(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 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
☒ | Smaller reporting company | |||||||||||||
Emerging growth company |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Investments | |||||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease assets | |||||||||||
Goodwill and intangibles, net | |||||||||||
Other long-term assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable and accrued liabilities | $ | $ | |||||||||
Deferred revenue and student deposits | |||||||||||
Total current liabilities | |||||||||||
Rent liability | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (see Note 15) | |||||||||||
Stockholders' equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Treasury stock, | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
University-related revenue | |||||||||||||||||||||||
Other revenue | |||||||||||||||||||||||
Revenue and other revenue | $ | $ | $ | $ | |||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Technology and academic services | $ | $ | $ | $ | |||||||||||||||||||
Counseling services and support | |||||||||||||||||||||||
Marketing and communication | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
University-related expenses | |||||||||||||||||||||||
Restructuring and impairment expense | |||||||||||||||||||||||
Total costs and expenses | |||||||||||||||||||||||
Operating income (loss) | ( | ( | ( | ||||||||||||||||||||
Other income (loss), net | ( | ( | |||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
Income tax expense (benefit) | ( | ( | ( | ||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Income (loss) per share: | |||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Weighted average number of common shares outstanding used in computing income (loss) per share: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | ||||||||||||||||||||||||||||||||
Shares | Par Value | Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Adoption of accounting standard (ASU 2016-13) | — | — | — | — | |||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under employee stock purchase plan | — | — | |||||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Contingent consideration | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued for acquisition | — | ( | — | ||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | $ | ( | $ |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | ||||||||||||||||||||||||||||||||
Shares | Par Value | Total | |||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Contingent consideration | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Issuance of shares for acquisition | — | — | ( | — | — | ||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under employee stock purchase plan | — | — | |||||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
Stock issued under stock incentive plan, net of shares held for taxes | ( | — | — | ( | |||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | ( | $ |
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
Provision for bad debts | |||||||||||
Depreciation and amortization | |||||||||||
Deferred income taxes | |||||||||||
Stock-based compensation | |||||||||||
Noncash lease expense | |||||||||||
Net loss (gain) on marketable securities | ( | ||||||||||
Loss (gain) on disposal or impairment of fixed assets | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ||||||||||
Other long-term assets | ( | ( | |||||||||
Accounts payable and accrued liabilities | ( | ( | |||||||||
Deferred revenue and student deposits | |||||||||||
Operating lease liabilities | ( | ( | |||||||||
Other liabilities | ( | ||||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | ( | ( | |||||||||
Purchases of investments | ( | ( | |||||||||
Capitalized costs for intangible assets | ( | ( | |||||||||
Sale of investments | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from the issuance of stock under employee stock purchase plan | |||||||||||
Borrowings from long-term liabilities | |||||||||||
Tax withholdings on issuance of stock awards | ( | ( | |||||||||
Repurchase of common stock | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Reconciliation of cash, cash equivalents, and restricted cash: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ |
Supplemental disclosure of non-cash transactions: | |||||||||||
Purchase of equipment included in accounts payable and accrued liabilities | $ | $ | |||||||||
Issuance of common stock for vested restricted stock units | $ | $ | |||||||||
Debt extinguishment | $ | $ | |||||||||
Issuance of notes payable | $ | $ | |||||||||
Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||
Costs and expenses: | As Reported | As Reclassified | As Reported | As Reclassified | |||||||||||||||||||
Technology and academic services | $ | $ | $ | $ | |||||||||||||||||||
Counseling services and support | |||||||||||||||||||||||
Marketing and communication | |||||||||||||||||||||||
Instructional costs and services | |||||||||||||||||||||||
Admissions advisory and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
University-related expenses | |||||||||||||||||||||||
Restructuring and impairment expense | |||||||||||||||||||||||
Total costs and expenses | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Strategic services revenue | $ | $ | $ | $ | |||||||||||||||||||
Transition services income | |||||||||||||||||||||||
Tuition revenue, net | |||||||||||||||||||||||
Digital materials revenue, net | |||||||||||||||||||||||
Technology fee revenue, net | |||||||||||||||||||||||
Other revenue, net (1) | |||||||||||||||||||||||
Total revenue, net | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Over time, over period of instruction | $ | $ | $ | $ | |||||||||||||||||||
Over time, full tuition grant (1) | |||||||||||||||||||||||
Point in time (2) | |||||||||||||||||||||||
Total revenue, net | $ | $ | $ | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Deferred revenue, current | $ | $ | |||||||||
Student deposits | |||||||||||
Total current deferred revenue and student deposits | $ | $ |
2021 | 2020 | ||||||||||
Current deferred revenue opening balance, January 1 | $ | $ | |||||||||
Current deferred revenue closing balance, September 30 | |||||||||||
Increase (decrease) | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Severance costs | $ | $ | ( | $ | $ | ||||||||||||||||||
Lease exit and other costs | |||||||||||||||||||||||
Total restructuring and impairment expense | $ | $ | $ | $ |
Student Transfer Costs | Severance Costs | Lease Exit and Other Costs | Total | ||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | |||||||||||||||||||
Restructuring and impairment expense | |||||||||||||||||||||||
Payments and adjustments | ( | ( | ( | ||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ |
As of September 30, 2021 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Mutual funds | $ | $ | $ | $ | |||||||||||||||||||
As of December 31, 2020 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Mutual funds | $ | $ | $ | $ | |||||||||||||||||||
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Accounts receivable | $ | $ | |||||||||
Less allowance for credit losses | |||||||||||
Accounts receivable, net | $ | $ |
Beginning Balance | Charged to Expense | Write-offs | Recoveries of amounts | Ending Balance | |||||||||||||||||||||||||
Non-FTG related allowance | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Total allowance for credit losses | $ | $ | $ | ( | $ | $ |
Beginning Balance | Charged to Expense | Write-offs | Recoveries of amounts | Ending Balance | |||||||||||||||||||||||||
FTG-related allowance | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Non-FTG related allowance | ( | ||||||||||||||||||||||||||||
Total allowance for credit losses | $ | $ | $ | ( | $ | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Prepaid expenses | $ | $ | |||||||||
Prepaid licenses | |||||||||||
Prepaid income taxes | |||||||||||
Income tax receivable | |||||||||||
Prepaid insurance | |||||||||||
Insurance recoverable | |||||||||||
Other current assets (1) | |||||||||||
Total prepaid expenses and other current assets | $ | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Furniture and office equipment | $ | $ | |||||||||
Software | |||||||||||
Leasehold improvements | |||||||||||
Vehicles | |||||||||||
Total property and equipment | |||||||||||
Less accumulated depreciation and amortization | ( | ( | |||||||||
Total property and equipment, net | $ | $ |
September 30, 2021 | |||||||||||||||||
Definite-lived intangible assets: | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||
Capitalized curriculum costs | $ | $ | ( | $ | |||||||||||||
Purchased intangible assets | ( | ||||||||||||||||
Total definite-lived intangible assets | $ | $ | ( | $ | |||||||||||||
Goodwill | |||||||||||||||||
Total goodwill and intangibles, net | $ | ||||||||||||||||
December 31, 2020 | |||||||||||||||||
