Speaker 1
Thank you, operator. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 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 of the company's website at perdoceoed.com. A webcast replay will also be available on our site for 90 days following the call, and 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 as amended. These statements are based on any 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 forward-looking statements. These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo's most recent annual report on Form 10-K 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?
Thank you, Nick. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 earnings call. In today's call, I'll start by discussing some key highlights for the quarter. Ashish will then provide more details on the operating and financial performance and discuss the 2025 outlook. As always, I'd like to thank our faculty, student support staff and all other employees for their outstanding commitment and hard work in serving and educating our students. Our academic institutions share a common mission of transforming lives through education by equipping learners with the practical skills required to succeed in today's dynamic work environment. CTU and AIUS provide diverse career-focused programs designed to help students excel in a rapidly changing job market. The University of St. Augustine develops professionals to deliver exceptional healthcare services to communities nationwide. Third quarter operating performance exceeded our expectations with net income of $39.9 million or $0.60 per diluted share, while adjusted earnings per diluted share, which excludes certain noncash items, was $0.65 as compared to $0.59 in the prior year. These operating results are supported by continued momentum in student retention and engagement that has been trending near multiyear highs as well as increased interest from prospective students looking to pursue a degree at one of our academic institutions. During the quarter, we also continued to invest in student technology and student support processes that we believe will further enhance academic outcomes and student experiences. Some key successes and other highlights from the quarter include total student enrollments grew 15.1% versus the prior year quarter, driven by 6.7% growth at CTU and the acquisition of St. Augustine. At CTU, this marks 8 consecutive quarters of total enrollment growth, primarily due to continued progress within the corporate student program as well as strong levels of interest from prospective students in pursuing a degree. As expected, AIUS reported a decline in total student enrollments of 2.9%. Excluding the impact from the academic calendar and number of enrollment days, AIUS would have also reported total enrollment growth. As a reminder, we expect AIUS to end the year with double-digit total enrollment growth. At St. Augustine, fall term new student enrollments increased as compared to the prior year, and there were approximately 4,400 total students enrolled for the term. Please note that the fall term is typically the biggest term of the year in terms of student enrollments. Supporting new enrollment growth at St. Augustine is the ongoing expansion of their program offering matrix in terms of introducing new modalities at current campus locations. The goal is to maximize the geographical area each campus location can serve while providing students with a wider choice in taking their courses, whether online instruction in person at a campus location or a hybrid option in between. We are very pleased with the current trends and expect adjusted operating income at St. Augustine to grow in 2026 as compared to 2025. Total enrollments from the corporate student programs at CTU and AIUS continue to increase. And these programs remain a priority as we continue to make strategic investments in technology and personnel to assist further enrollment growth in these corporate programs. Improving technology for admissions, academic and student support processes is a key priority, and we continue to equip our teams with the necessary tools to effectively counsel and support the growing number of students through their education. We continue to refine our marketing and admission spending strategies and are integrating artificial intelligence to help identify and engage prospective students who we believe are more likely to succeed at one of our academic institutions. Our capital allocation decisions throughout the year highlight, amongst other priorities, our continued commitment to returning capital to shareholders. Commensurately, during the quarter, we repurchased $20.6 million worth of shares under our recently approved $75 million share repurchase authorization. Through both share repurchases and quarterly dividends, we have returned a total of $94.1 million to shareholders for the first three quarters of 2025, underscoring our ongoing commitment to long-term value, delivering long-term value and disciplined capital deployment. In closing, I am pleased with the momentum we have experienced through 2025 and remain optimistic for 2026 as we continue to focus on serving students while investing in further enhanced academic outcomes and student experiences. Ashish will now provide more details on the quarter, our outlook through the remainder of 2025 and enrollment trends.
