ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “expect,” “plan,” “may,” “should,” ”will,” “continue to,” “focused on” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in Part I of this Annual Report on Form 10-K that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason.
As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries. The terms “institution” and “university” refer to an individual, branded, for-profit educational institution, owned by us and including its campus locations. The term “campus” refers to an individual main or branch campus operated by one of our institutions.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:
Overview
Consolidated Results of Operations
Segment Results of Operations
Summary of Critical Accounting Policies and Estimates
Liquidity, Financial Position and Capital Resources
OVERVIEW
Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions – Colorado Technical University (“ CTU ”), the American InterContinental University System (“ AIUS ” or “ AIU System ”) and University of St. Augustine for Health Sciences (" USAHS" ) – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS prepares medical professionals to provide quality medical care to communities across the country primarily through its graduate health sciences degree offerings in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers and communities needing a qualified workforce.
Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across three reporting segments: CTU, AIUS and USAHS.
See Note 17 “ Segment Reporting ” for a description of each of our current reporting segments along with revenues, operating income, significant segment expenses and total assets by reporting segment.
Regulatory Environment and Political Uncertainty
As indicated in “ Scrutiny of the For-Profit Postsecondary Education Sector ” section within Item 1, "Business", the for-profit education industry is scrutinized by various policymakers, regulatory agencies and interest groups. Congressional hearings and roundtable discussions were previously held regarding certain aspects of the education industry, including issues surrounding student debt, as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and
reports were issued that are highly critical of for-profit colleges and universities. Many of the most highly criticized institutions have been closed now for several years.
The November 2024 federal elections resulted in a new President and Congress. We cannot predict the actions that the new Administration or Congress may take or their effect on the higher education sector. The new Congress or Administration may delay, block, modify, or eliminate certain Title IV and other regulations applicable to higher education institutions. In addition, the new Administration may interpret, apply, and enforce Title IV and other regulations in a manner different from current Department guidance and practice. We expect to continue to need to operate nimbly, making necessary changes to the extent possible to comply with new rules or interpretations as well as new interpretations of existing rules.
We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” to learn more about our highly regulated industry and related risks and uncertainties.
Note Regarding Non-GAAP measures
We believe it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.
Adjusted operating income and adjusted earnings per diluted share have limitations as an analytical tool, and should not be considered in isolation, or as a substitute for net income, operating income, earnings per diluted share, or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.
Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.
2025 Review
During the year ended December 31, 2025 (" current year "), our academic institutions remained focused on enhancing student experiences and academic outcomes while aligning their academic programs with the current demands of the workforce. Student retention continued to trend near multi-year highs and we made purposeful investments in marketing and admissions to efficiently serve the prospective student interest our academic institutions experienced.
As of December 31, 2025, we experienced total student enrollment growth, supported by continued momentum in student retention and engagement as well as increased interest from prospective students looking to pursue a degree at our academic institutions. Total student enrollments increased 7.3% at December 31, 2025 as compared to December 31, 2024, driven by enrollment growth at all three of our academic institutions. CTU's total student enrollments increased 6.6% as compared to the prior year end, supported by high levels of student retention and engagement, growth within the corporate student program and strong levels of prospective student interest. Total student enrollments increased 11.2% at AIUS for the current year end as compared to the prior year end, driven by an additional academic session during the fourth quarter, as well as underlying student retention and engagement trends. Lastly, for USAHS, total student enrollments increased 2.6% for the current year end as compared to the prior year end, primarily driven by growth in programs such as nursing and speech language pathology.
Strategic investments in technology have been strong contributors to enrollment growth across all three of our academic institutions, as it gives our students, faculty and support staff the enhanced resources to support enrollment processes, student experiences and academic outcomes. Additionally, we are continuing to refine our overall marketing, advising, and admissions investments with a focus on optimizing the effectiveness of our student enrollment and support processes. This approach is designed to further enhance student retention and engagement while maintaining a disciplined cost structure.
