Phoenix Education Partners, Inc (PXED) Earnings

Management highlights

• Strategic Progress & Core Student Focus - Continued multi-year investments in learner journey improvements (technology-enabled support, personalized engagement, flexible pathways, skills-aligned curriculum) have driven sustained, strong student retention, a key indicator of student perceived value - Accelerated the launch of the evidence-based omni-channel *Built for Real Life* campaign, which highlights core differentiators for working adult learners: exceptional flexibility, affordable tuition, practical career-relevant education, and high student/alumni satisfaction - To date, students have earned over 1.1 million digital skills badges to demonstrate verified workforce-relevant skills to employers • AI Strategy & OpenAI Collaboration - AI strategy is focused on three core priorities: elevating the learner experience, equipping students with in-demand AI skills, and enhancing operational efficiency across the university - AI skill-building modules are now integrated into every course; additional AI-enabled tools include a Socratic dialogue tool that simulates professional scenarios and a 24/7 AI writing and math support agent - Announced a new strategic collaboration with OpenAI to accelerate AI-powered learning, explore collaborative research, and provide eligible students with direct access to ChatGPT for hands-on AI skill development - Launched the internal OneTeam AI assistant, which generates student case summaries and recommended next actions to help advisors support students more efficiently • Employer Partnership Growth - Continued healthy growth in employer-supported enrollment, which now represents 36% of total enrollment, up 3pp YoY, reflecting strong alignment between the university's offerings and employer workforce needs - A recent Harris Poll employer survey found 98% of surveyed employers report overall satisfaction with University of Phoenix graduates; the university was recognized as a 2025 platinum supplier by Wabash for workforce development collaboration - New academic offerings are planned across high-demand disciplines, including an approved 3-year bachelor's degree path in Criminal Justice Administration planned for a fall launch • Leadership & Governance Updates - Welcomed Robert Brackenberry to the Board of Directors, who brings extensive public pension investment and higher education leadership experience - Welcomed Michael Cochran as Senior Vice President of Corporate Development to lead evaluation of complementary growth opportunities • Financial Position & Capital Allocation - Maintains a strong, debt-free balance sheet: as of May 31, 2026, cash, cash equivalents, and marketable securities totaled $269.4 million, up from $194.8 million in August 2025 - Maintains capital allocation priorities: invest in student outcomes and strategic growth, maintain financial flexibility, return capital to shareholders, and evaluate disciplined M&A opportunities aligned with core strategy - A $50 million stock repurchase program was approved in April; $4 million in shares were repurchased in Q3, leaving $46 million in remaining capacity - Announced a quarterly dividend of 21 cents per share, with an expected annual run rate of 84 cents per share subject to board approval

Guidance

• Full-year FY26 net revenue guidance is revised to a range of $1.02 billion to $1.025 billion, a modest downward adjustment from prior guidance, primarily reflecting near-term transitional impacts from adapting digital enrollment strategies to evolving AI-powered search and discovery • Full-year FY26 adjusted EBITDA guidance is raised and tightened to a range of $246 million to $250 billion, an upward revision that reflects better-than-expected disciplined cost management and benefits from technology/AI-enabled operational efficiency initiatives - Management reaffirmed confidence in the long-term trajectory of the business, consistent with prior long-term guidance - Management declined to provide fiscal 2027 guidance on this call, and will share an updated 2027 outlook on the next quarterly earnings call

Segment performance

Phoenix Education Partners reports results only on a consolidated basis, with no separate product segment breakdown provided in the transcript. Consolidated Q3 FY26 net revenue was $271.8 million, flat compared to $271.7 million in the prior year period. Average total degreed enrollment increased 0.6% YoY to ~85,300 students. Net income attributable to the firm was $39.2 million ($1.01 per diluted share), down from $53.8 million ($1.42 per diluted share) YoY, primarily due to higher IPO-related share-based compensation, increased advertising, and higher restructuring/strategic expenses. Adjusted EBITDA for Q3 was $78.1 million, with an adjusted EBITDA margin of 28.7%, down from 30.7% YoY due to higher advertising spending for the new marketing campaign, partially offset by lower bad debt from stronger retention. For the first nine months of FY26, net revenue was $756.3 million, up 0.9% YoY, average total degree enrollment increased 2.2% YoY to ~84,500, net income was $65.4 million ($1.69 per diluted share) down from $116.4 million YoY, and adjusted EBITDA increased 1.2% YoY to $188.1 million. Employer-supported enrollment represented 36% of total enrollment in Q3, up from 33% YoY.