Thank you, Todd. I will start with an overview of the third quarter results and then discuss our balance sheet and outlook for the remainder of 2025 before handing the call back to Todd for his closing remarks. Please note all comparisons discussed on this call are versus the comparative prior year period unless otherwise stated. In addition, total student enrollment numbers and any referenced enrollment trends discussed during this call do not include learners pursuing nondegree-seeking and professional development programs and degree-seeking non-Title IV, self-paced programs at CTU and AIU System. As a final reminder regarding year-over-year comparability, this quarter's financial results include the operating performance from the University of St. Augustine for Health Sciences acquisition, which was completed in December of 2024. With that said, let us begin with an overview of our third quarter results. Third quarter operating income grew by 13.8% to $51 million, while adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes certain noncash items, increased 27.4% to $61 million as compared to $47.8 million during the prior year. Finally, adjusted earnings per diluted share was $0.65 as compared to $0.59 in the prior year. All three academic institutions contributed to the growth in operating income, adjusted operating income and adjusted EPS for the quarter. Revenue for the third quarter was $211.9 million, representing a 24.8% increase from $169.8 million in the prior year. Revenue was favorably impacted by $38 million attributed to the St. Augustine and total enrollment growth at CTU. As of September 30, total student enrollments increased 15.1% compared to the prior year. At a segment level, CTU's total enrollments increased by 6.7%, supported by higher levels of student retention and engagement, growth within the corporate student program and higher levels of prospective student interest. As Todd mentioned, this represents 8 consecutive quarters of total enrollment growth, and we expect to see continued growth in total enrollments in the fourth quarter as we exit 2025. As expected, total student enrollments at AIU System decreased by 2.9% as compared to the prior year. This decrease was due to enrollment day comparability. But looking ahead to the fourth quarter, we expect to see double-digit enrollment growth at AIU System. As a reminder, in addition to the underlying operating trends such as student retention and engagement, enrollment days in each quarter will also affect quarterly enrollment comparability at AIU System. At St. Augustine, we began our fall term with approximately 4,400 students enrolled in one of our academic programs. New student enrollments for the fall term were higher as compared to the prior year, primarily due to growth in programs such as nursing and speech language pathology as well as the introduction of new modalities for the doctorate in physical therapy program. Note that St. Augustine has a traditional university calendar with 3 academic terms and multiple campuses for in-person classes in California, Texas and Florida. Commensurately, we may share student enrollment data for the beginning of an academic term, which are typically different from the total student enrollment numbers reported at the end of each fiscal quarter. In summary, from a total company perspective, we expect revenue and total student enrollments to increase in the fourth quarter and for the full year 2025. And we believe that this expected enrollment growth in the fourth quarter should positively impact revenue and operating performance metrics going into 2026. Moving on to our segment results. For the third quarter, revenue at CTU was $117.1 million or 4.3% higher than the prior year quarter, while operating income for the quarter increased 6.7% to $47.8 million, primarily due to the student enrollment and revenue growth trends I previously discussed, including sustained demand for degree programs and our continued investment in marketing and admissions to support that demand. At AIU System, as expected, third quarter revenue remained relatively flat at $56.7 million, while operating income increased versus the prior year quarter, mainly due to lower operating expenses, including bad debt. St. Augustine recorded third quarter revenue of $38 million. Excluding depreciation and amortization, adjusted operating income for St. Augustine was $7.2 million, and as Todd mentioned, will be accretive to our operating results for the full year 2025 and expected to further grow adjusted operating income in 2026. Moving on to Corporate and Other. Operating losses for the quarter decreased to $6.1 million from $8.5 million in the prior year quarter. The decline was primarily due to the incurrence of acquisition-related expenses in the prior year period. Turning to income taxes. For the third quarter, we recorded a provision for income taxes of $16.2 million, bringing our year-to-date effective tax rate to 26.2%. The year-to-date effective tax rate was positively impacted by the tax effect of stock-based compensation, which reduced the effective tax rate by 2 percentage points. Finally, we expect that for the full year 2025, our effective tax rate will be between 26% and 26.5%, which includes an estimated benefit for tax effect of stock-based compensation and the release of previously recorded tax reserves for uncertain tax positions. Separately, the tax provisions from the reconciliation bill, allowing 100% bonus depreciation and the immediate expensing of domestic research expenditures are expected to reduce our U.S. federal cash tax payments for the rest of 2025 and future years. Additionally, various tax attributes acquired with