Through our corporate student programs, we provide accredited degree opportunities to employees of our partner organizations, supporting their career advancement while helping corporate partners strengthen employee development and retention. We continue to make strategic investments in technology and talent to expand these programs.
We expect the strong levels of student retention and student engagement we experienced over the past year, as well as the prospective student interest experienced, to continue into 2026. As a result, full year adjusted operating income is expected to be higher for 2026 as compared to 2025, primarily driven by expected total student enrollment and revenue growth.
Financial Highlights
Revenue for the current year increased by 24.2% or $164.8 million as compared to the prior year, primarily due to an increase of $147.5 million of revenue from the USAHS acquisition which was completed in December 2024 and therefore did not have comparable results in the prior year. CTU also contributed to the increase in revenue due to growth in total student enrollments driven by strong student retention and engagement trends along with increased prospective student interest, while AIUS remained relatively flat as compared to the prior year.
Operating income for the current year increased by 12.5% to $196.0 million as compared to operating income of $174.3 million in the prior year, driven by increased operating income within all three of our academic institutions as well as reduced operating losses within Corporate and Other. The increase in operating income for the current year was a result of revenue growth and continued management of operating expenses.
The Company believes it is useful to present non-GAAP financial measures, such as adjusted operating income, which exclude certain non-cash items, as a means to better understand the core performance of its operations. During the current year, the Company no longer adjusts for legal fees associated with certain matters as these amounts are no longer material to the results of operations and, as a result, prior period non-GAAP amounts have been recast to be comparable. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $237.6 million for the current year as compared to $188.9 million for the prior year.
Adjusted operating income and adjusted earnings per diluted share for the years ended December 31, 2025 and 2024 is presented below (dollars in thousands, except per share amounts):
For the Year Ended December 31,
Adjusted Operating Income
Operating income
Depreciation and amortization
Adjusted Operating Income
For the Year Ended December 31,
Adjusted Earnings Per Diluted Share
Reported Earnings Per Diluted Share
Pre-tax adjustments included in operating expenses:
Amortization for acquired intangible assets
Total pre-tax adjustments
Tax effect of adjustments (1)
Total adjustments after tax
Adjusted Earnings Per Diluted Share
The tax effect of adjustments was calculated by multiplying the pre-tax adjustments with a tax rate of 25%. This tax rate is intended to reflect federal and state taxable jurisdictions as well as the nature of the adjustments.
CONSOLIDATED RESULTS OF OPERATIONS
The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the years ended December 31, 2025 and 2024 (dollars in thousands), including comparisons of our year-over-year performance between these years. Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of our results for the year ended December 31, 2024, as well as the year-over-year comparison of our 2024 financial performance to 2023.
For the Year Ended December 31,
Total
Revenue
Total
Revenue
Total
Revenue
TOTAL REVENUE
OPERATING EXPENSES
Educational services and facilities (1)
General and administrative (2) :
Advertising and marketing
Admissions
Administrative
Bad debt
Total general and administrative expense
Depreciation and amortization
Asset impairment
OPERATING INCOME
PRETAX INCOME
PROVISION FOR INCOME TAXES
Effective tax rate
NET INCOME
Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, and costs of educational supplies and goods and services, including costs of textbooks and laptops, and rents on leased campus and administrative facilities.
General and administrative expense includes operating expenses associated with corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.
Year Ended December 31, 2025 as Compared to the Year Ended December 31, 2024
Revenue
Revenue for the year ended December 31, 2025 (" current year ") increased by 24.2% or $164.8 million, as compared to the prior year. The increase was primarily driven by the acquisition of USAHS, which was completed in December 2024 and therefore not included for the full comparative period of the prior year. Excluding the impact of the USAHS, revenue increased due to higher revenue at CTU as a result of growth in total student enrollments for the current year as compared to the prior year.
