Perdoceo Education (PRDO) Q1 2025 Earnings Call May 01, 2025 05:00 PM ET Speaker0 Hello, and welcome to the Perdocayo Education Corporation First Quarter twenty twenty five Earnings Conference Call. Now I would like to hand the call over to Nick Nelson from Alpha IR. Nick, you may begin. Speaker1 Thank you, operator. Good afternoon, everyone, and thank you for joining us for our first quarter twenty twenty five earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer an ...

PART I—FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited Q1 2025 statements show significant revenue and net income growth driven by the USAHS acquisition, with total assets growing to $1.27 billion and increased stockholders' equity [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached $1.269 billion as of March 31, 2025, driven by higher cash and receivables, while total stockholders' equity increased to $970.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $686,004 | $640,154 | | **Total assets** | $1,268,544 | $1,237,034 | | **Total current liabilities** | $153,960 | $132,162 | | **Total liabilities** | $298,289 | $277,498 | | **Total stockholders' equity** | $970,255 | $959,536 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 revenue grew 26.6% year-over-year to $213.0 million, driving a 10.8% increase in net income to $43.7 million, or $0.65 per diluted share Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenue** | $213,004 | $168,264 | | **Operating Income** | $51,727 | $46,278 | | **Net Income** | $43,688 | $39,442 | | **Net Income Per Share - Diluted** | $0.65 | $0.59 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased to $65.1 million in Q1 2025, while financing activities used $44.4 million for share repurchases and dividends Q1 2025 vs Q1 2024 Cash Flows (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $65,127 | $54,492 | | **Net cash provided by (used in) investing activities** | $1,182 | $(30,801) | | **Net cash used in financing activities** | $(44,413) | $(15,881) | | **Net increase in cash** | $21,896 | $7,810 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the $137.0 million USAHS acquisition, segment revenue, a new DOJ Civil Investigative Demand, and share repurchase activity - On December 2, 2024, the Company acquired the University of St. Augustine for Health Sciences (USAHS) for a preliminary purchase price of **$137.0 million**[25](index=25&type=chunk)[27](index=27&type=chunk) - On September 7, 2024, the Company received a **new Civil Investigative Demand (CID) from the DOJ** regarding CTU's admissions staff compensation practices and its Fast Track credit program[65](index=65&type=chunk) - During Q1 2025, the company repurchased approximately **1.0 million shares for $25.2 million** under its stock repurchase program, with **$21.9 million remaining available** for repurchase as of March 31, 2025[82](index=82&type=chunk)[83](index=83&type=chunk) Q1 2025 Revenue by Segment (in thousands) | Segment | Q1 2025 Revenue | | :--- | :--- | | CTU | $119,579 | | AIUS | $54,059 | | USAHS | $39,183 | | Corporate and Other | $183 | | **Total** | **$213,004** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes 26.6% Q1 revenue growth to the USAHS acquisition and strong CTU performance, with total student enrollment growing 16.7% and maintaining a strong liquidity position [Overview](index=30&type=section&id=MD&A%20Overview) Total student enrollment rose 16.7% in Q1 2025, driven by CTU growth and the USAHS acquisition, leading to a 26.6% revenue increase and higher adjusted operating income Total Student Enrollments as of March 31 | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | CTU | 33,400 | 30,200 | 10.6% | | AIUS | 10,600 | 11,100 | -4.5% | | USAHS | 4,200 | - | NM | | **Total** | **48,200** | **41,300** | **16.7%** | Q1 Financial Highlights (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Operating Income** | $51,727 | $46,278 | | **Adjusted Operating Income** | $63,534 | $49,294 | [Consolidated Results of Operations](index=33&type=section&id=MD&A%20Consolidated%20Results%20of%20Operations) Consolidated Q1 2025 revenue rose 26.6% due to the USAHS acquisition, which also drove higher operating expenses, resulting