the University of St. Augustine acquisition will also lower our federal cash tax income tax payments for the full year 2025 and beyond. Turning now to our balance sheet and liquidity position. For the year-to-date period ended September 30, 2025, net cash flows provided by operations were $185.1 million versus $144 million in the prior year-to-date. This growth versus the prior year was primarily supported by year-over-year improvements in adjusted operating income. We ended the third quarter with $668.6 million of cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represents an increase of approximately $77.1 million from our year-end position. During the first three quarters, some key uses of cash were $66.7 million in return of capital to shareholders in the form of stock repurchases, $27.4 million of quarterly dividend and dividend equivalent payments, $38.4 million of federal and state income tax payments and $6.3 million of capital expenditures. For full year 2025, we continue to foresee capital expenditures to be approximately 1.5% of revenues. Before sharing our revised outlook, I want to briefly address our approach to capital allocation. Consistent with our dividend policy and continued confidence in our long-term outlook, the Board of Directors declared a quarterly dividend payment of $0.15 per share payable on December 12, 2025, to the holders of record of Perdoceo's common stock at the close of business on November 28, 2025. Future quarterly dividend payments are expected to be paid out of free cash flows from the relevant year, subject to Board approval and the company's available retained earnings, financial condition and other relevant factors. Subject to the conditions previously outlined, we continue to view quarterly dividend payments as an integral and growing part of our balanced capital allocation strategy. We generally expect to evaluate dividend amounts on an annual basis, consistent with the Board's recent decision to increase the quarterly dividend. During the quarter, we repurchased 660,000 shares of our common stock for $20.6 million, bringing our year-to-date share repurchase total to 2.3 million shares repurchased for $66.7 million at an average price of $29.07 per share. As of September 30, 2025, approximately $54.3 million was available under our authorized stock repurchase program to repurchase outstanding shares of our common stock. This reflects our continued commitment to disciplined capital deployment and our ability to invest in growth opportunities, both organic and inorganic, while continually returning capital to our shareholders. With that foundation in place, we'll shift focus to our outlook for the remainder of 2025. Given the stronger-than-expected operating performance, we are updating our full year adjusted operating income outlook to a range between $234 million and $236 million. This compares to an adjusted operating income of $188.9 million in 2024, with the expected increase primarily due to the St. Augustine acquisition and positive operating trends at CTU and AIU Systems. Adjusted earnings per diluted share are expected to be between $2.54 and $2.56 versus $2.26 in 2024. As mentioned last quarter, beginning in 2025, the GAAP and adjusted EPS calculations include incremental expenses related to depreciation and finance leases for St. Augustine. While these expenses are excluded for the purpose of adjusted operating income, they are part of the adjusted EPS calculation. Inherent in the 2025 adjusted EPS outlook range provided is approximately $0.24 per diluted share related to these incremental expenses. This outlook reflects our current beliefs that the consistently high levels of student retention and student engagement that we experienced in the first three quarters will carry into the fourth quarter. The higher levels of prospective student interest, which we've experienced since the second half of 2024 will continue. And any changes to the regulatory or legislative environment will not have a meaningful impact on prospective student interest levels or necessitate any operational changes. Full year revenue is expected to increase as compared to 2024, primarily driven by the recent acquisitions St. Augustine and organic growth trends at CTU, as I just discussed. At AIU System, we may see quarterly variability in total enrollment trends due to enrollment day comparability. Additionally, AIU System has an additional academic session beginning in December 2025, which is expected to contribute to the year-over-year enrollment growth as of December 31 and expected to favorably impact operating performance going into 2026. As a reminder, the academic calendar at CTU and AIU System may influence the comparability of revenue earning days and student enrollment numbers in any given quarter, though not necessarily with the same magnitude or direction. For the fourth quarter of 2025, we expect adjusted operating income to be in the range of $47.9 million to $49.9 million as compared to $42.7 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.53 and $0.55 per diluted share versus $0.49 in the fourth quarter of 2024. Our 2025 outlook also assumes ongoing investments in technology, data analytics, real estate, academics and student support processes. We believe these investments have supported improved academic outcomes and enhanced student experiences. In addition, we plan to continue expanding the corporate student program teams at CTU and AIU system to support further growth and engagement. Please refer to our earnings release filed today for important information about the key assumptions and factors underlying this discussion from 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.
