Phoenix Education Partners (NYSE: PXED) posts Q3 2026 results with strong cash flow
Phoenix Education Partners, parent of University of Phoenix, generated $271.8 million in net revenue for Q3 FY2026, essentially flat year over year. Net income attributable to the company was $39.2 million, or $1.01 diluted EPS, reflecting higher share-based compensation and strategic, restructuring and cybersecurity-related costs following the 2025 IPO.
For the first nine months, net revenue was $756.3 million and adjusted EBITDA reached $188.1 million (24.9% margin). Operating cash flow improved to $116.7 million, while the company held $155.0 million of cash and cash equivalents and $111.4 million of marketable securities, with no borrowings under a $100 million revolving credit facility.
Average Total Degreed Enrollment rose 2.2% year over year to 84,500 for the nine-month period, supported by growth in employer-related enrollment. The company authorized a $50 million share repurchase program, buying about $4.0 million of stock, and paid a $0.21-per-share Q3 dividend. Key uncertainties include borrower defense to repayment exposure and ongoing data-privacy and cybersecurity litigation, though a comprehensive cyber insurance policy is in place.
Positive
- Operating cash flow for the first nine months of FY2026 increased to $116.7 million from $51.8 million, significantly strengthening liquidity while the $100 million revolving credit facility remained undrawn.
- Average Total Degreed Enrollment grew 2.2% year over year to 84,500 for the nine months ended May 31, 2026, supporting relatively stable net revenue and demonstrating improving student retention.
Negative
- Net income attributable to Phoenix Education Partners, Inc. for the first nine months declined to $65.4 million from $116.4 million, and diluted EPS fell to $1.69 from $3.08, driven in part by higher share-based compensation and strategic, restructuring and cybersecurity-related expenses.
Key Figures
Key Terms
Adjusted EBITDA financial
Title IV regulatory
Borrower Defense to Repayment regulatory
Secured Overnight Financing Rate financial
performance share units financial
noncontrolling interests financial
FAQ
How did Phoenix Education Partners (PXED) perform financially in Q3 FY2026?
What are the key enrollment trends for Phoenix Education Partners (PXED)?
What is Phoenix Education Partners’ (PXED) liquidity and debt position as of May 31, 2026?
What capital return actions did Phoenix Education Partners (PXED) take in FY2026?
How is the cybersecurity incident affecting Phoenix Education Partners (PXED)?
What are the borrower defense to repayment (BDR) risks facing Phoenix Education Partners (PXED)?
How did share-based compensation affect Phoenix Education Partners (PXED) results?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to __________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 7, 2026, the registrant had
Table of Contents
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Page |
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OVERVIEW |
ii |
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PART I. |
FINANCIAL INFORMATION |
1 |
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Item 1. |
Financial Statements (Unaudited) |
1 |
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Condensed Consolidated Balance Sheets |
1 |
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Condensed Consolidated Statements of Income |
2 |
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Condensed Consolidated Statements of Comprehensive Income |
3 |
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Condensed Consolidated Statements of Equity |
4 |
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Condensed Consolidated Statements of Cash Flows |
6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
33 |
Item 4. |
Controls and Procedures |
33 |
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PART II. |
OTHER INFORMATION |
35 |
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Item 1. |
Legal Proceedings |
35 |
Item 1A. |
Risk Factors |
35 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
35 |
Item 3. |
Defaults Upon Senior Securities |
35 |
Item 4. |
Mine Safety Disclosures |
35 |
Item 5. |
Other Information |
36 |
Item 6. |
Exhibits |
37 |
Signatures |
38 |
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i
OVERVIEW
In this Quarterly Report on Form 10-Q for the period ended May 31, 2026 (this “Quarterly Report on Form 10-Q”), unless otherwise indicated or the context otherwise requires, references to the “Company,” the “Issuer,” “we,” “us” or “our” refer, prior to our conversion into a corporation, to AP VIII Queso Holdings, L.P. and its consolidated subsidiaries and, after our conversion into a corporation, to Phoenix Education Partners, Inc. and its consolidated subsidiaries. References to the “University” refer to The University of Phoenix, Inc., our indirect wholly-owned subsidiary. Apollo Education Group, Inc., our direct wholly-owned subsidiary and the direct parent of the University, has been renamed Phoenix Education Operating Corp (“PEOC”).
Our fiscal year ends on August 31 of each year and our four fiscal quarters comprising our fiscal year end on the last day of November, February, May and August, respectively. The term “fiscal,” with respect to any year, refers to the period ending on August 31 of such year. All condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q have been prepared in U.S. dollars in accordance with generally accepted accounting principles in the United States of America.
ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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As of |
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(In thousands, except par value) |
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May 31, 2026 |
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August 31, 2025 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Restricted cash and cash equivalents |
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Marketable securities |
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Accounts receivable, net |
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Prepaid income taxes |
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Other current assets |
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Total current assets |
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Marketable securities |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Operating lease right-of-use assets, net |
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Deferred income taxes, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation and benefits |
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Student deposits |
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Deferred revenue |
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Current operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Long-term operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 14 and Note 15) |
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Equity:(1) |
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General partner |
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Limited partners ( |
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Preferred Stock ($ |
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Common Stock ($ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income, net |
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Total Phoenix Education Partners, Inc. equity |
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Noncontrolling interests |
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( |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
1
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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(In thousands, except per share data) |
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2026 |
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2025 |
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2026 |
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2025 |
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Net revenue |
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$ |
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$ |
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$ |
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$ |
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Costs and expenses: |
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Instructional and support |
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General and administrative |
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Strategic alternatives, restructuring and other |
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Total costs and expenses |
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Operating income |
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Interest income |
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Interest expense |
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( |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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Net loss (income) attributable to noncontrolling interests |
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( |
) |
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( |
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Net income attributable to Phoenix Education Partners, Inc. |
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$ |
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$ |
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$ |
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$ |
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Earnings per share:(1) |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Shares used in computing earnings per share: |
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Basic |
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Diluted |
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The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
2
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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Three Months Ended May 31, |
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Nine Months Ended May 31, |
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($ in thousands) |
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2026 |
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2025 |
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2026 |
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2025 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss) (net of tax)(1): |
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Change in fair value of available-for-sale securities |
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( |
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( |
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( |
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( |
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Comprehensive income |
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Comprehensive loss (income) attributable to noncontrolling interests |
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( |
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( |
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Comprehensive income attributable to Phoenix Education Partners, Inc. |
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$ |
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$ |
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$ |
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$ |
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The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
3
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands) |
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Common Stock(1) (Shares) |
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General |
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Limited Partners |
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Common Stock (Amount) |
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Additional Paid-in |
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Retained |
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Accumulated Other Comprehensive (Loss) |
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Total Phoenix Education Partners, Inc. |
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Noncontrolling |
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Total |
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Balance as of February 28, 2026 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Change in fair value of available-for-sale securities, |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued under share-based compensation plans |
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— |
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— |
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— |
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— |
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— |
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Tax withholdings for share-based award settlements |
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( |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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— |
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( |
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Common stock repurchased |
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( |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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— |
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( |
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Common stock dividends ($ |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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Balance as of May 31, 2026 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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(In thousands) |
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Common Stock(1) (Shares) |
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General |
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Limited Partners |
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Common Stock (Amount) |
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Additional Paid-in |
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Retained |
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Accumulated Other Comprehensive (Loss) |
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Total Phoenix Education Partners, Inc. |
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Noncontrolling |
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Total |
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Balance as of February 28, 2025 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Change in fair value of available-for-sale securities, |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance as of May 31, 2025 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
4
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands) |
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Common Stock(1) (Shares) |
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General |
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Limited Partners |
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Common Stock (Amount) |
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Additional Paid-in |
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Retained |
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Accumulated Other Comprehensive (Loss) |
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Total Phoenix Education Partners, Inc. |
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Noncontrolling |
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Total |
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Balance as of August 31, 2025 |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Corporate conversion |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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— |
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Change in fair value of available-for-sale securities, |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued under share-based compensation plans |
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|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Tax withholdings for share-based award settlements |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock repurchased |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock dividends ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Balance as of May 31, 2026 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(In thousands) |
|
Common Stock(1) (Shares) |
|
|
General |
|
|
Limited Partners |
|
|
Common Stock (Amount) |
|
|
Additional Paid-in |
|
|
Retained |
|
|
Accumulated Other Comprehensive (Loss) |
|
|
Total Phoenix Education Partners, Inc. |
|
|
Noncontrolling |
|
|
Total |
|
||||||||||
Balance as of August 31, 2024 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Noncontrolling interest issued in business combination |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Change in fair value of available-for-sale securities, |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Tax withholdings for share-based award settlements |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Dividends and dividend equivalents to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Capital distributions to limited partners ($ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Balance as of May 31, 2025 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
5
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine Months Ended May 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Impairment charges and asset disposal losses |
|
|
|
|
|
|
||
Provision for credit losses on accounts receivable |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Changes in assets and liabilities, excluding the impact of acquisition: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid income taxes |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
|
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued compensation and benefits |
|
|
( |
) |
|
|
( |
) |
Student deposits |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
Sales of marketable securities |
|
|
|
|
|
|
||
Maturities of marketable securities |
|
|
|
|
|
|
||
Acquisition, net of cash acquired |
|
|
|
|
|
( |
) |
|
Other investing activities |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
||
Common stock repurchased |
|
|
( |
) |
|
|
|
|
Payments of dividends and dividend equivalents |
|
|
( |
) |
|
|
|
|
Payroll taxes paid on share-based awards |
|
|
( |
) |
|
|
( |
) |
Proceeds from stock option exercises |
|
|
|
|
|
|
||
Payments of dividends and dividend equivalents to noncontrolling interests |
|
|
|
|
|
( |
) |
|
Capital distributions to limited partners |
|
|
|
|
|
( |
) |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net change in cash and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure information: |
|
|
|
|
|
|
||
Income tax payments, net |
|
$ |
|
|
$ |
|
||
Noncontrolling interest issued in business combination |
|
$ |
|
|
$ |
|
||
The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.
