Zovio Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Zovio Q3 2020 earnings conference call. At this time, participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Elena Vittucci, our VP of Corporate Communications. Thank you. Please go ahead.

Thank you, and good afternoon. Zovio's third quarter 2020 earnings release was issued earlier today and is posted on the company's website at www.zovio.com. Joining me on the call today are Andrew Clark, founder, president, and chief executive officer of and Kevin Royal, Chief Financial Officer. We would like to remind you that some of the statements we make today may be considered forward-looking, including statements regarding new enrollment growth, student retention, education partnerships, and other programs and services, our ability to meet all required conditions, and obtain all required approvals to close on the plans regarding Ashford University, and our current plan timing to do so, our ability to transition to become an education technology services company, our ability to grow through acquisition, our ability to successfully integrate and leverage acquired companies, future revenue growth, EBITDA, financial and related guidance, and commentary regarding fiscal year 2020 and later. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. On the call today, we will discuss certain non-GAAP financial measures In our earnings release, you will find additional disclosures regarding these measures, including reconciliations of these measures with U.S. GAAP. Note that these non-GAAP financial measures are intended to supplement GAAP financial information and should not be considered as a substitute for our GAAP results. Please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2019, as well as our quarterly report on Form 10-Q for the quarter ended September 30, 2020, which we filed with the SEC earlier today for a more detailed description of the risk factors that may affect our results. You may obtain copies from the SEC or by visiting the investor relations section of our website. At this time, it is my pleasure to introduce Zobio's founder, president, and CEO, Andrew Clark.

Thank you, Alana, and welcome to our third quarter 2020 earnings call. After I discuss some of the highlights for the quarter, Kevin will review our financial results and key operating metrics. After Kevin concludes, I will offer my closing comments. We are incredibly pleased to report a strong third quarter for 2020. First and foremost, in line with our guidance, we delivered low single-digit new enrollment growth. Our team has remained focused and energized as the steady flow of new inquiries continues. Retention for the quarter also saw significant improvement, increasing 320 basis points over the prior year, reaching 61.9% as of September 30th, 2020. Ashford's superior offerings and reputation, combined with the initiatives we put in place earlier this year to increase resources, and enhanced overall efficiency supported the best retention since the second quarter of 2016. As we look to the fourth quarter, we anticipate this momentum at Ashford to continue with new enrollment growth in the mid-single digits on a normalized basis. For the third quarter of 2020, we delivered reported revenue of $102.2 million and net income of 1.1 million or 3 cents per diluted share. Excluding non-GAAP items, our non-GAAP net income for the third quarter of 2020 was 2.9 million or 9 cents per diluted share. Last quarter, we announced the signing of a definitive agreement with the University of Arizona to acquire Ashford University, creating the University of Arizona Global Campus or UAGC. This transaction marked a key moment for Zovio's evolution into a world-class education technology services company and also reinforced the strength of Ashford's value proposition to its students. In fact, the university's net promoter score hit a new all-time high. As of the end of the third quarter, Ashford's NPS was 61.3, the highest since we began tracking this metric in January of 2017, and on par with other world-class global education leaders. Further, results from the 2020 National Survey of Student Engagement, or NSSE, indicated that Ashford provides an academic challenge that ranks with the top 10% of four-year colleges in the United States that participated in the NSSE. Ashford students rate their interactions with faculty and academic advising as high quality and say they experience high levels of effective teaching practices. Participating institutions include bachelor's degree-granting colleges and universities representing a broad diversity with respect to institution type, public or private, control, size, and region. We are incredibly excited to partner with UAGC in support of their vision. Building on the history of superior outcomes for students, UAGC will further expand access and provide innovative learning solutions to meet students where they are. We continue to target the transaction closing by the end of the year. However, this remains subject to approval by Ashford's accrediting body, WASC. As we discussed last quarter, through our strategic services agreement, we will continue to provide UAGC with our enterprise education technology and services, leveraging our unique advanced data analytics platform to provide personalized and innovative online education that enhances student engagement and improves the likelihood of student success. This agreement marks our inaugural university partnership client as we transition to a world-class education technology services company and will create a strong foundation from which we can pursue diversified growth, providing technology and services to other institutions, corporations, and learners. In our pursuit of growth, Zovio remains incredibly well-positioned. Leveraging our deep expertise delivering personalized individual learning experiences across all credential levels, modalities, and disciplines, we bring a clearly differentiated offering to our clients. First, we bring an end-to-end solution that spans the entire student lifecycle, marketing and recruitment to retention and course development tools. Second, our offerings are tailored and