology fees, and digital materials related to students whose primary funding source is governmental funding. Tuition represents amounts charged for course instruction, and technology fees represent amounts charged for the students’ use of the technology platform on which course instruction is delivered. Digital materials fees represent amounts charged for the digital textbooks that accompany the majority of courses taught at Ashford University. With the exception of students attending courses within the three-week conditional admission, the majority of tuition and technology fees are recognized as revenue as control of the services is transferred to the student, which occurs over the applicable period of instruction. Similarly, the majority of digital materials fees are recognized as revenue when control of the product has been transferred to the student, which occurs when the student is granted unrestricted access to the digital textbook, generally, on the first day of the course. Revenue generated from students within the conditional admission period is deferred and recognized when the student matriculates into Ashford University, which occurs in the fourth week of the course. Ashford University’s online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission and students enrolled under the FTG program, online students are billed on a payment period basis on the first day of a course. Students under conditional admission are billed for the payment period upon matriculation. If a student's attendance in a class precedes the receipt of cash from the student's source of funding, the Company establishes an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and related account receivable balances are reduced to present amounts attributable to the current course. In certain cases, Ashford University provides scholarships to students who qualify under various programs. These scholarships are recognized as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligations. Also, for some customers, we do not expect to collect 100% of the consideration to which we are contractually entitled and, as a result, those customers may receive discounts or price adjustments that, based on historical Company practice, represent implied price concessions and are accounted for as variable consideration. The majority of these price concessions relate to amounts charged to students for goods and services, which management has determined will not be covered by the student’s primary funding source (generally, government aid) and, as a result, the student will become directly financially responsible for them. The reduction in the transaction price that results from this estimate of variable consideration reflects the amount the Company does not expect to be entitled to in exchange for the goods and services it will transfer to the students, as determined using historical experience and current factors, and includes performing a constraint analysis. These estimates of variable consideration are recorded as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligation. A portion of tuition revenue, technology fee revenue, and digital materials revenue is generated from contracts with students enrolled under the FTG program, which is a 12-month grant that, when combined with a corporate partner’s annual tuition assistance program, enables eligible students to earn their degree without incurring student loan debt. Students enrolled under this program are eligible to take up to ten undergraduate or eight graduate courses per 12-month grant period and must first utilize 100% of the funds awarded under their employer’s annual tuition assistance program before they can be awarded the FTG grant. The grants awarded by Ashford University under the FTG program are considered a material right, and, as such, the Company records a contract liability for a portion of the consideration received or due under these contracts. The contract liability is recorded in deferred revenue and student deposits on the Company’s condensed consolidated balance sheets, and further discussed in the deferred revenue section below. The standalone selling price of the material right is determined based on the observable standalone selling price of the courses. The transaction price in each FTG contract is allocated to this material right on a relative standalone selling price basis. The contract liability is recognized as revenue at the earlier of satisfaction of the future obligation or its expiration. Billing of products and services transferred under a FTG student contract generally occurs after the conclusion of a course. There are no material differences between the timing of the products and services transferred and the payment terms. Deferred Revenue Deferred revenue consists of cash payments that are received or due in advance of the Company’s performance as well as deferrals associated with certain contracts that include a material right. Below are the opening and closing balances of deferred revenue from the Company’s contracts with customers (in thousands):
For further information on deferred revenue and student deposits, refer to Note 8, “Other Significant Balance Sheet Accounts - Deferred Revenue and Student Deposits” and for further information on receivables, refer to Note 7, “Accounts Receivable, Net” within the condensed consolidated financial statements. For the majority of the Company’s customers, payment for products and services is due at the beginning of each course. Under special circumstances, some customers may be offered non-interest bearing payment plan arrangements that can extend for up to a maximum of three years. These payment plan arrangements give rise to significant financing components. However, since the Company historically collects substantially all of the consideration to which it expects to be entitled under such payment plans within one year or less, the impact of these significant financing components is not material to any period presented. The difference between the opening and closing balances of deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. For the six months ended June 30, 2019, the Company recognized $21.3 million of revenue that was included in the deferred revenue balance as of January 1, 2019. For the six months ended June 30, 2018, the Company recognized $21.6 million of revenue that was included in the deferred revenue balance as of January 1, 2018. Amounts reported in the closing balance of deferred revenue are expected to be recognized as revenue within the next 12 months. |
Restructuring and Impairment Expense |
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Restructuring and Impairment Expense (Credit) | Restructuring and Impairment Expense During the three and six months ended June 30, 2019, the Company recognized $5.4 million and $5.4 million, respectively, of restructuring and impairment expense. During the three and six months ended June 30, 2018, the Company recognized $2.7 million and $2.6 million, respectively, of restructuring and impairment expense. These restructuring and impairment charges were comprised of the components described below. The Company had previously vacated or consolidated properties in San Diego and Denver, and subsequently reassessed its obligations on non-cancelable leases. As a result of these reassessments, during the three and six months ended June 30, 2019 the Company recognized expense of approximately $0.5 million and $0.6 million, respectively. During the three and six months ended June 30, 2018, the Company recognized expense of approximately $1.7 million and $1.2 million, respectively. For both the three and six months ended June 30, 2019, the Company recognized $5.0 million, respectively, as restructuring and impairment expense relating to severance costs for wages and benefits. There is an additional $2.2 million of related costs that will be recognized in the remainder of 2019, relating to employees that are required to render service. For the three and six months ended June 30, 2018, the Company recognized $0.7 million and $1.0 million, respectively, as restructuring and impairment expense relating to severance costs for wages and benefits, due to the Company’s execution of a strategic reorganization resulting in reductions in force. The reorganization was part of the Company’s overall reassessment of resources based upon benchmarking activities with competitors in the Company’s industry. For both the three and six months ended June 30, 2019, the Company recognized a credit of $0.1 million, respectively, as a reversal to restructuring and impairment, relating to the closure of a component of the Company's business, which was originally recorded in the fourth quarter of 2018. No such credit/expense was recorded for the three and six months ended June 30, 2018. The following table summarizes the amounts recorded in the restructuring and impairment charges line item on the Company’s condensed consolidated statements of income (loss) for each of the periods presented (in thousands):
