BRIDGEPOINT EDUCATION INC, 10-Q filed on 5/1/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 26, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name BRIDGEPOINT EDUCATION INC  
Entity Central Index Key 0001305323  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   27,353,520
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 171,178 $ 185,098
Restricted cash 17,457 20,428
Investments 2,121 2,065
Accounts receivable, net 33,594 27,077
Prepaid expenses and other current assets 21,394 22,388
Total current assets 245,744 257,056
Property and equipment, net 10,019 10,434
Goodwill and intangibles, net 14,170 14,593
Other long-term assets 4,814 5,456
Total assets 274,747 287,539
Current liabilities:    
Accounts payable and accrued liabilities 66,182 71,165
Deferred revenue and student deposits 61,698 68,207
Total current liabilities 127,880 139,372
Rent liability 6,030 7,001
Other long-term liabilities 12,773 12,708
Total liabilities 146,683 159,081
Commitments and contingencies (see Note 15)
Preferred stock, $0.01 par value:    
20,000 shares authorized; zero shares issued and outstanding at both March 31, 2018, and December 31, 2017 0 0
Common stock, $0.01 par value:    
300,000 shares authorized; 65,073 and 64,887 issued, and 27,344 and 27,158 outstanding, at March 31, 2018 and December 31, 2017, respectively 651 649
Additional paid-in capital 202,213 201,755
Retained earnings 430,964 431,818
Treasury stock, 37,729 shares at cost at both March 31, 2018, and December 31, 2017 (505,764) (505,764)
Total stockholders' equity 128,064 128,458
Total liabilities and stockholders' equity $ 274,747 $ 287,539
v3.8.0.1
Condensed Consolidated Balance Sheets - Parenthetical - $ / shares
Mar. 31, 2018
Dec. 31, 2017
Stockholders' equity:    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 300,000,000 300,000,000
Common stock, shares issued 65,073,000 64,887,000
Common stock, shares outstanding 27,344,000 27,158,000
Treasury stock, shares at cost 37,729,000 37,729,000
v3.8.0.1
Condensed Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Revenue $ 118,031 $ 129,490
Costs and expenses:    
Instructional costs and services 56,862 63,039
Admissions advisory and marketing 48,194 44,762
General and administrative 12,748 12,027
Restructuring and impairment expense (credit) (159) 0
Total costs and expenses 117,645 119,828
Operating income 386 9,662
Other income, net 250 443
Income before income taxes 636 10,105
Income tax expense (benefit) (1,661) 236
Net income $ 2,297 $ 9,869
Income per share:    
Basic (in usd per share) $ 0.08 $ 0.23
Diluted (in usd per share) $ 0.08 $ 0.23
Weighted average number of common shares outstanding used in computing income per share:    
Basic (in shares) 27,164 42,100
Diluted (in shares) 27,564 42,997
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
Net income $ 2,297 $ 9,869
Other comprehensive income, net of tax:    
Unrealized gains on investments 0 1
Comprehensive income $ 2,297 $ 9,870
v3.8.0.1
Condensed Consolidated Statement of Stockholders' Equity - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income
Treasury Stock
Balance, shares at Dec. 31, 2016   64,035        
Balance at Dec. 31, 2016 $ 280,706 $ 641 $ 195,854 $ 421,281 $ (1) $ (337,069)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Stock-based compensation 900   900      
Exercise of stock options, shares   139        
Exercise of stock options 1,299 $ 1 1,298      
Stock issued under stock incentive plan, net of shares held for taxes, shares   221        
Stock issued under stock incentive plan, net of shares held for taxes (1,481) $ 2 (1,483)      
Stock repurchase (152,000)         (152,000)
Net income 9,869     9,869    
Unrealized gains on investments, net of tax 1       1  
Balance, shares at Mar. 31, 2017   64,395        
Balance at Mar. 31, 2017 139,294 $ 644 196,569 431,150 0 (489,069)
Balance, shares at Dec. 31, 2017   64,887        
Balance at Dec. 31, 2017 128,458 $ 649 201,755 431,818 0 (505,764)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Adoption of accounting standards (Note 2) (3,151)     (3,151)    
Stock-based compensation 1,165   1,165      
Stock issued under stock incentive plan, net of shares held for taxes, shares   186        
Stock issued under stock incentive plan, net of shares held for taxes (705) $ 2 (707)      
Net income 2,297     2,297    
Unrealized gains on investments, net of tax 0          
Balance, shares at Mar. 31, 2018   65,073        
Balance at Mar. 31, 2018 $ 128,064 $ 651 $ 202,213 $ 430,964 $ 0 $ (505,764)
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities:    
Net income $ 2,297 $ 9,869
Adjustments to reconcile net income to net cash used in operating activities:    
Provision for bad debts 6,646 9,294
Depreciation and amortization 1,759 2,388
Amortization of premium/discount 0 20
Deferred income taxes 4 (1,284)
Stock-based compensation 1,165 900
Net gain on marketable securities (14) (76)
Reassessment of lease charges (506) 0
Loss on disposal or impairment of fixed assets 9 66
Changes in operating assets and liabilities:    
Accounts receivable (15,849) (15,762)
Prepaid expenses and other current assets 995 81
Other long-term assets 297 102
Accounts payable and accrued liabilities (4,332) (10,872)
Deferred revenue and student deposits (6,973) (2,872)
Other liabilities (567) (3,373)
Net cash used in operating activities (15,069) (11,519)
Cash flows from investing activities:    
Capital expenditures (809) (1,293)
Purchases of investments (747) (37)
Capitalized costs for intangible assets (265) (114)
Sales of investments 704 0
Maturities of investments 0 17,725
Net cash (used in) provided by investing activities (1,117) 16,281
Cash flows from financing activities:    
Proceeds from exercise of stock options 0 1,299
Tax withholdings on issuance of stock awards (705) (1,481)
Repurchase of common stock 0 (152,000)
Net cash used in financing activities (705) (152,182)
Net decrease in cash, cash equivalents and restricted cash (16,891) (147,420)
Cash, cash equivalents and restricted cash at beginning of period 205,526 332,335
Cash, cash equivalents and restricted cash at end of period 188,635 184,915
Supplemental disclosure of non-cash transactions:    
Purchase of equipment included in accounts payable and accrued liabilities 235 209
Issuance of common stock for vested restricted stock units 1,957 3,785
Cash and cash equivalents 171,178 164,733
Restricted cash $ 17,457 $ 20,182
v3.8.0.1
Nature of Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business
Nature of Business
Bridgepoint Education, Inc. (together with its subsidiaries, the “Company”), incorporated in 1999, is a provider of postsecondary education services. Its wholly-owned subsidiaries, Ashford University® and University of the RockiesSM, are regionally accredited academic institutions, which deliver programs primarily online. Ashford University offers associate’s, bachelor’s and master’s programs, and University of the Rockies offers master’s and doctoral programs.
v3.8.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission (“SEC”) on February 21, 2018. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented.
Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification Topic 606 (“ASC 606”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”). This literature is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, as well as assets recognized from costs incurred to obtain or fulfill a contract. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective adoption method. In accordance with the modified retrospective adoption method, the Company elected to retroactively adjust only those contracts that did not meet the definition of a completed contract at the date of initial application. The new guidance impacted the amount and timing of the Company’s revenue recognition as follows:
Deferral of revenue recognition for the corporate full tuition grant (“FTG”) contracts that include a material right under ASC 606. This material right is deferred until the earlier of redemption or expiration.
Prior to the adoption of ASC 606, we recognized revenue to the extent of cash receipts when collectibility was not reasonably assured. Under ASC 606, collectibility issues may indicate an implied price concession, which is accounted for as variable consideration. Consequently, revenues for these types of contracts is accelerated, net of any amounts to which we expect to be entitled.
Under ASC 606, once a student is deemed to have a history of collection issues, all future revenues earned are subject to a price concession as the student has demonstrated that they may not pay the full tuition price based on past behavior. This results in a reduction in the transaction price such that revenue is recorded based on the amount to which the Company expects to be entitled.
At the date of adoption of ASC 606, the Company recorded a cumulative adjustment to its consolidated balance sheet, including an adjustment to retained earnings, to adjust for the aggregate impact of these revenue items, as calculated under the new guidance. The cumulative effect adjustment decreased the opening balance of retained earnings on January 1, 2018, as follows (in thousands):
 
Closing balance at December 31, 2017
 
Adjustments due to ASC 606
 
Opening balance at January 1, 2018
Accounts receivable, net
$
27,077

 
$
(2,686
)
 
$
24,391

 
 
 
 
 


Deferred revenue and student deposits
$
68,207

 
$
465

 
$
68,672

Retained earnings
$
431,818

 
$
(3,151
)
 
$
428,667


The following tables present the impact of changes to the condensed consolidated financial statement line items as a result of applying ASC 606 to the periods presented (in thousands):
 
