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Zovio is studying sales of part of its business as net losses continue

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Zovio is studying sales of part of its business as net losses continue

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Short dive:

  • Zovio, an education service provider whose largest customer is the University of Arizona’s global campus, continues to research sales of all three parts of its business, company executives said during a recent call, discussing earnings in the first quarter of 2022.
  • These segments include Zovio’s contract with UAGC, which receives services such as marketing and recruitment from the company in exchange for a share of the training revenue. Zovio also owns two emerging companies, provider of training camps Fullstack Academy and online tutoring provider TutorMe, which generated revenue of $ 9.3 million, up 29.5% from last year.
  • However, the company’s total profit fell to $ 61.6 million in the first quarter, which is 19.8% less than $ 76.9 million for the same period last year. Officials said the decline was primarily due to problems with admission to the UAGC.

Diving Insight:

Representatives of Zovio first announced that they are considering the sale of three companies in April, after a difficult year for the company. Randy Hendrix, the company’s CEO, announced the effort during a call Tuesday.

“I am pleased with the interest shown and the progress we are making,” Hendrix said, adding that he would share details in the future.

While the company is considering a sale, it also hopes to improve UAGC registration and continue to develop Fullstack Academy and TutorMe, Hendrix said.

Zovio previously owned the University of Ashford, but in late 2020 sold the commercial establishment to the University of Arizona and evolved into a company that provides educational services. The State University transformed the commercial institution into UAGC and entered into a 15-year service agreement with Zovio.

The deal is there faced constant criticism of University of Arizona faculty who are concerned about reputational damage. The California Attorney General filed a lawsuit against the University of Ashford in 2017, accusing the institution of misleading students, and earlier this year a judge sided with the state. The court ordered Zovio to pay $ 22.4 million fine as a result.

The company has announced its intention to hold a new trial and overturn the verdict, Hendrix said. Consideration of the petition is scheduled for Friday.

UAGC has struggled with registration because it is refusing started even before its sale continue and affect the revenue that Zovio receives from the 15-year agreement. Despite these current challenges, company executives expressed optimism about enrollment and advertised growth from January to March.

Hendrix attributed these improvements to recent changes made by the company. In January, Zovio cut the management team serving UAGC to be “smarter and more agile” and responsive to the university, he said. It also combined two roles, enrollment consultants and enrollment coaches, so that students moved between fewer people during their stay at UAGC.

The new enrollment was “slower than a year ago,” said during the call Kevin Royal, CFO of Zovio. But the company has noticed improvements in compliance and expects the number of new students to increase in the second quarter from last year.

Zovio and UAGC did not immediately present current university admission figures on Wednesday.

While Hendrix declined to answer a call or cut UAGC costs, he said UAGC CEO and President Paul Pastarek “is doing really well” in order to keep university costs in line with tuition income.

Meanwhile, Zovio recently took steps to reduce its costs, Hendrix said. Total expenses and expenses fell to $ 68.9 million in the first quarter, down 20.1% from a year ago.

Zovio’s net loss fell from $ 9.5 million in the first quarter of 2021 to $ 7.4 million in 2022.

“We will carefully manage our costs until the company becomes profitable again,” Hendrix said.

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