6
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Nature of Operations and Significant Accounting Policies
Description of Business
Prior to completing our initial public offering (“IPO”) on October 10, 2025, AP VIII Queso Holdings, L.P. (“Queso”, and together with its subsidiaries, the “Company”, “we”, “us”, or “our”) was a limited partnership that was formed in accordance with the laws of Delaware on January 9, 2014. Queso made an election to be classified as a corporation for federal income tax purposes and its fiscal year was from September 1 to August 31. Prior to the IPO, Queso converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Phoenix Education Partners, Inc. (“Phoenix Education Partners”). In connection with our conversion into a corporation, all of the
Initial Public Offering
At our IPO closing, certain of our existing shareholders sold
Offering costs consist primarily of legal, accounting, printing and filing services, and other third-party fees associated with the IPO. Because we did not receive any proceeds from the IPO, these costs were expensed as incurred and are included in strategic alternatives, restructuring and other on our condensed consolidated statements of income. We did
Prior to the IPO, we owned approximately
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Phoenix Education Partners on a consistent basis with the audited consolidated financial statements for the year ended August 31, 2025, and contain all adjustments, including normal recurring adjustments, necessary to fairly state the information set forth herein. These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of our 2025 Annual Report on Form 10-K for the year ended August 31, 2025, as filed with the SEC on November 20, 2025. The results of operations for the three and nine months ended May 31, 2026 are not necessarily indicative of the results that may be expected for the year ending August 31, 2026 or any other future period.
In accordance with Accounting Standards Codification Topic 260, Earnings Per Share, we have applied retrospective presentation to our earnings per share for all periods presented in our financial statements to reflect the shares of common stock resulting from our IPO. Refer to Note 12. Earnings Per Share for additional information.
Beginning in the first quarter of fiscal year 2026 and after the IPO, we began separately presenting tax withholding for share‑based award settlements and dividends and dividend equivalents to noncontrolling interests on our condensed consolidated statements of equity and condensed consolidated statements of cash flows. We have reclassified prior periods to conform to our current period presentation.
7
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Estimates, Assumptions and Judgments
The preparation of these unaudited condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during applicable reporting periods. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ from our estimates under different assumptions, judgments or conditions.
Principles of Consolidation
These unaudited condensed consolidated financial statements include the assets, liabilities, revenues and expenses of Phoenix Education Partners, our wholly-owned subsidiaries and other subsidiaries that we control, substantially all of which represents the University. We eliminate intercompany transactions and balances in consolidation.
We record noncontrolling interests to recognize the noncontrolling ownership interests in our consolidated subsidiaries. We allocate a portion of the net income (loss) of such subsidiaries to our noncontrolling interests generally based on the respective noncontrolling shareholder’s ownership interest in the consolidated subsidiary.
Seasonality
The University’s non-term academic model encompasses a series of courses taken consecutively over the length of the program, which generally limits seasonal enrollment fluctuations. However, we have historically experienced, and expect to continue to experience, lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to the University’s holiday breaks when no related net revenue is recognized. While our operating costs generally do not fluctuate significantly on a quarterly basis, we have historically experienced, and expect to continue to experience, increased marketing expense in our second and fourth fiscal quarters due to course starts that occur during traditional back-to-school seasons.
Revenue Recognition
We recognize revenue in a manner to depict the transfer of goods or services to our customers at an amount that reflects the consideration we expect to receive in exchange for our goods or services. The University generates all of our consolidated net revenue, and substantially all of the University’s net revenue is generated from tuition-bearing degree programs. The University’s students generally fund their education through loans and/or grants from U.S. federal financial aid programs established by Title IV of the Higher Education Act and regulations promulgated thereunder (“Title IV”), military benefit programs, tuition assistance from their employers, or personal funds.
As of May 31, 2026 and August 31, 2025, we had $
Related Party Transactions
Prior to our IPO, we paid affiliates of Apollo Global Management, Inc. (“Apollo”) and The Vistria Group, LP (“Vistria”) for management consulting and advisory professional services. Apollo and Vistria are affiliated with entities that have ownership interests in Phoenix Education Partners. Our management consulting agreements with Apollo and Vistria were terminated effective as of the pricing of our IPO and amounts we paid for such services during the nine months ended May 31, 2026 were immaterial.
We remain a “controlled company” of Apollo following the IPO and have related party transactions with certain Apollo-affiliated portfolio companies. During the three months ended May 31, 2026 and 2025, we paid Rackspace Technology, Inc. $
8
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
New Accounting Standards
Income Taxes - Income Tax Disclosures
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies and enhances certain required income tax disclosures. ASU 2023-09 was effective for our fiscal year that began on September 1, 2025. ASU 2023-09 will not impact our consolidated balance sheets, consolidated statements of income or consolidated statements of cash flows, but will impact our financial statement disclosures in our 2026 Annual Report on Form 10-K.
Financial Instruments - Credit Losses
In July 2025, the FASB issued ASU 2025‑05, Financial Instruments—Credit Losses (Topic 326‑20): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of current accounts receivable and current contract assets. ASU 2025-05 will be effective for our fiscal year beginning on September 1, 2026 and we are currently evaluating the impact it may have on our consolidated financial statements.
Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. ASU 2024-03 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. ASU 2024-03 will be effective for our fiscal year beginning on September 1, 2027 and we are currently evaluating the impact it may have on our financial statement disclosures.
Intangibles - Goodwill and Other - Internal-Use Software
In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is intended to improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. ASU 2025-06 will be effective for our fiscal year beginning on September 1, 2028 and we are currently evaluating the impact it may have on our consolidated financial statements.
Interim Reporting
In December 2025, the FASB issued ASU 2025‑11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which is intended to clarify the applicability of interim reporting guidance, the types of interim reporting and the form and content of interim GAAP financial statements. ASU 2025-11 will be effective for our fiscal year beginning on September 1, 2028 and we are currently evaluating the impact it may have on our interim condensed consolidated financial statements.
9
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 2. Strategic Alternatives, Restructuring and Other
Strategic alternatives, restructuring and other includes the following during the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Strategic alternatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cybersecurity incident |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease restructuring expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Litigation charges and regulatory expense(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic alternatives, restructuring and other |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Strategic alternatives represents costs associated with our IPO, other capital market transactions, and the evaluation of other strategic alternatives (see Note 1. Nature of Operations and Significant Accounting Policies). See Note 14. Commitments and Contingencies for information on the cybersecurity incident and Note 8. Other Liabilities for information on lease restructuring.
Note 3. Acquisition
As of August 31, 2024, Talent Mobility, LLC, a wholly-owned subsidiary of Phoenix Education Operating Corp. (“PEOC”), had a minority ownership interest in Empath, Inc. (“Empath”). Empath provides clients with a company-wide skills inventory for its employees through machine learning-based skills inference. In the first quarter of fiscal year 2025, PEOC acquired a controlling interest in Empath pursuant to an Agreement and Plan of Merger, by merging Talent Mobility, LLC with Empath, with Empath surviving as a subsidiary of PEOC. Empath was subsequently renamed “Talent Mobility, Inc.” PEOC paid approximately $
We accounted for this merger as a business combination and allocated the purchase price to the assets acquired and liabilities assumed at fair value as summarized below:
|
|
|
|
|
($ in thousands) |
|
|
|
|
Cash |
|
$ |
|
|
Finite-lived intangibles - Technology ( |
|
|
|
|
Goodwill |
|
|
|
|
Deferred income taxes |
|
|
( |
) |
Other |
|
|
( |
) |
Total assets acquired and liabilities assumed, net |
|
|
|
|
Less: Fair value of noncontrolling interests |
|
|
( |
) |
Total fair value of consideration transferred |
|
|
|
|
Less: Cash acquired |
|
|
( |
) |
Less: Fair value of equity method investment |
|
|
( |
) |
Less: Note forgiven |
|
|
( |
) |
Cash paid for acquisition, net of cash acquired |
|
$ |
|
|
We determined fair value using the following assumptions, the majority of which include significant unobservable inputs (Level 3), that we believe reasonable market participants would use while employing the concept of highest and best use of the respective items:
10
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
The goodwill resulting from the merger is principally attributable to the future earnings potential associated with customer enrollment growth and other intangibles that do not qualify for separate recognition, such as the assembled workforce. The operating results of Empath are included in our consolidated financial statements from the date of acquisition and its results are not material to our consolidated results of operations. Pro forma financial information is not presented as Empath’s results were not material to our condensed consolidated statements of income.
