Operator: Hello and welcome to the Perdoceo Education Corporation First Quarter 2025 Earnings Conference Call. Now, I would like to hand the call over to Nick Nelson from Alpha IR. Nick, you may begin.

Nick Nelson: Thank you, operator. Good afternoon, everyone and thank you for joining us for our first 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 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 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 reasons. 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 first quarter 2025 earnings call. Our academic institutions remain focused on the goal of changing lives through education and preparing learners for essential skills needed in today’s job market. CTU and AIUS provide learners with relevant knowledge and equip them with essential skills needed to thrive in today’s evolving job market, while St. Augustine prepares professionals to serve and provide quality medical care to communities across the country. The enrollment trends that we have been experiencing across these three institutions have reinforced and validated our strategy of prioritizing student experiences and academic outcomes that we believe should ultimately support sustainable and responsible growth.

Now to the results. I’ll discuss some key highlights for the quarter. Ashish will then review the operating and financial performance and discuss our updated 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. First quarter results were ahead of our expectations with net income of $43.7 million or $0.65 per diluted share, while adjusted earnings per diluted share, which excludes certain non-cash items was $0.70. We entered 2025 with student retention and engagement near multi-year highs and expect CTU and AIUS to operate at/or near these levels for the coming quarters. First quarter results were positively impacted due to these retention and engagement trends, as well as increased interest from prospective students looking to pursue a degree at one of our academic institutions.

Some of the key observations and general highlights for the quarter include; first, in response to the increased levels of prospective student interest, our academic institutions have increased their marketing and admission spending to effectively and efficiently identify and engage with prospective students looking to pursue a degree at one of our academic institutions. Recall that our institutions continuously adjust their marketing strategies to identify prospective students who they believe are more likely to succeed in one of their academic programs. We remain optimistic for the remainder of 2025 and we’ll continue to monitor the different requirements and updated expectations from various federal and state regulatory bodies related to prospective student outreach.

At both CTU and AIUS, student enrollments for the corporate student programs continue to grow and this area remains a priority as we continue to make strategic investments in technology and personnel to further grow these programs. We maintained our commitment to training and developing our admissions, enrollment and student support teams, ensuring they are fully prepared to assist the increasing number of students throughout their educational journey, at our academic institutions. At St. Augustine, spring term new enrollments increased versus the prior year and we also expect new enrollment growth for the summer and fall terms. St. Augustine continues to expand its program and offerings, in terms of new modalities and current campus locations, with the goal of maximizing the geographical area they serve, while providing students with a wide choice in taking their courses between instruction online and in-person instruction at a campus location, as well as hybrid options in between with over 90% student retention from term to term in 2024 and experiencing similar retention levels in 2025.

The addition of St. Augustine will positively contribute to the overall revenue and adjusted operating income growth for 2025, and is expected to grow further in 2026. During the quarter, we returned approximately $34.4 million to shareholders in the form of dividends and stock repurchases buying back 985,000 shares during the quarter. Our capital allocation strategy continues to include the return of cash to shareholders via quarterly dividends and shareholder repurchases. A quick note on total enrollments. At CTU, total enrollments increased by 10.6% compared to the prior year quarter. And although AIUS decreased by 4.5%, we do expect both CTU and AIUS to experience total enrollment growth for the second quarter. Ashish, will provide more details on these total enrollment trends.

During the spring term which just ended, St. Augustine had approximately 4,200 students enrolled at the institution. Please note, that St. Augustine has a traditional university calendar with the three academic terms: Spring summer and fall, with the summer term commencing in about two weeks. Overall, I am pleased with the momentum we experienced in the first quarter and remain optimistic for the remainder of 2025. Ashish will now provide more details on the quarter, our outlook and enrollment trends. Ashish?

Ashish Ghia: Thank you, Todd. I will start with an overview of the first quarter 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 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 CTU and AIU System. Finally, a reminder about year-over-year comparability. The financial results for this quarter include the operating performance from the St. Augustine acquisition, which was completed in December 2024.

With that said, let us begin with an overview of our first quarter results. Net income for the quarter was $43.7 million or $0.65 per diluted share as compared to $39.4 million or $0.59 per diluted share. First quarter operating income grew by 11.8% to $51.7 million, while adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes certain noncash items grew 28.9% to $63.5 million as compared to $49.3 million. Finally, adjusted earnings per diluted share was $0.70 as compared to $0.60. Improvement across these reported metrics was primarily supported by organic revenue growth at CTU and lower operating expenses within AIU System. Additionally, from an adjusted operating income and adjusted EPS perspective, the St. Augustine acquisition had and will continue to positively impact year-over-year comparability through 2025.

First quarter revenue of $213 million increased by 26.6% as compared to $168.3 million in the prior year quarter. Revenue comparability was positively impacted by $39.2 million attributed to the St. Augustine acquisition. Also supporting revenue growth was organic total enrollment growth at CTU. A note on enrollments. At CTU, total student enrollments increased by 10.6% as of March 31, primarily supported by high levels of student retention and engagement, growth within the corporate student program and higher levels of prospective student interest in pursuing a degree at CTU. At AIU System, we reported total student enrollments of 10,600 as of March 31, a decrease of 4.5% as compared to the prior year quarter. Please note that in addition to the underlying positive trends in student retention and engagement, enrollment days and marketing spend in any given quarter will impact total enrollment comparability.

With that context, we expect AIU System to experience total enrollment growth in the second quarter. To summarize, from a total company perspective, we expect organic revenue and total enrollments to increase for each remaining quarter in 2025 versus 2024. Strong levels of prospective student interest and growth in total enrollments from corporate student program at CTU as well as sustained improvement in student retention and engagement at CTU and AIU System should support this expected growth. Lastly, for St. Augustine, as Todd mentioned, the spring term that just ended had approximately 4,200 enrolled students during the term. New enrollments for the spring term increased as compared to the prior year, primarily due to growth in programs such as nursing and speech language therapy as well as introduction of new modalities for the Doctor of Physical Therapy program.