Three Months Ended March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Revenue
$
118,031

 
$
283

 
$
118,314

Instructional costs and services
$
56,862

 
$
1,136

 
$
57,998

Net income
$
2,297

 
$
(853
)
 
$
1,444

 
As of March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Accounts receivable, net
$
33,594

 
$
2,248

 
$
35,842

Deferred revenue and student deposits
$
61,698

 
$
(50
)
 
$
61,648

Retained earnings
$
430,964

 
$
(2,298
)
 
$
428,666


Comparative historical information on the condensed consolidated statement of income has not been restated and continues to be reported under ASC 605. For further information regarding the disaggregation of revenue recorded in the current period, refer to Note 3, “Revenue Recognition” to the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the lease commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public companies should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company currently expects to adopt ASU 2016-02 in its first quarter of 2019. During the first quarter of 2018, the Company was in process of completing its initial evaluation of its existing leases and contracts based upon the new standards and continues to evaluate the impact that the adoption of ASU 2016-02 will have on the Company’s condensed consolidated financial statements.
v3.8.0.1
Revenue Recognition (Notes)
3 Months Ended
Mar. 31, 2018
Revenue Recognition [Abstract]  
Revenue Recognition
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to the institutions’ students, in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods or services. Determining whether a valid customer contract exists includes an assessment of whether amounts due under the contract are collectible. The Company performs this assessment at the beginning of every contract and subsequently thereafter if new information indicates there has been a significant change in facts and circumstances.
The Company’s contracts with customers generally include multiple performance obligations, which it identifies by assessing whether each good and service promised in the contract is distinct. For each performance obligation, the Company allocates the transaction price, including fixed and variable consideration, on the basis of the relative standalone selling prices of each good and service in the contract, which is determined using observable prices.
The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
 
Three Months Ended March 31, 2018
Tuition revenue, net
$
108,634

Digital materials revenue, net
5,926

Technology fee revenue, net
2,956

Other revenue, net (1)
515

Total revenue, net
$
118,031

(1)
Primarily consists of revenues generated from services such as graduation fees, transcript fees, and other miscellaneous services.

The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
 
Three Months Ended March 31, 2018
Over time, over period of instruction
$
102,205

Over time, full tuition grant (1)
9,522

Point in time (2)
6,304

Total revenue, net
$
118,031

(1)
Represents revenue generated from the corporate full tuition grant (“FTG”) program.
(2)
Represents revenue generated from digital textbooks and other one-time fees.

The Company operates under one reportable segment and has no foreign operations or assets located outside of the United States. For further information refer to Item 1. “Business” within the Company’s 2017 Form 10-K filed with the SEC on February 21, 2018.
The Company generates the majority of its revenue from tuition, technology fees, and digital materials related to students whose primary funding source is governmental funding. Tuition represents amounts charged for course instruction and technology fees represent amounts charged for the students’ use of the technology platform on which course instruction is delivered. Digital materials fees represent amounts charged for the digital textbooks that accompany the majority of courses taught at our institutions. With the exception of students attending courses within the three-week conditional admission period at Ashford University, the majority of tuition and technology fees are recognized as revenue as control of the services is transferred to the student, which occurs over the applicable period of instruction. Similarly, the majority of digital materials fees are recognized as revenue when control of the product has been transferred to the student, which occurs when the student is granted unrestricted access to the digital textbook, generally, on the first day of the course. Revenue generated from students within the conditional admission period is deferred and recognized when the student matriculates into the institution, which occurs in the fourth week of the course.
The Company's institutions' online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission and students enrolled under the FTG program, online students are billed on a payment period basis on the first day of a course. Students under conditional admission are billed for the payment period upon matriculation.
If a student's attendance in a class precedes the receipt of cash from the student's source of funding, the Company establishes an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and student deposits and related account receivable balances are reduced to present amounts attributable to the current course.
In certain cases, the Company's institutions provide scholarships to students who qualify under various programs. These scholarships are recognized as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligations. Also, for some of our customers, we do not expect to collect 100% of the consideration to which we are contractually entitled and, as a result, those customers may receive discounts or price adjustments that, based on historical Company practice, represent implied price concessions and are accounted for as variable consideration. The majority of these price concessions relate to amounts charged to students for goods and services, which management has determined will not be covered by the student’s primary funding source (generally, government aid) and, as a result, the student will become directly financially responsible for them. The reduction in the transaction price that results from this estimate of variable consideration reflects the amount the Company does not expect to be entitled to in exchange for the goods and services it will transfer to the students, as determined using historical experience and current factors, and includes performing a constraint analysis. These estimates of variable consideration are recorded as direct reductions of revenue consistent with the timing of recognition associated with the related performance obligation.
A portion of tuition revenue, technology fee revenue, and digital materials revenue is generated from contracts with students enrolled under the corporate FTG program, which is a 12-month grant that, when combined with a corporate partner’s annual tuition assistance program, enables eligible students to earn their degree without incurring student loan debt. Students enrolled under this program are eligible to take up to ten undergraduate or eight graduate courses per 12-month grant period and must first utilize 100% of the funds awarded under their employer’s annual tuition assistance program before they can be awarded the FTG grant. The grants awarded by Ashford University under the FTG program are considered a material right, and, as such, the Company records a contract liability for a portion of the consideration received or due under these contracts. The contract liability is recorded in the ‘deferred revenue and student deposits’ line item on the Company’s condensed consolidated balance sheets, and further discussed in the deferred revenue section below. The standalone selling price of the material right is determined based on the observable standalone selling price of our courses. The transaction price in each FTG contract is allocated to this material right on a relative standalone selling price basis. The contract liability is recognized as revenue at the earlier of satisfaction of the future obligation or its expiration. Billing of products and services transferred under a FTG student contract generally occurs after the conclusion of a course. There are no material differences between the timing of the products and services transferred and the payment terms.
Deferred Revenue
Deferred revenue consists of cash payments that are received or due in advance of the Company’s performance as well as deferrals associated with certain contracts that include a material right. Below are the opening and closing balances of deferred revenue from the Company’s contracts with customers (in thousands):
 
Deferred Revenue
Opening balance, January 1, 2018
$
19,600

Closing balance, March 31, 2018
22,971

Increase (Decrease)
$
3,371


For further information on deferred revenue and student deposits, refer to Note 7, “Other Significant Balance Sheet Accounts” and for further information on receivables, refer to Note 6, “Accounts Receivable, Net” within the condensed consolidated financial statements.
For the majority of the Company’s customers, payment for products and services is due at the beginning of each course. Under special circumstances, some of our customers may be offered non-interest bearing payment plan arrangements that can extend for up to a maximum of three years. These payment plan arrangements give rise to significant financing components. However, since the Company historically collects substantially all of the consideration to which it expects to be entitled under such payment plans within one year or less, the impact of these significant financing components is not material to any period presented.
The difference between the opening and closing balances of deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. For the three months ended March 31, 2018, we recognized $14.7 million of revenues that were included in the deferred revenue balance as of January 1, 2018. Amounts reported in the closing balance of deferred revenue are expected to be recognized as revenue within the next 12 months.
v3.8.0.1
Restructuring and Impairment Expense (Credit)
3 Months Ended
Mar. 31, 2018
Restructuring and Related Activities [Abstract]  
Restructuring and Impairment Expense (Credit)
Restructuring and Impairment Expense (Credit)
The Company has implemented various restructuring plans to better align its resources with its business strategy and the related amounts are recorded in the restructuring and impairment expense (credit) line item on the Company’s condensed consolidated statements of income. During the three months ended March 31, 2018, the Company recorded a total credit of $0.2 million to restructuring and impairment, which were comprised of the two components described below. There were no such charges during the three months ended March 31, 2017.
During the first quarter of 2018, the Company executed a strategic reorganization resulting in reductions in force. The reorganization was part of the Company’s overall reassessment of resources based upon benchmarking activities with competitors in the Company’s industry. As a result, for the three months ended March 31, 2018, the Company recognized $0.3 million as restructuring and impairment expense relating to severance costs for wages and benefits. There were no such charges during the three months ended March 31, 2017.
The Company had previously vacated or consolidated properties in San Diego and subsequently reassessed its obligations on non-cancelable leases. The fair value estimate of these non-cancelable leases is based on the contractual lease costs over the remaining term, partially offset by estimated future sublease rental income. As a result of a reassessment, during the three months ended March 31, 2018, the Company recognized a credit of $0.5 million as a reversal of the original estimated charge, which decreased restructuring charges relating to lease exit costs. There were no such charges during the three months ended March 31, 2017.
The following table summarizes the changes in the Company's restructuring and impairment liability by type during the three months ended March 31, 2018 (in thousands):
 
