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

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.

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 ~~August 2,~~November 1, 2021: ~~70,082,105~~70,105,521

	June 30,			December 31,			September 30,			December 31,
(In Thousands, Except Share and Per Share Amounts)	2021			2020			2021			2020
ASSETS	(unaudited)						(unaudited)
CURRENT ASSETS:
Cash and cash equivalents, unrestricted	$	87,343		$	105,684		$	266,400		$	105,684
Restricted cash		4,000			4,000			5,195			4,000
Total cash, cash equivalents and restricted cash		91,343			109,684			271,595			109,684
Short-term investments		389,310			300,676			209,391			300,676
Total cash and cash equivalents, restricted cash and short-term investments		480,653			410,360			480,986			410,360
Student receivables, gross		91,457			84,599			79,618			84,599
Allowance for credit losses		(39,775	)		(39,917	)		(37,133	)		(39,917	)
Student receivables, net		51,682			44,682			42,485			44,682
Receivables, other		2,568			2,873			1,900			2,873
Prepaid expenses		10,986			8,209			8,078			8,209
Inventories		619			596			1,178			596
Other current assets		2,637			341			2,517			341
Total current assets		549,145			467,061			537,144			467,061

NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $107,628 and $101,380 as of June 30, 2021 and December 31, 2020, respectively		24,807			27,761
Property and equipment, net of accumulated depreciation of $110,648 and $101,380 as of September 30, 2021 and December 31, 2020, respectively								25,838			27,761
Right of use asset, net		40,821			44,773			38,793			44,773
Goodwill		118,312			118,312			162,692			118,312
Intangible assets, net of amortization of $5,844 and $4,178 as of June 30, 2021 and December 31, 2020, respectively		13,856			15,522
Intangible assets, net of amortization of $6,761 and $4,178 as of September 30, 2021 and December 31, 2020, respectively								34,109			15,522
Student receivables, gross		4,568			3,533			4,239			3,533
Allowance for credit losses		(3,101	)		(2,230	)		(2,889	)		(2,230	)
Student receivables, net		1,467			1,303			1,350			1,303
Deferred income tax assets, net		31,782			40,351			30,413			40,351
Other assets		6,229			6,434			6,080			6,434
TOTAL ASSETS	$	786,419		$	721,517		$	836,419		$	721,517
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lease liability-operating	$	9,779		$	9,789		$	10,036		$	9,789
Accounts payable		11,533			13,259			12,650			13,259
Accrued expenses:
Payroll and related benefits		19,495			22,661			22,764			22,661
Advertising and marketing costs		11,615			10,249			10,749			10,249
Income taxes		1,522			1,402			3,565			1,402
Other		18,614			11,921			17,596			11,921
Deferred revenue		45,214			34,534			57,051			34,534
Total current liabilities		117,772			103,815			134,411			103,815

NON-CURRENT LIABILITIES:
Lease liability-operating		40,565			43,405			37,732			43,405
Other liabilities		14,470			18,390			18,891			18,390
Total non-current liabilities		55,035			61,795			56,623			61,795

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; NaN issued or outstanding		-			-			-			-
Common stock, $0.01 par value; 300,000,000 shares authorized; 87,884,843 and 87,264,910 shares issued, 70,082,105 and 70,062,364 shares outstanding as of June 30, 2021 and December 31, 2020, respectively		879			873
Common stock, $0.01 par value; 300,000,000 shares authorized; 87,908,259 and 87,264,910 shares issued, 70,105,521 and 70,062,364 shares outstanding as of September 30, 2021 and December 31, 2020, respectively								879			873
Additional paid-in capital		666,470			658,423			670,497			658,423
Accumulated other comprehensive income		20			364
Accumulated other comprehensive (loss) income								(3	)		364
Retained earnings		199,737			142,335			227,506			142,335
Treasury stock, at cost; 17,802,738 and 17,202,546 shares as of June 30, 2021 and December 31, 2020, respectively		(253,494	)		(246,088	)
Treasury stock, at cost; 17,802,738 and 17,202,546 shares as of September 30, 2021 and December 31, 2020, respectively								(253,494	)		(246,088	)
Total stockholders' equity		613,612			555,907			645,385			555,907
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	786,419		$	721,517		$	836,419		$	721,517

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

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended September 30,						For the Year to Date Ended September 30,
(In Thousands, Except Per Share Amounts)	2021			2020			2021			2020			2021			2020			2021			2020
REVENUE:
Tuition and fees	$	174,804		$	175,499		$	357,635		$	345,893		$	172,595		$	168,471		$	530,230		$	514,364
Other		735			536			1,542			1,136			1,403			655			2,945			1,791
Total revenue		175,539			176,035			359,177			347,029			173,998			169,126			533,175			516,155

OPERATING EXPENSES:
Educational services and facilities		28,532			28,676			57,506			55,587			25,961			27,562			83,467			83,149
General and administrative		107,132			105,840			217,177			209,369			106,289			105,495			323,466			314,864
Depreciation and amortization		3,913			4,151			7,915			6,790			3,887			3,995			11,802			10,785
Asset impairment		-			-			-			612			-			-			-			612
Total operating expenses		139,577			138,667			282,598			272,358			136,137			137,052			418,735			409,410
Operating income		35,962			37,368			76,579			74,671			37,861			32,074			114,440			106,745

OTHER INCOME:
OTHER (EXPENSE) INCOME:
Interest income		322			1,011			681			2,498			154			737			835			3,235
Interest expense		(280	)		(43	)		(389	)		(84	)		(572	)		(42	)		(961	)		(126	)
Miscellaneous (expense) income		(35	)		125			107			112			(116	)		(14	)		(9	)		98
Total other income		7			1,093			399			2,526
Total other (expense) income														(534	)		681			(135	)		3,207

PRETAX INCOME		35,969			38,461			76,978			77,197			37,327			32,755			114,305			109,952
Provision for income taxes		9,319			10,272			19,564			19,876
Provision for (benefit from) income taxes														9,557			(7,206	)		29,121			12,670
INCOME FROM CONTINUING OPERATIONS		26,650			28,189			57,414			57,321			27,770			39,961			85,184			97,282

LOSS FROM DISCONTINUED OPERATIONS, net of tax		(1	)		(22	)		(12	)		(48	)		(1	)		(21	)		(13	)		(69	)

NET INCOME		26,649			28,167			57,402			57,273			27,769			39,940			85,171			97,213

NET INCOME PER SHARE - BASIC:	$	0.38		$	0.41		$	0.82		$	0.82		$	0.40		$	0.58		$	1.21		$	1.40

NET INCOME PER SHARE - DILUTED:	$	0.37		$	0.40		$	0.80		$	0.80		$	0.39		$	0.56		$	1.19		$	1.36

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		70,299			69,094			70,224			69,467			70,089			69,167			70,179			69,366
Diluted		71,679			70,900			71,616			71,350			71,466			71,016			71,649			71,267

	For the Quarter Ended June 30,					For the Year to Date Ended June 30,					For the Quarter Ended September 30,						For the Year to Date Ended September 30,
(In Thousands)	2021			2020		2021			2020		2021			2020			2021			2020
NET INCOME	$	26,649		$	28,167	$	57,402		$	57,273	$	27,769		$	39,940		$	85,171		$	97,213
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments		28			53		(101	)		5		(74	)		123			(175	)		128
Unrealized (loss) gain on investments		(22	)		1,431		(243	)		592
Total other comprehensive income (loss)		6			1,484		(344	)		597
Unrealized gain (loss) on investments												51			(461	)		(192	)		131
Total other comprehensive (loss) income												(23	)		(338	)		(367	)		259
COMPREHENSIVE INCOME	$	26,655		$	29,651	$	57,058		$	57,870	$	27,746		$	39,602		$	84,804		$	97,472

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

	Common Stock				Treasury Stock								Accumulated Other								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			Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Income (Loss)			Retained Earnings		Total
BALANCE, April 1, 2021		87,795	$	878		(17,363	)	$	(248,120	)	$	662,485	$	14		$	173,088	$	588,345
BALANCE, July 1, 2021																						87,885	$	879		(17,803	)	$	(253,494	)	$	666,470	$	20		$	199,737	$	613,612
Net income																						-		-		-			-			-		-			27,769		27,769
Foreign currency translation																						-		-		-			-			-		(74	)		-		(74	)
Unrealized gain on investments																						-		-		-			-			-		51			-		51
Treasury stock purchased																						-		-		-			-			-		-			-		-
Share-based compensation expense																						-		-		-			-			3,857		-			-		3,857
Common stock issued																						23		-		-			-			170		-			-		170
BALANCE, September 30, 2021																						87,908	$	879		(17,803	)	$	(253,494	)	$	670,497	$	(3	)	$	227,506	$	645,385

																					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, July 1, 2020																						86,279	$	863		(17,148	)	$	(245,313	)	$	646,849	$	941		$	75,344	$	478,684
Net income		-		-		-			-			-		-			26,649		26,649			-		-		-			-			-		-			39,940		39,940
Foreign currency translation		-		-		-			-			-		28			-		28			-		-		-			-			-		123			-		123
Unrealized loss on investments		-		-		-			-			-		(22	)		-		(22	)		-		-		-			-			-		(461	)		-		(461	)
Treasury stock purchased		-		-		(440	)		(5,372	)		-		-			-		(5,372	)		-		-		(36	)		(553	)		-		-			-		(553	)
Share-based compensation expense		-		-		-			-			3,677		-			-		3,677			-		-		-			-			3,232		-			-		3,232
Common stock issued		90		1		-			(2	)		308		-			-		307			209		2		(17	)		(205	)		909		-			-		706
BALANCE, June 30, 2021		87,885	$	879		(17,803	)	$	(253,494	)	$	666,470	$	20		$	199,737	$	613,612

	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, April 1, 2020		86,209	$	862		(17,148	)	$	(245,311	)	$	642,958	$	(543	)	$	47,177	$	445,143
Net income		-		-		-			-			-		-			28,167		28,167
Foreign currency translation		-		-		-			-			-		53			-		53
Unrealized gain on investments		-		-		-			-			-		1,431			-		1,431
Share-based compensation expense		-		-		-			-			3,291		-			-		3,291
Common stock issued		70		1		-			(2	)		600		-			-		599
BALANCE, June 30, 2020		86,279	$	863		(17,148	)	$	(245,313	)	$	646,849	$	941		$	75,344	$	478,684
BALANCE, September 30, 2020																						86,488	$	865		(17,201	)	$	(246,071	)	$	650,990	$	603		$	115,284	$	521,671

	Common Stock				Treasury Stock								Accumulated Other								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			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			87,265	$	873		(17,203	)	$	(246,088	)	$	658,423	$	364		$	142,335	$	555,907
Net income		-		-		-			-			-		-			57,402		57,402			-		-		-			-			-		-			85,171		85,171
Foreign currency translation		-		-		-			-			-		(101	)		-		(101	)		-		-		-			-			-		(175	)		-		(175	)
Unrealized loss on investments		-		-		-			-			-		(243	)		-		(243	)		-		-		-			-			-		(192	)		-		(192	)
Treasury stock purchased		-		-		(440	)		(5,372	)		-		-			-		(5,372	)		-		-		(440	)		(5,372	)		-		-			-		(5,372	)
Share-based compensation expense		-		-		-			-			7,430		-			-		7,430			-		-		-			-			11,287		-			-		11,287
Common stock issued		620		6		(160	)		(2,034	)		617		-			-		(1,411	)		643		6		(160	)		(2,034	)		787		-			-		(1,241	)
BALANCE, June 30, 2021		87,885	$	879		(17,803	)	$	(253,494	)	$	666,470	$	20		$	199,737	$	613,612
BALANCE, September 30, 2021																						87,908	$	879		(17,803	)	$	(253,494	)	$	670,497	$	(3	)	$	227,506	$	645,385

