Thank you, Dante. Good afternoon, everyone, and thank you for joining us for our second quarter 2022 earnings call.

With me on the call today is Todd Nelson, Executive Chairman; Andrew Hurst, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section at perdoceoed.com.

A webcast replay will also be available on our site, and you can always contact the Alpha IR Group for Investor Relations support. Let me remind you that this afternoon's earnings release and remarks made today include forward-looking statements as defined in Section 21E 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 31, 2021, 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 changed 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 a reconciliation of the GAAP to non-GAAP measures and is available within the Investor Relations page of the company's website. With that, I'd like to turn the call over to Andrew Hurst.

Andrew?

Thank you, Davis. Good afternoon to everyone, and thank you for joining us.

Overall, we are pleased with our operating results and continued progress during the quarter. I would like to thank our faculty, student support staff and all our other employees for their hard work, dedication and diligence in serving and educating our students.

We continue to invest in technology upgrades and maintain appropriate levels of academic and student support services that we believe are positively impacting academic outcomes and student experiences. Second quarter operating results came in ahead of our expectations, in part due to better-than-expected improvements in student engagement, as overall macroeconomic and governmental responses generally wind down from the pandemic.

Let me touch upon some of the key operational highlights from the quarter. First, while student engagement continues to show progress from the pandemic era lows, we continue to see some students pause their academic programs or decide not to begin classes, which impacted total enrollments for the end of the second quarter.

We still expect total enrollments to be lower for the full year as compared to the prior year. Second, and as a reminder, beginning in the third quarter of 2021, we made adjustments to our marketing processes to further improve our focus on identifying prospective students who are more likely to succeed at one of our universities.

While these adjustments will negatively impact total student enrollments during 2022, in the long run, we believe they should further enhance student experiences, retention and academic outcomes. Lastly, effective July 1, we completed the acquisition of substantially all of the assets and academic programs of California Southern University, originally accredited university.

CalSouthern offers non-Title IV online associate, bachelors, masters and doctoral degree programs with a focus primarily in psychology, business management and risk management. Ashish will provide more details around this acquisition shortly.

Now let me touch upon some of the financial results for the second quarter. We reported net income of $25.8 million or $0.37 per diluted share, while adjusted earnings per diluted share, which excludes certain significant and noncash items, was $0.42.

As expected, total student enrollments declined in the second quarter, with total student enrollments 7% lower as compared to the prior year quarter end. Total student enrollments decreased by 14.5% at the AIU System and 2.3% at CTU.

Student engagement continues to improve, and changes to the marketing processes will annualize beginning in the third quarter. As a result, we expect the rate of decline in student enrollments to lessen for the remainder of the year.

During the quarter, we continued to prioritize our efforts to enhance our academic offerings and student experiences. We are making necessary investments to upgrade our student-serving technology and continue to leverage data analytics and machine learning to provide timely and relevant engagement with our students.

Our chat bots at AIU and CTU are one such example and are now being used throughout the student academic cycle, beginning with student onboarding enrollment and continuing through to students in the classroom. We believe these investments are resulting in increased levels of engagement across our academic institutions.

In addition, we are continuing to maintain proper staffing levels to ensure our students are receiving appropriate support at all stages of their education journey. With that said, I would now like to turn the call over to Ashish for a deeper review of our operating performance for the quarter.

Ashish?

Thank you, Andrew. I will review our second quarter results and then discuss our balance sheet and the updated 2022 outlook before handing the call back to Andrew 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 the AIU System and CTU reflect the two acquisitions completed during the third quarter of 2021. Also, the recent acquisition of CalSouthern will be included within the operating results of the AIU System beginning in the third quarter of 2022.

With that said, let us begin with an overview of the operating and financial results. For the second quarter of 2022, total company operating income decreased by 5.6% to $33.9 million as compared to an operating income of $36 million in the prior year quarter.

Adjusted operating income, which excludes certain significant and noncash items, which we believe is more reflective of the underlying operating performance was slightly lower at $41.9 million as compared to $42.3 million. This result exceeded the high end of our previous outlook range primarily due to better-than-expected student engagement and revenue for the quarter.

Total revenue for the quarter was $167.7 million, or approximately 4.5% below prior year quarter, primarily driven by lower total student enrollments. However, most of the revenue decline was offset by reduced expenses within marketing and admissions as well as lower bad debt expense.

Please note that the two acquisitions we completed in the third quarter of 2021 did not have a material impact on the adjusted operating income for the quarter and operate on a relatively cash-neutral basis. Net income for the quarter was $25.8 million compared to $26.6 million, equating to $0.37 per diluted share for both quarters.

Adjusted earnings per diluted share, which we believe is more indicative of the underlying operating performance, was $0.42 as compared to $0.41. As it relates to our segments, total student enrollments as of June 30, 2022 decreased by 2.3% at CTU and by 14.5% at AIU System as compared to the prior year quarter end.