Student Transfer Agreement Costs
 
Severance Costs
 
Lease Exit and Other Costs
 
Total
Balance at December 31, 2017
$
594

 
$
195

 
$
10,643

 
$
11,432

Restructuring and impairment expense (credit)

 
347

 
(506
)
 
(159
)
Payments and adjustments
3

 
(216
)
 
(3,803
)
 
(4,016
)
Balance at March 31, 2018
$
597

 
$
326

 
$
6,334

 
$
7,257


The restructuring liability amounts are recorded within either the (i) accounts payable and accrued liabilities account, (ii) rent liability account or (iii) other long-term liabilities account on the condensed consolidated balance sheets.
v3.8.0.1
Investments
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Investments
Investments
The following tables summarize the fair value information for investments as of March 31, 2018 and December 31, 2017, respectively (in thousands):
 
As of March 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
2,121

 
$

 
$

 
$
2,121

 
As of December 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
2,065

 
$

 
$

 
$
2,065


The mutual funds in the tables above, represent the deferred compensation asset balances, which are considered to be trading securities. There were no transfers between level categories for our investments during the periods presented. The Company’s money market securities are recorded in the cash and cash equivalents line item on the Company’s condensed consolidated balance sheets, and are classified as Level 1 securities.
There were no differences between amortized cost and fair value of investments as of March 31, 2018 and December 31, 2017, respectively. There were no reclassifications out of accumulated other comprehensive income during either the three months ended March 31, 2018 and 2017.
v3.8.0.1
Accounts Receivable, Net
3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Accounts Receivable, Net
Accounts Receivable, Net
Accounts receivable, net, consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Accounts receivable
$
47,023

 
$
44,656

Less allowance for doubtful accounts
(13,429
)
 
(17,579
)
Accounts receivable, net
$
33,594

 
$
27,077


There are an immaterial amount of accounts receivable, net, at each balance sheet date with a payment due date of greater than one year.
The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the three months ended March 31, 2018
$
(17,579
)
 
$
6,646

 
$
(10,796
)
 
$
(13,429
)
For the three months ended March 31, 2017
$
(16,154
)
 
$
9,294

 
$
(7,649
)
 
$
(17,799
)
(1)
Deductions represent accounts written off, net of recoveries.
v3.8.0.1
Other Significant Balance Sheet Accounts
3 Months Ended
Mar. 31, 2018
Balance Sheet Related Disclosures [Abstract]  
Other Significant Balance Sheet Accounts
Other Significant Balance Sheet Accounts
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Prepaid expenses
$
6,236

 
$
6,195

Prepaid licenses
6,416

 
4,882

Income tax receivable
5,034

 
8,889

Prepaid insurance
2,388

 
1,215

Insurance recoverable
1,217

 
1,192

Other current assets
103

 
15

Total prepaid expenses and other current assets
$
21,394

 
$
22,388


Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Furniture and office equipment
$
43,869

 
$
43,330

Software
12,472

 
12,313

Leasehold improvements
5,403

 
5,445

Vehicles
22

 
22

Total property and equipment
61,766

 
61,110

Less accumulated depreciation and amortization
(51,747
)
 
(50,676
)
Total property and equipment, net
$
10,019

 
$
10,434


For the three months ended March 31, 2018 and 2017, depreciation and amortization expense related to property and equipment was $1.1 million and $1.4 million, respectively.
Goodwill and Intangibles, Net
Goodwill and intangibles, net, consists of the following (in thousands):
 
March 31, 2018
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
21,627

 
$
(19,579
)
 
$
2,048

Purchased intangible assets
15,850

 
(6,295
)
 
9,555

     Total definite-lived intangible assets
$
37,477

 
$
(25,874
)
 
$
11,603

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
14,170

 
 
 
 
 
 
 
December 31, 2017
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
21,463

 
$
(19,300
)
 
$
2,163

Purchased intangible assets
15,850

 
(5,987
)
 
9,863

     Total definite-lived intangible assets
$
37,313

 
$
(25,287
)
 
$
12,026

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
14,593


For the three months ended March 31, 2018 and 2017, amortization expense was $0.7 million and $0.9 million, respectively.
The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Year Ended December 31,
 
 
Remainder of 2018
$
1,806

2019
1,875

2020
1,591

2021
1,385

2022
1,243

Thereafter
3,703

Total future amortization expense
$
11,603


Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Accounts payable
$
5,453

 
$
5,619

Accrued salaries and wages
6,277

 
8,573

Accrued bonus
3,351

 
6,924

Accrued vacation
8,837

 
8,237

Accrued litigation and fees
9,791

 
9,886

Accrued expenses
21,122

 
16,024

Rent liability
8,537

 
12,971

Accrued insurance liability
2,814

 
2,931

Total accounts payable and accrued liabilities
$
66,182

 
$
71,165


Deferred Revenue and Student Deposits
Deferred revenue and student deposits consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Deferred revenue
$
22,971

 
$
19,135

Student deposits
38,727

 
49,072

Total deferred revenue and student deposits
$
61,698

 
$
68,207


Other Long-Term Liabilities
Other long-term liabilities consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Uncertain tax positions
$
9,454

 
$
8,893

Other long-term liabilities
3,319

 
3,815

Total other long-term liabilities
$
12,773

 
$
12,708

v3.8.0.1
Credit Facilities
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Credit Facilities
Credit Facilities
The Company has issued letters of credit that are collateralized with cash in the aggregate amount of $9.6 million, which is included in restricted cash as of March 31, 2018.
As part of its normal business operations, the Company is required to provide surety bonds in certain states in which the Company does business. The Company has entered into a surety bond facility with an insurance company to provide such bonds when required. As of March 31, 2018, the Company’s total available surety bond facility was $6.5 million and the surety had issued bonds totaling $4.1 million on the Company’s behalf under such facility.
v3.8.0.1
Lease Obligations
3 Months Ended
Mar. 31, 2018
Lease Obligations [Abstract]  
Lease Obligations
Lease Obligations
Operating Leases
The Company leases certain office facilities and office equipment under non-cancelable lease arrangements that expire at various dates through 2023. The office leases contain certain renewal options. Rent expense under non-cancelable operating lease arrangements is accounted for on a straight-line basis and totaled $3.9 million and $3.6 million for the three months ended March 31, 2018 and 2017, respectively. Rent expense in certain periods also includes the restructuring and impairment charges recorded and therefore, may differ significantly from cash payments. For additional information, refer to Note 4, “Restructuring and Impairment Expense (Credit).”
The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at March 31, 2018 (in thousands):
Year Ended December 31,
 
 
Remainder of 2018
$
22,112

2019
20,833

2020
9,503

2021
5,112

2022
1,558

Thereafter
391

Total minimum payments
$
59,509

v3.8.0.1
Income Per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Income Per Share
Income Per Share
Basic income per share is calculated by dividing net income available to common stockholders for the period by the weighted average number of common shares outstanding for the period.
Diluted income per share is calculated by dividing net income available to common stockholders for the period by the sum of (i) the weighted average number of common shares outstanding for the period, plus (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented include stock options, unvested restricted stock units (“RSUs”) and unvested performance stock units (“PSUs”).
The following table sets forth the computation of basic and diluted income per share for the periods indicated (in thousands, except per share data):
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net income
$
2,297

 
$
9,869

Denominator:
 
 
 
Weighted average number of common shares outstanding
27,164

 
42,100

Effect of dilutive options and stock units
400

 
897

Diluted weighted average number of common shares outstanding
27,564

 
42,997

Income per share:
 
 
 
Basic
$
0.08

 
$
0.23

Diluted
$
0.08

 
$
0.23


The following table sets forth the number of stock options, RSUs and PSUs, excluded from the computation of diluted income per share for the periods indicated below because their effect was anti-dilutive (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Stock options
2,870

