Perdoceo Education (US:PRDO)2025-07-31 20:02Part I Financial Statements Financial statements for the period ended June 30, 2025, reflect significant revenue and net income growth, driven by the USAHS acquisition, with increased assets and equity supported by strong operating cash flow Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.29 billion, driven by cash, while liabilities grew due to deferred revenue, and stockholders' equity rose to $984.6 million Condensed Consolidated Balance Sheet Highlights (In Thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $721,207 | $640,154 | | Total Assets | $1,294,387 | $1,237,034 | | Total current liabilities | $168,799 | $132,162 | | Total Liabilities | $309,756 | $277,498 | | Total Stockholders' Equity | $984,631 | $959,536 | Condensed Consolidated Statements of Income For Q2 2025, revenue grew 25.7% to $209.6 million and net income increased 6.8% to $41.0 million, with year-to-date revenue reaching $422.6 million and net income $84.7 million Financial Performance Summary (In Thousands, Except Per Share) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $209,581 | $166,740 | $422,585 | $335,004 | | Operating Income | $51,399 | $46,006 | $103,126 | $92,284 | | Net Income | $41,028 | $38,429 | $84,716 | $77,871 | | Net Income Per Share - Diluted | $0.62 | $0.57 | $1.27 | $1.16 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating cash flow significantly increased to $143.9 million, investing activities used $7.3 million, and financing activities used $74.7 million for repurchases and dividends Year-to-Date Cash Flow Summary (In Thousands) | Cash Flow Category | YTD Ended June 30, 2025 | YTD Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $143,905 | $93,017 | | Net cash used in investing activities | $(7,254) | $(60,137) | | Net cash used in financing activities | $(74,727) | $(23,012) | | Net increase in cash | $61,924 | $9,868 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail key accounting policies, the December 2024 USAHS acquisition, segment revenue contributions, stock repurchases, and legal contingencies, with CTU remaining the largest revenue and operating income contributor - On December 2, 2024, the Company completed the acquisition of the University of St. Augustine for Health Sciences (USAHS) for a purchase price of $137.0 million, resulting in goodwill of $17.0 million2426 YTD 2025 Revenue by Segment (In Thousands) | Segment | Tuition and fees, net | Other revenue | Total revenue | | :--- | :--- | :--- | :--- | | CTU | $236,025 | $1,524 | $237,549 | | AIUS | $108,322 | $460 | $108,782 | | USAHS | $75,876 | $4 | $75,880 | | Corporate and Other | - | $374 | $374 | | Total | $420,223 | $2,362 | $422,585 | - The company is involved in a False Claims Act lawsuit and received a Civil Investigative Demand (CID) from the DOJ regarding CTU's compensation practices and Fast Track credit program. The outcome is uncertain, and no liability has been recognized636566 - During the six months ended June 30, 2025, the company repurchased 1.6 million shares for $46.1 million. A new $75.0 million stock repurchase program was approved on July 31, 20258394 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 revenue growth to the USAHS acquisition and organic growth, with total student enrollment up 17.4% YoY, while discussing a new federal law impacting student aid and maintaining a strong liquidity position and capital allocation strategy 2025 Second Quarter Overview Q2 2025 saw a 17.4% increase in total student enrollments across all institutions, with revenue up 25.7% to $209.6 million and operating income rising to $51.4 million, resulting in adjusted operating income of $61.5 million Total Student Enrollments by Segment (as of June 30) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | CTU | 31,900 | 29,700 | 7.4% | | AIUS | 10,600 | 9,900 | 7.1% | | USAHS | 4,000 | - | NM | | Total | 46,500 | 39,600 | 17.4% | - Q2 2025 revenue increased by 25.7% ($42.8 million) YoY, primarily due to $36.7 million from the USAHS acquisition and growth at CTU and AIUS111 Adjusted Operating Income Reconciliation (Q2, In Thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Operating income (GAAP) | $51,399 | $46,006 | | Depreciation and amortization | $10,148 | $3,069 | | Adjusted Operating Income (Non-GAAP) | $61,547 | $49,075 | Recent Legislative Development A new law signed on July 4, 2025, will significantly reform federal