This decline in total enrollments was expected due to the adjustments made to our marketing processes and our continued belief that student engagement in general has been impacted by the lingering COVID-19 pandemic. However, we believe that once changes to our marketing processes annualize beginning with the third quarter and as student engagement continues to improve, the rate of decline in total student enrollments should lessen in the second half of 2022.

As a reminder, total enrollments do not include students who are participating in our nondegree professional development and continuing education offerings. Second quarter revenue at CTU was $100.5 million or 1.5% lower than the prior year quarter, primarily due to lower total enrollments at CTU.

Additionally, please note that the current quarter includes revenue related to the acquisition completed in the third quarter of 2021, which positively impacted year-over-year comparability. Operating income of was $2.4 million lower versus the prior year quarter due to the decrease in revenue as well as amortization expenses from the prior year acquisition.

Turning to AIU System. Revenue was $66.9 million for the quarter, resulting in a decrease of 8.6%, primarily due to lower total enrollments at AIU System.

However, operating income of $10.7 million increased 16.4% as operating efficiencies in admissions and marketing as well as improved bad debt expense more than offset this decrease in revenue. We would also like to remind you that there is typically a lag impact on revenue from changes in total student enrollment levels.

Therefore, we expect revenue for the second half of 2022 to be lower as compared to the second half of 2021 as well as compared to the first half of 2021 when excluding any incremental revenue from recent acquisitions. Having said that, we will continue with our efforts to adjust various operating processes and expenses to partially offset the revenue decline, while still prioritizing the overall academic experience of our students.

Moving on to Corporate and Other. Second quarter operating losses increased to $9.8 million versus $8.7 million in the prior year quarter, primarily due to increased legal fees including those associated with the responses to the Department of Education relating to loan forgiveness applications by former students as well as acquisition-related expenses.

For additional information on this matter, please refer to the disclosure regarding borrower defense to repayment in our 10-Q that was filed this afternoon. Now to income taxes.

For the second quarter, we recorded a provision for income taxes of $8.9 million, resulting in an effective tax rate of 25.8%. The effective tax rate for the quarter was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves, the net effect of which decreased the tax rate by approximately 1.2%.

Finally, we expect that for the full year 2022, our effective tax rate will be between 25.5% and 26.5%. Now to our balance sheet.

As of June 30, we ended with $516.8 million of cash, cash equivalents, restricted cash and available-for-sale short-term investments as compared to $499.4 million at year-end 2021. This increase in cash as compared to year-end '21 was driven by positive cash flow from operations of $54.8 million, which was partially offset with cash outflows related to advanced payments for the CalSouthern acquisition, capital expenditures and share buybacks.

Capital expenditures for the second quarter were approximately $2 million or 1.2% of revenue. For the full year 2022, we foresee capital expenditures to be approximately 2% of revenues.

Finally, I would like to discuss our updated outlook for the remainder of 2022. Full year 2022 adjusted operating income is now expected to range between $142 million to $148 million as compared to the previously provided range of $137 million to $148 million.

This outlook reflects our continued beliefs that the recent improvement in student engagement will continue and the overall rate of decline in total student enrollments will lessen to the second half of 2022. However, year-end total student enrollments will be lower than 2021.

Full year revenue, excluding the recent acquisition completed in the July of 2022 will be lower than 2021, reflecting the lower student enrollments. Lastly, as disclosed in our Form 10-Q filed today and the 10-K filed in February of 2022, the Department of Education is going through various stages of negotiated rule-making surrounding a variety of topics.

While we continue to monitor these rule-making activities, any operational changes undertaken this year that may be necessary as a result of any proposed or final rules could have an impact on the outlook presented above. Adjusted earnings per diluted share is now expected to range between $1.41 and $1.48 per diluted share.

For the third quarter of 2022, we expect adjusted operating income to be in the range of $28 million to $30 million as compared to $46.3 million in the prior year quarter with adjusted earnings per diluted share to range between $0.28 to $0.30 per diluted share versus $0.45. Please note that the first half of 2022 operating performance includes the revenue benefit from the academic calendar redesign at CTU as well as lower operating expenses compared to the prior year.

These benefits will not apply to the same degree for the remainder of the year. As a result, adjusted operating income for the second half will be lower as compared to the first half of the year and the comparative prior year period.

I would like to conclude by commenting on our balanced approach to capital allocation that is intended to enhance shareholder value while maintaining adequate student investments in our academic institutions. We continue to focus on maintaining a strong balance sheet and adequate liquidity while investing in organic projects, in particular technology-related initiatives, which are designed to benefit our students; and evaluating diverse strategies to enhance stockholder value, including acquisitions and share repurchases.

With respect to share repurchases, we repurchased 1.5 million shares for the first six months of 2022 for approximately $15.7 million at an average price of $10.59 per share. As of June 30, 2022, approximately 34.3 million was still available under our authorized stock repurchase program.

It is our intent to continue repurchasing shares under our program when market conditions are appropriate. Separately, as Andrew mentioned, we completed the acquisition of substantially all of the assets and academic programs of CalSouthern, a regionally-accredited university, effective July 1, 2022.

