(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 ☐
|
|
|
|
|
||
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||
|
||
|
||
|
||
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||
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
163,091
|
|
|
$
|
185,098
|
|
Restricted cash
|
25,444
|
|
|
20,428
|
|
||
Investments
|
2,203
|
|
|
2,065
|
|
||
Accounts receivable, net
|
33,566
|
|
|
27,077
|
|
||
Prepaid expenses and other current assets
|
20,361
|
|
|
22,388
|
|
||
Total current assets
|
244,665
|
|
|
257,056
|
|
||
Property and equipment, net
|
14,715
|
|
|
10,434
|
|
||
Goodwill and intangibles, net
|
13,332
|
|
|
14,593
|
|
||
Other long-term assets
|
3,030
|
|
|
5,456
|
|
||
Total assets
|
$
|
275,742
|
|
|
$
|
287,539
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued liabilities
|
$
|
58,369
|
|
|
$
|
71,165
|
|
Deferred revenue and student deposits
|
53,870
|
|
|
68,207
|
|
||
Total current liabilities
|
112,239
|
|
|
139,372
|
|
||
Rent liability
|
4,790
|
|
|
7,001
|
|
||
Other long-term liabilities
|
9,835
|
|
|
12,708
|
|
||
Total liabilities
|
126,864
|
|
|
159,081
|
|
||
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 September 30, 2018, and December 31, 2017
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value:
|
|
|
|
||||
300,000 shares authorized; 65,257 and 64,887 issued, and 27,136 and 27,158 outstanding, at September 30, 2018 and December 31, 2017, respectively
|
653
|
|
|
649
|
|
||
Additional paid-in capital
|
203,913
|
|
|
201,755
|
|
||
Retained earnings
|
452,500
|
|
|
431,818
|
|
||
Treasury stock, 38,121 shares at cost at September 30, 2018, and 37,729 shares at cost at December 31, 2017
|
(508,188
|
)
|
|
(505,764
|
)
|
||
Total stockholders' equity
|
148,878
|
|
|
128,458
|
|
||
Total liabilities and stockholders' equity
|
$
|
275,742
|
|
|
$
|
287,539
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenue
|
$
|
114,858
|
|
|
$
|
119,367
|
|
|
$
|
353,723
|
|
|
$
|
373,438
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Instructional costs and services
|
54,470
|
|
|
57,756
|
|
|
165,318
|
|
|
181,943
|
|
||||
Admissions advisory and marketing
|
41,902
|
|
|
43,669
|
|
|
129,971
|
|
|
132,133
|
|
||||
General and administrative
|
13,731
|
|
|
11,441
|
|
|
39,028
|
|
|
37,019
|
|
||||
Legal settlement expense
|
—
|
|
|
—
|
|
|
141
|
|
|
—
|
|
||||
Restructuring and impairment expense
|
1,225
|
|
|
8,004
|
|
|
3,795
|
|
|
8,004
|
|
||||
Total costs and expenses
|
111,328
|
|
|
120,870
|
|
|
338,253
|
|
|
359,099
|
|
||||
Operating income (loss)
|
3,530
|
|
|
(1,503
|
)
|
|
15,470
|
|
|
14,339
|
|
||||
Other income, net
|
367
|
|
|
381
|
|
|
899
|
|
|
1,165
|
|
||||
Income (loss) before income taxes
|
3,897
|
|
|
(1,122
|
)
|
|
16,369
|
|
|
15,504
|
|
||||
Income tax benefit
|
(408
|
)
|
|
(1,161
|
)
|
|
(7,464
|
)
|
|
(718
|
)
|
||||
Net income
|
$
|
4,305
|
|
|
$
|
39
|
|
|
$
|
23,833
|
|
|
$
|
16,222
|
|
Income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
0.88
|
|
|
$
|
0.49
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
0.87
|
|
|
$
|
0.47
|
|
Weighted average number of common shares outstanding used in computing income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
27,061
|
|
|
29,123
|
|
|
27,131
|
|
|
33,333
|
|
||||
Diluted
|
27,589
|
|
|
29,671
|
|
|
27,532
|
|
|
34,193
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income
|
$
|
4,305
|
|
|
$
|
39
|
|
|
$
|
23,833
|
|
|
$
|
16,222
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gains on investments
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Comprehensive income
|
$
|
4,305
|
|
|
$
|
39
|
|
|
$
|
23,833
|
|
|
$
|
16,223
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive (Loss) Income