in an 11.8% increase in operating income - Revenue for Q1 2025 increased by **26.6% or $44.7 million** compared to the prior year, primarily driven by the acquisition of USAHS[117](index=117&type=chunk) - Depreciation and amortization expense increased by **$8.8 million**, driven by the USAHS acquisition, which includes amortization for definite-lived intangible assets and finance leases[125](index=125&type=chunk) - The effective tax rate for Q1 2025 was **22.7%**, down from 25.4% in Q1 2024, primarily due to a larger benefit from the tax effect of stock-based compensation[127](index=127&type=chunk) [Segment Results of Operations](index=36&type=section&id=MD&A%20Segment%20Results%20of%20Operations) CTU revenue and operating income grew, AIUS operating income rose despite a slight revenue dip, and the new USAHS segment contributed $39.2 million in revenue Q1 2025 Segment Performance (in thousands) | Segment | Revenue | Operating Income (Loss) | Operating Margin | | :--- | :--- | :--- | :--- | | CTU | $119,579 | $46,097 | 38.5% | | AIUS | $54,059 | $11,884 | 22.0% | | USAHS | $39,183 | $(330) | -0.8% | | Corporate and other | $183 | $(5,924) | NM | [Liquidity, Financial Position and Capital Resources](index=37&type=section&id=MD&A%20Liquidity,%20Financial%20Position%20and%20Capital%20Resources) The company maintains a strong liquidity position with $612.2 million in cash and investments, funding operations and shareholder returns with $65.1 million in Q1 operating cash flow - As of March 31, 2025, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled **$612.2 million**[139](index=139&type=chunk) - Net cash from operating activities totaled **$65.1 million** for Q1 2025, up from $54.5 million in Q1 2024[145](index=145&type=chunk) - The company expects capital expenditures for the full year 2025 to be between **1.0% and 2.0% of revenue**[150](index=150&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is limited interest rate exposure on its investment portfolio, which is not considered material to earnings or cash flows - The company's main market risk is from changes in interest rates on its investments, but it believes the **exposure is not significant**[158](index=158&type=chunk) - A hypothetical **100 basis point** increase or decrease in average interest rates would **not have a material impact** on future earnings, fair values, or cash flows[159](index=159&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that as of March 31, 2025, **disclosure controls and procedures were effective**[161](index=161&type=chunk) - **No changes occurred in internal control** over financial reporting during Q1 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[163](index=163&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 9, 'Contingencies,' for detailed information on the company's ongoing legal matters - Information regarding legal proceedings is provided in **Note 9 "Contingencies"** to the unaudited condensed consolidated financial statements[167](index=167&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the company's 2024 Form 10-K for a comprehensive discussion of risk factors affecting the business - The company refers readers to the **Risk Factors section of its 2024 Form 10-K** for a discussion of factors that could affect its business[168](index=168&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 985,000 shares in Q1 2025 under its publicly announced stock repurchase program - A stock repurchase program authorizing up to **$50.0 million** was approved on February 20, 2024, and commenced on March 1, 2024[169](index=169&type=chunk)[172](index=172&type=chunk) Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Plan | | :--- | :--- | :--- | :--- | | Jan 2025 | - | $ - | - | | Feb 2025 | 350,000 | $25.81 | 350,000 | | Mar 2025 | 941,657 | $25.17 | 635,000 | | **Total** | **1,291,657** | | **985,000** | [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists all filed exhibits, including Sarbanes-Oxley certifications and Inline XBRL data files - The exhibit list includes **CEO/CFO certifications under Sections 302 and 906** of the Sarbanes-Oxley Act and XBRL filings[173](index=173&type=chunk)[178](index=178&type=chunk)

