Operator: Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Perdoceo Education Corporation Fourth Quarter and Full-Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Mr. Nick Nelson, Alpha IR. You may begin your conference.

Nick Nelson: Thank you, operator. Good afternoon, everyone, and thank you for joining us for our fourth quarter 2024 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, 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. 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 pros — 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 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?

Todd Nelson: Thank you, Nick. Good afternoon, everyone, and thank you for joining us for our fourth quarter 2024 earnings call. Today, I look forward to discussing the operating success we’ve experienced over the past year and how our academic institutions are furthering our goals of changing lives through education and preparing learners for essential skills needed in today’s job market. The enrollment trends we are experiencing have reinforced and validated our strategy of optimizing and prioritizing student experiences and academic outcomes that we believe should ultimately support sustainable and responsible growth. Our acquisition of the University of St. Augustine for Health Sciences as a prestigious academic institution in the graduate health sciences field, offering clinical teaching excellence through its innovation, individualized and quality clinical and distance education model.

With a strong focus on retention and graduating students, St. Augustine prepares medical professionals to serve and provide quality medical care to communities across the country. Now to the results. I’ll first discuss some key highlights for the quarter and full year. Ashish will then review the operating and financial performance and discuss our 2025 outlook. As always, I’d like to thank our faculty, student support staff and all of their employees for their under — outstanding and ongoing commitment and hard work in serving and educating our students. 2024 was a year of operating efficiency as we experienced further improvement in student retention and engagement across our academic institutions. This coupled with various federal student aid initiatives put in place by the Department of Education supported total student enrollment growth through 2024.

We are entering 2025 with student retention and engagement near multi-year highs and expect to operate at or near these levels through the next few quarters. The entire Perdoceo team remains focused on continuing to enhance and support student retention and engagement, while making selective investments in student technology and leveraging data analytics to identify and engage with prospective students who are most likely to succeed at one of our academic institutions. Let me now review some other key observations and general highlights for the quarter and year. First, our academic institutions, including the University of St. Augustine for Health Sciences, graduated over 12,000 students in 2024, then we wish them well with all their very best for the future.

Marketing and admissions investments and commensurately prospective student inquiry generation grew in the second-half of 2024, as we experienced an increase in interest from prospective students looking to pursue a degree at one of our academic institutions. Further, we have seen increased efficiency within our student enrollment and onboarding processes, supported by the use of data analytics and technology as well as our evolving marketing strategies that focus on identifying prospective students who are most likely to succeed at one of our universities. We have also increased training and development within our admissions and enrollment teams. While optimistic for 2025, we will continue to monitor the myriad of rules, orders and updated expectations from various federal and state bodies around prospective student outreach.

Our corporate engagement programs remain a focus and a priority. Both AIUS and CTU continue to make investments in staff and technology to further grow their programs in an efficient and effective manner. We used approximately $38.5 million for dividends and stock buybacks during 2024. Returning cash to shareholders via quarterly dividends is expected to be an integral and growing part of our capital allocation strategy. Now I’d like to take a minute to discuss the University of St. Augustine for Health Sciences. In early December, we successfully completed the acquisition of St. Augustine, which is a leader in graduate health science degrees, primarily in physical therapy, occupational therapy, and speech therapy as well as nursing. St. Augustine offers its academic programs through a network of ground campuses in California, Florida and Texas.

This strategic acquisition allows us to diversify and significantly expand our academic offerings into the health sciences field. Broadening our reach and community impact, we expect St. Augustine to be accretive to Perdoceo’s operating income and adjusted operating income in 2025 and to provide further growth in operating income and adjusted operating income in 2026. Shifting now to our operating results. Fourth quarter and full-year results surpassed our expectations. We reported fourth quarter net income of $31.5 million, or $0.47 per diluted share, while adjusted earnings per diluted share, which excludes certain significant and non-cash items was $0.50. A quick note on total student enrollments. At CTU, total student enrollments increased by 8.1% compared to the prior year-end and as anticipated at AIU System, total student enrollments increased by 11.8%, as AIUS reverted to normalized operations in 2024.

