Good evening, and welcome to the Perdoceo Education Corporation Second Quarter 2021 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Wyatt Turk. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for our second quarter 2021 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer. The conference call is being webcast live on the Investor Relations section at perdoceoed.com. The webcast replay will also be available on our site, and you can always contact the Alpha IR for Investor Relations support. Let me remind you that this afternoon's earnings release and remarks made today and include forward-looking statements as defined in Section 21-E of the Securities Exchange Act of 1934. These statements are based on assumptions made by and information currently available to Perdoceo Education and involve risks and uncertainties that could cause actual future results, performance, business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo's annual report on Form 10-K for the year ended December 31st, 2020, and subsequent filings with the Securities and Exchange Commission. Except as expressly required by the Securities Laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or change in circumstances or for any other reason. In addition, today's remarks refer to non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The earnings release that accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures and has been available within the Investor Relations page of the company's website. With that, I'd like to turn the call over to Todd Nelson. Todd?

This is the conference operator. Mr. Todd Nelson please go ahead.

Good afternoon, everyone, and thank you for joining us for our second quarter 2021 earnings call. I'd like to begin by thanking our faculties, student support staff and all other employees for another quarter of hard work, diligence and dedication in serving our students. Overall, we are pleased with results of our quarter and our team was able to adapt well to a changing environment while keeping student experiences, retention and academic outcomes at the forefront of our operations. We also continue to put our balance sheet to work and executed another strategic acquisition that I'll outline for you in a few minutes. We believe the prolonged pandemic and its resulting social distancing practices and safety measures as well as the macroeconomic and governmental responses has impacted overall student engagement similar to what other academic institutions in the post-secondary education industry may be experiencing. While prospective student interest remains in line with our recent experience, during the quarter some students began deferring their decision to begin classes and there has been an increase in current students taking a pause from their academic programs. Based on what we're seeing so far, going into the traditional back-to-school months, we believe this change in student behavior may be temporary and was impacted by a better than expected opening of the economy and the various stimulus packages supporting it. However, additional time is needed to assess the impact of the evolving pandemic environment on student behavior. For the quarter, we reported net income of $26.6 million or $0.37 per diluted share while adjusted earnings per diluted share which excludes certain significant and noncash items was $0.41. Our balance sheet remains a source of strength that has enabled us to make investments in student-serving functions as well as evaluate acquisitions of high-quality academic programs. Speaking…

Thank you, Todd. I will now review our second quarter results and then discuss our balance sheet and 2021 outlook before handing the call back to Todd for his closing remarks. Please note that all comparisons I discuss are versus the comparative prior year period unless otherwise stated. Before I begin, a quick reminder about year-over-year comparability. Operating results for AIU reflect the Trident acquisition commencing on March 2nd, 2020. Beginning with this quarter, AIU's operating results are fully comparable to the prior quarter as it relates to the Trident acquisition. I would also like to remind everyone that we are no longer including adjustments for any expenses related to closed campuses when presenting adjusted operating income or adjusted earnings per diluted share because these expenses are no longer material. All prior year period amounts have been recast to maintain comparability. Let's start with an overview of our operating results. For the second quarter of 2021, total company operating income was $36 million as compared to an operating income of $37.4 million. Adjusted operating income, which excludes certain significant and noncash items and which we believe is more reflective of the underlying operating performance, totaled $42.3 million for the quarter, reflecting an increase of 1.8% versus the prior year. Net income for the quarter was $26.6 million or $0.37 per diluted share, while adjusted earnings per diluted share, which again, we believe is more reflective of the underlying operating performance was $0.41 for both the current and the prior year quarter. Let me quickly comment on the adjustments to the reported operating results for the quarter. In addition to the typical depreciation and amortization adjustment, we are also adjusting for legal fees associated with two matters: first, acquisitions; and second, responses to the Department of Education relating to the loan…

Thanks, Ashish. Again, I'm extremely proud of the entire Perdoceo team, which has shown a steadfast commitment to serving and educating students while adjusting their outreach and engagement strategies in response to the ever-changing and evolving pandemic. We look forward to continuing to educate and serve our current and prospective students while keeping our focus on student experiences, retention and academic outcomes. Thank you again for joining us today, and we will now open the line for any analyst questions.

Thank you. [Operator Instructions] Your first question comes from Alex Paris from Barrington Research. Please go ahead, Alex.

Hi guys, thanks for taking my question today. I have a couple of questions all over the place but I guess I'll start also with the acquisition of DigitalCrafts. I hear you that it's not going to have a material impact on adjusted operating income for the year, what about revenue?

Yes, it will obviously impact revenue. However, as we have not disclosed any of those numbers and but yes it will obviously positively impact revenue for the third quarter and full-year.