Financial Performance - Operating income increased by 11.8% to $51.7 million, while adjusted operating income rose by 28.9% to $63.5 million[4] - Revenue for the quarter ended March 31, 2025, was $213.0 million, reflecting a 26.6% increase from $168.3 million in the prior year quarter[5] - Net income for Q1 2025 was $43.688 million, representing a 10.7% increase compared to $39.442 million in Q1 2024[30] - Total revenue for Q1 2025 was $213.004 million, a 26.6% increase from $168.264 million in Q1 2024[29] - Adjusted Operating Income for Q1 2025 was $63.534 million, up from $49.294 million in Q1 2024, representing a 29% increase[36] - Reported Earnings Per Diluted Share for Q1 2025 was $0.70, compared to $0.60 in Q1 2024, reflecting a 16.67% increase[38] - The full-year 2025 outlook for Adjusted Operating Income is between $220.0 million and $235.0 million, compared to $188.898 million in 2024, indicating a potential growth of 16.5% to 24.5%[36] - Reported Earnings Per Diluted Share for the full year 2025 is projected to be between $2.40 and $2.56, compared to $2.26 in 2024, suggesting a growth of 6.2% to 13.3%[38] Student Enrollment - Total student enrollments increased by 16.7% to 48,200 as of March 31, 2025, compared to 41,300 in the prior year[7] Cash Flow and Liquidity - Net cash provided by operating activities was $65.1 million, a 19.5% increase from $54.5 million in the prior year[19] - Cash and cash equivalents, including restricted cash and short-term investments, totaled $612.176 million as of March 31, 2025, compared to $591.548 million at the end of 2024[27] - As of March 31, 2025, the company had $612.2 million in cash, cash equivalents, restricted cash, and available-for-sale short-term investments[19] Operating Expenses and Capital Expenditures - Operating expenses increased to $161.277 million in Q1 2025, up from $121.986 million in Q1 2024, primarily due to higher educational services and facilities costs[29] - Capital expenditures for the quarter were $1.7 million, a 45.0% increase from $1.2 million in the prior year[17] - Depreciation and amortization for Q1 2025 was $11.807 million, significantly higher than $3.016 million in Q1 2024, indicating increased capital expenditures[36] Acquisitions - The company completed the acquisition of the University of St. Augustine for Health Sciences (USAHS) on December 2, 2024, contributing to revenue growth[6] - Perdoceo completed the acquisition of USAHS on December 2, 2024, contributing to the revenue growth in Q1 2025[34] Future Outlook - The company expects operating income for the second quarter of 2025 to be between $48.8 million and $50.8 million, and adjusted operating income to be between $59.0 million and $61.0 million[21] - Operating income for Q2 2025 is expected to be between $48.8 million and $50.8 million, compared to $46.006 million in Q2 2024, indicating a growth of 6% to 6.1%[36] - The outlook for Q2 2025 projects Adjusted Operating Income between $59.0 million and $61.0 million, compared to $49.075 million in Q2 2024[36] Dividends - The board declared a quarterly dividend of $0.13 per share, payable on June 13, 2025[16] Non-GAAP Financial Measures - The company emphasizes the importance of non-GAAP financial measures to analyze core performance, which excludes certain non-cash items[40] Share Information - The company reported a weighted average diluted shares outstanding of 66,872 for Q1 2025, compared to 66,841 in Q1 2024[29] Operating Margin - The operating margin for Q1 2025 was 24.3%, down from 27.5% in Q1 2024[34] Adjustments - The company reported a total pre-tax adjustment of $0.06 for Q1 2025, up from $0.02 in Q1 2024, highlighting an increase in amortization for acquired intangible assets[38] - The total adjustments after tax for Q1 2025 were $0.05, compared to $0.01 in Q1 2024, reflecting a significant increase in adjusted earnings[38]