As mentioned earlier, since 2020, the Department of Education has implemented several student loan initiatives that, in addition to organic improvements contributed to total enrollment growth in 2024. Some of these programs have ended and are expected to change or end in 25 — 2025. However, we believe that the underlying momentum in student retention and student engagement metrics, coupled with increased levels of prospective student interest should be able to offset any headwinds from loan program initiatives ending. Ashish will now provide more details on the quarter and full-year performance, 2025 outlook and enrollment trends. With that said, I’d now like to turn the call over to Ashish for a deeper review of our performance. Ashish?

Ashish Ghia: Thank you, Todd. I will now review the fourth quarter and full-year results and then discuss our balance sheet and 2025 outlook 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. Please also note that the total student enrollment numbers discussed on this call or any enrollment trends that are referred to on this call, exclude learners pursuing non-degree seeking and professional development programs and degree-seeking non-Title IV self-paced programs at our universities. Finally, a quick reminder about year-over-year comparability. 2024 financial results include one-month of operating performance from the University of St. Augustine for Health Sciences acquisition, which will be reported as a separate segment and which we will refer to as St. Augustine.

With that said, let us begin with an overview of our operating results. Net income for the full year was $147.6 million, or $2.19 per diluted share compared to $147.7 million, or $2.18 per diluted share. Adjusted earnings per diluted share, which we believe is more indicative of the underlying operating performance was $2.29, as compared to $2.10 in the prior year. Please note that the 2024 EPS and adjusted EPS were higher than ’23, despite the prior year EPS, including a non-recurring federal income tax benefit of approximately $4.5 million, or $0.07. Full-year 2024 operating income of $174.3 million was $23.8 million higher as compared to the prior year quarter. Adjusted operating income, which excludes certain significant and non-cash items that we believe is not necessarily indicative of the underlying operating performance was $192 million, or 9.9% higher as compared to the prior year.

As expected, revenue for the full-year was lower by $28.7 million, which was more than offset with $52 million in lower operating expenses. This expected decrease in revenue was primarily due to a lag impact from the 2023 operational changes at AIU System and changes within the professional development offerings at CTU. Operating expenses for the year were favorable due to overall expense efficiencies, and certain non-recurring charges in the prior year that benefited year-over-year expense comparability. Additionally, we realized cost-savings from rightsizing processes and operations that supported our professional development offerings at CTU. As we focus on delivering academic programs more effectively and efficiently while investing in student processes that we believe will further enhance the overall academic value proposition of CTU.

For the fourth quarter, adjusted operating income was $43.2 million, as compared to $19.4 million in the prior year quarter and adjusted earnings per diluted share was $0.50 as compared to $0.27. This increase was primarily due to 12.5% organic revenue growth that is after excluding St. Augustine as well as lower expenses that I just discussed. Please note that the December acquisition of St. Augustine did not have a material impact on the year-over-year comparability of adjusted operating income. Full-year revenue excluding St. Augustine decreased to $671.2 million as compared to $710 million. This decline in full year revenue was expected due to the lag impact resulting from the operational changes made at AIU System in 2023 and simplification of our professional development offerings at CTU.

But as I just mentioned, revenue in the fourth quarter increased by 12.5% to $166.4 million, primarily due to strong levels of student retention and engagement across AIU System and CTU. Furthermore, the effects of the operational changes at AIU System have largely been annualized as AIU System has been operating at normalized levels of marketing and admissions through most of 2024. A note on total student enrollments. Total enrollments at CTU increased by 8.1% as of December 31st, primarily driven by growth in enrollments from corporate engagements as well as continued improvements in prospective student interest levels, student retention and student engagement trends. At AIU System, total student enrollments at December 31st increased 11.8% as compared to the prior year.

This was in line with our expectations of double-digit enrollment growth at AIU System operated at normalized levels of marketing and admissions for the most of 2024. For 2025, we expect total revenue and total enrollments to increase versus 2024. Strong levels of prospective student interest for CTU and AIU System as well as sustained improvement in student retention and engagement should offset the headwinds from the US Department of Education student loan initiatives program that have ended or are expected to change or end in 2025. Moving now to our segment results. Full-year revenue at CTU decreased by 2.6% to $456.9 million. Excluding the impact from the simplification of the professional development offerings, 2024 revenue at CTU experienced organic growth.