And as Todd mentioned, we also expect growth for summer and fall term new enrollments. Note that St. Augustine has a traditional university calendar with three academic terms and multiple campuses for in-person classes in California, Texas and Florida. Commensurately, we may also provide information from time to time about academic term enrollments in addition to the typical quarterly reporting. Moving now to our segment results. For the first quarter, revenue at CTU was $119.6 million or 5.3% higher than the prior year quarter, primarily due to the growth trends I just discussed and despite fewer revenue earning days and lower revenue within the professional development program offerings. Operating income for the quarter was $46.1 million as compared to $42.2 million in the prior year quarter, supported by organic revenue growth.

Marketing and advertising expenses were higher for the quarter, and we will continue aligning our investments in these areas with prospective student interest levels for programs at CTU. At AIU System, first quarter revenue of $54.1 million was relatively flat as compared to the prior year quarter, while operating income for the quarter was $11.9 million as compared to $9.3 million, reflecting a 28% increase. This increase in operating income was primarily due to lower operating expenses. In the first quarter, St. Augustine recorded revenue of $39.2 million. Excluding depreciation and amortization, the adjusted operating income for St. Augustine was $8.5 million, and as previously shared, is accretive to our overall adjusted operating results.

Lastly, for Corporate and Other, operating losses for the quarter were $5.9 million as compared to $5.2 million in the prior year quarter. Turning to income taxes. For the first quarter, we recorded a provision for income taxes of $12.8 million. This resulted in an effective tax rate of 22.7% for the quarter. The effective tax rate for the quarter was positively impacted by the tax effect of stock-based compensation and the release of previously recorded tax reserves, which reduced the effective tax rate by 5.5% and 1.3%, respectively. 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 the release of previously recorded tax reserves for uncertain tax positions.

Now to our balance sheet and liquidity. For the first quarter of 2025, net cash flows provided by operations were $65.1 million versus $54.5 million in the prior year quarter. This growth versus the prior year was primarily supported by year-over-year improvement in adjusted operating income that was partially offset by some timing of cash receipts related to tuition and fees. We ended the quarter with approximately $612 million of cash, cash equivalents, restricted cash and available-for-sale short-term investments. This represents an increase of approximately $20.6 million from year-end. Some of the primary uses of cash during the quarter were, $25.2 million in return of capital to shareholders in the form of stock repurchases, $9.2 million of quarterly dividend and dividend equivalent payments and $1.7 million of capital expenditures or approximately 0.8% of revenue.

For full year 2025, we foresee capital expenditures to be approximately 1% to 2% of revenue. 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 first quarter 2025 dividend payment of $0.13 per share, payable on June 13, 2025 to the holders of record of Perdoceo’s common stock at the close of business on June 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 retained 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 amounts on an annual basis.

Additionally, during the quarter, we repurchased 985,000 shares for $25.2 million. After this repurchase, we have $21.9 million of buyback authorization left under our stock repurchase plan. And subject to market conditions, we will remain opportunistic regarding future stock buybacks. We continue to maintain a strong balance sheet, while actively evaluating diverse strategies to further enhance stockholder value, including capital return and acquisitions. At the same time, our balanced approach to capital allocation also includes inorganic projects — investments in organic projects, focusing on technology updates that support student success, as well as real estate updates for St. Augustine. Now, let us discuss our outlook for 2025. With better-than-anticipated operating trends, we now expect the full year 2025 adjusted operating income to range between $220 million and $235 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, as well as organic growth expectations in CTU and AIU System. Adjusted earnings per diluted share is expected to range between $2.40 and $2.56 versus $2.26 in 2024. Please note that beginning in 2025, the GAAP and adjusted EPS calculation will include incremental expenses related to depreciation and finance leases for St. Augustine. These expenses are excluded for the purpose of adjusted operating income. The 2025 adjusted EPS range is impacted by 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 quarter will continue to persist in 2025.

Additionally, the higher levels of prospective student interest, which we have experienced in the second half of 2024, should persist in 2025 and any changes to the regulatory environment 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. At CTU, with consistently high levels of prospective student interest, supported by strong student retention and engagement trends and growth from the corporate student program, we expect revenue and total enrollment growth for each quarter and full year 2025. At AIU System, we may see quarterly variability in total enrollment trends due to the enrollment day comparability and adjustments to our marketing strategies.

Additionally, for the year-end 2025, AIU System has an additional academic session starting in December 2025, which will significantly contribute to the total enrollment growth when comparing year-over-year total enrollments at December 31. Excluding this comparability dynamic, we expect revenue for AIU System to experience growth for the full year with each quarter generally in line with the prior year. As a reminder, the academic calendar at CTU and AIU System 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 second quarter of 2025, we expect adjusted operating income to range — to be in the range of $59 million to $61 million as compared to $49.1 million in the prior year quarter with adjusted earnings per diluted share to range between $0.64 and $0.66 per diluted share versus $0.59 in the second 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 student program teams. Please refer to our earnings release filed today for important information about 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. Todd?

Todd Nelson: Thanks, Ashish. I’d like to once again thank all of the students and staff for their continued dedication and ongoing hard work. We are off to a strong start in 2025 and remain committed to supporting student engagement and retention while continuing to invest in technologies that enrich the student experience. Thank you again for joining us, and we look forward to speaking again with you next quarter.

Operator: That concludes today’s call. You may now disconnect.

End of Q&A:

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PERDOCEO EDUCATION CORP

Q1 2025

Earnings Transcript

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