The following table summarizes the changes in the Company's restructuring and impairment liability by type during the six months ended June 30, 2019 (in thousands):
The restructuring liability amounts are recorded within either the (i) accounts payable and accrued liabilities account, (ii) lease liability account or (iii) other long-term liabilities account on the condensed consolidated balance sheets. |
Fair Value Measurements |
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Investments | Fair Value Measurements The following tables summarize the fair value information as of June 30, 2019 and December 31, 2018, respectively (in thousands):
The mutual funds in the tables above, represent the deferred compensation asset balances, which are considered to be trading securities. There were no transfers between level categories for investments during the periods presented. The Company’s deferred compensation asset balances are recorded in the investments line item on the Company’s condensed consolidated balance sheets, and are classified as Level 1 securities. There were no differences between amortized cost and fair value of investments as of June 30, 2019 and December 31, 2018, respectively. There were no reclassifications out of accumulated other comprehensive income during either the six months ended June 30, 2019 and 2018. The contingent consideration relates to shares to be issued as part of the acquisition of Fullstack. The contingent consideration is recorded in the other long-term liabilities line item on the Company’s condensed consolidated balance sheets, and are classified as Level 3 securities. For further information regarding acquisitions, refer to Note 3, “Business Combinations” to the condensed consolidated financial statements. The fair value of accrued contingent consideration is remeasured each reporting period. Increases or decreases in projected revenue and the related probabilities of achieving the forecast results, may result in a higher or lower fair value measurement. Changes in fair value resulting from changes in the likelihood of contingent payments are included in the condensed consolidated statements of income (loss). |
Accounts Receivable, Net |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net | Accounts Receivable, Net Accounts receivable, net, consists of the following (in thousands):
There is an immaterial amount of accounts receivable, net, at each balance sheet date with a payment due date of greater than one year. The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
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Other Significant Balance Sheet Accounts |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Balance Sheet Accounts | Other Significant Balance Sheet Accounts Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consists of the following (in thousands):
Property and Equipment, Net Property and equipment, net, consists of the following (in thousands):
For the three months ended June 30, 2019 and 2018, depreciation and amortization expense related to property and equipment was $1.3 million and $1.1 million, respectively. For the six months ended June 30, 2019 and 2018, depreciation and amortization expense was $2.3 million and $2.2 million, respectively. Goodwill and Intangibles, Net Goodwill and intangibles, net, consists of the following (in thousands):
The increase in goodwill relates to our acquisitions of Fullstack and TutorMe. For further information regarding the acquisitions, refer to Note 3, “Business Combinations” to the condensed consolidated financial statements. The amount of goodwill recognized is subject to change, pending the final determination of the fair value of assets acquired and liabilities assumed in connection with the acquisitions. For the three months ended June 30, 2019 and 2018, amortization expense was $1.4 million and $0.7 million, respectively. For the six months ended June 30, 2019 and 2018, amortization expense was $1.9 million and $1.3 million, respectively. The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consists of the following (in thousands):
Deferred Revenue and Student Deposits Deferred revenue and student deposits consists of the following (in thousands):
Other Long-Term Liabilities Other long-term liabilities consists of the following (in thousands):
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Credit Facilities |
6 Months Ended |
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Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Credit Facilities The Company has issued letters of credit that are collateralized with cash (held in restricted cash) in the aggregate amount of $16.6 million as of June 30, 2019. Included in this balance is $5.7 million of letters of credit recorded as long-term restricted cash as of June 30, 2019. As part of its normal business operations, the Company is required to provide surety bonds in certain states in which the Company does business. The Company has entered into a surety bond facility with an insurance company to provide such bonds when required. As of June 30, 2019, the Company’s total available surety bond facility was $8.5 million and the surety had issued bonds totaling $8.1 million on the Company’s behalf under such facility. |
Lease Obligations |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Obligations | Lease Obligations Operating Leases The Company leases various office facilities which expire at various dates through 2023. These facilities are used for academic operations, corporate functions, enrollment services and student support services. The Company does not have any leases other than its office facilities. All of the leases were classified as operating leases for the period ended June 30, 2019, and the Company does not have any finance leases. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on the Company’s condensed consolidated balance sheets. During 2018, the Company entered into a lease agreement, which commenced in April 2019, consisting of approximately 131,000 square feet of office space located in Chandler, Arizona, which extends through 2030. The Company is involved in the construction and the build-out of the space, and as such, serves as the construction agent on behalf of the landlord. Under such arrangement, the Company has obligations to fund cost over-runs in its capacity as the construction agent. The Company has determined that under the new lease accounting standard ASC 842, it does not have control during construction, and as such has derecognized the asset and financing obligation as of January 1, 2019. As of June 30, 2019, the lease amounts on the condensed consolidated balance sheets do not include any options to extend, nor any options for early termination. The Company’s lease agreements do not include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company is not a party to any related party arrangements with respect to its lease transactions. Some of the more significant assumptions and judgments in determining the amounts to capitalize include the determination of the discount rate, which is discussed below. Rental expense for the three and six months ended June 30, 2019 was $5.3 million and $9.7 million, respectively, calculated in accordance with ASC 842, and rental expense for the three and six months ended June 30, 2018 was $3.7 million and $7.6 million, respectively, calculated in accordance with ASC 840. The Company has agreements to sublease certain portions of its office facilities, with three active subleases as of June 30, 2019. The Company’s subleases do not include any options to extend, nor any options for early termination. The Company’s subleases do not contain any residual value guarantees or restrictive covenants. All of the subleases were classified as operating leases for the period ended June 30, 2019. The Company is subleasing approximately 28,400 square feet of office space in San Diego, California with a remaining commitment to lease of 10 months and net lease payments of $0.6 million. The Company is subleasing approximately 72,200 square feet of office space in Denver, Colorado with a remaining commitment to lease of 26 months and net lease payments of $2.1 million. In April 2019, the Company entered into a sublease agreement of approximately 21,000 square feet of office space in Denver, Colorado with a remaining commitment to lease of 44 months and net lease payments of $2.1 million. Sublease income for the six months ended June 30, 2019 and 2018 was $1.6 million (in accordance with ASC 842) and $1.4 million (in accordance with ASC 840), respectively. The following tables represent the classification and amounts recorded on the condensed consolidated balance sheets as of June 30, 2019 (in thousands):