Definite-lived intangible assets: | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||
Capitalized curriculum costs | $ | $ | ( | $ | |||||||||||||
Purchased intangible assets | ( | ||||||||||||||||
Total definite-lived intangible assets | $ | $ | ( | $ | |||||||||||||
Goodwill | |||||||||||||||||
Total goodwill and intangibles, net | $ |
Year Ended December 31, | ||||||||
Remainder of 2021 | $ | |||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
2025 | ||||||||
Thereafter | ||||||||
Total future amortization expense | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Accounts payable | $ | $ | |||||||||
Accrued salaries and wages | |||||||||||
Accrued bonus | |||||||||||
Accrued vacation | |||||||||||
Accrued litigation and fees | |||||||||||
Minimum residual liability | |||||||||||
Accrued expenses | |||||||||||
Current leases payable | |||||||||||
Accrued insurance liability | |||||||||||
Accrued income taxes payable | |||||||||||
Total accounts payable and accrued liabilities | $ | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
Uncertain tax positions | $ | $ | |||||||||
Notes payable | |||||||||||
Deferred revenue | |||||||||||
Other long-term liabilities | |||||||||||
Total other long-term liabilities | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Denominator: | |||||||||||||||||||||||
Weighted average number of common shares outstanding | |||||||||||||||||||||||
Effect of dilutive options and stock units | |||||||||||||||||||||||
Diluted weighted average number of common shares outstanding | |||||||||||||||||||||||
Income (loss) per share: | |||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Stock options | |||||||||||||||||||||||
Stock units |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Revenue by segment | |||||||||||||||||||||||
University Partners | $ | $ | $ | $ | |||||||||||||||||||
Zovio Growth | |||||||||||||||||||||||
Total revenue and other revenue | $ | $ | $ | $ | |||||||||||||||||||
Segment profitability | |||||||||||||||||||||||
University Partners | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Zovio Growth | ( | ( | ( | ( | |||||||||||||||||||
Total segment profitability(1) | $ | ( | $ | $ | ( | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Income (loss) before income taxes | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Adjustments: | |||||||||||||||||||||||
Other expense, net | ( | ( | |||||||||||||||||||||
Depreciation and amortization expense | |||||||||||||||||||||||
Total segment profitability | $ | ( | $ | $ | ( | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
University Partners | $ | $ | |||||||||
Zovio Growth | |||||||||||
Total assets | $ | $ |
As of September 30, 2021 | As of December 31, 2020 | ||||||||||
University Partners accounts receivable | $ | $ | |||||||||
Zovio Growth accounts receivable | |||||||||||
Total accounts receivable | $ | $ | |||||||||
University Partners deferred revenue | $ | $ | |||||||||
Zovio Growth deferred revenue | |||||||||||
Total deferred revenue | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
Consolidated Statement of Income Data: | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Revenue and other revenue | $ | 62,226 | $ | 102,166 | $ | 208,271 | $ | 303,978 | |||||||||||||||
Operating income (loss) | $ | (5,091) | $ | 654 | $ | (18,917) | $ | (4,556) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Revenue and other revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Costs and expenses: | |||||||||||||||||||||||
Technology and academic services | 26.5 | 18.7 | 25.7 | 18.0 | |||||||||||||||||||
Counseling services and support | 32.8 | 24.1 | 33.1 | 23.5 | |||||||||||||||||||
Marketing and communication | 33.9 | 22.8 | 33.0 | 23.0 | |||||||||||||||||||
General and administrative | 14.5 | 11.2 | 15.9 | 12.0 | |||||||||||||||||||
University-related expenses | — | 22.4 | — | 23.9 | |||||||||||||||||||
Restructuring and impairment expense | 0.5 | 0.2 | 1.3 | 1.1 | |||||||||||||||||||
Total costs and expenses | 108.2 | 99.4 | 109.0 | 101.5 | |||||||||||||||||||
Operating income (loss) | (8.2) | 0.6 | (9.0) | (1.5) | |||||||||||||||||||
Other income (loss), net | (0.1) | 0.0 | 0.0 | (0.0) | |||||||||||||||||||
Income (loss) before income taxes | (8.3) | 0.6 | (9.0) | (1.5) | |||||||||||||||||||
Income tax expense (benefit) | 0.1 | (0.5) | (0.0) | (4.2) | |||||||||||||||||||
Net income (loss) | (8.4) | % | 1.1 | % | (9.0) | % | 2.7 | % |
Payments Due by Period | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | Total | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | ||||||||||||||||||||||||||||||||||
Operating lease obligations | $ | 55,358 | $ | 1,754 | $ | 7,009 | $ | 5,316 | $ | 5,022 | $ | 4,759 | $ | 31,498 | |||||||||||||||||||||||||||
Other contractual obligations | 16,639 | 3,859 | 7,270 | 4,912 | 598 | — | — | ||||||||||||||||||||||||||||||||||
Uncertain tax positions | 28 | — | 28 | — | — | — | — | ||||||||||||||||||||||||||||||||||
Total | $ | 72,025 | $ | 5,613 | $ | 14,307 | $ | 10,228 | $ | 5,620 | $ | 4,759 | $ | 31,498 |
Exhibit | Description | |||||||
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, 2021, filed with the SEC on October 27, 2021, formatted in Extensible Business Reporting Language (“XBRL”): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income (Loss); (iii) the Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements. | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
ZOVIO INC | |||||
October 27, 2021 | /s/ KEVIN ROYAL | ||||
Kevin Royal Chief Financial Officer (Principal financial officer and duly authorized to sign on behalf of the registrant) |
/s/ CHRISTOPHER L. SPOHN | ||||||||
Christopher L. Spohn Office of the Chief Executive Officer |
/s/ KEVIN ROYAL | ||||||||
Kevin Royal Chief Financial Officer |
/s/ CHRISTOPHER L. SPOHN | ||||||||
Christopher L. Spohn Office of the Chief Executive Officer (Principal Executive Officer) |
/s/ KEVIN ROYAL | ||||||||
Kevin Royal Chief Financial Officer (Principal Financial Officer) |
Condensed Consolidated Balance Sheets - Parenthetical - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Less allowance for credit losses | $ 1,833 | $ 1,216 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 300,000,000 | |
Common Stock, Shares, Issued | 67,155,000 | 66,454,000 |
Common Stock, Shares, Outstanding | 33,446,000 | 32,267,000 |
Treasury Stock, Shares | 33,709,000 | 34,187,000 |
Nature of Business |
9 Months Ended |
---|---|
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Zovio Inc (the “Company”) is a Delaware corporation, and is an education technology services company that partners with higher education institutions and employers to deliver innovative, personalized solutions to help learners and leaders achieve their aspirations. In April 2019, the Company acquired both Fullstack Academy, Inc. (“Fullstack”) and TutorMe.com, Inc. (“TutorMe”), each of which became wholly-owned subsidiaries of the Company at that time. Fullstack is an innovative web development school offering immersive technology bootcamps, and TutorMe is an online education platform that provides 24/7 on-demand tutoring and online courses. On December 1, 2020, the Company and AU LLC finalized a definitive Asset Purchase and Sale Agreement (the “Purchase Agreement”), by and among the Company, AU LLC, the Arizona Board of Regents, a body corporate, for and on behalf of the University of Arizona (the “University of Arizona”), and the University of Arizona Global Campus, a newly formed Arizona nonprofit corporation (“Global Campus”). Upon the closing of the Purchase Agreement (the “Sale Transaction”), the Company and Ashford University (the “University”) transferred to Global Campus the tangible and intangible academic and related operations and assets comprising the University to Global Campus. Following the closing of the Sale Transaction, Global Campus owns and operates the University in affiliation with the University of Arizona and with a focus on expanding access to education for non-traditional adult learners, and the Company provides services to Global Campus under a long-term Strategic Services Agreement (the “Services Agreement”). The services that the Company provides to Global Campus under the Services Agreement include recruiting, admissions, marketing, student finance, financial aid processing, and financial aid advising, program advising, student retention advising, support services for academics, information technology and institutional support. The majority of the Company's cash comes from the Services Agreement with Global Campus. The service fees in the Services Agreement are subject to certain minimum residual liability adjustments, including performance-based adjustments, minimum profit level adjustments, and excess direct cost adjustments. These adjustments are all variable in nature in that they depend upon the Company’s performance during each service period, and to a certain extent the performance and forecast of Global Campus.
