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Zovio Inc Reports Fourth Quarter and Full Year 2020 Results

2/24/2021
Zovio Growth segment continues to exceed expectations, delivering 105% revenue growth in 2020

CHANDLER, Ariz., Feb. 24, 2021 /PRNewswire/ -- Zovio Inc (NASDAQ:ZVO), an education technology services company, today announced the results for its fourth quarter and full year ended December 31, 2020.

"We ended the year strong, executing on the sale of the University, delivering triple-digit growth in Zovio Growth and exceeding earnings expectations. Zovio is an enviable position as we embark on this new chapter as a leading education technology services business. Our track record of innovation, driven by advanced data and analytics, strong culture and more than 200 institutional partners will allow us to offer services to our university partners that span the student journey and support the best possible outcomes. As we enter 2021, we remain poised for long-term growth and value-creation as we capture the rapid changes in education to empower all learners," commented Andrew Clark, Founder, President and Chief Executive Officer.

Financial Results for the Three Months Ended December 31, 2020

Revenue and other revenue for the three months ended December 31, 2020 was $93.1 million, compared with revenue of $96.3 million for the three months ended December 31, 2019.

Operating loss for the three months ended December 31, 2020 was $57.3 million, compared with operating loss of $21.2 million for the three months ended December 31, 2019.

The Company recognized an income tax benefit of approximately $0.2 million for the three months ended December 31, 2020, compared with income tax expense of $1.8 million for the three months ended December 31, 2019.

Net loss for the three months ended December 31, 2020 was $57.2 million, compared with net loss of $23.0 million for the three months ended December 31, 2019.

Diluted loss per share for the three months ended December 31, 2020 was $1.75, compared with diluted loss per share of $0.76 for the three months ended December 31, 2019.

Non-GAAP Financial Results for the Three Months Ended December 31, 2020

Non-GAAP operating income for the three months ended December 31, 2020 was $0.9 million, compared with non-GAAP operating loss of $4.4 million for the three months ended December 31, 2019. Non-GAAP operating income for the three months ended December 31, 2020 excludes restructuring and impairment charges of $1.4 million, separation transaction costs of $1.2 million, acquisition costs of $0.9 million and loss on transaction of $54.8 million. Non-GAAP operating loss for the three months ended December 31, 2019 excludes restructuring and impairment charges of $13.6 million, separation transaction costs of $0.9 million and acquisition costs of $2.4 million.

Non-GAAP net income for the three months ended December 31, 2020 was $0.9 million, compared with non-GAAP net loss of $4.5 million for the three months ended December 31, 2019. Non-GAAP net income for the three months ended December 31, 2020 excludes restructuring and impairment charges of $1.4 million, separation transaction costs of $1.2 million and acquisition costs of $0.9 million, loss on transaction of $54.8 million and the related tax effects. Non-GAAP net loss for the three months ended December 31, 2019 excludes restructuring and impairment charges of $13.6 million, separation transaction costs of $0.9 million, acquisition costs of $2.4 million and the related tax effects.

Non-GAAP diluted income per share for the three months ended December 31, 2020 was $0.03, compared with non-GAAP diluted loss per share of $0.15 for the three months ended December 31, 2019.

Financial Results for the Year Ended December 31, 2020

Revenue and other revenue for the year ended December 31, 2020 was $397.1 million, compared with revenue of $417.8 million for the year ended December 31, 2019.

Operating loss for the year ended December 31, 2020 was $61.9 million, compared with operating loss of $56.6 million for the year ended December 31, 2019.

The Company recognized an income tax benefit of $13.1 million for the year ended December 31, 2020, compared with income tax benefit of $0.8 million for the year ended December 31, 2019.

Net loss for the year ended December 31, 2020 was $49.0 million, compared with net loss of $54.8 million for the year ended December 31, 2019.

Diluted loss per share for the year ended December 31, 2020 was $1.53, compared with diluted loss per share of $1.86 for the year ended December 31, 2019.

