PERDOCEO EDUCATION Corp: Form 10-Q for the period ended Jun 30, 2025

The discussion below and other items in this Quarterly Report on Form 10-Q contain “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “plan,” “may,” “should,” ”will,” “continue to,” “focused on” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024 that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Among the factors that could cause actual results to differ materially from those expressed in, or implied by, our forward-looking statements are the following:

• declines in enrollment or interest in our programs or our ability to attract or connect with prospective students;
• our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the new 90-10, gainful employment, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education (the “Department”)), as well as applicable accreditation standards and state regulatory requirements;
• the impact of various versions of “borrower defense to repayment” regulations;
• the final outcome of various legal challenges to the Department's loan discharge and forgiveness efforts;
• rulemaking or changing interpretations of existing regulations, guidance or historical practices by the Department or any state or accreditor and increased focus by Congress and governmental agencies on, or increased negative publicity about, for-profit education institutions;
• the impact of any federal budget reconciliation or other legislative process on the availability of current levels of federal student aid or the conditions associated with participating in such aid programs;
• the success of our initiatives to improve student experiences, retention and academic outcomes;
• our continued eligibility to participate in educational assistance programs for key employers, veterans and other military personnel;
• our ability to pay dividends on our common stock and execute our stock repurchase program;
• increased competition;
• the impact of management changes; and
• changes in the overall U.S. economy.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:

• Overview
• Consolidated Results of Operations
• Segment Results of Operations
• Summary of Critical Accounting Policies and Estimates
• Liquidity, Financial Position and Capital Resources

OVERVIEW

Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions – Colorado Technical University (“CTU”), the American InterContinental University System (“AIUS” or “AIU System”) and University of St. Augustine for Health Sciences ("USAHS") – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS prepares medical professionals to provide quality medical care to communities across the country primarily through its graduate health sciences degrees offerings in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers and communities needing a qualified workforce.

On December 2, 2024, the Company acquired the University of St. Augustine for Health Sciences (the "USAHS acquisition"). Results of operations related to the USAHS acquisition are included in the consolidated financial statements from the date of acquisition.

Our reporting segments are determined in accordance with Financial Accounting Standards Board (“*FASB”)*Accounting Standards Codification (“*ASC”)*Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across three reporting segments: CTU, AIUS and USAHS.

Regulatory Environment and Political Uncertainty

As indicated in “Scrutiny of the For-Profit Postsecondary Education Sector” section within Item 1, "Business" in our Annual Report on Form 10-K for the year ended December 31, 2024, the for-profit industry is scrutinized by various policymakers, agencies and interest groups. Congressional hearings and roundtable discussions were previously held regarding certain aspects of the education industry, including issues surrounding student debt as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. Many of the most highly criticized institutions have been closed now for several years.

The November 2024 federal elections resulted in a new President and Congress. We cannot predict the actions that the new Administration or Congress may take or their effect on the higher education sector. The new Congress or Administration may delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions. In addition, the new Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from current Department guidance and practice. We expect to continue to need to operate nimbly, making necessary changes to the extent possible to comply with new rules or interpretations as well as new interpretations of existing rules.

We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K to learn more about our highly regulated industry and related risks and uncertainties, in addition to the MD&A in our 2025 Quarterly Reports on Form 10-Q.

Note Regarding Non-GAAP measures

We believe it is useful to present non-GAAP financial measures which exclude certain non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.

We believe certain non-GAAP measures allow us to compare our current operating results with respective historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We believe the items we are adjusting for are operating expenses which are not reflective of our underlying business. In evaluating the use of non-GAAP measures, investors should be aware that in the future we may incur expenses similar to the adjustments presented below. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. A non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

2025 Second Quarter Overview

During the second quarter ended June 30, 2025 ("current quarter"), our academic institutions remained focused on furthering their goal of changing lives through education and preparing learners for essential skills needed in today’s job market. CTU and AIUS offer a wide array of career-focused degree programs which help learners thrive in today’s evolving job market, while USAHS prepares professionals to serve communities across the country with quality medical care. The total enrollment growth at our academic institutions during the current quarter reinforced and validated our strategy of prioritizing student experiences and academic outcomes that, we believe, should ultimately support sustainable and responsible growth.

