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Perdoceo Education Corporation (NASDAQ:PRDO)
Q2 2020 Earnings Call
Aug 6, 2020, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Perdoceo Education Corporation Second Quarter 2020 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Brooks Hamilton with Investor Relations. Please go ahead.

Brooks Hamilton -- Investor Relations

Thank you, Andrea. Good afternoon, everyone, and thank you for joining us on our second quarter 2020 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section at perdoceoed.com. A webcast replay will also be available on our site. You can always contact the Alpha IR Group for Investor Relations support. Let me remind you that this afternoon's earnings release and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions made by and information currently available to Perdoceo Education and involve risks and uncertainties that could cause actual future results, performance, business prospects and opportunities to differ materially from those expressed in or implied by these statements.

These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo's annual report on Form 10-K for the year ended December 31, 2019, and subsequent filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, today's remarks refer to non-GAAP financial measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The earnings release that accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures and is available within the Investor Relations page of the company's website.

With that, I'd like to turn the call over to Todd Nelson. Todd?

Todd Nelson -- President and Chief Executive Officer

Thank you, Brooks. Good afternoon, everyone, and thank you for joining us on today's call. Let me start by saying that I'm very proud of our faculty and employees for their commitment and dedication to educating and serving our students during these uncertain times. Supported by our scalable and innovative technology infrastructure, all of our students are taking classes online and are well served by employees working remotely. We continue to improve our technology and processes and are providing the necessary tools and resources for our employees. The health and well-being of our students, employees and communities remain our top priority, and I am proud of the remote learning and service environment that we have built which I believe will help keep our students and employees safe during the ongoing pandemic. Now let's discuss the quarter. We're pleased with our operating results for the quarter, which came in ahead of our expectations. We continue to execute against our objective of sustainable and responsible growth while remaining focused on providing a quality education to our students.

Some key highlights for the quarter included: first, year-over-year growth in revenue and operating income for the quarter, supported by, among other items, student-serving operations and technology initiatives; two, organic enrollment growth at both universities, supported by consistent levels of prospective student interest that were well served by our student enrollment processes; three, the positive impact of the quarter from the Trident acquisition. As a reminder, the acquisition of substantially all the assets of Trident University International was completed in early March. We refer to this asset acquisition transition as the Trident acquisition for the remainder of today's discussion. The second quarter was the first full quarter with the Trident academic programs as part of AIU, and we are pleased with the broad range of educational program offerings and resources brought by the Trident acquisition.

Four, ongoing investments in technology. Investing in technological capabilities that equip our staff with relevant resources, enabling them to efficiently and effectively serve our students is always a priority for our educational platform, but this has proved to be a particularly important in this remote environment. Now to some quarter details some additional details about our operating performance for the second quarter. We reported net income of $28.2 million or $0.40 per diluted share, while adjusted earnings per diluted share, which excludes certain significant noncash items, was $0.41. Adjusted operating income was $41.7 million, a 27.2% increase from the prior year quarter, which was primarily attributable to revenue growth at both universities. Additionally, both universities contributed to enrollment growth for the quarter with total enrollment student enrollments as of June 30, 2020, up 20.1%, supported by new student enrollment growth for the quarter of 45.3%.

At CTU, total student enrollments as of June 30, 2020, increased 4% as compared to the prior year, supported by new student enrollment growth of 4.5% for the quarter. Our previously mentioned investments in technology and student-serving-functions continue to enable our admissions, financial aid and advising staff to support our students effectively throughout the enrollment orientation and learning processes. Faculty and advising teams are further increasing their student outreach efforts by optimizing scheduling and focusing on the needs of students, participating and beginning general education courses. CTU's mobile app continues to be widely used, and we are making investments in technology that use predictive data analytics, allowing further customization of our student engagement process that we believe will improve student experiences and ultimately, academic outcomes. A quick note on the corporate partnerships, which have been a meaningful contributor to enrollment growth at CTU.

We have a dedicated team working with our partners to best serve these organizations and their students. Our corporate partners remain committed to offering their adult employees educational opportunities that can progress their career paths. CTU collaborates with our corporate partners to offer academic programs that center around the organization's educational priorities, which makes these partnerships mutually beneficial. We will further invest in this strategic channel, which will continue to be an important part of our growth going forward. Turning to AIU. Total student enrollments as of June 30, 2020, increased 52.7% as compared to the prior year. Year-to-date, new student enrollments increased 36% as compared to the prior year period. These increases reflect the Trident acquisition, which was completed in March of 2020 as well as underlying organic growth in new enrollments. As a reminder, quarterly enrollments results are impacted by AIU's academic calendar and the resulting number of enrollment days in any given period.