Educational Services and Facilities Expense (dollars in thousands)
For the Year Ended December 31,
2025 vs 2024 % Change
2024 vs 2023 % Change
Educational services and facilities:
Academics & student related
Occupancy
Total educational services and facilities
Educational services and facilities expense for the current year increased by 63.4% or $76.7 million as compared to the prior year. The increase was primarily due to a full year of expenses related to the USAHS acquisition as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, expenses increased slightly, primarily driven by increased academic expenses at CTU to support the growth in total student enrollments.
Academics and student-related costs increased by 54.2%, or $60.8 million, and occupancy-related costs increased by 183.7%, or $15.9 million, respectively, as compared to the prior year. These increases were primarily attributable to a full year of expenses related to USAHS in the current year, as compared to only one month of such expenses in the prior year period.
General and Administrative Expense (dollars in thousands)
For the Year Ended December 31,
2025 vs 2024 % Change
2024 vs 2023 % Change
General and administrative:
Advertising and marketing
Admissions
Administrative
Bad Debt
Total general and administrative expense
The general and administrative expense for the current year increased by 12.0% or $43.9 million as compared to the prior year. The increase was primarily due to a full year of expenses related to the USAHS acquisition as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, expenses increased by 1.3% or $4.9 million, primarily driven by higher expenses at CTU to support the growth in total student enrollments for the current year as compared to the prior year.
Advertising and marketing expense for the current year increased by 11.8% or $11.9 million as compared to the prior year. The increase was due to a full year of advertising and marketing expenses related to the USAHS acquisition in the current year, as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, advertising and marketing costs decreased slightly as compared to the prior year.
Admissions expense increased by 8.8% or $7.2 million as compared to the prior year. The increase was primarily attributable to a full year of admissions expenses related to the USAHS acquisition in the current year, as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, admissions expenses would have slightly increased as compared to the prior year, primarily due to total student enrollment growth at both CTU and AIUS.
Administrative expense for the current year increased by 19.3% or $29.0 million as compared to the prior year. The increase was primarily attributable to a full year of administrative expenses related to the USAHS acquisition in the current year, as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, administrative expenses would have increased as compared to the prior year, primarily due to non-recurring personnel investments in the current year period.
Bad debt expense incurred by each of our segments during the years ended December 31, 2025, 2024 and 2023 was as follows (dollars in thousands):
For the Year Ended December 31,
% of Segment Revenue
% of Segment Revenue
% of Segment Revenue
2025 vs 2024 % Change
2024 vs 2023 % Change
Bad debt expense by segment:
CTU
AIUS
USAHS (1)
Corporate and Other
Total bad debt expense
(1) USAHS includes results of operations starting from the acquisition date on December 2, 2024.
Bad debt expense decreased by 12.5% or $4.2 million for the current year as compared to the prior year. The improvement for the current year was primarily driven by decreases in bad debt expense at both CTU and AIUS as we experienced stronger student engagement and retention within our academic institutions.
We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. We continue to expect quarterly fluctuations in bad debt expense.
Depreciation and Amortization Expense
Depreciation and amortization expense increased by 184.2% or $27.0 million as compared to the prior year. This increase was primarily driven by amortization associated with intangible assets at USAHS as well as increased depreciation expense for assets within USAHS, including a failed sale lease-back transaction.
Operating Income
Operating income for the current year increased by 12.5% or $21.7 million as compared to the prior year. This improvement was primarily driven by increased revenue, which more than offset the increases in operating expenses, as compared to the prior year.
Provision for Income Taxes
The effective income tax rate for the current year was 26.3% compared to 26.7% for the prior year. The decrease in the effective income tax rate was primarily due a reduction in nondeductible compensation.
For the full year 2026, we expect our effective tax rate to be between 23.5% and 24.5%.
SEGMENT RESULTS OF OPERATIONS
The summary of segment financial information below should be referenced in connection with a review of the following discussion of our segment results from operations for the years ended December 31, 2025 and 2024 (dollars in thousands), including comparisons of our year-over-year performance. Please refer to Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of our results for the year ended December 31, 2024, as well as the year-over-year comparison of our 2024 financial performance to 2023.