	Common Stock				Treasury Stock								Accumulated Other								Common Stock				Treasury Stock								Accumulated Other
(In Thousands)	Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Income			Retained Earnings		Total			Issued Shares		$0.01 Par Value		Purchased Shares			Cost			Additional Paid-in Capital		Comprehensive Income			Retained Earnings		Total
BALANCE, January 1, 2020		85,953	$	860		(15,802	)	$	(227,315	)	$	639,335	$	344		$	18,071	$	431,295			85,953	$	860		(15,802	)	$	(227,315	)	$	639,335	$	344		$	18,071	$	431,295
Net income		-		-		-			-			-		-			57,273		57,273			-		-		-			-			-		-			97,213		97,213
Foreign currency translation		-		-		-			-			-		5			-		5			-		-		-			-			-		128			-		128
Unrealized gain on investments		-		-		-			-			-		592			-		592			-		-		-			-			-		131			-		131
Treasury stock purchased		-		-		(1,284	)		(17,309	)		-		-			-		(17,309	)		-		-		(1,320	)		(17,862	)		-		-			-		(17,862	)
Share-based compensation expense		-		-		-			-			6,503		-			-		6,503			-		-		-			-			9,735		-			-		9,735
Common stock issued		326		3		(62	)		(689	)		1,011		-			-		325			535		5		(79	)		(894	)		1,920		-			-		1,031
BALANCE, June 30, 2020		86,279	$	863		(17,148	)	$	(245,313	)	$	646,849	$	941		$	75,344	$	478,684
BALANCE, September 30, 2020																						86,488	$	865		(17,201	)	$	(246,071	)	$	650,990	$	603		$	115,284	$	521,671

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

	For the Year to Date Ended June 30,						For the Year to Date Ended September 30,
(In Thousands)	2021			2020			2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	57,402		$	57,273		$	85,171		$	97,213
Adjustments to reconcile net income to net
cash provided by operating activities:
Asset impairment		-			612			-			612
Depreciation and amortization expense		7,915			6,790			11,802			10,785
Bad debt expense		26,168			25,187			36,360			36,706
Compensation expense related to share-based awards		7,430			6,503			11,287			9,735
Deferred income taxes		8,569			19,262			9,938			11,339
Changes in operating assets and liabilities		(24,739	)		(10,263	)		(10,352	)		(28,637	)
Net cash provided by operating activities		82,745			105,364			144,206			137,753

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(218,437	)		(209,846	)		(269,739	)		(333,767	)
Sales of available-for-sale investments		127,193			145,819			357,280			213,576
Purchases of property and equipment		(3,059	)		(3,439	)		(6,276	)		(7,479	)
Business acquisition		-			(34,065	)
Net cash used in investing activities		(94,303	)		(101,531	)
Business acquisitions, net of cash acquired								(56,947	)		(39,819	)
Net cash provided by (used in) investing activities								24,318			(167,489	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		623			1,014			793			1,925
Purchase of treasury stock		(5,372	)		(17,309	)		(5,372	)		(17,862	)
Payments of employee tax associated with stock compensation		(2,034	)		(689	)		(2,034	)		(894	)
Net cash used in financing activities		(6,783	)		(16,984	)		(6,613	)		(16,831	)

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(18,341	)		(13,151	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH								161,911			(46,567	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period		109,684			108,687			109,684			108,687
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period	$	91,343		$	95,536		$	271,595		$	62,120

Supplemental non-cash disclosure:

Amounts placed in escrow during the period to secure indemnification obligations from business acquisition	$	-		$	4,000
Amounts placed in escrow during the period to secure indemnification obligations from business acquisitions							$	1,210		$	4,000

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

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

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 and year to date ended ~~June~~September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021.

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 2 reporting segments: CTU and AIU.

On August 2, 2021, the Company acquired substantially all of the assets of DigitalCrafts (the “DigitalCrafts acquisition”). DigitalCrafts’ operations were brought within the AIU segment, preserving the ‘DigitalCrafts’ name and programs as part of AIU’s operations. Results of operations related to the DigitalCrafts acquisition are not material to our consolidated results of operations and are included in the unaudited condensed consolidated financial statements from the date of acquisition. See Note 3 “Business Acquisitions” for further information.

On September 10, 2021, the Company acquired all of the outstanding equity of Hippo Education, LLC (“Hippo” and the “Hippo acquisition”). Hippo’s operations were brought within the CTU segment, preserving the ‘Hippo Education’ name and programs as part of CTU’s operations. Results of operations related to the Hippo acquisition are not material to our consolidated results of operations and are included in the unaudited condensed consolidated financial statements from the date of acquisition. See Note 3 “Business Acquisitions” for further information.

On August 2, 2021 and September 10, 2021, the Company completed the DigitalCrafts and Hippo acquisitions, respectively.

DigitalCrafts, launched in 2015, helps provide individuals an opportunity in the technology area through reskilling and upskilling courses within the areas of web development, web design and cybersecurity. DigitalCrafts’ programs are now offered by AIU under the ‘DigitalCrafts’ name. On the date of acquisition, the Company made a cash payment of $16.3 million for the DigitalCrafts assets. The initial payment was fully funded with the Company’s available cash balances. Pursuant to the acquisition agreement, a post-closing contingent consideration payment of up to $2.5 million is expected to be paid in early 2024 based upon the achievement of certain financial metrics.

The preliminary purchase price of $18.4 million for the DigitalCrafts assets consists of the initial purchase price of $16.3 million, the preliminary fair value calculation of contingent consideration of $1.9 million, and a working capital adjustment. The preliminary purchase price was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $20.0 million and assumed liabilities of $1.7 million as of August 2, 2021. Provisional intangible assets acquired include a trade name with an estimated fair value of approximately $0.7 million with an estimated useful life of 5 years and customer relationships and developed technology with an aggregate estimated fair value of $1.0 million with estimated useful lives of 3 years each. We are in the process of finalizing third-party valuations of certain intangible assets and contingent consideration. Thus, the provisional measurements of intangible assets, goodwill and contingent consideration as well as the estimated useful lives are subject to change. Based on our preliminary purchase price allocation, we have recorded goodwill of $16.5 million. Goodwill reflects the revenue growth opportunities following the acquisition. We expect substantially all of this goodwill balance to be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the fair values of acquired assets and liabilities, as well as the fair value of contingent consideration, are finalized.

Hippo, founded in 2011, is a provider of continuing medical education and exam preparation for medical professionals with a quality technology platform and strong course content. Hippo programs are now offered by CTU under the ‘Hippo Education’ name. On the date of acquisition, the Company made an initial cash payment of $42.0 million. Pursuant to the terms of the acquisition agreement, $1.2 million of this payment was set aside in an escrow account to secure indemnification obligations of the seller after closing and is reflected as restricted cash on our condensed consolidated balance sheets. The initial payment was fully funded with the Company’s available cash balances. Additionally, pursuant to the purchase agreement, a post-closing contingent consideration payment of up to $4.0 million is expected to be paid in early 2024 based upon the achievement of certain financial metrics.

The preliminary purchase price of $43.3 million for Hippo represents the initial purchase price of $42.0 million as well as the preliminary fair value calculation of contingent consideration of $1.3 million. The preliminary purchase price was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $47.7 million and assumed liabilities of $4.3 million as of September 10, 2021. Provisional intangible assets acquired include a trade name with an estimated fair value of approximately $3.3 million with an estimated useful life of 10 years, customer relationships with an estimated fair value of approximately $14.1 million with an estimated useful life of 7 years and developed technology with an estimated fair value of $2.0 million with an estimated useful life of 4 years. We are in the process of obtaining third-party valuations of certain intangible assets and contingent consideration. Thus, the provisional measurements of intangible assets, goodwill and contingent consideration as well as the estimated useful lives are subject to change. Based on our preliminary purchase price allocation, we have recorded goodwill of $27.9 million. Goodwill reflects the revenue growth opportunities following the acquisition. We expect substantially all of this goodwill balance to be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the fair values of acquired assets and liabilities, as well as the fair value of contingent consideration, are finalized.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of August 2, 2021 and September 10, 2021 (dollars in thousands):

Pro forma financial information relating to the DigitalCrafts and Hippo acquisitions is not presented because the acquisitions are not material to the Company.

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing

certain exceptions, including the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items and the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also simplify the accounting for income taxes by requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. For all public business entities, ASU 2019-12 is effective for annual periods and interim periods beginning after December 15, 2020. We have evaluated and adopted this guidance effective January 1, 2021. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

Investments consist of the following as of ~~June~~September 30, 2021 and December 31, 2020 (dollars in thousands):

	June 30, 2021									September 30, 2021
			Gross Unrealized									Gross Unrealized
	Cost		Gain		(Loss)			Fair Value		Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	138	$	-	$	-		$	138	$	5,057	$	-	$	(3	)	$	5,054
Non-governmental debt securities		386,509		81		(164	)		386,426		203,643		38		(65	)		203,616
Treasury and federal agencies		2,746		1		(1	)		2,746		723		1		(3	)		721
Total short-term investments (available for sale)	$	389,393	$	82	$	(165	)	$	389,310	$	209,423	$	39	$	(71	)	$	209,391

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 commercial paper and certificates of deposit. 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.

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 ~~June~~September 30, 2021, 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 ~~June~~September 30, 2021 and December 31, 2020. Additionally, money market funds of ~~$38.2~~$190.1 million and $1.7 million included within cash and cash equivalents on our condensed consolidated balance sheets as of ~~June~~September 30, 2021 and December 31, 2020, respectively, were measured under Level 1 and certificates of deposit, commercial paper and treasury bills of $5.1 million included within cash and cash equivalents on our condensed consolidated balance sheets as of December 31, 2020 were measured under Level 2.

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 ~~June~~September 30, 2021, our investment in an equity affiliate equated to a 30.7%, or ~~$3.2~~$3.1 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 ~~June~~September 30, 2021 and 2020, we recorded less than $0.1 million of loss and approximately $0.1 million of gain, respectively, and during the years to date ended ~~June~~September 30, 2021 and 2020, we recorded approximately ~~$0.2~~$0.1 million of gain and ~~$0.1~~$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 paid during the quarters and years to date ended ~~June~~September 30, 2021 and 2020 were as follows (dollars in thousands):

(1)During the first quarter of 2020, the Company prepaid maintenance payments for the full year 2020, of which approximately $0.4 million and ~~$0.8~~$1.2 million was recognized as expense for the quarter and year to date ended ~~June~~September 30, 2020, respectively.

On ~~December 27, 2018,~~September 8, 2021, the ~~Company; its wholly-owned subsidiary, CEC Educational Services, LLC;~~Company and the subsidiary guarantors thereunder entered into a credit agreement with ~~BMO Harris~~Wintrust Bank N.A. (“~~BMO Harris~~Wintrust”), in its capacities as the sole ~~lender, the~~lead arranger, sole bookrunner, administrative agent and letter of credit issuer ~~thereunder and the administrative agent~~ for the lenders ~~which~~ from time to time ~~may be~~ parties ~~to the credit agreement.~~thereto. The credit agreement provides the Company with the benefit of a ~~$50.0~~$125.0 million senior secured revolving credit facility. The $125.0 million revolving credit facility ~~and~~under the credit agreement is scheduled to mature on ~~January 20, 2022.~~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 ~~100% secured~~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 ~~marketable securities deposited~~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.

This credit agreement with Wintrust replaced the ~~bank.~~previous $50.0 million revolving credit facility set forth in the credit agreement dated as of December 27, 2018 with BMO Harris Bank N.A. As of ~~June~~September 30, 2021 and December 31, 2020, there were 0 outstanding borrowings under the current or prior revolving credit facility.

