Home Career Zovio sells tutoring services for $ 55 million

Zovio sells tutoring services for $ 55 million

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Short dive:

  • Zovio, an educational services company, on Monday sold its tutoring business to GoGuardian, a K-12 technology company, for $ 55 million in cash.
  • The sale of a subsidiary, called TutorMe, comes after Zovio leaders recently said they are exploring segments of the sales business. Zovio still owns Fullstack Academy, an educational provider of technology training camps, and provides educational services to the University of Arizona Global Campus under a 15-year contract.
  • Zovio also repaid a $ 31.5 million loan it took out in April in part to prepare for the final verdict. a lawsuit filed by California against the company in 2017. Earlier this year, a judge in the case ruled that Zovio had misled students when he owned Ashford Commercial University, and fined the company $ 22.4 million.

Diving Insight:

Zovio, formerly known as Bridgepoint Education, was trying to move into an education company after previously working as the owner of a nonprofit college. As part of the turnaround, the company bought TutorMe in 2019 for a deal, including $ 2.8 million in cash and nearly 310,000 shares.

In December 2020, Zovio sold the University of Ashford to the University of Arizona, which rebranded the online college into the Global Campus of the University of Arizona. Zovio maintains close ties with the university through a 15-year contract under which it provides services such as marketing and recruitment, in exchange for a reduction in online college revenue.

But Zovio’s transition was turbulent.

The company faces a severe fine from a California ordinance decision, struggles with UAGC enrollment issues and struggles with constant criticism regarding its relationship with the online college. The company is also in danger removal from Nasdaq if it cannot raise its share price when closing above $ 1 for 10 consecutive business days until the end of October.

Zovio CEO Randy Hendrix said in an email that the sale of TutorMe underscores the company’s ability to fulfill its plan to find strategic alternatives.

“We believe this transaction is in the interests of our stakeholders and will play an important role in our plan to disclose value to our shareholders,” Hendrix said.

The California ruling in March kicked off some of Zovio’s recent struggles. In a 49-page opinion, San Diego High Court Judge Eddie Sturgeon found that the University of Ashford has misled students about the cost and career outcomes of the institution’s programs. The judge cited evidence that the company made more than 1.2 million false calls to prospective students from March 2009 to April 2020.

The company has announced its intention to hold a new trial and overturn the verdict. Sturgeon rejected Zovio’s petition for a new trial on May 13. But a judge has reduced the bond the company must provide to avoid paying a total fine of $ 22.4 million while it appeals the case. up to $ 7 millionless than $ 33 million.

In court documents Filed before the decision, Zovio said it had contacted several bond suppliers but the company did not have enough cash, real estate and other securities to meet their collateral requirements.

“We are pleased that the judge has reduced the amount of bail claims and we are considering our appeal options,” Vicky Shray, Zovio’s chief external relations officer, said in an email.

Following a court ruling that Ashford misled students, Zovio leaders told analysts they were considering selling part of the business. It is unclear whether Zovio is also going to unload Fullstack and its contract with UAGC. The company did not answer a question Tuesday on whether it is studying selling other business units.

TutorMe was a growing source of income for Zovio. Together with Fullstack Academy, TutorMe generated $ 9.3 million in the first quarter of 2022, up 29.5% from the same period a year earlier.

Meanwhile, revenue from Zovio’s contract with UAGC fell 24.9% to $ 52.3 million in the first quarter of 2022.

GoGuardian said in a statement that it shares a commitment with TutorMe to make learning more convenient, efficient and equitable. “We are excited to join our teams to better support the students, schools and districts we serve,” the statement said.

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