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Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Unaudited Interim Financial Information The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on February 24, 2021. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP for complete annual consolidated financial statements. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. Notes Payable The fair value of the Company’s outstanding notes payable was estimated using the net present value of the payments, discounted at an interest rate consistent with market interest rates. The Company, through Fullstack, had previously entered into a contract whereby its counterparty advanced funds to the Company for certain program development costs, which the Company was obligated to repay out of future revenues from the developed program. The Company originally recognized these advances as a debt obligation. During the first half of 2021, the notes payable contract was amended and the amount was revalued. As such, included within the other income (loss), net, on the condensed consolidated statements of income (loss) for the nine months ended September 30, 2021, is an offset of interest expense in the amount of $3.1 million, as well as a loss on extinguishment of debt of $2.8 million, the net impact of which is immaterial. Revenue and Other Revenue Revenues are recognized when control of the promised goods or services are transferred, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. The Company performs this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances. On December 1, 2020, the Company entered into the Services Agreement with Global Campus whereby the Company will provide certain educational technology and support services, which has an initial term of just over fifteen years, subject to renewal options and certain early termination provisions. The amounts earned from the Services Agreement are within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”), and are denoted as revenue on the condensed consolidated statements of income (loss). On December 1, 2020, the Company also entered into a transition services agreement with Global Campus whereby the Company will provide certain temporary transition services (the “Transition Services Agreement”), which has a term of three years. The amounts earned from the Transition Services Agreement are denoted as other revenue on the condensed consolidated statements of income (loss). The Services Agreement has a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements. The single performance obligation constitutes a series of distinct services as the customer benefits as services are provided. Service revenue is recognized over time using the input method. The input method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the direct cost incurred. The service fees received over the term of the agreement are variable in nature in that they are dependent upon the number of students attending the university and revenues generated from those students during the service period. The service fees are subject to certain adjustments, including performance-based adjustments, minimum profit level adjustments, and excess direct cost adjustments. These adjustments are all variable in nature in that they depend upon the Company’s performance during each service period. Such adjustments are presented as minimum residual liability within accounts payable and accrued liabilities. For additional information, see Note 8, “Other Significant Balance Sheet Accounts - Accounts Payable and Accrued Liabilities.” The Company allocates variable consideration to the distinct increments of service to which it relates, as the variability is directly related to the Company’s effort to satisfy the distinct increments of service provided. This is consistent with the allocation objective in ASC 606. The Company meets the criteria in the standard and exercises the practical expedient to not disclose the aggregate amount of the transaction price allocated to the single performance obligation that is unsatisfied as of the end of the reporting period. The Company does not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company, through Fullstack, offers both full-time and part-time technology bootcamps. The tuition fees for these programs are recognized as revenue as the services are provided to the student, which occurs over the applicable period of instruction. For most Fullstack programs, tuition is collected prior to the start of the cohort; however, for certain programs students can defer payment until completion of the program and for these students an accounts receivable balance is recorded. The Company, through TutorMe, provides online on-demand tutoring services through hourly and access license contracts. Revenue for these contracts are recognized based on hours used or ratably over the contract period depending on the type of contract. For most TutorMe contracts, cash is collected at or near the onset of the contract. The collected cash is recognized as deferred revenue until recognized into revenue. Technology and Academic Services Technology and academic services costs consist primarily of costs related to ongoing maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems. These costs were previously components of instructional costs and services, as well as general and administrative. This also includes costs to provide support for curriculum and new program development, support for faculty training and development and technical support. This expense category includes salaries, benefits and share-based compensation, information technology costs, curriculum and new program development costs (which are expensed as incurred) and other costs associated with these support services. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services. Counseling Services and Support Counseling services and support costs consist primarily of costs including team-based counseling and other support to prospective and current students as well as financial aid processing. These costs were previously components of instructional costs and services, admissions advisory and marketing, as well as general and administrative. This expense category includes salaries, benefits and share-based compensation, and other costs such as dues, fees and subscriptions and travel costs. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services. Marketing and Communication Marketing and communication costs consist primarily of lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services. These costs were previously components of admissions advisory and marketing, as well as some general and administrative. This expense category includes salaries, benefits and share-based compensation for marketing and communication personnel, brand advertising, marketing leads and other promotional and communication expenses. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services. Advertising costs are expensed as incurred. General and Administrative General and administrative costs consist primarily of compensation and benefit costs, including related stock-based compensation, for employees engaged in corporate management, finance, compliance, and other corporate functions. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services. University-Related Expenses University-related expenses represent those costs that were transferred to Global Campus in the Sale Transaction and that are no longer incurred by the Company. These costs were previously primarily components of instructional costs and services, with some costs from admissions advisory and marketing and some general and administrative, including instructor fees and other employee costs, student related bad debt expense, license fees for licenses transferred to Global Campus and other costs. Comprehensive Income (Loss) The Company has no components of other comprehensive income (loss), and therefore, comprehensive income (loss) equals net income (loss). Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740. The amendments in this update also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this standard are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company applied the new standard, including all applicable updates, effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
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Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue, Other Revenue and Deferred Revenue The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
(1) Primarily consists of revenues generated from various services and other miscellaneous fees. The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
(1)Represents revenue generated from the FTG program. (2)Represents revenue generated from digital textbooks and other miscellaneous fees. The Company operates under two reportable segments and has no foreign operations or assets located outside of the United States. For additional information on segmentation, see Note 16, “Segment Information.” Deferred Revenue and Student Deposits Current deferred revenue and student deposits consisted of the following (in thousands):
Below are the opening and closing balances of current deferred revenue from the Company’s contracts with customers (in thousands):
For further information on receivables, refer to Note 7, “Accounts Receivable, Net” within the condensed consolidated financial statements. Deferred revenue consists of cash payments that are received or due in advance of the Company’s performance. As of September 30, 2021 the deferred revenue balance relates entirely to the Zovio Growth segment. For the majority of the Company’s customers, payment for services is due prior to services being provided and is included in current deferred revenue. However, there are contracts which include deferred revenue that is deemed to be long-term. For additional information, refer to Note 8, “Other Significant Balance Sheet Accounts - Other Long-Term Liabilities” within the condensed consolidated financial statements. The difference between the opening and closing balances of deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. For the nine months ended September 30, 2021, the Company recognized $6.4 million of revenue that was included in the deferred revenue balance as of January 1, 2021. For the nine months ended September 30, 2020, the Company recognized $23.3 million of revenue that was included in the deferred revenue balance as of January 1, 2020. Amounts reported in the closing balance of deferred revenue are expected to be recognized as revenue within the next 12 months.