Non-GAAP Financial Results for the Year Ended December 31, 2020

Non-GAAP operating income for the year ended December 31, 2020 was $8.8 million, compared with non-GAAP operating loss of $15.0 million for the year ended December 31, 2019. Non-GAAP operating income for the year ended December 31, 2020 excludes restructuring and impairment charges of $4.8 million, separation transaction costs of $6.7 million, acquisition costs of $4.3 million and loss on transaction of $54.8 million. Non-GAAP operating loss for the year ended December 31, 2019 excludes restructuring and impairment charges of $21.5 million, separation transaction costs of $5.8 million, acquisition costs of $14.1 million and other non-GAAP costs of $0.2 million.

Non-GAAP net income for the year ended December 31, 2020 was $8.6 million, compared with non-GAAP net loss of $13.9 million for the year ended December 31, 2019. Non-GAAP net income for the year ended December 31, 2020 excludes restructuring and impairment charges of $4.8 million, separation transaction costs of $6.7 million, acquisition costs of $4.3 million, loss on transaction of $54.8 million, and the related tax effects. Non-GAAP net loss for the year ended December 31, 2019 excludes restructuring and impairment charges of $21.5 million, separation transaction costs of $5.8 million, acquisition costs of $14.1 million, other non-GAAP costs of $0.2 million and the related tax effects.

Non-GAAP diluted income per share for the year ended December 31, 2020 was $0.27, compared with non-GAAP diluted loss per share of $0.47 for the year ended December 31, 2019.

Balance Sheet and Cash Flow

As of December 31, 2020, the Company had cash and cash equivalents of $35.5 million as compared to $69.3 million as of December 31, 2019.

The Company had $25.3 million of cash provided by operating activities during the year ended December 31, 2020, compared with $46.1 million of cash used in operating activities during the year ended December 31, 2019.

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP diluted income (loss) per share, EBITDA and Adjusted EBITDA. These non-GAAP measures exclude restructuring and impairment charges, separation transaction costs, acquisition costs, loss on transaction, as well as certain income tax adjustments, as applicable. These non-GAAP financial measures are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and are not based on a comprehensive set of accounting rules. Management believes non-GAAP financial measures are useful in providing investors with an understanding of how specific line items in the consolidated statements of income are affected by items that may not be indicative of the operating results of the Company's core business. To the extent that other companies use similar methods in calculating and reporting non-GAAP operating results, the Company believes provision of supplemental non-GAAP financial information allows for a meaningful comparison of the Company's performance against the performance of other companies. The Company further believes that these non-GAAP financial measures provide useful information regarding its ongoing operating activities and business trends related to its results of operations, as well as a meaningful comparison with historical financial results. The Company's management and board of directors utilize these non-GAAP financial measures, together with the Company's financial statements prepared in accordance with GAAP, in developing operating budgets and evaluating the Company's performance. These non-GAAP financial measures are intended to supplement GAAP financial information, and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. Refer to the accompanying tables for a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

Earnings Conference Call and Webcast

Zovio Inc will host a conference call at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today to discuss its latest financial results and recent highlights. The dial-in number for callers in the United States is (877) 395-6119, and the dial-in number for other callers is (647) 689-5537. The access code for all callers is 4834547. A live broadcast of the call will also be available on the Company's website at http://ir.zovio.com.

About Zovio Inc

Zovio Inc (NASDAQ: ZVO) 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. The Zovio network, which includes Fullstack Academy and TutorMe, leverages its core strengths and applies its technology and capabilities to priority market needs. Using advanced data and analytics, Zovio identifies the most meaningful ways to enhance the learner experience and deliver strong outcomes for higher education institutions, employers, and learners. Zovio's purpose is to help everyone be in a class of their own. For more information, visit www.zovio.com.

Forward-Looking Statements

This news release may contain forward-looking statements which are not statements of historical fact and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding management's intentions, hopes, beliefs or expectations, and statements regarding the Company's outlook for the remainder of 2021 and beyond. These forward-looking statements are based on current information and expectations and are subject to various risks and uncertainties. The Company's actual performance or results may differ materially from those expressed in or suggested by such statements due to various factors, including without limitation: our ability to successfully transition to being an education technology services company, and the success of our strategies with respect to student initiatives.