For the Year Ended December 31,
2025 vs 2024 % Change
2024 vs 2023 % Change
REVENUE:
CTU (1)
AIUS (1)
USAHS (2)
Corporate and Other
Total
OPERATING INCOME (LOSS):
CTU (1)
AIUS (1)
USAHS (2)
Corporate and Other
Total
OPERATING INCOME (LOSS) MARGIN:
CTU (1)
AIUS (1)
USAHS (2)
Corporate and Other
Total
The prior year operating results for CTU and AIUS were recast to reflect the transition of Hippo Education from CTU to AIUS.
USAHS includes results of operations beginning on the acquisition date of December 2, 2024. Operating income (loss) for the current year includes $30.3 million of depreciation and amortization expense associated with acquired tangible and intangible assets, as well as finance leases, as compared to $2.5 million in the prior year.
As of December 31,
2025 vs 2024 % Change
2024 vs 2023 % Change
TOTAL STUDENT ENROLLMENTS:
CTU
AIUS
USAHS (1)
Total
Perdoceo completed the acquisition of USAHS on December 2, 2024.
Total student enrollments represent all students who are active as of the last day of the reporting period. Active students are defined as those students who are considered in attendance by participating in class related activities during the previous two weeks of the most recent academic term. Total student enrollments do not include learners participating in: a) non-degree seeking and professional development programs, and b) degree seeking, non-Title IV, self-paced programs at our universities.
Year Ended December 31, 2025 as Compared to the Year Ended December 31, 2024
CTU. Revenue for the current year increased by 4.1% or $18.2 million as compared to the prior year. The increase was driven by total student enrollment growth of 6.6% at December 31, 2025 as compared to December 31, 2024. CTU's total student enrollment growth was supported by high levels of student retention and engagement, growth in the corporate student program and higher levels of prospective student interest.
Current year operating income for CTU increased by 3.4% or $5.9 million as compared to the prior year. This improvement in operating income was driven by the increase in revenue discussed above, which more than offset increased operating expenses to support the student enrollment growth.
AIUS. Revenue for the current year decreased slightly by 0.4% or $0.9 million as compared to the prior year. Total student enrollments increased by 11.2% at December 31, 2025 as compared to December 31, 2024 due to an extra session start in December 2025, which will positively impact revenue into 2026. The slight decrease in revenue is driven by Trident University, as the recent government shutdown disparately impacted this institution.
Current year operating income for AIUS increased by 9.8% or $3.2 million as compared to the prior year, driven by lower operating expenses as compared to the prior year.
USAHS. Revenue for the current year was approximately $157.6 million, with operating income of approximately $3.2 million. Operating income for the current year includes $30.3 million of depreciation and amortization expense associated with acquired tangible and intangible assets, as well as finance leases, as compared to $2.5 million in the prior year.
Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current year improved by 22.2% or $6.8 million as compared to the prior year, primarily due to lower acquisition-related expenses.
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have identified the accounting policies and estimates listed below as those that we believe require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 2 “Summary of Significant Accounting Policies” to our audited consolidated financial statements which includes a discussion of these and other significant accounting policies.
Revenue Recognition
Description : Our revenue, which is derived primarily from academic programs taught to students who attend our universities, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our universities and are reflected net of scholarships and tuition discounts. Our universities charge tuition and fees at varying amounts and bill students a single charge that covers tuition, certain fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed separately to students. These fees are generally earned over the applicable term and are not considered separate performance obligations.
Assumptions and judgment : Revenue recognition includes assumptions and significant judgments including determination of the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606 as well as the assessment of
collectability. We analyze revenue recognition on a portfolio approach under ASC Topic 606. Significant judgment is used in determining the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606. We have determined that all of our students can be grouped into one portfolio. Based on our past experience, students at different universities, in different programs or with different funding all behave similarly. Enrollment agreements all contain similar terms, refund policies are similar across all institutions and students work with the university to obtain some type of funding, for example, Title IV Program funds, Veterans Administration funds, military funding, employer tuition assistance or self-pay. We have significant historical data for our students which allows us to analyze collectability. We do not expect that revenue earned for the portfolio is significantly different as compared to revenue that would be earned if we were to assess each student contract separately.