Note 4. Financial Instruments
Cash and cash equivalents and Restricted cash and cash equivalents
We consider all highly liquid investments with original maturities of three months or less from the date we purchase the investment to be cash equivalents.
Restricted cash and cash equivalents are presented separately from cash and cash equivalents on our condensed consolidated balance sheets.
|
|
May 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash and cash equivalents |
|
|
|
|
|
|
||
Total cash and restricted cash |
|
$ |
|
|
$ |
|
||
Fair value measurements
Our financial instruments are classified within Level 1 or Level 2 of the fair value hierarchy because their fair values are derived from quoted prices for transactions in active exchange markets involving identical assets or quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.
The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective periods:
|
|
May 31, 2026 |
|
|||||||||||||||||||||||||
($ in thousands) |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
|
Cash and Cash |
|
|
Current |
|
|
Noncurrent |
|
|||||||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
U.S. agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
11
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
|
|
August 31, 2025 |
|
|||||||||||||||||||||||||
($ in thousands) |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
|
Cash and Cash |
|
|
Current |
|
|
Noncurrent |
|
|||||||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Corporate debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales. Additionally, all of our securities are investment grade, are classified as available for sale, and have no related allowance for credit losses as of May 31, 2026.
Note 5. Accounts Receivable, Net
Accounts receivable, net consists of the following as of the respective periods:
($ in thousands) |
|
May 31, |
|
|
August 31, |
|
||
Student accounts receivable |
|
$ |
|
|
$ |
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Net student accounts receivable |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
The following summarizes the activity in allowance for credit losses during the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Beginning allowance for credit losses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for credit losses on accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Write-offs, net of recoveries |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending allowance for credit losses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 6. Goodwill and Intangibles
Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the net identifiable assets acquired and liabilities assumed. See Note 3. Acquisition for goodwill acquired in the first quarter of fiscal year 2025.
Intangible assets consist of the following as of the respective periods:
|
|
May 31, 2026 |
|
|
August 31, 2025 |
|
||||||||||||||||||
($ in thousands) |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
||||||
Curriculum |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total finite-lived intangible assets |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Trademark |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Accreditation |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total indefinite-lived intangible assets |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Our finite-lived intangible assets are amortized on a straight-line basis. Amortization expense was $
The weighted average remaining useful life of our finite-lived intangible assets as of May 31, 2026 was approximately
($ in thousands) |
|
Remainder of 2026 |
|
|
2027 |
|
|
2028 |
|
|
2029 |
|
|
Total |
|
|||||
Estimated future amortization expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Note 7. Leases
Lease expense is included in instructional and support, general and administrative and strategic alternatives, restructuring and other on our condensed consolidated statements of income.
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Sublease income(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total lease cost, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Future payments related to our operating lease liabilities were as follows for periods subsequent to May 31, 2026:
($ in thousands) |
|
|
|
|
Remainder of 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
2031 |
|
|
|
|
Total operating lease payments |
|
|
|
|
Less: liability accretion |
|
|
( |
) |
Present value of operating lease liabilities |
|
|
|
|
Less: current operating lease liabilities |
|
|
( |
) |
Long-term operating lease liabilities |
|
$ |
|
|
The following provides supplemental information related to leases during the respective periods:
|
|
Nine Months Ended May 31, |
||||
|
|
2026 |
|
2025 |
||
Cash paid for amounts included in the measurement of operating lease liabilities(1) |
|
$ |
|
$ |
||
Operating lease ROU assets obtained in exchange for lease liabilities |
|
|
|
|
||
Note 8. Other Liabilities
Other current liabilities consist of the following as of the respective periods:
($ in thousands) |
|
May 31, 2026 |
|
|
August 31, 2025 |
|
||
Accrued advertising |
|
$ |
|
|
$ |
|
||
Contract liabilities for discount programs |
|
|
|
|
|
|
||
Restructuring obligations(1) |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
||
Other long-term liabilities consist of the following as of the respective periods:
($ in thousands) |
|
May 31, 2026 |
|
|
August 31, 2025 |
|
||
Restructuring obligations(1) |
|
$ |
|
|
$ |
|
||
Uncertain tax position(2) |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other long-term liabilities |
|
$ |
|
|
$ |
|
||
14
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 9. Revolving Credit Facility
On November 13, 2025, we entered into a senior secured revolving credit facility in an aggregate principal amount of $
In addition, the Revolving Facility requires us to comply on a quarterly basis with a maximum leverage ratio if borrowings under the Revolving Facility on such date exceed
As of May 31, 2026, we had
Note 10. Income Taxes
We are subject to income taxes in the United States and various state jurisdictions. We compute our interim income tax provision by applying our estimated effective tax rate expected to be applicable for the fiscal year, adjusted for discrete items, if applicable, to our income before income taxes for the period. Our effective tax rate is dependent upon several factors, such as tax rates in state jurisdictions and the relative amount of income we earn in such jurisdictions. We exercise significant judgment in determining our income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain.
Our income tax expense for the three and nine months ended May 31, 2026 was $
For the three months ended May 31, 2026, the effective tax rate differed from the federal statutory rate of
For the nine months ended May 31, 2026, the effective tax rate differed from the federal statutory rate of
Our income tax expense for the three and nine months ended May 31, 2025 was $
Income Tax Audits
Our U.S. federal income tax return for fiscal year 2023 is currently under review by the Internal Revenue Service and our U.S. federal income tax returns for fiscal years 2022, 2024 and 2025 are currently open for review. Additionally, tax years as early as fiscal year 2021 remain subject to examination by state or local tax authorities.
Note 11. Common Stock Repurchase Program
In April 2026, our Board of Directors approved a $
During the three and nine months ended May 31, 2026, we repurchased approximately
15
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
As of May 31, 2026, approximately $
Note 12. Earnings Per Share
In connection with our IPO, Queso converted into a Delaware corporation and all of its
We calculate earnings per share by dividing net income attributable to Phoenix Education Partners, Inc. by the weighted average shares outstanding. For diluted weighted average shares outstanding, we calculate the dilutive effect of share-based awards by applying the treasury stock method.
The components of basic and diluted earnings per share consist of the following for the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
(In thousands, except per share data) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Phoenix Education Partners, Inc. (basic and diluted) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of stock options(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of restricted stock units(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income per share attributable to Phoenix Education Partners, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted income per share attributable to Phoenix Education Partners, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
16
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 13. Share-Based Awards
Share-Based Awards – The University of Phoenix, Inc. Management Equity Plan
Prior to the IPO, we had outstanding stock option and restricted stock unit equity awards that were issued under the University of Phoenix, Inc. Management Equity Plan. Upon the future vesting of the University’s outstanding restricted stock units, we will issue shares of the Company’s common stock on a
In connection with the IPO, we modified approximately
For the above modification, we used the Black-Scholes model to estimate the fair value of the stock options using the following weighted average inputs:
We did
|
|
Options Outstanding |
|
|||||||||||||
|
|
Number of Shares |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Balance at August 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
N/A |
|
|
|
|
|
|
|
||||
Exercised(1) |
|
|
( |
) |
|
$ |
|
|
|
|
|
$ |
|
|||
Forfeited, canceled or expired |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Balance at May 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest as of May 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable as of May 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
In addition to the expense associated with the stock options described above, we have $
Share-Based Awards – Phoenix Education Partners Omnibus Incentive Plan
In connection with our IPO, our new Omnibus Incentive Plan became effective. The Omnibus Incentive Plan has an aggregate reserve of approximately
17
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Restricted stock units granted pursuant to the Omnibus Incentive Plan generally vest over
In connection with our IPO, we granted the following share-based awards:
We also granted an immaterial amount of restricted stock units and performance share units subsequent to the IPO that will vest over one- or three-year periods from their respective grant dates.
As of May 31, 2026, we expect to recognize approximately $
Phoenix Education Partners Employee Stock Purchase Plan
In connection with the IPO, we adopted an Employee Stock Purchase Plan (“ESPP”) pursuant to which all eligible employees of the Company are able to purchase shares of our common stock at a favorable price and upon favorable terms on specified dates. As of May 31, 2026, we have reserved an aggregate of
Share-Based Compensation
The following details total share-based compensation during the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Instructional and support |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 14. Commitments and Contingencies
Guarantees
We have indemnified officers and directors and certain affiliates from losses and other amounts arising from certain events or occurrences. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have liability insurance that mitigates our exposure and enables us to recover a portion of any future amounts paid. The fair value of these indemnification agreements, if any, cannot be estimated.