The positive impact of the Trident acquisition as well as 50% more enrollment base in the quarter contributed to a 118.8% increase in new student enrollments for the quarter versus the prior year quarter. These results are supported by a holistic approach we have implemented within AIU student-serving operations. AIU student support structure focuses on engagement across the entire student life cycle from enrolling and orientation to ongoing learning and graduation. Full-time faculty have been assigned to graduate teams and are focused on helping incoming students get acclimated to the intellipath orientation and online learning. AIU Messenger, which was launched last year, is increasingly used by our faculty and staff to communicate with students, improving the effectiveness of our outreach. We believe our investments in technology continue to enhance the effectiveness of our student support teams, which we are regularly evaluating new ways to improve student engagement.

Overall, we are pleased with our progress and efforts to integrate Trident's unique academic programs along with the students, faculty and staff into AIU's operations. Trident's unique academic model and its masters and doctor programs will continue with AIU, providing a diversification of educational learning models and programs to better serve students' needs. Trident students and faculty now, as a part of AIU, will also benefit over time from AIU's technology investments and operational support. Because of Trident's unique academic model, some statements I'll make now and in the future regarding AIU's methods and processes will not be applicable to Trident operating within AIU. To conclude, I am extremely proud of the faculty and staff at both universities who have undertaken various measures and precautions to continue delivery of our commitment to student support and education. Our faculty and advising teams continue to work with students who have been directly or indirectly affected by the pandemic, providing them with necessary support as they work to complete their program of study. Overall, we are executing well despite these challenging times, and we believe our operating results reflect our commitment to educating and serving our students.

With that, I'd like to hand the call over to Ashish for a more detailed review of our second quarter 2020 results, balance sheet and 2020 outlook. Ashish?

Ashish Ghia -- Senior Vice President and Chief Financial Officer

Thank you, Todd. I will review the second quarter 2020 results and then discuss our balance sheet and 2020 outlook before handing the call back to Todd for his closing remarks. All comparisons are versus the comparative prior year period, unless otherwise stated. Before I begin, a quick comment on the year-over-year comparability. Operating results for AIU now reflect the Trident acquisition, commencing on March 2, 2020. Total company operating income for the second quarter was $37.4 million as compared to operating income of $0.2 million in the prior year. As a reminder, the prior year quarter included a $30 million expense related to the FTC settlement. We believe adjusted operating income, which excludes certain significant and noncash items, is more reflective of the underlying operating performance.

This measure increased 27.2% to $41.7 million for the quarter, and was above the high end of our outlook range of $38 million to $40 million. Net income for the quarter was $28.2 million or $0.40 per diluted share, while adjusted earnings per diluted share, which we believe is more reflective of the underlying operating performance, was up 20.6% to $0.41 per share. The improvement in adjusted operating income was primarily due to revenue growth at both universities, which reflects underlying enrollment growth that was well supported by our student-serving operations. Also benefiting our second quarter results was the Trident acquisition as well as COVID-19-related savings associated with reduced employee health insurance expenses, occupancy-related expenses, travel and other events. Partially offsetting these positives were incremental investments in marketing and student-serving functions, costs associated with compliance and monitoring efforts and legal expenses related to the recently resolved VA matter.

Now on to more specific details around the second quarter. Total company revenue increased by $19.6 million or 12.5% to $176 million as compared to the prior year quarter. As it relates to our segments, revenue at CTU was up $3.6 million or 3.8% to $100.2 million for the quarter, reflecting new and total student enrollment growth, while operating income of $33.1 million was up from $12.1 million in the prior year quarter. Please note that the prior year quarter included $18.6 million of expenses related to the FTC settlement. From an expense perspective, CTU continues to be diligent in prioritizing expenditures on student support initiatives. Incremental expenses incurred within marketing and student-serving functions were partially offset with cost efficiencies achieved across various administrative processes and reduced expenses associated with pandemic-related savings. Now to AIU. Revenue increased 26.7% to $75.8 million for the quarter, supported by the Trident acquisition and underlying organic enrollment growth.