The following tables disaggregate our revenue by major source for the quarters and years to date ended ~~June~~September 30, 2021 and 2020 (dollars in thousands):

	For the Quarter Ended June 30, 2021								For the Quarter Ended June 30, 2020								For the Quarter Ended September 30, 2021								For the Quarter Ended September 30, 2020
	CTU		AIU		Corporate and Other⁽³⁾		Total		CTU		AIU		Corporate and Other⁽³⁾		Total		CTU ⁽⁴⁾		AIU ⁽⁵⁾		Corporate and Other⁽⁶⁾		Total		CTU		AIU		Corporate and Other⁽⁶⁾		Total
Tuition	$	95,723	$	70,123	$	-	$	165,846	$	94,204	$	73,004	$	-	$	167,208
Tuition ⁽¹⁾																	$	98,730	$	65,101	$	-	$	163,831	$	93,071	$	67,394	$	-	$	160,465
Technology fees		5,530		2,873		-		8,403		5,162		2,633		-		7,795		5,339		2,962		-		8,301		5,085		2,439		-		7,524
Other miscellaneous fees⁽¹⁾		389		166		-		555		323		173		-		496
Other miscellaneous fees ⁽²⁾																		278		185		-		463		290		192		-		482
Total tuition and fees		101,642		73,162		-		174,804		99,689		75,810		-		175,499		104,347		68,248		-		172,595		98,446		70,025		-		168,471
Other revenue⁽²⁾		393		61		281		735		504		25		7		536
Other revenue ⁽³⁾																		441		700		262		1,403		539		23		93		655
Total revenue	$	102,035	$	73,223	$	281	$	175,539	$	100,193	$	75,835	$	7	$	176,035	$	104,788	$	68,948	$	262	$	173,998	$	98,985	$	70,048	$	93	$	169,126

	For the Year to Date Ended June 30, 2021								For the Year to Date Ended June 30, 2020								For the Year to Date Ended September 30, 2021								For the Year to Date Ended September 30, 2020
	CTU		AIU		Corporate and Other⁽³⁾		Total		CTU		AIU		Corporate and Other⁽³⁾		Total		CTU ⁽⁴⁾		AIU ⁽⁵⁾		Corporate and Other⁽⁶⁾		Total		CTU		AIU		Corporate and Other⁽⁶⁾		Total
Tuition	$	195,328	$	144,621	$	-	$	339,949	$	191,755	$	137,549	$	-	$	329,304	$	294,058	$	209,722	$	-	$	503,780	$	284,826	$	204,943	$	-	$	489,769
Technology fees		11,013		5,668		-		16,681		10,282		5,290		-		15,572		16,352		8,630		-		24,982		15,367		7,729		-		23,096
Other miscellaneous fees⁽¹⁾		681		324		-		1,005		695		322		-		1,017
Other miscellaneous fees ⁽²⁾																		959		509		-		1,468		985		514		-		1,499
Total tuition and fees		207,022		150,613		-		357,635		202,732		143,161		-		345,893		311,369		218,861		-		530,230		301,178		213,186		-		514,364
Other revenue⁽²⁾		835		87		620		1,542		1,049		70		17		1,136
Other revenue ⁽³⁾																		1,276		787		882		2,945		1,588		93		110		1,791
Total revenue	$	207,857	$	150,700	$	620	$	359,177	$	203,781	$	143,231	$	17	$	347,029	$	312,645	$	219,648	$	882	$	533,175	$	302,766	$	213,279	$	110	$	516,155

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. 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 course.

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

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

For each term, the portion of tuition and fee payments received from students but not yet earned is recorded as deferred revenue and reported as a current liability on our condensed consolidated balance sheets, as we expect to earn these revenues within the next year. A contract asset is recorded for each student for the current term for which they are enrolled for the amount charged for the current term that has not yet been received as payment and to which we do not have the unconditional right to receive payment because the student has not reached the point in the student’s current academic term at which the amount billed is no longer refundable to the student. On a student by student basis, the contract asset is offset against the deferred revenue balance for the current term and the net deferred revenue balance is reflected within current liabilities on our condensed consolidated balance sheets. For AIU’s Trident and DigitalCrafts programs and CTU’s Hippo programs, students are billed as they ~~register for~~enroll in courses, including courses related to future ~~terms.~~periods. Any billings for future ~~terms~~periods would meet the definition of a contract asset as we do not have the unconditional right to receive payment as the ~~academic term~~course has not yet started. Contract assets related to future ~~terms~~periods are offset against the deferred revenue associated with the respective future ~~term.~~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 ~~terms.~~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 ~~terms~~periods remain as contract assets until the ~~academic term~~course begins and the student reaches the point in that ~~academic term~~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 ~~June~~September 30, 2021 and December 31, 2020 were as follows (dollars in thousands):

	As of						As of
	June 30, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Gross deferred revenue	$	121,467		$	85,402		$	92,087		$	85,402
Gross contract assets		(76,253	)		(50,868	)		(35,036	)		(50,868	)
Deferred revenue, net	$	45,214		$	34,534		$	57,051		$	34,534

Changes in our deferred revenue balances for the quarters and years to date ended ~~June~~September 30, 2021 and 2020 were as follows (dollars in thousands):

	For the Quarter Ended June 30, 2021									For the Quarter Ended June 30, 2020									For the Quarter Ended September 30, 2021									For the Quarter Ended September 30, 2020
	CTU			AIU			Total			CTU			AIU			Total			CTU			AIU			Total			CTU			AIU			Total
Gross deferred revenue, April 1	$	25,136		$	32,886		$	58,022		$	27,986		$	28,934		$	56,920
Gross deferred revenue, July 1																			$	77,818		$	43,649		$	121,467		$	28,092		$	39,725		$	67,817
Business acquisitions, beginning balance																				3,952			1,404			5,356			-			-			-
Revenue earned from prior balances		(22,814	)		(26,977	)		(49,791	)		(25,238	)		(22,929	)		(48,167	)		(66,878	)		(32,623	)		(99,501	)		(25,035	)		(31,236	)		(56,271	)
Billings during period⁽¹⁾		155,861			83,904			239,765			99,464			86,343			185,807			90,662			46,547			137,209			99,219			57,598			156,817
Revenue earned for new billings during the period		(78,828	)		(46,185	)		(125,013	)		(74,451	)		(52,881	)		(127,332	)		(37,469	)		(35,625	)		(73,094	)		(73,411	)		(38,789	)		(112,200	)
Other adjustments		(1,537	)		21			(1,516	)		331			258			589			951			(301	)		650			(777	)		(330	)		(1,107	)
Gross deferred revenue, June 30	$	77,818		$	43,649		$	121,467		$	28,092		$	39,725		$	67,817

Gross deferred revenue, September 30																			$	69,036		$	23,051		$	92,087		$	28,088		$	26,968		$	55,056

	For the Year to Date Ended June 30, 2021									For the Year to Date Ended June 30, 2020									For the Year to Date Ended September 30, 2021									For the Year to Date Ended September 30, 2020
	CTU			AIU			Total			CTU			AIU			Total			CTU			AIU			Total			CTU			AIU			Total
Gross deferred revenue, January 1	$	28,522		$	56,880		$	85,402		$	27,845		$	35,359		$	63,204		$	28,522		$	56,880		$	85,402		$	27,845		$	35,359		$	63,204
Business acquisition, beginning balance		-			-			-			-			13,395			13,395
Business acquisitions, beginning balance																				3,952			1,404			5,356			-			13,395			13,395
Revenue earned from prior balances		(25,698	)		(44,809	)		(70,507	)		(24,367	)		(39,533	)		(63,900	)		(26,183	)		(46,020	)		(72,203	)		(24,376	)		(38,904	)		(63,280	)
Billings during period⁽¹⁾		257,645			136,465			394,110			202,508			132,991			335,499			348,307			183,012			531,319			301,727			190,589			492,316
Revenue earned for new billings during the period		(181,324	)		(105,804	)		(287,128	)		(178,365	)		(103,628	)		(281,993	)		(285,186	)		(172,841	)		(458,027	)		(276,802	)		(174,282	)		(451,084	)
Other adjustments		(1,327	)		917			(410	)		471			1,141			1,612			(376	)		616			240			(306	)		811			505
Gross deferred revenue, June 30	$	77,818		$	43,649		$	121,467		$	28,092		$	39,725		$	67,817
Gross deferred revenue, September 30																			$	69,036		$	23,051		$	92,087		$	28,088		$	26,968		$	55,056

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.~~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 $2.3million as of ~~June~~September 30, 2021 and December 31, 2020. 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. ~~Such~~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 ~~$0.5~~$0.3 million and ~~$0.3~~$0.2 million of revenue for the quarters ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$0.9~~$1.2 million and ~~$0.6~~$0.8 million for the years to date ended ~~June~~September 30, 2021 and 2020, respectively, for payments received from withdrawn students.

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 or fees 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.~~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 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 ~~June~~September 30, 2021 and December 31, 2020, 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 ~~$1.5~~$1.4 million and $1.3 million, respectively.

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 and years to date ended ~~June~~September 30, 2021 and 2020 were as follows (dollars in thousands):

	For the quarter ended June 30,						For the year to date ended June 30,						For the quarter to date ended September 30,						For the year to date ended September 30,
	2021			2020			2021			2020			2021			2020			2021			2020
Balance, beginning of period	$	43,785		$	36,095		$	42,147		$	31,964		$	42,876		$	39,044		$	42,147		$	31,964
Beginning balance related to business acquisition		-			-			-			2,174
Beginning balance related to business acquisitions														180			-			180			2,174
Provision for credit losses		12,448			12,325			26,172			25,187			10,192			11,519			36,364			36,706
Amounts written-off		(14,253	)		(10,133	)		(27,320	)		(21,734	)		(13,982	)		(10,479	)		(41,302	)		(32,213	)
Recoveries		896			757			1,877			1,453			756			637			2,633			2,090
Balance, end of period	$	42,876		$	39,044		$	42,876		$	39,044		$	40,022		$	40,721		$	40,022		$	40,721

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.

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):

	For the Quarter Ended June 30, 2021			For the Year to Date Ended June 30, 2021			For the Quarter Ended September 30, 2021			For the Year to Date Ended September 30, 2021
Lease expenses ⁽¹⁾
Fixed lease expenses - operating	$	2,806		$	5,821		$	2,813		$	8,634
Variable lease expenses - operating		1,239			2,752			561			3,313
Sublease income		(335	)		(834	)		(263	)		(1,097	)
Total lease expenses	$	3,710		$	7,739		$	3,111		$	10,850

Other information
Gross operating cash flows for operating leases ⁽²⁾	$	(4,313	)	$	(9,534	)	$	(4,443	)	$	(13,977	)
Operating cash flows from subleases⁽²⁾	$	353		$	883		$	271		$	1,154

	For the Quarter Ended June 30, 2020			For the Year to Date Ended June 30, 2020			For the Quarter Ended September 30, 2020			For the Year to Date Ended September 30, 2020
Lease expenses ⁽¹⁾
Fixed lease expenses - operating	$	3,116		$	6,264		$	3,059		$	9,323
Variable lease expenses - operating		1,627			3,542			1,204			4,746
Sublease income		(563	)		(1,351	)		(494	)		(1,845	)
Total lease expenses	$	4,180		$	8,455		$	3,769		$	12,224

Other information
Gross operating cash flows for operating leases ⁽²⁾	$	(5,930	)	$	(12,120	)	$	(5,063	)	$	(17,183	)
Operating cash flows from subleases⁽²⁾	$	558		$	1,234		$	486		$	1,720

	As of June 30, 2021			As of June 30, 2020			As of September 30, 2021			As of September 30, 2020
Weighted average remaining lease term (in months) – operating leases		72			73			71			71
Weighted average discount rate – operating leases		4.9	%		5.0	%		4.9	%		4.9	%

Historically, for certain of our leased locations we have vacated the facility and have fully or partially subleased the space. As of ~~June~~September 30, 2021, we only have 1 sublease ~~remaining~~ with a remaining term of 2320 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 ~~$0.6~~$0.5 million for the quarters ended ~~June~~September 30, 2021 and 2020, respectively, and ~~$0.8~~$1.1 million and ~~$1.4~~$1.8 million for the years to date ended ~~June~~September 30, 2021 and 2020, respectively, as an offset to lease expense on our unaudited condensed consolidated statements of income.

An accrual for estimated legal fees and settlements of ~~$2.9~~$1.6 million and $1.0 million at ~~June~~September 30, 2021 and December 31, 2020, 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.

We receive informal requests from state attorneys general and other government agencies relating to specific complaints they have received from students or former students which seek information about the student, our programs and other matters relating to our activities in the relevant state. 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 inquiry or investigation into our practices in a particular state. 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 graduates, 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, 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 final 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.

We recorded preliminary contingent consideration amounts for the DigitalCrafts and Hippo acquisitions in the aggregate amount of $3.2 million during the quarter ended September 30, 2021. This aggregate amount is preliminary as we are in the process of finalizing third party valuation reports in conjunction with the purchase price allocations for these acquisitions. 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.

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 (benefit from) income taxes and effective tax rate from continuing operations:

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter to Date Ended September 30,						For the Year to Date Ended September 30,
(Dollars in Thousands)	2021			2020			2021			2020			2021			2020			2021			2020
Pretax income	$	35,969		$	38,461		$	76,978		$	77,197		$	37,327		$	32,755		$	114,305		$	109,952
Provision for income taxes	$	9,319		$	10,272		$	19,564		$	19,876
Provision for (benefit from) income taxes													$	9,557		$	(7,206	)	$	29,121		$	12,670
Effective rate		25.9	%		26.7	%		25.4	%		25.7	%		25.6	%		-22.0	%		25.5	%		11.5	%

As of December 31, 2020, a valuation allowance of $29.0 million was maintained with respect to our foreign tax credits not supported by an Overall Domestic Loss (“ODL”) account balance and certain state net operating losses. 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 $29.0 million valuation allowance against our non-ODL supported foreign tax credits and state net operating losses as of ~~June~~September 30, 2021.