|
|
Treasury
Stock
|
|
|
|||||||||||||||
|
Shares
|
|
Par Value
|
|
Total
|
|||||||||||||||||||||
Balance at December 31, 2016
|
64,035
|
|
|
$
|
641
|
|
|
$
|
195,854
|
|
|
$
|
421,281
|
|
|
$
|
(1
|
)
|
|
$
|
(337,069
|
)
|
|
$
|
280,706
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,834
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,834
|
|
||||||
Exercise of stock options
|
479
|
|
|
4
|
|
|
3,795
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,799
|
|
||||||
Stock issued under employee stock purchase plan
|
15
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
141
|
|
||||||
Stock issued under stock incentive plan, net of shares held for taxes
|
265
|
|
|
3
|
|
|
(1,765
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,762
|
)
|
||||||
Stock repurchase
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(152,000
|
)
|
|
(152,000
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
16,222
|
|
|
—
|
|
|
—
|
|
|
16,222
|
|
||||||
Unrealized gains on investments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Balance at September 30, 2017
|
64,794
|
|
|
$
|
648
|
|
|
$
|
200,859
|
|
|
$
|
437,503
|
|
|
$
|
—
|
|
|
$
|
(489,069
|
)
|
|
$
|
149,941
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive Income
|
|
Treasury
Stock
|
|
|
|||||||||||||||
|
Shares
|
|
Par Value
|
|
Total
|
|||||||||||||||||||||
Balance at December 31, 2017
|
64,887
|
|
|
$
|
649
|
|
|
$
|
201,755
|
|
|
$
|
431,818
|
|
|
$
|
—
|
|
|
$
|
(505,764
|
)
|
|
$
|
128,458
|
|
Adoption of accounting standards (Note 2)
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,151
|
)
|
|
—
|
|
|
—
|
|
|
(3,151
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,590
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,590
|
|
||||||
Exercise of stock options
|
122
|
|
|
2
|
|
|
453
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
455
|
|
||||||
Net share settlement of stock options
|
—
|
|
|
—
|
|
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,097
|
)
|
||||||
Stock issued under employee stock purchase plan
|
16
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
||||||
Stock issued under stock incentive plan, net of shares held for taxes
|
232
|
|
|
2
|
|
|
(886
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(884
|
)
|
||||||
Stock repurchase
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,424
|
)
|
|
(2,424
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
23,833
|
|
|
—
|
|
|
—
|
|
|
23,833
|
|
||||||
Balance at September 30, 2018
|
65,257
|
|
|
$
|
653
|
|
|
$
|
203,913
|
|
|
$
|
452,500
|
|
|
$
|
—
|
|
|
$
|
(508,188
|
)
|
|
$
|
148,878
|
|
|
Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
23,833
|
|
|
$
|
16,222
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
||||
Provision for bad debts
|
18,538
|
|
|
24,440
|
|
||
Depreciation and amortization
|
5,200
|
|
|
6,821
|
|
||
Amortization of premium/discount
|
—
|
|
|
20
|
|
||
Deferred income taxes
|
54
|
|
|
25
|
|
||
Stock-based compensation
|
3,590
|
|
|
2,834
|
|
||
Net gain on marketable securities
|
(63
|
)
|
|
(193
|
)
|
||
Reassessment of lease charges
|
1,864
|
|
|
5,829
|
|
||
Loss on disposal or impairment of fixed assets
|
334
|
|
|
66
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(27,713
|
)
|
|
(32,286
|
)
|
||
Prepaid expenses and other current assets
|
2,027
|
|
|
(1,081
|
)
|
||
Other long-term assets
|
2,082
|
|
|
(3,164
|
)
|
||
Accounts payable and accrued liabilities
|
(14,743
|
)
|
|
(13,920
|
)
|
||
Deferred revenue and student deposits
|
(14,801
|
)
|
|
(12,952
|
)
|
||
Other liabilities
|
(10,870
|
)
|
|
(9,405
|
)
|
||
Net cash used in operating activities
|
(10,668
