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Revenue Recognition
 6 Months Ended
Jun. 30, 2020
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

6. REVENUE RECOGNITION

 

Disaggregation of Revenue

The following tables disaggregate our revenue by major source for the quarters and years to date ended June 30, 2020 and 2019 (dollars in thousands):

 

 

 

For the Quarter Ended June 30, 2020

 

 

For the Quarter Ended June 30, 2019

 

 

 

CTU

 

 

AIU (3)

 

 

Corporate and Other(4)

 

 

Total

 

 

CTU

 

 

AIU

 

 

Corporate and Other(4)

 

 

Total

 

Tuition

 

$

94,204

 

 

$

73,004

 

 

$

-

 

 

$

167,208

 

 

$

90,903

 

 

$

57,341

 

 

$

-

 

 

$

148,244

 

Technology fees

 

 

5,162

 

 

 

2,633

 

 

 

-

 

 

 

7,795

 

 

 

4,590

 

 

 

2,391

 

 

 

-

 

 

 

6,981

 

Other miscellaneous fees(1)

 

 

323

 

 

 

173

 

 

 

-

 

 

 

496

 

 

 

463

 

 

 

91

 

 

 

-

 

 

 

554

 

    Total tuition and fees

 

 

99,689

 

 

 

75,810

 

 

 

-

 

 

 

175,499

 

 

 

95,956

 

 

 

59,823

 

 

 

-

 

 

 

155,779

 

Other revenue(2)

 

 

504

 

 

 

25

 

 

 

7

 

 

 

536

 

 

 

599

 

 

 

50

 

 

 

13

 

 

 

662

 

Total revenue

 

$

100,193

 

 

$

75,835

 

 

$

7

 

 

$

176,035

 

 

$

96,555

 

 

$

59,873

 

 

$

13

 

 

$

156,441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year to Date Ended June 30, 2020

 

 

For the Year to Date Ended June 30, 2019

 

 

 

CTU

 

 

AIU (3)

 

 

Corporate and Other(4)

 

 

Total

 

 

CTU

 

 

AIU

 

 

Corporate and Other(4)

 

 

Total

 

Tuition

 

$

191,755

 

 

$

137,549

 

 

$

-

 

 

$

329,304

 

 

$

183,521

 

 

$

115,571

 

 

$

-

 

 

$

299,092

 

Technology fees

 

 

10,282

 

 

 

5,290

 

 

 

-

 

 

 

15,572

 

 

 

8,039

 

 

 

4,769

 

 

 

-

 

 

 

12,808

 

Other miscellaneous fees(1)

 

 

695

 

 

 

322

 

 

 

-

 

 

 

1,017

 

 

 

887

 

 

 

220

 

 

 

-

 

 

 

1,107

 

    Total tuition and fees

 

 

202,732

 

 

 

143,161

 

 

 

-

 

 

 

345,893

 

 

 

192,447

 

 

 

120,560

 

 

 

-

 

 

 

313,007

 

Other revenue(2)

 

 

1,049

 

 

 

70

 

 

 

17

 

 

 

1,136

 

 

 

1,165

 

 

 

92

 

 

 

30

 

 

 

1,287

 

Total revenue

 

$

203,781

 

 

$

143,231

 

 

$

17

 

 

$

347,029

 

 

$

193,612

 

 

$

120,652

 

 

$

30

 

 

$

314,294

 

__________________

 

(1)

Other miscellaneous fees include student activity fees and graduation fees.

 

(2)

Other revenue primarily includes contract training revenue and bookstore sales.

(3)  AIU includes revenue related to the Trident acquisition commencing on the March 2, 2020 date of acquisition.

 

(4)

Revenue recorded within Corporate and Other relates to certain bookstore sales and closed campuses which are now reported within this category.

 

Performance Obligations

Our revenue, which is derived primarily from academic programs taught to students who attend our institutions, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our institutions. Our institutions charge tuition and fees at varying amounts, depending on the institution, the type of program and specific curriculum. Our institutions bill students a single charge that covers tuition, fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term, and recognize the tuition as revenue on a straight-line basis over the academic term, which includes any applicable externship period. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed to students. These fees are earned over the applicable term and are not considered separate performance obligations.