The effective tax rate for the quarter and year to date ended ~~June~~September 30, 2021 was impacted by federal and state tax credits claimed for the 2020 tax return, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.2%, respectively. The tax effect of stock-based compensation and the release of previously recorded tax reserves for the 2021 year to date tax rate reflects a 0.5% net benefit. The effective tax rate for the quarter and year to date ended September 30, 2020 reflects a $16.0 million valuation allowance release related to our ODL supported foreign tax credit carryforwards, which decreased the effective tax rate for the quarter and year to date by 49.0% and 14.6%, respectively. The 2020 year to date effective tax rate also reflects a 0.6% net benefit attributable to the tax effect of stock-based compensation and the release of previously recorded tax reserves. The effect of these discrete items decreased the effective tax rate for the quarter and year to date by 0.4% and 0.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2020 was impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves. The effect of these discrete items increased the effective tax rate for the quarter by 0.3% and decreased the year to date rate by 0.8%.

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 and year to date ended ~~June~~September 30, 2021 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 ~~June~~September 30, 2021, we had accrued ~~$1.8~~$1.9 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.

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.

For the quarters ended June 30, 2021 and 2020, the Company granted less than 0.1 million restricted stock units in each period which are not “performance-based” and which have a grant-date fair value of approximately $0.8 million and $0.9 million, respectively. For the years to date ended ~~June~~September 30, 2021 and 2020, the Company granted approximately 0.4 million and 0.3 million restricted stock units, respectively, which are not “performance-based” and which have a grant-date fair value of approximately $4.4 million for each period.

~~For~~Additionally, for the years to date ended ~~June~~September 30, 2021 and 2020, the Company granted approximately 0.4 million and 0.3 million restricted stock units, respectively, which are “performance-based” and which have a grant-date fair value of approximately $4.2 million and $3.9 million, respectively. ~~There were 0 “performance-based” restricted stock units granted during the quarters ended June 30, 2021 and 2020.~~ 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.

There were 0 restricted stock units granted during each of the quarters ended September 30, 2021 and 2020.

All restricted stock units granted in 2020 and 2021 are to be settled in shares of our common stock.

There were 0 stock options granted during each of the quarters or years to date ended ~~June~~September 30, 2021 and 2020.

Total share-based compensation expense for the quarters and years to date ended ~~June~~September 30, 2021 and 2020 for all types of awards was as follows (dollars in thousands):

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,					For the Quarter Ended September 30,				For the Year to Date Ended September 30,
Award Type	2021		2020		2021		2020			2021		2020		2021		2020
Stock options	$	96	$	293	$	256	$	698		$	101	$	265	$	357	$	963
Restricted stock units settled in stock		3,577		2,994		7,165		5,797			3,752		2,962		10,917		8,759
Restricted stock units settled in cash		-		-		-		(240	)		-		-		-		(240	)
Total share-based compensation expense	$	3,673	$	3,287	$	7,421	$	6,255		$	3,853	$	3,227	$	11,274	$	9,482

As of ~~June~~September 30, 2021, we estimate that compensation expense of approximately ~~$21.0~~$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.

On November 4, 2019, the Board of Directors of the Company approved a stock repurchase program which authorizes the Company to repurchase up to $50.0 million of the Company’s outstanding common stock. The program replaced all prior stock repurchase programs authorized by the Board of Directors. The program’s original expiration date was December 31, 2021. On October 19, 2021, the Board of Directors of the Company extended the expiration date of the program to 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. ~~The program expires on December 31, 2021 and replaced all prior stock repurchase programs authorized by the Board of Directors.~~

During the ~~quarter and~~ year to date ended ~~June~~September 30, 2021, we repurchased 0.4million shares of our common stock for approximately $5.4million at an average price of $12.23per share, and repurchased 1.3 million shares of our common stock for approximately ~~$17.3~~$17.9 million at an average price of ~~$13.48~~$13.53 per share during the year to date ended ~~June~~September 30, ~~2020.~~ 2020, of which less than 0.1 million shares of common stock were repurchased for $0.6 million during the quarter ended September 30, 2020 at an average price of $15.31 per share. There were 0 stock repurchases during the quarter ended September 30, 2021.

As of ~~June~~September 30, 2021, approximately $22.9 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.

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 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 and years to date ended ~~June~~September 30, 2021 and 2020 were as follows (shares in thousands):

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,				For the Quarter Ended September 30,				For the Year to Date Ended September 30,
	2021		2020		2021		2020		2021		2020		2021		2020
Basic common shares outstanding		70,299		69,094		70,224		69,467		70,089		69,167		70,179		69,366
Common stock equivalents		1,380		1,806		1,392		1,883		1,377		1,849		1,470		1,901
Diluted common shares outstanding		71,679		70,900		71,616		71,350		71,466		71,016		71,649		71,267

For the quarters and years to date ended ~~June~~September 30, 2021 and 2020, 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 ~~0.4~~0.3 million and ~~0.6~~0.5 million shares for the quarters ended ~~June~~September 30, 2021 and 2020, respectively, and 0.4 million and 0.6 million shares for the years to date ended ~~June~~September 30, 2021 and 2020, respectively.

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 ~~June~~September 30, 2021, our 2 segments are:

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

	For the Quarter Ended June 30,																For the Quarter Ended September 30,

	Revenue										Operating Income (Loss)						Revenue										Operating Income (Loss)
	2021		% of Total			2020		% of Total			2021			2020			2021		% of Total			2020		% of Total			2021			2020
CTU(1)	$	102,035		58.1	%	$	100,193		56.9	%	$	35,398		$	33,076		$	104,788		60.2	%	$	98,985		58.5	%	$	41,217		$	32,993
AIU(2)		73,223		41.7	%		75,835		43.1	%		9,218			10,476			68,948		39.6	%		70,048		41.4	%		8,334			5,513
Corporate and Other ⁽¹⁾⁽³⁾		281		0.2	%		7		0.0	%		(8,654	)		(6,184	)		262		0.2	%		93		0.1	%		(11,690	)		(6,432	)
Total	$	175,539		100.0	%	$	176,035		100.0	%	$	35,962		$	37,368		$	173,998		100.0	%	$	169,126		100.0	%	$	37,861		$	32,074

	For the Year to Date Ended June 30,																For the Year to Date Ended September 30,
	Revenue										Operating Income (Loss)						Revenue										Operating Income (Loss)
	2021		% of Total			2020		% of Total			2021			2020			2021		% of Total			2020		% of Total			2021			2020
CTU(1)	$	207,857		57.9	%	$	203,781		58.7	%	$	71,541		$	67,695		$	312,645		58.6	%	$	302,766		58.7	%	$	112,758		$	100,688
AIU ⁽²⁾		150,700		42.0	%		143,231		41.3	%		20,541			19,852			219,648		41.2	%		213,279		41.3	%		28,875			25,365
Corporate and Other ⁽¹⁾⁽³⁾		620		0.1	%		17		0.0	%		(15,503	)		(12,876	)		882		0.2	%		110		0.0	%		(27,193	)		(19,308	)
Total	$	359,177		100.0	%	$	347,029		100.0	%	$	76,579		$	74,671		$	533,175		100.0	%	$	516,155		100.0	%	$	114,440		$	106,745

	Total Assets as of⁽³⁾				Total Assets as of⁽⁴⁾
	June 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
CTU(1)	$	113,450	$	96,922	$	154,438	$	96,922
AIU(2)		146,863		141,602		150,970		141,602
Corporate and Other ⁽¹⁾⁽³⁾		526,106		482,993		531,011		482,993
Total	$	786,419	$	721,517	$	836,419	$	721,517

On August 2, 2021, the Company acquired substantially all of the assets of DigitalCrafts. Launched in 2015, DigitalCrafts has helped provide individuals an opportunity in the technology area through reskilling and upskilling courses within the areas of web development, web design and cybersecurity. The acquisition of DigitalCrafts fits well with our overall objective of extending the breadth of our academic program offerings while diversifying revenue away from federal student financial aid funding.

The initial cash consideration for the acquisition of $16.25 million was funded with the Company’s available cash balances on the date of acquisition and is subject to a working capital adjustment. In addition, a post-closing contingent consideration payment of up to $2.5 million is expected to be paid in early 2024 based upon the level of achievement of certain financial metrics.

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, 2020 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:

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:

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 (“AIU”) – provide degree programs from associate through ~~the master’s or~~ doctoral level as well as ~~associate~~non-degree professional development and ~~bachelor’s levels.~~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 AIU 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.

On August 2, 2021, the Company acquired substantially all of the assets of DigitalCrafts (the “DigitalCrafts acquisition”). DigitalCrafts helps provide individuals an opportunity in the technology area through reskilling and upskilling courses within the areas of web development, web design and cybersecurity. DigitalCrafts operations were brought within the AIU segment, preserving the ‘DigitalCrafts’ name and programs as part of AIU’s operations. Results of operations related to the DigitalCrafts acquisition are included in the unaudited condensed consolidated financial statements from the date of acquisition.

On September 10, 2021, the Company acquired Hippo Education, LLC (“Hippo” and the “Hippo Acquisition”). Hippo provides continuing medical education and exam preparation for medical professionals with a quality technology platform and strong course content. Hippo’s operations were brought within the CTU segment, preserving the ‘Hippo Education’ name and programs as part of CTU’s operations. Results of operations related to the Hippo acquisition are included in the unaudited condensed consolidated financial statements from the date of acquisition.

On March 2, 2020, the Company acquired substantially all of the assets of Trident University International (“Trident University”), an accredited university offering online undergraduate, master’s and doctoral programs with a strong focus on graduate programs. Trident University’s operations were brought within the AIU segment, preserving the ~~“Trident”~~‘Trident’ name and programs as part of American InterContinental University’s operations. Results of operations related to the acquisition of substantially all of the assets of Trident University (the “Trident acquisition”) are included in the unaudited condensed consolidated financial statements from the date of acquisition. Effective November 5, 2020, AIU implemented a university system model, the American InterContinental University System, which is comprised of two universities: American InterContinental University and Trident University International (“Trident” or “TUI”). The system structure provides a new framework for American InterContinental University and Trident to continue to serve their unique student populations while benefitting from one university system.

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.

The current Presidential and Department administrations, as well as Congress, are likely to pursue 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 ~~and Risk Factors~~ in our 2021 Quarterly Reports on Form 10-Q.

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.

Our financial results for the ~~second~~third quarter ended ~~June~~September 30, 2021 (“current quarter”) ~~reflected a decrease~~reflect an increase in revenue and operating income as compared to the prior year quarter ~~due~~and reflect adjustments to ~~a decrease in~~certain expenses while continuing to prioritize resources for technology and relevant student-serving processes that we believe enhance student ~~enrollments discussed further below.~~experiences, retention and academic outcomes. The financial results include the DigitalCrafts and Hippo acquisitions commencing on the respective dates of acquisition in the current quarter, and the Trident acquisition commencing on the March 2, 2020 date of ~~acquisition~~acquisition. The DigitalCrafts and ~~therefore the quarter ended June 30, 2020 reflects a full comparable quarter of financial results for Trident.~~

~~The results for~~Hippo acquisitions during the current quarter ~~reflected~~expand our ~~ability~~professional development and continuing education offerings.

We continue to ~~adapt well to a changing environment, while keeping student experiences, retention and academic outcomes at the forefront of our operations. We~~ believe the prolonged pandemic and its resulting social distancing practices and safety measures, as well as the macro-economic and governmental response, has impacted overall student engagement. ~~While prospective student interest remains in line with our recent experience, during~~During the current quarter we continued to experience some students ~~began deferring~~pause their academic programs or defer their decision to begin ~~classes and there has been an increase in current students taking a pause from their academic programs. Based on what we are seeing so far going into the traditional back to school months, we~~classes. We believe this change in student behavior may be temporary, and was impacted by a better than expected opening of the economy and the various stimulus packages supporting it. However, additional time is needed to assess the impact of the evolving pandemic environment on student behavior.

~~Total~~yet we do expect total student enrollments ~~increased 7.5%~~to continue to be impacted in the short-term. Additionally, leveraging data analytics, we made adjustments to our marketing strategies during the third quarter. We believe these changes will help further improve our ability to identify prospective students who are more likely to succeed at ~~June~~one of our universities. These changes are also expected to negatively impact total student enrollments in the short-term, but we believe that in the long-term they will further enhance student experiences, retention and academic outcomes. Typically, changes in total student enrollments have a lag impact on revenue. We will continue our efforts to adjust our operating processes and expenses to align with overall revenue and enrollment trends.