The following table represents the classification and amounts recorded on the condensed consolidated statements of income (loss) for the six months ended June 30, 2019 (in thousands):
The following table represents the maturities of lease liabilities as of June 30, 2019 (in thousands):
The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2018 (in thousands):
The following table represents the lease term and discount rate used in the calculations as of June 30, 2019:
The following table represents the cash flow information of operating leases for the six months ended June 30, 2019 (in thousands):
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Income Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Per Share | Income (Loss) Per Share Basic income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the sum of (i) the weighted average number of common shares outstanding for the period, plus (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented include stock options, unvested restricted stock units (“RSUs”) and unvested performance stock units (“PSUs”). The following table sets forth the computation of basic and diluted income (loss) per share for the periods indicated (in thousands, except per share data):
The following table sets forth the number of stock options, RSUs and PSUs, excluded from the computation of diluted income (loss) per share for the periods indicated below because their effect was anti-dilutive (in thousands):
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Stock Repurchase Program Stock Repurchase Program |
6 Months Ended |
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Jun. 30, 2019 | |
Stock Repurchase Programs [Abstract] | |
Stock Repurchase Program | Stock Repurchase Program The Company's board of directors (“board”) may authorize the Company to repurchase outstanding shares of its common stock from time to time in the open market through block trades or otherwise depending on market conditions and other considerations, pursuant to the applicable rules of the SEC. The Company's policy is to retain these repurchased shares as treasury shares and not to retire them. The amount and timing of future share repurchases, if any, will be determined as market and business conditions warrant. During the six months ended June 30, 2018, the Company repurchased approximately 0.0 million shares of the Company's common stock for an aggregate purchase price of approximately $2.4 million, including fees. On November 17, 2017, the Company's board authorized a share repurchase program of up to $20.0 million in aggregate value of shares of its common stock over the next 12 months. The timing and extent of any repurchases will depend upon market conditions, the trading price of the Company's shares and other factors, and subject to the restrictions relating to volume, price and timing under applicable law. The Company may commence or suspend share repurchases at any time, or from time to time. Under this program, during the six months ended June 30, 2019, the Company repurchased approximately 0.0 million shares of the Company’s common stock for an aggregate purchase price of approximately $0.0 million, including fees. |
Stock-Based Compensation |
6 Months Ended |
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Jun. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recorded $3.6 million and $1.2 million of stock-based compensation expense for the three months ended June 30, 2019 and 2018, respectively, and $5.3 million and $2.3 million of stock-based compensation expense for the six months ended June 30, 2019 and 2018, respectively. The related income tax benefit was $0.9 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively, and $1.3 million and $0.6 million for the six months ended June 30, 2019 and 2018, respectively. During the six months ended June 30, 2019, the Company granted 1.2 million RSUs at a weighted average grant date fair value of $6.03 and 0.4 million RSUs vested. During the six months ended June 30, 2018, the Company granted 0.8 million RSUs at a grant date fair value of $6.75 and 0.3 million RSUs vested. During the six months ended June 30, 2019, 0.8 million market-based PSUs were granted at a weighted average grant date fair value of $7.17 and no performance-based or market-based PSUs vested. During the six months ended June 30, 2018, no performance-based or market-based PSUs were granted and no performance-based or market-based PSUs vested. During the six months ended June 30, 2019, the Company granted 0.2 million stock options at a grant date fair value of $4.28 and 6,274 stock options were exercised. During the six months ended June 30, 2018, the Company granted 35,088 stock options at a grant date fair value of $2.97 and no stock options were exercised. As of June 30, 2019, there was unrecognized compensation cost of $15.7 million related to unvested stock options, RSUs and PSUs. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company uses the asset-liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in income and deductions in future years. The Company recognizes deferred tax assets if realization of such assets is more-likely-than-not. In order to make this determination, the Company evaluates a number of factors including the ability to generate future taxable income from reversing taxable temporary differences, forecasts of financial and taxable income or loss, and the ability to carryback certain operating losses to refund taxes paid in prior years. The cumulative loss incurred over the three-year period ended June 30, 2019 constituted significant negative objective evidence against the Company’s ability to realize a benefit from its federal deferred tax assets. Such objective evidence limited the ability of the Company to consider in its evaluation certain subjective evidence such as the Company’s projections for future growth. On the basis of its evaluation, the Company determined that its deferred tax assets were not more-likely-than-not to be realized and that a valuation allowance against its deferred tax assets should continue to be maintained as of June 30, 2019. The Company determines the interim income tax provision by applying the estimated effective income tax rate expected to be applicable for the full fiscal year to income before income taxes for the period. In determining the full year estimate, the Company does not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes. The Company’s current effective income tax rate that has been applied to normal, recurring operations for the six months ended June 30, 2019 was (0.6)%. The Company’s actual effective income tax rate after discrete items was 9.0% for the six months ended June 30, 2019. The Company released approximately $2.4 million in valuation allowance as a result of tax benefits recorded in connection with our acquisitions during the second quarter of 2019 for which a deferred tax liability was established in purchase accounting. As of June 30, 2019 and December 31, 2018, the Company had $0.9 million of gross unrecognized tax benefits, of which $0.7 million would impact the effective income tax rate if recognized. Although the Company cannot predict the timing of resolution with taxing authorities, if any, the Company believes it is reasonably possible that the total of the unrecognized tax benefits could change in the next twelve months due to settlement with tax authorities or expiration of the applicable statute of limitations. Although the Company believes the tax accruals provided are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from the Company’s historical income tax provisions and accruals. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The tax years 2001 through 2017 are open to examination by major taxing jurisdictions to which the Company is subject. The Company is currently under Internal Revenue Service audit examinations of the Company’s income and payroll tax returns for the years 2013 through 2016. The Company’s income tax returns for the tax years ended December 31, 2013 through 2015 are under examination by the California Franchise Tax Board. The audit examination is currently on hold until the Internal Revenue Service audit examination has been completed. |
Regulatory |
6 Months Ended |
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Jun. 30, 2019 | |
Regulatory [Abstract] | |