flexible. Third, we are aligned to operate at scale to support our clients' rapid growth objectives. And lastly, all of our robust solutions are powered by Signals. Signals is Dovio's proprietary predictive analytics platform that provides data-driven insights to enhance our clients' offerings and improve overall results and outcomes. This enables Zovio to develop solutions and engineer workflows that optimize performance metrics from marketing through graduation. The pandemic has, of course, presented significant challenges for everyone, making it clear that an increasingly virtual world will be our new normal. Higher education is at the forefront of this trend, yet not all institutions are prepared for this accelerated shift. Now more than ever, it will be critical to provide students with a robust online platform that meets them where they are and enables them to achieve success. At the same time, the employed and unemployed workforce is seeking opportunities to upskill. Zovio could not be better positioned to leverage these trends and execute our long-term strategy, which is centered on a number of key initiatives. First, deliver education services that meet the diverse and large-scale needs of higher education institutions. Second, accelerate growth businesses through ongoing investment to support strong growth expectations and diversification. Third, expand our skills to employment B2B and B2C offerings to empower learners to better connect with in-demand jobs, leveraging Learn at Forbes and education partners. And fourth, establish leadership position as a data-first services provider to offer institutions a technology and data-first suite of solutions that will further differentiate Xovio's offerings. Xovio's subsidiaries, Fullstack, TutorMe, and Learn at Forbes, all continue to perform better than expected. The addition of these services enhances Xovio's ecosystem to support learners' education and career aspirations by building on our existing capabilities to meaningfully serve higher ed institutions, bridge the education-to-employment gap, and help enterprise upskill and educate their most important asset, their people. During the quarter, Fullstack continued to outperform the anticipated number of university partnership agreements, with meaningful partnership announcements, including Colorado State University, Emory University, and University of Illinois, Chicago. As an example, Fullstack's partnership with Emory University's non-credit division, Emory Continuing Education, ECE, will offer programs aimed at developing qualified professionals to meet the staffing needs of Atlanta's prospering technology sector, with Emory's impressive reputation across Georgia and its long-standing relationships with Atlanta's most prominent businesses, bringing this accelerated training to the region alongside Emory was a natural fit. As students and experienced professionals continue to look for opportunities to upskill, we are seeing increased opportunity for our offerings. By the end of 2020, we expect Fullstack to have nearly doubled the university partners from our initial expectations, and we remain incredibly optimistic for its prospects as we move forward. In recognition of its superior offering, in September, TutorMe was awarded HowToLearn.com's 2020 Parent and Teacher Choice Award. The Parent and Teacher Choice Award from howtolearn.com are among the most recognized international awards by both parents and teachers. As students, parents, and teachers have pivoted to remote learning, the importance of online educational resources like TutorMe have become necessary to support learners. Given the dynamic of remote learning, companies are providing tutoring support as an employee benefit while education institutions from higher education to K-12 districts are leveraging TutorMe to ensure their students have help when and where they need it. In this vein, TutorMe continued to execute new partnership agreements during the quarter from universities to corporations to school districts. In September, TutorMe announced its alliance with the Allendale County School District which will provide over 1,150 K-12 students in the district with access to free online tutoring. Since 2017, Allendale County Schools have been focused on increasing the successful outcomes of the district students, and TutorMe stood out as an effective online tutoring program because the platform gives its students access to a live tutor consistently within 30 seconds. TudorBee added another 60 plus partners at the end of the third quarter of 2020, bringing the total to 176, an increase of nearly 280% year over year. Further, as the COVID-19 pandemic has driven increased demand, remote learning has continued to support explosive growth for online tutoring services. In the third quarter, total customer and partner usage increased nearly 340% year over year, continuing the strong momentum we saw in the second quarter. As a self-paced, skills-based content platform for the consumer, Learn at Forbes attracted subscribers at a strong clip. At the end of the third quarter, we had 2,700 active subscribers, which increased as a percentage in the high teens from the second quarter of 2020. We continue to be very encouraged by the success of this offering, and we remain enthusiastic about the prospects ahead for Learn at Forbes. We are incredibly pleased with the progress and growth we achieved during the third quarter. We delivered a return to new enrollment growth in line with our expectations. Student retention at levels not seen since 2016. And our broader offerings, including Fullstack, TutorMe, and Learn at Forbes, are firing on all cylinders. As we march towards the final step of Xovia's transition into a world-class education technology services company, we remain excited for the future. I want to thank our team for their hard work over the last several years to get us to this point. It is your commitment to superior student outcomes that has put Zobio on a path to take advantage of the attractive trends in higher education and deliver long-term growth and value creation. Now I will turn the call over to Kevin Royal to review our financial and operating results.