 
3,245

RSUs and PSUs
11

 
14

v3.8.0.1
Stock Repurchase Program Stock Repurchase Program
3 Months Ended
Mar. 31, 2018
Stock Repurchase Programs [Abstract]  
Stock Repurchase Program
Stock Repurchase Program
The Company's board of directors (“board”) may authorize the Company to repurchase outstanding shares of its common stock from time to time in the open market through block trades or otherwise depending on market conditions and other considerations, pursuant to the applicable rules of the SEC. The Company's policy is to retain these repurchased shares as treasury shares and not to retire them. The amount and timing of future share repurchases, if any, will be determined as market and business conditions warrant.
During the three months ended March 31, 2017, the Company repurchased approximately 18.1 million shares of the Company's common stock for an aggregate purchase price of approximately $152.0 million, including fees.
On November 17, 2017, the Company's board authorized a share repurchase program of up to $20.0 million in aggregate value of shares of its common stock over the next 12 months. The timing and extent of any repurchases will depend upon market conditions, the trading price of the Company's shares and other factors, and subject to the restrictions relating to volume, price and timing under applicable law. The Company may commence or suspend share repurchases at any time or from time to time.
Separate from the authorized repurchase program noted above, on November 21, 2017, the Company repurchased 2.1 million shares of the Company's common stock for an aggregate purchase price of approximately $16.7 million, including fees.
During the three months ended March 31, 2018, the Company did not repurchase any shares of the Company’s common stock.
v3.8.0.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
The Company recorded $1.2 million and $0.9 million of stock-based compensation expense for the three months ended March 31, 2018 and 2017, respectively. The related income tax benefit was $0.3 million and $0.3 million for the three months ended March 31, 2018 and 2017, respectively.
During the three months ended March 31, 2018, the Company granted 0.7 million RSUs at a grant date fair value of $6.74 and 0.3 million RSUs vested. During the three months ended March 31, 2017, the Company granted 0.4 million RSUs at a grant date fair value of $10.44 and 0.4 million RSUs vested.
During the three months ended March 31, 2018 and 2017, the Company did not grant any PSUs and no PSUs vested.
During the three months ended March 31, 2018, no stock options were granted by the Company and no stock options were exercised. During the three months ended March 31, 2017, the Company granted 0.3 million stock options at a grant date fair value of $4.76 and 0.1 million stock options were exercised.
As of March 31, 2018, there was unrecognized compensation cost of $8.3 million related to unvested stock options, RSUs and PSUs.
v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company uses the asset-liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in income and deductions in future years.
The Company recognizes deferred tax assets if realization of such assets is more-likely-than-not. In order to make this determination, the Company evaluates a number of factors including the ability to generate future taxable income from reversing taxable temporary differences, forecasts of financial and taxable income or loss, and the ability to carryback certain operating losses to refund taxes paid in prior years. The cumulative loss incurred over the three-year period ended March 31, 2018 constituted significant negative objective evidence against the Company’s ability to realize a benefit from its federal deferred tax assets. Such objective evidence limited the ability of the Company to consider in its evaluation certain subjective evidence such as the Company’s projections for future growth. On the basis of its evaluation, the Company determined that its deferred tax assets were not more-likely-than-not to be realized and that a valuation allowance against its deferred tax assets should continue to be maintained as of March 31, 2018.
The Company determines the interim income tax provision by applying the estimated effective income tax rate expected to be applicable for the full fiscal year to income before income taxes for the period. In determining the full year estimate, the Company does not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.
The Company’s current effective income tax rate that has been applied to normal, recurring operations for the three months ended March 31, 2018 was 1.8%. The Company’s actual effective income tax rate was (261.2)% for the three months ended March 31, 2018, which includes a discrete tax benefit of $1.7 million associated with refund claims for qualified production activities tax deductions for the tax years 2013 and 2014, as well as a discrete tax expense of $0.1 million for interest expense related to unrecognized tax benefits.
On December 22, 2017, President Donald Trump signed into law H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”). The Tax Legislation significantly revised the U.S. tax code that will affect the Company’s year ending December 31, 2018, including, but not limited to, lowering the U.S. federal corporate income tax rate from 35% to 21%; bonus depreciation that will allow for full expensing of qualified property; limitations on the deductibility of certain executive compensation and other deductions; and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
The enactment of the Tax Legislation resulted in a one-time remeasurement of the Company’s U.S. federal deferred tax assets and liabilities from 35% to the lower enacted corporate tax rate of 21%. The provisional remeasurement of the Company’s deferred tax balance was primarily offset by a corresponding change in the valuation allowance. The Company is still analyzing the impact the Tax Legislation will have on the remeasurement of the deferred taxes or whether new deferred taxes exist. Where the Company has not yet been able to make reasonable estimates of the impact of certain elements, it has not recorded any amounts related to those elements and has continued to account for them in accordance with ASC 740 on the basis of the tax laws in effect immediately prior to the enactment of the Tax Legislation. Examples of certain elements include accounting for the existence of deferred taxes, as well as the impact the Tax Legislation may have on state jurisdictions. New guidance from regulators, interpretation of the law, and refinement of the Company’s estimates from ongoing analysis of data and tax positions may change the provisional amounts.
At March 31, 2018, the Company had $19.2 million of gross unrecognized tax benefits, of which $14.8 million would impact the effective income tax rate if recognized. At December 31, 2017, the Company had $18.9 million of gross unrecognized tax benefits, of which $14.8 million would impact the effective income tax rate if recognized. Although the Company cannot predict the timing of resolution with taxing authorities, if any, the Company believes it is reasonably possible that the total of the unrecognized tax benefits could change in the next twelve months due to settlement with tax authorities or expiration of the applicable statute of limitations. These unrecognized tax benefits primarily relate to apportionment of online service revenues for corporate income tax purposes. Although the Company believes the tax accruals provided are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from the Company’s historical income tax provisions and accruals.
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The tax years 2001 through 2016 are open to examination by major taxing jurisdictions to which the Company is subject.
The Company is currently under Internal Revenue Service audit examinations of the Company’s income and payroll tax returns for the years 2013 through 2016.
The Company’s income tax returns are being audited by the California Franchise Tax Board for the years 2008 through 2015. The Company was notified by the Franchise Tax Board in March 2017 that they are continuing to challenge the Company’s filing position. The Company continues to work toward resolution, and based on all available information the Company has accrued for any uncertain tax positions that may be addressed in the audit.
The Company’s income tax returns are being audited by the Oregon Department of Revenue for the years 2012 through 2014. In January 2018, the Oregon Department of Revenue issued a Notice of Assessment that upheld their Notices of Deficiencies that were issued in January 2017. The Company has appealed the Assessment to the Oregon Tax Court. The Company does not expect any significant adjustments to amounts already reserved.
In March 2018, the Company was notified by the Florida Department of Revenue that the Company’s income tax returns are under examination for the tax years 2014 through 2016.
v3.8.0.1
Regulatory
3 Months Ended
Mar. 31, 2018
Regulatory [Abstract]  
Regulatory
Regulatory
The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (“Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (“Department”) subject the Company to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial aid programs under Title IV of the Higher Education Act (“Title IV programs”).
Ashford University is regionally accredited by WASC Senior College and University Commission (“WSCUC”) and University of the Rockies is regionally accredited by the Higher Learning Commission (“HLC”).
Department of Education Open Program Review of Ashford University
On July 7, 2016, Ashford University was notified by the Department that an off-site program review had been scheduled to assess Ashford University’s administration of the Title IV programs in which it participates. The off-site program review commenced on July 25, 2016 and covered students identified in the 2009-2012 calendar year data previously provided by Ashford University to the Department in response to a request for information received from the Multi-Regional and Foreign School Participation Division of the Department’s Office of Federal Student Aid (“FSA”) on December 10, 2015, but may be expanded if the Department deems such expansion appropriate.
On December 9, 2016, the Department informed Ashford University that it intended to continue the program review on-site at Ashford University. The on-site program review commenced on January 23, 2017 and initially covered the 2015-2016 and 2016-2017 award years, but may be expanded if the Department deems such expansion appropriate. To date, the Company has not received a draft report from the Department.
Program Participation Agreement for Ashford University
On April 23, 2018, Ashford University received an updated Program Participation Agreement from the Department. Based on the updated Program Participation Agreement, Ashford University is provisionally certified to participate in Federal Student Financial Aid Programs until March 31, 2021. Ashford University is required to submit its reapplication for continued certification by December 31, 2020.
Program Participation Agreement for University of the Rockies
On April 23, 2018, the University of the Rockies received an updated Program Participation Agreement from the Department. Based on the updated Program Participation Agreement, the University is provisionally certified to participate in Federal Student Financial Aid Programs until March 31, 2021. The University is required to submit its reapplication for continued certification by December 31, 2020.
WSCUC Accreditation of Ashford University
In July 2013, WSCUC granted Initial Accreditation to Ashford University for five years, until July 15, 2018. In December 2013, Ashford University effected its transition to WSCUC accreditation and designated its San Diego, California facilities as its main campus and its Clinton, Iowa campus as an additional location. As part of a continuing monitoring process, Ashford University hosted a visiting team from WSCUC on a special visit in April 2015. In July 2015, Ashford University received an Action Letter from WSCUC outlining the findings arising out of its visiting team's special visit. The Action Letter stated that the WSCUC visiting team found evidence that Ashford University continues to make progress in all six areas recommended by WSCUC in 2013. As part of its institutional review process, WSCUC is conducting a comprehensive review of Ashford University which commenced with an off-site review in March 2018, to be followed by an on-site review in September 2018.
GI Bill Benefits
On May 20, 2016, the Company received a letter from the Iowa Department of Education (“Iowa DOE”) indicating that, as a result of the planned closure of the Clinton Campus, the Iowa State Approving Agency (“ISAA”) would no longer continue to approve Ashford University’s programs for benefits under the GI Bill after June 30, 2016, and recommending Ashford University seek approval through the State Approving Agency of jurisdiction for any location that meets the definition of a “main campus” or “branch campus.” Ashford University began the process of applying for approval through the State Approving Agency in California (“CSAAVE”), and the Company subsequently disclosed that on June 20, 2016 it received a second letter from the Iowa DOE indicating that the Iowa DOE had issued a stay of the ISAA’s withdrawal of approval of Ashford University’s programs for GI Bill benefits effective immediately until the earlier of (i) 90 days from June 20, 2016 or (ii) the date on which CSAAVE completed its review and issued a decision regarding the approval of Ashford University in California. Ashford University received communication from CSAAVE indicating that additional information and documentation would be required before Ashford University’s application could be considered for CSAAVE approval. Ashford University subsequently withdrew the CSAAVE application and continued working with the U.S. Department of Veterans Affairs (“VA”), the Iowa DOE and the ISAA to obtain continued approval of Ashford University’s programs for GI Bill benefits and to prevent any disruption of educational benefits to Ashford University’s veteran students.
