UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes
Number of shares of registrant’s common stock, par value $0.01, outstanding as of May 2, 2022:
PERDOCEO EDUCATION CORPORATION
FORM 10-Q
TABLE OF CONTENTS
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Page |
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PART I—FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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1 |
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2 |
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Condensed Consolidated Statements of Comprehensive Income (Unaudited) |
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Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
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Item 3. |
26 |
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Item 4. |
26 |
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PART II—OTHER INFORMATION |
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Item 1. |
28 |
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Item 1A. |
28 |
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Item 2. |
28 |
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Item 6. |
28 |
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30 |
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PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, |
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December 31, |
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(In Thousands, Except Share and Per Share Amounts) |
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2022 |
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2021 |
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ASSETS |
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(unaudited) |
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CURRENT ASSETS: |
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Cash and cash equivalents, unrestricted |
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$ |
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$ |
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Restricted cash |
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Total cash, cash equivalents and restricted cash |
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Short-term investments |
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Total cash and cash equivalents, restricted cash and short-term investments |
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Student receivables, gross |
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Allowance for credit losses |
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Student receivables, net |
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Receivables, other |
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Prepaid expenses |
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Inventories |
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Other current assets |
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Total current assets |
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NON-CURRENT ASSETS: |
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Property and equipment, net of accumulated depreciation of $ as of March 31, 2022 and December 31, 2021, respectively |
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Right of use asset, net |
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Goodwill |
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Intangible assets, net of amortization of $ |
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Student receivables, gross |
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Allowance for credit losses |
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Student receivables, net |
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Deferred income tax assets, net |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Lease liability-operating |
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$ |
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$ |
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Accounts payable |
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Accrued expenses: |
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Payroll and related benefits |
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Advertising and marketing costs |
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Income taxes |
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Other |
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Deferred revenue |
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Total current liabilities |
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NON-CURRENT LIABILITIES: |
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Lease liability-operating |
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Other liabilities |
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Total non-current liabilities |
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STOCKHOLDERS' EQUITY: |
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Preferred stock, $ |
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Common stock, $ and outstanding as of March 31, 2022 and December 31, 2021, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Treasury stock, at cost; and December 31, 2021, respectively |
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( |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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For the Quarter Ended March 31, |
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(In Thousands, Except Per Share Amounts) |
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2022 |
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2021 |
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REVENUE: |
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Tuition and fees, net |
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$ |
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$ |
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Other |
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Total revenue |
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OPERATING EXPENSES: |
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Educational services and facilities |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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OTHER INCOME: |
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Interest income |
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Interest expense |
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( |
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Miscellaneous (expense) income |
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( |
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Total other income |
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PRETAX INCOME |
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Provision for income taxes |
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NET INCOME |
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NET INCOME PER SHARE - BASIC: |
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$ |
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$ |
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NET INCOME PER SHARE - DILUTED: |
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$ |
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$ |
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WEIGHTED AVERAGE SHARES OUTSTANDING: |
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Basic |
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Diluted |
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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For the Quarter Ended March 31, |
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(In Thousands) |
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2022 |
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2021 |
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NET INCOME |
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$ |
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$ |
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OTHER COMPREHENSIVE LOSS, net of tax: |
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Foreign currency translation adjustments |
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( |
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( |
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Unrealized loss on investments |
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( |
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( |
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Total other comprehensive loss |
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( |
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( |
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COMPREHENSIVE INCOME |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
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Common Stock |
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Treasury Stock |
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Accumulated Other |
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(In Thousands) |
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Issued Shares |
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$0.01 Par Value |
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Purchased Shares |
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Cost |
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Additional Paid-in Capital |
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Comprehensive Loss |
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Retained Earnings |
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Total |
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BALANCE, January 1, 2022 |
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$ |
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( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Unrealized loss on investments, net of tax |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Treasury stock purchased |
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- |
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- |
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( |
) |
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( |
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- |
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- |
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- |
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( |
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Share-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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Common stock issued |
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( |
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( |
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- |
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- |
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( |
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BALANCE, March 31, 2022 |
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$ |
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( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Treasury Stock |
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Accumulated Other |
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(In Thousands) |
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Issued Shares |
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$0.01 Par Value |
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Purchased Shares |
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Cost |
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Additional Paid-in Capital |
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Comprehensive Income (Loss) |
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Retained Earnings |
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Total |
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BALANCE, January 1, 2021 |
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$ |
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( |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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Net income |
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- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Unrealized loss on investments, net of tax |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Share-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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Common stock issued |
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( |
) |
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( |
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- |
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- |
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( |
) |
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BALANCE, March 31, 2021 |
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$ |
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( |
) |
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$ |
( |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the Quarter Ended March 31, |
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(In Thousands) |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net |
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cash provided by operating activities: |
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Depreciation and amortization expense |
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Bad debt expense |
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Compensation expense related to share-based awards |
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Deferred income taxes |
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Changes in operating assets and liabilities |
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( |
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( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of available-for-sale investments |
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( |
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( |
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Sales of available-for-sale investments |
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Purchases of property and equipment |
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( |
) |
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( |
) |
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Payments for potential business acquisition |
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( |
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- |
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Net cash used in investing activities |
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( |
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( |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Issuance of common stock |
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Purchase of treasury stock |
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( |
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- |
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Payments of employee tax associated with stock compensation |
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( |
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( |
) |
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Release of cash held in escrow |
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( |
) |
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- |
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Net cash used in financing activities |
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( |
) |
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( |
) |
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NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
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( |
) |
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|
( |
) |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE COMPANY
Perdoceo’s academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. Our accredited institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIUS” or “AIU System”) – provide degree programs from associate through doctoral level as well as non-degree professional development and continuing education offerings. Our universities offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to support students and enhance learning. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.