Group 1 - The article emphasizes the importance of the Zacks Rank system, which focuses on earnings estimates and revisions to identify strong stocks [1] - Value investing is highlighted as a beloved strategy that seeks to find undervalued companies through fundamental analysis and traditional valuation metrics [2] - The Style Scores system is introduced as a tool for investors to find stocks with specific traits, particularly in the "Value" category [3] Group 2 - Perdoceo Education (PRDO) is identified as a potential value investment, currently holding a Zacks Rank of 2 (Buy) and a Value grade of A [4] - PRDO's P/E ratio is reported at 10.47, significantly lower than the industry average of 14.02, indicating potential undervaluation [4] - The company has a PEG ratio of 0.70, which is comparable to the industry average of 0.71, suggesting favorable growth expectations [5] Group 3 - PRDO's P/B ratio stands at 1.77, which is lower than the industry average of 3.09, further supporting the notion of undervaluation [6] - The P/CF ratio for PRDO is 10.72, compared to the industry's average of 41.77, indicating a solid cash outlook [7] - Overall, the metrics suggest that Perdoceo Education is likely undervalued, making it an attractive value stock at the moment [8]

Perdoceo Education (PRDO) could be a solid choice for investors given its recent upgrade to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individual investors ...

Investors looking for stocks in the Schools sector might want to consider either Perdoceo Education (PRDO) or Lincoln Educational Services Corporation (LINC) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and ...

Financial Data and Key Metrics Changes - The company reported fourth quarter net income of $31.5 million, or $0.47 per diluted share, while adjusted earnings per diluted share was $0.50 [18] - Full-year net income was $147.6 million, or $2.19 per diluted share, compared to $147.7 million, or $2.18 per diluted share in the prior year [26] - Adjusted earnings per diluted share increased to $2.29 from $2.10 in the prior year [26] - Full-year operating income rose to $174.3 million, an increase of $23.8 million compared to the prior year [26] Business Line Data and Key Metrics Changes - At CTU, total student enrollments increased by 8.1% compared to the prior year-end [19] - At AIU System, total student enrollments increased by 11.8% as it reverted to normalized operations [19] - Full-year revenue at CTU decreased by 2.6% to $456.9 million, but fourth quarter revenue increased by 9.7% to $114.8 million [33][34] - AIU System's full-year revenue decreased by 11.1% to $213.5 million, while fourth quarter revenue increased by 19.1% to $51.4 million [35] Market Data and Key Metrics Changes - The company experienced total student enrollment growth through 2024, supported by federal student aid initiatives [11] - The acquisition of the University of St. Augustine for Health Sciences is expected to diversify and expand academic offerings in the health sciences field [17] Company Strategy and Development Direction - The company focuses on enhancing student retention and engagement while making selective investments in technology and data analytics [12] - The acquisition of St. Augustine is expected to be accretive to operating income in 2025 and provide further growth in 2026 [17] - The company aims to maintain a balanced capital allocation strategy, prioritizing investments in organic projects and returning capital to shareholders [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, expecting total revenue and enrollments to increase compared to 2024 [32] - The company anticipates that high levels of student retention and engagement will continue, offsetting headwinds from changes in federal student loan initiatives [51] - The effective tax rate for 2025 is expected to be between 25.5% and 26.5% [41] Other Important Information - The company returned approximately $38.5 million to shareholders through dividends and stock buybacks during 2024 [15] - Cash flow from operations for the full year was $161.6 million, an increase from $112 million in the prior year [42] - The company ended the year with $591.5 million in cash and equivalents, excluding the St. Augustine purchase [43] Q&A Session Summary Question: What are the expectations for 2025 in terms of revenue and enrollments? - The company expects total revenue and enrollments to increase in 2025, driven by strong prospective student interest and sustained improvements in retention and engagement [32] Question: How will the acquisition of St. Augustine impact financial performance? - The acquisition is expected to be accretive to operating income in 2025 and contribute positively to cash flow from operations [17][45] Question: What is the outlook for adjusted earnings per diluted share in 2025? - Adjusted earnings per diluted share is expected to range between $2.31 and $2.51, reflecting the impact of incremental expenses related to the acquisition [50]

