# PERDOCEO EDUCATION Corp: Form 10-Q for the period ended Jun 30, 2023

- Company: [PERDOCEO EDUCATION Corp](/companies/prdo.md) (CIK 1046568)
- Form: 10-Q
- Filed: 2023-08-03
- Accepted by EDGAR: Aug 3, 2023, 16:18 ET
- Period: 2023-06-30
- Accession: 0000950170-23-038021
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1046568/000095017023038021/prdo-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1046568/000095017023038021/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $186.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $382.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $48.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $91.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $96.0k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $191.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $19.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $32.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $54.7m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $89.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.80 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $1.30 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.81 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $1.32 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 68,533,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 68,512,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $66.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $2.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $140.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $643.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $1.01bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $160.7m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2023-06-30 | $792.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,734 characters.

*The discussion below and other items in this Quarterly Report on Form 10-Q contain “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “plan,” “may,” “should,” ”will,” “continue to,” “focused on” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022 that could cause our actual growth, 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 such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Among the factors that could cause actual results to differ materially from those expressed in, or implied by, our forward-looking statements are the following:*

- *declines in enrollment or interest in our programs;*
- *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 90-10, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education (the “Department”)), as well as applicable accreditation standards and state regulatory requirements;*
- *the impact of various versions of “borrower defense to repayment” regulations;*
- *rulemaking by the Department or any state or accreditor and increased focus by Congress and governmental agencies on, or increased negative publicity about, for-profit education institutions;*
- *the success of our initiatives to improve student experiences, retention and academic outcomes;*
- *our continued eligibility to participate in educational assistance programs for veterans and other military personnel;*
- *increased competition;*
- *our ability to pay dividends on our common stock and execute our stock repurchase program;*
- *the impact of management changes; and*
- *changes in the overall U.S. economy.*

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“*MD&A”*) should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:

- Overview
- Consolidated Results of Operations
- Segment Results of Operations
- Summary of Critical Accounting Policies and Estimates
- Liquidity, Financial Position and Capital Resources

### OVERVIEW

Our accredited academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. The Company’s academic institutions – Colorado Technical University (“*CTU”*) and the American InterContinental University System (“*AIUS”* or “*AIU System”) –* provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

Our reporting segments are determined in accordance with Financial Accounting Standards Board (“*FASB”)* Accounting Standards Codification (“*ASC”)*Topic 280 – *Segment Reporting* and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across two reporting segments: CTU and AIUS.

### Regulatory Environment and Political Uncertainty

We operate in a highly regulated industry, which has significant impacts on our business and creates risks and uncertainties. In recent years, Congress, the Department, states, accrediting agencies, the Consumer Financial Protection Bureau, the Federal Trade Commission, state attorneys general and the media have all scrutinized the for-profit postsecondary education sector. Congressional hearings and roundtable discussions were held regarding various aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. A group of influential U.S. senators, consumer advocacy groups and some media outlets have strongly and repeatedly encouraged the Department, the Department of Defense and the Department of Veterans Affairs and its state approving agencies to take action to limit or terminate the participation of institutions such as ours in existing tuition assistance programs. In addition, targeted loan relief to student borrowers is a stated priority for the Department, and consumer advocacy groups and others are focusing their lobbying and other efforts relating to student debt forgiveness on for-profit colleges and universities, encouraging loan discharge applications and complaints by former students.

The current administration, as well as Congress, are pursuing significant legislative, regulatory and administrative actions affecting our business. A loss or material reduction in Title IV Programs or the amount of student financial aid for which our students are eligible would materially impact our student enrollments and profitability and could impact the continued viability of our business as currently conducted.

We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K to learn more about our highly regulated industry and related risks and uncertainties, in addition to the MD&A in our 2023 Quarterly Reports on Form 10-Q.

### Note Regarding Non-GAAP measures

We believe it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.

We believe certain non-GAAP measures allow us to compare our current operating results with respective historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We believe the items we are adjusting for are not normal operating expenses necessary to run our business. In evaluating the use of non-GAAP measures, investors should be aware that in the future we may incur expenses similar to the adjustments presented below. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. A non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

### 2023 Second Quarter Overview

During the quarter ended June 30, 2023 ("*current quarter"*), we experienced continued improvement in student retention and engagement at both of our academic institutions supported by the various operating changes and student initiatives that we have undertaken over the past several years.

Total student enrollments decreased 5.2% at June 30, 2023 as compared to June 30, 2022, primarily driven by a decrease at AIUS of 14.2% while total student enrollments remained relatively flat at CTU. The decrease in total student enrollments for AIUS was primarily driven by certain operational changes made during the current year within admissions, outreach and enrollment processes for prospective students. These changes were made to ensure compliance with any anticipated or final regulatory changes. We believe these changes are only necessary for the short term and expect to return to normalized levels of operations within our admissions and enrollment processes during the fourth quarter. At CTU, improved student retention and student enrollment growth in corporate partnerships for the current quarter end as compared to the prior year quarter end were offset with a negative timing impact from the academic calendar redesign.