Additional information on factors that could cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements is included from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 to be filed with the SEC on February 24, 2021, the Company's quarterly reports on Form 10-Q and the Company's current reports on Form 8-K which are available at www.zovio.com. You should not place undue reliance on any forward-looking statements. Forward-looking statements are made on the basis of management's good faith beliefs, expectations and assumptions regarding future events based on information available at the time such statements are made. Forward-looking statements speak only as of the date they are made. The Company assumes no obligation to update or revise any forward-looking statements to reflect actual results or any changes in assumptions, expectations or other factors affecting such forward-looking statements, except to the extent required by applicable securities laws.

 

ZOVIO INC

Consolidated Statements of Income (Loss)

(In thousands, except per share amounts)



Three Months Ended
December 31,


Year Ended
December 31,


2020


2019


2020


2019

University Partners segment revenue

$

87,401



$

92,307



$

376,220



$

407,594


Zovio Growth segment revenue

5,742



3,978



20,901



10,201


Revenue and other revenue

93,143



96,285



397,121



417,795










Costs and expenses:








Technology and academic services

19,591



17,944



74,412



73,342


Counseling services and support

25,467



25,231



96,996



110,256


Marketing and communication

21,603



19,451



91,620



96,001


General and administrative

10,947



13,018



47,352



56,840


University-related expense

16,669



28,290



89,001



116,488


Restructuring and impairment charges

1,413



13,575



4,843



21,465


Loss on transaction

54,797





54,797




Total costs and expenses

150,487



117,509



459,021



474,392


Operating loss

(57,344)



(21,224)



(61,900)



(56,597)


Other income (loss), net

(58)



(25)



(120)



1,015


Loss before income taxes

(57,402)



(21,249)



(62,020)



(55,582)


Income tax expense (benefit)

(162)



1,766



(13,068)



(770)


Net loss

$

(57,240)



$

(23,015)



$

(48,952)



$

(54,812)


Loss per share:








Basic

$

(1.75)



$

(0.76)



$

(1.53)



$

(1.86)


Diluted

$

(1.75)



$

(0.76)



$

(1.53)



$

(1.86)


Weighted average number of common shares outstanding used in computing loss per share:








Basic

32,697



30,270



31,959



29,492


Diluted

32,697



30,270



31,959



29,492


 

 

ZOVIO INC

Consolidated Balance Sheets

(In thousands)



As of December 31,


2020


2019

ASSETS




Current assets:




Cash and cash equivalents

$

35,462



$

69,280


Restricted cash

20,035



23,257


Investments

1,515



2,502


Accounts receivable, net

7,204



34,951


Prepaid expenses and other current assets

12,617



20,524


Total current assets

76,833



150,514


Property and equipment, net

30,575



34,294


Operating lease assets

20,114



18,615


Goodwill and intangibles, net

31,785



44,419


Other long-term assets

1,999



2,296


Total assets

$

161,306



$

250,138


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

62,693



$

68,160


Deferred revenue and student deposits

8,090



55,284


Total current liabilities

70,783



123,444


Rent liability

24,125



22,409


Other long-term liabilities

7,181



5,347


Total liabilities

102,089



151,200


Total stockholders' equity

59,217



98,938


Total liabilities and stockholders' equity

$

161,306



$

250,138


 

 

ZOVIO INC

Consolidated Statements of Cash Flows

(In thousands)



Year Ended December 31,


2020


2019

Cash flows from operating activities




Net loss

$

(48,952)



$

(54,812)


Adjustments to reconcile net loss to net cash used in operating activities:




Provision for bad debts

14,256



16,252


Depreciation and amortization

11,403



10,229


Deferred income taxes

119



(36)


Stock-based compensation

8,291



12,340


Noncash lease expense

10,644



19,261


Net loss (gain) on marketable securities

(111)



(308)


Reassessment of lease charges



558


Loss on disposal or impairment

38



878


Loss on transaction

51,952




Changes in operating assets and liabilities:




  Accounts receivable

(17,666)



(18,537)


  Prepaid expenses and other current assets

10,339



3,874


  Other long-term assets

(1,241)



(7)


  Accounts payable and accrued liabilities

(4,978)



1,939


  Deferred revenue and student deposits

1,706



(11,099)