Significant judgment is also required to assess collectability, particularly as it relates to students seeking funding under Title IV Programs. Because students are required to provide documentation, and in some cases extensive documentation, to the Department to be eligible and approved for funding, the timeframe for this process can sometimes span between 90 to 120 days. We monitor the progress of students through the eligibility and approval process and assess collectability for the portfolio each reporting period to monitor that the collectability threshold is met.
These assumptions and significant judgments are based upon our interpretation of accounting guidance and historical experience. Although management believes these assumptions and significant judgments to be reasonable, actual amounts may differ if historical experience is not reflective of future results.
Impact if actual results differ from assumptions and judgment: If actual performance is not consistent with historical experience in regards to our assessment of collectability, our revenue recognition may be materially different than what was originally recorded.
Allowance for Credit Losses
Description: We extend unsecured credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs. Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we estimate will ultimately not be collectible. As such, our results from operations only reflect the amount of revenue that is estimated to be reasonably collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trend analysis of our collections and write-off experience as well as monitoring any emerging factors that we believe impact the ability to collect our student receivables.
Assumptions and judgment: Management makes a range of assumptions to determine what is believed to be the appropriate level of allowance for credit losses. Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast period as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the historical modeling factors described above. All of these estimates are susceptible to significant change.
Impact if actual results differ from assumptions and judgment : We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or modifications to our collection practices, and other related policies may impact our estimate of our allowance for credit losses and our results from operations.
A one percentage point change in our allowance for credit losses as a percentage of gross earned student receivables as of December 31, 2025 would have resulted in a change in pretax income of $0.8 million during the year then ended.
Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs, would likely have a material impact on the realizability of future receivables.
Income Taxes
Description : We are subject to the income tax laws of the U.S. and various state, local and foreign jurisdictions. These tax laws are complex and subject to interpretation. As a result, significant judgments and interpretations are required in determining our income tax provisions (benefits) and evaluating our uncertain tax positions.
We account for income taxes in accordance with FASB ASC Topic 740 – Income Taxes . Topic 740 requires the recognition of deferred income tax assets and liabilities based upon the income tax consequences of temporary differences between financial reporting and income tax reporting by applying enacted statutory income tax rates applicable to future years to differences between the financial statement carrying amounts and the income tax basis of existing assets and liabilities. Topic 740 also requires that deferred
income tax assets be reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized.
Assumptions and judgment: In establishing a provision for income tax expense or a liability for an uncertain tax position, we must make judgments and interpretations about the application of inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems in the various tax jurisdictions or may be settled with the taxing authority upon examination or audit.
Impact if actual results differ from assumptions and judgment: Although we believe the judgments and estimates used are reasonable, actual results could differ and we may be exposed to changes in tax liability that could be material. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would result in an increase in our effective income tax rate.
LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES
As of December 31, 2025, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $643.5 million. Restricted cash as of December 31, 2025 was $21.3 million and primarily relates to a letter of credit USAHS is required to maintain with the Department of Education. On January 16, 2026, USAHS was notified by the Department that it is no longer required to maintain its existing letter of credit in the amount of $20.5 million and thus these funds are no longer restricted as of the date of the letter. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We generated cash in 2025 as a result of improved operating performance and expect to continue to generate cash in 2026. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments, share repurchases and quarterly dividends payments through at least the next 12 months primarily with cash generated by operations and existing cash balances.
