Phoenix Education Partners, Inc Q2 FY2026 earnings call

• Chris mentioned the second quarter reflects continued progress across key priorities like enrollment growth, margin expansion, and strong balance sheet. • Highlighted strong retention trends with a retention rate of 76.6% from the most recent annual cohort, up ~500 basis points from prior year. • Employer-affiliated channel is a meaningful growth driver, with students representing 35% of total enrollment. • Investing in technology and AI across the university, including AI-assisted student onboarding, 24-7 support, increased advisor productivity, etc. • Optimizing presence across search and discovery platforms to reach prospective students. • University well positioned for workforce needs, with commitment to AI fluency in curriculum for over two years. • Announced $50 million share repurchase program and a quarterly dividend of 21 cents per share.

For the second quarter, average total degree enrollment was up 1.8%, net revenue was down 0.4%, and adjusted EBITDA was up 7.8% from the prior year. Employer-affiliated or B2B channel students represented 35% of total enrollment in the quarter, up from 31% in the comparable period in 2025. For the first six months of fiscal 2026, net revenue was $484.5 million, an increase of 1.3% compared to $478.1 million in the prior year. Average total degree enrollment was up 2.9% for the first six months. Adjusted EBITDA for the first six months increased 7.4% to $110 million, and adjusted EBITDA margin increased from 21.4% in the prior year to 22.7% in the current year.

• Reiterated net revenue guidance of $1.025 billion to $1.035 billion and adjusted EBITDA guidance of $244 million to $249 million. • Expect revenues to trend toward the lower end of the full-year range due to near-term marketing dynamics. • Confident in adjusted EBITDA outlook and trending toward the upper end of the guided range, driven by discipline, cost management, and efficiencies from strategic and operational initiatives including AI and technology-enabled capabilities.

• Changes to search algorithms affected the marketing funnel. • Fraud prevention initiatives have some friction, though not material to date. • Relationship between revenue and enrollment affected by students in risk-free periods last year, which is expected to reverse in Q4.

Q: Follow up on marketing themes, specifically on starts or application growth and impact of algorithm shifts.

A: Chris said they navigated algorithm shifts, migrated content to YouTube, saw improvements in trends into Q3, with healthy demand at top of funnel.

Q: Regarding education department rules on private equity ownership, impact on investment.

A: Short answer is no, no anticipated impact based on six-year program participation agreement.

Q: Clarification on marketing changes impact on Q2 enrollment.

A: Algorithm shift in early second quarter had impact in late second quarter, made changes, seeing improvement in early Q3.

Q: On revenues guidance for balance of year.

A: Blair said revenues should trend to lower end of range due to marketing dynamics, adjusted EBITDA trending to upper end due to cost management and lower bad debt from better retention.

Q: Update on fraud prevention initiatives and impact on enrollment.

A: George was told they have strong fraud prevention infrastructure, systems deter volume, friction reduced for well-intended students.

Q: On retention rate improvement, initiatives and sustainability.

A: Chris said it's part of ongoing transformation, numerous initiatives like mobile-ready courses, dispersed by course, leveraging AI, expect retention to continue improving.

Q: On employer-affiliated students growth and revenue enrollment relationship.

A: Chris said B2B growth has potential, B2B students have discounted rates but durable revenue, explained impact of students in risk-free periods last year on revenue enrollment relationship.

Q: On degree preferences shifting due to Gen AI.

A: Jeff asked about shifting degree preferences, Chris said they've aligned curriculum to career-relevant PLCs, embedded AI fluency, seeing growth in programs including business, IT, health care.

Q: On competitive landscape and strategy to differentiate.

A: Stephanie asked about competitive landscape, Chris said they focus on meeting student needs, differentiating through career-relevant skills, saving time and money, empathetic support, and leveraging AI in strategy.