Regulatory | Regulatory The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (“Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (“Department”) subject the Company to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial aid programs under Title IV of the Higher Education Act (“Title IV programs”). Ashford University is regionally accredited by Western Association of Schools and Colleges Senior College and University Commission (“WSCUC”). Department of Education Open Program Review of Ashford University On July 7, 2016, Ashford University was notified by the Department that an off-site program review had been scheduled to assess Ashford University’s administration of the Title IV programs in which it participates. The off-site program review commenced on July 25, 2016 and covered students identified in the 2009-2012 calendar year data previously provided by Ashford University to the Department in response to a request for information received from the Multi-Regional and Foreign School Participation Division of the Department’s Office of Federal Student Aid (“FSA”) on December 10, 2015, but may be expanded if the Department deems such expansion appropriate. On December 9, 2016, the Department informed Ashford University that it intended to continue the program review on-site at Ashford University. The on-site program review commenced on January 23, 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such expansion appropriate. To date, the Company has not received a draft report from the Department. Program Participation Agreement for Ashford University On April 23, 2018, Ashford University received an updated Program Participation Agreement from the Department. Based on the updated Program Participation Agreement, Ashford University is provisionally certified to participate in Federal Student Financial Aid Programs until March 31, 2021. Ashford University is required to submit its reapplication for continued certification by December 31, 2020. WSCUC Accreditation of Ashford University In July 2013, WSCUC granted Initial Accreditation to Ashford University for five years, until July 15, 2018. In December 2013, Ashford University effected its transition to WSCUC accreditation and designated its San Diego, California facilities as its main campus and its Clinton, Iowa campus as an additional location. As part of a continuing monitoring process, Ashford University hosted a visiting team from WSCUC on a special visit in April 2015. In July 2015, Ashford University received an Action Letter from WSCUC outlining the findings arising out of its visiting team's special visit. The Action Letter stated that the WSCUC visiting team found evidence that Ashford University continues to make progress in all six areas recommended by WSCUC in 2013. As part of its institutional review process, WSCUC commenced its comprehensive review of Ashford University with an off-site review in March 2018. Ashford University was notified on June 8, 2018 that the Ashford University Accreditation Visit originally scheduled for fall 2018 had been rescheduled to April 3-5, 2019. The visit took place as scheduled and the WSCUC evaluation team provided a report of the visit. Ashford University then prepared a response to the report. The team report and Ashford University’s response were considered at the June 2019 WSCUC Commission meeting. On July 12, 2019, WSCUC notified Ashford University that it had reaffirmed its accreditation for six years. In a separate action, Ashford University submitted a change of control and legal status application (the “Change of Control Application”) to convert to a nonprofit California public benefit corporation, and separate from the Company (the “Conversion Transaction”). On November 19, 2018 and March 6, 2019, WSCUC notified Ashford University that, pending the receipt and review of additional documents, WSCUC would defer any action on the Change of Control Application. Ashford University submitted the requested documentation related to the Conversion Transaction to WSCUC and the Change of Control Application was reconsidered by the assigned WSCUC evaluation team. The team’s report and recommendations were considered at the June 2019 WSCUC Commission meeting. On July 12, 2019, WSCUC notified Ashford University that it had approved the Change of Control Application for the Conversion Transaction. The approval is subject to certain conditions which must be met prior to the close of the Conversion Transaction, including divestiture of financial and ownership interest in the Company by all Ashford University officers and related parties and submission of a revised services agreement with respect to the Conversion Transaction, including the incorporation of key performance indicators into that agreement. WSCUC is also requiring a post-implementation site visit of Ashford University within six months of the close of the Conversion Transaction. As part of the Conversion Transaction, Ashford University will become an independent, self-governed, nonprofit institution. Following the Conversion Transaction, the Company plans to operate as an education technology services company that will provide certain services to Ashford University and potentially, in the future, to other customers. The Company and Ashford University are continuing to finalize the terms of the Conversion Transaction pending the Department’s response to Ashford University’s preacquisition review application which is expected in the near future. WSCUC also visited Ashford University on May 1, 2019 to conduct its federally mandated, six-month post-implementation review, due to the merger of University of the Rockies and into Ashford University which was finalized on October 31, 2018. WSCUC has verified that Ashford University has met all post-implementation requirements related to the merger of the two entities. GI Bill Benefits On May 20, 2016, the Company received a letter from the Iowa Department of Education (“Iowa DOE”) indicating that, as a result of the planned closure of the Clinton Campus, the Iowa State Approving Agency (“ISAA”) would no longer continue to approve Ashford University’s programs for benefits under the GI Bill after June 30, 2016, and recommending Ashford University seek approval through the State Approving Agency of jurisdiction for any location that meets the definition of a “main campus” or “branch campus.” Ashford University began the process of applying for approval through the State Approving Agency in California (“CSAAVE”), and the Company subsequently disclosed that on June 20, 2016 it received a second letter from the Iowa DOE indicating that the Iowa DOE had issued a stay of the ISAA’s withdrawal of approval of Ashford University’s programs for GI Bill benefits effective immediately until the earlier of (i) 90 days from June 20, 2016 or (ii) the date on which CSAAVE completed its review and issued a decision regarding the approval of Ashford University in California. Ashford University received communication from CSAAVE indicating that additional information and documentation would be required before Ashford University’s application could be considered for CSAAVE approval. Ashford University subsequently withdrew the CSAAVE application and continued working with the U.S. Department of Veterans Affairs (“VA”), the Iowa DOE and the ISAA to obtain continued approval of Ashford University’s programs for GI Bill benefits and to prevent any disruption of educational benefits to Ashford University’s veteran students. On September 15, 2016, in response to a Petition for Declaratory and Injunctive Relief (“Petition”) filed by Ashford University, the Iowa District Court for Polk County entered a written order (“Order”) staying the Iowa DOE’s announced intention to withdraw the approval of Ashford University as a GI Bill eligible institution until the entry of a final and appealable order and judgment in the action. On June 23, 2017, the Iowa District Court held a hearing on Ashford University’s Petition and on July 17, 2017, the Court ruled in favor of the Iowa DOE and denied the petition. Ashford University filed a motion for reconsideration of this ruling, which was denied on August 17, 2017. On August 23, 2017, Ashford University filed a Petition to Vacate or Modify the Iowa District Court’s July 17, 2017 ruling, based on material evidence, newly discovered, which could not with reasonable diligence have been previously discovered by Ashford University (“First Petition to Vacate”). On September 18, 2017, Ashford University appealed, inter alia, the July 17, 2017 ruling to the Iowa Supreme Court and posted an appeal bond, which stayed this matter pending resolution of Ashford University’s appeal. As a result, Ashford University’s approval was not withdrawn, and Ashford University’s programs remain approved for GI Bill purposes. The Assistant Attorney General handling this matter on behalf of the Iowa DOE also advised Ashford University that the Iowa DOE would take no action pending the post-ruling motions and appeal. On October 12, 2017, Judge Eliza Ovrom, the Iowa District Court Judge who issued the July 17, 2017 ruling, filed a Disclosure Statement revealing family ties to the Iowa Attorney General’s Office. Following motions by Ashford University for her recusal, Judge Ovrom recused herself from all further proceedings. On October 24, 2017, Ashford University filed with the Iowa Supreme Court a Petition to Vacate or, in the Alternative, for Limited Remand (“Second Petition to Vacate”), in