Other revenue, which consists primarily of contract training revenue and bookstore sales, is billed and recognized as goods are delivered or services are performed. Contract training revenue results from individual training courses that are stand-alone courses and not part of a degree or certificate program. Bookstore sales are primarily initiated by the student and are not included in the enrollment agreement at the onset of a student’s entrance to the institution. These types of sales constitute a separate performance obligation from classroom instruction.

Our institutions’ academic year is generally at least 30 weeks in length but varies both by institution and program of study and is divided by academic terms. Academic terms are determined by regulatory requirements mandated by the federal government and/or applicable accrediting body, which also vary by institution and program. Academic terms are determined by start dates, which vary by institution and program and are generally 8 - 12 weeks in length.

Contract Assets

For each term, the portion of tuition and fee payments received from students but not yet earned is recorded as deferred revenue and reported as a current liability on our condensed consolidated balance sheets, as we expect to earn these revenues within the next

year. A contract asset is recorded for each student for the current term for which they are enrolled for the amount charged for the current term that has not yet been received as payment and to which we do not have the unconditional right to receive payment because the student has not reached the point in the student’s current academic term at which the amount billed is no longer refundable to the student. On a student by student basis, the contract asset is offset against the deferred revenue balance for the current term and the net deferred revenue balance is reflected within current liabilities on our condensed consolidated balance sheets. For AIU’s Trident programs, students are billed as they register for courses, including courses related to future terms. Any billings for future terms would meet the definition of a contract asset as we do not have the unconditional right to receive payment as the academic term has not yet started. Contract assets related to future terms are offset against the deferred revenue associated with the respective future term.

Due to the short-term nature of our academic terms, the contract asset balance which exists at the beginning of each quarter will no longer be a contract asset at the end of that quarter, with the exception of the contract assets associated with future terms. The decrease in contract asset balances are a result of one of the following: it becomes a student receivable balance once a student reaches the point in a student’s academic term where the amount billed is no longer refundable to the student; a refund is made to withdrawn students for the portion entitled to be refunded under each institutions’ refund policy; we receive funds to apply against the contract asset balance; or a student makes a change to the number of classes they are enrolled in which may cause an adjustment to their previously billed amount. As of the end of each quarter, a new contract asset is determined on a student by student basis based on the most recently started term and a student’s progress within that term as compared to the date at which the student is no longer entitled to a refund under each institution’s refund policy. Contract assets associated with future terms remain as contract assets until the academic term begins and the student reaches the point in that academic term that they are no longer entitled to a refund.

The amount of contract assets which are being offset with deferred revenue balances as of June 30, 2020 and December 31, 2019 were as follows (dollars in thousands):

 

 

As of

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Gross deferred revenue

 

$

67,817

 

 

$

63,204

 

Gross contract assets

 

 

(29,279

)

 

 

(38,557

)

Deferred revenue, net

 

$

38,538

 

 

$

24,647

 

Deferred Revenue

Changes in our deferred revenue balances for the quarters and years to date ended June 30, 2020 and 2019 were as follows (dollars in thousands):

 

 

For the Quarter Ended June 30, 2020

 

 

For the Quarter Ended June 30, 2019

 

 

 

CTU

 

 

AIU

 

 

Total

 

 

CTU

 

 

AIU

 

 

Total

 

Gross deferred revenue, April 1

 

$

27,986

 

 

$

28,934

 

 

$

56,920

 

 

$

25,901

 

 

$

10,180

 

 

$

36,081

 

Revenue earned from prior balances

 

 

(25,238

)

 

 

(22,929

)

 

 

(48,167

)

 

 

(23,679

)

 

 

(8,860

)

 

 

(32,539

)

Billings during period(1)

 

 

99,464

 

 

 

86,343

 

 

 

185,807

 

 

 

95,424

 