We believe that student retention and engagement have improved, in part, due to an increased focus on enrolling students who we believe will be more likely to succeed at one of our institutions as well as changes we have made to better serve and onboard new learners in a more efficient and effective manner. Additionally, federal aid initiatives implemented by the current administration simplified processes for students to receive the financial support needed to continue their education, thus leading to improved retention and engagement. As a result, we expect full year revenue to be slightly higher as compared to 2022, resulting from recent acquisitions, the academic calendar redesign at CTU and underlying organic improvements in student retention and engagement. However, total student enrollments at the end of 2023 are expected to be lower as compared to year end 2022, primarily due to the academic calendar redesign at CTU as well as operational changes at AIUS.

We believe investments in technology positively impact student experiences and academic outcomes and we remain committed to investing in and upgrading technology to further enhance academic experiences for our students. We believe technology is an enabler and differentiator for us and we will continue to leverage data analytics and machine learning to provide our students with a more relevant and meaningful experience. Over the past two years we have committed to various investments in this area and will continue to invest, as appropriate, through the remainder of 2023.

During the current quarter the Company entered into a non-cash asset purchase agreement with Le Cordon Bleu International B.V. ("*LCBI"*), a company incorporated in The Netherlands, to sell Perdoceo's outright rights to the Le Cordon Bleu ("*LCB"*) brand, trade names and rights for North America in exchange for 1.8 million outstanding shares of Perdoceo's stock. The fair value of the 1.8 million shares received was $22.1 million, resulting in a non-cash gain on sale of asset of $22.1 million recorded within other miscellaneous income (expense) on our unaudited condensed consolidated statements of income with the offset being recorded as an addition to treasury stock on our condensed consolidated balance sheet.

### Financial Highlights

Revenue for the quarter ended June 30, 2023 increased by 11.3% or $18.9 million as compared to the prior year quarter, driven by an increase in revenue at CTU. The improvement in revenue at CTU for the current quarter was driven both by an increase in organic total student enrollments as well as a positive timing impact from the academic calendar as the current quarter had more revenue-earning days as compared to the prior year quarter. CTU's academic calendar redesign may impact the comparability of revenue-earning days and enrollment results in any given quarter, with the impact on revenue and total student enrollments not necessarily having the same magnitude or directional impact. Additionally, revenue for the current quarter was benefited by the acquisitions completed in 2022 that were not part of the comparative prior year quarter.

Operating income for the current quarter increased by 41.7% to $48.1 million as compared to operating income of $33.9 million in the prior year quarter. The increase in operating income for the current quarter was primarily due to the increase in revenue as well as decreased advertising and bad debt expenses.

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $55.2 million for the current quarter as compared to $41.9 million for the prior year quarter.

Adjusted operating income and adjusted earnings per diluted share for the quarters and years to date ended June 30, 2023 and 2022 is presented below (dollars in thousands, unless otherwise noted):

| Adjusted Operating Income | For the Quarter Ended June 30, 2023 2022 | For the Year to Date Ended June 30, 2023 2022 |
| --- | ---: | ---: |
| **Operating income** | **$48,094** **$33,946** | **$91,430** **$77,639** |
| Depreciation and amortization (1) | 4,369 4,909 | 9,524 9,791 |
| Legal fee expense related to certain matters (2) | 2,709 3,087 | 7,328 5,434 |
| **Adjusted Operating Income** | **$55,172** **$41,942** | **$108,282** **$92,864** |
|  | **For the Quarter Ended June 30,** | **For the Year to Date Ended June 30,** |
| **Adjusted Earnings Per Diluted Share** | **2023** **2022** | **2023** **2022** |
| **Reported Earnings Per Diluted Share** | **$0.80** **$0.37** | **$1.30** **$0.83** |
| **Pre-tax adjustments included in operating expenses:** |  |  |
| Amortization for acquired intangible assets (1) | 0.03 0.02 | 0.07 0.05 |
| Legal fee expense related to certain matters (2) | 0.04 0.05 | 0.11 0.08 |
| Gain on sale of intangible asset (3) | (0.32) - | (0.32) - |
| **Total pre-tax adjustments** | $(0.25) $0.07 | $(0.14) $0.13 |
| **Tax effect of adjustments (4)** | 0.06 (0.02) | 0.03 (0.03) |
| **Total adjustments after tax** | (0.19) 0.05 | (0.11) 0.10 |
| **Adjusted Earnings Per Diluted Share** | **$0.61** **$0.42** | **$1.19** **$0.93** |

(1) Amortization relates to definite-lived intangible assets associated with acquisitions.

(2) Legal fee expense associated with (i) responses to the Department of Education (the "*Department"*) relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts.