Enrollment Growth - Total student enrollments increased by 20.0% as of December 31, 2024, compared to the previous year, with CTU and AIUS contributing to this growth [344]. - CTU's total student enrollments increased by 8.1% compared to the prior year, driven by growth in corporate engagement programs [344]. - AIUS experienced an 11.8% increase in total student enrollments, returning to normalized levels of operations [344]. - Total student enrollments increased by 20.0% to 41,400 as of December 31, 2024, compared to 34,500 in 2023 [369]. Revenue and Income - Revenue for the current year decreased by 4.0% or $28.7 million, primarily due to a 2.6% decrease at CTU and an 11.1% decrease at AIUS, offset by $10.0 million from the USAHS acquisition [347]. - Total revenue for the year ended December 31, 2024, decreased by 4.0% or $28.7 million, primarily due to declines in revenue from CTU and AIUS [355]. - CTU revenue for 2024 was $456.9 million, a decrease of 2.6% compared to 2023, while AIUS revenue decreased by 11.1% to $213.5 million [367]. - Operating income increased to $174.3 million in the current year, up from $150.4 million in the prior year, due to decreased operating expenses [348]. - Adjusted operating income for the current year was $192.2 million, compared to $174.9 million in the prior year [349]. - Adjusted earnings per diluted share increased to $2.29 for the current year, up from $2.10 in the prior year [351]. - Operating income increased by 15.8% or $23.8 million compared to the prior year, supported by lower operating expenses across most categories [363]. - Operating income margin improved to 25.6% in 2024 from 21.2% in 2023 [367]. Expenses and Cost Management - Educational services and facilities expense decreased by 7.3% or $9.5 million, driven by improvements in academics and student-related costs [357]. - General and administrative expenses decreased by 7.8% or $31.0 million, primarily due to lower administrative, admissions, and advertising expenses [359]. - Bad debt expense increased slightly by 1.5% or $0.5 million for the current year compared to the prior year [362]. - AIUS's operating income decreased by 20.1% or $9.1 million in 2024, despite reduced operating expenses [374]. - Corporate and Other operating loss improved by 21.4% or $8.3 million in 2024, mainly due to lower legal expenses [375]. Acquisitions and Strategic Initiatives - The acquisition of USAHS on December 2, 2024, allows for diversification and expansion into health sciences, broadening the company's academic offerings [343]. - The acquisition completed on December 2, 2024, contributed to the current year's revenue, which was not included in the full comparative period of the prior year [355]. - USAHS generated approximately $10.0 million in revenue starting from its acquisition date on December 2, 2024 [374]. - The company completed the acquisition of USAHS on December 2, 2024, expanding its educational offerings [370]. Cash Flow and Financial Position - As of December 31, 2024, cash balances totaled $591.5 million, with restricted cash at $22.6 million [401]. - Net cash flows from operating activities increased to $161.6 million in 2024 from $112.0 million in 2023, driven by improved operating performance [406]. - Approximately 77% of cash receipts from tuition payments in 2024 came from Title IV Program funding, slightly up from 76% in 2023 [407]. - Total cash, cash equivalents, restricted cash, and short-term investments decreased by 2% from $604.2 million in 2023 to $591.5 million in 2024 [419]. Shareholder Returns and Future Outlook - The company approved a new stock repurchase program for up to $50.0 million, effective from March 1, 2024, to September 30, 2025 [403]. - Dividend payments increased significantly to $31.7 million in 2024 from $14.4 million in 2023 [414]. - Capital expenditures decreased to $4.6 million in 2024, representing 0.7% of revenue, with expectations to rise to approximately 2.0% of revenue in 2025 [411]. - The company expects revenue growth in 2025, primarily due to the USAHS acquisition and improvements in student retention and engagement [346]. - The company expects an effective tax rate between 25.5% and 26.5% for the full year 2025 [365]. - The effective tax rate for the year ended December 31, 2024, was 26.7%, compared to 23.1% in the prior year [364].

I've been managing my own as well as family members' portfolios for several years now. I love the investing process, getting to learn about a variety of new and interesting companies, learning about investing psychology, and all the myriad things that contribute to successful (and from time to time, not so successful) investing outcomes. A big component of my investing philosophy is to try to have my errors be largely skewed towards errors of omission rather than errors of commission, as the former are much ...

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it.Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- ...