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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-23245

PERDOCEO EDUCATION CORPORATION

(Exact name of registrant as specified in its charter)

Delaware | 36-3932190
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
231 N. Martingale Road Schaumburg, Illinois | 60173
(Address of principal executive offices) | (Zip Code)

Registrant’s telephone number, including area code: (847) 781-3600

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.01 par value |  | PRDO |  | Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☒ |  | Accelerated filer | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company | ☐
Emerging growth company |  | ☐ |  |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

Number of shares of registrant’s common stock, par value $0.01, outstanding as of May 2, 2022: 68,779,291

PERDOCEO EDUCATION CORPORATION

FORM 10-Q

TABLE OF CONTENTS

|  | Page
PART I—FINANCIAL INFORMATION |
Item 1. | Financial Statements |
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Income (Unaudited) | 2
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 2
| Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) | 3
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 4
| Notes to Unaudited Condensed Consolidated Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 26
Item 4. | Controls and Procedures | 26
PART II—OTHER INFORMATION |
Item 1. | Legal Proceedings | 28
Item 1A. | Risk Factors | 28
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28
Item 6. | Exhibits | 28
SIGNATURES | 30

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

|  | March 31, |  |  | December 31, |
(In Thousands, Except Share and Per Share Amounts) |  | 2022 |  |  | 2021 |
ASSETS |  | (unaudited) |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |
Cash and cash equivalents, unrestricted |  | $ | 190,443 |  |  | $ | 319,982 |
Restricted cash |  |  | 1,210 |  |  |  | 5,196 |
Total cash, cash equivalents and restricted cash |  |  | 191,653 |  |  |  | 325,178 |
Short-term investments |  |  | 307,620 |  |  |  | 174,213 |
Total cash and cash equivalents, restricted cash and short-term investments |  |  | 499,273 |  |  |  | 499,391 |
Student receivables, gross |  |  | 74,869 |  |  |  | 79,418 |
Allowance for credit losses |  |  | (40,765 | ) |  |  | (36,385 | )
Student receivables, net |  |  | 34,104 |  |  |  | 43,033 |
Receivables, other |  |  | 8,845 |  |  |  | 1,692 |
Prepaid expenses |  |  | 9,874 |  |  |  | 6,919 |
Inventories |  |  | 1,405 |  |  |  | 904 |
Other current assets |  |  | 2,702 |  |  |  | 2,514 |
Total current assets |  |  | 556,203 |  |  |  | 554,453 |
NON-CURRENT ASSETS: |  |  |  |  |  |  |  |
Property and equipment, net of accumulated depreciation of $116,927 and $113,711 as of March 31, 2022 and December 31, 2021, respectively |  |  | 27,956 |  |  |  | 28,355 |
Right of use asset, net |  |  | 34,535 |  |  |  | 36,664 |
Goodwill |  |  | 162,579 |  |  |  | 162,579 |
Intangible assets, net of amortization of $10,328 and $8,662 as of March 31, 2022 and December 31, 2021, respectively |  |  | 30,542 |  |  |  | 32,208 |
Student receivables, gross |  |  | 4,206 |  |  |  | 4,242 |
Allowance for credit losses |  |  | (2,892 | ) |  |  | (2,870 | )
Student receivables, net |  |  | 1,314 |  |  |  | 1,372 |
Deferred income tax assets, net |  |  | 24,128 |  |  |  | 25,114 |
Other assets |  |  | 6,570 |  |  |  | 6,688 |
TOTAL ASSETS |  | $ | 843,827 |  |  | $ | 847,433 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Lease liability-operating |  | $ | 8,355 |  |  | $ | 9,400 |
Accounts payable |  |  | 12,135 |  |  |  | 10,838 |
Accrued expenses: |  |  |  |  |  |  |  |
Payroll and related benefits |  |  | 17,648 |  |  |  | 25,312 |
Advertising and marketing costs |  |  | 9,971 |  |  |  | 8,690 |
Income taxes |  |  | 10,982 |  |  |  | 211 |
Other |  |  | 12,148 |  |  |  | 15,180 |
Deferred revenue |  |  | 39,108 |  |  |  | 70,613 |
Total current liabilities |  |  | 110,347 |  |  |  | 140,244 |
NON-CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Lease liability-operating |  |  | 33,757 |  |  |  | 35,549 |
Other liabilities |  |  | 21,343 |  |  |  | 21,530 |
Total non-current liabilities |  |  | 55,100 |  |  |  | 57,079 |
STOCKHOLDERS' EQUITY: |  |  |  |  |  |  |  |
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding |  |  | - |  |  |  | - |
Common stock, $0.01 par value; 300,000,000 shares authorized; 89,264,034 and 88,724,438 shares issued, 68,779,291 and 68,748,662 shares outstanding as of March 31, 2022 and December 31, 2021, respectively |  |  | 893 |  |  |  | 887 |
Additional paid-in capital |  |  | 677,311 |  |  |  | 674,242 |
Accumulated other comprehensive loss |  |  | (1,541 | ) |  |  | (96 | )
Retained earnings |  |  | 284,050 |  |  |  | 251,972 |
Treasury stock, at cost; 20,484,743 and 19,975,776 shares as of March 31, 2022 and December 31, 2021, respectively |  |  | (282,333 | ) |  |  | (276,895 | )
Total stockholders' equity |  |  | 678,380 |  |  |  | 650,110 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |  | $ | 843,827 |  |  | $ | 847,433 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

|  | For the Quarter Ended March 31, |
(In Thousands, Except Per Share Amounts) |  | 2022 |  |  | 2021 |
REVENUE: |  |  |  |  |  |  |  |
Tuition and fees, net |  | $ | 181,327 |  |  | $ | 182,831 |
Other |  |  | 1,632 |  |  |  | 807 |
Total revenue |  |  | 182,959 |  |  |  | 183,638 |
OPERATING EXPENSES: |  |  |  |  |  |  |  |
Educational services and facilities |  |  | 28,088 |  |  |  | 28,974 |
General and administrative |  |  | 106,296 |  |  |  | 110,045 |
Depreciation and amortization |  |  | 4,882 |  |  |  | 4,002 |
Total operating expenses |  |  | 139,266 |  |  |  | 143,021 |
Operating income |  |  | 43,693 |  |  |  | 40,617 |
OTHER INCOME: |  |  |  |  |  |  |  |
Interest income |  |  | 333 |  |  |  | 359 |
Interest expense |  |  | (103 | ) |  |  | (109 | )
Miscellaneous (expense) income |  |  | (89 | ) |  |  | 131 |
Total other income |  |  | 141 |  |  |  | 381 |
PRETAX INCOME |  |  | 43,834 |  |  |  | 40,998 |
Provision for income taxes |  |  | 11,756 |  |  |  | 10,245 |
NET INCOME |  |  | 32,078 |  |  |  | 30,753 |
NET INCOME PER SHARE - BASIC: |  | $ | 0.47 |  |  | $ | 0.44 |
NET INCOME PER SHARE - DILUTED: |  | $ | 0.46 |  |  | $ | 0.43 |
WEIGHTED AVERAGE SHARES OUTSTANDING: |  |  |  |  |  |  |  |
Basic |  |  | 68,746 |  |  |  | 70,149 |
Diluted |  |  | 69,567 |  |  |  | 71,482 |

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

|  | For the Quarter Ended March 31, |
(In Thousands) |  | 2022 |  |  | 2021 |
NET INCOME |  | $ | 32,078 |  |  | $ | 30,753 |
OTHER COMPREHENSIVE LOSS, net of tax: |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  |  | (81 | ) |  |  | (129 | )
Unrealized loss on investments |  |  | (1,364 | ) |  |  | (221 | )
Total other comprehensive loss |  |  | (1,445 | ) |  |  | (350 | )
COMPREHENSIVE INCOME |  | $ | 30,633 |  |  | $ | 30,403 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