|
)
|
|
(16,744
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(1,696
|
)
|
|
(2,876
|
)
|
||
Purchases of investments
|
(1,050
|
)
|
|
(83
|
)
|
||
Capitalized costs for intangible assets
|
(700
|
)
|
|
(438
|
)
|
||
Sales of investments
|
975
|
|
|
—
|
|
||
Maturities of investments
|
—
|
|
|
22,725
|
|
||
Net cash (used in) provided by investing activities
|
(2,471
|
)
|
|
19,328
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from exercise of stock options
|
455
|
|
|
3,799
|
|
||
Tax withholdings related to net issuance of stock options
|
(1,097
|
)
|
|
—
|
|
||
Proceeds from the issuance of stock under employee stock purchase plan
|
98
|
|
|
141
|
|
||
Tax withholdings on issuance of stock awards
|
(884
|
)
|
|
(1,762
|
)
|
||
Repurchase of common stock
|
(2,424
|
)
|
|
(152,000
|
)
|
||
Net cash used in financing activities
|
(3,852
|
)
|
|
(149,822
|
)
|
||
Net decrease in cash, cash equivalents and restricted cash
|
(16,991
|
)
|
|
(147,238
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
205,526
|
|
|
332,335
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
188,535
|
|
|
$
|
185,097
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash transactions:
|
|
|
|
||||
Purchase of equipment included in accounts payable and accrued liabilities
|
$
|
462
|
|
|
$
|
67
|
|
Issuance of common stock for vested restricted stock units
|
$
|
2,569
|
|
|
$
|
4,520
|
|
Property and equipment under build-to-suit leases
|
$
|
6,076
|
|
|
$
|
—
|
|
|
|
|
|
||||
Reconciliation of cash, cash equivalents, and restricted cash:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
163,091
|
|
|
$
|
165,176
|
|
Restricted cash
|
25,444
|
|
|
19,921
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
188,535
|
|
|
$
|
185,097
|
|
•
|
Deferral of revenue recognition for the corporate full tuition grant (“FTG”) contracts that include a material right under ASC 606. This material right is deferred until the earlier of redemption or expiration.
|
•
|
Prior to the adoption of ASC 606, we recognized revenue to the extent of cash receipts when collectibility was not reasonably assured. Under ASC 606, collectibility issues may indicate an implied price concession, which is accounted for as variable consideration. Consequently, revenues for these types of contracts are accelerated, net of any amounts to which we expect to be entitled.
|
•
|
Under ASC 606, once a student is deemed to have a history of collection issues, future revenues earned are subject to a price concession as the student has demonstrated that they may not pay the full tuition price based on past behavior. This results in a reduction in the transaction price such that revenue is recorded based on the amount to which the Company expects to be entitled if, in the future, a student is deemed to have resolved their collection issues, a price concession will no longer be recorded.
|
|
Closing balance at December 31, 2017
|
|
Adjustments due to ASC 606
|
|
Opening balance at January 1, 2018
|
||||||
Accounts receivable, net
|
$
|
27,077
|
|
|
$
|
(2,686
|
)
|
|
$
|
24,391
|
|
|
|
|
|
|
|
|
|||||
Deferred revenue and student deposits
|
$
|
68,207
|
|
|
$
|
465
|
|
|
$
|
68,672
|
|
Retained earnings
|
$
|
431,818
|
|
|
$
|
(3,151
|
)
|
|
$
|
428,667
|
|
|
For the three months ended September 30, 2018
|
||||||||||
|
As Reported under ASC 606
|
|
Adjustments due to ASC 606
|
|
Amounts under ASC 605
|
||||||
Revenue
|
$
|
114,858
|
|
|
$
|
2,921
|
|
|
$
|
117,779
|
|
Instructional costs and services
(1)
|
$
|
54,470
|
|
|
$
|
1,651
|
|
|
$
|
56,121
|
|
Net income
|
$
|
4,305
|
|
|
$
|
1,270
|
|
|
$
|
5,575
|
|
|
For the nine months ended September 30, 2018
|
||||||||||