which Ashford University argued that the July 17, 2017 ruling and all other material orders entered by Judge Ovrom should be vacated due to her previously undisclosed conflict of interest. On January 8, 2018, the Iowa Supreme Court remanded the Second Petition to Vacate to the District Court, where all proceedings in this matter were consolidated before Judge Michael Huppert. On April 26, 2018, Judge Huppert granted the Second Petition to Vacate and vacated all material rulings by Judge Ovrom, including the July 17, 2017 ruling, thus on June 21, 2018, the Iowa Supreme Court issued a Procedendo stating that the appeal was concluded. Judge Huppert’s decision mooted the First Petition to Vacate and Ashford’s appeal of, inter alia, the July 17, 2017 ruling. The case is now proceeding on the merits de novo before a new judge and Ashford filed its opening brief in support of the Petition on July 25, 2019. On July 6, 2017, Ashford University received approval from the Arizona State Approving Agency (“ASAA”) to provide GI Bill benefits to its students. On September 13, 2017, the VA accepted the ASAA’s approval, subject to Ashford University's compliance with the approval requirements, and the University subsequently received a facility code from the VA. On November 9, 2017, the VA informed Ashford University that the ASAA had not provided sufficient evidence to establish that it has jurisdictional authority over Ashford University’s online programs. The VA stated that it intends to suspend payment of educational assistance and approval of new student enrollments and student re-enrollments for Ashford University’s online programs in 60 days unless corrective action was taken. On November 17, 2017, Ashford University filed a petition for review in the United States Court of Appeals for the Federal Circuit challenging the VA’s actions. In response to that petition, the VA agreed to stay the actions with respect to the suspension and reenrollment it had announced on November 9, 2017 through the entry of judgment in the Federal Circuit case, on the condition that Ashford University request and submit an application for approval to CSAAVE on or before January 8, 2018. Ashford University submitted an application to CSAAVE for approval on January 5, 2018. On February 21, 2018, CSAAVE provided notice of its intention not to act on Ashford University’s initial application for approval for the training of veterans and other eligible persons. The notice directed Ashford University to request approval of its application by the VA. Ashford University continues to work in good faith with the VA while its petition for review remains pending with the Federal Circuit. In keeping with this commitment, Ashford University agreed, at the VA’s request, to submit another application to CSAAVE. Ashford University filed that additional application on November 19, 2018. On December 14, 2018, however, CSAAVE again informed Ashford University that it did not intend to act on Ashford University’s application, and again indicated that Ashford University could request approval of its application directly from the VA. The parties completed all briefing for the petition for review on May 3, 2019 and the Court may schedule the matter for oral argument. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with GAAP, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated, the best estimate within that range should be accrued. If no estimate is better than another, the Company records the minimum estimated liability in the range. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party. California Attorney General Investigation of For-Profit Educational Institutions In January 2013, the Company received from the Attorney General of the State of California (“CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General requested documents and detailed information for the time period March 1, 2009 to the date of the Investigative Subpoena. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General, each requesting additional documents and information for the time period March 1, 2009 through each such date. Representatives from the Company met with representatives from the CA Attorney General’s office on several occasions to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices. The parties also discussed a potential resolution involving injunctive relief, other non-monetary remedies and a payment to the CA Attorney General and in the third quarter of 2016, the Company recorded an expense of $8.0 million related to the cost of resolving this matter. The parties did not reach a resolution and on November 29, 2017, the CA Attorney General filed suit against Ashford University and Bridgepoint Education, now known as Zovio Inc. The Company intends to vigorously defend this case and emphatically denies the allegations made by the CA Attorney General that it ever deliberately misled its students, falsely advertised its programs, or in any way was not fully accurate in its statements to investors. However, the outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. At present, the Company cannot reasonably estimate any updated range of loss for this action based on currently available information and as such, the prior accrual of $8.0 million remains. Massachusetts Attorney General Investigation of Bridgepoint Education, Inc. and Ashford University On July 21, 2014, the Company and Ashford University received from the Attorney General of the State of Massachusetts (“MA Attorney General”) a Civil Investigative Demand (“MA CID”) relating to the MA Attorney General’s investigation of for-profit educational institutions and whether the university’s business practices complied with Massachusetts consumer protection laws. Pursuant to the MA CID, the MA Attorney General has requested from the Company and Ashford University documents and information for the time period January 1, 2006 to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action. Department of Justice Civil Investigative Demand On July 7, 2016, the Company received from the U.S. Department of Justice (“DOJ”) a Civil Investigative Demand (“DOJ CID”) related to the DOJ's investigation concerning allegations that the Company may have misstated Title IV refund revenue or overstated revenue associated with private secondary loan programs and thereby misrepresented its compliance with the 90/10 rule of the Higher Education Act. Pursuant to the DOJ CID, the DOJ has requested from the Company documents and information for fiscal years 2011 to 2015. The Company is cooperating with the DOJ and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action. Shareholder Derivative Actions In re Bridgepoint, Inc. Shareholder Derivative Action On July 24, 2012, a shareholder derivative complaint was filed in California Superior Court by Alonzo Martinez. In the complaint, the plaintiff asserts a derivative claim on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Martinez v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement on behalf of the Company, as well as other equitable relief and attorneys’ fees. On September 28, 2012, a substantially similar shareholder derivative complaint was filed in California Superior Court by David Adolph-Laroche. In the complaint, the plaintiff asserts a derivative claim on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Adolph-Laroche v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. On October 11, 2012, the Adolph-Laroche action was consolidated with the Martinez action and the case is now captioned In re Bridgepoint, Inc. Shareholder Derivative Action. A consolidated complaint was filed on December 18, 2012 and the defendants filed a motion to stay the case while the underlying securities class action is pending. The motion was granted by the Court on April 11, 2013. A status conference was held on October 10, 2013, during which the Court ordered the stay continued for the duration of discovery in the underlying securities class action, but permitted the plaintiff to receive copies of any discovery responses served in the underlying securities class action. The stay was lifted following the settlement of the underlying securities class action and all defendants filed demurrers on October 3, 2016, which were granted with leave to amend on October 6, 2017. On October 17, 2017, the plaintiff submitted a litigation demand to the Company's Board of Directors, which appointed a working group to evaluate the demand. The Board refused the demand and the Plaintiff filed a Second Amended Complaint on October 3, 2018. All defendants filed demurrers on December 21, 2018, which were granted by the Court on June 14, 2019. As a result, the Court entered a final order dismissing the case on July 8, 2019. Based on information available to the Company at present, it cannot reasonably estimate a range of loss and accordingly has not accrued any liability associated