Risks & headwinds

• The shift to AI-powered search and discovery has created a more iterative, elongated prospective student evaluation process, creating near-term headwinds to enrollment growth that required a modest downward revision to full-year revenue guidance; the timing of when search results will stabilize is uncertain, though management expects long-term benefits for institutions with proven differentiators • Ongoing regulatory change in higher education, including planned future negotiated rulemaking that may revisit the 90-10 rule which currently only applies to for-profit institutions; while the university's current 88% ratio is comfortably below the 90% limit, potential changes to the rule could create future operational or financial impacts • While the Department of Education's new fraud detection and identity verification controls validated the effectiveness of the university's existing internal controls, the rollout of the new process created temporary enrollment friction during Q3, and future additional enhancements to Department controls could create future near-term friction in the enrollment funnel • Higher near-term advertising spending to support the accelerated marketing campaign and AI search adaptation has compressed near-term margins, though management expects these investments to drive long-term efficiency and growth

Analyst Q&A

• Q: What changed from initial enrollment expectations, and are changes related to AI search structural or temporary? /

  A: Management says there is no weakening in underlying demand for University of Phoenix programs, and branded search growth remains strong year-over-year. The only meaningful change is a shift in how prospective students evaluate programs: AI-powered search has created a longer, more iterative evaluation process, which is the primary driver of near-term enrollment impact. A secondary temporary factor was minor enrollment friction from the rollout of the Department of Education's new fraud verification controls, which has now been resolved. Management views the search shift as a transitional period, and expects it will benefit institutions with proven, evidence-based differentiators like University of Phoenix over the long term.

• Q: How does B2B employer enrollment growth impact revenue and profitability, and will this channel remain a key focus? /

  A: Employer-supported enrollment now makes up 36% of total enrollment, up from 33% a year ago, and will remain a core strategic growth focus going forward. While there is a slight reduction in average revenue per student due to tuition discounts for employer programs, B2B students have higher retention and completion rates, so overall profitability for the channel is similar to the B2C channel. As the channel scales and becomes more efficient, management expects profitability dynamics to improve over time.

• Q: How is the university adapting its content strategy to be found by AI large language models, and how much lead flow is currently coming from LLMs? /

  A: The university is optimizing content across channels that LLMs draw from most: it maintains strong leadership in social media, has expanded video content on YouTube which is a key LLM source, and leverages organic engagement from its 750,000 alumni on LinkedIn. The team monitors thousands of key search prompts to measure traction, and is already seeing progress. Management says it is difficult to quantify the exact share of leads from LLMs, as many prospective students discover the brand through AI before navigating directly to the university's website, but the shift to a longer evaluation process is clear, and the university is adapting quickly.

• Q: What is the differentiated advantage of the university's AI strategy, and does the OpenAI collaboration create synergies with B2B partners? /

  A: Management says early and extensive investments in the university's tech and data foundation allow it to move much faster on AI integration than most peer institutions, which often face lengthy governance barriers to curriculum change. AI is integrated across all core areas: enhancing the learner experience, driving operational efficiency, and most importantly, equipping students with in-demand AI workforce skills, with AI skill modules in every course. The new OpenAI collaboration accelerates all these efforts, allowing deeper integration of industry-standard AI tools into curriculum, collaborative development of AI skill pathways, and more rapid scaling of internal operational AI tools that create operating leverage, all of which align well with employer partners' focus on building AI-capable workforces.