student aid programs effective July 1, 2026, introducing new loan limits and an earnings-based eligibility requirement, which the company believes will be less restrictive - A new law signed on July 4, 2025, will introduce major changes to federal student aid programs, including new loan limits and an earnings-based eligibility requirement, effective July 1, 2026117 - The Act introduces a new earnings-based eligibility requirement for federal loan access that applies to all higher education institutions, which the company believes will be less restrictive than current gainful employment rules122125 - The Department of Education will establish two negotiated rulemaking committees in Fall 2025 to implement the statutory changes, with new regulations likely not effective until July 1, 2027129130 Consolidated and Segment Results of Operations Consolidated Q2 2025 revenue increased 25.7% due to the USAHS acquisition and organic growth, while operating expenses rose 82.6% due to USAHS, which contributed $36.7 million in revenue but incurred an operating loss of $1.7 million Q2 2025 Segment Performance (In Thousands) | Segment | Revenue | Operating Income (Loss) | Operating Margin | | :--- | :--- | :--- | :--- | | CTU | $117,970 | $46,262 | 39.2% | | AIUS | $54,723 | $12,080 | 22.1% | | USAHS | $36,697 | $(1,694) | -4.6% | | Corporate and other | $191 | $(5,249) | NM | - The increase in Educational services and facilities expense (up 82.6% in Q2) was primarily due to a full quarter of expenses related to the USAHS acquisition134 - USAHS's operating loss was primarily driven by $7.2 million in depreciation and amortization expenses related to acquired assets and finance leases for the quarter154 Liquidity, Financial Position and Capital Resources The company ended the quarter with $659.6 million in cash and investments, H1 2025 operating cash flow of $143.9 million, and continues its capital allocation strategy with a new $75.0 million repurchase program and a 15.4% dividend increase - As of June 30, 2025, the company held $659.6 million in cash, cash equivalents, restricted cash, and short-term investments157 - On July 31, 2025, the Board approved a new stock repurchase program for up to $75.0 million, expiring January 31, 2027160 - The Board declared a quarterly dividend of $0.15 per share, a 15.4% increase, payable on September 12, 2025161 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on its investment portfolio, which management considers limited due to its capital preservation policy, with a 100 basis point change not expected to materially impact earnings or cash flows - The company's main market risk is interest rate exposure on its investments, but it does not use derivative instruments and considers the risk to be limited175 - A hypothetical 100 basis point (1%) change in average interest rates would not have a material impact on the company's future earnings, fair values, or cash flows177 Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective178 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls179 Part II Legal Proceedings This section incorporates by reference Note 9, detailing ongoing legal matters, including a False Claims Act lawsuit and a Civil Investigative Demand from the DOJ concerning Colorado Technical University - Information regarding legal proceedings is detailed in Note 9 "Contingencies" of the financial statements183 Unregistered Sales of Equity Securities and Use of Proceeds The company details its year-to-date stock repurchase activity, with 1,635,000 shares repurchased, and approximately $1.0 million remaining available under the existing program as of June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - 30, 2025 | - | - | | May 1 - 31, 2025 | 240,000 | $31.11 | | June 1 - 30, 2025 | 410,000 | $32.74 | - As of June 30, 2025, approximately $990,720 remained available for repurchase under the stock repurchase program authorized on February 20, 2024186188 Other Information During Q2 2025, several executive officers, including the CEO and CFO, adopted pre-arranged Rule 10b5-1 stock trading plans to sell company shares over a future period - CEO Todd Nelson adopted a Rule 10b5-1 trading plan on May 29, 2025, to sell up to 291,346 shares between September 2025 and April 2026193 - CFO Ashish Ghia adopted a Rule 10b5-1 trading plan on May 8, 2025, to sell up to 53,081 shares (including vested options) between August 2025 and February 2026191