Sponsorship Rights Agreement
In August 2018, PEOC entered into an agreement for sponsorship rights on a stadium in Glendale, Arizona, which is the home of the Arizona Cardinals of the National Football League. The agreement term is in effect until 2030 with options to extend. Pursuant to the agreement, PEOC was required to pay $
18
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Letter of Credit
As of May 31, 2026, we had a $
Surety Bonds
Our insurers issue surety bonds that are required by various states where we operate, or that are required for other purposes. We are obligated to reimburse our insurers for any surety bonds that are paid. As of May 31, 2026, the face amount of these surety bonds was less than $
Litigation and Other Matters
We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. We do not believe any of these are material for separate disclosure and we do not believe any of these, individually or in the aggregate, will have a material effect on our consolidated financial position, results of operations or cash flows.
The following is a description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business.
Cybersecurity Incident
We experienced a cybersecurity incident involving the Oracle E-Business Suite software platform (“Oracle EBS”). We are one of a number of organizations, including other academic institutions, from which an unauthorized third-party exfiltrated data by exploiting a previously unknown software vulnerability in Oracle EBS. The incident has not impacted our business operations or student programming.
Upon detecting the incident on November 21, 2025, we promptly took steps to investigate and respond with the assistance of leading third-party cybersecurity firms. While the investigation remains ongoing, we believe that the software vulnerability was used in August 2025 to copy certain data maintained in our Oracle EBS environment. We promptly installed Oracle EBS software patches to remediate the vulnerability following their release in October 2025. We believe that certain personal information, including names and contact information, dates of birth, social security numbers, and bank account and routing numbers, with respect to numerous individuals was accessed without authorization. To our knowledge, the unauthorized third-party has not publicly disseminated the data. We are continuing to review the impacted data and are providing the required notifications to affected parties and applicable regulatory entities and also implemented measures to enhance security and reduce the risk of a similar incident occurring in the future.
In connection with this cybersecurity incident, putative class action lawsuits have been filed in which the University is a co-defendant with Oracle and other companies. All of these lawsuits have been consolidated into a single matter, along with other lawsuits against unrelated defendants which stem from the same Oracle EBS software vulnerability discussed above. This consolidated putative class action is titled In re Oracle Corporation Data Breach Litigation and is pending in federal court in the Western District of Texas (Case No. 1:25-cv-01805).
The complaint generally alleges that the University and other co-defendants failed to protect the plaintiffs’ confidential information in violation of various federal and/or state laws. The University (along with the other co-defendants) filed motions to dismiss in June 2026, which remain pending before the court.
Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on information available to us at present, we cannot reasonably estimate a range of loss, if any, for this action and, accordingly, we have not accrued any liability associated with this action.
During the nine months ended May 31, 2026, we recorded $
19
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
expense, potential regulatory action, business interruption, and costs associated with investigating, defending, and resolving legal proceedings related to the incident, subject to deductibles, exclusions and limits.
Class Action Lawsuit
On April 1, 2025, Janielle Dawson filed a class action complaint against the University in the United States District Court for the Northern District of Illinois. The complaint alleges that the University violated the Video Privacy Protection Act, Electronic Communications Privacy Act, and the Illinois Eavesdropping Act by integrating third-party tracking technology in its website and thereby disclosing to third parties its users’ personally identifiable and other protected information. The complaint seeks damages on behalf of the plaintiff and other members of the class.
During the second quarter of fiscal year 2026, we filed a motion to dismiss this matter, which the court granted in part and denied in part. Subsequently, the parties mutually agreed to explore resolution of this matter via mediation. Mediation occurred in June 2026 and concluded without resolution. Following mediation, the parties have continued settlement discussions and have made substantial progress toward a potential resolution; however, no term sheet, settlement agreement or other binding agreement has been executed, and any proposed settlement would remain subject to the negotiation and execution of definitive documentation and any required court approval. Discovery remains stayed.
Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. We have accrued an immaterial amount representing our estimate of probable loss associated with this matter. It is reasonably possible that the ultimate resolution of this matter could result in a loss in excess of the amount accrued; however, based on information available to us at present, we do not believe that any such additional loss would be material to our consolidated financial position, results of operations or cash flows.
Note 15. Regulatory Matters
Borrower Defense to Repayment Claims
Under the Higher Education Act, the Department of Education’s regulations specify acts or omissions of a school that a student loan borrower may assert as a defense to repayment of a federal student loan (referred to as a BDR claim) and thereby seek to obtain a discharge and refund of such loan. Under the BDR Rules, the Department of Education has indicated that it believes it may also assert such a claim on behalf of a student borrower. Additionally, the Department of Education may initiate a recoupment proceeding against a school to collect loan amounts that are discharged or refunded as the result of BDR claims. The BDR Rules have been significantly revised in recent years. Currently, a complex framework of rules applies different loan relief and recoupment standards and procedures based upon the date that the loan in question was first disbursed. Additionally, the BDR Rules are subject to various pending litigation that increases related complexity and uncertainty.
The Department of Education began sending borrower defense applications to the University in June 2020. As part of the fact-finding process, the Department sends individual student applications to the University and allows the University the opportunity to submit responses to the borrower defense applications. The University has submitted, or will submit within the timeframe prescribed by the Department, initial substantive responses to these applications to the Department.
In September 2023, the Department of Education announced that it had approved more than
Because of the many questions of fact and law that may arise, the outcome of BDR claims is uncertain at this point. Based on the information available to us at present, we cannot estimate a reasonably possible range of loss for BDR claims and, accordingly, we have not accrued any liability associated with such claims.
20
PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 16. Segment Reporting
We have
The following provides information on net revenue, significant expenses and net income for our single reportable segment during the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation and related costs(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for credit losses on accounts receivable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Strategic alternatives, restructuring and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. The forward-looking statements are contained principally in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and include, among other things, statements relating to: (i) our strategy, outlook and growth prospects; (ii) our operational and financial targets and dividend policy; (iii) general economic trends and trends in the industry and markets; and (iv) the competitive environment in which we operate.
These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Important factors that could cause our results to vary from expectations include, but are not limited to:
These forward-looking statements are based on assumptions and subject to risks and uncertainties. Given these uncertainties, undue reliance should not be placed on these forward-looking statements. Except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We anticipate that subsequent events and developments will cause our views to change. This Quarterly Report on Form 10-Q and the documents filed as exhibits hereto should be read completely and with the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,
22
dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements.
Overview
We, through our subsidiary The University of Phoenix, Inc., are a pioneer of online higher education for working adults in the United States. Since our founding in 1976, the University has been a mission-driven organization focused on offering a distinctive and affordable online higher education experience that is customized for working adults who did not fit the traditional 18- to 22-year-old campus-based student model. The University has been accredited since 1978 by the Higher Learning Commission (“HLC”), an institutional accrediting agency recognized by the Department of Education. In our nearly five decades of operation, we have served more than 1.1 million alumni (including those who have completed non-degree certificates) and conferred more than 1.3 million degrees.
Initial Public Offering
On October 10, 2025, we completed an IPO of 4.9 million shares of common stock at a price of $32.00 per share, which included 0.6 million shares sold to the underwriters pursuant to their option to purchase additional shares. The shares were offered by certain of the Company’s existing shareholders and, accordingly, we did not receive any proceeds from the offering.
In connection with the expiration of the IPO lock-up period on April 6, 2026, securities held by our pre-IPO holders, other than our Section 16 officers who remain subject to a one-year lock-up, became eligible for sale in the public market, subject to applicable trading restrictions. As a result, shares of our common stock issuable upon the exercise of University stock options by such holders became eligible for sale to the extent such options are settled in shares. Upon exercise of these options, we may elect to repurchase options for cash, in which case no shares of University or Company common stock would be issued. Otherwise, option exercises may be settled through various methods, including net share settlement, cash exercises, or broker-assisted sell-to-cover transactions pursuant to which shares are sold in the market to satisfy the exercise price and applicable tax withholding obligations.
We cannot reasonably estimate the extent of future option exercises, the timing of any related sales of shares, or the settlement methods that may be utilized and, accordingly, the potential impact on our outstanding share count, liquidity and stock price remains uncertain.
Factors Affecting Results of Operations
We believe our market position provides us with a significant opportunity to drive sustainable growth in the future. The following factors, among others described herein, have historically affected, and we expect in the future will similarly affect, our performance:
Enrollment. The net revenue we generate in a given period largely depends on the total number of courses taken by the enrolled student population and the price per course. As part of our focus on affordable and accessible tuition, we have not raised tuition rates since 2018. Our student retention rates, calculated as (i) the number of confirmed undergraduate students who both started a degree or non-degree certificate program and posted attendance in a course within such program as of an applicable date, divided by (ii) the number of confirmed undergraduate students who started such a program, expressed as a percentage, have increased from 59.7% for the 2016/2017 cohort to 76.6% for the 2024/2025 cohort (our most recent completed cohort for retention rate purposes), which represents a 5.1 percentage point increase from the 2023/2024 cohort. The increase in retention is a key factor driving the growth in Average Total Degreed Enrollment in recent years, including a 2.2% increase in the nine months ended May 31, 2026 as compared to the prior year period.