 

 

69,368

 

 

 

164,792

 

Revenue earned for new billings during the period

 

 

(74,451

)

 

 

(52,881

)

 

 

(127,332

)

 

 

(72,277

)

 

 

(50,963

)

 

 

(123,240

)

Other adjustments

 

 

331

 

 

 

258

 

 

 

589

 

 

 

456

 

 

 

251

 

 

 

707

 

Gross deferred revenue, June 30

 

$

28,092

 

 

$

39,725

 

 

$

67,817

 

 

$

25,825

 

 

$

19,976

 

 

$

45,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year to Date Ended June 30, 2020

 

 

For the Year to Date Ended June 30, 2019

 

 

 

CTU

 

 

AIU

 

 

Total

 

 

CTU

 

 

AIU

 

 

Total

 

Gross deferred revenue, January 1

 

$

27,845

 

 

$

35,359

 

 

$

63,204

 

 

$

24,250

 

 

$

27,444

 

 

$

51,694

 

Business acquisition, beginning balance

 

 

-

 

 

 

13,395

 

 

 

13,395

 

 

 

-

 

 

-

 

 

 

-

 

Revenue earned from prior balances

 

 

(24,367

)

 

 

(39,533

)

 

 

(63,900

)

 

 

(22,335

)

 

 

(21,785

)

 

 

(44,120

)

Billings during period(1)

 

 

202,508

 

 

 

132,991

 

 

 

335,499

 

 

 

192,940

 

 

 

112,401

 

 

 

305,341

 

Revenue earned for new billings during the period

 

 

(178,365

)

 

 

(103,628

)

 

 

(281,993

)

 

 

(170,112

)

 

 

(98,775

)

 

 

(268,887

)

Other adjustments

 

 

471

 

 

 

1,141

 

 

 

1,612

 

 

 

1,082

 

 

 

691

 

 

 

1,773

 

Gross deferred revenue, June 30

 

$

28,092

 

 

$

39,725

 

 

$

67,817

 

 

$

25,825

 

 

$

19,976

 

 

$

45,801

 

______________

 

1)

Billings during period includes adjustments for prior billings.

 

 

Cash Receipts

Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment plans, employer reimbursement, Veterans’ Administration and other military funding and grants, private and institutional scholarships and cash payments. Cash receipts from government related sources are typically received during the current academic term. We typically receive funds after the end of an academic term for students who receive employer reimbursements. Students who have not applied for any type of financial aid generally set up a payment plan with the institution and make payments on a monthly basis per the terms of the payment plan.

If a student withdraws from one of our institutions prior to the completion of the academic term, we refund the portion of tuition and fees already paid that, pursuant to our refund policy and applicable federal and state law and accrediting agency standards, we are not entitled to retain. Generally, the amount to be refunded to a student is calculated based upon the percent of the term attended and the amount of tuition and fees paid by the student as of their withdrawal date. In certain circumstances, we have recognized revenue for students who have withdrawn that we are not entitled to retain. We have estimated a reserve for these limited circumstances based on historical evidence in the amount $1.2 million and $1.1 million as of June 30, 2020 and December 31, 2019, respectively. Students are typically entitled to a partial refund through approximately halfway of their term. Pursuant to each institution’s policy, once a student reaches the point in the term where no refund is given, the student would not have a refund due if withdrawing from the institution subsequent to that date.

Management reassesses collectability when a student withdraws from the institution and has unpaid tuition charges for the current term which the institution is entitled to retain per the applicable refund policy. Such unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue in accordance with ASC Topic 606 when cash is received and the contract is terminated and neither party has further performance obligations. We have no remaining performance obligations for students who have withdrawn from our institutions, and once the refund calculation is performed and funds are returned to the student, if applicable under our refund policy, no further consideration is due back to the student. We recognized $0.3 million of revenue for each of the quarters ended June 30, 2020 and 2019, and $0.6 million and $0.5 million for the years to date ended June 30, 2020 and 2019, respectively, for payments received from withdrawn students.