(3) Non-cash gain associated with the sale of the LCB tradename in exchange for outstanding shares of Perdoceo's stock.

(4) The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.

### Regulatory Updates

### Legislative Action and Recent Department Regulatory Initiatives

On July 6, 2023, in response to the Supreme Court’s decision to block the current administration’s plan to provide broad student loan forgiveness to borrowers with certain federal student loans, the U.S. Department of Education ("*Department"*) issued a notice of its intent to establish a negotiated rulemaking committee aimed at opening an alternative path to debt relief “for as many borrowers as possible,” using the Secretary of Education's authority under the Higher Education Act ("*HEA"*). The notice announced a virtual public hearing that was held on July 18, 2023 and solicited written comments from stakeholders. The Department intends to finalize the issues to be addressed through rulemaking, begin the negotiated rulemaking sessions this fall, and complete this rulemaking “as quickly as possible.” The Department has also taken other actions to further prioritize and enact targeted loan relief to federal student loan borrowers, including its announcement on July 15, 2023 to provide 804,000 student loan borrowers with $39 billion in automatic loan forgiveness as a result of fixes it deemed necessary to income driven repayment plans.

### Negotiated Rulemakings

The Department is currently engaged in a number of negotiated rulemakings that are at various stages of the process.

On March 24, 2023, the Department published a notice of intent to convene one or more committees, which may include a subcommittee, to develop proposed regulations pertaining to the following topics:

- The Federal TRIO programs
- The Secretary's recognition of accrediting agencies
- Institutional eligibility, including State authorization
- Return of Title IV funds
- Cash management
- Third-party servicers and related issues
- The definition of “distance education” as it pertains to clock hour programs and reporting for students who enroll primarily online

The Department has yet to move forward with any of these topics. We continue to closely monitor the Department’s rulemaking agenda, but we are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.

On May 16, 2023, the Department rescinded the Dear Colleague Letter that significantly expanded its interpretation of the types of service providers that qualify as participating in the administration of Title IV funds under the definition of a “Third Party Servicer.” The Department stated that it plans to publish revised guidance with an effective date at least six months after its publication. We are unable to determine the potential impact that revised guidance may have on our business at this time.

On May 19, 2023, the Department published a Notice of Proposed Rulemaking ("*NPRM"*) for the following rules:

- Gainful Employment ("*GE")*
- Financial Value Transparency ("*FVT")*
- Financial Responsibility
- Administrative Capability
- Certification Procedures
- Ability to Benefit ("*ATB")*

The proposed FVT regulation, which was not presented to the negotiated rulemaking committee, seeks to establish a framework that would increase the quality and availability of information provided directly to students about the costs, sources of financial aid, and outcomes of students enrolled in all eligible programs. FVT disclosures would apply to all Title IV eligible programs offered by all institutions (except for approved prison education programs and comprehensive transition and postsecondary programs) and use the same debt to earnings and earnings premium metrics as the GE framework. While the FVT regulations do not contemplate penalties or sanctions as under the GE rule, the regulations would require that current and prospective students be provided relevant disclosures and acknowledge when an educational program is associated with a high debt burden.

The Department accepted public comments on the NPRM through June 20, 2023. Following review of these public comments, the Department issues final regulations, which, if published by November 1, 2023, would take effect on July 1, 2024. We are closely monitoring the negotiated rulemaking process but are unable to determine the potential impact of any future rule proposals or final regulations on our business at this time.

### State Regulation

CTU and AIUS participate in the State Authorization Reciprocity Agreement ("*SARA"*), which is an agreement among member states, districts, and territories establishing national standards for interstate postsecondary distance education. SARA allows institutions to enroll students in distance education programs in each SARA member state without seeking authorization in each state. On March 1, 2023 and June 7, 2023, SARA’s coordinating body, the National Council for State Authorization Reciprocity Agreements ("*NC-SARA"*), held public policy forums to seek input on potential changes to NC-SARA policies. In addition to the public policy forums, written comments were accepted through May 17, 2023. On July 5, 2023, NC-SARA published revised policy proposals. Several of the proposals would make significant operational changes to the current reciprocity standards, including, but not limited to, allowing states to impose their own education-specific requirements on out-of-state institutions, expanding consumer protections to allow states to limit or condition participation of institutions based on “risk profile,” expanding state authority to deny or revoke institutional participation based on investigations, and modifying requirements for provisional status. NC-SARA’s regional compacts will vote on each proposal presented by September 1, 2023. Proposals must be approved by each of the four compacts in order to be considered by the NC-SARA board of directors. The board will review and vote on the proposals approved by the compacts by October 25, 2023. We cannot predict whether NC-SARA will adopt any of these proposals. The adoption of certain proposals could materially limit or severely condition the ability of our institutions to offer distance education programs in certain states.