Enrollment is also affected by the manner in which prospective students discover, research and evaluate educational opportunities. Recently, enrollment has been influenced in part by changes in prospective student search and discovery behavior, including through artificial intelligence-enabled platforms. Although we continue to adapt our marketing and enrollment strategies, these changes may affect the timing and pace at which prospective students engage with the University and make enrollment decisions and impact the effectiveness of our enrollment process.
We have invested and continue to invest in many areas of our business that we expect will further improve enrollment, retention and graduation rates, which drive sustainable growth. However, enrollment and retention of students at the University are impacted by the risks described in Item 1A, “Risk Factors” of our 2025 Annual Report on Form 10-K, many of which are beyond our control.
Career-Relevant Education and Employer Relationships. Our career-oriented programs and learning platform position us for continued growth in the corporate-sponsored training and education market. Enrollment through our employer relationships represented approximately 35% of our Average Total Degreed Enrollment in the nine months ended May 31, 2026, which represents an approximate three percentage point increase compared to the prior year period. This represents a valuable opportunity to drive growth, diversify our
23
student population and reinforce the durability of our net revenue as these students generally have higher retention and graduation rates. We believe demand from employers and working adults for education aligned with evolving workforce and technology needs, including artificial intelligence-related capabilities, continues to support our long-term growth strategy. In addition, we continue to have discussions with employers regarding our comprehensive suite of talent development solutions and professional development offerings that extend beyond our degree offerings. While the development of our talent development solutions is in the early stages, we believe our ability to offer these solutions has broadened our relationships with key employers and provides an opportunity for growth.
Regulatory Requirements. Our operations are subject to extensive U.S. federal and state regulation applicable to providers of post-secondary education who participate in Title IV programs. Failure to comply with applicable regulatory requirements, standards or policies could subject us to significant monetary liabilities, Title IV repayment obligations, fines and penalties, including loss of or limitations upon access to U.S. federal student loans and grants for our students. Any actions that limit our participation in Title IV programs or the amount of student financial aid for which our students are eligible would materially impact our student enrollment and profitability and could impact the continued viability of our business as currently conducted. See Item 1A, “Risk Factors” of our Annual Report on Form 10-K for a detailed discussion of regulatory requirements and related risks.
Cost Structure. Our ability to grow profitably depends on our ability to manage our cost structure. Our margin expansion over recent years has been largely derived from the operating leverage resulting from the increase in net revenue relative to our costs that are more fixed in nature and our exit from all but one of our ground campuses. We intend to augment this historical operating leverage through additional strategic and operational initiatives to enhance support for students in a more efficient manner. We continue to invest in optimization, which we expect will reduce friction points and increase efficiencies throughout the University.
Seasonality. The University’s non-term academic model encompasses a series of courses taken consecutively over the length of the program, which generally limits seasonal enrollment fluctuations. However, we have historically experienced, and expect to continue to experience, lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to the University’s holiday breaks when no related net revenue is recognized. While our operating costs generally do not fluctuate significantly on a quarterly basis, we have historically experienced, and expect to continue to experience, increased marketing expense in our second and fourth fiscal quarters due to course starts that occur during traditional back-to-school seasons.
Key Performance Metrics
We review a number of operating and financial metrics, including the key performance metrics presented in the table below, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
(Enrollment statistics rounded to the nearest hundred; dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average Total Degreed Enrollment |
|
|
85,300 |
|
|
|
84,800 |
|
|
|
84,500 |
|
|
|
82,700 |
|
Net income attributable to Phoenix Education Partners, Inc. |
|
$ |
39,167 |
|
|
$ |
53,841 |
|
|
$ |
65,401 |
|
|
$ |
116,382 |
|
Net income attributable to Phoenix Education Partners, Inc. margin |
|
|
14.4 |
% |
|
|
19.8 |
% |
|
|
8.6 |
% |
|
|
15.5 |
% |
Adjusted EBITDA |
|
$ |
78,077 |
|
|
$ |
83,375 |
|
|
$ |
188,071 |
|
|
$ |
185,819 |
|
Adjusted EBITDA margin |
|
|
28.7 |
% |
|
|
30.7 |
% |
|
|
24.9 |
% |
|
|
24.8 |
% |
Average Total Degreed Enrollment. Enrollment is the primary driver of our net revenue and a key non-financial metric that helps compare our performance on a consistent basis across periods. Additionally, enrollment is a reflection of our ability to retain continuing students and enroll new students, which are key components of our growth strategy. Enrollment measures in our industry are not standardized, and other companies in our industry may calculate enrollment measures differently than we do.
Substantially all of our net revenue is generated from student enrollment in tuition-bearing degree programs encompassing a series of courses (e.g., most often five-week courses) taken consecutively over the length of the program. Over comparative periods, Total Degreed Enrollment generally increases as new students attend a credit-bearing course or continuing students return to the University, which increases are generally offset by graduations or continuing students not attending a credit-bearing course (e.g., by withdrawing from the University). We define “Total Degreed Enrollment” as the number of confirmed students (both new and continuing) enrolled in credit-bearing courses who post attendance at least one time during a calendar month (even if they withdraw later in the same month), excluding students who graduated as of the end of such month. Average Total Degreed Enrollment for the periods shown above represents the aggregate of monthly Total Degreed Enrollment during such period divided by the number of months in the period. For
24
example, Average Total Degreed Enrollment for the three months ended May 31, 2026 is calculated as the aggregate Total Degreed Enrollment for the three months from March 2026 through May 2026 divided by three.
Net income attributable to Phoenix Education Partners, Inc., net income attributable to Phoenix Education Partners, Inc. margin, adjusted EBITDA and adjusted EBITDA margin. We believe these items are primary indicators of our operating performance because they are measures of profitability and assist with comparing our performance across periods and evaluating the effectiveness of our business strategies. Additionally, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures that allow us to evaluate our profitability on a consistent basis across periods by excluding items that management and our board of directors do not believe are indicative of our core operating performance. We use adjusted EBITDA and adjusted EBITDA margin to supplement GAAP measures of performance and to compare our performance against peer companies utilizing similar measures. See “Non-GAAP Financial Measures and Reconciliations” below for the definitions of adjusted EBITDA and adjusted EBITDA margin, a reconciliation of net income attributable to Phoenix Education Partners, Inc. to adjusted EBITDA and the calculation of adjusted EBITDA margin. We calculate net income attributable to Phoenix Education Partners, Inc. margin as net income attributable to Phoenix Education Partners, Inc. divided by net revenue, expressed as a percentage.
Results of Operations
Three and Nine Months Ended May 31, 2026 Compared to the Three and Nine Months Ended May 31, 2025
The following details our consolidated results of operations during the respective periods:
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
% Change |
|
|
|
|
|
|
|
|
% Change |
|
||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 versus 2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 versus 2025 |
|
||||||
Net revenue |
|
$ |
271,801 |
|
|
$ |
271,703 |
|
|
|
0.0 |
% |
|
$ |
756,289 |
|
|
$ |
749,801 |
|
|
|
0.9 |
% |
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Instructional and support |
|
|
110,284 |
|
|
|
110,446 |
|
|
|
(0.1 |
)% |
|
|
330,774 |
|
|
|
325,779 |
|
|
|
1.5 |
% |
General and administrative |
|
|
97,754 |
|
|
|
83,320 |
|
|
|
17.3 |
% |
|
|
302,416 |
|
|
|
255,703 |
|
|
|
18.3 |
% |
Strategic alternatives, restructuring and other |
|
|
11,937 |
|
|
|
6,837 |
|
|
|
74.6 |
% |
|
|
31,673 |
|
|
|
17,886 |
|
|
|
77.1 |
% |
Total costs and expenses |
|
|
219,975 |
|
|
|
200,603 |
|
|
|
9.7 |
% |
|
|
664,863 |
|
|
|
599,368 |
|
|
|
10.9 |
% |
Operating income |
|
|
51,826 |
|
|
|
71,100 |
|
|
|
(27.1 |
)% |
|
|
91,426 |
|
|
|
150,433 |
|
|
|
(39.2 |
)% |
Interest income |
|
|
2,183 |
|
|
|
2,278 |
|
|
|
(4.2 |
)% |
|
|
5,720 |
|
|
|
8,334 |
|
|
|
(31.4 |
)% |
Interest expense |
|
|
(651 |
) |
|
|
(107 |
) |
|
* |
|
|
|
(1,416 |
) |
|
|
(332 |
) |
|
* |
|
||
Income before income taxes |
|
|
53,358 |
|
|
|
73,271 |
|
|
|
(27.2 |
)% |
|
|
95,730 |
|
|
|
158,435 |
|
|
|
(39.6 |
)% |
Provision for income taxes |
|
|
14,452 |
|
|
|
18,622 |
|
|
|
(22.4 |
)% |
|
|
30,877 |
|
|
|
40,564 |
|
|
|
(23.9 |
)% |
Net income |
|
|
38,906 |
|
|
|
54,649 |
|
|
|
(28.8 |
)% |
|
|
64,853 |
|
|
|
117,871 |
|
|
|
(45.0 |
)% |
Net loss (income) attributable to noncontrolling interests |
|
|
261 |
|
|
|
(808 |
) |
|
* |
|
|
|
548 |
|
|
|
(1,489 |
) |
|
* |
|
||
Net income attributable to Phoenix Education Partners, Inc. |
|
$ |
39,167 |
|
|
$ |
53,841 |
|
|
|
(27.3 |
)% |
|
$ |
65,401 |
|
|
$ |
116,382 |
|
|
|
(43.8 |
)% |
*Not meaningful
Net revenue
We generate all, or substantially all, of our consolidated net revenue from tuition-bearing degree programs offered by the University. Under the University’s non-term academic delivery model, students generally enroll in a program of study encompassing a series of courses taken consecutively over the length of the program, and net revenue is recognized evenly over the duration of the course (e.g., daily over five weeks for a five-week course, other than the University’s holiday breaks when no related net revenue is recognized).