|  | Common Stock |  |  | Treasury Stock |  |  |  |  |  |  | Accumulated Other |  |  |  |  |  |  |  |  |
(In Thousands) |  | Issued Shares |  |  | $0.01 Par Value |  |  | Purchased Shares |  |  | Cost |  |  | Additional Paid-in Capital |  |  | Comprehensive Loss |  |  | Retained Earnings |  |  | Total |
BALANCE, January 1, 2022 |  |  | 88,724 |  |  | $ | 887 |  |  |  | (19,976 | ) |  | $ | (276,895 | ) |  | $ | 674,242 |  |  | $ | (96 | ) |  | $ | 251,972 |  |  | $ | 650,110 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 32,078 |  |  |  | 32,078 |
Foreign currency translation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (81 | ) |  |  | - |  |  |  | (81 | )
Unrealized loss on investments, net of tax |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,364 | ) |  |  | - |  |  |  | (1,364 | )
Treasury stock purchased |  |  | - |  |  |  | - |  |  |  | (363 | ) |  |  | (3,828 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,828 | )
Share-based compensation expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,416 |  |  |  | - |  |  |  | - |  |  |  | 2,416 |
Common stock issued |  |  | 540 |  |  |  | 6 |  |  |  | (146 | ) |  |  | (1,610 | ) |  |  | 653 |  |  |  | - |  |  |  | - |  |  |  | (951 | )
BALANCE, March 31, 2022 |  |  | 89,264 |  |  | $ | 893 |  |  |  | (20,485 | ) |  | $ | (282,333 | ) |  | $ | 677,311 |  |  | $ | (1,541 | ) |  | $ | 284,050 |  |  | $ | 678,380 |
|  | Common Stock |  |  | Treasury Stock |  |  |  |  |  |  | Accumulated Other |  |  |  |  |  |  |  |  |
(In Thousands) |  | Issued Shares |  |  | $0.01 Par Value |  |  | Purchased Shares |  |  | Cost |  |  | Additional Paid-in Capital |  |  | Comprehensive Income (Loss) |  |  | Retained Earnings |  |  | Total |
BALANCE, January 1, 2021 |  |  | 87,265 |  |  | $ | 873 |  |  |  | (17,203 | ) |  | $ | (246,088 | ) |  | $ | 658,423 |  |  | $ | 364 |  |  | $ | 142,335 |  |  | $ | 555,907 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 30,753 |  |  |  | 30,753 |
Foreign currency translation |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (129 | ) |  |  | - |  |  |  | (129 | )
Unrealized loss on investments, net of tax |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (221 | ) |  |  | - |  |  |  | (221 | )
Share-based compensation expense |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,753 |  |  |  | - |  |  |  | - |  |  |  | 3,753 |
Common stock issued |  |  | 530 |  |  |  | 5 |  |  |  | (160 | ) |  |  | (2,032 | ) |  |  | 309 |  |  |  | - |  |  |  | - |  |  |  | (1,718 | )
BALANCE, March 31, 2021 |  |  | 87,795 |  |  | $ | 878 |  |  |  | (17,363 | ) |  | $ | (248,120 | ) |  | $ | 662,485 |  |  | $ | 14 |  |  | $ | 173,088 |  |  | $ | 588,345 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|  | For the Quarter Ended March 31, |
(In Thousands) |  | 2022 |  |  | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |  |  |
Net income |  | $ | 32,078 |  |  | $ | 30,753 |
Adjustments to reconcile net income to net |  |  |  |  |  |  |  |
cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 4,882 |  |  |  | 4,002 |
Bad debt expense |  |  | 13,715 |  |  |  | 13,719 |
Compensation expense related to share-based awards |  |  | 2,416 |  |  |  | 3,753 |
Deferred income taxes |  |  | 986 |  |  |  | 4,767 |
Changes in operating assets and liabilities |  |  | (31,923 | ) |  |  | (12,286 | )
Net cash provided by operating activities |  |  | 22,154 |  |  |  | 44,708 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Purchases of available-for-sale investments |  |  | (194,997 | ) |  |  | (126,009 | )
Sales of available-for-sale investments |  |  | 59,825 |  |  |  | 64,408 |
Purchases of property and equipment |  |  | (4,742 | ) |  |  | (1,042 | )
Payments for potential business acquisition |  |  | (7,000 | ) |  |  | - |
Net cash used in investing activities |  |  | (146,914 | ) |  |  | (62,643 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Issuance of common stock |  |  | 659 |  |  |  | 314 |
Purchase of treasury stock |  |  | (3,828 | ) |  |  | - |
Payments of employee tax associated with stock compensation |  |  | (1,610 | ) |  |  | (2,032 | )
Release of cash held in escrow |  |  | (3,986 | ) |  |  | - |
Net cash used in financing activities |  |  | (8,765 | ) |  |  | (1,718 | )
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |  |  | (133,525 | ) |  |  | (19,653 | )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period |  |  | 325,178 |  |  |  | 109,684 |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period |  | $ | 191,653 |  |  | $ | 90,031 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE COMPANY

Perdoceo’s academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. Our accredited institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIUS” or “AIU System”) – provide degree programs from associate through doctoral level as well as non-degree professional development and continuing education offerings. Our universities 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 support students and enhance learning. 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.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022.

The unaudited condensed consolidated financial statements presented herein include the accounts of Perdoceo Education Corporation and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

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.

As of January 1, 2022, the Company began recording income (loss) from discontinued operations within other miscellaneous income (expense) on its unaudited condensed consolidated statements of income as future amounts will be immaterial and infrequent. Prior period amounts are also immaterial and have been recast to maintain comparability.

During the first quarter of 2022, the Company paid an advance deposit related to a potential acquisition which is reflected within other current receivables on its unaudited condensed consolidated balance sheets and as a cash outflow from investing activities on its unaudited condensed consolidated statements of cash flows. The fair value of this note receivable approximates carrying value due to its short term nature and is expected to be offset against the final purchase price should the acquisition close.

3. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting guidance to be adopted in 2023

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this ASU eliminate the Troubled Debt Restructuring (“TDR”) recognition and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan (consistent with the accounting for other loan modifications). The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. For all public business entities, ASU 2022-02 is effective for annual periods and interim periods beginning after December 15, 2022; early adoption is permitted. We are currently evaluating this guidance and believe the adoption will not significantly impact the presentation of our financial condition, results of operations and disclosures.

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4. FINANCIAL INSTRUMENTS

Investments consist of the following as of March 31, 2022 and December 31, 2021 (dollars in thousands):

|  | March 31, 2022 |
|  |  |  |  |  | Gross Unrealized |  |  |  |  |
|  | Cost |  |  | Gain |  |  | (Loss) |  |  | Fair Value |
Short-term investments (available for sale): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal bonds |  | $ | 5,000 |  |  | $ | - |  |  | $ | - |  |  | $ | 5,000 |
Non-governmental debt securities |  |  | 208,401 |  |  |  | 3 |  |  |  | (1,192 | ) |  |  | 207,212 |
Treasury and federal agencies |  |  | 95,737 |  |  |  | - |  |  |  | (329 | ) |  |  | 95,408 |
Total short-term investments (available for sale) |  | $ | 309,138 |  |  | $ | 3 |  |  | $ | (1,521 | ) |  | $ | 307,620 |

|  | December 31, 2021 |
|  |  |  |  |  | Gross Unrealized |  |  |  |  |
|  | Cost |  |  | Gain |  |  | (Loss) |  |  | Fair Value |
Short-term investments (available for sale): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal bonds |  | $ | 5,028 |  |  | $ | - |  |  | $ | (1 | ) |  | $ | 5,027 |
Non-governmental debt securities |  |  | 168,623 |  |  |  | 27 |  |  |  | (184 | ) |  |  | 168,466 |
Treasury and federal agencies |  |  | 720 |  |  |  | - |  |  |  | - |  |  |  | 720 |
Total short-term investments (available for sale) |  | $ | 174,371 |  |  | $ | 27 |  |  | $ | (185 | ) |  | $ | 174,213 |

In the table above, unrealized holding gains (losses) relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than one year.

Our non-governmental debt securities primarily consist of corporate bonds, certificates of deposit and commercial paper. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities. We do not intend to sell our investments in these securities prior to maturity and it is not likely that we will be required to sell these investments before recovery of the amortized cost basis.

Fair Value Measurements

FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2022, we held investments that are required to be measured at fair value on a recurring basis. These investments (available for sale) consist of municipal bonds, non-governmental debt securities and treasury and federal agencies securities. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

All of our available for sale investments were measured under Level 2 as of March 31, 2022 and December 31, 2021. Additionally, money market funds of $51.8 million and $225.3 million included within cash and cash equivalents on our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively, were measured under Level 1, and commercial paper and treasury bills of $63.9 million included within cash and cash equivalents on our unaudited condensed consolidated balance sheets as of March 31, 2022 were measured under Level 2.

Equity Method Investment

Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, represents an international investment in a private company. As of March 31, 2022, our investment in an equity affiliate equated to a 30.7%, or $3.0 million, non-controlling interest in CCKF, a Dublin-based educational technology company providing intelligent systems to power the delivery of individualized and personalized learning.

During the quarters ended March 31, 2022 and 2021, we recorded approximately $0.1 million of loss and approximately $0.2 million of gain, respectively, related to our proportionate investment in CCKF within miscellaneous (expense) income on our unaudited condensed consolidated statements of income.

We make periodic operating maintenance payments to CCKF related to proprietary rights that we use in our intellipath® personalized learning technology. The total fees recorded during the quarters ended March 31, 2022 and 2021 were as follows (dollars in thousands):

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| Maintenance Fee Payments |
For the quarter ended March 31, 2022 | $ | 433 |
For the quarter ended March 31, 2021 | $ | 423 |

Credit Agreement

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.

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 March 31, 2022 and December 31, 2021, there were no outstanding borrowings under the revolving credit facility.