Operating income for the quarter was $10.5 million as compared to an operating loss of $4.2 million in the prior year quarter. Recall that the prior year quarter included an $11.4 million expense related to the FTC settlement. AIU too continues to focus on achieving efficiencies across various administrative processes and experienced pandemic-related savings, while marketing expenses were higher for the quarter. Separately, while bad debt expense as a percent of revenue stabilized for the quarter, please do keep in mind that from a comparability perspective, AIU's operating expenses exhibited year-over-year increase across most line items due to the Trident acquisition. Let me briefly touch on bad debt expense. As a percentage of revenue, bad debt expense for the company was lower sequentially from the first quarter and as compared to the prior year quarter. We continue to invest resources to help students financially prepared for school, so that they are more likely to complete their program of study. While we still expect fluctuations, we are encouraged with the year-to-date progress in this area.

Moving on to student enrollments. Total enrollments at CTU grew by 4%, supported by new enrollment growth of 4.5% versus the prior year quarter. The enrollment growth is reflective of consistent levels of prospective student interest that are being well served by the investments made in our admissions and advising functions. Looking forward, we expect new student enrollments at CTU to grow in the third quarter and for the full year 2020. Total student enrollments at AIU increased 52.7% as of June 30, 2020, while new student enrollments increased 118.8% for the quarter. Please note that these results reflect a full quarter of the Trident acquisition. The positive impact of the Trident acquisition as well as 50% more enrollment days in the quarter contributed to the new enrollment increase versus the prior year quarter. Recall that the academic calendar at AIU, specifically the number of enrollment days in any given quarter has a significant impact on the new student enrollments for that quarter.

Looking forward, we expect new student enrollments at AIU to grow in the third quarter and also show growth for the full year 2020. Please note that on a full year basis, AIU's 2020 academic calendar is relatively comparable to 2019 with a consistent number of revenue and enrollment days for each year. Also, enrollment days for the third and fourth quarters of 2020 will be comparable for each quarter as compared to the respective prior year quarter. Now a quick update on Corporate and Other. This category includes residual operating losses associated with closed campuses. Operating losses associated with closed campuses were approximately $0.4 million in the second quarter as compared to $1.8 million, with the improvement primarily driven by lower professional fees associated with legacy legal matters. Excluding operating losses associated with closed campuses, corporate costs were relatively in line with the prior year quarter. Now to income taxes.

We recorded a provision for income taxes of $10.3 million for the current quarter, which resulted in an effective tax rate of 26.7%. The tax rate for the quarter includes an increase of approximately 0.3% related to the release of previously recorded tax reserves and the tax effect of stock-based compensation. For 2020, we expect our tax rate to be between 25.5% and 26.5%, without assuming any material benefit related to the release of tax reserves and the tax effect of stock-based compensation for the second half of the year. Also, the full year estimated rate assumes a negative impact due to increase in tax reserves and the tax effect of expenses that are not deductible for tax purposes. Separately, we ended 2019 with approximately $108.5 million of federal net operating loss carryforwards, which are available to offset future taxable income. As a result, specifically as it relates to 2020, we do not expect to pay any federal income taxes. Now let me spend a few minutes reviewing our balance sheet.

We ended the quarter with $345.8 million of cash, cash equivalents, restricted cash and short-term investments, which will be referred to as cash balances for the remainder of today's discussion. This represents an increase of $51.6 million over year-end 2019. Key drivers of cash for the first half of the year are: positive cash flows from university operations were partially offset by cash outflows related to the Trident acquisition; payments related to the settlement of the Oregon arbitration matters; annual and long-term incentive payments; and share repurchases in the first quarter. Capital expenditures were approximately $2.4 million in the second quarter as compared to $0.9 million in the prior year quarter. For the full year 2020, we foresee capital expenditures to be approximately 1.5% of revenues. As noted previously, we completed the acquisition of substantially all of the assets of Trident University International on March 2. The cash purchase price, net of working capital adjustment, was $43.8 million, with the final purchase price payment of $5.7 million paid during July of 2020.

Please note that the $4 million of the total purchase price was paid into an escrow and is reflected as restricted cash on our balance sheet. Overall, the company is executing well against its objective of sustainable and responsible growth, with investments in student-serving initiatives and technology showing positive results. Finally, to our 2020 outlook. The outlook incorporates anticipated COVID-19 pandemic related costs, such as transitioning students and employees to a remote environment and providing ongoing technology support and restructuring costs related to the Trident acquisition. Further, please note that the outlook assumes no material impact to future operating results from the COVID-19 pandemic, again, an assumption based on our experiences to date. So for the full year 2020, outlook is as follows: we are maintaining our adjusted operating income outlook to be in the range of $151 million to $155 million as compared to $134.3 million in 2019.