Total student enrollments increased 17.4% at June 30, 2025 as compared to June 30, 2024. CTU's total student enrollments increased 7.4% as compared to the prior year quarter end, primarily supported by high levels of student retention and engagement, growth within the corporate student program and higher levels of prospective student interest. Total student enrollments increased 7.1% at AIUS for the current quarter end as compared to the prior year quarter end, driven by the academic calendar at AIUS that resulted in a higher number of enrollment days in the current quarter as compared to the prior year quarter and underlying organic enrollment growth. Lastly, for USAHS, the summer term which began in May of 2025 had total student enrollments of 4,000 as of the current quarter end. New enrollments for the summer term included growth in programs such as nursing and speech language therapy as well as the introduction of new modalities for the Doctorate of Physical Therapy program. USAHS has a traditional university calendar with three academic terms and multiple campuses for in-person classes in California, Texas and Florida. USAHS continues to expand its program 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 wider choice in taking their courses between online instruction and in person instruction at a campus location as well as hybrid options in between.

For the current quarter, our academic institutions experienced increased levels of prospective student interest and we continued to refine our marketing and admissions spending strategies, including selectively leveraging generative artificial intelligence to identify and engage with prospective students who, we believe, are more likely to succeed at one of our academic institutions. We also continued to upgrade and enhance our technology within admissions, enrollment and student support processes to ensure that our teams are well-equipped to guide and support the growing number of students enrolled at one of our academic institutions throughout their education journey. Additionally, 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.

We expect the high levels of student retention and student engagement we experienced through the second quarter of 2025, as well as the prospective student interest experienced, to continue through the remainder of 2025. As a result, full year revenue is expected to be higher for 2025 due to the USAHS acquisition as well as growth in revenue and student enrollments within CTU and AIUS.

Financial Highlights

Revenue for the current quarter increased by 25.7% or $42.8 million as compared to the prior year quarter, primarily due to $36.7 million of revenue from the USAHS acquisition which was completed in December 2024 and therefore did not have comparable results in the prior year quarter. CTU and AIUS also contributed to the increase in revenue due to growth in total student enrollments driven by strong student retention and engagement trends along with increased prospective student interest.

Operating income for the current quarter increased to $51.4 million as compared to operating income of $46.0 million in the prior year quarter, driven by increased operating income within CTU and reduced operating losses within Corporate and Other. The increase in operating income for the current quarter was a result of revenue growth at CTU and lower acquisition-related expenses in Corporate and Other as compared to the prior year quarter.

The Company believes it is useful to present non-GAAP financial measures, which exclude certain non-cash items, as a means to understand the core performance of its operations. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $61.5 million for the current quarter as compared to $49.1 million for the prior year quarter.

Adjusted operating income and adjusted earnings per diluted share for the quarters and years to date ended June 30, 2025 and 2024 is presented below (dollars in thousands, unless otherwise noted):

(1) The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.

Recent Legislative Development

On July 4, 2025, President Trump signed into law Public Law No. 119-21 (2025) (the “Act”), nicknamed the “One Big Beautiful Bill,” a multi-faceted reconciliation package that includes changes impacting many areas of government spending. The Act includes a number of changes to federal student aid programs under the Higher Education Act of 1965, as amended (“HEA”), including eliminating and replacing Grad PLUS loans for new graduate and professional students, imposing new annual and lifetime borrowing limits across multiple loan programs, establishing an earnings-based eligibility requirement for federal loans that applies equally to all higher education institutions, and adopting new loan repayment options. The changes generally take effect beginning July 1, 2026, and apply prospectively to new borrowers, however some of the changes will require regulations to be promulgated by the Department. Also, existing students as of the effective date are grandfathered in existing loan programs for up to three years while they complete their existing program of study.

Loan Limits

Under existing law, federal loan limits for undergraduate students are tiered by academic year, with separate ceilings for subsidized and unsubsidized federal Stafford Loans. Graduate and professional students, in turn, may borrow under the Grad PLUS loan program up to the full cost of attendance without regard to any loan limits, subject only to basic credit criteria and the cost of attendance. Parent PLUS loans similarly allowed creditworthy parents to borrow without regard to specific loan limits, provided the amount did not exceed their child’s cost of attendance minus other aid.

For undergraduate students, the Act maintains annual and aggregate borrowing limits, with different limits for dependent and independent students. For graduate and professional students, the Act replaces the Grad PLUS loan program with new higher unsubsidized Direct Stafford loan annual and aggregate loan limits, with both annual and aggregate limits for professional students being higher than for graduate students. The Act also sets a lifetime aggregate loan limit that is inclusive of any undergraduate debt. Parent PLUS loans now include both annual and aggregate loan limits. The Act also provides a lifetime aggregate student loan limit, which applies to all federal student loan borrowers, regardless of academic program or degree level.