As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022.
The unaudited condensed consolidated financial statements presented herein include the accounts of Perdoceo Education Corporation and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across
As of January 1, 2022, the Company began recording income (loss) from discontinued operations within other miscellaneous income (expense) on its unaudited condensed consolidated statements of income as future amounts will be immaterial and infrequent. Prior period amounts are also immaterial and have been recast to maintain comparability.
During the first quarter of 2022, the Company paid an advance deposit related to a potential acquisition which is reflected within other current receivables on its unaudited condensed consolidated balance sheets and as a cash outflow from investing activities on its unaudited condensed consolidated statements of cash flows. The fair value of this note receivable approximates carrying value due to its short term nature and is expected to be offset against the final purchase price should the acquisition close.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting guidance to be adopted in 2023
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the Troubled Debt Restructuring (“TDR”) recognition and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan (consistent with the accounting for other loan modifications). The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For all public business entities, ASU 2022-02 is effective for annual periods and interim periods beginning after December 15, 2022; early adoption is permitted. We are currently evaluating this guidance and believe the adoption will not significantly impact the presentation of our financial condition, results of operations and disclosures.
5
4. FINANCIAL INSTRUMENTS
Investments consist of the following as of March 31, 2022 and December 31, 2021 (dollars in thousands):
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March 31, 2022 |
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Gross Unrealized |
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Cost |
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Gain |
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(Loss) |
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Fair Value |
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Short-term investments (available for sale): |
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Municipal bonds |
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$ |
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$ |
- |
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$ |
- |
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|
$ |
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Non-governmental debt securities |
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|
|
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|
( |
) |
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Treasury and federal agencies |
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- |
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( |
) |
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Total short-term investments (available for sale) |
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$ |
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|
$ |
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|
$ |
( |
) |
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$ |
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December 31, 2021 |
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Gross Unrealized |
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Cost |
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Gain |
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(Loss) |
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Fair Value |
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Short-term investments (available for sale): |
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Municipal bonds |
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$ |
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$ |
- |
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$ |
( |
) |
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$ |
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Non-governmental debt securities |
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( |
) |
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Treasury and federal agencies |
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- |
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- |
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Total short-term investments (available for sale) |
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$ |
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$ |
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$ |
( |
) |
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$ |
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In the table above, unrealized holding gains (losses) relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than
Our non-governmental debt securities primarily consist of corporate bonds, certificates of deposit and commercial paper. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities. We do not intend to sell our investments in these securities prior to maturity and it is not likely that we will be required to sell these investments before recovery of the amortized cost basis.
Fair Value Measurements
FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of March 31, 2022, we held investments that are required to be measured at fair value on a recurring basis. These investments (available for sale) consist of municipal bonds, non-governmental debt securities and treasury and federal agencies securities. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
All of our available for sale investments were measured under Level 2 as of March 31, 2022 and December 31, 2021. Additionally, money market funds of $
Equity Method Investment
Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, represents an international investment in a private company. As of March 31, 2022, our investment in an equity affiliate equated to a
During the quarters ended March 31, 2022 and 2021, we recorded approximately $
We make periodic operating maintenance payments to CCKF related to proprietary rights that we use in our intellipath® personalized learning technology. The total fees recorded during the quarters ended March 31, 2022 and 2021 were as follows (dollars in thousands):
6
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Maintenance Fee Payments |
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For the quarter ended March 31, 2022 |
$ |
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For the quarter ended March 31, 2021 |
$ |
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Credit Agreement
On September 8, 2021, the Company and the subsidiary guarantors thereunder entered into a credit agreement with Wintrust Bank N.A. (“Wintrust”), in its capacities as the sole lead arranger, sole bookrunner, administrative agent and letter of credit issuer for the lenders from time to time parties thereto. The credit agreement provides the Company with the benefit of a $
The credit agreement and the ancillary documents executed in connection therewith contain customary affirmative, negative and financial maintenance covenants. The Company is required to maintain unrestricted cash, cash equivalents and short-term investments in domestic accounts in an amount at least equal to the aggregate loan commitments then in effect. Acquisitions to be undertaken by the Company must meet certain criteria, and the Company’s ability to make restricted payments, including payments in connection with a repurchase of shares of our common stock, is subject to an aggregate maximum of $
Under the credit agreement, outstanding principal amounts bear annual interest at a fluctuating rate equal to
As of March 31, 2022 and December 31, 2021, there were
5. REVENUE RECOGNITION
Disaggregation of Revenue
The following tables disaggregate our revenue by major source for the quarters ended March 31, 2022 and 2021 (dollars in thousands):
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