On September 15, 2016, in response to a Petition for Declaratory and Injunctive Relief (“Petition”) filed by Ashford University, the Iowa District Court for Polk County entered a written order (“Order”) staying the Iowa DOE’s announced intention to withdraw the approval of Ashford University as a GI Bill eligible institution until the entry of a final and appealable order and judgment in the action. On June 23, 2017, the Iowa District Court held a hearing on Ashford University’s Petition and on July 17, 2017, the Court ruled in favor of the Iowa DOE and denied the petition. Ashford University filed a motion for reconsideration of this ruling, which was denied on August 17, 2017. On August 23, 2017, Ashford University filed a Petition to Vacate or Modify the Iowa District Court’s July 17, 2017 ruling, based on material evidence, newly discovered, which could not with reasonable diligence have been previously discovered by Ashford University (“First Petition to Vacate”). On September 18, 2017, Ashford University appealed, inter alia, the July 17, 2017 ruling to the Iowa Supreme Court and posted an appeal bond, which stayed this matter pending resolution of Ashford University’s appeal. As a result, Ashford University’s approval was not withdrawn, and Ashford University’s programs remain approved for GI Bill purposes. The Assistant Attorney General handling this matter on behalf of the Iowa DOE also advised Ashford University that the Iowa DOE would take no action pending the post-ruling motions and appeal. On October 12, 2017, Judge Eliza Ovrom, the Iowa District Court Judge who issued the July 17, 2017 ruling, filed a Disclosure Statement revealing family ties to the Iowa Attorney General’s Office. Following motions by Ashford University for her recusal, Judge Ovrom recused herself from all further proceedings. On October 24, 2017, Ashford University filed with the Iowa Supreme Court a Petition to Vacate or, in the Alternative, for Limited Remand (“Second Petition to Vacate”), in which Ashford University argued that the July 17, 2017 ruling and all other material orders entered by Judge Ovrom should be vacated due to her previously undisclosed conflict of interest. On January 8, 2018, the Iowa Supreme Court remanded the Second Petition to Vacate to the District Court, where all proceedings in this matter were consolidated before Judge Michael Huppert. On April 26, 2018, Judge Huppert granted the Second Petition to Vacate and vacated all material rulings by Judge Ovrom, including the July 17, 2017 ruling. Judge Huppert’s decision mooted the First Petition to Vacate and Ashford’s appeal of, inter alia, the July 17, 2017 ruling. The case will now proceed on the merits de novo before Judge Huppert.
On July 6, 2017, Ashford University received approval from the Arizona State Approving Agency (“ASAA”) to provide GI Bill benefits to its students. On September 13, 2017, the VA accepted the ASAA’s approval, subject to Ashford University's compliance with the approval requirements, and the University subsequently received a facility code from the VA. On November 9, 2017, the VA informed Ashford University that the ASAA had not provided sufficient evidence to establish that it has jurisdictional authority over Ashford University’s online programs. The VA stated that they intend to suspend payment of educational assistance and approval of new student enrollments and student re-enrollments for Ashford University’s online programs in 60 days unless corrective action was taken.
On November 17, 2017, Ashford University filed a petition for review in the United States Court of Appeals for the Federal Circuit challenging the VA’s actions. In response to that petition, the VA agreed to stay the actions with respect to the suspension and reenrollment it had announced on November 9, 2017 through the entry of judgment in the Federal Circuit case, on the condition that Ashford University request and submit an application for approval to CSAAVE on or before January 8, 2018. Ashford University submitted an application to CSAAVE for approval on January 5, 2018. On February 21, 2018, CSAAVE provided notice of its intention not to act on Ashford University’s initial application for approval for the training of veterans and other eligible persons. The notice directs Ashford University to request approval of its application by the VA. Ashford University continues to work in good faith with the VA while its petition for review remains pending with the Federal Circuit.
v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Litigation
From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with GAAP, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated, the best estimate within that range should be accrued. If no estimate is better than another, the Company records the minimum estimated liability in the range. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party.
California Attorney General Investigation of For-Profit Educational Institutions
In January 2013, the Company received from the Attorney General of the State of California (“CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General requested documents and detailed information for the time period March 1, 2009 to present. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General, each requesting additional documents and information for the time period March 1, 2009 through the current date.
Representatives from the Company met with representatives from the CA Attorney General’s office on several occasions to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices.
The parties also discussed a potential resolution involving injunctive relief, other non-monetary remedies and a payment to the CA Attorney General and the Company recorded an expense of $8.0 million related to the cost of resolving this matter.
The parties did not reach a resolution and on November 29, 2017, the CA Attorney General filed suit against Ashford University and Bridgepoint Education. The Company intends to vigorously defend this case and emphatically denies the allegations made by the CA Attorney General that it ever deliberately misled its students, falsely advertised its programs, or in any way was not fully accurate in its statements to investors. However, the outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. At present, the Company cannot reasonably estimate any updated range of loss for this action based on currently available information and as such, the prior accrual remains.
Massachusetts Attorney General Investigation of Bridgepoint Education, Inc. and Ashford University
On July 21, 2014, the Company and Ashford University received from the Attorney General of the State of Massachusetts (“MA Attorney General”) a Civil Investigative Demand (“MA CID”) relating to the MA Attorney General’s investigation of for-profit educational institutions and whether the university’s business practices complied with Massachusetts consumer protection laws. Pursuant to the MA CID, the MA Attorney General has requested from the Company and Ashford University documents and information for the time period January 1, 2006 to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action.
Department of Justice Civil Investigative Demand
On July 7, 2016, the Company received from the U.S. Department of Justice (“DOJ”) a Civil Investigative Demand (“DOJ CID”) related to the DOJ's investigation concerning allegations that the Company may have misstated Title IV refund revenue or overstated revenue associated with private secondary loan programs and thereby misrepresented its compliance with the 90/10 rule of the Higher Education Act. Pursuant to the DOJ CID, the DOJ has requested from the Company documents and information for fiscal years 2011 to 2015. The Company is cooperating with the DOJ and cannot predict the eventual scope, duration or outcome of the investigation at this time. The Company has not accrued any liability associated with this action.
Securities Class Action
Zamir v. Bridgepoint Education, Inc., et al.
On February 24, 2015, a securities class action complaint was filed in the U.S. District Court for the Southern District of California by Nelda Zamir naming the Company, Andrew Clark and Daniel Devine as defendants. The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements and failed to disclose material adverse facts regarding the Company’s business, operations and prospects, specifically regarding the Company’s improper application of revenue recognition methodology to assess collectability of funds owed by students. The complaint asserts a putative class period stemming from August 7, 2012 to May 30, 2014 and seeks unspecified monetary relief, interest and attorneys’ fees. On July 15, 2015, the Court granted plaintiff’s motion for appointment as lead plaintiff and for appointment of lead counsel.
On September 18, 2015, the plaintiff filed a substantially similar amended complaint that asserts a putative class period stemming from March 12, 2013 to May 30, 2014. The amended complaint also names Patrick Hackett, Adarsh Sarma, Warburg Pincus & Co., Warburg Pincus LLC, Warburg Pincus Partners LLC, and Warburg Pincus Private Equity VIII, L.P. as additional defendants. On November 24, 2015, all defendants filed motions to dismiss. On July 25, 2016, the Court granted the motions to dismiss and granted plaintiff leave to file an amended complaint within 30 days. Plaintiffs subsequently filed a second amended complaint and the Company filed a second motion to dismiss on October 24, 2016, which was granted by the Court with leave to amend. Plaintiffs filed a third amended complaint on April 19, 2017 and the defendants filed a third motion to dismiss, which was granted with prejudice by the court on March 12, 2018. As a result, this matter is now concluded.
Shareholder Derivative Actions
In re Bridgepoint, Inc. Shareholder Derivative Action
On July 24, 2012, a shareholder derivative complaint was filed in California Superior Court by Alonzo Martinez. In the complaint, the plaintiff asserts a derivative claim on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Martinez v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement on behalf of the Company, as well as other equitable relief and attorneys’ fees. On September 28, 2012, a substantially similar shareholder derivative complaint was filed in California Superior Court by David Adolph-Laroche. In the complaint, the plaintiff asserts a derivative claim on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Adolph-Laroche v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched.
On October 11, 2012, the Adolph-Laroche action was consolidated with the Martinez action and the case is now captioned In re Bridgepoint, Inc. Shareholder Derivative Action. A consolidated complaint was filed on December 18, 2012 and the defendants filed a motion to stay the case while the underlying securities class action is pending. The motion was granted by the Court on April 11, 2013. A status conference was held on October 10, 2013, during which the Court ordered the stay continued for the duration of discovery in the underlying securities class action, but permitted the plaintiff to receive copies of any discovery responses served in the underlying securities class action. The stay was lifted following the settlement of the underlying securities class action and all defendants filed demurrers on October 3, 2016, which were granted with leave to amend on October 6, 2017. On October 17, 2017, the plaintiff submitted a litigation demand to the Company's Board of Directors, which appointed a working group to evaluate the demand.
Reardon v. Clark, et al.
On March 18, 2015, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company’s behalf against certain of its current and former officers and directors. The complaint is captioned Reardon v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Pursuant to a stipulation among the parties, on May 27, 2015, the Court ordered the case stayed during discovery in the underlying Zamir securities class action, but permitted the plaintiff to receive copies of any discovery conducted in the underlying Zamir securities class action.
Larson v. Hackett, et al.
On January 19, 2017, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Larson v. Hackett, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. The parties have not yet responded to the complaint, but will most likely seek to have the case dismissed.
Nieder v. Ashford University, LLC
On October 4, 2016, Dustin Nieder filed a purported class action against Ashford University in the Superior Court of the State of California in San Diego. The complaint is captioned Dustin Nieder v. Ashford University, LLC and generally alleges various wage and hour claims under California law for failure to pay overtime, failure to pay minimum wages and failure to provide rest and meal breaks. The lawsuit seeks back pay, the cost of benefits, penalties and interest on behalf of the putative class members, as well as other equitable relief and attorneys' fees. On January 5, 2018, the parties reached a mediated agreement to settle the case, subject to final court approval. Accordingly, the Company has accrued a liability of $1.8 million associated with this action.
v3.8.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Principles of Consolidation
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
Unaudited Interim Financial Information
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete annual financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission (“SEC”) on February 21, 2018. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company’s condensed consolidated financial position, results of operations and cash flows as of and for the periods presented.
Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements.
Use of Estimates
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, or Accounting Standards Codification Topic 606 (“ASC 606”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”). This literature is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, as well as assets recognized from costs incurred to obtain or fulfill a contract. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective adoption method. In accordance with the modified retrospective adoption method, the Company elected to retroactively adjust only those contracts that did not meet the definition of a completed contract at the date of initial application. The new guidance impacted the amount and timing of the Company’s revenue recognition as follows:
Deferral of revenue recognition for the corporate full tuition grant (“FTG”) contracts that include a material right under ASC 606. This material right is deferred until the earlier of redemption or expiration.
Prior to the adoption of ASC 606, we recognized revenue to the extent of cash receipts when collectibility was not reasonably assured. Under ASC 606, collectibility issues may indicate an implied price concession, which is accounted for as variable consideration. Consequently, revenues for these types of contracts is accelerated, net of any amounts to which we expect to be entitled.
Under ASC 606, once a student is deemed to have a history of collection issues, all future revenues earned are subject to a price concession as the student has demonstrated that they may not pay the full tuition price based on past behavior. This results in a reduction in the transaction price such that revenue is recorded based on the amount to which the Company expects to be entitled.
At the date of adoption of ASC 606, the Company recorded a cumulative adjustment to its consolidated balance sheet, including an adjustment to retained earnings, to adjust for the aggregate impact of these revenue items, as calculated under the new guidance. The cumulative effect adjustment decreased the opening balance of retained earnings on January 1, 2018, as follows (in thousands):
 
