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Operating income of $17.3 million versus prior quarter operating loss of $19.9 million, driven by better than expected execution of strategic initiatives

SCHAUMBURG, Ill.--(BUSINESS WIRE)-- Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the second quarter and year to date ended June 30, 2016. The Company also updated its 2016 year end cash and consolidated adjusted EBITDA outlook.

Second Quarter Consolidated Results:

• Revenue of $182.6 million for the quarter as compared to $216.8 million in the prior year quarter, with the decline driven by teach-out campuses
• Net income improved to $11.8 million as compared to the prior year quarter net loss of $20.7 million
• Consolidated adjusted EBITDA of $25.6 million compared to negative $4.3 million in the prior year quarter (see reconciliation of GAAP to non-GAAP items attached to this press release)
• Cash flow generated from operations was $16.7 million, compared to cash usage of $6.4 million in the prior year quarter

Year to Date Consolidated Results:

• Net income improved to $14.9 million as compared to the prior year net loss of $45.6 million
• Operating expenses decreased by $130.8 million as compared to the prior year driven by continued execution on strategic initiatives
• Consolidated adjusted EBITDA improved to $38.8 million as compared to negative $16.1 million in the prior year (see reconciliation of GAAP to non-GAAP items attached to this press release)
• As of June 30, 2016, cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings, was $208.8 million

Key Business Highlights:

• University Group revenue increased by 3.0 percent versus the prior year quarter
• University Group operating income increased by 25.0 percent to $36.8 million compared to the prior year quarter, primarily driven by increased revenue and improved efficiency of operations
• University Group total enrollments increased by 1.0 percent as compared to the prior year
• Organization has committed incremental investments to various student-serving operations to further its goal of improving student retention and outcomes
• Total student enrollment at our Transitional and Culinary Arts campuses is trending better than estimated

“Strong student retention across most of our institutions, better than estimated total student enrollment at our teach-out campuses, and continued efficiency and stability at our University Group, resulted in another quarter of improvement in year-over-year operating performance,” said Todd Nelson, President and Chief Executive Officer. “This improvement in our operating performance has enabled us to make incremental investments in various student-serving areas of operations, which we believe will positively impact student experiences in the future. For the remainder of this year, we are focused on optimizing our operating processes with the goal of further enhancing student retention and outcomes. As a result of the positive trends we have been experiencing, we are updating our year end cash and adjusted EBITDA outlook we provided last quarter, and are committed to continue executing against our ongoing initiatives.”

REVENUE

For the quarter and year to date ended June 30, 2016, total revenue was $182.6 million and $381.5 million, respectively, representing a decrease of 15.8 percent and 14.0 percent, respectively, compared to total revenue of $216.8 million and $443.8 million for the quarter and year to date ended June 30, 2015, respectively. Total revenue for the University Group was $142.3 million and $287.3 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 3.0 percent and 3.9 percent, respectively.

TOTAL AND NEW STUDENT ENROLLMENTS

As of the end of the second quarter of 2016, total student enrollments for the University Group were 31,600, compared to 31,300 as of the prior year quarter end, primarily driven by improved student retention at CTU and new enrollment growth at AIU. New student enrollments for the University Group were 7,630 and 17,260 for the quarter and year to date ended June 30, 2016, respectively, compared to new enrollments of 7,950 and 18,080 for the quarter and year to date ended June 30, 2015, respectively.

OPERATING INCOME (LOSS)

For the quarter and year to date ended June 30, 2016, operating income was $17.3 million and $24.3 million, respectively, representing an improvement of 186.9 percent and 154.8 percent compared to an operating loss of $19.9 million and $44.3 million for the quarter and year to date ended June 30, 2015, respectively. Total University Group operating income increased to $36.8 million and $58.0 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 25.0 percent and 40.8 percent, respectively.

NET INCOME (LOSS)

Net income was $11.8 million for the quarter ended June 30, 2016 as compared to a net loss of $20.7 million in the prior year quarter, an improvement of 157.1 percent. For the year to date ended June 30, 2016, net income was $14.9 million representing an improvement of 132.6 percent as compared to net loss of $45.6 million for the prior year to date.

ADJUSTED EBITDA

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

As shown in the table below, adjusted EBITDA for the University Group and Corporate was $34.3 million and $54.5 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 29.4 percent, or 7.8 million, and 44.0 percent, or $16.7 million, respectively, as compared to the prior year periods. Adjusted EBITDA for the Transitional Group, Culinary Arts and discontinued operations improved to negative $8.7 million and negative $15.7 million for the quarter and year to date ended June 30, 2016, respectively, representing an improvement of 71.8 percent and 71.0 percent, respectively, as compared to the prior year periods.