As a result of these factors, total student enrollments decreased 0.9% at September 30, 2021 as compared to ~~June~~September 30, 2020, with CTU increasing by ~~14.2%~~7.5% and AIU decreasing by ~~1.8%~~11.6%. The increase in total student enrollments for CTU was due to the timing impact of the academic calendar ~~redesign, as the current year to date reflects five session start dates as compared to only four in the comparative prior year period.~~

redesign. The decrease in total student enrollments for AIU at ~~June~~September 30, 2021 as compared to ~~June~~September 30, 2020 was ~~driven~~impacted by the factors mentioned above as well as a decrease in student enrollments at Trident. Trident’s total student enrollments at Trident, partially offset with a total student enrollment increase at American InterContinental University. We believe Trident’s total student enrollment decline was a result of the decrease associated with their military-affiliated student population duecontinued to ~~a change~~be impacted by changes in the Army education administration portal and related technical challenges ~~along with reduced opportunities for in-person marketing activities at military installations~~as well as a ~~result~~reduced number of ~~the prolonged pandemic. We believe these issues may be temporary and have recently begun seeing an increase in military~~in-person recruiting events and in-person activities. Overall, we believe Trident has transitioned into our organization well and complements AIU. The Trident acquisition expanded and diversified our academic program offerings and also allowed us to internally develop a framework for integrating acquisitions as we continue to evaluate inorganic opportunities.which impacted their military-affiliated student population.

We believe investments in technology ~~and student-serving functions have~~continued to positively ~~impacted~~impact student experiences and student ~~learning. Both CTU and AIU~~learning during the current quarter. We continued to ~~leverage data analytics and~~make technology ~~to enhance the effectiveness of their services to students. Technology~~ investments in machine learning and data analytics ~~were mostly~~across the academics and advising functions and we began implementing enhancements to our student technology infrastructure during the current quarter. These investments and enhancements are anticipated to be completed over a ~~continuation from previous quarters~~multi-year period and include several upgrades to our mobile platform and virtual campus as ~~we expanded their use across various student serving processes. Additionally, we are evaluating~~well as a redesign of our digital ~~intranet tools~~toolsets and technology that are utilized by our teams to serve and educate students ~~through~~throughout their academic life cycle. We believe that continuing to refine these internet-based student platforms will further enhance the student experience, especially for our non-traditional adult learners, while driving further efficiencies within the business.

With respect to the COVID-19 pandemic, while we have ~~experienced~~continued to experience some impacts to student enrollments during the current quarter, we have not experienced any material disruptions to our business operations to date. Our strong balance sheet and technology infrastructure provide us with the ability to adapt our operations in response to fluctuations in enrollment trends. ~~While we~~We continue to monitor for future impacts of a potential worsening of global economic conditions on our university operations ~~we are also monitoring~~and for changes in prospective student interest or student engagement levels as a result of changes in social distancing requirements and the U.S. economy.

Revenue for the ~~second~~third quarter ended ~~June~~September 30, 2021 ~~decreased $0.5~~increased $4.9 million or ~~0.3%~~2.9% as compared to the prior year quarter, reflecting an increase in revenue ~~growth~~ at CTU which was ~~more than~~partially offset with a revenue decline at AIU as a result of the enrollment results discussed above. ~~Operating income~~The revenue increase for ~~the current quarter decreased to $36.0 million as compared to operating income of $37.4 million for the prior year quarter. The decrease in operating income~~CTU was primarily due to increased legal fees and advertising and marketing expenses to support the launch of the new workforce development training programs at Trident partially offset with operating efficiencies gained by reallocating resources across various student-serving functions.

~~Revenue within our CTU segment increased $1.8 million or 1.8% for the second quarter of 2021 as compared to the prior year quarter~~ due to more revenue-earning days in the current quarter as compared to the prior year quarter as a result of the timing impact of CTU’s academic calendar redesign. Operating income for ~~CTU increased by $2.3 million to $35.4 million for~~ the current quarter increased to $37.9 million as compared to operating income of ~~$33.1~~$32.1 million for the prior year ~~quarter driven by~~quarter. The increase in operating income was primarily due to the increase in ~~revenue.~~

~~Revenue within our AIU segment~~revenue at CTU as well as decreased $2.6 million or 3.4% for the second quarter of 2021 as compared to the prior year quarter due to the enrollment decrease discussed above. Operating income for AIU decreased by $1.3 million to $9.2 million for the current quarter as compared to the prior year quarter driven by an increase in advertisingadvertisting and marketing ~~expenses to support the launch of the new workforce development training programs at Trident as lower administration, academics~~ and admissions ~~expenses partially~~expense which more than offset the decline in revenue ~~decline for the current quarter.~~

~~Within our Corporate and Other category, operating loss of $8.7 million increased from $6.2 million in the prior year quarter~~at AIU as ~~the reduction in operating losses associated with closed campuses was offset with~~well as increased legal fee ~~expenses related~~expense relating to loan forgiveness applications submitted to the Department by former ~~students.~~students and acquisition efforts. We expect an increase in legal fees as compared to the prior year periods for the remainder of 2021.

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 ~~$42.3~~$46.3 million for the current quarter as compared to ~~$41.5~~$36.1 million in the prior year quarter. The improvement was ~~partially~~ due to ~~operating efficiencies gained by reallocating resources across various student-serving functions~~the revenue increase at CTU as well as ~~administrative expenses, which, when excluding the adjusting item for legal fees related to certain matters, were lower~~a decrease in advertising and marketing and admissions expense as compared to the prior year quarter.

~~Beginning in~~During 2021, we 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, as we believe that these expenses are not reflective of underlying operating performance. Additionally, we no longer adjust operating income or earnings per diluted share for expenses related to vacated facilities at closed campuses as these expenses are expected to be immaterial. Additionally, the Company began adjusting for legal fee expense related to acquisitions and responses to the Department related to borrower defense to repayment applications from former students during the second quarter of 2021. The Company believes that these expenses are not reflective of underlying operating performance. The prior period amounts were recast for these items to maintain comparability to 2021 non-GAAP measures.

Adjusted operating income and adjusted earnings per diluted share for the quarters and years to date ended ~~June~~September 30, 2021 and 2020 is presented below (dollars in thousands, unless otherwise noted):

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended September 30,						For the Year to Date Ended September 30,
Adjusted Operating Income	2021			2020			2021			2020 ⁽⁵⁾			2021			2020			2021			2020

Operating income	$	35,962		$	37,368		$	76,579		$	74,671		$	37,861		$	32,074		$	114,440		$	106,745
Depreciation and amortization ⁽¹⁾		3,913			4,151			7,915			6,790			3,887			3,995			11,802			10,785
Legal fee expense related to certain matters ⁽²⁾		2,416			22			2,658			163			4,583			4			7,241			167
Adjusted Operating Income ⁽⁴⁾⁽³⁾	$	42,291		$	41,541		$	87,152		$	81,624		$	46,331		$	36,073		$	133,483		$	117,697

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended September 30,						For the Year to Date Ended September 30,
Adjusted Earnings Per Diluted Share	2021			2020			2021			2020 ⁽⁵⁾			2021			2020			2021			2020

Reported Earnings Per Diluted Share	$	0.37		$	0.40		$	0.80		$	0.80		$	0.39		$	0.56		$	1.19		$	1.36
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets ⁽¹⁾		0.01			0.02			0.02			0.02			0.01			0.01			0.03			0.02
Legal fee expense related to certain matters ⁽²⁾		0.04			-			0.04			-			0.06			-			0.10			-
Total pre-tax adjustments	$	0.05		$	0.02		$	0.06		$	0.02		$	0.07		$	0.01		$	0.13		$	0.02
Tax effect of adjustments ⁽³⁾⁽⁴⁾		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)		-			(0.03	)		-
Release of valuation allowance ⁽⁵⁾														-			(0.22	)		-			(0.22	)
Total adjustments after tax		0.04			0.01			0.05			0.01			0.06			(0.21	)		0.10			(0.20	)
Adjusted Earnings Per Diluted Share ⁽⁴⁾	$	0.41		$	0.41		$	0.85		$	0.81
Adjusted Earnings Per Diluted Share ⁽³⁾													$	0.45		$	0.35		$	1.29		$	1.16

~~Negotiated Rulemaking.~~Cohort Default Rates. ~~On May 24,~~In late September 2021, the Department ~~issued~~released the official three-year cohort default rates for the 2018 cohort. Both CTU and AIU had cohort default rates under the 30% threshold for the 2018 cohort, with the rates for both institutions showing improvement from the prior year cohort. We increased our student communication, counseling and other efforts in this area beginning in late 2016 and began to see improvements in the cohort default rate beginning with the 2016 cohort. A listing of the official 2018, 2017 and 2016 three-year cohort default rates for our institutions is provided in the table below.

As part of the CARES Act, which was signed into law on March 27, 2020, federal student loan payments were suspended for a ~~press release announcing~~period of time, currently extended through January 31, 2022. During this period, student loan borrowers have their loans placed in forbearance, and as such, are no longer required to make payments on their federal student loans. Consequently, no further defaults can occur during this period. Based on this forbearance, and more specifically the timing of it, we expect a favorable impact to the 2018-2020 cohort default rates, with the impact for 2018 being smaller. After the forbearance ends, all students will need to resume their next normally scheduled payment. It is unclear how many students will commence their regularly scheduled payments when the forbearance expires, and the loan servicers may have difficulty handling the volume of borrowers resuming repayment obligations at the same time, particularly as three of the ten current federal loan servicers have announced that they plan to cease providing these services. As a result, whether this forbearance has a negative impact on future cohorts is unclear.

See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Student Loan Default Rates” in our Annual Report on Form 10-K for the year ended December 31, 2020 for more information about cohort default rates and the Department’s related standards.

Negotiated Rulemaking. October 4-8, 2021 the Department held the first in a series of ~~public hearings~~negotiated rulemaking sessions focused on topics related to ~~allow stakeholders~~affordability and student loans. The initial sessions discussed the topics generally, but did not include proposed regulatory language. Broadly, the week’s discussions focused significantly on making it easier for students to ~~offer comments on potential issues~~discharge their student loans, in some cases at the expense of institutions of higher education, and efforts to ~~be addressed~~reduce the cost of student loans through revised repayment plan options. Further negotiating sessions are scheduled for weeks in ~~future negotiated rulemakings. These hearings were held on June 21, 23~~November and 24, 2021, and the Department also permitted additional comments to be made outside the formal hearing process due to extensive stakeholder interest in the hearings. In its announcement, the Department provided a broadDecember 2021. The list of ~~potential~~ topics ~~for new~~that are the subject of the rulemaking ~~for stakeholders to comment on, including:~~include:

Additionally, on October 1, 2021, the Department ~~invited stakeholders~~announced its intention to ~~comment on additional areas for regulation that might improve outcomes for students. Following these hearings, we expect the Department to convene multiple~~establish a second negotiated rulemaking ~~committees~~committee to ~~consider modifying~~prepare proposed regulations ~~in the areas above, as well as modifications to the~~on institutional and program eligibility which would include a revised 90-10 ~~Rule to implement legislation enacted in March 2021.~~standard and could include revised administrative capability, gainful employment and financial responsibility standards. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – 2021 First Quarter Overview – Regulatory Updates,” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 for a brief overview of ~~this~~ recent legislation impacting the 90-10 Rule.

Pursuant to the negotiated rulemaking process, the Department, through a series of meetings, works to develop a notice of proposed rulemaking in collaboration with representatives of the parties who will be affected significantly by the regulations. If a rulemaking committee is able to reach a consensus on its area, then the agreed upon proposal is submitted for public comment as the proposed regulation, and the final regulation typically aligns closely with the agreed upon proposal. The Department indicated during the October 2021 negotiating sessions that it intends to seek the committee’s consensus on an issue-by-issue basis, rather than for all the topics included for the committee’s consideration as a whole. If a rule-making committee is not able to reach consensus, then the Department will publish its recommended regulatory changes in a notice of proposed rulemaking for public comment, and after the public comment period expires it must publish the final regulation. In all cases, 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. Negotiated rulemaking committees convened in recent years generally have not reached consensus, resulting in the Department having significant latitude in formulating regulations. 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, 2020 for more information about the risks and uncertainties relating to our highly regulated industry and potential regulatory changes.

Borrower Defense to Repayment. 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. We have begun to receive these claims and are reviewing and compiling the individual facts of each to submit responses to the Department for its review. 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. ~~Based on our review~~We have submitted initial responses to ~~date, we anticipate that the responses will~~everything received which indicate that we believe the applications fail to establish a valid borrower defense and the Department should therefore deny them. However, the outcome of the Department’s evaluation of each of these applications is uncertain. See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Borrower Defense to Repayment,” and 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, 2020 for more information about the borrower defense to repayment regulations.