Okay. So, not disclosed. Then I had a question about the workforce development programs at Trident. You got seven launched and I realize you're considering others. Could you perhaps give us some color on those seven programs, when did they launch and what's the initial response from prospective students.

Sure, thanks Alex. Yes, we're -- they have been launched. We have been really very pleased with the 1000s of inquiries, which is good. We surpassed 100 students, which is also something we're pleased with. And we're obviously just getting going but really excited about the future of that.

Great, thank you. And then is it still your intention to roll these programs out to AIU at large or CTU at some point?

Well, they right now yes, absolutely. I mean anybody who would have interest in that and obviously there are those who have expressed interest in the past. But right now, again, we just, as I said very pleased with the response that we have which has given us encouragement to develop additional programs. It takes time obviously to build enrollment but the answer to your question is yes.

Okay, thank you. And then just a few cats and dogs left. You're relocating the Colorado Springs campus at CTU. I wasn't aware that that was planned. Why was that and maybe a little color there.

You bet! Great question. We like the facility we had but it was a leased facility and we made the decision to frankly upgrade to a better facility and obviously take advantage of the lease rates in the Colorado Springs market. But again, based on demand and that being our home campus, it was very important that we maintain a presence in Colorado Springs but again it was a good opportunity for us to upgrade.

Great. And then I guess the last one from me is, I have the 10-Q open and I'm trying to understand this whole borrowers defense to repayment and the legal or the legal fee in settlement in the quarter. What's going on there, just maybe a little color and then I'll read the 10-Q more carefully.

Sure. And by the way, we do encourage you to read that. As we disclosed in our 10-Q, we've been notified that the department there were several 1000 of these borrower defense claims and by the way, it covered a time period of decades. And obviously a significant number of those even from schools that have been taught out and closed for some time. So obviously, that's no idea how long those have been there. But again, one of the things that's important, that's why obviously read the 10-Q, each one of these you have to have a response regardless of how they may seem to be not a very valid claim but again you cannot not respond, you have to and so that's why there's legal fees associated with that. But again, we're looking forward to making sure we get all the information, those individual responses to those. And yes, so that's the process that you have to follow.

Alright. So, just a little clarification. Were the majority at schools that have been closed or were there claims at AIU and CTU as well?

Again, just refer to the, just look at the 10-Q because as we as these come in you analyze them and I don't really have that information at this point, Alex.

Okay, fair enough. I'll leave it at that for now and I'll get back in the queue.

Okay. Thanks, Alex.

Thank you.

Thank you. [Operator Instructions] Your next question comes from Greg Pendy. Please go ahead.

Hi, guys. Thanks for taking my questions. Just wanted to --.

Hi, Greg.

Hi. In light of the fact that we are in a heightened investment year I guess we can call it, just wanted to understand maybe a little bit of clarity on where some of the dollars are going and kind of how you're thinking about the payback and just things usually don't end on a calendar year. So, I mean how should we be thinking about this, is this going to go throughout the fourth quarter possibly. Is there some spend that might trickle into next year or is this something that might be winding down in November. Just trying to get a sense of where the heightened investment is.

Sure. Well obviously, we feel very optimistic based on the inquiries and the interest in our programs. But as we've said on prior calls as well that our ability to add to the breadth and depth of our programs is very important. It what again was very appealing with DigitalCrafts. Obviously, as we said we're looking at other things that add, will continue to add to that. Some of them, it's easier to bring to closure or to close on sooner or rather later. It's just hard to say how much of that will be this year or will fall into next year but obviously as we have it at this pace, we'll make sure that we give you the information as soon as we have it. But basically it's about it.

Okay, great. And then just again, I know it's always kind of out there in the past, I know. Anything on the front on maybe closing the spread in terms of operating profitability of AIU and CTU. I mean is there, is it still just a question of scale?

Well, I think scale being the biggest one but obviously, we need to continue to watch where the demand in our particular industry goes and if there's opportunities as it was with Trident to add some breadth and depth there. But we may find that there's also some opportunities for CTU as well. So, we would want to invest there. But I do think scale is still the largest, we're excluding some external issues that you may face that are based on demand that we just it's hard to predict that.

But I guess maybe now that you have a good picture of what AIU looks like with Trident, I mean there's nothing structurally significantly different from AIU versus CTU. Is that fair to say?

Yes, that's fair to say. You have obviously your accreditation is similar, you're positioned in the market in a similar way. There is still some difference in the number of programs but as we continue to add those programs at AIU, again, they become closer. But again similar attributes with, there aren't really any big change differences in the attributes of the two.

Okay, great. That's helpful. Thanks, a lot.

Thank you, Greg.

Thank you.

Thank you. At this stage, there are no questions in the queue. [Operator Instructions] It appears there are no further questions at this time. I will now pass back for any closing remarks.

Well, thank you again for joining us for the quarter. We look forward to speaking again next quarter. Thank you.

Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.