5. REVENUE RECOGNITION

Disaggregation of Revenue

The following tables disaggregate our revenue by major source for the quarters ended March 31, 2022 and 2021 (dollars in thousands):

|  | For the Quarter Ended March 31, 2022 |  |  | For the Quarter Ended March 31, 2021 |
|  | CTU (4) |  |  | AIUS (5) |  |  | Corporate and Other(6) |  |  | Total |  |  | CTU |  |  | AIUS |  |  | Corporate and Other(6) |  |  | Total |
Tuition, net (1) |  | $ | 106,927 |  |  | $ | 65,451 |  |  | $ | - |  |  | $ | 172,378 |  |  | $ | 99,605 |  |  | $ | 74,498 |  |  | $ | - |  |  | $ | 174,103 |
Technology fees |  |  | 5,442 |  |  |  | 3,110 |  |  |  | - |  |  |  | 8,552 |  |  |  | 5,483 |  |  |  | 2,795 |  |  |  | - |  |  |  | 8,278 |
Other miscellaneous fees (2) |  |  | 182 |  |  |  | 215 |  |  |  | - |  |  |  | 397 |  |  |  | 292 |  |  |  | 158 |  |  |  | - |  |  |  | 450 |
Total tuition and fees, net |  |  | 112,551 |  |  |  | 68,776 |  |  |  | - |  |  |  | 181,327 |  |  |  | 105,380 |  |  |  | 77,451 |  |  |  | - |  |  |  | 182,831 |
Other revenue (3) |  |  | 597 |  |  |  | 756 |  |  |  | 279 |  |  |  | 1,632 |  |  |  | 442 |  |  |  | 26 |  |  |  | 339 |  |  |  | 807 |
Total revenue |  | $ | 113,148 |  |  | $ | 69,532 |  |  | $ | 279 |  |  | $ | 182,959 |  |  | $ | 105,822 |  |  | $ | 77,477 |  |  | $ | 339 |  |  | $ | 183,638 |

__________________

| (1) | Tuition includes revenue earned for degree-granting programs as well as revenue earned for non-degree professional development and continuing education offerings related to the DigitalCrafts and Hippo acquisitions from the date of acquisitions.

| (2) | Other miscellaneous fees primarily include graduation fees.

| (3) | Other revenue primarily includes contract training revenue and miscellaneous non-student related revenue.

| (4) | CTU includes revenue related to the Hippo acquisition commencing on the September 10, 2021 date of acquisition.

| (5) | AIUS includes revenue related to the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition.

| (6) | Revenue recorded within Corporate and Other relates to miscellaneous non-student related revenue.

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Performance Obligations

Our revenue, which is derived primarily from academic programs taught to students who attend our universities, 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 universities and are reflected net of scholarships and tuition discounts. Our universities charge tuition and fees at varying amounts, depending on the university, the type of program and specific curriculum. Our universities 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 for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. 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. We bill student tuition upon enrollment for our non-degree professional development and continuing education offerings and recognize the tuition as revenue on a straight-line basis over the length of the offering.

Other revenue, which consists of contract training revenue, bookstore sales and miscellaneous non-student related revenue, is billed and recognized as goods are delivered or services are performed.

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 university and program. Academic terms are determined by start dates, which vary by university and program and are generally 8-12 weeks in length. Our non-degree professional development and continuing education offerings are generally 16-52 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 AIUS’ Trident and DigitalCrafts programs and CTU’s Hippo programs, students are billed as they enroll in courses, including courses related to future periods. Any billings for future periods would meet the definition of a contract asset as we do not have the unconditional right to receive payment as the course has not yet started. Contract assets related to future periods are offset against the respective deferred revenue associated with the future period.

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 periods. 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 periods remain as contract assets until the course begins and the student reaches the point in that course that they are no longer entitled to a refund.

The amount of deferred revenue balances which are being offset with contract assets balances as of March 31, 2022 and December 31, 2021 were as follows (dollars in thousands):

|  | As of |
|  | March 31, 2022 |  |  | December 31, 2021 |
Gross deferred revenue |  | $ | 67,850 |  |  | $ | 113,719 |
Gross contract assets |  |  | (28,742 | ) |  |  | (43,106 | )
Deferred revenue, net |  | $ | 39,108 |  |  | $ | 70,613 |

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Deferred Revenue

Changes in our deferred revenue balances for the quarters ended March 31, 2022 and 2021 were as follows (dollars in thousands):

|  | For the Quarter Ended March 31, 2022 |  |  | For the Quarter Ended March 31, 2021 |
|  | CTU |  |  | AIUS |  |  | Total |  |  | CTU |  |  | AIUS |  |  | Total |
Gross deferred revenue, January 1 |  | $ | 64,674 |  |  | $ | 49,045 |  |  | $ | 113,719 |  |  | $ | 28,522 |  |  | $ | 56,880 |  |  | $ | 85,402 |
Revenue earned from prior balances |  |  | (53,952 | ) |  |  | (36,987 | ) |  |  | (90,939 | ) |  |  | (25,689 | ) |  |  | (42,403 | ) |  |  | (68,092 | )
Billings during period(1) |  |  | 86,621 |  |  |  | 48,575 |  |  |  | 135,196 |  |  |  | 101,784 |  |  |  | 52,561 |  |  |  | 154,345 |
Revenue earned for new billings during the period |  |  | (58,599 | ) |  |  | (31,789 | ) |  |  | (90,388 | ) |  |  | (79,691 | ) |  |  | (35,048 | ) |  |  | (114,739 | )
Other adjustments |  |  | 599 |  |  |  | (337 | ) |  |  | 262 |  |  |  | 210 |  |  |  | 896 |  |  |  | 1,106 |
Gross deferred revenue, March 31 |  | $ | 39,343 |  |  | $ | 28,507 |  |  | $ | 67,850 |  |  | $ | 25,136 |  |  | $ | 32,886 |  |  | $ | 58,022 |

______________

| (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, as well as private loans for our non-degree programs. 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 university and make payments on a monthly basis per the terms of the payment plan.

If a student withdraws from one of our universities 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 of $2.3 million and $2.1 million as of March 31, 2022 and December 31, 2021, respectively. Students are typically entitled to a partial refund until approximately halfway through their term. Pursuant to each university’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 university subsequent to that date.

Management reassesses collectability when a student withdraws from the university and has unpaid tuition charges for the current term which the university is entitled to retain per the applicable refund policy. Certain 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 universities, 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 $0.4 million of revenue for each of the quarters ended March 31, 2022 and 2021, for payments received from withdrawn students.

6. STUDENT RECEIVABLES

Student receivables represent funds owed to us in exchange for the educational services provided to a student. Student receivables are reflected net of an allowance for credit losses at the end of the reporting period. Student receivables, net, are reflected on our condensed consolidated balance sheets as components of both current and non-current assets. We do not charge interest on any of our payment plans.

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, as well as private loans for our non-degree programs. 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. For those balances that are not received during the academic term, the balance is typically due within the current academic year which is approximately 30 weeks in length. Generally, a student receivable balance is written off once a student is out of school and it reaches greater than 90 days past due.

Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe

9

have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trend analysis and comparing estimated and actual performance.

We have an immaterial amount of student receivables that are due greater than 12 months from the date of our condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the amount of non-current student receivables under payment plans that are longer than 12 months in duration, net of allowance for credit losses, was $1.3 million and $1.4 million, respectively.

Allowance for Credit Losses

We define student receivables as a portfolio segment under ASC Topic 326 – Financial Instruments – Credit Losses. Changes in our current and non-current allowance for credit losses related to our student receivable portfolio in accordance with the guidance under ASU 2016-13 for the quarters ended March 31, 2022 and 2021 were as follows (dollars in thousands):

|  | For the Quarter Ended March 31, |
|  | 2022 |  |  | 2021 |
Balance, beginning of period |  | $ | 39,255 |  |  | $ | 42,147 |
Provision for credit losses |  |  | 13,715 |  |  |  | 13,724 |
Amounts written-off |  |  | (10,264 | ) |  |  | (13,067 | )
Recoveries |  |  | 951 |  |  |  | 981 |
Balance, end of period |  | $ | 43,657 |  |  | $ | 43,785 |

Fair Value Measurements

The carrying amount reported in our condensed consolidated balance sheets for the current portion of student receivables approximates fair value because of the nature of these financial instruments as they generally have short maturity periods. It is not practicable to estimate the fair value of the non-current portion of student receivables, since observable market data is not readily available, and no reasonable estimation methodology exists.

7. LEASES

We lease most of our administrative and educational facilities under non-cancelable operating leases expiring at various dates through 2032. Lease terms generally range from five to ten years with one to four renewal options for extended terms. In most cases, we are required to make additional payments under facility operating leases for taxes, insurance and other operating expenses incurred during the operating lease period, which are typically variable in nature.

We determine if a contract contains a lease when the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Upon identification and commencement of a lease, we establish a right of use (“ROU”) asset and a lease liability.

