Q1 2022 Zovio Inc Earnings Call
We are encouraged by the preliminary results from the changes I discussed on April 15th for.
For example for the first time since we completed the strategic transaction with <unk> in December of 2020.
Ending enrollment for the University grew for the period January one through March 31.
It's noteworthy to mention two of our textbooks have received textbook and academic author Association's TAA Awards. The TAA is the national organization dedicated to supporting textbook and academic authors.
These awards recognize our commitment to creating and providing quality educational products.
The Forbes school of business and technology at the University of Arizona Global campus utilizes both textbooks to support student learning in their undergraduate business programs.
With regard to the judgment that was issued on March three 2022, we have filed a notice of intention to move for a new trial <unk> move to vacate the judgment.
The motion is currently scheduled for a hearing on may 13th.
Turning to our other businesses full stack Academy in tutor me continued to perform well in the first quarter with revenues of $9 3 million growing 30% for the quarter year over year.
<unk> full stack continues to be well positioned for long term growth and value creation.
<unk> continued to execute new partnership agreements during the first quarter of 2022 with school districts and universities.
Our tutor me total partnership Count is now over $3 50.
In the first quarter total student usage continue to increase year over year with approximately 28000 students tutored in the quarter.
Adding to an already robust portfolio of accolades tutor me as one Ed Tech Digest 2022 award for best tutoring solution.
Our team was also recognized as a finalist in the personalized learning solution Award category.
Turning to full stack over the last quarter, we continue to expand our university powered boot camps by adding product management to our growing list of programs.
Full stacks growth strategy includes adding university partners as well as increasing the number of programs offered by our current University partners.
During Q1, we grew the total number of programs delivered by University partners by 38% sequentially.
In Q1, the first cohort of students in conjunction with our upgrade partnership in India started cyber security and data analytics programs.
In addition, we launched our second cohort for web development with the New York City Workforce Development Corporation.
Full stack partners with companies to help our students secure meaningful jobs after graduation by actively participating and recruitment events and sharing job openings with our students.
We are committed to expanding the number of companies that we work with and are pleased with the addition of approximately 50 new partners in Q1.
We continue to have high expectation for new partnerships for 200, <unk> full stack and our outlook for <unk> growth remains strong.
Before I turn the call over to Kevin I want to address our comprehensive review of the business.
As I mentioned on the last call. We are assessing strategic alternatives that will create the most value for our shareholders, which includes potential divestitures of all three businesses we operate.
I am pleased with the interest being shown in the progress we are making and look forward to sharing details with you in the future.
Simultaneously, we are executing our turnaround plan for enrollment at UHC and are capitalizing on opportunities for growth with Tudor me and full stack.
Now I will turn the call over to Kevin Royal to review, our financial and operating results.
Thank you Randy.
Looking at the results of the quarter revenue for the first quarter of 2022 was $61 6 million compared to $76 9 million for the same period in the prior year.
The decrease is primarily related to the lower average enrollment partially offset by an increase in the <unk> growth segment revenues.
For the first quarter of 2022 technology and academic services were $18 5 million or 30% of revenue.
Third to $19 1 million or 24, 9% of revenue for the comparable prior year period.
<unk> is in this category are lower overall on an absolute basis due to cost reduction efforts lower bad debt and lower amortization of intangible assets. However expenses are higher as a percentage of revenues due to lower revenues year over year.
Counseling services and support for the first quarter of 2022 were $21 3 million or 34, 6% of revenue compared to $25 3 million or 32, 9% of revenue for the comparable prior year period. The overall decreased between periods on an app.
Absolute basis were primarily due to decreases in employee costs and facilities costs.
Yes.
Marketing and communication expenses for the first quarter of 2022, or $21 9 million or 35, 6% of revenue.
The $25 8 million or 33, 6% of revenue for the comparable prior year period.
Raul decreased between periods on an absolute basis were primarily due to decreases in advertising and employee costs.
General and administrative expenses for the first quarter of 2022, or $7 1 million or 11, 6% of revenue compared to $15 9 million or 28% of revenue for the comparable prior year period.
The overall decrease between periods on an absolute basis were primarily due to decreases in employee costs severance costs and professional fees.
Our net loss for the first quarter of 2022 was $7 4 million or a net loss of 22 per diluted share.
This is compared to a net loss of $9 5 million or a net loss of 29 per diluted share for the first quarter of the prior year.