This is consistent with our overall objective of sustainable and responsible growth. Adjusted earnings per diluted share is to be in the range of $1.48 to $1.52 per share versus $1.37 in 2019. Now for the third quarter outlook. Our third quarter outlook reflects the company's expectation of growth in new student enrollments at CTU and AIU. Further, the company expects adjusted operating income to be in the range of $35 million to $36 million versus $34 million in the prior year quarter and adjusted earnings per diluted share to be in the range of $0.34 to $0.35 versus $0.35 in the prior year quarter. Please refer to our earnings release filed today for important information about the key assumptions and factors underlying this outlook and other expectations discussed on today's call as well as the GAAP to non-GAAP reconciliations.

With that, I will turn the call back over to Todd for his closing remarks. Todd?

Todd Nelson -- President and Chief Executive Officer

Thanks, Ashish. Our teams remain focused on positively impacting student experiences, retention and academic outcomes and we are executing well against our objective of sustainable and responsible growth. With our scalable and innovative technology infrastructure, I'm confident in our ability to provide a learning environment for current and prospective nontraditional students, including adult learners, which helps to keep them safe during the current pandemic. I'm proud of the entire Perdoceo team for their hard work and dedication to our students.

Thank you again for joining us today, and we'll now open the call for any analyst questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Alex Paris of Barrington Research. Please go ahead.

Alex Paris -- Barrington Research -- Analyst

Okay and. Ashish, congratulations on the quarter. Thanks for taking my question.

Ashish Ghia -- Senior Vice President and Chief Financial Officer

Thanks, Alex.

Alex Paris -- Barrington Research -- Analyst

Thank you. First question, both. Todd and Ashish, congratulations on the quarter. First question, both Todd and Ashish, you said you had organic enrollment growth across both universities, supported by consistent demand from prospective students. What are your thoughts on the counter-cyclicality of enrollment in higher education? There's been a number of different players in the space who talked about it being countercyclical.

Others talked about it being acyclical. And most recently, a large player in this space talked about it being very very pro-cyclical. So have you noticed any uptick in demand as a result of increased unemployment? And what's your view generally there?

Todd Nelson -- President and Chief Executive Officer

It's a good question. I think it depends, Alex, on the program and also the level of degree versus Bachelors versus Masters or Doctoral degree, but I would say that, again, we've had very consistent demand. In some areas, we have seen a pickup and again, I think that the philosophy that during a tough economy, there is more attention given to prospective students upgrading their education to help them get a job, a better job or promotion raise. And I do think that is very consistent with what we're seeing. But again, across the board, I would say, as we said, it's been very consistent for us at this point with some areas better than maybe it has been in the past.

Alex Paris -- Barrington Research -- Analyst

All right. And then similarly, what's been your experience with conversion of this demand? Has there has it improved? Has it stayed the same?

Todd Nelson -- President and Chief Executive Officer

That has been consistent. And again, I think that this is just, again, what I have seen over the years of being in this industry is what you will see is that conversion rate as far as those wanting to attend tends to increase, but it may be a little more difficult for them as far as funding, so that may then have a little bit of a counter effect. So I think what you look for is a consistent conversion rate during a time like this because, again, you see some things more incentives for people to do it, but against some maybe a little bit more headwinds as far as getting their funding.

Alex Paris -- Barrington Research -- Analyst

Got you. All right. And then kind of my final question is a bigger is kind of a bigger scope question. There was a negative article over the weekend in Barron's. I'm sure you saw it. It was an interview with an investor. He talked about a couple of stocks that he liked and a couple of stocks that he'd avoid or short. Yours was one of them that he mentioned as a pan as opposed to a pick. And your stock, and the other one mentioned, was down on Monday.

Your stock has since recovered, but I was wondering if you could maybe address some of the issues he brought up because I think it's important. First of all, he brought up the FTC settlement and then the VA issue, obviously, both related. This is from a long time ago. Maybe you can kind of refresh our memories on what it really involved, what period of time were they looking at, and why you settled it without admitting wrongdoing?

Todd Nelson -- President and Chief Executive Officer

Thanks, Alex. And again, I did read the article. I thought again, it was some of the arguments, again, I felt were very outdated, and frankly, some of them are just not again, I don't think really applied, but that's my opinion. But regarding the FTC, yes, those again, there were allegations of issues relating to the use of lead aggregators. It wasn't anything we were doing internally, which, again, the article led I think it kind of led to imply that. But again, it was the use of some aggregators. And Alex, these were it was years ago, and there were well over 100 universities that bought those leads. And as soon as we found that there may have been some information that wasn't accurate that they were using, not to our knowledge, we stopped using them. Other universities continued to do that. But regardless, again, I think that in the article, it made a connection there that just was not the case.