Strong underlying student retention and engagement and an increase in enrollments from corporate engagements more than offset the negative impact of approximately 5% peer revenue earning days during the year and resulted in this organic revenue growth. For the fourth quarter, revenue at CTU was $114.8 million, or 9.7% higher than the prior year quarter, primarily due to the growth trends I just discussed. Operating income for the quarter was $42 million as compared to $25.4 million in the prior year quarter, while full-year operating income increased by 18.9% to $171.3 million. Lower expenses associated with professional development offerings combined with the organic revenue growth discussed above contributed to the year-over-year increase in operating income.

At AIU System, as expected, full-year revenue decreased by 11.1% to $213.5 million, but fourth quarter revenue was $51.4 million, or 19.1% higher than the prior year quarter. The increase in fourth quarter revenue was in line with our expectations and supported by total enrollment growth, which also resulted in an operating income for the quarter of $4.9 million as compared to $0.6 million. Please also note that while the full-year operating income decreased by 20.1% to $36.2 million, much of that decrease was experienced in the first-half of ’24. Let us now spend a minute on the University of St. Augustine for Health Sciences. St. Augustine has a traditional university calendar with ground campuses in California, Texas and Florida. The university develops professional healthcare practitioners through innovative on-ground and virtual education.

St. Augustine has three academic terms; spring, summer, and fall. Prospective students are generally required to have an undergraduate degree and go through a comprehensive application and admissions process, which has allowed St. Augustine to maintain strong academic outcomes and student experiences. St. Augustine had approximately 3,800 total enrollments at December 31st, and we expect that to grow in 2025. Please note that the reported total enrollments in December will typically be a low-point in the year, since the fall term ends in December and the spring term does not begin until January. Moving on to Corporate and Other. Operating losses for the quarter and the year were $7.1 million and $30.5 million, respectively, which improved by $2.9 million and $8.3 million respectively as compared to the prior year periods.

This improvement was primarily driven by lower legal expenses during the full-year 2024. Now turning to income taxes. For the fourth quarter, we recorded a provision for income taxes of $11.7 million. This resulted in an effective tax rate of 27.2% for the quarter, bringing our annual tax rate to 26.7%. The effective tax rate for the quarter was positively impacted by approximately 1.4%, as a result of the overall reduction in the amount of previously recorded tax reserves for uncertain tax positions. Similarly, the full-year tax rate was benefited by approximately 2% for discrete adjustments primarily attributable to the release of previously recorded tax reserves for uncertain tax positions. Finally, we expect that for the full-year 2025, our effective tax rate will be between 25.5% and 26.5%, which includes an estimated benefit for the tax effect of stock-based compensation and release of previously recorded tax reserves for uncertain tax positions.

Now moving on to our balance sheet and liquidity. For the full-year 2024, cash flow from operations was $161.6 million versus $112 million in the prior year. This increase was partially driven by year-over-year improvement in adjusted operating income. Additionally, 2023 cash flow from operations was negatively impacted by the timing of cash receipts related to tuition and fees positively impacting the comparability to 2024. We ended the year with $591.5 million in cash, cash equivalents, restricted cash and available-for-sale short-term investments. Excluding the St. Augustine purchase price payment of approximately $137.8 million, this balance represents an increase of approximately $125 million as compared to the year-end 2023 cash balance.

Some of the primary uses of cash during the year were $46.8 million in income tax payments, $38.5 million in return of capital to shareholders in the form of dividends and stock repurchases and $4.6 million of capital expenditures. We expect our 2025 ending cash balance to grow, as compared to the year-end 2024. Please note that St. Augustine did not have a material impact on the 2024 operating cash flows, but we expect it to contribute positively to our 2025 cash flow from operations. Capital expenditures for the full-year were approximately $4.6 million, or 0.7% of revenue. For full-year 2025, we foresee capital expenditures to be approximately 2% of revenue, largely driven by St. Augustine. Before I share the updated outlook, let me take a minute to discuss capital allocation.