|
As Reported under ASC 606
|
|
Adjustments due to ASC 606
|
|
Amounts under ASC 605
|
||||||
Revenue
|
$
|
353,723
|
|
|
$
|
5,236
|
|
|
$
|
358,959
|
|
Instructional costs and services
(1)
|
$
|
165,318
|
|
|
$
|
4,364
|
|
|
$
|
169,682
|
|
Net income
|
$
|
23,833
|
|
|
$
|
872
|
|
|
$
|
24,705
|
|
|
As of September 30, 2018
|
||||||||||
|
As Reported under ASC 606
|
|
Adjustments due to ASC 606
|
|
Amounts under ASC 605
|
||||||
Accounts receivable, net
|
$
|
33,566
|
|
|
$
|
2,686
|
|
|
$
|
36,252
|
|
Deferred revenue and student deposits
|
$
|
53,870
|
|
|
$
|
(211
|
)
|
|
$
|
53,659
|
|
Retained earnings
|
$
|
452,500
|
|
|
$
|
(4,023
|
)
|
|
$
|
448,477
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||
Tuition revenue, net
|
$
|
104,246
|
|
|
$
|
322,406
|
|
Digital materials revenue, net
|
6,305
|
|
|
18,849
|
|
||
Technology fee revenue, net
|
3,874
|
|
|
10,974
|
|
||
Other revenue, net
(1)
|
433
|
|
|
1,494
|
|
||
Total revenue, net
|
$
|
114,858
|
|
|
$
|
353,723
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||
Over time, over period of instruction
|
$
|
96,753
|
|
|
$
|
302,270
|
|
Over time, full tuition grant
(1)
|
11,663
|
|
|
31,716
|
|
||
Point in time
(2)
|
6,442
|
|
|
19,737
|
|
||
Total revenue, net
|
$
|
114,858
|
|
|
$
|
353,723
|
|
(1)
|
Represents revenue generated from the corporate full tuition grant (“FTG”) program.
|
(2)
|
Represents revenue generated from digital textbooks and other miscellaneous fees.
|
|
Deferred Revenue
|
||
Opening balance, January 1, 2018
|
$
|
19,600
|
|
Closing balance, September 30, 2018
|
17,857
|
|
|
Increase (Decrease)
|
$
|
(1,743
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Asset impairment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
325
|
|
|
$
|
—
|
|
Student transfer agreement costs
|
(268
|
)
|
|
—
|
|
|
(268
|
)
|
|
—
|
|
||||
Severance costs
|
855
|
|
|
2,175
|
|
|
1,874
|
|
|
2,175
|
|
||||
Lease exit and other costs
|
638
|
|
|
5,829
|
|
|
1,864
|
|
|
5,829
|
|
||||
Total restructuring and impairment charges
|
$
|
1,225
|
|
|
$
|
8,004
|
|
|
$
|
3,795
|
|
|
$
|
8,004
|
|
|
Asset Impairment
|
|
Student Transfer Agreement Costs
|
|
Severance Costs
|
|
Lease Exit and Other Costs
|
|
Total
|
||||||||||
Balance at December 31, 2017
|
$
|
—
|
|
|
$
|
594
|
|
|
$
|
195
|
|
|
$
|
10,643
|
|
|
$
|
11,432
|
|
Restructuring and impairment expense
|
325
|
|
|
(268
|
)
|
|
1,874
|
|
|
1,864
|
|
|
3,795
|
|
|||||
Payments and adjustments
|
(325
|
)
|
|
(270
|
)
|
|
(1,459
|
)
|
|
(10,605
|
)
|
|
(12,659
|
)
|
|||||
Balance at September 30, 2018
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
610
|
|
|
$
|
1,902
|
|
|
$
|
2,568
|
|
|
As of September 30, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Mutual funds
|
$
|
2,203
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,203
|
|
|
As of December 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Mutual funds
|
$
|
2,065
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,065
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Accounts receivable
|
$
|
49,231
|
|
|
$
|
44,656
|
|
Less allowance for doubtful accounts
|
(15,665
|
)
|
|
(17,579
|
)
|
||
Accounts receivable, net
|
$
|
33,566
|
|
|
$
|
27,077
|
|
|
Beginning
Balance
|
|
Charged to
Expense
|
|
Deductions (1)
|
|
Ending
Balance
|
||||||||
Allowance for doubtful accounts receivable:
|
|
|
|
|
|
|
|
||||||||
For the nine months ended September 30, 2018
|
$
|
(17,579
|
)
|
|
$
|
18,538
|
|
|
$
|
(20,452
|
)
|
|
$
|
(15,665
|
)
|
For the nine months ended September 30, 2017
|
$
|
(16,154
|
)
|
|
$
|
24,440
|
|
|
$
|
(22,541
|
)
|
|
$
|
(18,053
|
)
|
(1)
|
Deductions represent accounts written off, net of recoveries.