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Restructuring and Impairment Expense |
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Restructuring, Impairment, and Other Activities Disclosure | Restructuring and Impairment Expense During the three months ended September 30, 2021 and 2020, the Company recognized $0.3 million and $0.2 million, respectively, of restructuring and impairment expense. During the nine months ended September 30, 2021 and 2020, the Company recognized $2.6 million and $3.4 million, respectively, of restructuring and impairment expense. The components of these expenses are further described below. The Company had previously vacated or consolidated properties and subsequently reassessed its non-cancelable leases obligation. Additionally, the Company had previously relocated its headquarters from California to Arizona. As a result, during the three and nine months ended September 30, 2020, the Company recognized relocation and lease reassessment expenses of $0.3 million and $0.5 million, respectively. No such expense was recorded for either the three or nine months ended September 30, 2021, respectively. In May and July 2021, the Company implemented restructuring plans to reduce operating expenses, implement cost reductions and conserve cash resources. During the three months ended September 30, 2021, the Company recognized severance costs of $0.3 million, all of which related to the University Partners segment. These restructuring charges consist of one-time termination benefits for employee severance, benefits and related costs, all of which are expected to result in cash expenditures and substantially all of which will be paid out over the next 12 months. For the three months ended September 30, 2020, the Company reversed $0.1 million of restructuring and impairment expense relating to severance costs for wages and benefits for a prior restructuring plan. During the nine months ended September 30, 2021 and 2020, the Company recognized severance costs of $2.6 million and $2.9 million, respectively. The following table summarizes the amounts recorded in the restructuring and impairment expense line item on the Company’s condensed consolidated statements of income (loss) for each of the periods presented (in thousands):
The following table summarizes the changes in the Company's restructuring and impairment liability by type during the nine months ended September 30, 2021 (in thousands):
The restructuring liability amounts are recorded within either the (i) accounts payable and accrued liabilities account or (ii) lease liability account on the condensed consolidated balance sheets.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The following tables summarize the fair value information as of September 30, 2021 and December 31, 2020, respectively (in thousands):
The mutual funds in the tables above, represent the deferred compensation asset balances, which are considered to be trading securities. The Company’s deferred compensation asset balances are recorded in the investments line item on the Company’s condensed consolidated balance sheets, and are classified as Level 1 securities. There were no transfers between any level categories for investments during the periods presented. There were no differences between amortized cost and fair value of investments as of September 30, 2021 or December 31, 2020, and no reclassifications out of accumulated other comprehensive income during either the nine months ended September 30, 2021 or 2020.
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Accounts Receivable, Net |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net | Accounts Receivable, Net Accounts receivable, net, consisted of the following (in thousands):
The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2021 (in thousands):
The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2020 (in thousands):
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Other Significant Balance Sheet Accounts |
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Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Significant Balance Sheet Accounts | Other Significant Balance Sheet Accounts Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands):
(1) Other current assets includes a net asset adjustment due from Global Campus related to the Sale Transaction, which is currently in mediation. Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands):
For the three months ended September 30, 2021 and 2020, depreciation and amortization expense related to property and equipment was $1.4 million and $1.5 million, respectively. For the nine months ended September 30, 2021 and 2020, depreciation and amortization expense related to property and equipment was $3.9 million and $4.7 million, respectively. Goodwill and Intangibles, Net Goodwill and intangibles, net, consisted of the following (in thousands):
For the three months ended September 30, 2021 and 2020, amortization expense was $0.7 million and $1.3 million, respectively. For the nine months ended September 30, 2021 and 2020, amortization expense was $2.4 million and $4.0 million, respectively. The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following (in thousands):
Other Long-Term Liabilities Other long-term liabilities consisted of the following (in thousands):
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Credit Facilities |
9 Months Ended |
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Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Credit Facilities The Company has issued letters of credit that are collateralized with cash, in the aggregate amount of $9.8 million as of September 30, 2021. The letters of credit relate primarily to the Company's leased facilities and insurance requirements. The collateralized cash is held in restricted cash on the Company's condensed consolidated balance sheets. The Company is required to provide surety bonds in certain states in which it does business. As a result, the Company had previously entered into a surety bond facility with an insurance company to provide such bonds when required. Although there are no remaining bonds on the Company’s behalf under this facility as of September 30, 2021, the Company still holds certain liability associated with any required collateral.
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Lease Obligations |
9 Months Ended |
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Sep. 30, 2021 | |
Leases [Abstract] | |
Lease Obligations | Lease Obligations Operating Leases The Company leases various office and classroom facilities with terms that expire at various dates through 2033. These facilities are used for academic operations, corporate functions, enrollment services and student support services. The Company does not have any leases other than its office facilities and classrooms. All of the leases were classified as operating leases for the period ended September 30, 2021, and the Company does not have any finance leases. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on the Company’s condensed consolidated balance sheets. The Company obtained additional right-of-use assets of $14.6 million in exchange for lease obligations related to new classroom and office leases during the period ended September 30, 2021. The Company has agreements to sublease certain portions of its office facilities, with two active subleases as of September 30, 2021. The Company’s subleases do not include any options to extend or for early termination and do not contain any residual value guarantees or restrictive covenants. All of the subleases were classified as operating leases for the period ended September 30, 2021. The Company is subleasing office space of approximately 21,000 square feet in Denver, Colorado with a remaining commitment to lease of 17 months and net lease payments of $0.9 million. The Company is also subleasing approximately 24,000 square feet of office space in San Diego, California with a remaining commitment to lease of 3 months and net lease payments of $0.3 million. Sublease income for the nine months ended September 30, 2021 and 2020 was $1.9 million and $1.4 million, respectively.
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Income Per Share |
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Income Per Share | Income (Loss) Per Share Basic income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the sum of (i) the weighted average number of common shares outstanding for the period, plus (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented include stock options, unvested restricted stock units (“RSUs”) and unvested performance stock units (“PSUs”). The following table sets forth the computation of basic and diluted income (loss) per share for the periods indicated (in thousands, except per share data):
The following table sets forth the number of stock options and stock units excluded from the computation of diluted income (loss) per share for the periods indicated below because their effect was anti-dilutive (in thousands):
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Stock-Based Compensation |
9 Months Ended |
---|---|
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recorded $1.0 million and $1.1 million of stock-based compensation expense for the three months ended September 30, 2021 and 2020, respectively. The related income tax benefit was $0.2 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively. The Company recorded $3.6 million and $6.1 million of stock-based compensation expense for the nine months ended September 30, 2021 and 2020, respectively. The related income tax benefit was $0.9 million and $1.5 million for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, the Company granted 1.1 million RSUs at a weighted average grant date fair value of $3.31 and 1.0 million RSUs vested. During the nine months ended September 30, 2020, the Company granted 1.4 million RSUs at a grant date fair value of $2.22, and 0.8 million RSUs vested. During the nine months ended September 30, 2021, the Company granted 0.9 million performance-based PSUs at a weighted average grant date fair value of 2.72, and no performance-based or market-based PSUs vested. During the nine months ended September 30, 2020, 1.1 million market-based PSUs were granted at a weighted average grant date fair value of 2.18 and no performance-based or market-based PSUs vested. During each of the nine months ended September 30, 2021, and September 30, 2020, the Company did not grant any stock options and no stock options were exercised. As of September 30, 2021, unrecognized compensation cost was $5.4 million related to unvested stock options, RSUs and PSUs.