While we continue to evaluate the Act, the Company believes that the new federal loan levels are generally sufficient to meet the level of borrowing typical students make while enrolled in our institutions’ programs. Pursuant to the Act’s transition provisions, current graduate and professional students and parents of dependent undergraduate students, who received a federal loan prior to July 1, 2026, may continue borrowing under the prior Grad and Parent PLUS loan programs for up to three additional academic years, or the remainder of the borrower’s expected time to credential, whichever is less, provided the student remains continuously enrolled in the same program. See Item 1, “Business - Student Financial Aid and Related Federal Regulation,” in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.

New Earnings Premium Requirement

The Act introduces a new earnings-based eligibility requirement for federal loan access that applies to all institutions, public, private nonprofit, and for-profit. Under the eligibility requirement, graduates from an institution’s programs other than undergraduate certificate programs must meet or exceed specified earnings thresholds. Programs that do not meet these benchmarks risk losing access to federal student loans only, not grants.

Under the new earnings metric, by program, the Department evaluates the median earnings of graduates who received Title IV federal student aid four years after completion. The calculation includes only those graduates who are actively employed in two of three years and not enrolled in additional postsecondary education. For undergraduate programs, a program fails the test if median earnings for those graduates fall below those of working adults aged 25 to 34 with only a high school diploma or equivalent. For graduate and professional programs, the comparison group is working adults in the same age range whose highest credential is a bachelor’s degree. If a program fails this test in two of the three most recent years for which data is available, it becomes ineligible to participate in federal student loan programs.

The Act includes institutional obligations and several procedural safeguards. The Department is required by the Act to establish a formal appeals process. During the pendency of an appeal, the Secretary may permit the institution to maintain participation in federal financial aid programs. Institutions are required to provide timely warnings to students enrolled in any program that fails to meet the earnings threshold in a given year. For programs that lose eligibility under this framework, institutions may seek to regain access to federal student loans after a period of at least two years. It is anticipated the Department will publish regulations, after completion of a negotiated rulemaking, notice and comment, to fully implement the earnings measure under the Act.

The Company believes that this new universally applied earnings requirement will be less restrictive than the existing gainful employment rules. Although the gainful employment rules remain in place following the passage of the Act, existing legal challenges and the passage of this new universal requirement present potential opportunities for the Department to eliminate it as a redundant program assessment measure. We are continuing to evaluate this new requirement, but as with gainful employment, given the complexity of the rule, lack of availability of the earnings data used to calculate the metrics and lack of formal regulations, we are unable to determine the ultimate impact of this requirement on our business at this time. See Item 1, “Business - Student Financial Aid and Related Federal Regulation – GE and FVT Negotiated Rulemaking,” in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.

Borrower Defense and Closed School Loan Discharge Relief

The Act delays implementation of the Biden administration regulations on borrower defense to repayment and closed school loan discharges for 10 years, to July 1, 2035, which reinstates the rules promulgated under the first Trump administration. These regulations remain the subject of a legal challenge currently pending with the Supreme Court of the United States. See Item 1, “Business - Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – ‘Borrower Defense to Repayment’” in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.

Streamlined Loan Repayment Programs

The Act consolidates federal student loan repayment options, reducing them to two primary plans starting July 1, 2026: a standard repayment plan where borrowers make fixed payments with terms ranging from 10 to 25 years based on amount borrowed, and a new income-driven Repayment Assistance Plan (“RAP”) that offers loan forgiveness after 30 years. Existing income-driven repayment plans will be phased out by July 2026, requiring both new and existing borrowers to transition to the new repayment structure. These changes may affect students’ ability to manage loan repayment and could influence enrollment decisions, particularly among non-traditional and graduate students.

The ultimate impact of the Act on our business, financial condition, and results of operations will depend on the final implementing regulations and the responses of our current and prospective students and other stakeholders.

Regulatory Update

On July 24, 2025, the Department announced its intent to establish two negotiated rulemaking committees scheduled to meet this fall. One committee will consider changes to the Federal student loan programs and the other committee will consider changes to institutional and programmatic accountability, including the Pell Grant Program and other changes. This rulemaking is necessary to implement the statutory changes to the Title IV, HEA programs included in the Act, as well as to implement other Administration priorities. We believe the negotiated rulemaking will also include discussion of the current gainful employment and financial value transparency regulations that overlap with requirements under the Act's earnings premium provisions. While the Secretary has authority to early implement aspects of new regulations that do not adversely affect regulated entities, under the Administrative Procedure Act's master calendar provisions, any new regulations would generally not become effective until July 1, 2027 if final regulations are published in the federal register on or before November 1, 2026.