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 and years to date ended ~~June~~September 30, 2021 and 2020 (dollars in thousands):

	For the Quarter Ended June 30,															For the Year to Date Ended June 30,															For the Quarter Ended September 30,															For the Year to Date Ended September 30,
		2021		% of Total Revenue				2020		% of Total Revenue			2021 vs 2020 % Change				2021		% of Total Revenue				2020		% of Total Revenue			2021 vs 2020 % Change				2021		% of Total Revenue				2020		% of Total Revenue			2021 vs 2020 % Change				2021		% of Total Revenue				2020		% of Total Revenue			2021 vs 2020 % Change
TOTAL REVENUE	$	175,539					$	176,035						-0.3	%	$	359,177					$	347,029						3.5	%	$	173,998					$	169,126						2.9	%	$	533,175					$	516,155						3.3	%
OPERATING EXPENSES
Educational services and facilities ⁽¹⁾		28,532			16.3	%		28,676			16.3	%		-0.5	%		57,506			16.0	%		55,587			16.0	%		3.5	%		25,961			14.9	%		27,562			16.3	%		-5.8	%		83,467			15.7	%		83,149			16.1	%		0.4	%
General and administrative: ⁽²⁾
Advertising and marketing		35,442			20.2	%		34,962			19.9	%		1.4	%		72,236			20.1	%		70,019			20.2	%		3.2	%		35,435			20.4	%		39,121			23.1	%		-9.4	%		107,671			20.2	%		109,140			21.1	%		-1.3	%
Admissions		25,188			14.3	%		24,668			14.0	%		2.1	%		51,028			14.2	%		49,361			14.2	%		3.4	%		23,207			13.3	%		24,802			14.7	%		-6.4	%		74,235			13.9	%		74,163			14.4	%		0.1	%
Administrative		34,054			19.4	%		33,885			19.2	%		0.5	%		67,741			18.9	%		64,802			18.7	%		4.5	%		37,455			21.5	%		30,053			17.8	%		24.6	%		105,196			19.7	%		94,855			18.4	%		10.9	%
Bad debt		12,448			7.1	%		12,325			7.0	%		1.0	%		26,172			7.3	%		25,187			7.3	%		3.9	%		10,192			5.9	%		11,519			6.8	%		-11.5	%		36,364			6.8	%		36,706			7.1	%		-0.9	%
Total general and administrative expense		107,132			61.0	%		105,840			60.1	%		1.2	%		217,177			60.5	%		209,369			60.3	%		3.7	%		106,289			61.1	%		105,495			62.4	%		0.8	%		323,466			60.7	%		314,864			61.0	%		2.7	%
Depreciation and amortization		3,913			2.2	%		4,151			2.4	%		-5.7	%		7,915			2.2	%		6,790			2.0	%		16.6	%		3,887			2.2	%		3,995			2.4	%		-2.7	%		11,802			2.2	%		10,785			2.1	%		9.4	%
Asset impairment		-			0.0	%		-			0.0	%	NM				-			0.0	%		612			0.2	%	NM				-			0.0	%		-			0.0	%	NM				-			0.0	%		612			0.1	%	NM
OPERATING INCOME		35,962			20.5	%		37,368			21.2	%		-3.8	%		76,579			21.3	%		74,671			21.5	%		2.6	%		37,861			21.8	%		32,074			19.0	%		18.0	%		114,440			21.5	%		106,745			20.7	%		7.2	%

PRETAX INCOME		35,969			20.5	%		38,461			21.8	%		-6.5	%		76,978			21.4	%		77,197			22.2	%		-0.3	%		37,327			21.5	%		32,755			19.4	%		14.0	%		114,305			21.4	%		109,952			21.3	%		4.0	%
PROVISION FOR INCOME TAXES		9,319			5.3	%		10,272			5.8	%		-9.3	%		19,564			5.4	%		19,876			5.7	%		-1.6	%
PROVISION FOR (BENEFIT FROM) INCOME TAXES																																9,557			5.5	%		(7,206	)		-4.3	%		232.6	%		29,121			5.5	%		12,670			2.5	%		129.8	%
Effective tax rate		25.9	%					26.7	%								25.4	%					25.7	%								25.6	%					-22.0	%								25.5	%					11.5	%

INCOME FROM CONTINUING OPERATIONS		26,650			15.2	%		28,189			16.0	%		-5.5	%		57,414			16.0	%		57,321			16.5	%		0.2	%		27,770			16.0	%		39,961			23.6	%		-30.5	%		85,184			16.0	%		97,282			18.8	%		-12.4	%
LOSS FROM DISCONTINUED OPERATIONS, net of tax		(1	)		0.0	%		(22	)		0.0	%		-95.5	%		(12	)		0.0	%		(48	)		0.0	%		-75.0	%		(1	)		0.0	%		(21	)		0.0	%		-95.2	%		(13	)		0.0	%		(69	)		0.0	%		-81.2	%
NET INCOME	$	26,649			15.2	%	$	28,167			16.0	%		-5.4	%	$	57,402			16.0	%	$	57,273			16.5	%		0.2	%	$	27,769			16.0	%	$	39,940			23.6	%		-30.5	%	$	85,171			16.0	%	$	97,213			18.8	%		-12.4	%

Current quarter and year to date revenue ~~decreased slightly~~increased by ~~0.3%~~2.9% or ~~$0.5~~$4.9 million and 3.3% or $17.0 million, respectively, as compared to the prior year periods. The current quarter ~~while~~improvement is driven by an increase of $5.8 million within CTU which was partially offset with the decrease of $1.1 million within AIU. CTU’s revenue growth for the current ~~year to date~~quarter was positively impacted by the academic calendar redesign which resulted in more revenue ~~increased 3.5% or $12.1 million~~earning days for the current quarter as compared to the prior year ~~period. The current quarter decrease is driven by a $2.6 million decline in revenue within AIU which was only partially offset with an increase of $1.8 million within CTU.~~ quarter.

The current year to date revenue ~~includes six~~increase is driven by growth in revenue within both CTU and AIU. The current year to date increase was benefitted by the DigitalCrafts and Hippo acquisitions, and also benefitted from nine months of results related to the Trident acquisition as compared to only ~~four~~seven months in the prior year to date. Additionally, the current year to date increase was positively impacted by ~~total student enrollment growth~~the academic calendar redesign at CTU which resulted in more revenue earning days for ~~CTU at June 30, 2021~~the current year to date as compared to ~~June 30, 2020.~~the prior year to date.

	For the Quarter Ended June 30,					For the Year to Date Ended June 30,					For the Quarter Ended September 30,					For the Year to Date Ended September 30,
		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change
Educational services and facilities:
Academics & student related	$	23,800	$	23,201	2.6%	$	47,633	$	44,713	6.5%	$	21,921	$	22,654	-3.2%	$	69,554	$	67,367	3.2%
Occupancy		4,732		5,475	-13.6%		9,873		10,874	-9.2%		4,040		4,908	-17.7%		13,913		15,782	-11.8%
Total educational services and facilities	$	28,532	$	28,676	-0.5%	$	57,506	$	55,587	3.5%	$	25,961	$	27,562	-5.8%	$	83,467	$	83,149	0.4%

~~The~~Current quarter educational services and facilities expense ~~for~~decreased by 5.8% or $1.6 million as compared to the ~~current~~prior year quarter, ~~remained relatively flat~~with 3.2% or $0.7 million lower academics and student related expense and 17.7% or $0.9 million lower occupancy expense as compared to the prior year quarter. Academics and student related expense decreased for the current quarter as compared to the prior year quarter as a result of decreased salary expense at AIU due to lower student enrollments and open positions. Occupancy expense decreased for the current quarter as a result of certain one-time real estate tax credits as well as reduced occupancy expense as a result of the remote work environment.

The educational services and facilities expense for the current year to date ~~increased by 3.5% or $1.9 million~~remained relatively flat as compared to the prior year period. Academics and student related ~~costs~~expense increased by ~~6.5%~~3.2% or ~~$2.9~~$2.2 million for the current year to date as compared to the prior year period, primarily as a result of the Trident acquisition. Partially offsetting the year to date increase in academics and student related ~~costs were decreases~~expense was a decrease in occupancy ~~expenses~~expense of ~~9.2%~~11.8% or ~~$1.0~~$1.9 million as compared to the prior year period. The improvement within occupancy ~~expenses~~expense was primarily driven by the remote work environment as a result of the pandemic and decreased expenses associated with our closed campuses.

	For the Quarter Ended June 30,					For the Year to Date Ended June 30,					For the Quarter Ended September 30,					For the Year to Date Ended September 30,
		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change		2021		2020	2021 vs 2020 % Change
General and administrative:
Advertising and marketing	$	35,442	$	34,962	1.4%	$	72,236	$	70,019	3.2%	$	35,435	$	39,121	-9.4%	$	107,671	$	109,140	-1.3%
Admissions		25,188		24,668	2.1%		51,028		49,361	3.4%		23,207		24,802	-6.4%		74,235		74,163	0.1%
Administrative		34,054		33,885	0.5%		67,741		64,802	4.5%		37,455		30,053	24.6%		105,196		94,855	10.9%
Bad debt		12,448		12,325	1.0%		26,172		25,187	3.9%		10,192		11,519	-11.5%		36,364		36,706	-0.9%
Total general and administrative expense	$	107,132	$	105,840	1.2%	$	217,177	$	209,369	3.7%	$	106,289	$	105,495	0.8%	$	323,466	$	314,864	2.7%

General and administrative expense increased by ~~1.2%~~0.8% or ~~$1.3~~$0.8 million and ~~3.7%~~2.7% or ~~$7.8~~$8.6 million for the current quarter and year to date, respectively, as compared to the prior year periods, primarily driven by ~~increases within all~~increased administrative expense ~~categories~~ for both comparative periods. Partially offsetting the current quarter and year to date increase in administrative expense were decreases in advertising and marketing and bad debt expense as compared to the prior year periods. The current quarter also benefitted from lower admissions expense as compared to the prior year period.

Advertising and marketing expense ~~increased~~decreased by ~~1.4%~~9.4% or ~~$0.5~~$3.7 million and ~~3.2%~~1.3% or ~~$2.2~~$1.5 million for the current quarter and year to date, respectively, as compared to the prior year ~~periods, due to increased spending~~periods. The lower advertising and marketing expense was a result of improved marketing processes related to ~~the workforce development training programs at Trident~~identifying prospective student interest within both CTU and AIU.

Admissions expense decreased by 6.4% or $1.6 million for the current quarter as ~~well as~~compared to ~~identify prospective student interest~~the prior year quarter, and ~~to support total student enrollment growth~~remained relatively flat for the current year to ~~date.~~date as compared to the prior year period. The lower admissions expense for the current quarter reflects decreased expense within both CTU and AIU as a result of the improved marketing processes discussed above which also benefit admissions expense.

~~Admissions~~Administrative expense increased by ~~2.1%~~24.6% or ~~$0.5~~$7.4 million and ~~3.4%~~10.9% or ~~$1.7~~$10.3 million for the current quarter and year to date, respectively, as compared to the prior year periods. The current quarter and year to date increase was ~~impacted by higher employee expenses and, for the current year to date, six months of expense related to the Trident acquisition as compared to only four months in the prior year to date.~~

~~Administrative expense increased by 0.5% or $0.2 million and 4.5% or $2.9 million for the current quarter and year to date, respectively, as compared to the prior year periods primarily~~ driven by increased legal fees within Corporate and ~~Other.~~Other related to the borrower defense to repayment applications from former students and acquisition efforts.