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Prepaid expenses
|
$
|
6,106
|
|
|
$
|
6,195
|
|
Prepaid licenses
|
5,554
|
|
|
4,882
|
|
||
Income tax receivable
|
4,971
|
|
|
8,889
|
|
||
Prepaid insurance
|
2,625
|
|
|
1,215
|
|
||
Insurance recoverable
|
682
|
|
|
1,192
|
|
||
Other current assets
|
423
|
|
|
15
|
|
||
Total prepaid expenses and other current assets
|
$
|
20,361
|
|
|
$
|
22,388
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Buildings
|
$
|
6,076
|
|
|
$
|
—
|
|
Furniture and office equipment
|
43,538
|
|
|
43,330
|
|
||
Software
|
12,516
|
|
|
12,313
|
|
||
Leasehold improvements
|
5,375
|
|
|
5,445
|
|
||
Vehicles
|
22
|
|
|
22
|
|
||
Total property and equipment
|
67,527
|
|
|
61,110
|
|
||
Less accumulated depreciation and amortization
|
(52,812
|
)
|
|
(50,676
|
)
|
||
Total property and equipment, net
|
$
|
14,715
|
|
|
$
|
10,434
|
|
|
September 30, 2018
|
||||||||||
Definite-lived intangible assets:
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Capitalized curriculum costs
|
$
|
21,954
|
|
|
$
|
(20,127
|
)
|
|
$
|
1,827
|
|
Purchased intangible assets
|
15,850
|
|
|
(6,912
|
)
|
|
8,938
|
|
|||
Total definite-lived intangible assets
|
$
|
37,804
|
|
|
$
|
(27,039
|
)
|
|
$
|
10,765
|
|
Goodwill and indefinite-lived intangibles
|
|
|
|
|
2,567
|
|
|||||
Total goodwill and intangibles, net
|
|
|
|
|
$
|
13,332
|
|
||||
|
|
|
|
|
|
||||||
|
December 31, 2017
|
||||||||||
Definite-lived intangible assets:
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Capitalized curriculum costs
|
$
|
21,463
|
|
|
$
|
(19,300
|
)
|
|
$
|
2,163
|
|
Purchased intangible assets
|
15,850
|
|
|
(5,987
|
)
|
|
9,863
|
|
|||
Total definite-lived intangible assets
|
$
|
37,313
|
|
|
$
|
(25,287
|
)
|
|
$
|
12,026
|
|
Goodwill and indefinite-lived intangibles
|
|
|
|
|
2,567
|
|
|||||
Total goodwill and intangibles, net
|
|
|
|
|
$
|
14,593
|
|
Year Ended December 31,
|
|
|
||
Remainder of 2018
|
$
|
566
|
|
|
2019
|
2,000
|
|
||
2020
|
1,733
|
|
||
2021
|
1,495
|
|
||
2022
|
1,264
|
|
||
Thereafter
|
3,707
|
|
||
Total future amortization expense
|
$
|
10,765
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Accounts payable
|
$
|
4,004
|
|
|
$
|
5,619
|
|
Accrued salaries and wages
|
5,186
|
|
|
8,573
|
|
||
Accrued bonus
|
6,707
|
|
|
6,924
|
|
||
Accrued vacation
|
8,089
|
|
|
8,237
|
|
||
Accrued litigation and fees
|
8,041
|
|
|
9,886
|
|
||
Accrued expenses
|
19,970
|
|
|
16,024
|
|
||
Current leases payable
|
4,122
|
|
|
12,971
|
|
||
Accrued insurance liability
|
2,250
|
|
|
2,931
|
|
||
Total accounts payable and accrued liabilities
|
$
|
58,369
|
|
|
$
|
71,165
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Deferred revenue
|
$
|
17,857
|
|
|
$
|
19,135
|
|
Student deposits
|
36,013
|
|
|
49,072
|
|
||
Total deferred revenue and student deposits
|
$
|
53,870
|
|
|
$
|
68,207
|
|
|
As of
September 30, 2018 |
|
As of
December 31, 2017 |
||||
Uncertain tax positions
|
$
|
842
|
|
|
$
|
8,893
|
|
Lease financing obligation
|
6,076
|
|
|
—
|
|
||
Other long-term liabilities
|
2,917
|
|
|
3,815
|
|
||
Total other long-term liabilities
|
$
|
9,835
|
|
|
$
|
12,708
|
|
Year Ended December 31,
|
|
|
||
Remainder of 2018
|
$
|
5,104
|
|
|
2019
|
21,010
|
|
||
2020
|
11,209
|
|
||
2021
|