Net revenue increased $0.1 million, or flat as a percentage, in the three months ended May 31, 2026 compared to the prior year period, and Average Total Degreed Enrollment was materially consistent for both periods.
Net revenue increased $6.5 million, or 0.9%, in the nine months ended May 31, 2026 compared to the prior year period. The increase was principally attributable to enrollment growth, as measured by Average Total Degreed Enrollment, which increased 2.2% compared to the prior year period primarily due to improved student retention. The increase was partially offset by an increase in discounts primarily resulting from a higher percentage of our enrollment through employer relationships.
25
Instructional and support
Instructional and support principally consists of costs related to the delivery and administration of our educational programs and includes costs related to faculty, academic administrators, enrollment and student advisory personnel (including share-based compensation), credit losses associated with uncollectible accounts receivable, financial aid processing costs and depreciation of applicable property and equipment. Instructional and support also includes course development costs (including amortization of related intangible assets) and costs associated with delivering course content.
Instructional and support decreased $0.2 million, or 0.1%, in the three months ended May 31, 2026 compared to the prior year period, and remained consistent as a percentage of net revenue at 40.6%. The decrease was principally attributable to a $4.0 million decrease in credit losses on accounts receivable, partially offset by a $2.8 million increase in compensation and related costs, including a $0.9 million increase in share-based compensation expense resulting from our IPO (see Note 1. Nature of Operations and Significant Accounting Policies and Note 13. Share-Based Awards to our condensed consolidated financial statements).
Instructional and support increased $5.0 million, or 1.5%, in the nine months ended May 31, 2026 compared to the prior year period, and increased as a percentage of net revenue from 43.4% to 43.7%. The increase was principally attributable to a $14.6 million increase in compensation and related costs, including a $9.7 million increase in share-based compensation expense resulting from our IPO, partially offset by lower credit losses on accounts receivable of $11.3 million (see Note 1. Nature of Operations and Significant Accounting Policies and Note 13. Share-Based Awards to our condensed consolidated financial statements).
General and administrative
General and administrative principally consists of costs related to management and employees in administrative functions (including share-based compensation), marketing expense, legal and professional fees, information technology infrastructure costs, depreciation of property associated with our administrative functions, rent and related expenses associated with our corporate facilities and other related costs.
General and administrative increased $14.4 million, or 17.3%, in the three months ended May 31, 2026 compared to the prior year period, and increased as a percentage of net revenue from 30.7% to 36.0%. The increase was principally attributable to higher compensation and related costs of $6.8 million, including a $6.9 million increase in share-based compensation resulting from our IPO, and higher advertising expense of $6.6 million (see Note 1. Nature of Operations and Significant Accounting Policies and Note 13. Share-Based Awards to our condensed consolidated financial statements).
General and administrative increased $46.7 million, or 18.3%, in the nine months ended May 31, 2026 compared to the prior year period, and increased as a percentage of net revenue from 34.1% to 40.0%. The increase was principally attributable to higher compensation and related costs of $36.4 million, including a $36.0 million increase in share-based compensation resulting from our IPO, and higher advertising expense of $8.1 million (see Note 1. Nature of Operations and Significant Accounting Policies and Note 13. Share-Based Awards to our condensed consolidated financial statements).
Strategic alternatives, restructuring and other
Strategic alternatives, restructuring and other includes the following during the respective periods:
|
|
Three Months Ended May 31, |
|
|
Nine Months Ended May 31, |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Strategic alternatives |
|
$ |
856 |
|
|
$ |
2,402 |
|
|
$ |
6,133 |
|
|
$ |
7,401 |
|
Cybersecurity incident |
|
|
267 |
|
|
|
— |
|
|
|
5,096 |
|
|
|
— |
|
Lease restructuring expense |
|
|
4,029 |
|
|
|
2,121 |
|
|
|
7,634 |
|
|
|
3,837 |
|
Litigation charges and regulatory expense(1) |
|
|
4,977 |
|
|
|
1,203 |
|
|
|
7,383 |
|
|
|
3,609 |
|
Other |
|
|
1,808 |
|
|
|
1,111 |
|
|
|
5,427 |
|
|
|
3,039 |
|
Strategic alternatives, restructuring and other |
|
$ |
11,937 |
|
|
$ |
6,837 |
|
|
$ |
31,673 |
|
|
$ |
17,886 |
|
Strategic alternatives, restructuring and other increased $5.1 million in the three months ended May 31, 2026 compared to the prior year period, which was principally due to an increase in lease restructuring expense driven by changes in our estimated future cash flows associated with exited space and an increase in litigation charges and regulatory expense related to a class action lawsuit (see Note 14. Commitments and Contingencies to our condensed consolidated financial statements).
26
Strategic alternatives, restructuring and other increased $13.8 million in the nine months ended May 31, 2026 compared to the prior year period, which was principally due to costs associated with the cybersecurity incident detected in November 2025, an increase in litigation charges and regulatory expense related to a class action lawsuit (see Note 14. Commitments and Contingencies to our condensed consolidated financial statements), and an increase in lease restructuring expense driven by changes in our estimated future cash flows associated with exited space.
Interest income
Interest income decreased $0.1 million, or 4.2%, in the three months ended May 31, 2026 compared to the prior year period, which was principally attributable to a decrease in interest rate yields.
Interest income decreased $2.6 million, or 31.4%, in the nine months ended May 31, 2026 compared to the prior year period, which was principally attributable to decreases in (i) average cash and cash equivalents and marketable securities held and (ii) interest rate yields.
Interest expense
Interest expense increased $0.5 million and $1.1 million in the three and nine months ended May 31, 2026, respectively, compared to the prior year periods. The increases were primarily from amortization of deferred financing costs from our $100 million Revolving Facility.
Provision for income taxes
Provision for income taxes decreased $4.2 million, or 22.4%, in the three months ended May 31, 2026 compared to the prior year period. Our effective income tax rate for the three months ended May 31, 2026 was 27.1% compared to 25.4% in the prior year period. The increase in our effective tax rate was primarily due to certain executive compensation costs becoming nondeductible after the completion of our IPO, partially offset by excess tax benefits from share-based compensation.
Provision for income taxes decreased $9.7 million, or 23.9%, in the nine months ended May 31, 2026 compared to the prior year period. Our effective income tax rate for the nine months ended May 31, 2026 was 32.3% compared to 25.6% in the prior year period. The increase in our effective tax rate was primarily due to the completion of our IPO, which resulted in certain IPO and executive compensation costs becoming nondeductible, partially offset by excess tax benefits from share-based compensation.
Non-GAAP Financial Measures and Reconciliations
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we also provide the following non-GAAP financial measures:
Adjusted net income attributable to Phoenix Education Partners, Inc., adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are included as supplemental disclosures because we believe they are useful indicators of our operating
1 During the first quarter of fiscal year 2026, we changed our definition of this measure to start with “Net income attributable to Phoenix Education Partners, Inc.” instead of “Net income” and began excluding expenses incurred related to our cybersecurity incident, which we do not believe are representative of our ongoing operations. We have retrospectively changed this measure for all periods presented to conform with our new definition.
27
performance. Derivations of net income and EBITDA are well recognized performance measurements in the education industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties to compare the operating performance of companies in our industry. We believe these non-GAAP measures help compare our performance on a consistent basis across periods and provide an additional analytical tool to assist with identifying underlying trends in our results of operations. While we believe that these non-GAAP measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the comparable GAAP measures.