Closing balance at December 31, 2017
 
Adjustments due to ASC 606
 
Opening balance at January 1, 2018
Accounts receivable, net
$
27,077

 
$
(2,686
)
 
$
24,391

 
 
 
 
 


Deferred revenue and student deposits
$
68,207

 
$
465

 
$
68,672

Retained earnings
$
431,818

 
$
(3,151
)
 
$
428,667


The following tables present the impact of changes to the condensed consolidated financial statement line items as a result of applying ASC 606 to the periods presented (in thousands):
 
Three Months Ended March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Revenue
$
118,031

 
$
283

 
$
118,314

Instructional costs and services
$
56,862

 
$
1,136

 
$
57,998

Net income
$
2,297

 
$
(853
)
 
$
1,444

 
As of March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Accounts receivable, net
$
33,594

 
$
2,248

 
$
35,842

Deferred revenue and student deposits
$
61,698

 
$
(50
)
 
$
61,648

Retained earnings
$
430,964

 
$
(2,298
)
 
$
428,666


Comparative historical information on the condensed consolidated statement of income has not been restated and continues to be reported under ASC 605. For further information regarding the disaggregation of revenue recorded in the current period, refer to Note 3, “Revenue Recognition” to the condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the lease commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public companies should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company currently expects to adopt ASU 2016-02 in its first quarter of 2019. During the first quarter of 2018, the Company was in process of completing its initial evaluation of its existing leases and contracts based upon the new standards and continues to evaluate the impact that the adoption of ASU 2016-02 will have on the Company’s condensed consolidated financial statements.
v3.8.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]
The following tables present the impact of changes to the condensed consolidated financial statement line items as a result of applying ASC 606 to the periods presented (in thousands):
 
Three Months Ended March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Revenue
$
118,031

 
$
283

 
$
118,314

Instructional costs and services
$
56,862

 
$
1,136

 
$
57,998

Net income
$
2,297

 
$
(853
)
 
$
1,444

 
As of March 31, 2018
 
As Reported under ASC 606
 
Adjustments due to ASC 606
 
Amounts under ASC 605
Accounts receivable, net
$
33,594

 
$
2,248

 
$
35,842

Deferred revenue and student deposits
$
61,698

 
$
(50
)
 
$
61,648

Retained earnings
$
430,964

 
$
(2,298
)
 
$
428,666

The cumulative effect adjustment decreased the opening balance of retained earnings on January 1, 2018, as follows (in thousands):
 
Closing balance at December 31, 2017
 
Adjustments due to ASC 606
 
Opening balance at January 1, 2018
Accounts receivable, net
$
27,077

 
$
(2,686
)
 
$
24,391

 
 
 
 
 


Deferred revenue and student deposits
$
68,207

 
$
465

 
$
68,672

Retained earnings
$
431,818

 
$
(3,151
)
 
$
428,667

v3.8.0.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2018
Revenue Recognition [Abstract]  
Disaggregation of revenue

The following table presents the Company’s net revenue disaggregated based on the timing of revenue recognition (in thousands):
 
Three Months Ended March 31, 2018
Over time, over period of instruction
$
102,205

Over time, full tuition grant (1)
9,522

Point in time (2)
6,304

Total revenue, net
$
118,031

(1)
Represents revenue generated from the corporate full tuition grant (“FTG”) program.
(2)
Represents revenue generated from digital textbooks and other one-t
The following table presents the Company’s net revenue disaggregated based on the revenue source (in thousands):
 
Three Months Ended March 31, 2018
Tuition revenue, net
$
108,634

Digital materials revenue, net
5,926

Technology fee revenue, net
2,956

Other revenue, net (1)
515

Total revenue, net
$
118,031

(1)
Primarily consists of revenues generated from services such as graduation fees, transcript fees, and other miscellaneous services.
Deferred revenue of Company's contracts with customers
Below are the opening and closing balances of deferred revenue from the Company’s contracts with customers (in thousands):
 
Deferred Revenue
Opening balance, January 1, 2018
$
19,600

Closing balance, March 31, 2018
22,971

Increase (Decrease)
$
3,371

v3.8.0.1
Restructuring and Impairment Expense (Credit) Restructuring and Impairment Expense (Credit) (Tables)
3 Months Ended
Mar. 31, 2018
Restructuring and Related Activities [Abstract]  
Schedule of Restructuring Reserve by Type of Cost
The following table summarizes the changes in the Company's restructuring and impairment liability by type during the three months ended March 31, 2018 (in thousands):
 