7,321
|
|
||
2022
|
3,825
|
|
||
Thereafter
|
20,677
|
|
||
Total minimum payments
|
$
|
69,146
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
4,305
|
|
|
$
|
39
|
|
|
$
|
23,833
|
|
|
$
|
16,222
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding
|
27,061
|
|
|
29,123
|
|
|
27,131
|
|
|
33,333
|
|
||||
Effect of dilutive options and stock units
|
528
|
|
|
548
|
|
|
401
|
|
|
860
|
|
||||
Diluted weighted average number of common shares outstanding
|
27,589
|
|
|
29,671
|
|
|
27,532
|
|
|
34,193
|
|
||||
Income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
0.88
|
|
|
$
|
0.49
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
0.87
|
|
|
$
|
0.47
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Stock options
|
1,560
|
|
|
2,625
|
|
|
2,709
|
|
|
1,858
|
|
RSUs and PSUs
|
2
|
|
|
19
|
|
|
2
|
|
|
9
|
|
•
|
our ability to successfully convert Ashford University to a not-for-profit university;
|
•
|
Ashford University's ability to continue to operate an accredited institution subject to the requirements of the State of California, Department of Consumer Affairs, Bureau for Private Postsecondary Education (“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 gainful employment rules and 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 our institution;
|
•
|
our ability to obtain continued approval of Ashford University’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 University’s veteran students;
|
•
|
Ashford University’s ability 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 University’s active duty military students;
|
•
|
the outcome of various lawsuits, claims and other legal proceedings;
|
•
|
new initiatives focused on student success, retention and academic quality;
|
•
|
changes in our student fee structure;
|
•
|
expectations regarding the adequacy of our cash and cash equivalents and other sources of liquidity for ongoing operations;
|
•
|
expectations regarding investment in online and other advertising and 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 September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Consolidated Statement of Income Data:
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
114,858
|
|
|
$
|
119,367
|
|
|
$
|
353,723
|
|
|
$
|
373,438
|
|
Operating income (loss)
|
$
|
3,530
|
|
|
$
|
(1,503
|
)
|
|
$
|
15,470
|
|
|
$
|
14,339
|
|
|
|
|
|
|
|
|
|
||||||||
Consolidated Other Data:
|
|
|
|
|
|
|
|
||||||||
Period-end enrollment
(1)
|
|
|
|
|
|
|
|
||||||||
Online
|
39,536
|
|
|
42,065
|
|
|
39,536
|
|
|
42,065
|
|
||||
Campus-based
|
48
|
|
|
67
|
|
|
48
|
|
|
67
|
|
||||
Total
|
39,584
|
|
|
42,132
|
|
|
39,584
|
|
|
42,132
|
|
(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, 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.
|
•
|
Certification:
Institutions must certify that each of their gainful employment programs meet state and federal licensure, certification and accreditation requirements.
|
•
|
Accountability Measures:
To maintain Title IV eligibility, gainful employment programs will be required to meet minimum standards for the debt burden versus the earnings of their graduates.
|
◦
|
Pass: Programs whose graduates have annual loan payments less than 8% of total earnings or less than 20% of discretionary earnings.