### Institutional Accreditation

On July 21, 2023, the Higher Learning Commission informed CTU that it had acted at its meeting on July 17, 2023 to continue CTU's accreditation, with its next reaffirmation of accreditation scheduled for 2032-2033.

### CONSOLIDATED RESULTS OF OPERATIONS

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the quarters and years to date ended June 30, 2023 and 2022 (dollars in thousands):

|  | For the Quarter Ended June 30, 2023 | % of Total Revenue | 2022 | % of Total Revenue | 2023 vs 2022 % Change | For the Year to Date Ended June 30, 2023 | % of Total Revenue | 2022 | % of Total Revenue | 2023 vs 2022 % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| TOTAL REVENUE | $186,564 |  | $167,684 |  | 11.3% | $382,162 |  | $350,643 |  | 9.0% |
| OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |
| Educational services and facilities (1) | 32,748 | 17.6% | 27,269 | 16.3% | 20.1% | 66,599 | 17.4% | 55,357 | 15.8% | 20.3% |
| General and administrative: (2) |  |  |  |  |  |  |  |  |  |  |
| Advertising and marketing | 25,836 | 13.8% | 30,426 | 18.1% | -15.1% | 57,131 | 14.9% | 63,224 | 18.0% | -9.6% |
| Admissions | 23,325 | 12.5% | 23,699 | 14.1% | -1.6% | 49,313 | 12.9% | 46,443 | 13.2% | 6.2% |
| Administrative | 43,257 | 23.2% | 36,543 | 21.8% | 18.4% | 87,903 | 23.0% | 73,582 | 21.0% | 19.5% |
| Bad debt | 8,170 | 4.4% | 10,664 | 6.4% | -23.4% | 18,927 | 5.0% | 24,379 | 7.0% | -22.4% |
| Total general and administrative expense | 100,588 | 53.9% | 101,332 | 60.4% | -0.7% | 213,274 | 55.8% | 207,628 | 59.2% | 2.7% |
| Depreciation and amortization | 4,369 | 2.3% | 4,909 | 2.9% | -11.0% | 9,524 | 2.5% | 9,791 | 2.8% | -2.7% |
| Asset impairment | 765 | 0.4% | 228 | 0.1% | NM | 1,335 | 0.3% | 228 | 0.1% | NM |
| OPERATING INCOME | 48,094 | 25.8% | 33,946 | 20.2% | 41.7% | 91,430 | 23.9% | 77,639 | 22.1% | 17.8% |
| PRETAX INCOME | 74,603 | 40.0% | 34,715 | 20.7% | 114.9% | 121,656 | 31.8% | 78,549 | 22.4% | 54.9% |
| PROVISION FOR INCOME TAXES | 19,930 | 10.7% | 8,948 | 5.3% | 122.7% | 32,499 | 8.5% | 20,704 | 5.9% | 57.0% |
| Effective tax rate | 26.7% |  | 25.8% |  |  | 26.7% |  | 26.4% |  |  |
| **NET INCOME** | **$54,673** | **29.3%** | **$25,767** | **15.4%** | **112.2%** | **$89,157** | **23.3%** | **$57,845** | **16.5%** | **54.1%** |

(1) Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, and costs of educational supplies and facilities, such as rents on leased facilities. Also included in educational services and facilities expense are rents on leased administrative facilities, such as our corporate headquarters, and costs of other goods and services provided by our campuses, including costs of textbooks and laptop computers.

(2) General and administrative expense includes operating expenses associated with, including salaries and benefits of personnel in, corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.

### Revenue

The current quarter and year to date revenue increased by 11.3% or $18.9 million and 9.0% or $31.5 million, respectively, as compared to the prior year periods, driven by increases in revenue within both CTU and AIUS. The current quarter and year to date increase in revenue benefitted by the acquisitions completed in 2022 that were not part of the comparative prior year periods. The increase in CTU's revenue for the current quarter and current year to date also had a positive timing impact from the academic calendar redesign.

### Educational Services and Facilities Expense (dollars in thousands)

| Educational services and facilities: | For the Quarter Ended June 30, 2023 | 2022 | 2023 vs 2022 % Change | For the Year to Date Ended June 30, 2023 | 2022 | 2023 vs 2022 % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Academics & student related | $30,233 | $22,883 | 32.1% | $61,356 | $46,577 | 31.7% |
| Occupancy | 2,515 | 4,386 | -42.7% | 5,243 | 8,780 | -40.3% |
| **Total educational services and facilities** | **$32,748** | **$27,269** | **20.1%** | **$66,599** | **$55,357** | **20.3%** |

The educational services and facilities expense for the current quarter and year to date increased by 20.1% or $5.5 million and 20.3% or $11.2 million, respectively, as compared to the prior year periods. Academics and student related costs increased by 32.1% or $7.4 million and 31.7% or $14.8 million for the current quarter and year to date, respectively, as compared to the prior year periods, primarily driven by the full quarter and year to date expense associated with the 2022 acquisitions as compared to no expense in the prior year periods. Occupancy expense for the current quarter and year to date improved by 42.7% or $1.9 million and 40.3% or $3.5 million, respectively, as compared to the prior year periods, driven by decreases associated with exited leased facilities.