Quantitative information related to leases is presented in the following table (dollars in thousands):

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| For the Quarter Ended March 31, 2022 |  | For the Quarter Ended March 31, 2021 |
Lease expenses (1) |  |  |  |  |  |
Fixed lease expenses - operating | $ | 2,767 |  | $ | 3,015 |
Variable lease expenses - operating |  | 815 |  |  | 1,513 |
Sublease income |  | (276 | ) |  | (499 | )
Total lease expenses | $ | 3,306 |  | $ | 4,029 |
Other information |  |  |  |  |  |
Gross operating cash flows for operating leases (2) | $ | (4,555 | ) | $ | (5,221 | )
Operating cash flows from subleases (2) | $ | 274 |  | $ | 530 |
| As of March 31, 2022 |  | As of March 31, 2021 |
Weighted average remaining lease term (in months) – operating leases |  | 68 |  |  | 73 |
Weighted average discount rate – operating leases |  | 4.9 | % |  | 5.0 | %

__________________

| (1) | Lease expense and sublease income represent the amount recorded within our unaudited condensed consolidated statements of income. Variable lease amounts represent expenses recognized as incurred which are not included in the lease liability. Fixed lease expenses and sublease income are recorded on a straight-line basis over the lease term and therefore are not necessarily representative of cash payments during the same period.

| (2) | Cash flows are presented on a consolidated basis and represent cash payments for fixed and variable lease costs.

Subleases

Historically, for certain of our leased locations we have vacated the facility and have fully or partially subleased the space. As of March 31, 2022, we have one sublease with a remaining term of 13 months, for which we remain the guarantor under the lease and therefore become the intermediate lessor. We have recognized sublease income of $0.3 million and $0.5 million for the quarters ended March 31, 2022 and 2021, respectively, as an offset to lease expense on our unaudited condensed consolidated statements of income.

8. CONTINGENCIES

An accrual for estimated legal fees and settlements of $1.8 million and $1.1 million at March 31, 2022 and December 31, 2021, respectively, is presented within other current liabilities on our condensed consolidated balance sheets.

We record a liability when we believe that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that was previously accrued and make adjustments as further information develops, circumstances change or contingencies are resolved. Significant judgment is required to determine both probability and the estimated amount. We may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (1) if the damages sought are indeterminate; (2) if the proceedings are in early stages; (3) if there is uncertainty as to the outcome of pending appeals, motions or settlements; (4) if there are significant factual issues to be determined or resolved; and (5) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

On April 8, 2022, the Company received a Civil Investigative Demand (“CID”) from the Department of Justice (“DOJ”). The CID requests information and documentation from CTU regarding compliance with federal financial aid credit hour requirements for five of its entry-level courses as well as information regarding CTU’s learning management system. The information sought covers the time period from January 1, 2017 to the present. The Company is cooperating with the DOJ with a view towards resolving this inquiry as promptly as possible.

We receive from time-to-time requests from state attorneys general, federal and state government agencies and accreditors relating to our institutions, to specific complaints they have received from students or former students or to student loan forgiveness claims which seek information about students, our programs, and other matters relating to our activities. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal action or claims of non-compliance. We are subject to a variety of other claims, lawsuits, arbitrations and investigations that arise from time to time out of the conduct of our business, including, but not limited to, matters involving prospective students, students or former students, alleged violations of the Telephone Consumer Protection Act, both individually and on behalf of a putative class, and employment matters. Periodically matters arise that we consider outside the scope of ordinary routine litigation incidental to our business. While we currently believe that these matters, individually or in aggregate, will not have a material adverse impact on our financial position,

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cash flows or results of operations, these matters are subject to inherent uncertainties, and management’s view of these matters may change in the future. Were an unfavorable outcome to occur in any one or more of these matters, there exists the possibility of a material adverse impact on our business, reputation, financial position and cash flows.

Contingent Consideration for Business Acquisitions

We have an accrual for contingent consideration amounts related to the DigitalCrafts and Hippo acquisitions in the aggregate fair value amount of $3.2 million as of March 31, 2022. Pursuant to the acquisition agreements, post-closing contingent consideration payments are expected to be paid in early 2024 based upon the achievement of certain financial metrics, with an aggregate maximum amount of $6.5 million.

9. INCOME TAXES

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following is a summary of our provision for income taxes and effective tax rate:

|  | For the Quarter Ended March 31, |
(Dollars in Thousands) |  | 2022 |  |  | 2021 |
Pretax income |  | $ | 43,834 |  |  | $ | 40,998 |
Provision for income taxes |  | $ | 11,756 |  |  | $ | 10,245 |
Effective rate |  |  | 26.8 | % |  |  | 25.0 | %

As of December 31, 2021, a valuation allowance of $32.2 million was maintained with respect to our foreign tax credits not supported by an Overall Domestic Loss (“ODL”) account balance, state net operating losses, and capital loss carryforward. After considering both positive and negative evidence related to the realization of the deferred tax assets, we have determined that it is necessary to continue to maintain a $32.2 million valuation allowance against our non-ODL supported foreign tax credits, state net operating losses, and capital loss carryforward as of March 31, 2022.

The effective tax rate for the quarter ended March 31, 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 increased the effective tax rate by 0.5%. The effective tax rate for the quarter ended March 31, 2021 was benefitted by the release of previously recorded tax reserves, which reduced the effective tax rate by 1.3%.

We estimate that it is reasonably possible that the gross liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $1.6 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter ended March 31, 2022 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of March 31, 2022, we had accrued $2.0 million as an estimate for reasonably possible interest and accrued penalties.

Our tax returns are routinely examined by federal, state and local tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service has completed its examination of our U.S. income tax returns through our tax year ended December 31, 2014.

10. SHARE-BASED COMPENSATION

Overview

The Perdoceo Education Corporation Amended and Restated 2016 Incentive Compensation Plan (the “2016 Plan”) became effective (as the Career Education Corporation 2016 Incentive Compensation Plan) on May 24, 2016, and the amendment and restatement of the 2016 Plan became effective on June 3, 2021, upon its approval by the Company’s stockholders. Under the 2016 Plan, Perdoceo may grant to eligible participants awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, annual incentive awards, and substitute awards, which generally may be settled in cash or shares of our common stock. The vesting of all types of awards is subject to possible acceleration in certain circumstances. If a plan participant terminates employment for any reason other than by death or disability during the vesting period, the right to unvested awards is generally forfeited.

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Restricted Stock Units

For the quarters ended March 31, 2022 and 2021, the Company granted approximately 0.3 million restricted stock units in each period which are not “performance-based” and which have a grant-date fair value of approximately $2.9 million and $3.6 million, respectively.

Additionally, for the quarters ended March 31, 2022 and 2021, the Company granted approximately 0.4 million restricted stock units in each period which are “performance-based” and which have a grant-date fair value of approximately $4.0 million and $4.2 million, respectively. The performance-based restricted stock units are subject to performance conditions which are determined at the time of grant and typically cover a three-year performance period. These performance conditions may result in all units being forfeited even if the requisite service period is met.

All restricted stock units granted in 2022 and 2021 are to be settled in shares of our common stock.

Stock Options

There were no stock options granted during each of the quarters ended March 31, 2022 and 2021.

Share-Based Compensation Expense

Total share-based compensation expense for the quarters ended March 31, 2022 and 2021 for all types of awards was as follows (dollars in thousands):

|  | For the Quarter Ended March 31, |
Award Type |  | 2022 |  |  | 2021 |
Stock options |  | $ | 89 |  |  | $ | 160 |
Restricted stock units settled in stock |  |  | 2,323 |  |  |  | 3,588 |
Total share-based compensation expense |  | $ | 2,412 |  |  | $ | 3,748 |

As of March 31, 2022, we estimate that total compensation expense of approximately $17.0 million will be recognized over the next four years for all unvested share-based awards that have been granted to participants. This amount excludes any estimates of forfeitures.

11. STOCK REPURCHASE PROGRAM

On January 27, 2022, the Board of Directors of the Company approved a new stock repurchase program for up to $50.0 million which commenced March 1, 2022 and expires September 30, 2023. The other terms of the new stock repurchase program are consistent with the Company’s previous stock repurchase program which expired February 28, 2022.

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. Repurchases will be made in open market transactions, including block purchases, conducted in accordance with Rule 10b-18 under the Exchange Act as well as may be made pursuant to trading plans established under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The stock repurchase program does not obligate the Company to purchase shares and the Company may, in its discretion, begin, suspend or terminate repurchases at any time, without any prior notice.

During the quarter ended March 31, 2022, we repurchased 0.4 million shares of our common stock for approximately $3.8 million at an average price of $10.56 per share. There were no stock repurchases during the quarter ended March 31, 2021.