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Income Taxes |
9 Months Ended |
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Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company uses the asset-liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in income and deductions in future years. The Company recognizes deferred tax assets if realization of such assets is more-likely-than-not. In order to make this determination, the Company evaluates a number of factors including the ability to generate future taxable income from reversing taxable temporary differences, forecasts of financial and taxable income or loss, and the ability to carryback certain operating losses to refund taxes paid in prior years. The cumulative loss incurred over the three-year period ended September 30, 2021 constituted significant negative objective evidence against the Company’s ability to realize a benefit from its federal deferred tax assets. Such objective evidence limited the ability of the Company to consider in its evaluation certain subjective evidence such as the Company’s projections for future growth. On the basis of its evaluation, the Company determined that its deferred tax assets were not more-likely-than-not to be realized and that a valuation allowance against its deferred tax assets should continue to be maintained as of September 30, 2021. The Company’s current effective income tax rate that has been applied to normal, recurring operations for the nine months ended September 30, 2021 was (1.0)%. The Company’s actual effective income tax rate for the nine months ended September 30, 2021, after discrete items, was 0.4%. As of both September 30, 2021, and December 31, 2020, the Company had $19 thousand, respectively, of gross unrecognized tax benefits, of which $15 thousand, respectively, would impact the effective income tax rate if recognized. Although the Company believes the tax accruals provided are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from the Company’s historical income tax provisions and accruals. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The tax years 2001 through 2020 are open to examination by major taxing jurisdictions to which the Company is subject.
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Regulatory |
9 Months Ended |
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Sep. 30, 2021 | |
Regulatory [Abstract] | |
Regulatory | Regulatory The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (“Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (“Department”) subject the Company and its university partners to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial aid programs under Title IV of the Higher Education Act (“Title IV programs”). Department of Education On-Site Program Review of former Ashford University In December 2016, the Department informed the University that it intended to continue the on-site program review, which commenced in January 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such expansion appropriate. To date, the Company has not received a draft report from the Department. Department of Education Close Out Audit of University of the Rockies The Company previously recorded an expense of $1.5 million during the fiscal year 2018, in relation to the close out audit of University of the Rockies resulting from its merger with the University in October 2018. The expense was recorded in relation to borrower defense to repayment regulations. On September 26, 2019, the Department sent the University a Final Audit Determination letter for the University of the Rockies. This letter confirmed that with the exception of the borrower defense to repayment regulations, none of the other audit findings resulted in financial liability. The Department also stated that additional liabilities could accrue in the future. On December 19, 2019, the Company filed an administrative appeal with the Department appealing the alleged liability on the basis that the University of Rockies did not close but rather merged with the University. The briefing on the appeal is complete and the Company is awaiting a decision by the administrative law judge. WSCUC Accreditation of former Ashford University Global Campus is regionally accredited by WASC Senior College and University Commission (“WSCUC”). As part of the WSCUC Institutional Review Process, a Reaffirmation of Accreditation Visit was conducted by an evaluation team in April 2019. At its meeting in June 2019, the Commission acted to reaffirm accreditation through Spring 2025. In connection with the Purchase Agreement by and among the Company and the University of Arizona, the Company submitted to WSCUC, on July 1, 2020, a substantive change application for a change in ownership from the University to Global Campus which required review and approval by the Substantive Change Committee and the Structural Change Committee of the Commission. On November 12, 2020, WSCUC approved the change of control application filed to complete the Sale Transaction, subject to certain conditions. These conditions included (i) ensuring that Global Campus is differentiated effectively from the University of Arizona and its affiliates in marketing materials; (ii) providing a report to WSCUC within 90 days of the close of the transaction outlining the actionable steps it will take to address student success including in the form of retention and graduation; (iii) those officers, administrators and related parties who become Global Campus officers or administrators divest themselves of their financial and ownership interest in the Company; and (iv) Global Campus and the Company submit a revised strategic services agreement which incorporates any applicable key performance indicators into that agreement. Additionally, WSCUC notified Global Campus that the provisions of the Notice of Concern issued as part of the reaffirmation of the University in July 2019 remain in effect. Department of Education Regulation On December 1, 2020, the parties to the Purchase Agreement entered into Amendment No. 1 to the Purchase Agreement (“Amendment”) pursuant to which, among other things, the University of Arizona and Global Campus waived the closing condition regarding issuance of a pre-acquisition review notice by the Department of Education. Under the terms of the Purchase Agreement, as amended, the Closing was subject to customary closing conditions for transactions in this sector. The Department is expected to conduct a post-closing review of Global Campus following the Sale Transaction, consistent with the Department’s procedures during which the Department makes a determination on the institution’s request for recertification from the Department following the change of control, including whether to impose or place other conditions or restrictions. To be eligible to participate in Title IV programs, an institution must comply with the Higher Education Act and the regulations thereunder that are administered by the Department. The provisions of the Higher Education Act also include being in compliance with the following: •The 90/10 Rule - A proprietary institution loses eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues from Title IV program funds for two consecutive fiscal years, as calculated in accordance with Department regulations. Any institution that violates the 90/10 rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least fiscal years. In addition, an institution whose rate exceeds 90% for any single fiscal year is placed on provisional certification and may be subject to other enforcement measures. •Cohort Default Rate - For each federal fiscal year, the Department calculates a rate of student defaults over a three-year measuring period for each educational institution, which is known as a “cohort default rate.” An institution may lose eligibility to participate in the Federal Direct Loan Program and the Federal Pell Grant Program if, for each of the three most recent federal fiscal years, 30% or more of its students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year. •Financial Responsibility - The Department calculates an institution’s composite score for financial responsibility based on its (i) equity ratio, which measures the institution’s capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institution’s ability to operate at a profit. An institution that does not meet the Department’s minimum composite score of 1.5 may demonstrate its financial responsibility by posting a letter of credit in favor of the Department and possibly accepting other conditions on its participation in the Title IV programs. Defense to Repayment On October 28, 2016, the Department published borrower defense to repayment regulations to change processes that assist students in gaining relief under certain provisions of the Direct Loan Program regulations. These defense to repayment regulations allow a borrower to assert a defense to repayment on the basis of a substantial misrepresentation, any other misrepresentation in cases where certain other factors are present, a breach of contract or a favorable nondefault contested judgment against a school for its act or omission relating to the making of the borrower’s loan or the provision of educational services for which the loan was provided. In addition, the financial responsibility standards contained in the new regulations establish the conditions or events that trigger the requirement for an institution to provide the Department with financial protection in the form of a letter of credit or other security against potential institutional liabilities. Triggering conditions or events include, among others, certain state, federal or accrediting agency actions or investigations, and in the case of publicly traded companies, receipt of certain warnings from the SEC or the applicable stock exchange, or the failure to timely file a required annual or quarterly report with the SEC. The new regulations also prohibit schools from requiring that students agree to settle future disputes through arbitration. On March 15, 2019, the Department issued guidance for the implementation of parts of the regulations. The guidance covers an institution’s responsibility in regard to reporting mandatory and discretionary triggers as part of the financial responsibility standards, class action bans and pre-dispute arbitration agreements, submission of arbitral and judicial records, and repayment rates. On August 30, 2019, the Department finalized the regulations derived from the 2017-2018 negotiated rulemaking process and subsequent public comments. This version of the borrower defense regulations applies to all federal student loans made on or after July 1, 2020, and, among other things: grants borrowers the right to assert borrower defense to repayment claims against institutions, regardless of whether the loan is in default or in collection proceedings; allows borrowers to file defense to repayment claims three years from either the student’s date of graduation or withdrawal from the institution; and gives students the ability to allege a specific amount of financial harm and to obtain relief in an amount determined by the Department, which may be greater or lesser than their original claim amount. It also includes financial triggers and other factors for recalculating an institution’s financial responsibility composite score that differ from those in the 2016 regulations. On March 18, 2021, the Department announced it would adopt a streamlined approach for granting full debt relief to borrowers reversing the methodology first announced in December 2019 that allowed for partial student loan cancellation for borrowers. The Department determined that the previous methodology did not result in an appropriate relief determination. In July 2020, the Department notified the Company that they would be initiating a preliminary review of borrower defense applications from borrowers who made claims regarding the University. As part of the initial fact-finding process, the Department will send individual student claims to the University and allow the institution the opportunity to submit a response to the borrower’s allegations. In 2020, the Company received and timely responded to the submitted claims. The Company has responded to everything received and cannot predict the outcome of this the Department's review at this time.