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities for the quarter and year to date ended June 30, 2016 was $16.7 million and $6.0 million, respectively, representing an improvement from cash usage of $6.4 million and $26.6 million for the quarter and year to date ended June 30, 2015, respectively. The Company’s continued focus on improving operating efficiencies within the University Group and the inherent economics at the onset of a teach-out associated with the LCB campuses resulted in an improvement in cash usage.

As of June 30, 2016 and December 31, 2015, cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings totaled $208.8 million and $201.0 million, respectively.

OUTLOOK

Career Education Corporation revised its consolidated adjusted EBITDA and year end cash outlook, in order to incorporate recent trends of improved student retention across most of its institutions, better than estimated total enrollments at its teach-out campuses and continued efficiency in University operations. The Company now expects the following results, subject to the updated key assumptions identified below:

• Consolidated adjusted EBITDA to improve in 2016 as compared to 2015 and to be positive, to remain flat in 2017 as compared to 2016, and to increase in 2018 as compared to 2017
• End of year cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of any borrowings, as reported on the consolidated balance sheets of approximately $160 million to $170 million for the year ending December 31, 2016, approximately $140 million to $155 million for the year ending December 31, 2017, and then to increase for the year ended December 31, 2018

Forward looking adjusted EBITDA expectations are estimated on a basis consistent with adjusted EBITDA calculations presented in the reconciliation of GAAP to non-GAAP items attached to this press release. Net income, which is the most directly comparable GAAP measure to consolidated adjusted EBITDA, may not follow the same trends as discussed in our outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations of vacated space less an estimated amount for sublease income as well as income taxes, depreciation, amortization, asset impairment charges, interest income, interest expense and stock compensation. The adjusted EBITDA and cash outlook provided above for 2016 and beyond are based on the following key assumptions and factors, among others: (i) flat-to-modest total enrollment growth within the University Group while achieving the intended University Group efficiencies, (ii) teach-outs to progress as expected and performance consistent with current trends, (iii) achievement of recovery rates for the Company’s real estate obligations and timing of any associated lease termination payments consistent with the Company’s historical experiences, (iv) right-sizing of the Company’s corporate expense structure to serve primarily online institutions, (v) no material changes in the legal or regulatory environment and excludes legal settlements, regulatory settlements and any impact of new or proposed regulations, and (vi) consistent working capital movements in line with historical operating trends and potential impacts of teach-out campuses on working capital in line with expectations.Although these estimates and assumptions are based upon management’s good faith beliefs regarding current events and actions that may be undertaken in the future, actual results could differ materially from these estimates.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, August 3, 2016 at 5:30 p.m. Eastern time to discuss its second quarter and year to date 2016 results. Interested parties can access the live webcast of the conference call and the related presentation materials at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 844-378-6484 (domestic) or 412-542-4179 (international). Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website.

ABOUT CAREER EDUCATION CORPORATION

Career Education’s academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and hybrid learning programs. Our two universities – American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today’s busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath™ adaptive learning platform that allow students to more efficiently pursue earning a degree by receiving course credit for knowledge they can already demonstrate. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of individual campus locations and web links to Career Education’s institutions can be found at www.careered.com.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “believe,” “will,” “expect,” “estimate,” “continue,” “trend” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various assumptions, risks, uncertainties and other factors that could cause our results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update or revise such factors or any of the forward-looking statements contained herein to reflect future events, developments or changed circumstances, or for any other reason. These risks and uncertainties, the outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment; increased competition; negative trends in the real estate market which could impact the costs related to teaching out campuses and the success of our initiatives to reduce our real estate obligations; our ability to achieve anticipated cost savings and business efficiencies; rulemaking by the U.S. Department of Education or any state or accreditor and increased focus by Congress, the President and governmental agencies on, or increased negative publicity about, for-profit education institutions; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the gainful employment, 90-10, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education), as well as applicable accreditation standards and state regulatory requirements; the impact of management changes; our ability to successfully defend litigation and other claims brought against us; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and its subsequent filings with the Securities and Exchange Commission.

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Investors:
Alpha IR Group
Sam Gibbons or Chris Hodges
(312) 445-2870
[email protected]
or
Media:
Career Education Corporation
(847) 585-2600
[email protected]

Source: Career Education Corporation