As of March 31, 2022, approximately $46.2 million was available under our authorized stock repurchase program to repurchase outstanding shares of our common stock. Shares of stock repurchased under the program are held as treasury shares. These repurchased shares have reduced the weighted average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

12. WEIGHTED AVERAGE COMMON SHARES

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive common shares outstanding is computed using the Treasury Stock Method and reflects the additional shares that

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would be outstanding if dilutive stock options were exercised and restricted stock units were settled for common shares during the period.

The weighted average number of common shares used to compute basic and diluted net income per share for the quarters ended March 31, 2022 and 2021 were as follows (shares in thousands):

| For the Quarter Ended March 31, |
| 2022 |  |  | 2021 |
Basic common shares outstanding |  | 68,746 |  |  |  | 70,149 |
Common stock equivalents |  | 821 |  |  |  | 1,333 |
Diluted common shares outstanding |  | 69,567 |  |  |  | 71,482 |

For the quarters ended March 31, 2022 and 2021, certain unexercised stock option awards are excluded from our computations of diluted earnings per share, as these shares were out-of-the-money and their effect would have been anti-dilutive. The anti-dilutive options that were excluded from our computations of diluted earnings per share were 0.3 million and 0.5 million shares for the quarters ended March 31, 2022 and 2021, respectively.

13. SEGMENT REPORTING

Our segments are determined in accordance with FASB ASC Topic 280—Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment is comprised of an accredited postsecondary education institution that offers a variety of academic programs. These segments are organized by key market segments and to enhance brand focus within each segment to more effectively execute our business plan. As of March 31, 2022, our two segments are:

| ♦ | Colorado Technical University (CTU) is committed to providing quality and industry-relevant higher education to a diverse student population through innovative technology and experienced faculty, enabling the pursuit of personal and professional goals. CTU is focused on serving adult, non-traditional students seeking career advancement, as well as addressing employer’s needs for a well-educated workforce. CTU offers academic programs in the career-oriented disciplines of business and management, nursing, healthcare management, computer science, engineering, information systems and technology, project management, cybersecurity and criminal justice. Students pursue their degrees through fully-online programs, local campuses and blended formats, which combine campus-based and online education. As of March 31, 2022, students enrolled at CTU represented approximately 63% of our total enrollments. Approximately 95% of CTU’s students are enrolled in programs offered fully online. Beginning in the first quarter of 2022, CTU’s ground-based campuses began to offer in-person instruction to students with the option to remain virtual.

| ♦ | The American InterContinental University System (AIUS or AIU System) is comprised of two universities: American InterContinental University (“AIU”) and Trident University International (“Trident” or “TUI”). AIUS is committed to providing quality and accessible higher education opportunities for a diverse student population, including adult and other non-traditional learners and the military community. AIUS places emphasis on the educational, professional and personal growth of each student. AIUS offers academic programs in the career-oriented disciplines of business studies, information technologies, education, health sciences and criminal justice. Students pursue their degrees through fully-online programs, local campuses and blended formats, which combine campus-based and online education. As of March 31, 2022, students enrolled at AIUS represented approximately 37% of our total enrollments. Approximately 97% of AIUS’ students are enrolled in programs offered fully online. Students at AIUS’ ground-based campus are offered the opportunity to return to campus-based instruction or remain virtual.

Summary financial information by reporting segment is as follows (dollars in thousands):

|  | For the Quarter Ended March 31, |
|  | Revenue |  |  | Operating Income (Loss) |
|  | 2022 |  |  | % of Total |  |  | 2021 |  |  | % of Total |  |  | 2022 |  |  | 2021 |
CTU (1) |  | $ | 113,148 |  |  |  | 61.8 | % |  | $ | 105,822 |  |  |  | 57.6 | % |  | $ | 43,026 |  |  | $ | 36,143 |
AIUS (2) |  |  | 69,532 |  |  |  | 38.0 | % |  |  | 77,477 |  |  |  | 42.2 | % |  |  | 9,523 |  |  |  | 11,323 |
Corporate and Other (3) |  |  | 279 |  |  |  | 0.2 | % |  |  | 339 |  |  |  | 0.2 | % |  |  | (8,856 | ) |  |  | (6,849 | )
Total |  | $ | 182,959 |  |  |  | 100.0 | % |  | $ | 183,638 |  |  |  | 100.0 | % |  | $ | 43,693 |  |  | $ | 40,617 |

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|  | Total Assets as of (4) |
|  | March 31, 2022 |  |  | December 31, 2021 |
CTU |  | $ | 152,252 |  |  | $ | 153,072 |
AIUS |  |  | 138,730 |  |  |  | 151,407 |
Corporate and Other (3) |  |  | 552,845 |  |  |  | 542,954 |
Total |  | $ | 843,827 |  |  | $ | 847,433 |

(1) | CTU results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.

(2) | AIUS results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition.

(3) | Corporate and Other includes results of operations and total assets for closed campuses. Revenue recorded within Corporate and Other relates to miscellaneous non-student related revenue.

(4) | Total assets do not include intercompany receivable or payable activity between institutions and corporate and investments in subsidiaries.

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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2021 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;

| • | the impact of management changes; and

| • | changes in the overall U.S. economy which may continue to be impacted by the global COVID-19 pandemic.

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 academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. Our accredited institutions – Colorado Technical University (“CTU”) and the American InterContinental University System (“AIUS” or “AIU System”) – provide degree programs from associate through doctoral level as well as non-degree professional development and continuing education offerings. Our universities 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 support students and enhance learning. 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.

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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 p ostsecondary education provider that offer s a variety of academic programs. We organize our business across two reporting segments: CTU and AIU S. These segments are organized by key market segments and to enhance brand focus within each segment to more effectively execute our business plan.

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 CFPB, the FTC, state attorneys general and the media have scrutinized the for-profit postsecondary education sector. Congressional hearings and roundtable discussions were held regarding various aspects of the education industry 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 Departments of Education, Defense and Veterans Affairs to take action to limit or terminate the participation of for-profit educational institutions, including Perdoceo, 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 Presidential and Department administrations, 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 2022 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. 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.

2022 First Quarter Overview

During the quarter ended March 31, 2022 (“current quarter”), we continued to focus on enhancing student experiences, retention and academic outcomes as students adjust to the evolving COVID-19 pandemic and as pandemic-era restrictions ease. We believe the prolonged pandemic and its resulting safety measures, as well as the macro-economic and governmental response, has impacted overall student engagement and will continue to have a lingering impact on total student enrollments for the remainder of 2022. As a result, during the first quarter we continued to experience some students pause their academic programs or decide not to begin classes which negatively impacted total student enrollments as of the end of the current quarter. While we did see some improvement in student engagement during the current quarter we expect total student enrollments for the full year to decrease as compared to the prior year.

Additionally, leveraging data analytics, we made adjustments to our marketing strategies beginning in the third quarter of 2021. We believe these changes should further improve our ability, in the long term, to identify prospective students who are more likely to

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succeed at one of our universities. H owever, in the short-term, we believe these changes negatively impacted total student enrollments as of March 31, 2022 and will continue to negatively impact total student enrollments during the second quarter of 2022.

Total student enrollments decreased 14.7% at March 31, 2022 as compared to March 31, 2021, with CTU decreasing by 13.9% and AIUS decreasing by 16.1%. These decreases were a result of the factors mentioned above along with a negative timing impact as a result of the academic calendar redesign for the CTU segment. In early 2021, we redesigned CTU’s academic calendar to strategically place breaks between sessions and provide more opportunities for students to continue with their academic programs. We believe this redesign may improve student experiences and engagement. CTU’s academic calendar redesign, along with the previous academic calendar redesign at AIU, 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.

We believe investments in technology positively impact student experiences and academic outcomes. During the current quarter, we continued to invest in our technology infrastructure, including data analytics, so that our teams can be more effective in their student support efforts. Our technology infrastructure advancement project is progressing well and we continue to update our mobile platform and virtual campus. Additionally, we are experiencing longer than expected position vacancies and increased employee compensation expectations as a result of the competitive job market. As a result, we invested more in our recruiting resources and thus far have been maintaining appropriate staffing levels to effectively serve and educate our students.

While we believe that the factors impacting student engagement discussed above will negatively impact total student enrollments in 2022, we believe that the rate of decline in total student enrollments should gradually improve throughout the remainder of 2022 as the changes to our marketing processes begin to annualize in the third quarter of 2022 and as students further adjust to an environment post COVID-19. Typically, changes in total student enrollments have a lag in the impact on revenue, and, as a result, we expect revenue and operating income for 2022 to be lower as compared to 2021, excluding any positive impacts from acquisitions or the academic calendar redesign. We will continue our efforts to adjust our operating processes and expenses to align with overall revenue and enrollment trends, although we do not expect these adjustments to fully offset the expected revenue decline. Our strong balance sheet and technology infrastructure provide us with the ability to adapt our operations in response to fluctuations in enrollment trends. We continue to monitor for future impacts of a potential worsening of global economic conditions on our university operations and for changes in prospective student interest or student engagement levels as a result of changes in CDC and state mandated COVID-19 protocols and the U.S. economy.

