Perdoceo Education : Winter 2020 Investor Update

CJS Securities

Winter 2020 Investor Conference

January 8, 2020

New York, NY

CAUTIONARY STATEMENTS & DISCLOSURES

Certain financial information is presented on a non-GAAP basis. 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. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and to provide estimates of future performance.

The most directly comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures

are provided at the end of this presentation on slides 23-25.

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PERDOCEO: INVESTMENT THESIS

Investment

Thesis

FAVORABLE

INDUSTRY TRENDS

INNOVATIVE

TECHNOLOGY /

STUDENT FOCUS

SCALABLE SHARED

SERVICES

STRONG BALANCE

SHEET /

PROFITABILITY

VALUATION METRICS/ MULTIPLE EXPANSION

• Postsecondary enrollments expected to show growth
• Online platform well accepted and growing
• Continued demand for skilled professionals
• Increasing participation from non-traditional students, adult learners
• Utilize technology as an enabler and a differentiator: leveraging mobility and predictive analytics to enhance student engagement
• Student first mind-set across all our operations
• Innovative personalized learning technology, powered by intellipath®
• Support organic growth at our Universities
• Key enabler for Inorganic strategies
• Capital allocation prioritizes high ROIC project: ROIC > Cost of Capital
• Increased cash flow from operations
• Pending acquisition of Trident University
• Opportunity for further multiple expansion: completion of teach-outs and execution against our objective of sustainable and responsible growth

3

COMPANY OVERVIEW

4

EXECUTIVE MANAGEMENT TEAM

EXPERIENCED EXECUTIVE MANAGEMENT TEAM WITH COMBINED INDUSTRY EXPERIENCE OF OVER 100 YEARS

Todd Nelson

Chief Executive Officer

Jeffrey Ayers	Beth Boeke
General Counsel	Chief Human Resources Officer
& Corporate Secretary
Dave Czeszewski	Ashish Ghia
Chief Information Officer	Chief Financial Officer
Andrew Hurst	John Kline
President	President
Colorado Technical University	American InterContinental University

5

REGIONALLY ACCREDITED ACADEMIC INSTITUTIONS

Primarily an online institution		Primarily an online institution
	SCALABLE
2 campus locations	SHARED	2 campus locations
- Atlanta, GA	SERVICES	- Aurora, CO
- Houston, TX		- Colorado Springs, CO
Total Enrollments - 13,800(1)		Total Enrollments - 22,900(1)
Degrees conferred -		Degrees conferred -
141,000+ since 1970		104,000+ since 1965

(1) As of September 30, 2019	6

PERDOCEO OPERATIONS ARE SPREAD ACROSS THE UNITED STATES

HEADQUARTERS

Schaumburg, IL

CTU AURORA

Aurora, CO

CTU COLORADO SPRINGS

Colorado Springs, CO

CTU SUPPORT CENTER	AIU ATLANTA
Tempe, AZ
Atlanta, GA
AIU SUPPORT CENTER
Chandler, AZ
	AIU HOUSTON
	Houston, TX

7

TRANSFORMATION

8

PROGRESS AND ACCOMPLISHMENTS

2018 WAS A WATERSHED YEAR FOR OUR COMPANY

TRANSFORM

Teach-out process completed

• Related lease obligations have substantially diminished
• ~$10M of net lease obligations 2019 through 2021

STRONG

BALANCE

SHEET

Ended 2018 with ~$229 million of cash(1)

• Operating cash flows strengthened to a seven year high

No Debt

INVESTMENTS	GROWTH	SCALABILITY	EXPERIENCED
TEAM
Incremental	Positive	Shared services	Motivated team
investments in	enrollment trends	and support	that is focused on
student support	across both	functions have	effectivelyand
services and	Universities	achieved an	efficiently
processes		optimized level of	educatingour
• IL and AZ	Total Perdoceo	efficiency which	students
margin expansion	is scalable for
centers

• Graduation	future growth
teams
• Technology

(1) Includes cash, cash equivalents, restricted cash, and available-for-saleshort-term investments	9

HOW WE GOT HERE: OUR TRANSFORMATION PLAN

Transformation Plan initiated in 2015 - NOW COMPLETE

Teach-out/Divest	Improve operating	Invest in and
Sanford Brown (SB) and	efficiency through	grow University
Le Cordon Bleu ® (LCB)	process	operations
schools	re-engineering

COMPLETE

COMPLETE

PRESENT FOCUS

10

TRANSFORMATION PLAN COMPLETE

TRANSFORMATION ENABLED US TO FOCUS ON

REGIONALLY ACCREDITED INSTITUTIONS

Past

Keeping our commitments to students while transforming the Company

Process re-engineering

Investing in technology and

student services

Commitment to Education

(responsible teach-out completion)

Present

Strong institutions with focus on student experiences, retention & academic outcomes

2019 Total Enrollments: 36,700

(as of September 30th)

11

AIU AND CTU BRANDS

HOW ARE

AIU and CTU

ALIKE and

DIFFERENT?