But regardless, the FTC agreement is something we're actually very proud of because in that, we commit to a very robust process using a technology partner to make sure to literally scrub every lead before we acquire it to make sure the accuracy, the consistency of the information before we acquire that lead. And I would say that I'm not aware of, if any, universities, for profit or nonprofit, have as robust a compliance process as we do and that we were willing to agree to that in an agreement with them. So again, we feel that as a very positive versus the negative slant that I think was used there. So that's our approach. As far as the VA, again, that stemmed from, again, some of those things that were mentioned in the FTC agreement, which again were years ago, that are nothing new. And as soon as we submitted the information, they considered it.

The outcome was what we had expected as they would see the very robust compliance process that we have. And therefore, there was no interruption. And so again, although you can't prevent those things from them asking or presenting an inquiry. Once they did review the data and the information, it was a very positive outcome for us, which we expected because we knew what we're doing. So again, I felt like it was consistent with maybe those who try to short our stock, put out information that I think when you read between the lines, there's a lot more there. And in our case, again, it was I view as positive information, but again, that's my opinion.

Alex Paris -- Barrington Research -- Analyst

And then just one other question, and it also was raised in that article, but I would have the question anyway. Bad debt, you called out bad debt in excess of 9% of revenue. That's higher than I had calculated. First of all, what is bad debt as a percentage of revenue currently? Why it was that high?

Todd Nelson -- President and Chief Executive Officer

I'll respond to just the issue of bad debt in general and then if Ashish wants to add anything to it. First of all, I think there's a disconnect there as far as bad debt in any way reflecting on the quality of students. That bad debt is more an issue of what is going on in the economy in general, as you would expect. And in this during this time of pandemic, you in your desire to help students graduate, it's probably I think it's very much in their favor to be very helpful for them, and that may impact your bad debt. Having said that, we are seeing improvements in certain areas of bad debt.

So and again, I'll let Ashish go on, but again, I think that the guiding principle there, which is missed is, what are you doing to help your students graduate, especially on time, so maybe funding is a little bit more difficult for them. And I think, again, it needs to be within reason, it needs to be managed, but it should be something that is your goal should be trying to help your students. So Ashish, you want to add to that?

Ashish Ghia -- Senior Vice President and Chief Financial Officer

Sure. Alex, to your first comment, I think you are correct. The article does mention 9%, but that is I don't know where that number came from, but to your point, bad debt for year-to-date is 7.3%, not 9%. And then for the quarter, it is 7%, which is better than the prior year quarter. So we are seeing good progress in that area. As Todd mentioned, we have invested a lot of resources to make sure students are financially prepared for school. The goal is to always do everything in the best interest of the students.

And lastly, also, if you just look at the revenue growth that we have had over the past few quarters and years and if you look at the quality of earnings, if you will, you will see there is healthy cash flow from revenue to operating income to our EBITDA and to cash. So all those factors combined, we believe we are happy with the progress we have made in that area. And we are cognizant of what goes on there, and we'll continue to make sure we make progress there.

Alex Paris -- Barrington Research -- Analyst

Good. And I appreciate the consistency of Perdoceo through this pandemic both in terms of actual and keeping guidance and actually raising guidance last quarter and maintaining guidance this quarter. So I think consistency is pretty valuable in this environment. Thank you.

Ashish Ghia -- Senior Vice President and Chief Financial Officer

Thank you, Alex.

Operator

Our next question comes from Dan Moore of CJS Securities. Please go ahead.

Brendan Popson -- CJS Securities -- Analyst

Good evening guys. This is Brendan Popson on for Dan. Just wanted to ask about and you might have mentioned this, if I missed it, but could you speak to the organic growth for the business, excluding Trident?

Todd Nelson -- President and Chief Executive Officer

We didn't break that out, but I think you can from the numbers that we present, I think you can see that it was a very good quarter from a growth perspective for AIU. Yes, there were 50% more enrollment days during the quarter year-over-year. So again, it's not exactly apples-for-apples, but you can use that as a good benchmark, and yet they had 118% new student growth. And so again, without when you take out the 50%, you're still talking about a 68% implied growth year-over-year. And yes, part of that is Trident, but, yes, there's still a significant amount that's AIU. Ashish, you want to add to that at all.