Financial Highlights

Revenue for the quarter ended March 31, 2022 decreased by 0.4% or $0.7 million as compared to the prior year quarter, resulting from an increase in revenue for CTU of 6.9% or $7.3 million which was more than offset with a decrease for AIUS of 10.3% or $7.9 million. The revenue increase for CTU was primarily driven by a positive timing impact of the academic calendar redesign along with the Hippo acquisition. Excluding these positive impacts, CTU would have experienced a decline in revenue as compared to the prior year quarter which, along with the decline at AIUS, was driven by the factors impacting total student enrollments previously discussed. Operating income for the current year increased to $43.7 million as compared to operating income of $40.6 million for the prior year quarter. The increase in operating income was primarily due to increased revenue at CTU along with decreased operating expense associated with advertising and marketing, admissions and occupancy for the current quarter as compared to the prior year quarter.

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 $50.9 million for the current quarter as compared to $44.9 million for the prior year quarter. The improvement was driven by the same factors discussed above for the improvement in operating income.

Adjusted operating income and adjusted earnings per diluted share for the quarters ended March 31, 2022 and 2021 is presented below (dollars in thousands, unless otherwise noted):

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|  | For the Quarter Ended March 31, |
Adjusted Operating Income |  | 2022 |  |  | 2021 |
Operating income |  | $ | 43,693 |  |  | $ | 40,617 |
Depreciation and amortization (1) |  |  | 4,882 |  |  |  | 4,002 |
Legal fee expense related to certain matters (2) |  |  | 2,347 |  |  |  | 242 |
Adjusted Operating Income (3) |  | $ | 50,922 |  |  | $ | 44,861 |
|  | For the Quarter Ended March 31, |
Adjusted Earnings Per Diluted Share |  | 2022 |  |  | 2021 |
Reported Earnings Per Diluted Share |  | $ | 0.46 |  |  | $ | 0.43 |
Pre-tax adjustments included in operating expenses: |  |  |  |  |  |  |  |
Amortization for acquired intangible assets (1) |  |  | 0.02 |  |  |  | 0.01 |
Legal fee expense related to certain matters (2) |  |  | 0.03 |  |  |  | - |
Total pre-tax adjustments |  | $ | 0.05 |  |  | $ | 0.01 |
Tax effect of adjustments (4) |  |  | (0.01 | ) |  |  | - |
Total adjustments after tax |  |  | 0.04 |  |  |  | 0.01 |
Adjusted Earnings Per Diluted Share (3) |  | $ | 0.50 |  |  | $ | 0.44 |

(1) | Amortization for acquired intangible assets relate to definite-lived intangible assets associated with the Trident, DigitalCrafts and Hippo acquisitions.

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

(3) | The Company began adjusting for legal fee expense associated with (i) responses to the Department relating to borrower defense to repayment applications from former students, and (ii) acquisition efforts, during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. Prior period amounts were recast for these items to maintain comparability.

(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

Institutional and Programmatic Eligibility Negotiated Rulemaking. The Department’s previously announced negotiated rulemaking committee regarding institutional and programmatic eligibility requirements met in January, February and March 2022. As part of each negotiating session, the Department provided issue papers that revealed its intent to adjust current requirements as well as impose a number of additional obligations for schools and programs to remain eligible for Title IV Program funds.

Negotiators reached consensus on two of seven topics that were open for discussion:

| • | Adopting new regulations to calculate the ratio of a for-profit school’s revenue that is federal education assistance, referred to as the “90-10 Rule”; and

| • | Establishing Title IV Program eligibility through an alternative process known as the "ability to benefit.”

Negotiators failed to come to agreement on the remaining topics:

| • | Adopting a program eligibility rule tied to the term “gainful employment”;

| • | Imposing new requirements on owners and operators that sign agreements with the Department to participate in Title IV Programs;

| • | Placing additional requirements and limits on changes of ownership or control;

| • | Adopting new events that can lead to the posting of letters of credit or other commitments as part of the Department’s financial responsibility standards; and

| • | The Department’s proposal to add a number of requirements schools must satisfy in order to be considered administratively capable.

With negotiations completed, the next step in the rulemaking process is for the Department to draft and publish proposed regulations on these topics, or a subset of the topics, for public comment. On the two areas where negotiators reached consensus, the

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Department is obligated to use the consensus language in the regulatory text it publishes for comment. On the areas where consensus was not reached, the Department is free to draft language as it sees fit. The consensus proposal on the “90-10 Rule” includes an expanded view of what aid would be considered “federal educational assistance” under the rule, and is expected to include any identifiable revenue a school receives from tuition assistance programs offered by f ederal agencies, such as the Department s of Defense, Veterans Affairs and Labor. The consensus proposal also includes a number of technical changes, including a departure from the historical focus on cash basis revenue and existing Title IV Program cash management regulations. For example, institutions would be requir ed to accelerate the receipt of, or would be deemed to have received, federal funds at the end of the annual measurement period.

Following a public comment period on the proposed regulations, the Department will review and address the comments received and publish final regulations. Publication of final regulations in the Federal Register must occur on or before November 1 for the regulations to be effective for the next federal student financial aid award year, which begins July 1 of the following year.

See Item 1, “Business – Legislative Action and Recent Department Regulatory Initiatives” and “Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for an overview of the previously adopted and rescinded gainful employment regulation and the current rules relating to the 90-10 Rule, change of ownership or control, financial responsibility and administrative capability.

See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate – The extensive regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sector and the results of the 2020 Presidential and Congressional elections, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult,” in our Annual Report on Form 10-K for the year ended December 31, 2021 for information about the potential impact of new regulations on our business.

Pending Borrower Defense to Repayment Applications. In May 2021, the Department notified the Company that the Department has several thousand borrower defense applications that make claims regarding the Company’s institutions, including institutions that have ceased operations. As part of the initial fact-finding process, the Department will send individual student claims to the Company and allow the institutions the opportunity to submit responses to the borrower defense applications. A large majority of the claims received involve institutions or campuses that have ceased operations and, in some cases, involve students who attended over 25 years ago. We have submitted initial responses to the majority of claims received, and these responses indicate that we believe the applications fail to establish a valid borrower defense and the Department should therefore deny them. We continue to receive additional claims and respond to requests for information going back as far as 25 years with respect to these claims. The outcome of the Department’s evaluation of each of these applications is uncertain. See Item 1A, “Risk Factors – Risks Related to the Highly Regulated Field in Which We Operate - ‘Borrower defense to repayment’ regulations, including closed school discharges, may subject us to significant repayment liability to the Department for discharged federal student loans and posting of substantial letters of credit that may limit our ability to make investments in our business which could negatively impact our future growth,” in our Annual Report on Form 10-K for the year ended December 31, 2021 for more information about risks associated with the borrower defense to repayment regulations.

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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 ended March 31, 2022 and 2021 (dollars in thousands):

|  | For the Quarter Ended March 31, |
|  |  | 2022 |  |  | % of Total Revenue |  |  |  | 2021 |  |  | % of Total Revenue |  |  | 2022 vs 2021 % Change |
TOTAL REVENUE |  | $ | 182,959 |  |  |  |  |  |  | $ | 183,638 |  |  |  |  |  |  |  | -0.4 | %
OPERATING EXPENSES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Educational services and facilities (1) |  |  | 28,088 |  |  |  | 15.4 | % |  |  | 28,974 |  |  |  | 15.8 | % |  |  | -3.1 | %
General and administrative: (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Advertising and marketing |  |  | 32,798 |  |  |  | 17.9 | % |  |  | 36,794 |  |  |  | 20.0 | % |  |  | -10.9 | %
Admissions |  |  | 22,744 |  |  |  | 12.4 | % |  |  | 25,840 |  |  |  | 14.1 | % |  |  | -12.0 | %
Administrative |  |  | 37,039 |  |  |  | 20.2 | % |  |  | 33,687 |  |  |  | 18.3 | % |  |  | 10.0 | %
Bad debt |  |  | 13,715 |  |  |  | 7.5 | % |  |  | 13,724 |  |  |  | 7.5 | % |  |  | -0.1 | %
Total general and administrative expense |  |  | 106,296 |  |  |  | 58.1 | % |  |  | 110,045 |  |  |  | 59.9 | % |  |  | -3.4 | %
Depreciation and amortization |  |  | 4,882 |  |  |  | 2.7 | % |  |  | 4,002 |  |  |  | 2.2 | % |  |  | 22.0 | %
OPERATING INCOME |  |  | 43,693 |  |  |  | 23.9 | % |  |  | 40,617 |  |  |  | 22.1 | % |  |  | 7.6 | %
PRETAX INCOME |  |  | 43,834 |  |  |  | 24.0 | % |  |  | 40,998 |  |  |  | 22.3 | % |  |  | 6.9 | %
PROVISION FOR INCOME TAXES |  |  | 11,756 |  |  |  | 6.4 | % |  |  | 10,245 |  |  |  | 5.6 | % |  |  | -14.7 | %
Effective tax rate |  |  | 26.8 | % |  |  |  |  |  |  | 25.0 | % |  |  |  |  |  |  |  |
NET INCOME |  | $ | 32,078 |  |  |  | 17.5 | % |  | $ | 30,753 |  |  |  | 16.7 | % |  |  | 4.3 | %

(1) | Educational services and facilities expense includes costs attributable to the educational activities of our universities, 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 and certain costs of establishing and maintaining computer laboratories. 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

Revenue for the first quarter of 2022 (“current quarter”) decreased by 0.4% or $0.7 million as compared to the prior year quarter. The current quarter decrease is driven by a $7.9 million decline in revenue within AIUS which was partially offset with an increase of $7.3 million within CTU. Revenue for the current quarter was positively impacted by the academic calendar redesign at CTU.