Adjusted net income attributable to Phoenix Education Partners, Inc., adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools. Additionally, other companies in our industry may calculate such measures differently than we do, limiting each measure’s usefulness as a comparative measure. Some of these limitations are:
Because of these limitations, adjusted net income attributable to Phoenix Education Partners, Inc., adjusted EBITDA and adjusted EBITDA margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Investors should not place undue reliance on this information.
The following tables present reconciliations of net income attributable to Phoenix Education Partners, Inc. to adjusted net income attributable to Phoenix Education Partners, Inc. and net income attributable to Phoenix Education Partners, Inc. to adjusted EBITDA and adjusted EBITDA margin during the respective periods:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net income attributable to Phoenix Education Partners, Inc. |
|
$ |
39,167 |
|
|
$ |
53,841 |
|
|
$ |
65,401 |
|
|
$ |
116,382 |
|
Special items and share-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring lease expense, net(a) |
|
|
4,029 |
|
|
|
2,121 |
|
|
|
7,634 |
|
|
|
3,837 |
|
Strategic alternatives expense(b) |
|
|
856 |
|
|
|
2,402 |
|
|
|
6,133 |
|
|
|
7,401 |
|
Cybersecurity incident expense(c) |
|
|
267 |
|
|
|
— |
|
|
|
5,096 |
|
|
|
— |
|
Impairment charges and asset disposal losses(d) |
|
|
89 |
|
|
|
29 |
|
|
|
609 |
|
|
|
113 |
|
Litigation charges and regulatory expense(e) |
|
|
4,977 |
|
|
|
1,295 |
|
|
|
7,383 |
|
|
|
3,980 |
|
Non-cash share-based compensation expense(f) |
|
|
8,458 |
|
|
|
645 |
|
|
|
47,624 |
|
|
|
1,908 |
|
Other(g) |
|
|
1,719 |
|
|
|
1,057 |
|
|
|
4,818 |
|
|
|
3,288 |
|
Income tax effects of special items and share-based compensation(h) |
|
|
(3,794 |
) |
|
|
(1,857 |
) |
|
|
(12,669 |
) |
|
|
(5,050 |
) |
Adjusted net income attributable to Phoenix Education Partners, Inc. |
|
$ |
55,768 |
|
|
$ |
59,533 |
|
|
$ |
132,029 |
|
|
$ |
131,859 |
|
28
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net income attributable to Phoenix Education Partners, Inc. |
|
$ |
39,167 |
|
|
$ |
53,841 |
|
|
$ |
65,401 |
|
|
$ |
116,382 |
|
Restructuring lease expense, net(a) |
|
|
4,029 |
|
|
|
2,121 |
|
|
|
7,634 |
|
|
|
3,837 |
|
Strategic alternatives expense(b) |
|
|
856 |
|
|
|
2,402 |
|
|
|
6,133 |
|
|
|
7,401 |
|
Cybersecurity incident expense(c) |
|
|
267 |
|
|
|
— |
|
|
|
5,096 |
|
|
|
— |
|
Impairment charges and asset disposal losses(d) |
|
|
89 |
|
|
|
29 |
|
|
|
609 |
|
|
|
113 |
|
Litigation charges and regulatory expense(e) |
|
|
4,977 |
|
|
|
1,295 |
|
|
|
7,383 |
|
|
|
3,980 |
|
Non-cash share-based compensation expense(f) |
|
|
8,458 |
|
|
|
645 |
|
|
|
47,624 |
|
|
|
1,908 |
|
Depreciation and amortization |
|
|
5,595 |
|
|
|
5,534 |
|
|
|
16,800 |
|
|
|
16,348 |
|
Interest income, net of interest expense |
|
|
(1,532 |
) |
|
|
(2,171 |
) |
|
|
(4,304 |
) |
|
|
(8,002 |
) |
Provision for income taxes |
|
|
14,452 |
|
|
|
18,622 |
|
|
|
30,877 |
|
|
|
40,564 |
|
Other(g) |
|
|
1,719 |
|
|
|
1,057 |
|
|
|
4,818 |
|
|
|
3,288 |
|
Adjusted EBITDA |
|
$ |
78,077 |
|
|
$ |
83,375 |
|
|
$ |
188,071 |
|
|
$ |
185,819 |
|
Net income attributable to Phoenix Education Partners, Inc. margin |
|
|
14.4 |
% |
|
|
19.8 |
% |
|
|
8.6 |
% |
|
|
15.5 |
% |
Adjusted EBITDA margin |
|
|
28.7 |
% |
|
|
30.7 |
% |
|
|
24.9 |
% |
|
|
24.8 |
% |
Net revenue used in computing net income attributable to Phoenix Education Partners, Inc. margin and adjusted EBITDA margin |
|
$ |
271,801 |
|
|
$ |
271,703 |
|
|
$ |
756,289 |
|
|
$ |
749,801 |
|
Liquidity and Capital Resources
Our primary sources of cash are cash provided by operations and cash and cash equivalents and marketable securities on hand. We also have available liquidity through our Revolving Facility.
29
Our principal uses of cash are, and we expect to continue to be, payments of our operating expenses, such as employee compensation and marketing related costs, and investments to maintain and enhance our digital technology platform and various technology systems to support and improve the student experience.
We paid a regular, quarterly cash dividend of $0.21 per share of common stock in each of our second and third quarters of fiscal year 2026. Additionally, our board of directors approved a regular, quarterly cash dividend of $0.21 per share of common stock that will be paid to shareholders of record and holders of certain share-based awards during our fourth quarter of fiscal year 2026. We plan to pay additional regular, quarterly cash dividends in subsequent quarters, subject to the discretion of and approval from our board of directors.
On April 3, 2026, our board of directors adopted a share repurchase program of up to an aggregate of $50 million of our common stock (the “April 2026 Repurchase Program”). As of May 31, 2026, we have utilized $4.0 million of the authorized amount.
We expect that any repurchases under the April 2026 Repurchase Program will be funded using our existing cash and cash equivalents. The timing and amount of any repurchases will depend on a variety of factors, including our stock price, general market conditions, liquidity and capital requirements, and other uses of cash, including potential cash outflows associated with the settlement of share-based compensation awards. Repurchases under the program may be made from time to time through open market purchases, privately negotiated purchases or other acquisitions of shares of our common stock, including pursuant to Rule 10b5-1 or Rule 10b-18 of the Securities Exchange Act of 1934, as amended.
We believe that our existing cash and cash equivalents, marketable securities, Revolving Facility and cash generated from operating activities will be sufficient to meet our working capital and other cash requirements for the foreseeable future.
Although we currently have substantial liquidity, our ability to deploy currently available liquidity is constrained by our need to maintain a Department of Education financial responsibility composite score of at least 1.5. See Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for a discussion of composite score requirements and calculations.
30
Cash and cash equivalents, restricted cash and cash equivalents and marketable securities
Our cash and cash equivalents, restricted cash and cash equivalents and marketable securities are placed with high-credit-quality financial institutions. The following provides a summary of these financial instruments as of the respective periods:
|
|
As of |
|
|
|
|
||||||
($ in thousands) |
|
May 31, |
|
|
August 31, |
|
|
% Change |
|
|||
Cash and cash equivalents |
|
$ |
155,020 |
|
|
$ |
136,504 |
|
|
|
13.6 |
% |
Restricted cash and cash equivalents |
|
|
2,973 |
|
|
|
36,497 |
|
|
|
(91.9 |
)% |
Current marketable securities |
|
|
75,051 |
|
|
|
9,005 |
|
|
|
733.4 |
% |
Noncurrent marketable securities |
|
|
36,396 |
|
|
|
12,803 |
|
|
|
184.3 |
% |
Total |
|
$ |
269,440 |
|
|
$ |
194,809 |
|
|
|
38.3 |
% |
Total cash and cash equivalents (including restricted cash and cash equivalents) and marketable securities (including current and noncurrent marketable securities) increased $74.6 million, or 38.3%, during the nine months ended May 31, 2026. The increase was principally due to $116.7 million of cash generated from operating activities, which was partially offset by $17.4 million of cash paid for dividends and dividend equivalents, $15.0 million of capital expenditures, net cash paid to settle share-based awards, and common stock repurchases.
See Note 14. Commitments and Contingencies for information on our letter of credit and the related decrease in our restricted cash and cash equivalents balance.
