Core Insights - The company reported strong performance, leading to an increase in full-year fiscal 2026 guidance, with recurring revenue rising 14.8% year over year to $357 million, representing 82% of total revenue [1] - Digital revenue increased by 11% to $364 million, accounting for 84% of total revenue, while remaining performance obligation (RPO) stood at $1.7 billion [1] Financial Performance - For the quarter ended December 31, 2025, revenue increased 4.2% year over year to $434 million, with adjusted EBITDA rising 7.7% to $136 million [2] - Adjusted EBITDA margin improved to 31.3%, up nearly 100 basis points from the prior year, and gross profit margin expanded to 85.3% [2] - The company reported Q3 fiscal 2026 revenue of $434 million (+4.2%) and adjusted EBITDA of $136 million (+7.7%), with 82% of revenue being recurring [5] Market Dynamics - Higher education revenue was a key growth driver, increasing 24% year over year to $225 million, with a record-high market share of 30% [5][7] - Inclusive Access and the Evergreen platform contributed significantly to higher education revenue, with 70% of this revenue coming from Evergreen [5][10] - K-12 revenue declined 14.6% year over year to $128 million, attributed to a smaller market and tough comparisons against prior-year performance [12] Strategic Initiatives - The company emphasized the importance of AI in its offerings, with AI Reader reaching over 1 million higher education students and generating 16 million learning interactions [17] - Management highlighted the launch of an offer management system to streamline sales processes and improve pricing visibility [19] - The company is focusing on organic investment and deleveraging, with a net leverage target of 2.0x to 2.5x [22][23] Leadership Transition - A leadership change occurred with Simon Allen retiring as president and CEO, and Philip Moyer taking over the role [3]

Core Insights - The Zacks Schools industry is experiencing a recovery driven by increased demand for applied and career-oriented education, particularly in healthcare, skilled trades, cybersecurity, and IT [1][5] - Technology is becoming a significant competitive advantage, with institutions investing in adaptive learning systems and online platforms to enhance student engagement and operational efficiency [2][8] - The industry is consolidating, with larger providers acquiring smaller institutions to expand offerings and improve operational leverage [6] Industry Overview - The Zacks Schools industry includes for-profit education companies offering various programs in finance, healthcare, technology, and skilled trades, focusing on career-oriented education [4] - The sector is addressing the shortage of healthcare professionals through intensive training models linked to industry needs [1][5] Trends Influencing Growth - There is a rising demand for workforce-oriented programs, particularly among adult learners and career switchers, as the labor market increasingly values job-ready skills [5] - Government initiatives supporting vocational education and non-degree pathways are contributing to the growth outlook [3][5] Financial Performance and Valuation - The Zacks Schools industry has a Zacks Industry Rank of 65, placing it in the top 27% of over 250 Zacks industries, indicating positive near-term prospects [11][12] - The industry's forward 12-month price-to-earnings ratio is currently at 12.58X, significantly lower than the S&P 500's 23.57X, suggesting potential undervaluation [18] Key Companies and Their Prospects - **McGraw Hill**: Experiencing growth from digital and subscription models, with a projected fiscal 2026 earnings of $1.63 per share on $2.05 billion in revenues, reflecting a 300% surprise in the last quarter [21][24] - **Grand Canyon Education**: Focused on scalable online expansion and healthcare programs, with expected earnings growth of 12.9% and 11.2% for 2025 and 2026, respectively [27][28] - **Perdoceo Education**: Benefiting from rising student interest and expanding program offerings, with expected earnings growth of 11.4% and 9% for 2025 and 2026 [31][32] - **Adtalem**: Gaining from enrollment momentum and strategic partnerships, with projected earnings growth of 17.7% and 13.7% for fiscal 2026 and 2027 [35][37] - **Nerdy**: Enhancing its platform with AI integration, with improvements in earnings estimates for 2025 and 2026, indicating a potential investment opportunity [39][40]