### General and Administrative Expense (dollars in thousands)

| General and administrative: | For the Quarter Ended June 30, 2023 | 2022 | 2023 vs 2022 % Change | For the Year to Date Ended June 30, 2023 | 2022 | 2023 vs 2022 % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Advertising and marketing | $25,836 | $30,426 | -15.1% | $57,131 | $63,224 | -9.6% |
| Admissions | 23,325 | 23,699 | -1.6% | 49,313 | 46,443 | 6.2% |
| Administrative | 43,257 | 36,543 | 18.4% | 87,903 | 73,582 | 19.5% |
| Bad debt | 8,170 | 10,664 | -23.4% | 18,927 | 24,379 | -22.4% |
| **Total general and administrative expense** | **$100,588** | **$101,332** | **-0.7%** | **$213,274** | **$207,628** | **2.7%** |

The general and administrative expense for the current quarter decreased by 0.7% or $0.7 million and increased by 2.7% or $5.6 million for the current year to date, as compared to the prior year periods. The current quarter improvement was primarily driven by lower advertising and marketing, bad debt and admissions expenses, which more than offset the increase in administrative expense. The year to date increase was driven by increases in administrative and admissions expenses as compared to the prior year period, which were partially offset by decreases in advertising and marketing and bad debt expenses.

Advertising and marketing expense for the current quarter and year to date decreased by 15.1% or $4.6 million and 9.6% or $6.1 million, respectively, as compared to the prior year periods, as a result of adjustments to our marketing processes related to identifying prospective student interest within both AIUS and CTU as well as operational changes made within AIUS during the current year.

Admissions expense for the current quarter decreased by 1.6% or $0.4 million and increased by 6.2% or $2.9 million for the current year to date, as compared to the prior year periods. The current quarter improvement was driven by decreased expenses within AIUS as a result of operational changes made during the current year. The year to date increase was primarily impacted by a full period of expense associated with the 2022 acquisitions as compared to no expense in the prior year period.

Administrative expense for the current quarter and year to date increased by 18.4% or $6.7 million and 19.5% or $14.3 million, respectively, as compared to the prior year periods. The current quarter and year to date increases were primarily due to the 2022 acquisitions, as mentioned above, along with increased legal fees within Corporate and Other for the current year to date.

Bad debt expense incurred by each of our segments during the quarters and years to date ended June 30, 2023 and 2022 was as follows (dollars in thousands):

| Bad debt expense: | For the Quarter Ended June 30, 2023 | % of Segment Revenue | 2022 | % of Segment Revenue | 2023 vs 2022 % Change | For the Year to Date Ended June 30, 2023 | % of Segment Revenue | 2022 | % of Segment Revenue | 2023 vs 2022 % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| CTU | $4,571 | 3.8% | $5,990 | 6.0% | -23.7% | $11,696 | 4.8% | $13,175 | 6.2% | -11.2% |
| AIUS | 3,604 | 5.4% | 4,682 | 7.0% | -23.0% | 7,239 | 5.2% | 11,233 | 8.2% | -35.6% |
| Corporate and Other | (5) | NM | (8) | NM | NM | (8) | NM | (29) | NM | NM |
| **Total bad debt expense** | **$8,170** | **4.4%** | **$10,664** | **6.4%** | **-23.4%** | **$18,927** | **5.0%** | **$24,379** | **7.0%** | **-22.4%** |

Bad debt expense improved by 23.4% or $2.5 million and 22.4% or $5.5 million for the current quarter and current year to date, respectively, as compared to the prior year periods. AIUS' bad debt expense decreased by 23.0% or $1.1 million and 35.6% or $4.0 million, respectively, for the current quarter and current year to date as compared to the prior year periods. CTU's bad debt expense improved by 23.7% or $1.4 million and 11.2% or $1.5 million, respectively, for the current quarter and year to date, as compared to the prior year periods.

We continue to expect quarterly fluctuations in bad debt expense. We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. Our student support teams have maintained their focus on financial aid documentation collection and are counseling students through the Title IV financial aid process so that they are better prepared to start school. Additionally, federal aid initiatives simplified processes for students to receive the financial support needed to continue their education. We have also focused on emphasizing employer-paid and other direct-pay education programs such as corporate partnerships as students within these programs typically have lower bad debt expense associated with them.

### Operating Income

Operating income increased by 41.7% or $14.1 million and 17.8% or $13.8 million for the current quarter and year to date, respectively, as compared to the prior year periods. The current quarter and year to date increase was primarily driven by the increased revenue along with lower advertising and bad debt expenses as compared to the prior year periods.