Bad debt expense incurred by each of our segments during the quarters and years to date ended ~~June~~September 30, 2021 and 2020 was as follows (dollars in thousands):

	For the Quarter Ended June 30,															For the Year to Date Ended June 30,															For the Quarter Ended September 30,															For the Year to Date Ended September 30,
		2021		% of Segment Revenue				2020		% of Segment Revenue			2021 vs 2020 % Change				2021		% of Segment Revenue				2020		% of Segment Revenue			2021 vs 2020 % Change				2021		% of Segment Revenue				2020		% of Segment Revenue			2021 vs 2020 % Change				2021		% of Segment Revenue				2020		% of Segment Revenue			2021 vs 2020 % Change
Bad debt expense:
CTU	$	5,757			5.6	%	$	5,955			5.9	%		-3.3	%	$	12,080			5.8	%	$	12,638			6.2	%		-4.4	%	$	4,248			4.1	%	$	5,401			5.5	%		-21.3	%	$	16,328			5.2	%	$	18,039			6.0	%		-9.5	%
AIU		6,710			9.2	%		6,393			8.4	%		5.0	%		14,125			9.4	%		12,594			8.8	%		12.2	%		5,954			8.6	%		6,139			8.8	%		-3.0	%		20,079			9.1	%		18,733			8.8	%		7.2	%
Corporate and Other		(19	)	NM				(23	)	NM			NM				(33	)	NM				(45	)	NM			NM				(10	)	NM				(21	)	NM			NM				(43	)	NM				(66	)	NM			NM
Total bad debt expense	$	12,448			7.1	%	$	12,325			7.0	%		1.0	%	$	26,172			7.3	%	$	25,187			7.3	%		3.9	%	$	10,192			5.9	%	$	11,519			6.8	%		-11.5	%	$	36,364			6.8	%	$	36,706			7.1	%		-0.9	%

Bad debt expense ~~increased~~decreased by ~~1.0%~~11.5% or ~~$0.1~~$1.3 million and ~~3.9%~~0.9% or ~~$1.0~~$0.3 million for the current quarter and year to date, respectively, as compared to the prior year periods. ~~Bad~~Total bad debt expense as a percentage of revenue ~~remained relatively flat~~also improved for the current quarter and year to date by 90 basis points and 30 basis points, respectively, as compared to the prior year periods. ~~AIU’s increase as a percentage of revenue of 80 basis point and 60 basis points for~~For the current quarter, CTU’s and AIU’s bad debt expense improved by 21.3% or $1.2 million and 3.0% or $0.2 million, respectively, as compared to the prior year quarter. For the current year to date, ~~respectively, was~~CTU’s bad debt expense decreased by 9.5% or $1.7 million, as compared to the prior year period, which more than offset ~~with CTU’s decrease~~the increased bad debt expense at AIU of 7.2% or $1.3 million, as ~~a percentage of revenue of 30 basis points and 40 basis points, respectively.~~compared to the prior year period.

We continue to expect quarterly fluctuations in bad debt expense. We regularly monitor our reserve rates, which includes a ~~review~~quarterly update of our analysis of historical student receivable collectability ~~which we update quarterly~~ based on the most recent data available ~~along with~~and a review of current known factors which we believe could affect future collectability of our student receivables, ~~including~~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.

~~Current~~Operating income increased by 18.0% or $5.8 million and 7.2% or $7.7 million for the current quarter ~~operating income decreased by 3.8% or $1.4 million~~and year to date, respectively, as compared to the prior year ~~period~~periods. The current quarter and ~~increased by 2.6% or $1.9 million for the current~~ year to date improvement was primarily due to increased revenue of $4.9 million and $17.0 million, respectively, as compared to the prior year ~~period. The current quarter decrease was primarily driven by increased legal fees and~~periods. Additionally, operating income improved as a result of decreased advertising and marketing expenses to support the launch of the new workforce development training programs at Trident partially offset with operating efficiencies gained by reallocating resources across various student-serving functions. The current year to date increase was driven by increased revenue within both CTUexpense and ~~AIU as compared to the prior year period,~~bad debt expense which was partially offset with increased ~~expenses within all general and~~ administrative expense categories as well as investments in student-serving functions. Depreciation and amortization expense also increased for the current year to date as compared to the prior year to date as a result of increased investments in technology initiatives and the Trident acquisition.expense.

For the quarter and year to date ended ~~June~~September 30, 2021, we recorded a provision for income taxes of ~~$9.3~~$9.6 million reflecting an effective tax rate of ~~25.9%~~25.6% and ~~$19.6~~$29.1 million reflecting an effective tax rate of ~~25.4%~~25.5%, respectively, as compared to a ~~provision for~~benefit from income taxes of ~~$10.3~~$7.2 million reflecting an effective tax rate of ~~26.7%~~negative 22.0% for the quarter ended September 30, 2020, and ~~$19.9~~provision for income taxes of $12.7 million reflecting an effective tax rate of ~~25.7%~~11.5% for the ~~respective prior~~ year ~~periods.~~to date ended September 30, 2020.

The effective tax rate for the quarter and year to date ended ~~June~~September 30, 2021 was impacted by federal and state tax credits claimed for the ~~effect of stock-based compensation and the release of previously recorded~~2020 tax ~~reserves. The effect of these discrete items~~year, which decreased the effective tax rate for the quarter and year to date by ~~0.4%~~0.6% and ~~0.7%~~0.2%, respectively. The tax effect of stock-based compensation and the release of previously recorded tax reserves for the 2021 year to date tax rate reflects a 0.5% net benefit. The effective tax rate for the quarter and year to date ended ~~June~~September 30, 2020 ~~was impacted~~reflects a $16.0 million valuation allowance release related to our overall domestic loss (“ODL”) supported foreign tax credit carryforwards, which decreased the effective tax rate for the quarter and year to date by 49.0% and 14.6%, respectively. The 2020 year to date effective tax rate also reflects a 0.6% net benefit attributable to the tax effect of stock-based compensation and the release of previously recorded tax ~~reserves, which increased the effective tax rate for the quarter by 0.3% and decreased the year to date effective tax rate by 0.8%.~~reserves. For the full year 2021, we expect our effective tax rate to be between 26.0% and 26.5%.

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

	For the Quarter Ended June 30,																						For the Quarter Ended September 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN						REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN
		2021		2020	% Change				2021			2020		% Change				2021			2020			2021		2020	% Change				2021			2020		% Change				2021			2020
REVENUE:
CTU(1)	$	102,035	$	100,193		1.8	%	$	35,398		$	33,076			7.0	%		34.7	%		33.0	%	$	104,788	$	98,985		5.9	%	$	41,217		$	32,993			24.9	%		39.3	%		33.3	%
AIU(2)		73,223		75,835		-3.4	%		9,218			10,476			-12.0	%		12.6	%		13.8	%		68,948		70,048		-1.6	%		8,334			5,513			51.2	%		12.1	%		7.9	%
Corporate and other ⁽¹⁾⁽³⁾		281		7	NM				(8,654	)		(6,184	)		39.9	%	NM			NM				262		93		181.7	%		(11,690	)		(6,432	)		81.7	%	NM			NM
Total	$	175,539	$	176,035		-0.3	%	$	35,962		$	37,368			-3.8	%		20.5	%		21.2	%	$	173,998	$	169,126		2.9	%	$	37,861		$	32,074			18.0	%		21.8	%		19.0	%

	For the Year to Date Ended June 30,																						For the Year to Date Ended September 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN						REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN
		2021		2020	% Change				2021			2020		% Change				2021			2020			2021		2020	% Change				2021			2020		% Change				2021			2020
REVENUE:
CTU(1)	$	207,857	$	203,781		2.0	%	$	71,541		$	67,695			5.7	%		34.4	%		33.2	%	$	312,645	$	302,766		3.3	%	$	112,758		$	100,688			12.0	%		36.1	%		33.3	%
AIU ⁽²⁾		150,700		143,231		5.2	%		20,541			19,852			3.5	%		13.6	%		13.9	%		219,648		213,279		3.0	%		28,875			25,365			13.8	%		13.1	%		11.9	%
Corporate and other ⁽¹⁾⁽³⁾		620		17	NM				(15,503	)		(12,876	)	NM			NM			NM				882		110		701.8	%		(27,193	)		(19,308	)		40.8	%	NM			NM
Total	$	359,177	$	347,029		3.5	%	$	76,579		$	74,671			2.6	%		21.3	%		21.5	%	$	533,175	$	516,155		3.3	%	$	114,440		$	106,745			7.2	%		21.5	%		20.7	%

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 ~~our workforce~~non-degree professional development ~~training programs due to the short-term nature of these programs.~~and continuing education offerings.

~~Beginning in the first quarter of~~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 ~~days as well as new enrollment~~ results between periods and new enrollment results may not be reflective of operating performance and enrollment growth. As a result, we no longer report new student enrollment results and focus our discussions on total student enrollments.in any given quarter.

	TOTAL STUDENT ENROLLMENTS						TOTAL STUDENT ENROLLMENTS
	At June 30,						At September 30,
		2021	2020	% Change				2021	2020	% Change
CTU		26,600	23,300		14.2	%		25,800	24,000		7.5	%
AIU		16,500	16,800		-1.8	%		16,800	19,000		-11.6	%
Total		43,100	40,100		7.5	%		42,600	43,000		-0.9	%

CTU. Current quarter and year to date revenue increased by ~~1.8%~~5.9% or ~~$1.8~~$5.8 million and ~~2.0%~~3.3% or ~~$4.1~~$9.9 million, respectively, as compared to the prior year periods. CTU experienced an increase in total student enrollment of ~~14.2%~~7.5% at ~~June~~September 30, 2021 as compared to ~~June~~September 30, 2020. CTU’s academic calendar redesign positively impacted the total student enrollments at ~~June~~September 30, ~~2021.~~2021 as well as revenue for the current quarter and current year to date. The current quarter and current year to date have an increased number of revenue earning days as compared to the prior year periods.

Current quarter and year to date operating income for CTU ~~increased~~improved by ~~7.0%~~24.9% or ~~$2.3~~$8.2 million and ~~5.7%~~12.0% or ~~$3.8~~$12.1 million, respectively, as compared to the prior year periods, ~~driven~~supported by the increase in revenue discussed above as well as ~~efficiencies~~decreases within operating processes, which improved operating margin by 170 basis points and 120 basis points for the current quarter and year to date, respectively, as compared to the prior year periods. Partially offsetting the revenue growth and efficiencies within operating processes were increased expense within admissions, advertising and marketing and ~~academics~~bad debt expense for the current quarter and year to date as compared to the ~~respective~~ prior year periods.

AIU. Current quarter revenue decreased by ~~3.4%~~1.6% or ~~$2.6~~$1.1 million as compared to the prior year period and increased by ~~5.2%~~3.0% or $7.5 million for the year to date as compared to the prior year period. The current quarter decrease reflects lower total student enrollments at June 30, 2021 as compared to June 30, 2020, due to a decrease in student enrollments at Trident. Trident focuses on serving students from the military-affiliated population and the prolonged pandemic has had an impact on enrollments from the military as a result of reduced opportunities for in-person marketing activities at military installations as well as technical challenges associated with a change in the Army education administration portal. The current year to date increase benefitted from six months of revenue related to Trident as compared to four months in the prior year period.

~~Current quarter operating income for AIU decreased by 12.0% or $1.3 million as compared to the prior year period and increased by 3.5% or $0.7~~$6.4 million for the current year to date as compared to the prior year period. AIU experienced a decrease in total student enrollment of 11.6% at September 30, 2021 as compared to September 30, 2020. We believe the decrease in total student enrollments were caused by several factors, including students pausing their academic programs and prolonged student decision-making as a result of the COVID-19 pandemic, 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, and a reduction in student enrollments from the military population. Partially offsetting the decrease in revenue for the current quarter is revenue associated with the DigitalCrafts acquisition. Additionally, the current year to date revenue increase benefitted from nine months of revenue related to Trident as compared to seven months in the prior year period.

Current quarter and year to date operating income for AIU increased by 51.2% or $2.8 million and 13.8% or $3.5 million, respectively, as compared to the prior year periods. The current quarter ~~decrease~~improvement was primarily driven by decreased advertising and marketing ~~expenses to support the launch of the new workforce development training programs at Trident as lower administration, academics~~ and admissions ~~expenses partially~~expense as compared to the prior year quarter which more than offset the decline in revenue ~~decline~~ for the current quarter. The current year to date ~~increase~~improvement was primarily driven by the increase in revenue discussed above, which was partially offset with ~~increases in~~increased expense within academics ~~admissions, advertising~~ and ~~marketing~~student related, occupancy and bad ~~debt expense categories due, in part, to the Trident acquisition which has six months of operating expenses during the current year to date as compared to four months in the prior year period.~~debt.

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 and year to date increased ~~39.9%~~81.7% or ~~$2.5~~$5.3 million and ~~20.4%~~40.8% or ~~$2.6~~$7.9 million, respectively, as compared to the prior year periods, primarily as a result of increased legal fee expense associated with the borrower defense to repayment applications from former students and acquisition efforts, which more than offset the decreased operating losses associated with our closed campuses.

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, 2020. 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, 2020 also includes a discussion of these and other significant accounting policies, and Note 34 "Recent Accounting Pronouncements" in this Form 10-Q describes accounting policies adopted in 2021.

As of ~~June~~September 30, 2021, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled ~~$480.7~~$481.0 million. Restricted cash as of ~~June~~September 30, 2021 was ~~$4.0~~$5.2 million and relates to amounts held in an escrow ~~account~~accounts to secure post-closing indemnification obligations of the ~~seller~~sellers pursuant to the Trident ~~acquisition.~~and Hippo acquisitions. 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 2021. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures and lease commitments through at least the next 12 months primarily with cash generated by operations and existing cash balances.