High touch student centric support model

Potential for faster growth and margin expansion

Classroom built for learning: easy navigation, learner centric curriculum

Regionally accredited

Scalable

shared services

Blended learning: online

and campus-based

Non-traditional students:

Adult learners

Shared best practices

Variety of

Program offerings:

Engineering, Computer Science, Nursing, Doctoral level

Diversity of populations: Corporate Partnerships, Military

Education built for the busy adult: CTU Fast Track™

Modest growth

12

INDUSTRY

13

INDUSTRY OVERVIEW

ONLINE POSTSECONDARY EDUCATION - VALUE PROPOSITION

Growth in 'blended		Need for non-traditional		Advancement in		Increased earning
learning' online platform		classroom format - adult
		innovative technology		potential with degrees
- well accepted		learners

Source: BMO The Education Industry: 2018, p. 13	14

INDUSTRY OUTLOOK: INDUSTRY GROWTH DRIVERS

PERDOCEO

WELL POSITIONED WITHIN THE POSTSECONDARY EDUCATION LANDSCAPE

PERDOCEO POSITIONING

• Blended offerings (online/campus-based)
• Innovative technology (AI, intellipath® and Mobility)
• Mostly serving non-traditional, adult learners with opportunity to further penetrate and expand student demographics
• Scholarships, grants and corporate partnerships
• Student first model with focus on retention, academic outcomes and student experiences
• Scalable shared services: back-end student support and general corporate functions

15

FINANCIAL HIGHLIGHTS

16

STUDENT DEMOGRAPHICS

STUDENT DEMOGRAPHICS: NON-TRADITIONAL ADULT LEARNERS

University Total Enrollments (as of December 31st, 2018)

BY SEGMENT

Revenue	11,800
34%
$375.8M
65%

Revenue $204.9M 35%

22,600

66%

AIU CTU

BY DEGREE TYPE

16% 13%

71%

Doctoral & Master's

Bachelor's

Associate

BY CORE CURRICULA

12%

14%

74%

Business Studies

Information Technology

Health Education

17

KEY METRICS FOR 2018 FULL YEAR and 2019 SEPTEMBER 30TH YEAR TO DATE

ENROLLMENT GROWTH DRIVEN BY INVESTMENTS IN TECHNOLOGY AND STUDENT-SERVING PROCESSES

		2018		2017		2018 FY			2019		'19 vs PY
		Full Year		Full Year		vs PY			Sept YTD		Sept YTD
New Enrollments:	38,650	37,900	+2.0%		33,680	(1)
University		+16.2%
Total Enrollments:	(2)	(2)	(3)		(4)	+6.1%
University	34,400	34,700	-0.9%		36,700
Operating Income:		$71.3M		$34.1M	+108.9%			$54.4M	(5)
Total CEC					+6.5%
Adjusted Operating Income:	(6)	$105.2M		$66.8M	+57.3%			$99.8M	+32.3%
Total CEC

1. Positively impacted by the academic calendar redesign at AIU
2. 2018 and 2017 enrollments are as of December 31st
3. Enrollment comparability impacted by timing of academic calendar redesign at AIU
4. 2019 enrollments are as of September 30th
5. Year-to-dateresults (Q1+Q2+Q3) include legal settlements for FTC and Oregon arbitrations recorded in 2019 and Surrett recorded in 2018
6. See slides 23-25 for the GAAP to non-GAAP reconciliation

INVESTMENTS IN:

• Two new student support centers in Arizona
• Further enhancing our Illinois centers
• Graduation teams
• Training and development
• Student technology