Student Transfer Agreement Costs
 
Severance Costs
 
Lease Exit and Other Costs
 
Total
Balance at December 31, 2017
$
594

 
$
195

 
$
10,643

 
$
11,432

Restructuring and impairment expense (credit)

 
347

 
(506
)
 
(159
)
Payments and adjustments
3

 
(216
)
 
(3,803
)
 
(4,016
)
Balance at March 31, 2018
$
597

 
$
326

 
$
6,334

 
$
7,257

v3.8.0.1
Investments (Tables)
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Information of Short and Long-term Investments
The following tables summarize the fair value information for investments as of March 31, 2018 and December 31, 2017, respectively (in thousands):
 
As of March 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
2,121

 
$

 
$

 
$
2,121

 
As of December 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
2,065

 
$

 
$

 
$
2,065

v3.8.0.1
Accounts Receivable, Net (Tables) - Allowance for Doubtful Accounts, Current
3 Months Ended
Mar. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]  
Schedule of Accounts Receivable, Net
Accounts receivable, net, consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Accounts receivable
$
47,023

 
$
44,656

Less allowance for doubtful accounts
(13,429
)
 
(17,579
)
Accounts receivable, net
$
33,594

 
$
27,077

Changes in Allowance for Doubtful Accounts, Accounts Receivable
The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the three months ended March 31, 2018
$
(17,579
)
 
$
6,646

 
$
(10,796
)
 
$
(13,429
)
For the three months ended March 31, 2017
$
(16,154
)
 
$
9,294

 
$
(7,649
)
 
$
(17,799
)
(1)
Deductions represent accounts written off, net of recoveries.
v3.8.0.1
Other Significant Balance Sheet Accounts (Tables)
3 Months Ended
Mar. 31, 2018
Balance Sheet Related Disclosures [Abstract]  
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Prepaid expenses
$
6,236

 
$
6,195

Prepaid licenses
6,416

 
4,882

Income tax receivable
5,034

 
8,889

Prepaid insurance
2,388

 
1,215

Insurance recoverable
1,217

 
1,192

Other current assets
103

 
15

Total prepaid expenses and other current assets
$
21,394

 
$
22,388

Property and Equipment, Net
Property and equipment, net, consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Furniture and office equipment
$
43,869

 
$
43,330

Software
12,472

 
12,313

Leasehold improvements
5,403

 
5,445

Vehicles
22

 
22

Total property and equipment
61,766

 
61,110

Less accumulated depreciation and amortization
(51,747
)
 
(50,676
)
Total property and equipment, net
$
10,019

 
$
10,434

Goodwill and Intangibles, Net
Goodwill and intangibles, net, consists of the following (in thousands):
 
March 31, 2018
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
21,627

 
$
(19,579
)
 
$
2,048

Purchased intangible assets
15,850

 
(6,295
)
 
9,555

     Total definite-lived intangible assets
$
37,477

 
$
(25,874
)
 
$
11,603

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
14,170

 
 
 
 
 
 
 
December 31, 2017
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
21,463

 
$
(19,300
)
 
$
2,163

Purchased intangible assets
15,850

 
(5,987
)
 
9,863

     Total definite-lived intangible assets
$
37,313

 
$
(25,287
)
 
$
12,026

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
14,593

Intangibles, Estimated Remaining Amortization Expense
The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Year Ended December 31,
 
 
Remainder of 2018
$
1,806

2019
1,875

2020
1,591

2021
1,385

2022
1,243

Thereafter
3,703

Total future amortization expense
$
11,603

Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Accounts payable
$
5,453

 
$
5,619

Accrued salaries and wages
6,277

 
8,573

Accrued bonus
3,351

 
6,924

Accrued vacation
8,837

 
8,237

Accrued litigation and fees
9,791

 
9,886

Accrued expenses
21,122

 
16,024

Rent liability
8,537

 
12,971

Accrued insurance liability
2,814

 
2,931

Total accounts payable and accrued liabilities
$
66,182

 
$
71,165

Deferred Revenue and Student Deposits
Deferred revenue and student deposits consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Deferred revenue
$
22,971

 
$
19,135

Student deposits
38,727

 
49,072

Total deferred revenue and student deposits
$
61,698

 
$
68,207

Other Long-Term Liabilities
Other long-term liabilities consists of the following (in thousands):
 
As of
March 31, 2018
 
As of
December 31, 2017
Uncertain tax positions
$
9,454

 
$
8,893

Other long-term liabilities
3,319

 
3,815

Total other long-term liabilities
$
12,773

 
$
12,708

v3.8.0.1
Lease Obligations (Tables)
3 Months Ended
Mar. 31, 2018
Lease Obligations [Abstract]  
Schedule of Future Minimum Rental Payments for Operating Leases
The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at March 31, 2018 (in thousands):
Year Ended December 31,
 
 
Remainder of 2018
$
22,112

2019
20,833

2020
9,503

2021
5,112

2022
1,558

Thereafter
391

Total minimum payments
$
59,509

v3.8.0.1
Income Per Share (Tables)
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Computation of Basic and Diluted Earnings Per Common Share
The following table sets forth the computation of basic and diluted income per share for the periods indicated (in thousands, except per share data):
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net income
$
2,297

 
$
9,869

Denominator:
 
 
 
Weighted average number of common shares outstanding
27,164

 
42,100

Effect of dilutive options and stock units
400

 
897

Diluted weighted average number of common shares outstanding
27,564

 
42,997

Income per share:
 
 
 
Basic
$
0.08

 
$
0.23

Diluted
$
0.08

 
$
0.23

Antidilutive Securities
The following table sets forth the number of stock options, RSUs and PSUs, excluded from the computation of diluted income per share for the periods indicated below because their effect was anti-dilutive (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Stock options
2,870

