AP VIII Queso Holdings(PXED) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue grew 2.9% year over year to $262 million, driven by a 4.1% increase in average total degree enrollment to 85,600 students [5][12] - Net income attributable to the company decreased to $15.5 million, or $0.40 diluted earnings per share, compared to $46.4 million, or $1.23 diluted earnings per share a year ago [12] - Adjusted EBITDA increased 7.2% to $75.2 million, with an adjusted EBITDA margin of 28.7%, up from 27.5% in the prior period [13][14] Business Line Data and Key Metrics Changes - Employer-affiliated enrollment accounted for approximately 34% of total enrollment, up from 31% in the first quarter of 2025 [5] - Adjusted net income attributable to the company increased 5.3% to $53.6 million, up from $50.9 million in the prior year period [12] Market Data and Key Metrics Changes - The company reported a solid start to the year with financial performance consistent with expectations, reinforcing the full-year outlook provided in the previous earnings call [4][11] - The preliminary program performance metrics released by the Department of Education indicated that all University of Phoenix programs for which metrics were provided are passing [8] Company Strategy and Development Direction - The company remains focused on expanding access to higher education that delivers relevant, career-aligned skills for working adults, emphasizing flexible programs and strong academic outcomes [4] - AI is viewed as an important enabler of existing strategies, with a focus on preparing students to be AI-fluent and leveraging AI for operational excellence [6][10] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the durability of cash generation and announced a regular quarterly cash dividend of approximately $0.21 per share, reflecting a disciplined approach to capital allocation [10][16] - The company reiterated its net revenue guidance of $1.025 billion to $1.035 billion and adjusted EBITDA guidance of $244 million to $249 million for fiscal 2026 [17] Other Important Information - The company recorded $4.5 million in expenses related to a cybersecurity incident, which did not impact student and academic programming [9][10] - The company maintains a strong balance sheet with no outstanding debt and substantial cash and marketable securities totaling $218.1 million as of November 30, 2025 [15][16] Q&A Session Summary Question: Comments on enrollment growth and regulatory changes - Management noted that the recent Negotiated Rulemaking discussions were positive, with all programs passing preliminary performance metrics [20][21] Question: Coverage of programs in preliminary data - Over 50% of programs had earnings information available, covering a significant portion of the company's offerings [26] Question: Challenges in specific programs - Behavioral sciences programs may face challenges due to historically lower earnings, but preliminary data was positive [28] Question: Impact of fraud detection measures - The company has seen a downward trend in fraudulent attempts since implementing new controls [30] Question: New student enrollment trends - New student enrollment has been up year over year, with expectations for continued growth in Q2 and Q3 [31] Question: B2B growth and employer engagement - The company is seeing broad-based growth across programs, with effective account management driving deeper penetration with current employer affiliates [41][59] Question: Pricing strategy - The company has maintained consistent pricing since 2018, with affordability becoming increasingly important [66] Question: Future job displacement due to AI - Management acknowledged the potential for job displacement and emphasized the need for reskilling in AI [70]