18

ENROLLMENT METRICS: UNIVERSITY GROUP

New Enrollments Trends → Growth

CTU NEW ENROLLMENT GROWTH vs PRIOR YEAR

2017

2018

2019

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

New Enrollments

+5.5%

+1.6%

+10.9%

+7.4%

+4.6%

+5.8%

+9.0%

+7.1%

+14.3%

+7.0%

-0.3%

AIU NEW ENROLLMENT GROWTH vs PRIOR YEAR

2017

2018

2019

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

New Enrollments

+1.4%

+17.3%

-2.8%

+27.2%

-51.5%

+9.0%

+96.8%

-30.8%

+124.7%

-0.3%

+10.0%

Enrollment Days

-6.2%

+9.1%

-9.1%

+38.5%

-42.1%

0%

+60.0%

-38.9%

+60.0%

-16.7%

0%

'est imat ed'

ENROLLMENT DAYS: In general, enrollment days attributable to any given quarter are the available days during which a

prospective student can apply to start school in that quarter

AIU quarterly comparability impacted by the academic calendar redesign

19

INVESTMENT THESIS

20

PERDOCEO: INVESTMENT THESIS

Investment

Thesis

FAVORABLE

INDUSTRY TRENDS

INNOVATIVE

TECHNOLOGY /

STUDENT FOCUS

SCALABLE SHARED

SERVICES

STRONG BALANCE

SHEET /

PROFITABILITY

VALUATION METRICS/ MULTIPLE EXPANSION

• Postsecondary enrollments expected to show growth
• Online platform well accepted and growing
• Continued demand for skilled professionals
• Increasing participation from non-traditional students, adult learners
• Utilize technology as an enabler and a differentiator: leveraging mobility and predictive analytics to enhance student engagement
• Student first mind-set across all our operations
• Innovative personalized learning technology, powered by intellipath®
• Support organic growth at our Universities
• Key enabler for Inorganic strategies
• Capital allocation prioritizes high ROIC project: ROIC > Cost of Capital
• Increased cash flow from operations
• Pending acquisition of Trident University
• Opportunity for further multiple expansion: completion of teach-outs and execution against our objective of sustainable and responsible growth

21

APPENDIX

22

GAAP TO NON-GAAP RECONCILIATIONS - FULL YEAR: 2018 vs 2017

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)

(In thousands)

		For the Year Ended December 31,
		ACTUAL
Adjusted Operating Income		2018			2017
Total Company:
Operating (loss) income	$	71,298	$	34,136
Depreciation and amortization		9,394			13,990
Lease expenses for vacated space (2)		8,416			12,167
Severance and related costs, net of cancellations (3)		1,455			-
Significant legal settlements (4)		14,595			6,543
Adjusted Operating Income --
Total Company	$	105,158	$	66,836

23

GAAP TO NON-GAAP RECONCILIATIONS - SEPTEMBER 30TH YEAR TO DATE: 2019 vs 2018

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)

(In thousands)

		For the Year to Date Ended September 30,
		ACTUAL
Adjusted Operating Income		2019			2018
Total Company:
Operating (loss) income	$	54,449	$	51,115
Depreciation and amortization		6,752			7,049
Lease expenses for vacated space (2)		1,453			5,774
Severance and related costs, net of cancellations (3)		-			1,898
Significant legal settlements (4)		37,100			9,595
Adjusted Operating Income --
Total Company	$	99,754	$	75,431

24

GAAP TO NON-GAAP RECONCILIATIONS

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS

1. 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. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its operations, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and to provide estimates of future performance.

The Company believes adjusted operating income (loss) allows it to analyze and assess its ongoing operations and compare current operating results with the operational performance of other companies in its industry because it does not give effect to potential differences caused by items it does not consider reflective of underlying operating performance, such as restructuring charges and significant legal reserves. In evaluating adjusted operating income (loss), investors should be aware that in the future the Company may incur expenses similar to the adjustments presented above. The presentation of adjusted operating income (loss) should not be construed as an inference that the Company's future results will be unaffected by expenses that are unusual, non-routine or non- recurring. Adjusted operating income (loss) has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for net income (loss), operating income (loss), or any other performance measure derived in accordance and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to corresponding 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 corresponding financial results presented in accordance with GAAP.

1. Lease expenses for vacated space include both fixed and variable lease costs offset with sublease income.
2. Severance and related costs, net of cancellations, include charges related to significant restructuring actions which were primarily recorded within the University Group. These restructuring charges do not regularly occur and are not considered part of ongoing operating results.
3. Significant legal settlements relate to the FTC and Oregon arbitration matters recorded during 2019 and the Surrett matter recorded during 2018.

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