Our non-GAAP net loss for the first quarter of 2022 was $4 5 million or a loss of 13 cents per diluted share compared to the non-GAAP net loss of $3 3 million.
Or loss of <unk> 10 cents per diluted share for the first quarter of the prior year.
The non-GAAP net loss for the first quarter of 2022 excludes acquisition costs of <unk> 5 million certain non-GAAP stock compensation of $1 2 million and other non-GAAP cost of $2 2 million, including severance and legal costs.
As of March 31, 2022, we had unrestricted cash and cash equivalents of $33 7 million as compared to $28 3 million as of December 31, 2021.
In addition, we had restricted cash of $6 1 million at March 31, 2022, as compared to $9 3 million at December 31 2021.
Subsequent to the quarter end, we entered into a 31 $5 million three year term loan towards capital.
There was $2 6 million of cash provided by operating activities. During the year to date period ended March 31 2022.
A comparison, we had $8 million of cash provided by operating activities. During the same period in the prior year.
The year over year change in the cash provided by operating activities was primarily driven by the changes in the working capital accounts and the lower net loss.
Capital expenditures for the year to date period ended March 31, 2022, or 24000 as compared to $1 2 million for the same period last year.
At this time I will ask the operator to open the phone lines for your questions.
Thank you.
At this time, if you would like to ask a question. Please press star one on your telephone keypad again to ask a question simply press star one on your telephone keypad and your first question comes from the line.
Perez from Barrington Research. Your line is open. Please go ahead.
Hey, guys. Thanks.
Thanks for taking my question.
Couple of questions.
Randy you talked about the fact that youre working with UGC to stabilize and growth starts when you've taken actions several organizational and operational changes I wonder if you could give us a little bit more color on those changes.
Sure.
Alex and thank you for joining.
First of all words.
We're really pleased that we're starting to see some outcome of the actions and that was what I commented on a few minutes ago that for the first quarter of this calendar year sustaining one through March 31 at the ending enrollment is.
Is greater than the beginning enrollment for for the University and then that follows the four quarters of 2021, which was a rough year, which we talked about so that's very encouraging to see in Q1 those results.
There's a direct relationship to the.
Falling.
First from a set of organizational adjustments that we made.
Yes.
January .
<unk> reduced the size of the management team that serves <unk> with the intent of being more nimble and agile increasing span of control reducing layers and so that we would be able to be.
Just very high service and responsive to our client that was won in terms of.
Operational changes we made.
Here's an example, we made a change where we combined.
Enrollment advisers and enrollment coaches those were too.
Separately defined roles, we merged the rolls in and that created fewer handoffs.
In the student experience that they have with us throughout the lifecycle of their experience with with the University and Thats true.
Improve the experience and improving the experience reduces.
The students in terms of dropping dropping courses are dropping out entirely.
Lastly, Alex I think the selection of the leaders that.
<unk> chosen and have confidence in.
The work with <unk> to work for <unk>. They are our single largest client. These are a group of leaders that are well versed in the areas that they lead in.
They're really they've increased I believe the working relationship in a way that there is less friction and just more about getting things done together, we're very aligned.
And the <unk>.
The objective is that <unk> has as.
As a mission and purpose of the University.
Those are a few Alex.
No that's very helpful.
And then and related and you referred to this for the first time since the <unk> transaction in December of 2021, ending enrollment was up from from December 31 to March 31.
Im wondering if you could break that down a little bit.
Whereas the turnaround coming from is it continuing students is it new student starts is it both in.
When do you foresee a turn in the year over year starts growth, which are which were negative.
2021 comps got to be getting easier, although it's no easy feat to grow new student starts and then maybe just a little bit of talk about the overall demand environment.
Sure. Alex This is Kevin so where we really saw the strength this quarter was in the improvement.
In student retention.
So new enrollment.
Slower than a year ago.
First quarter.
But we did see a pretty significant improvement in the retention of students. So lower drops in higher re entries for students who had previously drops and then with respect to your second question.
We actually.
Believe that our new enrollment will exceed the prior years, new enrollment in our second quarter. So we'll begin to see improvements in new enrollment in the second quarter and then also with respect to overall demand.
We are seeing good demand and with operational changes that Randy has has made and the personnel changes.
We're starting to see improvement has seen our ability to capitalize on that demand.
Great.
Awesome color and good news for sure.
The.
In your overview of tutor me.
Full stack tutor me you said you now have.
Over 350 partnerships with school districts in universities and other I assume.
How many.
His partnership agreements do you have now.