CONSOLIDATED RESULTS OF OPERATIONS

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the quarters and years to date ended June 30, 2025 and 2024 (dollars in thousands):

(1) Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, costs of educational supplies and other goods and services, including costs of textbooks and laptops, and rents on leased campus and administrative facilities.

(2) General and administrative expense includes operating expenses associated with corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.

Revenue

The current quarter and year to date revenue increased by 25.7% or $42.8 million and 26.1% or $87.6 million, respectively, as compared to the prior year periods. The increase was primarily driven by the acquisition of USAHS completed in December 2024 that was not part of the comparative prior year periods as well as increases in revenue for both the current quarter and year to date at both CTU and AIUS.

Educational Services and Facilities Expense (dollars in thousands)

The educational services and facilities expense for the current quarter and year to date increased by 82.6% or $22.7 million and 72.2% or $41.4 million, respectively, as compared to the prior year periods. The increase was primarily due to a full quarter of expenses related to the USAHS acquisition as compared to no expenses in the prior year periods for USAHS.

General and Administrative Expense (dollars in thousands)

The general and administrative expense for the current quarter and year to date increased by 9.5% or $8.5 million and 12.4% or $21.9 million, respectively, as compared to the prior year periods. The increase was primarily due to a full quarter of expenses related to the USAHS acquisition as compared to no expenses in the prior year quarter.

Advertising and marketing expense for the current quarter and year to date increased by 16.9% or $3.9 million and 16.1% or $7.6 million, respectively, as compared to the prior year periods. Excluding USAHS expenses, advertising expenses would have remained relatively flat as compared to the prior year periods.

Admissions expense for the current quarter and year to date increased by 12.0% or $2.4 million and 9.7% or $4.0 million, respectively, as compared to the prior year periods. Excluding USAHS expenses, admissions expenses would have increased 5.3% or $1.1 million and 3.0% or $1.2 million, respectively, as compared to the prior year periods.

The administrative expense for the current quarter and year to date increased by 7.0% or $2.8 million and 13.1% or $10.0 million, respectively, as compared to the prior year periods. Excluding USAHS expenses, administrative expenses would have decreased 7.1% or $2.9 million for the current quarter as compared to the prior year period, and remained relatively flat for the year to date as compared to the prior year period.

Bad debt expense incurred by each of our segments during the quarters and years to date ended June 30, 2025 and 2024 was as follows (dollars in thousands):

(1) USAHS includes results of operations starting from the acquisition date on December 2, 2024.

Bad debt expense for the current quarter decreased by 10.2% or $0.6 million and increased by 3.0% or $0.4 million for the current year to date, as compared to the prior year periods. The improvement in the current quarter was primarily driven by CTU, fully offsetting an increase at AIUS and expense associated with the USAHS acquisition. The year to date increase was primarily due to a full quarter of USAHS expense, compared to none in the prior year period.

We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. We continue to expect quarterly fluctuations in bad debt expense.

Depreciation and Amortization

Depreciation and amortization expense for the current quarter and year to date increased by $7.1 million and $15.9 million as compared to the prior year periods, driven by the USAHS acquisition, which includes amortization for definite-lived intangible assets as well as amortization related to finance leases for ground-based campuses.

Operating Income

Operating income for the current quarter and year to date increased by 11.7% or $5.4 million and 11.7% or $10.8 million as compared to the prior year periods. This improvement was primarily driven by increased revenue, which more than offset the increases in operating expenses, as compared to the prior year periods.

Provision for Income Taxes

For the quarter and year to date ended June 30, 2025, we recorded a provision for income taxes of $15.2 million reflecting an effective tax rate of 27.0% and $28.0 million reflecting an effective tax rate of 24.9%, respectively, as compared to a provision for income taxes of $14.6 million reflecting an effective tax rate of 27.5% and $28.0 million reflecting an effective tax rate of 26.4% for the respective prior year periods. The effective tax rate for the current quarter and year to date was benefitted by the tax effect of stock-based compensation, which decreased the effective tax rate for the quarter and year to date by 0.3% and 2.9%, respectively. The effective tax rate for the current quarter and year to date also includes the release of previously recorded tax reserves, which decreased the effective tax rate by 1.7% and 1.5%, respectively. The effective tax rate for the prior year quarter and year to date includes release of previously recorded tax reserves, which reduced the effective tax rate by 1.2% and 1.3%, respectively.