|
◦
|
Zone: Programs whose graduates have annual loan payments between 8% and 12% of total earnings or between 20% and 30% of discretionary earnings.
|
◦
|
Fail: Programs whose graduates have annual loan payments greater than 12% of total earnings and greater than 30% of discretionary earnings.
|
•
|
Transparency:
Institutions will be required to make public disclosures regarding the performance and outcomes of their gainful employment programs. The disclosures will include information such as costs, earnings, debt and completion rates.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||
Instructional costs and services
|
47.4
|
|
|
48.4
|
|
|
46.8
|
|
|
48.8
|
|
Admissions advisory and marketing
|
36.5
|
|
|
36.6
|
|
|
36.7
|
|
|
35.4
|
|
General and administrative
|
12.0
|
|
|
9.6
|
|
|
11.0
|
|
|
9.9
|
|
Legal settlement expense
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
|
0.0
|
|
Restructuring and impairment expense
|
1.1
|
|
|
6.7
|
|
|
1.1
|
|
|
2.1
|
|
Total costs and expenses
|
97.0
|
|
|
101.3
|
|
|
95.6
|
|
|
96.2
|
|
Operating income (loss)
|
3.0
|
|
|
(1.3
|
)
|
|
4.4
|
|
|
3.8
|
|
Other income, net
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
Income (loss) before income taxes
|
3.3
|
|
|
(1.0
|
)
|
|
4.7
|
|
|
4.1
|
|
Income tax benefit
|
(0.4
|
)
|
|
(1.0
|
)
|
|
(2.0
|
)
|
|
(0.2
|
)
|
Net income
|
3.7
|
%
|
|
0.0
|
%
|
|
6.7
|
%
|
|
4.3
|
%
|
|
Payments Due by Period
|
||||||||||||||||||||||||||
(In thousands)
|
Total
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||||
Operating lease obligations
|
$
|
69,146
|
|
|
$
|
5,104
|
|
|
$
|
21,010
|
|
|
$
|
11,209
|
|
|
$
|
7,321
|
|
|
$
|
3,825
|
|
|
$
|
20,677
|
|
Other contractual obligations
|
41,268
|
|
|
6,335
|
|
|
11,656
|
|
|
9,496
|
|
|
3,626
|
|
|
2,620
|
|
|
7,535
|
|
|||||||
Uncertain tax positions
|
842
|
|
|
—
|
|
|
842
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total
|
$
|
111,256
|
|
|
$
|
11,439
|
|
|
$
|
33,508
|
|
|
$
|
20,705
|
|
|
$
|
10,947
|
|
|
$
|
6,445
|
|
|
$
|
28,212
|
|
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 September 30, 2018, filed with the SEC on November 8, 2018, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017; (ii) the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017; (iv) the Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2018 and 2017; (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017; and (vi) the Notes to Condensed Consolidated Financial Statements.
|
|
BRIDGEPOINT EDUCATION, INC.
|
|
|
November 8, 2018
|
/s/ KEVIN ROYAL
|
|
Kevin Royal
Chief Financial Officer
(Principal financial officer and duly authorized to
sign on behalf of the registrant)
|
1.1
|
Project:
|
The land, building(s), improvements and appurtenants commonly known as Ascend at Chandler Airport Center in Chandler, Arizona, as shown on attached
Exhibit A
.
|
|
|
|
1.2
|
Building/Building
Parcel:
|
The “Building Parcel” is that portion of the Project designated on
Exhibit A-1
attached hereto. The “Building” is the building in which the Premises are situated known as Ascend C as shown on attached
Exhibit A-1
, and located at 1811 E. Northrop Boulevard, Chandler, Arizona 85286.
|
|
|
|
1.3
|
Premises:
|
The space within the Building containing approximately 130,642 square feet of floor area, as shown on
Exhibit B
attached hereto, together with the Building and Building Parcel.
|
|
|
|
1.4
|
Common Areas:
|
The areas of the Project not regularly and customarily leased for exclusive use of tenants, including, but not limited to, any driveways; walks; landscaped areas; storm water retention and detention systems; multi-tenant monument signs as identified on Exhibit F and other sign monuments.