Full stack partnerships with universities or other.
I'm not talking about employers I'm talking about universities, yeah to answer your question Alex is 19.
Sure.
19, you'd okay via partnerships with an arm.
Our full stack Academy business, and it's a very important part of our go to market with those universities.
Okay great.
And then.
Guidance, you didn't mention it but I'm, assuming we're not giving guidance at this point for the full year or beyond.
That's correct Alex at this point in time as we continue to implement the changes.
I just think it's most prudent to.
With withhold and not provide guidance.
Sure.
Okay fair enough.
Thank you so much for answering my questions and I will save my other question's for offline.
Thank you Alex.
Thank you so much.
Next question.
Sorry, do you from water Tower Research. Your line is open. Please go ahead.
Thank you good afternoon Randy.
Kevin.
Hi, Terry.
Thanks Wendell.
Quite a few points.
You've made you've made.
Very significant changes in reaction to the.
The challenge in.
Enrollment.
In terms of organizational.
Cost cutting some some changes.
I was wondering if you could see.
Are you doing upfront.
And they made changes too.
The multi.
Mostly coming from your end.
Sure.
Well I don't want to comment on that.
Costs related items in terms of the.
Leadership of <unk> other than <unk>.
I do believe that pulp has <unk> has a really good handle along with his leadership team on keeping University revenues net tuition revenues and cost in line.
So.
Which we have confidence in that.
In terms of our.
Cost reduction initiatives.
Clear.
Terry you in terms of getting started.
First week of December that action needed to be taken swiftly.
To better align our cost structure with our revenues.
As I commented a few minutes ago, we're going to carefully manage our expenses until the company was once again profitable I'm pleased with the sequential improvement.
Both Kevin and I mentioned between <unk> 2021, and this first quarter of a new year 2022.
Yes.
The overall contract.
Uhm.
Hey.
Okay.
Increased guaranteed payment to <unk> and again this was really kind of agreed to in the context of expecting.
Increase in enrollment from the get go.
Unfortunately that Hasnt happened do you think there's any room for Jeff.
Adjustments on that on that front.
But there it's not it's nothing that type of address directly with either.
Paul Patrick or precedent Robbins.
Fully aware of the business case that was.
Behind the strategic thinking of the University of Arizona, and Silvio leadership at the time that included profit guarantees.
Unfortunately.
The first year last calendar year was was.
A bit of a rough start for both organizations as I commented on April 15th.
Look at it as a transition year.
The enrollment growth in a transition year as that is the best case example.
And it was it was a tough year for all four quarters, what I've been focused on since.
Having the opportunity to lead this company is that we.
We address the root cause of enrollment decline the contributing factors, we do that in partnership with <unk> leadership team, which we do we do everyday and I am pleased with whether it's identifying the initiatives together executing those initiatives and ultimately the results that Kevin.
I have shared in term.
A improvement in the first quarter of this year. So it's very encouraging and I can assure you. We work we work in partnership with <unk>.
Our largest client.
And it's.
It's a very good working relationship and that's what is required when you are facing challenges.
The combined leadership teams are facing after after a challenging transition year, but I think the way we should look at it Terry is 2021 was the transition year for both.
Silvio and for the University of Arizona Global campus, becoming a new University.
Yes.
Well, it's encouraging to see that.
As you indicated the Tianjin.
New enrollments.
We'll be improving both in terms of new enrollments and retention so thats.
Do you think there must be some some kinks have been worked out.
Hum.
Working relationships have been in dividend.
Maybe one last question do you have any time horizon for the strategic review or is it completely open.
Should we expect.
Three months six months nine months any thoughts there.
I think those timeframe as you've laid out a good time for him on it over the next three to six months it'll it will become very clear.
What.
Decisions, we make and we will share them as we make them in terms of one or more divestitures as a part of our.
As our.
Commitment to our shareholders to increase the value of the company. We've got many many many shareholders that are invested in silvio over the years.
Our market cap today is very low and I am committed to improving share holder value and that includes a comprehensive review of the business, which we've completed and I wanted to just be very clear that that does include divestitures, where it makes the most sense.
Great well that's it.
For my question. Thank you very much.
Terry.
Thank you. This concludes our question and answer session I will now turn the call over to Randy Hendrix for any closing remarks.
Thank you operator.
I'd just like to say to everybody. Thank you for todays callers for your interest in Silvio and for your participation on the call today. Thank you very much and now it's back to work.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
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