### Provision for Income Taxes

For the current quarter and year to date, we recorded a provision for income taxes of $19.9 million, reflecting an effective tax rate of 26.7% and $32.5 million, reflecting an effective tax rate of 26.7%, respectively, as compared to a provision for income taxes of $8.9 million, reflecting an effective tax rate of 25.8% and $20.7 million, reflecting an effective tax rate of 26.4% for the respective prior year periods.

The effective tax rate for the quarter and year to date ended June 30, 2023 was impacted by a $5.3 million unfavorable discrete adjustment related to the $22.1 million gain on the sale of the LCB trademark, which was taxed at 24.1%. The effective tax rate for the quarter and year to date ended June 30, 2023 also includes the tax effect of stock-based compensation and the release of previously recorded tax reserves, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2022 was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves. The net effect of these discrete items decreased the effective tax rate for the prior year quarter and year to date by 1.2% and 0.3%, respectively. For the full year 2023, we expect our effective tax rate to be between 26.5% to 27.5%.

### SEGMENT RESULTS OF OPERATIONS

The following tables present unaudited segment results for the reported periods (dollars in thousands):

| REVENUE: | For the Quarter Ended June 30, REVENUE 2023 | 2022 | % Change | OPERATING INCOME (LOSS) 2023 | 2022 | % Change | OPERATING MARGIN 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| CTU (1) | $119,292 | $100,461 | 18.7% | $40,451 | $33,008 | 22.5% | 33.9% | 32.9% |
| AIUS (2) | 67,062 | 66,920 | 0.2% | 17,078 | 10,733 | 59.1% | 25.5% | 16.0% |
| Corporate and other | 210 | 303 | -30.7% | (9,435) | (9,795) | -3.7% | NM | NM |
| **Total** | **$186,564** | **$167,684** | **11.3%** | **$48,094** | **$33,946** | **41.7%** | **25.8%** | **20.2%** |

| REVENUE: | For the Year to Date Ended June 30, REVENUE 2023 | 2022 | % Change | OPERATING INCOME (LOSS) 2023 | 2022 | % Change | OPERATING MARGIN 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| CTU (1) | $243,784 | $213,609 | 14.1% | $84,141 | $76,034 | 10.7% | 34.5% | 35.6% |
| AIUS (2) | 137,902 | 136,452 | 1.1% | 29,081 | 20,256 | 43.6% | 21.1% | 14.8% |
| Corporate and other | 476 | 582 | -18.2% | (21,792) | (18,651) | 16.8% | NM | NM |
| **Total** | **$382,162** | **$350,643** | **9.0%** | **$91,430** | **$77,639** | **17.8%** | **23.9%** | **22.1%** |

(1) CTU’s results of operations include the Coding Dojo acquisition commencing on the December 1, 2022 date of acquisition.

(2) AIUS’ results of operations include the CalSouthern acquisition commencing on the July 1, 2022 date of acquisition.

|  | TOTAL STUDENT ENROLLMENTS As of June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| CTU | 25,900 | 26,000 | -0.4% |
| AIUS | 12,100 | 14,100 | -14.2% |
| **Total** | **38,000** | **40,100** | **-5.2%** |

Total student enrollments do not include learners participating in: a) non-degree seeking and professional development programs, and b) degree seeking, non-Title IV, self-paced programs at our universities. Total student enrollments represent students who are active as of the last day of the reporting period. Active students are defined as those students who are considered in attendance by participating in class related activities during the previous two weeks.

***CTU.*** Current quarter and year to date revenue increased by 18.7% or $18.8 million and 14.1% or $30.2 million, respectively, as compared to the prior year periods. The increase in revenue reflects underlying organic growth and was benefitted by a positive timing impact of the academic calendar as well as the 2022 acquisition which was not part of the comparative prior year periods. Total student enrollments remained relatively flat at June 30, 2023 as compared June 30, 2022 due to a negative timing impact that offset underlying organic growth driven by improved student retention. CTU’s academic calendar redesign may impact the comparability of revenue-earning days and enrollment results in any given quarter, with the impact on revenue and total student enrollments not necessarily having the same magnitude or directional impact.

Current quarter and year to date operating income for CTU increased by 22.5% or $7.4 million and 10.7% or $8.1 million, respectively, as compared to the prior year periods driven by the increase in revenue discussed above as well as decreased bad debt and occupancy expenses.

***AIUS.*** Current quarter and year to date revenue increased by 0.2% or $0.1 million and 1.1% or $1.5 million, respectively, as compared to the prior year periods driven by the 2022 acquisition which was not part of the comparative prior year periods. Excluding the 2022 acquisition, revenue would have declined. Total student enrollments declined by 14.2% at June 30, 2023 as compared to June 30, 2022 driven by the operating changes made during the current year discussed above within "*2023 Second Quarter Overview".*

Current quarter and year to date operating income for AIUS increased by 59.1% or $6.3 million and 43.6% or $8.8 million, respectively, as compared to the prior year periods driven by lower advertising and marketing, occupancy and bad debt expenses as compared to the prior year periods as well as the increase in revenue.