We are pleased to announce that consistent with our dividend policy, the Board of Directors approved the fourth quarter 2024 dividend payment of $0.13 per share payable on March 13, 2025, to the holders of record of Perdoceo’s common stock at the close of business on March 1, 2025. Future quarterly dividend payments are expected to be paid out of free cash flows for the relevant year, subject to Board approval and the company’s available retail earnings, financial condition and other relevant factors. Subject to the requirements just mentioned, we continue to expect that quarterly dividend payments will be an integral and growing part of our balanced capital allocation strategy and generally expect to review quarterly dividend months on an annual basis.

Our balanced approach to capital allocation prioritizes investments in organic projects, focusing on technology updates that support student success as well as real estate updates for St. Augustine. At the same time, we strive to maintain a strong balance sheet, while actively evaluating diverse strategies to enhance stockholder value, including capital return and acquisitions. Now let us discuss our outlook for 2025. We expect the full-year 2025 adjusted operating income to range between $215 million and $235 million. This compares to an adjusted operating income of $192.2 million in 2024 with the expected increase primarily due to the St. Augustine acquisition, which is accretive to our 2025 performance as well as growth expectations at AIU System and CTU.

Adjusted earnings per diluted share is expected to range between $2.31 and $2.51 versus $2.29 in 2024. Please note that beginning in 2025, the GAAP and adjusted EPS calculation will include incremental expenses for depreciation and finance leases related to the St. Augustine acquisition. These expenses are excluded for the purpose of adjusted operating income. The 2025 adjusted EPS range is impacted by approximately $0.23 per diluted share related to these incremental expenses, which are not part of adjusted operating income. This outlook reflects our current beliefs that high levels of student retention and student engagement, we experienced in 2024, partly supported by the positive impact from various federal student aid initiatives will continue to persist in 2025.

The higher levels of prospective student interest, which we experienced in second-half of ’24 will persist into 2025 and any changes to the myriad of rules, orders and update expectations from various federal and state bodies around prospective student outreach will not have a meaningful impact on prospective student interest levels. Full-year revenue will be higher than 2024, primarily due to the recent acquisition of St. Augustine. Excluding the acquisition, we expect revenue and total enrollments for both AIU System and CTU to also show growth. While we may see quarterly variability in revenue and enrollment trends, our growth assumption is that the impact from the department student loan initiatives that have ended or expected to change or end in ’25 will be mostly offset with organic improvements in student retention, student engagement and higher levels of prospective student interest for our academic programs, including growth in corporate engagements.

Additionally, for the year-end 2025, AIU System has an additional academic session start in December 2025, which will contribute to the growth, specifically when comparing year-over-year total enrollments. As a reminder, the academic calendar at AIU System and CTU may impact the comparability of revenue-earning days and enrollment results in any given quarter, but not necessarily in the same magnitude or direction. For the first quarter of 2025, we expect adjusted operating income to be in the range of $61million to $63 million as compared to $14.5 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.64 and $0.67 per diluted share versus $0.60 in the first 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 been successful in positively impacting academic outcomes and student experiences. Additionally, we will also continue to increase the size of our institutions’ corporate engagement teams. As disclosed — as disclosed in our Form 10-K filed today, with a new presidential administration, many changes are anticipated at the Department of Education. We expect the new administration to review the organization of the department itself, as well potentially issue new regulations and provide new interpretations and guidance surrounding various topics. We will monitor and evaluate all these actions and initiatives. It is too early to determine if any of these actions or initiatives could have an impact, either positive or negative on the outlook I just presented.

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’ll turn the call back over to Todd for his closing remarks. Todd?

Todd Nelson: Thank you, Ashish. I am proud of our performance in 2024 and pleased with our operational execution, which continues to focus on improved academic outcomes and experiences for our students across our academic institutions. We’re excited about the addition of the University of St. Augustine for Health Sciences, our academic institutions remain focused on serving and educating students, and I’d like to once again thank all of our students and staff for their ongoing hard work and dedication. Thanks again for joining us.

Operator: That concludes today’s meeting. Thank you for your participation. You may now disconnect.

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PERDOCEO EDUCATION CORP

Q4 2024

Earnings Transcript

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