~~Our~~On September 8, 2021, the Company and the subsidiary guarantors thereunder entered into a credit agreement ~~allows us~~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 ~~borrow up to~~time parties thereto. The credit agreement provides the Company with the benefit of a ~~maximum amount of $50.0~~$125,000,000 senior secured revolving credit facility. The $125.0 million ~~and~~revolving credit facility under the credit agreement is scheduled to mature on ~~January 20, 2022.~~ 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 ~~contains~~and the ancillary documents executed in connection therewith contain customary affirmative, negative and financial maintenance ~~covenants, including a requirement~~covenants. The Company is required to maintain ~~a balance of~~unrestricted cash, cash equivalents and ~~marketable securities~~short-term investments in ~~our~~ domestic accounts ~~with the bank of~~in an amount at least ~~$50.0 million at all times. Amounts borrowed under~~equal to the ~~credit agreement are required~~aggregate loan commitments then in effect. Acquisitions to be ~~100% secured with deposits of cash~~undertaken by the Company must meet certain criteria, and ~~marketable securities with the bank. Under the credit agreement,~~ the Company’s ability to make restricted payments, including payments in connection with ~~an acquisition or~~ a repurchase of shares of our common stock, is subject to ~~limitations. Taking into consideration restricted payments already made by~~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 ~~during~~is required to maintain cash in a segregated, restricted account in an amount not less than the ~~term~~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.

The credit agreement with Wintrust replaced the previous $50.0 million revolving credit facility set forth in the credit agreement dated as of ~~June 30, 2021, the Company may make up to an additional $179.0 million of restricted payments through January 20, 2022.~~December 27, 2018 with BMO Harris Bank N.A.

We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) ~~prudently~~ investing in organic growth projects at our universities, such as student-serving initiatives and new academic program

development, 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 $58.0 million during the third quarter ended September 30, 2021 and are pursuing additional acquisition opportunities similar in size to these two. We currently anticipate that we will complete another acquisition by the end of 2022. 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 November 4, 2019, the Board of Directors of the Company approved a stock repurchase program which authorizes the Company to repurchase up to $50.0 million of our common stock from time to time depending on market conditions and other considerations. The ~~program expires on~~program’s original expiration date was December 31, 2021. On October 19, 2021, the Board of Directors of the Company extended the expiration date of the program to February 28, 2022. At the current market price for the Company’s common stock, we believe repurchases enhance stockholder value and currently intend to pursue them when deemed prudent based on market and other conditions. Since the November 4, 2019 inception date, the Company repurchased approximately 2.0 million shares for $27.1 million as of ~~which approximately 0.4 million shares were repurchased for $5.4 million during the quarter ended June~~September 30, 2021.

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, 2020.

During the years to date ended ~~June~~September 30, 2021 and 2020, net cash flows provided by operating activities totaled ~~$82.7~~$144.2 million and ~~$105.4~~$137.8 million, respectively. The ~~decrease~~increase in cash flows provided by operating activities for the current year to date as compared to the prior year to date was primarily ~~due to the timing impact of Title IV funding received in the prior year to date that would have historically been received in the fourth quarter of 2019 as well as income tax payments made during the~~driven by revenue growth at both CTU and AIU. The current year to date ~~as compared to no income tax payments in the prior year period. Partially offsetting these items are six~~revenue benefitted from nine months of cash flow during 2021 ~~for~~related to the Trident acquisition as compared to only ~~four~~seven months in the prior year to ~~date.~~date as well as the DigitalCrafts acquisition commencing on August 2, 2021 and the Hippo acquisition commencing on September 10, 2021.

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.~~payments, as well as private loans for our non-degree programs. For the year to date ended ~~June~~September 30, 2021, approximately 81% of our institutions’ aggregate cash receipts from tuition payments came from Title IV Program funding as compared to 80% for the full year of 2020. 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, 2020.

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.

During the ~~years~~year to date ended ~~June~~September 30, 2021, ~~and 2020,~~net cash flows provided by investing activities totaled $24.3 million compared to net cash flows used in investing activities ~~totaled $94.3 million and $101.5 million, respectively. The prior year period included a payment~~ of ~~$34.1~~$167.5 million for the ~~Trident acquisition.~~prior year to date.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash ~~outflow~~inflow of ~~$91.2 million and $64.0~~$87.5 million for the ~~years~~current year to date as compared to net cash outflow of $120.2 million for the prior year to date.

Business acquisitions. During the quarter ended ~~June~~September 30, 2021, the Company completed the DigitalCrafts and ~~2020, respectively.~~Hippo acquisitions and made initial payments of $56.9 million. The prior year to date includes $39.8 million for payments related to the Trident acquisition.

Capital Expenditures. Capital expenditures decreased to ~~$3.1~~$6.3 million for the year to date ended ~~June~~September 30, 2021 as compared to ~~$3.4~~$7.5 million for the year to date ended ~~June~~September 30, 2020. Capital expenditures represented approximately ~~1.0%~~1.2% and 1.4% of total revenue for ~~each of~~ the years to date ended ~~June~~September 30, 2021 and ~~2020.~~2020, respectively. For the full year 2021, we expect capital expenditures to be approximately 2.0% of revenue.

During the years to date ended ~~June~~September 30, 2021 and 2020, net cash flows used in financing activities totaled ~~$6.8~~$6.6 million and ~~$17.0~~$16.8 million, respectively. Payments to repurchase shares of our common stock were $5.4 million for the year to date ended ~~June~~September 30, 2021 and ~~$17.3~~$17.9 million for the year to date ended ~~June~~September 30, 2020.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $2.0 million and ~~$0.7~~$0.9 million for the years to date ended ~~June~~September 30, 2021 and 2020, respectively.

Selected condensed consolidated balance sheet account changes from December 31, 2020 to ~~June~~September 30, 2021 were as follows (dollars in thousands):

	June 30,		December 31,					September 30,		December 31,
	2021		2020		% Change			2021		2020		% Change
ASSETS
CURRENT ASSETS:
Total cash and cash equivalents, restricted cash and short-term investments	$	480,653	$	410,360		17	%	$	480,986	$	410,360		17	%
NON-CURRENT ASSETS:
Goodwill									162,692		118,312		38	%
Deferred income tax assets, net		31,782		40,351		-21	%		30,413		40,351		-25	%
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses - other		18,614		11,921		56	%		17,596		11,921		48	%
Deferred revenue		45,214		34,534		31	%		57,051		34,534		65	%
NON-CURRENT LIABILITIES:
Other liabilities		14,470		18,390		-21	%

Total cash and cash equivalents, restricted cash and short-term investments: The increase is primarily driven by cash provided by operating activities as a result of the increase in total revenue within CTU and AIU during the current year to date ~~period.~~period, partially offset with payments made for business acquisitions during the current year to date.

Goodwill: The increase in goodwill is attributable to the DigitalCrafts and Hippo acquisitions.

Deferred income tax assets, net: The decrease reflects the usage of deferred tax assets associated with the offset of income taxes payable.

Accrued expenses other: The increase is primarily related to the reclassification of $4.0 million of escrow liability related to the Trident acquisition from long term to short term as well as an increased accrual for ~~legal~~professional fees as of ~~June~~September 30, 2021.

Deferred revenue: The increase is primarily related to the timing impact of the academic calendar redesign at ~~CTU.~~CTU as well as the DigitalCrafts and Hippo acquisitions during the current quarter.

~~Other liabilities:~~ ~~The decrease is primarily related to the reclassification of $4.0 million of escrow liability related to the Trident acquisition from long term to short term.~~

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.

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 ~~June~~September 30, 2021, 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.

~~Any~~Under the credit agreement, outstanding ~~borrowings under our revolving credit facility~~principal amounts bear annual interest at a fluctuating ~~rates under either~~rate equal to 1.0% less than the ~~Base Rate Loan~~administrative agent’s prime commercial rate, subject to a 3.0% minimum rate. A higher rate may apply to late payments or ~~as determined by the London Interbank Offered Rate~~ ~~(“LIBOR”)~~ ~~for the relevant currency, plus the applicable rate based on the type~~if any event of loan. Under the credit agreement, if LIBOR cannot be determined or an announcement is made about a specific date after which LIBOR will no longer be used for determining interest rates for loans, an alternative to LIBOR or a mechanism to establish an alternate rate is specified.default exists. As of ~~June~~September 30, 2021, we had no outstanding borrowings under this facility.

Our financial instruments are recorded at their fair values as of ~~June~~September 30, 2021 and December 31, 2020. 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.

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 ~~June~~September 30, 2021, 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.

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 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.

Note 89 “Contingencies” to our unaudited condensed consolidated financial statements is incorporated herein by reference.

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, 2020, which was filed with the Securities and Exchange Commission on February 24, 2021.

On November 4, 2019, the Board of Directors of the Company approved a stock repurchase program which authorizes the Company to repurchase up to $50.0 million of the Company’s outstanding common stock. See Note 1112 “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 year to date ended ~~June~~September 30, 2021:

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⁾		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, 2020							$	28,231,593							$	28,231,593
January 1, 2021—January 31, 2021		-	$	-		-		28,231,593		-	$	-		-		28,231,593
February 1, 2021—February 28, 2021		-		-		-		28,231,593		-		-		-		28,231,593
March 1, 2021—March 31, 2021		159,989		12.70		-		28,231,593		159,989		12.70		-		28,231,593
April 1, 2021—April 30, 2021		-		-		-		28,231,593		-		-		-		28,231,593
May 1, 2021—May 31, 2021		273,578		12.06		273,578		24,927,010		273,578		12.06		273,578		24,927,010
June 1, 2021—June 30, 2021		166,625		12.45		166,474		22,850,626		166,625		12.45		166,474		22,850,626
July 1, 2021—July 31, 2021										-		-		-		22,850,626
August 1, 2021—August 31, 2021										-		-		-		22,850,626
September 1, 2021—September 30, 2021										-		-		-		22,850,626
Total		600,192				440,052				600,192				440,052

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.

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.

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)

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



		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	1618

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2730

Item 4.	Controls and Procedures	2731

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	2932

Item 1A.	Risk Factors	2932

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2932
Item 6.	Exhibits	2932

SIGNATURES		3134

	DigitalCrafts		Hippo
Assets:	August 2, 2021		September 10, 2021
Cash	$	-	$	93
Student receivables		1,777		202
Other current assets		4		25
Property and equipment		-		27
Intangible assets subject to amortization
Trade name		740		3,340
Customer relationships		200		14,100
Developed technology		830		1,960
Goodwill		16,477		27,903
Total assets acquired	$	20,028	$	47,650
Liabilities:
Accounts payable and other accrued liabilities	$	268	$	378
Deferred revenue		1,404		3,952
Total liabilities assumed	$	1,672	$	4,330

Net assets acquired	$	18,356	$	43,320

	Maintenance Fee Payments
For the quarter ended June 30, 2021	$	436
For the quarter ended June 30, 2020 ⁽¹⁾	$	-
For the year to date ended June 30, 2021	$	859
For the year to date ended June 30, 2020 ⁽¹⁾	$	1,443

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

	Cohort Default Rates 3-year rate
Institution, Main Campus Location
(Additional locations as defined by accreditors are in parentheses)	2018	2017 ⁽²⁾	2016
American InterContinental University ⁽¹⁾
Chandler, AZ (Online) (Atlanta, GA and Houston, TX)	15.8%	17.0%	19.2%
Colorado Technical University
Colorado Springs, CO (Denver, CO and Online)	15.7%	16.0%	18.8%

	INDEX TO EXHIBITS
Exhibit Number	Exhibit	Incorporated by Reference to:

*10.1	Credit Agreement dated as of September 8, 2021 among Perdoceo Education Corporation, ~~Amended~~the subsidiary guarantors from time to time parties thereto, the lenders from time to time parties thereto, and ~~Restated 2016 Incentive Compensation Plan~~Wintrust Bank, N.A, as administrative agent and letter of credit issuer	Exhibit 10.1 to our Form 8-K filed on ~~June 8,~~September 13, 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 ~~June~~September 30, 2021, 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.

	PERDOCEO EDUCATION CORPORATION

Date: ~~August 5,~~November 4, 2021	By:	/s/ TODD S. NELSON
		Todd S. Nelson President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 5,~~November 4, 2021	By:	/s/ ASHISH R. GHIA
		Ashish R. Ghia Senior Vice President and Chief Financial Officer (Principal Financial Officer)