We maintain a balanced capital allocation strategy that focuses on maintaining a strong balance sheet and adequate liquidity, while (i) investing in organic projects at our universities, in particular technology-related initiatives which are designed to benefit our students, as well as real estate updates, and (ii) evaluating diverse strategies to enhance stockholder value, including acquisitions, quarterly dividend payments and share repurchases. Ultimately, our goal is to deploy resources in a way that drives long term stockholder value while supporting and enhancing the academic value of our institutions.
On July 31, 2025, the Board of Directors of the Company approved a stock repurchase program for up to $75.0 million, which commenced July 31, 2025 and expires January 31, 2027. The stock repurchase program replaced the previous stock repurchase program approved on February 20, 2024. The timing of purchases and the number of shares repurchased under the program is determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors.
During the year ended December 31, 2025, we repurchased 4.1 million shares of our common stock for approximately $120.8 million at an average price of $29.17 per share. Shares of stock repurchased under the program are held as treasury shares. These repurchased shares have reduced the weighted average number of shares of common stock outstanding for basic and diluted earnings per share calculations.
On January 2, 2026, the Board of Directors of the Company approved a new common stock repurchase program, authorizing the Company to repurchase up to $100.0 million of its outstanding common stock on the open market. This new stock repurchase program, which expires on June 30, 2027, replaces the previous $75.0 million stock repurchase program, which was described above. The stock repurchase program may be modified, suspended or discontinued at any time in the Company's discretion without prior notice, and does not commit the Company to repurchase shares of its common stock.
The Board of Directors approved the aforementioned stock repurchase programs believing it advantageous to the Company and its stockholders to repurchase shares of the Company’s common stock from time to time at prices below what the Board of Directors believed to be the intrinsic value of the Company’s common stock.
The discussion above reflects management’s expectations regarding liquidity; however, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on timing or our ability to receive Title IV Program funds, or any requirement to post a significant letter of credit to the Department, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student enrollments which could be impacted by external factors. See Item 1A, “ Risk Factors .”
Sources and Uses of Cash
Operating Cash Flows
During the years ended December 31, 2025 and 2024, net cash flows provided by operating activities totaled $225.2 million and $161.6 million, respectively. The increase in net cash flows from operating activities for the current year was primarily driven by increased operating income.
Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state grant programs, private loans and grants, institutional payment plans, private and institutional scholarships, and cash payments. For the years ended December 31, 2025 and 2024, approximately 76% and 77% of our institutions’ aggregate cash receipts from tuition payments came from Title IV Program funding. This percentage differs from the Title IV Program percentage calculated under the 90-10 Rule due to the treatment of certain funding types and certain student level limitations on what and how much to count as prescribed under the rule.
For further discussion of Title IV Program funding and other funding sources for our students, see Item 1, “ Business - Student Financial Aid and Related Federal Regulation. ”
Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.
Investing Cash Flows
During the years ended December 31, 2025 and 2024, net cash flows used in investing activities totaled $53.6 million and $107.8 million, respectively.
Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash outflow of $47.0 million for the year ended December 31, 2025 as compared to a net cash inflow of $34.6 million for the year ended December 31, 2024.
Capital Expenditures. Capital expenditures increased to $8.6 million for the year ended December 31, 2025 as compared to $4.6 million for the year ended December 31, 2024. Capital expenditures represented approximately 1.0% and 0.7% of revenue for the years ended December 31, 2025 and 2024, respectively. For the year ending December 31, 2026, we expect capital expenditures to be approximately 1.5% of revenue.
Business acquisition. The Company received a working capital true up of $0.8 million from the former owners of USAHS in connection with the USAHS acquisition during the current year. For the year ended December 31, 2024, the Company made total cash payments of $137.8 million in relation to USAHS acquisition.
Financing Cash Flows
During the years ended December 31, 2025 and 2024, net cash flows used in financing activities totaled $171.1 million and $41.1 million, respectively.
Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $7.5 million for the year ended December 31, 2025 and $3.4 million for the year ended December 31, 2024.