Educational Services and Facilities Expense (dollars in thousands)

|  | For the Quarter Ended March 31, |
|  |  | 2022 |  |  |  | 2021 |  |  | 2022 vs 2021 % Change |
Educational services and facilities: |  |  |  |  |  |  |  |  |  |  |  |
Academics & student related |  | $ | 23,694 |  |  | $ | 23,833 |  |  | -0.6% |
Occupancy |  |  | 4,394 |  |  |  | 5,141 |  |  | -14.5% |
Total educational services and facilities |  | $ | 28,088 |  |  | $ | 28,974 |  |  | -3.1% |

Current quarter educational services and facilities expense decreased by 3.1% or $0.9 million as compared to the prior year quarter, with 0.6% or $0.1 million lower academics and student related expense and 14.5% or $0.7 million lower occupancy expense as compared to the prior year quarter. Academics and student related expense remained relatively flat as compared to the prior year quarter while the decrease in occupancy expense for the current quarter was primarily a result of the relocation of our CTU Colorado Springs campus to a smaller facility.

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General and Administrative Expense (dollars in thousands)

|  | For the Quarter Ended March 31, |
|  |  | 2022 |  |  |  | 2021 |  |  | 2022 vs 2021 % Change |
General and administrative: |  |  |  |  |  |  |  |  |  |  |  |
Advertising and marketing |  | $ | 32,798 |  |  | $ | 36,794 |  |  | -10.9% |
Admissions |  |  | 22,744 |  |  |  | 25,840 |  |  | -12.0% |
Administrative |  |  | 37,039 |  |  |  | 33,687 |  |  | 10.0% |
Bad debt |  |  | 13,715 |  |  |  | 13,724 |  |  | -0.1% |
Total general and administrative expense |  | $ | 106,296 |  |  | $ | 110,045 |  |  | -3.4% |

The general and administrative expense for the current quarter decreased by 3.4% or $3.7 million as compared to the prior year quarter, driven by decreases in advertising and marketing and admissions expenses. Partially offsetting the current quarter decreases in admissions and advertising and marketing expense were increased administrative costs as compared to the prior year quarter.

Advertising and marketing expense for the current quarter decreased by 10.9% or $4.0 million as compared to the prior year quarter, as a result of adjustments to our marketing processes related to identifying prospective student interest within both CTU and AIUS. Admissions expense decreased by 12.0% or $3.1 million as compared to the prior year quarter as a result of the changes to marketing processes mentioned above which also benefit admissions expense at both institutions.

Administrative expense for the current quarter increased by 10.0% or $3.4 million as compared to the prior year quarter primarily driven by increased legal fees within Corporate and Other related to the borrower defense to repayment applications from former students.

Bad debt expense incurred by each of our segments during the quarters ended March 31, 2022 and 2021 was as follows (dollars in thousands):

|  | For the Quarter Ended March 31, |
|  |  | 2022 |  |  | % of Segment Revenue |  |  |  | 2021 |  |  | % of Segment Revenue |  |  | 2022 vs 2021 % Change |
Bad debt expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CTU |  | $ | 7,185 |  |  |  | 6.4 | % |  | $ | 6,323 |  |  |  | 6.0 | % |  |  | 13.6 | %
AIUS |  |  | 6,551 |  |  |  | 9.4 | % |  |  | 7,415 |  |  |  | 9.6 | % |  |  | -11.7 | %
Corporate and Other |  |  | (21 | ) |  | NM |  |  |  | (14 | ) |  | NM |  |  | NM |
Total bad debt expense |  | $ | 13,715 |  |  |  | 7.5 | % |  | $ | 13,724 |  |  |  | 7.5 | % |  |  | -0.1 | %

Bad debt expense for the current quarter remained relatively flat as compared to the prior year quarter. AIUS’ bad debt expense decreased by 11.7% or $0.9 million as compared to the prior year quarter which was offset with increased bad debt expense at CTU of 13.6% or $0.9 million, as compared to the prior year quarter.

We continue to expect periodic fluctuations in bad debt expense. We regularly monitor 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. 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 7.6% or $3.1 million for the current quarter as compared to the prior year quarter. The current quarter improvement was primarily due to decreased advertising and marketing and admissions expenses which more than offset the increase in administrative expense and lower revenue for the current quarter as compared to the prior year quarter.

Provision for Income Taxes

For the quarter ended March 31, 2022, we recorded a provision for income taxes of $11.8 million or 26.8% as compared to a provision for income taxes of $10.2 million or 25.0% for the prior year quarter. The effective tax rate for the quarter ended March 31, 2022 was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves, the net effect of which increased the effective tax rate by 0.5%. The effective tax rate for the quarter ended March 31, 2021 was benefitted by the

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release of previously recorded tax reserves, which reduced the effective tax rate by 1.3%. F or the full year 202 2, we expect our effective tax rate to be between 25.5% and 26.5%.

SEGMENT RESULTS OF OPERATIONS

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

|  | For the Quarter Ended March 31, |
|  | REVENUE |  |  | OPERATING INCOME (LOSS) |  |  | OPERATING MARGIN |
|  |  | 2022 |  |  |  | 2021 |  |  | % Change |  |  |  | 2022 |  |  |  | 2021 |  |  | % Change |  |  |  | 2022 |  |  |  | 2021 |
REVENUE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CTU (1) |  | $ | 113,148 |  |  | $ | 105,822 |  |  |  | 6.9 | % |  | $ | 43,026 |  |  | $ | 36,143 |  |  |  | 19.0 | % |  |  | 38.0 | % |  |  | 34.2 | %
AIUS (2) |  |  | 69,532 |  |  |  | 77,477 |  |  |  | -10.3 | % |  |  | 9,523 |  |  |  | 11,323 |  |  |  | -15.9 | % |  |  | 13.7 | % |  |  | 14.6 | %
Corporate and other (3) |  |  | 279 |  |  |  | 339 |  |  |  | -17.7 | % |  |  | (8,856 | ) |  |  | (6,849 | ) |  |  | 29.3 | % |  | NM |  |  | NM |
Total |  | $ | 182,959 |  |  | $ | 183,638 |  |  |  | -0.4 | % |  | $ | 43,693 |  |  | $ | 40,617 |  |  |  | 7.6 | % |  |  | 23.9 | % |  |  | 22.1 | %

_________________

(1) | CTU’s results of operations include the Hippo acquisition commencing on the September 10, 2021 date of acquisition.

(2) | AIUS’ results of operations include the DigitalCrafts acquisition commencing on the August 2, 2021 date of acquisition.

(3) | Results of operations for closed campuses are included within Corporate and Other. Revenue recorded within Corporate and Other relates to miscellaneous non-student related revenue.

Total student enrollments represent all 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. Total student enrollments do not include learners participating in non-degree professional development and continuing education offerings.

|  | TOTAL STUDENT ENROLLMENTS |
|  | As of March 31, |
|  |  | 2022 |  |  |  | 2021 |  |  | % Change |
CTU |  |  | 23,500 |  |  |  | 27,300 |  |  |  | -13.9 | %
AIUS |  |  | 14,100 |  |  |  | 16,800 |  |  |  | -16.1 | %
Total |  |  | 37,600 |  |  |  | 44,100 |  |  |  | -14.7 | %

CTU. Current quarter revenue increased by 6.9% or $7.3 million as compared to the prior year quarter. The current quarter revenue was positively impacted by the timing impact of the academic calendar redesign as well as the Hippo acquisition. CTU experienced a decrease in total student enrollment of 13.9% at March 31, 2022 as compared to March 31, 2021. We believe the decrease in total student enrollments was primarily due to the following two factors: students pausing their academic programs and deciding not to begin class as a result of the COVID-19 pandemic, and changes in our marketing and student recruitment processes as we continue to use technology and data analytics to help us identify prospective students who are more likely to succeed at one of our universities. Additionally, total student enrollments were negatively impacted by the academic calendar redesign for the current quarter.

Current quarter operating income for CTU improved by 19.0% or $6.9 million as compared to the prior year quarter, primarily due to increased revenue as a result of the timing impact of the academic calendar redesign.