The initial cash purchase price net of cash received is approximately $40 million. For the trailing 12 months ended June 30, 2022, CalSouthern had unaudited revenues of approximately $17.8 million.

Call Southern offers non-Title IV online associates, bachelors, masters and doctoral degrees with a focus primarily in psychology, business management and risk management. Currently, we do not expect the acquisition to have a material impact on the 2022 adjusted operating income while operating on a relatively cash-neutral basis for the remainder of the year.

We ask you to refer to our earnings release filed today for important information about the key assumptions and factors underlying our 2022 outlook and other expectations discussed on today's call as well as the GAAP to non-GAAP reconciliations. With that, I will turn the call back over to Andrew for his closing remarks.

Andrew?

Thanks, Ashish. We are pleased with our second quarter operating results and remain focused on serving and educating our students to further enhance academic outcomes and student experiences.

Now I'll turn the call back over to Davis for any questions. Davis?

Thank you, Andrew. That concludes our prepared remarks for today's call, and we will now take questions, and I will pass the call to our operator to provide our listeners with instructions on how to submit your questions.

First of all, congrats on the beat and raise. It's kind of uncommon in the second quarter across the market and particularly within the industry.

And also, congratulations on the acquisition of CalSouthern. I had a couple of follow-ups with regard to that acquisition.

You say it's non-Title IV. It's regionally-accredited.

It's effective 7/1/22. Initial purchase price of $40 million and revenues on a trailing 12-month basis of $17.8 million.

You would you care to give us an EBITDA estimate for that same period of time?

As you saw that, as Ashish said, it's relatively cash neutral. We -- if you want to add anything to it, Ashish, please feel free to.

We're very pleased with the acquisition. It's really allows us to continue to add to the breadth and depth of our programs.

And as you mentioned, regionally-accredited and non-Title IV. So Ashish, anything you want to add on that?

No, I think that is correct. And Alex, as we disclosed here, we do not expect that to be a material number for the remainder of 2022.

That is on our adjusted operating income.

Okay. And given their name, they're based in Southern California.

Where are they headquartered?

It's -- again, Ashish, do you have any of that information?

I mean it is in California. But as we mentioned, it is primarily online, so they operate pretty much across all states, and then that's a good addition to our academic programs, so we are very glad to have that part of our AI system.

And you mentioned psychology, business management and risk management in that order. Is that the order of importance or the order -- the most significant programs?

Yes. Psychology is the most significant.

Yes, that's correct. Yes, psychology being the largest one.

Got you. Any reason they're not Title IV participants?

Not that that's a bad thing. That's actually kind of a good thing these days, but I'm just curious on why they've chosen not to participate in those programs.

No. It's by choice.

And as far as there being any other reason, I think to your point, I think it's again, not accessing Title IV. I think it's a good opportunity for, hopefully, to keep the amount of debt that they accumulate in student loans at the minimum.

And how does their tuition stack up against AIU or CTU in term -- just orders of magnitude?

Ashish? Cost per credit hour, that sort of thing.

Yes. It is very comparable, Alex.

You're right there, very comparable to what we offer at AIU and CTU.

Got you. All right.

And then moving on, just a big picture question about the overall demand environment. Obviously, this quarter's results were a little bit better than expected, though still down year-over-year.

You talked about some improvements in student engagement. You were talking about that last quarter as well.

Any changes? And any momentum to speak about coming out of the quarter?

Was June better than May, better than April? Or whatever color you can give there would be helpful.

Sure. It's just inquiry generation.

We continue to feel good about that. We feel that there's again those potential students are out there.

As we've said before, we've adjusted, to some degree, our marketing efforts there to maximize, again, we feel it's benefiting the students the most, potential students. And as we said, we're -- there have been some students who have delayed their starting of their programs because, again, we feel like some of the after-ending effects of the pandemic, but we're optimistic that, that rate of decrease should start to improve.

And then with the new marketing strategy being anniversaried here in the current quarter, we should think about that from a top of the funnel perspective. First of all, you're going to have more comparable marketing dollars year-over-year going forward in the third and fourth quarters.

But also, you should have a similar top of funnel because one of the objectives of the marketing strategy change was to attract students that are more likely to succeed, which results mathematically in a smaller number. So am I thinking about that right?

That's correct. Anything, Ashish, you want to add to that?

Yes. So Alex, two things.

You're absolutely correct in terms of comparability of the expenses, so the expenses will be comparable in the second half. And then to your point, it is focused on students that are more likely to succeed.

But even that is comparative to prior year, so I would not necessarily comment in terms of whether they're bigger or smaller, but both expenses and the student metrics are comparable. And as we continue to gain efficiencies within our ecosystem, we should see improvements there.

Okay. And then -- that's all I have.

I'll take my other questions off-line. Thank you so much and congratulations on the quarter and on the acquisition.

All right. Thank you again for joining us today.

We look forward to speaking with you again next quarter.