Zovio Inc

Zovio reported second-quarter revenue of $51.4 million, down from $69.2 million in the prior-year period. Net loss was $4.7 million, or $0.14 per diluted share, versus a net loss of $4.0 million, or $0.12 per diluted share, a year ago. Non-GAAP net loss was $12.3 million, or $0.36 per diluted share, compared with a non-GAAP net loss of $0.8 million, or $0.02 per diluted share, last year. The company also reported a $35.9 million impairment expense, a $45.7 million net gain on sale transactions, unrestricted cash and cash equivalents of $20.8 million at June 30, and $57.2 million of cash used in operating activities year to date. Management did not provide formal forward guidance; on the call, Kevin Royal said the company was not prepared to give revenue or EBITDA guidance, and Randy Hendricks said a decision on Fullstack Academy would be made over the next 90 days.

Randy Hendricks framed the quarter as a transition period and said Zovio had entered an agreement to sell its OPM business to UAGC after reviewing strategic alternatives aimed at unlocking shareholder value. He said military financial assistance issues at UAGC materially hurt enrollment and made it too capital-intensive to reach a profitable contract, leaving the company focused on a lower-cost run rate and the future of Fullstack Academy. His tone was pragmatic but cautiously optimistic about Fullstack, which he said has a strong outlook and continues to expand partnerships and programs.

Kevin Royal emphasized the financial impact of the UAGC transaction and the underlying quarter. He cited $51.4 million of revenue, $20.8 million of unrestricted cash at June 30, $6.1 million of restricted cash, and $57.2 million of cash used in operating activities year to date, with the increase driven mainly by the legal settlement and working capital changes. He also noted the company repaid the $31.5 million BlueToad term loan in full, paid UAGC $10.5 million in connection with the sale, and said cash would be about $12 million after that payment, before future stranded liabilities tied to the UAGC business.

Analysts focused on why Zovio chose to divest the UAGC OPM business, how much cash remained after the transaction, and whether management would provide Fullstack guidance. Randy Hendricks said the decision was driven by the time and capital needed to reach profitability, compounded by problems with military financial assistance, while Kevin Royal said cash would be roughly $12 million after the $10.5 million payment to UAGC. Management declined to give revenue or EBITDA guidance for Fullstack and said the strategic review should conclude within 90 days.