***Corporate and Other.*** This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current quarter decreased by 3.7% or $0.4 million as compared to the prior year quarter, driven by lower occupancy expense. The year to date operating loss increased by 16.8% or $3.1 million as compared to the prior year period, primarily as a result of increased legal fee expense.

### SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Summary of Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. Note 2 “*Summary of Significant Accounting Policies”* of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 also includes a discussion of these and other significant accounting policies.

### LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of June 30, 2023, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“*cash balances”)* totaled $578.1 million. Restricted cash as of June 30, 2023 was $9.5 million and relates to amounts held in escrow accounts to secure post-closing indemnification obligations of the sellers pursuant to recent acquisitions. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We expect to continue to generate cash during the remainder of 2023. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments, quarterly dividends payments and potential acquisitions through at least the next 12 months primarily with cash generated by operations and existing cash balances.

We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) investing in organic projects at our universities, in particular technology-related initiatives which are designed to benefit our students, and (ii) evaluating diverse strategies to enhance stockholder value, including acquisitions that further extend the depth and breadth of our educational offerings, share repurchases and quarterly dividend payments. Ultimately, our goal is to deploy resources in a way that drives long term stockholder value while supporting and enhancing the academic value of our institutions.

On January 27, 2022, the Board of Directors of the Company approved a stock repurchase program for up to $50.0 million which commenced March 1, 2022 and expires September 30, 2023. On July 27, 2023, the Board of Directors of the Company extended the expiration date of the program to September 30, 2024. The timing of purchases and the number of shares repurchased under the program will be determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. Share repurchases will remain a part of our capital allocation strategy. Since the March 1, 2022 inception date, the Company repurchased approximately 2.3 million shares for $25.9 million, of which approximately 0.2 million shares were repurchased for $1.9 million during the quarter ended June 30, 2023.

On September 8, 2021, the Company and the subsidiary guarantors thereunder entered into a credit agreement with Wintrust Bank N.A. (“*Wintrust”*), in its capacities as the sole lead arranger, sole bookrunner, administrative agent and letter of credit issuer for the lenders from time to time parties thereto. The credit agreement provides the Company with the benefit of a $125.0 million senior secured revolving credit facility. The $125.0 million revolving credit facility under the credit agreement is scheduled to mature on September 8, 2024. So long as no default has occurred and other conditions have been met, the Company may request an increase in the aggregate commitment in an amount not to exceed $50.0 million. The loans and letter of credit obligations under the credit agreement are secured by substantially all assets of the Company and the subsidiary guarantors.

The credit agreement and the ancillary documents executed in connection therewith contain customary affirmative, negative and financial maintenance covenants. The Company is required to maintain unrestricted cash, cash equivalents and short-term investments in domestic accounts in an amount at least equal to the aggregate loan commitments then in effect. Acquisitions to be undertaken by the Company must meet certain criteria, and the Company’s ability to make restricted payments, including payments in connection with a repurchase of shares of our common stock, is subject to an aggregate maximum of $100.0 million per fiscal year. Upon the occurrence of certain regulatory events or if the Company’s unrestricted cash, cash equivalents and short term investments are less than 125% of the aggregate amount of the loan commitments then in effect, the Company is required to maintain cash in a segregated, restricted account in an amount not less than the aggregate loan commitments then in effect. The credit agreement also contains customary representations and warranties, events of default, and rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans, terminate the commitments and realize upon the collateral securing the obligations under the credit agreement. As of June 30, 2023, there were no amounts outstanding under the revolving credit facility.

The discussion above reflects management’s expectations regarding liquidity; however, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on timing or our ability to receive Title IV Program funds, or any requirement to post a significant letter of credit to the Department, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student enrollments which could be impacted by external factors. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Sources and Uses of Cash

### Operating Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows provided by operating activities totaled $66.2 million and $54.8 million, respectively. The increase in net cash flows provided by operating activities for the current year to date as compared to the prior year to date was driven by increased operating income.

Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, private loans and grants, institutional payment plans, private and institutional scholarships and cash payments.

For further discussion of Title IV Program funding and other funding sources for our students, see Item 1, “Business - Student Financial Aid and Related Federal Regulation,” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.

### Investing Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows used in investing activities totaled $30.5 million and $209.6 million, respectively.

*Purchases and Sales of Available-for-Sale Investments.* Purchases and sales of available-for-sale investments resulted in a net cash outflow of $26.9 million and $195.8 million for the years to date ended June 30, 2023 and 2022, respectively.