For the full year 2025, we expect our effective tax rate to be between 26.0% and 26.5%.

SEGMENT RESULTS OF OPERATIONS

The following tables present unaudited segment results for the reported periods (dollars in thousands):

(1) USAHS includes results of operations beginning on the acquisition date of December 2, 2024. Operating loss for the current quarter and year to date includes $7.2 million and $16.1 million, respectively, of depreciation and amortization expense associated with acquired tangible and intangible assets as well as finance leases.

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(1) Perdoceo completed the acquisition of USAHS on December 2, 2024.

Total student enrollments represent all students who are active as of the last day of the reporting period. Active students are defined as those students who are considered in attendance by participating in class related activities during the previous two weeks of the most recent academic term. Total student enrollments do not include learners participating in: a) non-degree seeking and professional development programs, and b) degree seeking, non-Title IV, self-paced programs at our universities.

CTU. Current quarter and year to date revenue increased by 4.6% or $5.1 million and 4.9% or $11.2 million, respectively, as compared to the prior year periods. The increase was driven by total student enrollment growth of 7.4% at June 30, 2025 as compared to the prior year quarter end. CTU's total student enrollment growth was supported by high levels of student retention and engagement, growth in the corporate student program and higher levels of prospective student interest.

Current quarter and year to date operating income for CTU increased by 7.9% or $3.4 million and 8.6% or $7.3 million, respectively, as compared to the prior year periods driven by the increase in revenue discussed above, which more than offset increased operating expenses.

AIUS. Current quarter and year to date revenue increased slightly by 1.9% or $1.0 million and 0.5% or $0.6 million, respectively, as compared to the prior year periods. The increase was driven by total student enrollment growth of 7.1% at June 30, 2025 as compared to the prior year quarter end. The increase in total student enrollments was driven by the academic calendar at AIUS that resulted in a higher number of enrollment days in the quarter as compared to prior year quarter and underlying organic enrollment growth.

Current quarter operating income for AIUS decreased by 6.5% or $0.8 million as compared to the prior year quarter, primarily driven by a non-recurring expense benefit recorded in the prior year quarter. The year to date operating income for AIUS increased by 7.9% or $1.8 million as compared to the prior year period, primarily driven by lower operating expenses as compared to the prior year period.

USAHS. Revenue for the current quarter and year to date was approximately $36.7 million and $75.9 million, respectively. USAHS reported operating losses of approximately $1.7 million for the current quarter and $2.0 million for the current year to date. These losses were primarily driven by $7.2 million and $16.1 million, for the current quarter and year to date, respectively, in depreciation and amortization expenses related to acquired tangible and intangible assets, as well as finance leases.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current quarter and year to date improved by 46.5% or $4.6 million and 25.4% or $3.8 million, respectively, as compared to the prior year periods, primarily due to lower acquisition-related costs in both the current quarter and year to date as compared to the prior year periods.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Summary of Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024. Note 2 “Summary of Significant Accounting Policies” of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024 also includes a discussion of these and other significant accounting policies.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of June 30, 2025, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $659.6 million. Restricted cash as of June 30, 2025 was $21.6 million and primarily related to a letter of credit USAHS is required to maintain with the Department of Education. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We expect to continue to generate cash during the remainder of 2025. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments and quarterly dividend payments through at least the next 12 months primarily with cash generated by operations and existing cash balances.

We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) investing in organic projects at our universities, in particular technology-related initiatives which are designed to benefit our students, as well as real estate updates, and (ii) evaluating diverse strategies to enhance stockholder value, including acquisitions, quarterly dividend payments and share repurchases. Ultimately, our goal is to deploy resources in a way that drives long term stockholder value while supporting and enhancing the academic value of our institutions.

On July 31, 2025, the Board of Directors of the Company approved a new stock repurchase program for up to $75.0 million which will commence on July 31, 2025 and expires January 31, 2027. The new stock repurchase program replaced the previous stock repurchase program approved on February 20, 2024. The timing of purchases and the number of shares repurchased under the program is determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. The Board of Directors approved the aforementioned stock repurchase program believing it advantageous to the Company and its stockholders to repurchase shares of the Company’s common stock from time to time at prices below what the Board of Directors believed to be the intrinsic value of the Company’s common stock.