Repurchase of stock. During the year ended December 31, 2025, we repurchased 4.1 million shares of our common stock for approximately $120.8 million at an average price of $29.17 per share. During the year ended December 31, 2024, we repurchased 0.4 million shares of common stock for $6.8 million at an average price of $17.60 per share. Repurchases of stock during 2025 and 2024 were funded by cash generated from operating activities and existing cash balances. See Part II, Item 5 for more information.
Release of cash held in escrow . During each of the years ended December 31, 2025 and 2024, we released $0.3 million of escrow funds associated with acquisitions.
Payments of cash dividends and dividend equivalents . During the years ended December 31, 2025 and 2024, the Company made dividend and dividend equivalent payments of $36.9 million and $31.7 million, respectively.
Principal payments for finance leases and failed sale leaseback. During the years ended December 31, 2025 and 2024, the Company made payments of $5.5 million and $1.1 million, respectively, for finance leases and a failed sale leaseback, both related to the acquisition of USAHS.
Earnout payments related to business acquisition. During the year ended December 31, 2025, the Company made cash earnout payments of $1.8 million related to the Coding Dojo acquisition.
Contractual Obligations
As of December 31, 2025, future minimum cash payments due under contractual obligations for our non-cancelable operating and finance lease arrangements were $62.9 million and $12.2 million, respectively. Of these amounts, approximately $9.0 million for operating leases and $6.0 million for finance leases are due within the next 12 months. Additionally, future minimum cash payments due under a failed sale leaseback transition were $154.1 million. These future minimum cash payments reflect base rent and other fixed lease-related costs identified in the lease agreements but excludes variable costs such as common area maintenance payments and taxes, as these amounts are undeterminable at this time and may vary based on future circumstances. We lease most of our administrative and educational facilities under non-cancelable operating leases expiring at various dates through 2050.
As of December 31, 2025, we were not a party to any off-balance sheet financing or contingent payment arrangements, nor do we have any unconsolidated subsidiaries.
Changes in Financial Position – December 31, 2025 Compared to December 31, 2024
Selected consolidated balance sheet account changes from December 31, 2024 to December 31, 2025 were as follows (dollars in thousands):
As of December 31,
% Change
ASSETS
CURRENT ASSETS:
Cash, cash equivalents, restricted cash and short-term investments
NON-CURRENT ASSETS:
Goodwill
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Payroll and related benefits
NON-CURRENT LIABILITIES:
Sale lease-back financing
Construction financing
Cash, cash equivalents, restricted cash and short-term investments. The increase in total cash, cash equivalents, restricted cash and short-term investments is primarily due to increased operating income, partially offset with payments for share repurchases and dividends.
Goodwill: The increase in goodwill during the period was due to the finalization of purchase accounting for the USAHS acquisition.
Payroll and related benefits: The increase primarily relates to an accrual for a non-recurring investment in personnel costs that was paid in the first quarter of 2026.
Sale lease-back financing. The increase in sale lease-back financing liability is primarily due to the recategorization of construction financing upon lease commencement due to a failed sale leaseback transaction.
Construction financing. The decrease in construction financing liability is primarily due to the recategorization of the failed sale leaseback upon lease commencement.
Recent Accounting Pronouncements
See Note 4 “ Recent Accounting Pronouncements ” to our consolidated financial statements for a discussion of recent accounting pronouncements that may affect us.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, primarily changes in interest rates. We use various techniques to manage our interest rate risk. We have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available-for-sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we use asset managers who conduct initial and ongoing credit analyses on our investment portfolio and monitor that investments are in compliance with our investment policy. Despite the investment risk mitigation strategies
we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline.
Interest Rate Exposure
Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At December 31, 2025, a 100 basis point increase or decrease in average interest rates applicable to our investments would not have had a material impact on our future earnings, fair values or cash flows.
Our financial instruments are recorded at their fair values as of December 31, 2025 and December 31, 2024. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates applicable to our investments or borrowings is not significant.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is contained in Part IV, Item 15 of this Annual Report on Form 10-K.