with this action. Reardon v. Clark, et al. On March 18, 2015, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Reardon v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Following the dismissal of the underlying Zamir securities class action and pursuant to a stipulation among the parties, on May 10, 2018, the Court ordered the case stayed while the Company’s Board of Directors evaluated a litigation demand submitted by the plaintiff. After the Board of Directors refused the demand, the plaintiff agreed to voluntarily dismiss the case. Larson v. Hackett, et al. On January 19, 2017, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Larson v. Hackett, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Following the dismissal of the underlying Zamir securities class action and pursuant to a stipulation among the parties, on May 10, 2018, the Court ordered the case stayed while the Company’s Board of Directors evaluated a litigation demand submitted by the plaintiff. After the Board of Directors refused the demand, the plaintiff agreed to voluntarily dismiss the case. Stein Securities Class Action On March 8, 2019, a securities class action complaint (the “Stein Complaint”) was filed in the U.S. District Court for the Southern District of California by Shiva Stein naming the Company, Andrew Clark, Kevin Royal, and Joseph D’Amico as defendants (the “Defendants”). The Stein Complaint alleges that Defendants made false and materially misleading statements and failed to disclose material adverse facts regarding the Company's business, operations and prospects, specifically that the Company had applied an improper revenue recognition methodology to students enrolled in the FTG program. The Stein Complaint asserts a putative class period stemming from March 8, 2016 to March 7, 2019. The Stein Complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company is evaluating the Stein Complaint and intends to vigorously defend against the Stein Complaint. However, because of the many questions of fact and law that may arise, the outcome of the legal proceeding is uncertain at this point. Based on information available to the Company at present, the Company cannot reasonably estimate a range of loss and accordingly has not accrued any liability associated with this action the Stein Complaint. SEC Informal Inquiry On March 27, 2019, the Company received notice that the SEC Division of Enforcement began an informal inquiry regarding the Company, requesting various documents relating to the Company’s accounting practices, including FTG revenue recognition, receivables and other matters relating to the Company’s previously disclosed intention to restate its condensed financial statements for the three and nine months ended September 30, 2018. Based on these requests, the eventual scope, duration and outcome of the inquiry cannot be predicted at this time. We are cooperating fully with the SEC in connection with the inquiry. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On July 12, 2019, WSCUC notified Ashford University that it had approved the Change of Control Application for the Conversion Transaction. On the same date, WSCUC also notified Ashford University that it had reaffirmed its accreditation for six years. For further information, refer to Note 14, “Regulatory - WSCUC Accreditation of Ashford University” to the condensed consolidated financial statements. The Company evaluated events occurring between the end of its most recent fiscal year and the date of filing, noting no additional subsequent events. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation. |
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Unaudited Interim Financial Information | Unaudited Interim Financial Information The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission (“SEC”) on March 12, 2019. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements. |
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Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. |
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Reclassification, Policy [Policy Text Block] | Restatement of Previously Issued Condensed Consolidated Financial Statements Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2018, the Company determined that such financial statements had errors related to: (i) revenue for the Corporate Full Tuition Grant (“FTG”) program portion of our student contracts which was misstated due to allowances that had not been properly determined and computational errors, which also resulted in misstatements in accounts receivable and its provision for bad debts, deferred revenue and student deposits, and the related income tax impact; and (ii) a misstatement in the adjustment to beginning retained earnings as of January 1, 2018 as a result of the incorrect adoption of ASU 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification Topic 606 (“ASC 606”) as it relates to the FTG program, resulting in a decrease of $2.2 million from the amount previously reported of $3.2 million to $1.0 million, as restated. As a result, the Company has restated the accompanying condensed consolidated financial statements for the three and six months ended June 30, 2018 from amounts previously reported to correct these matters. Management considers the restatement to be immaterial. The following tables present a summary of the impact of the restatement corrections and other immaterial adjustments on the condensed consolidated statement of income (loss), the condensed consolidated statement of cash flows and the condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2018. The following tables are presented in thousands, except per share data:
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Comprehensive Income, Policy [Policy Text Block] | Comprehensive Income (Loss) The Company has no components of other comprehensive income (loss), and therefore, comprehensive income (loss) equals net income (loss). |
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Lessee, Leases [Policy Text Block] | Leases In accordance with ASU 2016-02, Leases (ASC 842) (“ASC 842”), leases are evaluated and classified as either operating or finance leases. The Company does not have any finance leases. The Company’s operating leases are included in operating lease assets, accounts payable and accrued liabilities, and noncurrent lease liabilities on the condensed consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on information available at the date of adoption in calculating the present value of its existing lease payments. The incremental borrowing rate is determined using the U.S. Treasury rate adjusted to account for the Company’s credit rating and the collateralized nature of operating leases. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line method over the term of the lease. Leased property and equipment meeting certain criteria are capitalized as finance lease assets, and the present value of the related lease payments is recognized as a finance lease liability on the condensed consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter. |
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Business Combinations Policy [Policy Text Block] | Business Combinations The Company uses the acquisition method of accounting for business combinations. This method requires the use of significant estimates, assumptions and judgments in the determination of the estimated fair value of assets acquired and liabilities assumed in order to properly allocate the purchase price at the acquisition date. The estimates, assumptions and judgments are based in part on historical experience, industry data, information obtained from the management of the acquired companies and assistance from independent third-party appraisal firms. Examples of critical estimates include assigning values to the acquired identifiable intangible assets and valuing contingent consideration and earnout liabilities. For further information regarding the acquisitions, refer to Note 3, “Business Combinations” to the condensed consolidated financial statements. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update 2018-15 (“ASU 2018-15”), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Specifically, ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract and which costs to expense. This guidance is effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted. Entities are permitted to apply a retrospective or a prospective transition approach to adopt the guidance. The Company early adopted ASU 2018-15 during the period ended March 31, 2019, on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements. The Company adopted ASU 2016-02, Leases (ASC 842), as of January 1, 2019, using the modified retrospective approach. The Company elected the ‘comparatives under ASC 840 option’ as a transitional practical expedient, which allows the Company to initially apply the new lease requirements at the effective date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. It also allows the Company to report comparative periods in the financial statements under previous GAAP under ASC 840, Leases (“ASC 840”). The Company also elected the ‘package of practical expedients’ permitted under the transition guidance, which allowed the Company to (i) carry forward the historical lease classification, (ii) forgo reassessment of whether any expired or existing contracts contain leases, and (iii) forgo reassessment of whether any previously unamortized initial direct costs continue to meet the definition of initial direct costs under ASC 842. The Company did not, however, elect the ‘hindsight’ practical expedient to reassess the lease term for existing leases. Additionally, the Company does not have land easements, therefore, practical expedients pertaining to land easements are not applicable to the Company. For the accounting policy practical expedients, the Company elected the short-term lease exemption, under which any lease less than 12 months is excluded from recognition on the balance sheet. The Company elected not to recognize right of use assets and lease liabilities for short term leases, which has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Additionally, the Company elected the non-separation of lease and non-lease components, and as a result, the Company does not need to account for lease components (e.g., fixed payments including rent) separately from the non-lease components (e.g., common-area maintenance costs). Upon adoption of ASC 842, the Company recorded right-of-use assets of approximately $25.2 million, with corresponding operating lease liabilities of approximately $31.8 million, respectively, with an offset to accounts payable and accrued liabilities and other long-term liabilities of approximately $8.4 million to eliminate accrued rent and an offset to prepaid and other current assets of $1.7 million on the consolidated balance sheet as of January 1, 2019. The Company also derecognized an existing construction-in-process of approximately $8.6 million, with a corresponding debt obligation of the same amount for an asset under construction in build-to-suit lease arrangements. However, when the Company completed the related build-to-suit construction in April 2019, the Company recognized a right-of-use asset and lease liability on its balance sheet for the associated lease. There was no adjustment to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and the other transition practical expedients elected by the Company. Adoption of the standard impacted the Company’s previously reported results on January 1, 2019, as follows (in thousands):
The standard did not materially impact the Company’s consolidated net earnings and had no material impact on the condensed consolidated statement of cash flows. For further information regarding leases, refer to Note 10, “Lease Obligations” to the condensed consolidated financial statements. In June 2018, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The update requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The update requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. The update is effective for SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company will adopt this standard on January 1, 2020, and does not believe the adoption of ASU 2016-13 will have a material impact on the Company’s consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement to Prior Year Income |
The following tables are presented in thousands, except per share data:
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Schedule of New Accounting Pronouncements | Adoption of the standard impacted the Company’s previously reported results on January 1, 2019, as follows (in thousands):
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Business Combinations (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | The following table summarizes the preliminary purchase price, as well as the preliminary allocation of the purchase price relating to the assets and liabilities purchased (in thousands):
The following table summarizes the preliminary purchase price, as well as the preliminary allocation of the purchase price relating to the assets and liabilities purchased (in thousands):
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Revenue Recognition (Tables) |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
(1) Primarily consists of revenues generated from services such as graduation fees, transcript fees, and other miscellaneous services. |
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Deferred revenue of Company's contracts with customers | Below are the opening and closing balances of deferred revenue from the Company’s contracts with customers (in thousands):
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Restructuring and Impairment Expense Restructuring and Impairment Expense (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and impairment charges | The following table summarizes the amounts recorded in the restructuring and impairment charges line item on the Company’s condensed consolidated statements of income (loss) for each of the periods presented (in thousands):
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Schedule of restructuring reserve by type of cost | The following table summarizes the changes in the Company's restructuring and impairment liability by type during the six months ended June 30, 2019 (in thousands):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Information of Short and Long-term Investments | The following tables summarize the fair value information as of June 30, 2019 and December 31, 2018, respectively (in thousands):
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Accounts Receivable, Net (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable, Net | Accounts receivable, net, consists of the following (in thousands):
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Changes in Allowance for Doubtful Accounts, Accounts Receivable | The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
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Other Significant Balance Sheet Accounts (Tables) |
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Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consists of the following (in thousands):
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Property and Equipment, Net | Property and equipment, net, consists of the following (in thousands):
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Goodwill and Intangibles, Net | Goodwill and intangibles, net, consists of the following (in thousands):
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Intangibles, Estimated Remaining Amortization Expense | The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
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Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities consists of the following (in thousands):
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Deferred Revenue and Student Deposits | Deferred revenue and student deposits consists of the following (in thousands):
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Other Long-Term Liabilities | Other long-term liabilities consists of the following (in thousands):
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Lease Obligations (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Classification and Amounts Recorded on Balance Sheet | The following tables represent the classification and amounts recorded on the condensed consolidated balance sheets as of June 30, 2019 (in thousands):
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Schedule of Lease Costs and Other Information | The following table represents the classification and amounts recorded on the condensed consolidated statements of income (loss) for the six months ended June 30, 2019 (in thousands):
The following table represents the lease term and discount rate used in the calculations as of June 30, 2019:
The following table represents the cash flow information of operating leases for the six months ended June 30, 2019 (in thousands):
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Schedule of Future Minimum Rental Payments for Operating Leases | The following table represents the maturities of lease liabilities as of June 30, 2019 (in thousands):
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Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2018 (in thousands):
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Income Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Common Share | The following table sets forth the computation of basic and diluted income (loss) per share for the periods indicated (in thousands, except per share data):