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Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with GAAP, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated, the best estimate within that range should be accrued. If no estimate is better than another, the Company records the minimum estimated liability in the range. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Other than the specific liabilities assumed by Global Campus, the Company and AU LLC will generally remain responsible for liabilities of the University relating to periods prior to the closing of the Sale Transaction. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party. California Attorney General Investigation of For-Profit Educational Institutions In January 2013, the Company received from the Attorney General of the State of California (“CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General requested documents and detailed information for the time period March 1, 2009 to the date of the Investigative Subpoena. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General, each requesting additional documents and information for the time period March 1, 2009 through each such date. Representatives from the Company met with representatives from the CA Attorney General’s office on several occasions to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices. The parties also discussed a potential resolution involving injunctive relief, other non-monetary remedies and a payment to the CA Attorney General and in the third quarter of 2016, the Company recorded an expense of $8.0 million related to the cost of resolving this matter. The parties did not reach a resolution and on November 29, 2017, the CA Attorney General filed suit against Ashford and the Company. The Company intends to vigorously defend this case and emphatically denies the allegations made by the CA Attorney General that it ever deliberately misled its students, falsely advertised its programs, or in any way was not fully accurate in its statements to investors. A bench trial for this matter is scheduled to begin in November 2021. We cannot predict the outcome of this matter at this time. The Company cannot reasonably estimate any updated range of loss for this action based on currently available information and as such, the prior accrual of $8.0 million remains and is recorded on the accounts payable and accrued liabilities line item on the condensed consolidated balance sheets.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure | Segment Information Prior to December 1, 2020, the Company operated in one segment for reporting purposes. Following the Sale Transaction, the Company now operates in two reportable segments: University Partners and Zovio Growth. These segments were recast based upon the Company’s respective offerings. On December 1, 2020, the Company consummated the Sale Transaction. For additional information see Note 1, “Nature of Business.” The Company reports segment information based upon the management approach, and the Sale Transaction resulted in a change in how the chief operating decision maker viewed the operations moving forward. This change included the creation of three operating segments: Fullstack, TutorMe, and Zovio, and two reportable segments: University Partners and Zovio Growth. The Company’s operating segments are determined based on (i) financial information reviewed by the chief operating decision maker, (ii) internal management and related reporting structure, and (iii) the basis upon which the chief operating decision maker makes resource allocation decisions. In conjunction with the departure of the Company's previous chief executive officer in March 2021, the chief operating decision maker transitioned to the Office of the CEO, which is comprised of three executives. The Fullstack and TutorMe operating segments are aggregated into a single reportable segment, the Zovio Growth segment. The aggregation of the Fullstack and TutorMe operating segments is based on their uniform customer bases and methods of services provided, as well as evaluation of quantitative thresholds as required by ASC 280-10-50-12. Based on these same quantitative tests, the Zovio operating segment is a separate reportable segment, the University Partners Segment. This change in segment reporting did not have any impact on the determination of reporting units used to assess impairment under ASC 350, Intangibles - Goodwill and Other. The Company’s University Partners segment includes the technology and services provided to colleges and universities to enable the online delivery of degree programs and related goods and services. University Partners also includes the tuition revenue related to the University prior to the Sale Transaction on December 1, 2020. Segment Performance The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented (in thousands):
(1) Segment profitability represents EBITDA. The following table reconciles total loss before income taxes to total segment profitability (in thousands):
During both the nine months ended September 30, 2021 and September 30, 2020, Global Campus accounted for the entire amount of the University Partners segment revenue, respectively. During both the nine months ended September 30, 2021 or 2020, there were no customers or individual university clients which accounted for 10% or more of the Zovio Growth segment revenue. The Company’s total assets by segment are as follows (in thousands):
The Company’s accounts receivable and deferred revenue in each segment are as follows (in thousands):
As of each September 30, 2021 and December 31, 2020, the University Partners accounts receivable balance was immaterial. As of each September 30, 2021 and December 31, 2020, there were no individual partners or customers which accounted for 10% or more of the Zovio Growth accounts receivable balance, as customers are individual students or third parties paying on their behalf, rather than university clients. The Company’s goodwill amounts as of September 30, 2021 and December 31, 2020, respectively, are fully attributable to the Zovio Growth segment. For additional information on goodwill, see Note 8, “Other Significant Balance Sheet Accounts - Goodwill and intangibles, net.”
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
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Unaudited Interim Financial Information | Unaudited Interim Financial Information The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on February 24, 2021. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP for complete annual consolidated financial statements.
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Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates.
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Revenue | Revenue and Other Revenue Revenues are recognized when control of the promised goods or services are transferred, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. The Company performs this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances. On December 1, 2020, the Company entered into the Services Agreement with Global Campus whereby the Company will provide certain educational technology and support services, which has an initial term of just over fifteen years, subject to renewal options and certain early termination provisions. The amounts earned from the Services Agreement are within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”), and are denoted as revenue on the condensed consolidated statements of income (loss). On December 1, 2020, the Company also entered into a transition services agreement with Global Campus whereby the Company will provide certain temporary transition services (the “Transition Services Agreement”), which has a term of three years. The amounts earned from the Transition Services Agreement are denoted as other revenue on the condensed consolidated statements of income (loss). The Services Agreement has a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements. The single performance obligation constitutes a series of distinct services as the customer benefits as services are provided. Service revenue is recognized over time using the input method. The input method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the direct cost incurred. The service fees received over the term of the agreement are variable in nature in that they are dependent upon the number of students attending the university and revenues generated from those students during the service period. The service fees are subject to certain adjustments, including performance-based adjustments, minimum profit level adjustments, and excess direct cost adjustments. These adjustments are all variable in nature in that they depend upon the Company’s performance during each service period. Such adjustments are presented as minimum residual liability within accounts payable and accrued liabilities. For additional information, see Note 8, “Other Significant Balance Sheet Accounts - Accounts Payable and Accrued Liabilities.” The Company allocates variable consideration to the distinct increments of service to which it relates, as the variability is directly related to the Company’s effort to satisfy the distinct increments of service provided. This is consistent with the allocation objective in ASC 606. The Company meets the criteria in the standard and exercises the practical expedient to not disclose the aggregate amount of the transaction price allocated to the single performance obligation that is unsatisfied as of the end of the reporting period. The Company does not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The Company, through Fullstack, offers both full-time and part-time technology bootcamps. The tuition fees for these programs are recognized as revenue as the services are provided to the student, which occurs over the applicable period of instruction. For most Fullstack programs, tuition is collected prior to the start of the cohort; however, for certain programs students can defer payment until completion of the program and for these students an accounts receivable balance is recorded. The Company, through TutorMe, provides online on-demand tutoring services through hourly and access license contracts. Revenue for these contracts are recognized based on hours used or ratably over the contract period depending on the type of contract. For most TutorMe contracts, cash is collected at or near the onset of the contract. The collected cash is recognized as deferred revenue until recognized into revenue.