AIUS. Current quarter revenue decreased by 10.3% or $7.9 million as compared to the prior year quarter. AIUS experienced a decrease in total student enrollment of 16.1% at March 31, 2022 as compared to March 31, 2021. We believe the decrease in total student enrollments was caused by the same two factors as mentioned above for CTU.

Current quarter operating income for AIUS decreased by 15.9% or $1.8 million as compared to the prior year quarter, driven by the lower revenue discussed above which more than offset decreased operating expense, primarily within advertising and marketing and admissions expenses, as compared to the prior year quarter.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company and remaining expenses associated with closed campuses. Total Corporate and Other operating loss for the current quarter increased 29.3% or $2.0 million as compared to the prior year quarter, primarily as a result of increased legal fee expense associated with the borrower defense to repayment applications from former students.

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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, 2021. 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, 2021 also includes a discussion of these and other significant accounting policies.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of March 31, 2022, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $499.3 million. Restricted cash as of March 31, 2022 was $1.2 million and relates to amounts held in an escrow account to secure post-closing indemnification obligations of the seller pursuant to the Hippo acquisition. 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 2022. 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 and acquisitions through at least the next 12 months primarily with cash generated by operations and existing cash balances.

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 March 31, 2022, there were no amounts outstanding under the revolving credit facility.

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 of quality educational institutions or programs and share repurchases. We completed two acquisitions with a combined initial cash consideration of approximately $57.1 million during the year ended December 31, 2021 and we currently anticipate that we will complete another acquisition by the end of 2022 with a purchase price relatively similar to the 2021 acquisitions. 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 new stock repurchase program for up to $50.0 million which commences March 1, 2022 and expires September 30, 2023. 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. The Company repurchased approximately 0.4 million shares for $3.8 million during the quarter ended March 31, 2022.

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, 2021.

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Sources and Uses of Cash

Operating Cash Flows

During the quarters ended March 31, 2022 and 2021, net cash flows provided by operating activities totaled $22.2 million and $44.7 million, respectively. The current quarter decrease in net cash flows provided by operating activities was driven by the timing impact of Title IV cash receipts which negatively impacted the current quarter.

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 the quarters ended March 31, 2022 and 2021, approximately 77% and 81%, respectively, of our institutions’ aggregate cash receipts from tuition payments came from Title IV Program funding. This percentage differs from the Title IV Program percentage calculated under the 90-10 Rule due to the treatment of certain funding types and certain student level limitations on what and how much to count as prescribed under the rule.

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, 2021.

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 quarters ended March 31, 2022 and 2021, net cash flows used in investing activities totaled $146.9 million and $62.6 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 $135.2 million and $61.6 million for the quarters ended March 31, 2022 and 2021, respectively.

Payments for potential business acquisition. During the quarter ended March 31, 2022, the Company made advance deposit payments of $7.0 million in connection with a potential business acquisition.

Capital Expenditures. Capital expenditures increased to $4.7 million for the quarter ended March 31, 2022 as compared to $1.0 million for the quarter ended March 31, 2021. Capital expenditures represented approximately 2.6% and 0.6% of total revenue for the quarters ended March 31, 2022 and 2021, respectively. For the full year 2022, we expect capital expenditures to be approximately 2.0% of revenue.

Financing Cash Flows

During the quarters ended March 31, 2022 and 2021, net cash flows used in financing activities totaled $8.8 million and $1.7 million, respectively. The current quarter included $3.8 million of payments to repurchase shares of our common stock and 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 $1.6 million and $2.0 million for the quarters ended March 31, 2022 and 2021, respectively.

Changes in Financial Position

Selected condensed consolidated balance sheet account changes from December 31, 2021 to March 31, 2022 were as follows (dollars in thousands):

|  | March 31, |  |  | December 31, |  |  |  |  |
|  | 2022 |  |  | 2021 |  |  | % Change |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |  |
Student receivables, net |  | $ | 34,104 |  |  | $ | 43,033 |  |  |  | -21 | %
Receivables, other |  |  | 8,845 |  |  |  | 1,692 |  |  |  | 423 | %
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |
Accrued expenses - payroll and related benefits |  |  | 17,648 |  |  |  | 25,312 |  |  |  | -30 | %
Income taxes |  |  | 10,982 |  |  |  | 211 |  |  |  | 5105 | %
Deferred revenue |  |  | 39,108 |  |  |  | 70,613 |  |  |  | -45 | %

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Student receivables, net: The decrease is primarily related to the timing of academic terms within AIUS and CTU.

Receivables, other: The increase is primarily related to the $7.0 million advance deposit in connection with a potential acquisition.

Accrued expenses – payroll and related benefits: The decrease is primarily related to payments made during the current quarter of annual incentive compensation.

Income taxes: The increase primarily relates to amounts owed with respect to estimated payments of federal and state income tax for 2022.

Deferred revenue: The decrease is primarily related to the timing impact of the academic terms within CTU and AIUS.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 March 31, 2022, 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 March 31, 2022, we had no outstanding borrowings under this facility.

Our financial instruments are recorded at their fair values as of March 31, 2022 and December 31, 2021. 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.

ITEM 4. CONTROLS AND PROCEDURES

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 March 31, 2022, 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 March 31, 2022 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

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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.

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PART II – OTHER INFORMATION

Item 1. | Legal Proceedings

Note 8 “Contingencies” to our unaudited condensed consolidated financial statements is incorporated herein by reference.

Item 1A. | Risk Factors

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, 2021, which was filed with the Securities and Exchange Commission on February 24, 2022.

Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds

On January 27, 2022, the Board of Directors of the Company approved a new stock repurchase program which authorizes the Company to repurchase up to $50.0 million of the Company’s outstanding common stock. See Note 11 “Stock Repurchase Program” to our unaudited condensed consolidated financial statements for further information.

The following table sets forth information regarding purchases made by us of shares of our common stock on a monthly basis during the quarter ended March 31, 2022:

Issuer Purchases of Equity Securities

Period |  | Total Number of Shares Purchased (1) |  |  | Average Price Paid per Share |  |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,889,583 |
January 1, 2022—January 31, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  |  | 2,889,583 |
February 1, 2022—February 28, 2022 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,889,583 |
March 1, 2022—March 31, 2022 |  |  | 508,967 |  |  |  | 10.69 |  |  |  | 362,571 |  |  |  | 46,164,617 |
Total |  |  | 508,967 |  |  |  |  |  |  |  | 362,571 |  |  |  |  |

(1) | Includes 146,396 shares delivered back to the Company for payment of withholding taxes from employees for vesting restricted stock units pursuant to the terms of the Perdoceo Education Corporation Amended and Restated 2016 Incentive Compensation Plan.

(2) | On January 27, 2022, the Board of Directors of the Company approved a new stock repurchase program of up to $50.0 million which commenced on March 1, 2022 and expires on September 30, 2023. The previous stock repurchase program expired on February 28, 2022.

Item 6. | Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the “Exhibit Index,” which is attached hereto and incorporated by reference herein.

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|  | INDEX TO EXHIBITS |  |
Exhibit Number |  | Exhibit |  | Incorporated by Reference to:
+10.1 |  | First Amendment to Credit Agreement entered into as of April 1, 2022, among Perdoceo Education Corporation, the guarantors and the lenders under the Credit Agreement and Wintrust Bank, N.A., as administrative agent and letter of credit issuer |  |
*10.2 |  | 2022 Annual Incentive Plan |  | Exhibit 10.1 to our Form 8-K filed on March 11, 2022
*10.3 |  | Form of Retention Bonus Award Agreement |  | Exhibit 10.2 to our Form 8-K filed on March 11, 2022
*10.4 |  | Amended and Restated Letter Agreement between Perdoceo Education Corporation and Todd Nelson dated January 19, 2022 |  | Exhibit 10.1 to our Form 8-K filed on January 20, 2022
*10.5 |  | Letter Agreement between Perdoceo Education Corporation and Jeffrey Ayers dated February 21, 2022 |  | Exhibit 10.21 to our Form 10-K for the year ended December 31, 2021
+31.1 |  | Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |  |
+31.2 |  | Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |  |
+32.1 |  | Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |  |
+32.2 |  | Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |  |
+101.INS |  | Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |  |
+101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  |
+101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |
+101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  |
+101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  |
+101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |
+104 |  | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL (included in Exhibit 101) |  |
|  | ____ |  |
|  | * Management contract or compensatory plan or arrangement required to be filed as an Exhibit on this Form 10-Q. |  |
|  | +Filed herewith. |  |

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| PERDOCEO EDUCATION CORPORATION
Date: May 5, 2022 | By: |  | /s/ ANDREW H. HURST
|  |  | Andrew H. Hurst President and Chief Executive Officer (Principal Executive Officer)
Date: May 5, 2022 | By: |  | /s/ ASHISH R. GHIA
|  |  | Ashish R. Ghia Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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