 
3,245

RSUs and PSUs
11

 
14

v3.8.0.1
Summary of Significant Accounting Policies Recent Accounting Pronouncements (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Jan. 01, 2018
Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Accounts receivable, net $ 33,594   $ 24,391 $ 27,077
Deferred revenue and student deposits 61,698   68,672 68,207
Retained earnings 430,964   428,667 431,818
Revenue 118,031 $ 129,490    
Instructional costs and services 56,862 63,039    
Net income 2,297 $ 9,869    
Deferred revenue and student deposits 61,698      
Calculated under Revenue Guidance in Effect before Topic 606        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Accounts receivable, net 35,842     27,077
Deferred revenue and student deposits       68,207
Retained earnings 428,666     $ 431,818
Revenue 118,314      
Instructional costs and services 57,998      
Net income 1,444      
Deferred revenue and student deposits 61,648      
ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]        
Accounts receivable, net 2,248   (2,686)  
Deferred revenue and student deposits     465  
Retained earnings (2,298)   $ (3,151)  
Revenue 283      
Instructional costs and services 1,136      
Net income (853)      
Deferred revenue and student deposits $ (50)      
v3.8.0.1
Revenue Recognition (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Jan. 01, 2018
Disaggregation of Revenue [Line Items]    
Total revenue, net $ 118,031  
Deferred revenue, opening balance 22,971 $ 19,600
Deferred revenue, ending balance 22,971 $ 19,600
Deferred revenue, increase (decrease) 3,371  
Deferred revenue, revenue recognized 14,700  
Over time, over period of instruction    
Disaggregation of Revenue [Line Items]    
Total revenue, net 102,205  
Over time, full tuition grant (1)    
Disaggregation of Revenue [Line Items]    
Total revenue, net 9,522  
Point in time (2)    
Disaggregation of Revenue [Line Items]    
Total revenue, net 6,304  
Tuition revenue, net    
Disaggregation of Revenue [Line Items]    
Total revenue, net 108,634  
Digital materials revenue, net    
Disaggregation of Revenue [Line Items]    
Total revenue, net 5,926  
Technology fee revenue, net    
Disaggregation of Revenue [Line Items]    
Total revenue, net 2,956  
Other revenue, net (1)    
Disaggregation of Revenue [Line Items]    
Total revenue, net $ 515  
v3.8.0.1
Restructuring and Impairment Expense (Credit) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Restructuring Reserve [Roll Forward]    
Restructuring reserve at beginning of period $ 11,432,000  
Restructuring and impairment expense (credit) (159,000) $ 0
Payments and adjustments (4,016,000)  
Restructuring reserve at end of period 7,257,000  
Student Transfer Agreement Costs    
Restructuring Reserve [Roll Forward]    
Restructuring reserve at beginning of period 594,000  
Restructuring and impairment expense (credit) 0  
Payments and adjustments 3,000  
Restructuring reserve at end of period 597,000  
Severance Costs    
Restructuring Reserve [Roll Forward]    
Restructuring reserve at beginning of period 195,000  
Restructuring and impairment expense (credit) 347,000 0
Payments and adjustments (216,000)  
Restructuring reserve at end of period 326,000  
Lease Exit and Other Costs    
Restructuring Reserve [Roll Forward]    
Restructuring reserve at beginning of period 10,643,000  
Restructuring and impairment expense (credit) (506,000) $ 0
Payments and adjustments (3,803,000)  
Restructuring reserve at end of period $ 6,334,000  
v3.8.0.1
Investments (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax $ 0 $ 0  
Mutual funds      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Available-for-sale securities 2,121   $ 2,065
Mutual funds | Level 1      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Available-for-sale securities 2,121   2,065
Mutual funds | Level 2      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Available-for-sale securities 0   0
Mutual funds | Level 3      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Available-for-sale securities $ 0   $ 0
v3.8.0.1
Accounts Receivable, Net (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Jan. 01, 2018
Dec. 31, 2017
Receivables [Abstract]      
Accounts receivable $ 47,023   $ 44,656
Less allowance for doubtful accounts (13,429)   (17,579)
Accounts receivable, net $ 33,594 $ 24,391 $ 27,077
v3.8.0.1
Accounts Receivable, Net (Change in Allowance) (Details) - Allowance for Doubtful Accounts, Current - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Movement in Valuation Allowances and Reserves [Roll Forward]    
Beginning Balance $ (17,579) $ (16,154)
Charged to Expense 6,646 9,294
Deductions (10,796) (7,649)
Ending Balance $ (13,429) $ (17,799)
v3.8.0.1
Other Significant Balance Sheet Accounts (Prepaid Expenses and Other Current Assets) (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Prepaid Expense and Other Assets, Current [Abstract]    
Prepaid expenses $ 6,236 $ 6,195
Prepaid licenses 6,416 4,882
Income tax receivable 5,034 8,889
Prepaid insurance 2,388 1,215
Insurance recoverable 1,217 1,192
Other current assets 103 15
Total prepaid expenses and other current assets $ 21,394 $ 22,388
v3.8.0.1
Other Significant Balance Sheet Accounts (Property and Equipment, Net) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Property, Plant and Equipment [Line Items]      
Property and equipment, gross $ 61,766   $ 61,110
Less accumulated depreciation and amortization (51,747)   (50,676)
Total property and equipment, net 10,019   10,434
Depreciation 1,100 $ 1,400  
Furniture and office equipment      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 43,869   43,330
Software      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 12,472   12,313
Leasehold improvements      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross 5,403   5,445
Vehicles      
Property, Plant and Equipment [Line Items]      
Property and equipment, gross $ 22   $ 22
v3.8.0.1
Other Significant Balance Sheet Accounts (Goodwill and Intangibles, Net) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Goodwill and Intangibles, Net      
Definite-lived intangible assets, gross carrying amount $ 37,477   $ 37,313
Definite-lived intangible assets, accumulated amortization (25,874)   (25,287)
Definite-lived intangible assets, net carrying amount 11,603   12,026
Goodwill and indefinite-lived intangibles 2,567   2,567
Total goodwill and intangibles, net 14,170   14,593
Amortization of intangible assets 700 $ 900  
Capitalized Curriculum Costs      
Goodwill and Intangibles, Net      
Definite-lived intangible assets, gross carrying amount 21,627   21,463
Definite-lived intangible assets, accumulated amortization (19,579)   (19,300)
Definite-lived intangible assets, net carrying amount 2,048   2,163
Purchased Intangible Assets      
Goodwill and Intangibles, Net      
Definite-lived intangible assets, gross carrying amount 15,850   15,850
Definite-lived intangible assets, accumulated amortization (6,295)   (5,987)
Definite-lived intangible assets, net carrying amount $ 9,555   $ 9,863
v3.8.0.1
Other Significant Balance Sheet Accounts (Remaining Amortization Expense) (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]      
Amortization of intangible assets $ 700 $ 900  
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]      
Remainder of 2018 1,806    
2019 1,875    
2020 1,591    
2021 1,385    
2022 1,243    
Thereafter 3,703    
Definite-lived intangible assets, net carrying amount $ 11,603   $ 12,026
v3.8.0.1
Other Significant Balance Sheet Accounts (Accounts Payable and Accrued Liabilities) (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]    
Accounts payable $ 5,453 $ 5,619
Accrued salaries and wages 6,277 8,573
Accrued bonus 3,351 6,924
Accrued vacation 8,837 8,237
Accrued litigation and fees 9,791 9,886
Accrued expenses 21,122 16,024
Rent liability 8,537 12,971
Accrued insurance liability 2,814 2,931
Total accounts payable and accrued liabilities $ 66,182 $ 71,165
v3.8.0.1
Other Significant Balance Sheet Accounts (Deferred Revenue) (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Jan. 01, 2018
Dec. 31, 2017
Deferred Revenue [Abstract]      
Deferred revenue $ 22,971   $ 19,135
Student deposits 38,727   49,072
Total deferred revenue and student deposits $ 61,698 $ 68,672 $ 68,207
v3.8.0.1
Other Significant Balance Sheet Accounts (Other Long-term Liabilities) (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Balance Sheet Related Disclosures [Abstract]    
Uncertain tax positions $ 9,454 $ 8,893
Other long-term liabilities 3,319 3,815
Total other long-term liabilities $ 12,773 $ 12,708
v3.8.0.1
Credit Facilities (Details)
$ in Millions
Mar. 31, 2018
USD ($)
Debt Disclosure [Abstract]  
Revolving line of credit, letters of credit outstanding $ 9.6
Surety Bond Facility [Abstract]  
Surety bond facility, available amount 6.5
Surety bond facility, issued amount $ 4.1
v3.8.0.1
Lease Obligations (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Lease Obligations [Abstract]    
Operating leases, rent expense, net $ 3,900 $ 3,600
Remainder of 2018 22,112  
2019 20,833  
2020 9,503  
2021 5,112  
2022 1,558  
Thereafter 391  
Total minimum payments $ 59,509  
v3.8.0.1
Income Per Share (Basic and Diluted Earnings Per Share) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Numerator:    
Net income $ 2,297 $ 9,869
Denominator:    
Weighted average number of common shares outstanding (in shares) 27,164 42,100
Effect of dilutive options and stock units (in shares) 400 897
Diluted weighted average number of common shares outstanding (in shares) 27,564 42,997
Income per share:    
Basic (in usd per share) $ 0.08 $ 0.23
Diluted (in usd per share) $ 0.08 $ 0.23
v3.8.0.1
Income Per Share (Anti-dilutive Securities) (Details) - shares
shares in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Stock options    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of dilutive common shares outstanding 2,870 3,245
RSUs and PSUs    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of dilutive common shares outstanding 11 14
v3.8.0.1
Stock Repurchase Program Stock Repurchase Program (Details) - USD ($)
3 Months Ended
Nov. 21, 2017
Mar. 31, 2018
Mar. 31, 2017
Nov. 17, 2017
Stock Repurchase Programs [Abstract]        
Stock repurchased during period (in shares) 2,100,000 0 18,100,000  
Payments for repurchase of common stock $ 16,700,000   $ 152,000,000  
Stock repurchase program, authorized amount       $ 20,000,000.0
v3.8.0.1
Stock-Based Compensation (Details) - USD ($)
$ / shares in Units, $ in Millions
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-based compensation expense $ 1.2 $ 0.9
Income tax benefit of stock-based compensation expense 0.3 $ 0.3
Unrecognized compensation cost related to unvested options and RSUs $ 8.3  
Restricted Stock Units    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Non-option equity instruments granted during the period (in units) 700,000 400,000
Grant date fair value (in dollars per share) $ 6.74 $ 10.44
Equity instruments other than options vested during period (in units) 300,000 400,000
Performance Shares    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Equity instruments other than options vested during period (in units) 0 0
Stock options    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock options granted (in shares) 0 300,000
Grant date fair value of options granted (in dollars per share)   $ 4.76
Stock options exercised (in shares) 0 100,000
v3.8.0.1
Income Taxes (Details) - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2018
Dec. 21, 2017
Dec. 31, 2017
Income Tax Contingency [Line Items]        
Effective tax rate (261.20%)      
Proceeds from Income Tax Refunds $ 1.7      
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense 0.1      
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent     35.00%  
Unrecognized tax benefits 19.2     $ 18.9
Gross unrecognized tax benefits that would impact effective tax rate if recognized $ 14.8     $ 14.8
Settlement with Taxing Authority [Member]        
Income Tax Contingency [Line Items]        
Effective tax rate 1.80%      
Scenario, Forecast [Member]        
Income Tax Contingency [Line Items]        
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent   21.00%    
v3.8.0.1
Commitments and Contingencies (Details)
$ in Millions
Dec. 31, 2017
USD ($)
California  
Loss Contingencies [Line Items]  
Estimated litigation liability $ 8.0
Nieder v Ashford University, LLC  
Loss Contingencies [Line Items]  
Settlement liabilities, current $ 1.8