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TechnologyAndAcademicServices | Technology and Academic Services Technology and academic services costs consist primarily of costs related to ongoing maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems. These costs were previously components of instructional costs and services, as well as general and administrative. This also includes costs to provide support for curriculum and new program development, support for faculty training and development and technical support. This expense category includes salaries, benefits and share-based compensation, information technology costs, curriculum and new program development costs (which are expensed as incurred) and other costs associated with these support services. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services.
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CounselingServicesAndSupport | Counseling Services and Support Counseling services and support costs consist primarily of costs including team-based counseling and other support to prospective and current students as well as financial aid processing. These costs were previously components of instructional costs and services, admissions advisory and marketing, as well as general and administrative. This expense category includes salaries, benefits and share-based compensation, and other costs such as dues, fees and subscriptions and travel costs. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services.
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Marketing and Promotional Costs, Policy | Marketing and Communication Marketing and communication costs consist primarily of lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services. These costs were previously components of admissions advisory and marketing, as well as some general and administrative. This expense category includes salaries, benefits and share-based compensation for marketing and communication personnel, brand advertising, marketing leads and other promotional and communication expenses. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services. Advertising costs are expensed as incurred.
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Selling, General and Administrative Expenses, Policy | General and Administrative General and administrative costs consist primarily of compensation and benefit costs, including related stock-based compensation, for employees engaged in corporate management, finance, compliance, and other corporate functions. This category also includes an allocation of depreciation, amortization, human resources, rent, and occupancy costs attributable to the provision of these services.
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Comprehensive Income (Loss) | Comprehensive Income (Loss) The Company has no components of other comprehensive income (loss), and therefore, comprehensive income (loss) equals net income (loss).
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740. The amendments in this update also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this standard are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company applied the new standard, including all applicable updates, effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
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UniversityRelatedExpenses | University-Related Expenses University-related expenses represent those costs that were transferred to Global Campus in the Sale Transaction and that are no longer incurred by the Company. These costs were previously primarily components of instructional costs and services, with some costs from admissions advisory and marketing and some general and administrative, including instructor fees and other employee costs, student related bad debt expense, license fees for licenses transferred to Global Campus and other costs.
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Debt | Notes Payable The fair value of the Company’s outstanding notes payable was estimated using the net present value of the payments, discounted at an interest rate consistent with market interest rates. The Company, through Fullstack, had previously entered into a contract whereby its counterparty advanced funds to the Company for certain program development costs, which the Company was obligated to repay out of future revenues from the developed program. The Company originally recognized these advances as a debt obligation. During the first half of 2021, the notes payable contract was amended and the amount was revalued. As such, included within the other income (loss), net, on the condensed consolidated statements of income (loss) for the nine months ended September 30, 2021, is an offset of interest expense in the amount of $3.1 million, as well as a loss on extinguishment of debt of $2.8 million, the net impact of which is immaterial.
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Revenue Recognition (Tables) |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
(1) Primarily consists of revenues generated from various services and other miscellaneous fees. The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
(1)Represents revenue generated from the FTG program. (2)Represents revenue generated from digital textbooks and other miscellaneous fees.
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Deferred revenue of Company's contracts with customers | Below are the opening and closing balances of current deferred revenue from the Company’s contracts with customers (in thousands):
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Deferred Revenue and Student Deposits | Current deferred revenue and student deposits consisted of the following (in thousands):
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Restructuring and Impairment Expense Restructuring and Impairment Expense (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and impairment charges | The following table summarizes the amounts recorded in the restructuring and impairment expense line item on the Company’s condensed consolidated statements of income (loss) for each of the periods presented (in thousands):
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Schedule of restructuring reserve by type of cost | The following table summarizes the changes in the Company's restructuring and impairment liability by type during the nine months ended September 30, 2021 (in thousands):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Information of Short and Long-term Investments | The following tables summarize the fair value information as of September 30, 2021 and December 31, 2020, respectively (in thousands):
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Accounts Receivable, Net (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable, Net | Accounts receivable, net, consisted of the following (in thousands):
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Changes in Allowance for Doubtful Accounts, Accounts Receivable | The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2021 (in thousands):
The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2020 (in thousands):
|
Other Significant Balance Sheet Accounts (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands):
(1) Other current assets includes a net asset adjustment due from Global Campus related to the Sale Transaction, which is currently in mediation.
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Property and Equipment, Net | Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands):
For the three months ended September 30, 2021 and 2020, depreciation and amortization expense related to property and equipment was $1.4 million and $1.5 million, respectively. For the nine months ended September 30, 2021 and 2020, depreciation and amortization expense related to property and equipment was $3.9 million and $4.7 million, respectively.
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Goodwill and Intangibles, Net | Goodwill and Intangibles, Net Goodwill and intangibles, net, consisted of the following (in thousands):
For the three months ended September 30, 2021 and 2020, amortization expense was $0.7 million and $1.3 million, respectively. For the nine months ended September 30, 2021 and 2020, amortization expense was $2.4 million and $4.0 million, respectively.