Operating cash flows
The following provides a summary of our operating cash flows during the respective periods:
|
|
Nine Months Ended May 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Net income |
|
$ |
64,853 |
|
|
$ |
117,871 |
|
Non-cash items |
|
|
101,937 |
|
|
|
88,509 |
|
Changes in assets and liabilities, excluding the impact of acquisition |
|
|
(50,106 |
) |
|
|
(154,591 |
) |
Net cash provided by operating activities |
|
$ |
116,684 |
|
|
$ |
51,789 |
|
For the nine months ended May 31, 2026, we generated $116.7 million of net cash provided by operating activities, which was principally attributable to net income of $64.9 million and the following:
Adjustments to reconcile net income to net cash provided by operating activities:
Changes in assets and liabilities:
For the nine months ended May 31, 2025, we generated $51.8 million of cash provided by operating activities, which was principally attributable to $117.9 million of net income and $88.5 million of non-cash adjustments. This was partially offset by a net
31
cash outflow of $154.6 million from changes in assets and liabilities, which was primarily the result of an increase in accounts receivable (excluding provision for credit losses) primarily from course start timing and a decrease in student deposits attributable to a change in the timing of financial aid disbursements for the University’s students. Before the change, financial aid funds were typically disbursed in two installments that generally involved four courses. Such funding was included in student deposits on our condensed consolidated balance sheets until students began subsequent courses. Beginning in July 2024, the University began transitioning to financial aid disbursements by course with students transitioning after they complete their current academic year. Accordingly, student deposits decreased throughout fiscal year 2025 as the University’s students transitioned to single course financial aid disbursements.
Investing cash flows
The following provides a summary of our investing cash flows during the respective periods:
|
|
Nine Months Ended May 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Purchases of property and equipment |
|
$ |
(15,005 |
) |
|
$ |
(16,399 |
) |
Marketable securities purchases, maturities and sales, net |
|
|
(89,547 |
) |
|
|
2,641 |
|
Acquisition, net of cash acquired |
|
|
— |
|
|
|
(1,982 |
) |
Other investing activities |
|
|
(108 |
) |
|
|
(58 |
) |
Net cash used in investing activities |
|
$ |
(104,660 |
) |
|
$ |
(15,798 |
) |
Net cash used in investing activities for the nine months ended May 31, 2026 and 2025 was $104.7 million and $15.8 million, respectively. Net cash used in investing activities for the nine months ended May 31, 2026 was primarily driven by $89.5 million of net marketable securities purchases and $15.0 million of purchases of property and equipment, substantially all of which related to internal software development. Net cash used in investing activities for the nine months ended May 31, 2025 was primarily driven by $16.4 million of purchases of property and equipment, substantially all of which related to internal software development, and $2.0 million paid, net of cash acquired, to acquire a controlling interest in Empath, Inc., partially offset by $2.6 million of net marketable securities maturities and sales. See Note 3. Acquisition to our condensed consolidated financial statements for more information regarding our acquisition of Empath, Inc.
Financing cash flows
The following provides a summary of our financing cash flows during the respective periods:
|
|
Nine Months Ended May 31, |
|
|||||
($ in thousands) |
|
2026 |
|
|
2025 |
|
||
Common stock repurchased |
|
$ |
(3,963 |
) |
|
$ |
— |
|
Payments of dividends and dividend equivalents |
|
|
(17,375 |
) |
|
|
— |
|
Payroll taxes paid on share-based awards |
|
|
(6,150 |
) |
|
|
(774 |
) |
Proceeds from stock option exercises |
|
|
456 |
|
|
|
— |
|
Payments of dividends and dividend equivalents to noncontrolling interests |
|
|
— |
|
|
|
(13,961 |
) |
Capital distributions to limited partners |
|
|
— |
|
|
|
(134,001 |
) |
Net cash used in financing activities |
|
$ |
(27,032 |
) |
|
$ |
(148,736 |
) |
Net cash used in financing activities was $27.0 million and $148.7 million for the nine months ended May 31, 2026 and 2025, respectively. Net cash used in financing activities for the nine months ended May 31, 2026 was primarily driven by $17.4 million of payments of dividends and dividend equivalents, $6.2 million of payroll taxes paid on share-based awards and $4.0 million for common stock repurchases. Net cash used in financing activities for the nine months ended May 31, 2025 was primarily driven by $134.0 million of capital distributions to limited partners and $14.0 million of payments of dividends and dividend equivalents to noncontrolling interests.
Off-Balance Sheet Arrangements
As of May 31, 2026, we had a $28 million outstanding letter of credit under our Revolving Facility supporting a sublease. This letter of credit was issued during the third quarter of fiscal year 2026 to replace a cash collateralized letter of credit. The replacement released the cash collateral supporting the prior letter of credit, thereby reducing restricted cash and availability under the Revolving Facility.
32
Additionally, our insurers issue surety bonds that are required by various states where we operate, or that are required for other purposes. We are obligated to reimburse our insurers for any surety bonds that are paid. As of May 31, 2026, the face amount of these surety bonds was less than $1 million.
Critical Accounting Estimates
A detailed discussion of our critical accounting estimates and significant accounting policies is included under the caption “Critical Accounting Estimates” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2025 Annual Report on Form 10-K. During the nine months ended May 31, 2026, there have been no material changes to our critical accounting estimates or our significant accounting policies as disclosed in our 2025 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 1. Nature of Operations and Significant Accounting Policies to our condensed consolidated financial statements for recently issued accounting pronouncements adopted or not yet adopted as of the date of this Quarterly Report on Form 10-Q.
JOBS Act Accounting Election
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our audited financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. See Note 1. Nature of Operations and Significant Accounting Policies to our audited consolidated financial statements for more information regarding new or revised accounting pronouncements.
We have chosen to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies; (iii) comply with certain types of new requirements adopted by the PCAOB; and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. We may remain an “emerging growth company” until August 31, 2031. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue equals or exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an “emerging growth company” prior to such date.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
We are subject to the impact of interest rate changes and may be subject to changes in the market values of our investments. We invest our excess cash in cash equivalents and marketable securities, including money market funds, U.S. Treasury securities, U.S. agency securities, and investment-grade corporate bonds and commercial paper. The fair value and investment income of these instruments fluctuate based on changes in market interest rates. A decline in interest rates could adversely affect our future investment income, and we may incur losses in principal if we are required to sell securities that have declined in market value as a result of rising interest rates.
During the three months ended May 31, 2026, our investment portfolio generated an average yield of approximately 3%, resulting in interest income of $2.2 million for the quarter.
Based on the composition of our investments as of May 31, 2026, a hypothetical 100-basis-point increase or decrease in market interest rates would not have a material impact on our condensed consolidated financial statements.
We do not currently have material risk associated with interest expense as we did not have any outstanding borrowings under our Revolving Facility as of May 31, 2026.
Item 4. Controls and Procedures.
Under the supervision and with the participation of our senior management, including our Chief Executive Officer and Chief
33
Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended May 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material effect on our consolidated financial position, results of operations or cash flows.
A description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business is provided in Note 14. Commitments and Contingencies to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which are incorporated herein by reference.
Item 1A. Risk Factors.
In addition to the information set forth in this Quarterly Report on Form 10-Q, investors should carefully consider the factors discussed in Item 1A, “Risk Factors,” in our 2025 Annual Report on Form 10-K. There have been no material changes to the risk factors previously disclosed in our 2025 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
The following table summarizes our stock repurchase activity for the three months ended May 31, 2026:
Period |
|
Total number of shares purchased |
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced plans or programs |
|
|
Approximate dollar value of shares that may yet be purchased under the plans or programs ($ in thousands) |
|
||||
March 1 to March 31, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
April 1 to April 30, 2026 |
|
|
30,445 |
|
|
$ |
28.29 |
|
|
|
30,445 |
|
|
$ |
49,139 |
|
May 1 to May 31, 2026 |
|
|
104,879 |
|
|
$ |
29.58 |
|
|
|
104,879 |
|
|
$ |
46,037 |
|
Total |
|
|
135,324 |
|
|
$ |
29.29 |
|
|
|
135,324 |
|
|
$ |
46,037 |
|
In April 2026, our Board of Directors approved a stock repurchase program (the “April 2026 Repurchase Program”) authorizing the repurchase of up to $50 million of our common stock. The April 2026 Repurchase Program was publicly announced on April 7, 2026, has no expiration date, and may be suspended, modified or discontinued at any time. The program did not expire during the quarter ended May 31, 2026, and we have not determined to terminate the program or cease making further purchases under it.
Recent Sales of Unregistered Equity Securities
The Company did not sell any unregistered equity securities during the three months ended May 31, 2026.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
35
Item 5. Other Information.
Director and Officer Trading Arrangements
During the three months ended May 31, 2026, the following directors or officers of Phoenix Education Partners, Inc. or the registrant’s subsidiaries adopted, modified, or terminated a trading arrangement that is intended to satisfy the affirmative defense conditions of a Rule 10b5-1 trading arrangement.
Name |
Title of Director or Officer |
|
Action |
|
Date |
|
Total Shares of Common Stock to be Sold |
|
|
Expiration Date |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
36
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
Certificate of Incorporation of Phoenix Education Partners, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2025) |
3.2 |
|
Bylaws of Phoenix Education Partners, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2025) |
31.1* |
|
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Phoenix Education Partners, Inc. |
|
|
|
|
|
Date: July 14, 2026 |
|
By: |
/s/ Blair Westblom |
|
|
|
Blair Westblom |
|
|
|
Chief Financial Officer |
38