  Operating lease liabilities

(10,751)



(22,967)


  Other liabilities

277



(3,651)


Net cash provided by (used in) operating activities

25,326



(46,086)


Cash flows from investing activities




Capital expenditures

(3,153)



(31,029)


Purchases of investments

(720)



(126)


Cash transferred in connection with disposition

(62,325)




Capitalized costs for intangible assets

(272)



(750)


Cash paid for acquisitions, net of cash acquired



(19,489)


Sales of investments

1,818




Net cash used in investing activities

(64,652)



(51,394)


Cash flows from financing activities




Proceeds from exercise of stock options

8



60


Proceeds from the issuance of stock under employee stock purchase plan

209



192


Borrowings from notes payable

2,682




Tax withholding on issuance of stock awards

(507)



(819)


Repurchase of common stock

(106)




Net cash provided by (used in) financing activities

2,286



(567)


Net decrease in cash, cash equivalents and restricted cash

(37,040)



(98,047)


Cash, cash equivalents and restricted cash at beginning of period

92,537



190,584


Cash, cash equivalents and restricted cash at end of period

$

55,497



$

92,537


 

 

ZOVIO INC

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended
December 31,


2020


2019


2020


2019

Operating Income (Loss) Reconciliation:








GAAP operating loss

$

(57,344)



$

(21,224)



$

(61,900)



$

(56,597)


Restructuring and impairment charges

1,413



13,575



4,843



21,465


Separation transaction costs

1,157



874



6,731



5,832


Acquisition costs

874



2,404



4,298



14,111


Other non-GAAP costs







238


Loss on transaction

54,797





54,797




Non-GAAP operating income (loss)

$

897



$

(4,371)



$

8,769



$

(14,951)


















Net Income (Loss) Reconciliation:








GAAP net loss

$

(57,240)



$

(23,015)



$

(48,952)



$

(54,812)


Restructuring and impairment charges

1,413



13,575



4,843



21,465


Separation transaction costs

1,157



874



6,731



5,832


Acquisition costs

874



2,404



4,298



14,111


Other non-GAAP costs







238


Loss on transaction

54,797





54,797




Income tax impact, non-GAAP

(89)



1,663



(13,122)



(750)


Non-GAAP net income (loss)

$

912



$

(4,499)



$

8,595



$

(13,916)


















Diluted Income (Loss) Per Share Reconciliation:








GAAP diluted loss per share

$

(1.75)



$

(0.76)



$

(1.53)



$

(1.86)


Restructuring and impairment charges

0.04



0.45



0.15



0.73


Separation transaction costs

0.04



0.03



0.21



0.20


Acquisition costs

0.03



0.08



0.13



0.48


Other non-GAAP costs







0.01


Loss on transaction

1.68





1.72




Income tax impact, non-GAAP

(0.01)



0.05



(0.41)



(0.03)


Non-GAAP diluted income (loss) per share

$

0.03



$

(0.15)



$

0.27



$

(0.47)


 

 

ZOVIO INC

Reconciliation of GAAP to Non-GAAP Financial Measures (continued)

(In thousands, except per share amounts)

(Unaudited)



Three Months Ended
December 31,


Year Ended
December 31,


2020


2019


2020


2019

EBITDA and Adjusted EBITDA Reconciliation:








GAAP net loss

$

(57,240)



$

(23,015)



$

(48,952)



$

(54,812)


Interest expense (income), net

58



(91)



120



(910)


Income tax expense (benefit)

(162)



1,766



(13,068)



(770)


Depreciation and amortization

2,655



3,055



11,403



10,229


EBITDA

(54,689)



(18,285)



(50,497)



(46,263)


Restructuring and impairment charges

1,413



13,575



4,843



21,465


Separation transaction costs

1,157



874



6,731



5,832


Acquisition costs

42



1,570



971



11,613


Other non-GAAP costs







238


Loss on transaction

54,797





54,797




Adjusted EBITDA

$

2,720



$

(2,266)



$

16,845



$

(7,115)


 

Contact: Alanna Vitucci
alanna.vitucci@zovio.com 
858 668 2586 x11636

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SOURCE Zovio

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