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Antidilutive Securities | The following table sets forth the number of stock options, RSUs and PSUs, excluded from the computation of diluted income (loss) per share for the periods indicated below because their effect was anti-dilutive (in thousands):
|
Accounts Receivable, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 43,563 | $ 39,195 |
Less allowance for doubtful accounts | 9,843 | 12,180 |
Accounts receivable, net | $ 33,720 | $ 27,015 |
Accounts Receivable, Net (Change in Allowance) (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Receivables [Abstract] | ||
Beginning Balance | $ 12,180 | $ 15,189 |
Provision for bad debts | 7,525 | 11,872 |
Deductions | (5,188) | (9,227) |
Ending Balance | $ 9,843 | $ 12,544 |
Other Significant Balance Sheet Accounts (Prepaid Expenses and Other Current Assets) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | |||
Prepaid expenses | $ 4,627 | $ 5,445 | |
Prepaid licenses | 6,398 | 5,840 | |
Prepaid Taxes | 198 | 0 | |
Income tax receivable | 4,241 | 5,044 | |
Prepaid insurance | 1,639 | 1,077 | |
Insurance recoverable | 911 | 723 | |
Other current assets | 7,740 | 126 | |
Total prepaid expenses and other current assets | $ 25,754 | $ 16,510 | $ 18,255 |
Other Significant Balance Sheet Accounts (Remaining Amortization Expense) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2019 | $ 2,665 | |
2019 | 5,205 | |
2020 | 4,015 | |
2021 | 3,380 | |
2022 | 3,300 | |
Thereafter | 3,508 | |
Definite-lived intangible assets, net carrying amount | $ 22,073 | $ 10,369 |
Other Significant Balance Sheet Accounts (Accounts Payable and Accrued Liabilities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Accounts payable | $ 8,260 | $ 5,313 |
Accrued salaries and wages | 11,918 | 7,807 |
Accrued bonus | 3,596 | 8,147 |
Accrued vacation | 6,042 | 7,929 |
Accrued litigation and fees | 8,041 | 8,041 |
Accrued expenses | 29,708 | 17,692 |
Current leases payable | 14,035 | 5,768 |
Accrued insurance liability | 2,286 | 2,095 |
Total accounts payable and accrued liabilities | $ 83,886 | $ 62,792 |
Other Significant Balance Sheet Accounts (Deferred Revenue) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred Revenue [Abstract] | ||
Deferred revenue | $ 24,009 | $ 21,768 |
Student deposits | 35,375 | 42,066 |
Total deferred revenue and student deposits | $ 59,384 | $ 63,834 |
Other Significant Balance Sheet Accounts (Other Long-term Liabilities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Contingent consideration | $ 3,250 | $ 0 |
Uncertain tax positions | 873 | 865 |
Other long-term liabilities | 2,433 | 2,570 |
Total other long-term liabilities | 6,556 | 3,435 |
Capital Lease Obligations, Noncurrent | $ 0 | $ 8,634 |
Credit Facilities (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Line of Credit Facility [Line Items] | |
Revolving line of credit, letters of credit outstanding | $ 16.6 |
Surety Bond Facility [Abstract] | |
Surety bond facility, available amount | 8.5 |
Surety bond facility, issued amount | 8.1 |
Other Noncurrent Liabilities [Member] | |
Line of Credit Facility [Line Items] | |
Revolving line of credit, letters of credit outstanding | $ 5.7 |
Lease Obligations (Details) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
ft²
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
ft²
|
Jun. 30, 2018
USD ($)
|
|
Lessee, Lease, Description [Line Items] | ||||
Operating Lease, Expense | $ 9.7 | $ 7.6 | ||
Net sublease value | $ 1.6 | $ 1.4 | ||
Build To Suit Leases | ||||
Lessee, Lease, Description [Line Items] | ||||
Net Rentable Area | ft² | 131,000 | 131,000 | ||
CALIFORNIA | ||||
Lessee, Lease, Description [Line Items] | ||||
Area of Real Estate Property | ft² | 28,400 | 28,400 | ||
Commitment to lease | 10 months | |||
Net sublease value | $ 0.6 | |||
COLORADO | ||||
Lessee, Lease, Description [Line Items] | ||||
Area of Real Estate Property | ft² | 72,200 | 72,200 | ||
Commitment to lease | 26 months | |||
Net sublease value | $ 2.1 | |||
COLORADO, Commencing on April 1, 2019 [Member] | ||||
Lessee, Lease, Description [Line Items] | ||||
Area of Real Estate Property | ft² | 21,000 | 21,000 | ||
Commitment to lease | 44 months | |||
Net sublease value | $ 2.1 |
Lease Obligations - Schedule of Classification and Amounts Recorded on Balance Sheet (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 26,261 | $ 25,165 | $ 0 |
Accounts payable and accrued liabilities | 14,035 | ||
Noncurrent operating lease liabilities | 24,928 | 13,426 | $ 3,183 |
Total lease liabilties | 38,963 | $ 31,800 | |
ARIZONA | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | 8,653 | ||
CALIFORNIA | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | 7,738 | ||
COLORADO | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | 8,799 | ||
IOWA | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | 170 | ||
NEW YORK | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | 589 | ||
Other Property [Member] | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 312 |
Lease Obligations - Schedule of Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Leases [Abstract] | ||
Operating Lease, Expense | $ 9,700 | $ 7,600 |
Operating lease costs | 9,345 | |
Short-term lease cost | 79 | |
Variable lease costs (1) | 270 | |
Less: Sub-lease income | 1,592 | |
Total net lease costs | $ 8,102 |
Lease Obligations - Schedule of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Leases [Abstract] | |||
Remainder of 2019 | $ 9,827 | ||
2020 | 9,992 | ||
2021 | 6,494 | ||
2022 | 3,921 | ||
2023 | 2,750 | ||
2024 | 2,406 | ||
After 2024 | 15,304 | ||
Total minimum payments | 50,694 | ||
Less: Interest (1) | (11,731) | ||
Operating lease liabilities | $ 38,963 | $ 31,800 | |
Operating Leases, Future Minimum Payments Due, Next Twelve Months | $ 20,382 | ||
Operating Leases, Future Minimum Payments, Due in Two Years | 9,936 | ||
Operating Leases, Future Minimum Payments, Due in Three Years | 6,460 | ||
Operating Leases, Future Minimum Payments, Due in Four Years | 3,826 | ||
Operating Leases, Future Minimum Payments, Due in Five Years | 2,726 | ||
Operating Leases, Future Minimum Payments, Due Thereafter | 17,710 | ||
Operating Leases, Future Minimum Payments Due | $ 61,040 |
Lease Obligations - Schedule of Other Information (Details) $ in Thousands |
3 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Leases [Abstract] | |
Weighted-average remaining lease term (in years): | 5 years 11 months |
Weighted-average discount rate: | 7.40% |
Operating cash flows from operating leases | $ 11,517 |
Income Per Share (Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Numerator: | ||||||
Net income (loss) | $ (17,597) | $ (6,642) | $ 15,080 | $ 1,310 | $ (24,239) | $ 16,390 |
Denominator: | ||||||
Weighted average number of common shares outstanding (in shares) | 30,215 | 27,170 | 28,706 | 27,167 | ||
Effect of dilutive options and stock units (in shares) | 0 | 178 | 0 | 324 | ||
Diluted weighted average number of common shares outstanding (in shares) | 30,215 | 27,348 | 28,706 | 27,491 | ||
Income (loss) per share: | ||||||
Earnings Per Share, Basic (in dollars per share) | $ (0.58) | $ 0.56 | $ (0.84) | $ 0.60 | ||
Earnings Per Share, Diluted (in dollars per share) | $ (0.58) | $ 0.55 | $ (0.84) | $ 0.60 | ||
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ (17,597) | $ 15,080 | $ (24,239) | $ 16,390 |
Income Per Share (Anti-dilutive Securities) (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of dilutive common shares outstanding | 1,973 | 2,847 | 1,987 | 2,859 |
RSUs and PSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of dilutive common shares outstanding | 2,990 | 42 | 1,336 | 10 |
Stock Repurchase Program Stock Repurchase Program (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Nov. 17, 2017 |
|
Stock Repurchase Programs [Abstract] | |||
Stock repurchased during period (in shares) | 0 | 0 | |
Repurchase of common stock | $ 0 | $ 2,424,000 | |
Stock repurchase program, authorized amount | $ 20,000,000.0 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Tax Contingency [Line Items] | |||
Payment, Tax Withholding, Share-based Payment Arrangement | $ 806 | $ 753 | |
Effective tax rate | 9.00% | ||
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | $ 2,400 | ||
Unrecognized tax benefits | 900 | $ 900 | |
Gross unrecognized tax benefits that would impact effective tax rate if recognized | $ 700 | $ 700 | |
Settlement with taxing authority | |||
Income Tax Contingency [Line Items] | |||
Effective tax rate | (0.60%) |
Commitments and Contingencies (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
CALIFORNIA | |
Loss Contingencies [Line Items] | |
Estimated litigation liability | $ 8.0 |
Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (1,000,000) |
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | 0 |
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | 5,730,000 |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (1,000,000) |
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