|
|
|
|
1.5
|
Term:
|
Eleven (11) years and six (6) months commencing on the Commencement Date and terminating on the Termination Date.
|
|
|
|
1.6
|
Commencement Date:
|
The earlier of (i) the date upon which Tenant occupies the Premises and (ii) April 15, 2019, subject to adjustment as set forth in Section 2 below.
|
|
|
|
1.7
|
Termination Date:
|
The last day of the one hundred thirty-eighth (138th) full calendar month following the Commencement Date, subject to adjustment as set forth in Section 43 below.
|
|
|
|
1.8
|
Monthly Base Rent:
|
See
Exhibit E
attached hereto and made a part hereof.
|
|
|
|
1.9
|
Initial Estimated
Monthly Operating
Expense:
|
$.3508 per square foot ($4.21 per square foot per year).
|
|
|
|
1.10
|
Tenant’s
Proportionate Share:
|
100%, subject to adjustment as set forth in Section 3.2 below.
|
|
|
|
1.11
|
Permitted Use:
|
Call center, general office, administrative offices and other uses reasonably incidental thereto, and as further set forth in Section 6 below,
|
|
|
including, without limitation, the marketing of for-profit, primarily online secondary education courses.
|
|
|
|
1.12
|
Security Deposit:
|
$5,600,000.00 in the form of a letter of credit, subject to reduction as set forth in Section 4 below.
|
|
|
|
1.13
|
Tenant Improvement
Allowance:
|
$7,223,496.18
|
|
|
|
1.14
|
Guarantor(s):
|
None
|
|
|
|
1.15
|
Exhibits:
|
A - Site Plan/Project
A-1 - Building Parcel and Building
B - Premises
C - TI Construction Terms and Conditions
D - Confirmation of Lease Term Agreement
E - Base Rent Schedule
F - Signage
G - SNDA Form
H - Form of Letter of Credit
|
Period
|
Size of Premises
|
Tenant’s Proportionate Share
|
Months 1 - 3
|
50,000 SF
|
38.27%
|
Months 4 - 6
|
75,000 SF
|
57.41%
|
Months 7 - 9
|
100,000 SF
|
76.55%
|
Months 10 - 12
|
115,000 SF
|
88.03%
|
Months 13 - 138
|
130,642 SF
|
100.00%
|
|
If to Landlord:
|
Ascend Northrop, LLC
|
|
|
c/o Irgens Partners, LLC
|
|
|
833 East Michigan Street, Suite 400
|
|
|
Milwaukee, WI 53202
|
|
|
Attention: CEO/Manager
|
|
|
|
|
If to Tenant:
|
|
|
|
|
|
Prior to
|
Bridgepoint Education, Inc.
|
|
Commencement Date:
|
8620 Spectrum Center Boulevard
|
|
|
San Diego, CA 92123
|
|
|
Attention: Jon Allen, Associate VP of Facilities and Security
|
|
|
|
|
On and After the
|
Bridgepoint Education, Inc.
|
|
Commencement Date:
|
1811 E. Northrop Boulevard
|
|
|
Chandler, AZ 85286
|
|
|
Attention: Jon Allen, Associate VP of Facilities and Security
|
|
|
|
|
With a copy to:
|
Procopio, Cory, Hargreaves & Savitch LLP
|
|
|
525 B Street, Suite 2200
|
|
|
San Diego, CA 92101
|
|
|
Attention: Thomas W. Turner, Jr.
|
LANDLORD:
|
|
TENANT:
|
||
|
|
|
|
|
Ascend Northrop, LLC
|
|
Bridgepoint Education, Inc.
|
||
|
|
|
|
|
By:
|
IDP Ascend Northrop, LLC, its Manager
|
|
By:
|
/s/ Kevin Royal
|
|
|
|
|
|
By:
|
Irgens Partners, LLC, its Manager
|
|
Name:
|
Kevin Royal
|
|
|
|
|
|
|
|
|
Title:
|
CFO
|
By:
|
/s/ Mark F. Irgens
|
|
|
|
|
Mark F. Irgens, CEO/Manager
|
|
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Bridgepoint Education, 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 Bridgepoint Education, 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)
|
|
|