On July 31, 2025 the Board of Directors declared a quarterly dividend of $0.15 per share, which will be paid on September 12, 2025 for holders of record of common stock as of September 2, 2025. This marks a 15.4% increase in the quarterly dividend, the second such increase since dividends commenced in 2023. Any decision to pay future cash dividends, however, will be made by the board of directors and depend on the Company’s available retained earnings, financial condition and other relevant factors. The Company expects quarterly dividend payments to be an integral and growing part of its balanced capital allocation strategy that also prioritizes investments in student support and technology projects, while also evaluating acquisitions and share repurchases.

The discussion above reflects management’s expectations regarding liquidity; however, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on timing or our ability to receive Title IV Program funds, or any requirement to post a significant letter of credit to the Department, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student enrollments which could be impacted by external factors. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Sources and Uses of Cash

Operating Cash Flows

During the years to date ended June 30, 2025 and 2024, net cash flows provided by operating activities totaled $143.9 million and $93.0 million, respectively. The increase in net cash flows from operating activities for the current quarter was primarily driven by increased operating income.

Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, private loans and grants, institutional payment plans, private and institutional scholarships and cash payments.

For further discussion of Title IV Program funding and other funding sources for our students, see Item 1, “Business - Student Financial Aid and Related Federal Regulation,” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.

Investing Cash Flows

During the years to date ended June 30, 2025 and 2024, net cash flows used in investing activities totaled $7.3 million and $60.1 million, respectively.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash outflow of $3.6 million and $58.1 million for the years to date ended June 30, 2025 and 2024, respectively.

Capital Expenditures. Capital expenditures increased to $4.5 million for the year to date ended June 30, 2025 as compared to $2.0 million for the year to date ended June 30, 2024. For the full year 2025, we expect capital expenditures to be approximately 1.5% of revenue.

Business Acquisition. The Company received a working capital true up of $0.8 million in relation to the USAHS acquisition during the year to date ended June 30, 2025.

Financing Cash Flows

During the years to date ended June 30, 2025 and 2024, net cash flows used in financing activities totaled $74.7 million and $23.0 million, respectively. Payments to repurchase shares of our common stock were $46.1 million for the year to date ended June 30, 2025 and $6.8 million for the year to date ended June 30, 2024.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $7.5 million and $3.4 million for the years to date ended June 30, 2025 and 2024, respectively.

Payments of cash dividends and dividend equivalents. During the years to date ended June 30, 2025 and 2024, the Company made dividend and dividend equivalent payments of $17.7 million and $14.6 million, respectively.

Principal payments for finance leases and failed sale leaseback. During the year to date ended June 30, 2025, the Company made payments of $2.9 million for finance leases and a failed sale leaseback, both related to USAHS.

Earnout payments related to business acquisition. During the year to date ended June 30, 2025, the Company made cash earnout payments of $1.8 million related to the Coding Dojo acquisition.

Changes in Financial Position

Selected condensed consolidated balance sheet account changes from December 31, 2024 to June 30, 2025 were as follows (dollars in thousands):

Student receivables, net: The increase is driven by timing of student billings for academic terms at our universities.

Accrued expenses - other: The decrease primarily relates to cash and stock earnout payments for a previous acquisition.

Deferred revenue: The increase in deferred revenue is driven by timing of academic terms and related student billings.

Sale lease-back financing. The increase in sale lease-back financing liability is primarily due to the recategorization of construction financing upon lease commencement due to a failed sale leaseback transaction.

Construction financing. The decrease in construction financing liability is primarily due to the recategorization of sale leaseback upon lease commencement.

We are exposed to financial market risks, primarily changes in interest rates. We use various techniques to manage our interest rate risk. We have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available-for-sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we use asset managers who conduct initial and ongoing credit analyses on our investment portfolio and monitor that investments are in compliance with our investment policy. Despite the investment risk mitigation strategies we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline.

Interest Rate Exposure

Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At June 30, 2025, a 100 basis point increase or decrease in average interest rates applicable to our investments or borrowings would not have a material impact on our future earnings, fair values or cash flows.

Our financial instruments are recorded at their fair values as of June 30, 2025 and December 31, 2024. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates applicable to our investments is not significant.

Evaluation of Disclosure Controls and Procedures

We completed an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q (“Report”) under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized and reported within the time periods specified in the rules and forms provided by the U.S. Securities and Exchange Commission (“SEC”), and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

In addition to the information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, Item 1A “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission on February 18, 2025.