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Intangibles, Estimated Remaining Amortization Expense | The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
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Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following (in thousands):
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Deferred Revenue and Student Deposits | Current deferred revenue and student deposits consisted of the following (in thousands):
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Other Long-Term Liabilities | Other Long-Term Liabilities Other long-term liabilities consisted of the following (in thousands):
|
Income Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Common Share | The following table sets forth the computation of basic and diluted income (loss) per share for the periods indicated (in thousands, except per share data):
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Antidilutive Securities | The following table sets forth the number of stock options and stock units excluded from the computation of diluted income (loss) per share for the periods indicated below because their effect was anti-dilutive (in thousands):
|
Segment Reporting (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following table summarizes financial information regarding each reportable segment’s results of operations for the periods presented (in thousands):
|
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2021 |
Sep. 30, 2021 |
|
Accounting Policies [Abstract] | ||
Interest Expense | $ 3,100 | $ 3,100 |
Gain (Loss) on Extinguishment of Debt | $ 2,800 | $ 2,800 |
Fair Value Measurements (Details) - USD ($) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mutual funds | $ 1,322,000 | $ 1,515,000 | |
Reclassification from accumulated other comprehensive income, current period, before Tax | 0 | $ 0 | |
Mutual funds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mutual funds | 1,322,000 | 1,515,000 | |
Mutual funds | Level 1 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mutual funds | 1,322,000 | 1,515,000 | |
Mutual funds | Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mutual funds | 0 | 0 | |
Mutual funds | Level 3 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mutual funds | $ 0 | $ 0 |
Accounts Receivable, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 10,372 | $ 8,420 |
Less allowance for credit losses | 1,833 | 1,216 |
Accounts receivable, net | $ 8,539 | $ 7,204 |
Accounts Receivable, Net (Change in Allowance) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Beginning Balance | $ 1,216 | $ 13,712 |
Charged to Expense | 1,002 | 9,845 |
Write-offs | (385) | (15,996) |
Recoveries of amounts | 0 | 4,855 |
Ending Balance | 1,833 | 12,416 |
FTG-related allowance | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Beginning Balance | 1,749 | |
Charged to Expense | 1,524 | |
Write-offs | (1,872) | |
Recoveries of amounts | 337 | |
Ending Balance | 1,738 | |
Non-FTG related allowance | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Beginning Balance | 1,216 | 11,963 |
Charged to Expense | 1,002 | 8,321 |
Write-offs | (385) | (14,124) |
Recoveries of amounts | 0 | 4,518 |
Ending Balance | $ 1,833 | $ 10,678 |
Other Significant Balance Sheet Accounts (Prepaid Expenses and Other Current Assets) (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 3,106 | $ 3,027 |
Prepaid licenses | 2,257 | 1,371 |
Prepaid income taxes | 0 | 48 |
Income tax receivable | 0 | 1,644 |
Prepaid insurance | 3,044 | 1,127 |
Insurance recoverable | 476 | 404 |
Other current assets (1) | 6,681 | 4,996 |
Total prepaid expenses and other current assets | $ 15,564 | $ 12,617 |
Other Significant Balance Sheet Accounts (Property and Equipment, Net) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 45,399 | $ 45,399 | $ 60,005 | ||
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (17,688) | (17,688) | (29,430) | ||
Property, Plant and Equipment, Net, Total | 27,711 | 27,711 | 30,575 | ||
Depreciation | 1,400 | $ 1,500 | 3,900 | $ 4,700 | |
Furniture and office equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 23,974 | 23,974 | 36,146 | ||
Software | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 5,502 | 5,502 | 7,512 | ||
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 15,901 | 15,901 | 16,325 | ||
Vehicles | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 22 | $ 22 | $ 22 |
Other Significant Balance Sheet Accounts (Remaining Amortization Expense) (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
Remainder of 2021 | $ 658 | |
2022 | 2,533 | |
2023 | 2,380 | |
2024 | 791 | |
2025 | 122 | |
Thereafter | 338 | |
Total future amortization expense | $ 6,822 | $ 8,609 |
Other Significant Balance Sheet Accounts (Accounts Payable and Accrued Liabilities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Accounts payable | $ 9,129 | $ 11,246 |
Accrued salaries and wages | 7,305 | 6,149 |
Accrued bonus | 2,521 | 11,428 |
Accrued vacation | 3,084 | 3,369 |
Accrued litigation and fees | 8,041 | 8,341 |
Minimum residual liability | 7,422 | 1,216 |
Accrued expenses | 14,494 | 12,473 |
Current leases payable | 4,405 | 6,934 |
Accrued insurance liability | 1,424 | 1,537 |
Accrued income taxes payable | 53 | 0 |
Total accounts payable and accrued liabilities | $ 57,878 | $ 62,693 |
Other Significant Balance Sheet Accounts (Other Long-term Liabilities) (Details) - USD ($) $ in Thousands |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|
Balance Sheet Related Disclosures [Abstract] | ||
Uncertain tax positions | $ 28 | $ 28 |
Notes payable | 2,885 | 2,981 |
Contract with Customer, Liability, Noncurrent | 942 | 0 |
Other long-term liabilities | 4,722 | 4,172 |
Total other long-term liabilities | $ 8,577 | $ 7,181 |
Credit Facilities (Details) $ in Millions |
Sep. 30, 2021
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Revolving line of credit, letters of credit outstanding | $ 9.8 |
Surety bond facility, issued amount | $ 0.0 |
Lease Obligations (Details) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2021
USD ($)
ft²
sublease
|
Sep. 30, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Lessee, Lease, Description [Line Items] | |||
Number of subleases | sublease | 2 | ||
Sublease income | $ 1,900 | $ 1,400 | |
Operating lease assets | 29,909 | $ 20,114 | |
Fullstack Academy | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 14,600 | ||
CALIFORNIA | |||
Lessee, Lease, Description [Line Items] | |||
Area of Real Estate Property | ft² | 24,000 | ||
Commitment to lease | 3 months | ||
Sublease income | $ 300 | ||
COLORADO, Commencing on April 1, 2019 [Member] | |||
Lessee, Lease, Description [Line Items] | |||
Area of Real Estate Property | ft² | 21,000 | ||
Commitment to lease | 17 months | ||
Sublease income | $ 900 |
Income Per Share (Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Numerator: | ||||||||
Net income (loss) | $ (5,219) | $ (4,033) | $ (9,493) | $ 1,121 | $ 5,147 | $ 2,020 | $ (18,745) | $ 8,288 |
Denominator: | ||||||||
Weighted average number of common shares outstanding (in shares) | 33,427 | 32,646 | 33,182 | 31,711 | ||||
Effect of dilutive options and stock units (in shares) | 0 | 1,369 | 0 | 631 | ||||
Diluted weighted average number of common shares outstanding (in shares) | 33,427 | 34,015 | 33,182 | 32,342 | ||||
Income (loss) per share: | ||||||||
Earnings Per Share, Basic (in dollars per share) | $ (0.16) | $ 0.03 | $ (0.56) | $ 0.26 | ||||
Earnings Per Share, Diluted (in dollars per share) | $ (0.16) | $ 0.03 | $ (0.56) | $ 0.26 |
Income Per Share (Anti-dilutive Securities) (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of dilutive common shares outstanding | 1,279 | 1,525 | 1,391 | 1,654 |
Stock units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of dilutive common shares outstanding | 972 | 0 | 1,170 | 577 |
Income Taxes (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
Income Tax Contingency [Line Items] | ||
Effective tax rate | 0.40% | |
Unrecognized tax benefits | $ 19 | $ 19 |
Gross unrecognized tax benefits that would impact effective tax rate if recognized | $ 15 | $ 15 |
Settlement with taxing authority | ||
Income Tax Contingency [Line Items] | ||
Effective tax rate | (1.00%) |
Regulatory US Department of Education (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
Regulatory Liabilities [Line Items] | |||||
Restructuring and impairment expense | $ 300 | $ 184 | $ 2,641 | $ 3,430 | |
Revenue, Regulatory Terms, Title 4 Eligibility, Maximum Allowable Percentage of Revenue Over Two Consecutive Fiscal Years From Title 4 Programs | 90.00% | ||||
Revenue, Regulatory Terms, Title 4 Eligibility, Minimum Term of Ineligibility Once Noncompliant | 2 years | ||||
Accreditation, Regulatory Terms, Maximum Cohort Default Rate over Prior Three Years | 30.00% | ||||
Student Transfer Costs | |||||
Regulatory Liabilities [Line Items] | |||||
Restructuring and impairment expense | $ 1,500 | $ 0 | |||
Minimum | |||||
Regulatory Liabilities [Line Items] | |||||
Eligibility for Title 4 Programs, Regulatory Compliance, Composite Score | 1.5 |
Commitments and Contingencies (Details) $ in Millions |
Sep. 30, 2021
USD ($)
|
---|---|
CALIFORNIA | |
Loss Contingencies [Line Items] | |
Estimated litigation liability | $ 8.0 |
Label | Element | Value |
---|---|---|
Retained Earnings [Member] | ||
Cumulative effect of adoption new accounting principle | zvo_CumulativeEffectOfAdoptionNewAccountingPrinciple | $ 91,000 |
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