*Capital Expenditures.* Capital expenditures decreased to $3.6 million for the year to date ended June 30, 2023 as compared to $6.8 million for the year to date ended June 30, 2022. Capital expenditures represented approximately 0.9% and 1.8% of total revenue for the years to date ended June 30, 2023 and 2022, respectively. For the full year 2023, we expect capital expenditures to be approximately 1.5% of revenue.

### Financing Cash Flows

During the years to date ended June 30, 2023 and 2022, net cash flows used in financing activities totaled $4.6 million and $20.4 million, respectively. Payments to repurchase shares of our common stock were $2.7 million for the year to date ended June 30, 2023 and $15.7 million for the year to date ended June 30, 2022. The prior year to date included a $4.0 million payment to release the escrow associated with the Trident acquisition.

*Payments of employee tax associated with stock compensation.* Payments of employee tax associated with stock compensation were $2.2 million and $1.6 million for the years to date ended June 30, 2023 and 2022, respectively.

### Changes in Financial Position

Selected condensed consolidated balance sheet account changes from December 31, 2022 to June 30, 2023 were as follows (dollars in thousands):

| ASSETS CURRENT ASSETS: | June 30, 2023 | December 31, 2022 | % Change |
| --- | ---: | ---: | ---: |
| Receivables, other | 6,896 | 3,457 | 99% |
| Prepaid expenses | 12,524 | 8,411 | 49% |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |  |
| **CURRENT LIABILITIES:** |  |  |  |
| Payroll and related benefits | 27,291 | 40,306 | -32% |
| Income taxes | 16,041 | 7,814 | 105% |
| **STOCKHOLDERS' EQUITY** |  |  |  |
| Treasury stock | (328,648) | (301,624) | 9% |

*Receivables, other:* The increase is primarily related to adjustments associated with the Dojo acquisition.

*Prepaid expenses:* The increase is driven by timing of prepayments for annual invoices, which are typically paid in the first half of the year and amortized by the end of a year.

*Payroll and related benefits:* The decrease is driven by annual incentive compensation payments typically made during the first quarter of the year.

*Income taxes:* The increase primarily relates to amounts owed with respect to estimated payments of federal and state income tax for 2023.

*Treasury stock:* The increase is primarily driven by the non-cash sale of the LCB trade name in exchange for 1.8 million outstanding shares of Perdoceo stock.

## Market risk

As filed, 2,001 characters.

We are exposed to financial market risks, primarily changes in interest rates. We use various techniques to manage our interest rate risk. We have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available for sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we use asset managers who conduct initial and ongoing credit analysis on our investment portfolio and monitor that investments are in compliance with our investment policy. Despite the investment risk mitigation strategies we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline.

### Interest Rate Exposure

Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At June 30, 2023, a 10% increase or decrease in interest rates applicable to our investments or borrowings would not have a material impact on our future earnings, fair values or cash flows.

Under the credit agreement, outstanding principal amounts bear annual interest at a fluctuating rate equal to 1.0% less than the administrative agent’s prime commercial rate, subject to a 3.0% minimum rate. A higher rate may apply to late payments or if any event of default exists. As of June 30, 2023, we had no outstanding borrowings under this facility.

Our financial instruments are recorded at their fair values as of June 30, 2023 and December 31, 2022. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates applicable to our investments or borrowings is not significant.

## Controls and procedures

As filed, 3,225 characters.

### Evaluation of Disclosure Controls and Procedures

We completed an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q (“*Report”*) under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities

Exchange Act of 1934, as amended (the “*Exchange Act”*). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the rules and forms provided by the U.S. Securities and Exchange Commission (“*SEC”*), and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

## Risk factors

As filed, 1,701 characters.

In addition to the information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, Item 1A “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 23, 2022.

***Dividends on our common stock are only payable if declared by the Board of Directors of the Company and permitted by Delaware law.***

We declared our first quarterly cash dividend in the third quarter of 2023. We may in the future pay cash dividends to our stockholders but our Board of Directors may, in its discretion, decrease the level of dividends or discontinue the payment of dividends entirely. Our declaration and payment of future cash dividends are subject to the final determination by our Board of Directors that (i) the dividend will be made in compliance with laws applicable to the declaration and payment of cash dividends, including Delaware law, and (ii) the payment of dividends remains in our best interests, which determination will be based on a number of factors, which may include the impact of changing laws and regulations, economic conditions, our results of operations and/or financial condition, including our earnings and cash flows, capital spending plans, the ability to satisfy financial covenants and other factors considered relevant by the Board of Directors. There can be no assurance our Board of Directors will approve the payment of cash dividends in the future. Any discontinuance of the payment of a dividend or changes to the amount of a dividend compared to prior dividends could cause our stock price to decline.

Filed Aug 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-038021. Last ingested by Listed: Nov 5, 2026, 16:27 ET. No prices; not investment advice.