Ashish Ghia -- Senior Vice President and Chief Financial Officer

No. I think that is correct. We don't separate out, excluding Trident, but we do say there is underlying organic enrollment growth at our AIU and that organic enrollment growth also is resulting in the operating income growth. So I think that's fair to say.

Brendan Popson -- CJS Securities -- Analyst

Okay. And then on Trident, could you speak to anything you've seen in terms of cost and revenue synergies that you've had for at least a little bit of time?

Todd Nelson -- President and Chief Executive Officer

Well, I think that just again, in general, we've been very pleased with the quality of the staff and faculty and programs that Trident brought to the company. And in particular, they are students. They're they have a lot of graduate students. They're very dedicated just even though we felt that, that would be good, I think it's been even more encouraging what we've seen. And especially, they're at the graduate level and then in their relationship with the military, those types of things have been, I think, really nice improvements for us.

And I think they have benefited from our robust technology and infrastructure compliance programs, those types of things that we've been able to help them with. And so the resulting combined effort of the two of them is I think that's why you're seeing good growth in the quarter and looking forward to more of that in the future.

Brendan Popson -- CJS Securities -- Analyst

And then just last question. Could you just speak to any I guess, your corporate partners. It sounded like you heard some good things this quarter, but is there any pulling back or any new interest and then any incremental opportunities with remote corporate training?

Todd Nelson -- President and Chief Executive Officer

All good questions. Not to our knowledge as far as anybody pulling back at this point. Again, I think that is always a risk that you would have across our industry. We've been fortunate that a lot of our partners are in industries that have not been affected by what's going on in the overall economy. Whether it's we've got areas of some of our partners are in technology. Some of them are in healthcare, and those are areas that are doing well. And I think that's been, for us, again, very positive. As far as the remote learning opportunities, there this is a real strength for the company. We have a very robust technology. And one of the things that I have noticed, as I noticed some of my own children and grandchildren, some of the remote the transition from on-ground to remote technologies to deliver the education candidly is somewhat lacking.

And that's where, again, you look at what we do and the years and years of experience and millions of dollars devoted to the technology and the academic infrastructure to produce quality learning outcomes as good or, in some cases, better than on than face-to-face type education. And this is where, again, I think we really have an opportunity to shine as a very good alternative, certainly in an environment like this, but I also think going forward, I think more people are seeing the benefit of this as not just as a technology that's utilized in this environment, but going forward because there are some real efficiencies. And again, I think that it is really a complement to our academic staff, our technology staff over the years to continue to refine and develop that.

Brendan Popson -- CJS Securities -- Analyst

Thank you.

Todd Nelson -- President and Chief Executive Officer

Thank you.

Operator

Our next question is from Greg Pendy of Sidoti. Please go ahead.

Greg Pendy -- Sidoti -- Analyst

Hi guys, thanks for taking my question and I apologize if this was asked earlier, but just this was probably one quarter end with Trident University. So just kind of looking at the operating margin differential with CTU and AIU, how should we be thinking about that maybe over, not the next quarter or two, but just over the next couple of years, and do you think big picture, AIU would be at a similar operating margin as CTU, if it had, say, the same number of students?

Todd Nelson -- President and Chief Executive Officer

Greg, yes, very good question. And yes, the way we look at it is there are certain variables that exist at both CTU and AIU that if they're consistent being your cost per credit hour, your quality of your program, the what your programmatic offerings are, the particular demographic of students you serve. And there's a lot of consistency between AIU and CTU and so given that, we do believe that there's the opportunity for AIU to have similar margins at a similar number of students. Again, a lot of things can change externally in the environment that will affect that. But it's certainly, from our point of view, the potential.

And I think adding Trident, what that did is that, one enhanced the breadth and depth of AIU programs in a very much faster level than if you would go through and get those individual program approvals and development over several years as you add them one at a time versus adding a partner that already had approved programs. And so that actually does, I think, shorten the time frame that would allow you to have comparable margins. It still takes time, and you still need the scale that you're referring to. But certainly, we believe the elements are there, excluding, obviously, the external impact that may happen. But yes, we feel like there's that opportunity and Trident really added to that their ability to accomplish that.

And I would just, again, thank you all for joining us today, and we look forward to speaking with you again next quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Brooks Hamilton -- Investor Relations

Todd Nelson -- President and Chief Executive Officer

Ashish Ghia -- Senior Vice President and Chief Financial Officer

Alex Paris -- Barrington Research -- Analyst

Brendan Popson -- CJS Securities -- Analyst

Greg Pendy -- Sidoti -- Analyst

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