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Phoenix Education Partners, Inc. (PXED)

CIK: 0001600222. SIC: 8200 Services-Educational Services. Latest 10-K as of: 2025-11-20.

SIC breadcrumb: Services > SIC Major Group 82 > SIC 8200 Services-Educational Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1600222. Latest filing source: 0001193125-25-289786.

Selected Fundamentals

MetricValueUnitFYFiled

Financials

No standardized annual SEC companyfacts metrics were extracted for this company.

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001600222.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2026-Q12025-11-30262,027,00015,454,0000.40reported discrete quarter
2026-Q22026-02-28222,461,00010,780,0000.28reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001193125-26-145546.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-04-07. Report date: 2026-02-28.

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:

•
our ability to comply with the extensive regulatory requirements for our business, and the impact of a failure to comply with applicable regulations or regulatory requirements, standards or policies, which could subject us to significant monetary liabilities, fines and penalties, including loss of or limitations upon access to U.S. federal student loans, grants and military program benefits for our students, and otherwise have a material adverse impact on our business;

•
shifts in higher education policy at the federal and state levels;

•
our ability to maintain our institutional accreditation and our eligibility to participate in Title IV programs;

•
our ability to enroll and retain students, including the impact of changes to internet search due to artificial intelligence;

•
our ability to adapt to changing market needs or new technologies;

•
our ability to maintain existing, and develop additional, business-to-business, or B2B, relationships with employers;

•
our ability to attract or retain a qualified senior management team and qualified faculty members;

•
the impact of compliance reviews, claims, or litigation that government agencies, regulatory agencies, and third parties may conduct, bring or initiate against us based on alleged violations of the extensive regulatory requirements applicable to us;

•
our ability to establish, maintain, protect and enforce our intellectual property and proprietary rights and prevent third parties from making unauthorized use of such rights;

•
liability associated with any failure to comply with data privacy and data security laws and the unauthorized access, duplication, distribution or other use of confidential or personal information, including liability and costs associated with the cybersecurity incident we identified in November 2025;

•
additional tax liabilities;

•
our ability to pay dividends on our common stock or the timing or amount of any such dividends; and

•
other risk factors included under “Risk Factors” in our Annual Report on Form 10-K.

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, dispositions, joint ventures, or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements.

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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 sale of shares associated with the offering.

In connection with the expiration of the IPO lock-up period on April 6, 2026, shares of our common stock issued upon prior or future exercises of University stock options by the option holders (other than our Section 16 officers, who remain subject to a one-year lock-up) became eligible for sale, subject to normal trading window restrictions, in the public market. Upon exercise, we may elect to settle such awards through net share settlement or repurchase of the options for cash. The extent to which these options are exercised, and the method of settlement we elect, will affect either or both the number of shares of our common stock outstanding and our liquidity.

As of the date of this filing, we cannot reasonably estimate the extent of future option exercises or the method of settlement that will be elected, and accordingly, the potential impact on our outstanding share count and liquidity is uncertain. In addition, following the expiration of the lock-up period, sales of shares by our employees and former employees may adversely affect the market price of our common stock.

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 2.9% increase in the six months ended February 28, 2026 as compared to the prior year period. 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 34% of our Average Total Degreed Enrollment in the six months ended February 28, 2026, which represents an approximate 4 percentage point increase compared to the prior year period. This represents a valuable opportunity to drive growth, diversify our student population and reinforce the durability of our net revenue as these students generally have higher retention and graduation rates. In addition, we have begun to expand discussions with employers beyond our degree offerings to include our comprehensive suite of talent development solutions and professional development offerings. While the development of our talent development solutions is in the early stages, 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, 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

22

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 we

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2025-11-20. Report date: 2025-08-31.

Item 7. 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 audited consolidated financial statements and the related notes thereto included in this Annual Report on Form 10-K. For a discussion of the year ended August 31, 2024, compared to August 31, 2023, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our prospectus dated October 8, 2025 as filed with the SEC on October 9, 2025. This discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions and forecasts. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in this Annual Report on Form 10-K. The last day of our fiscal year is August 31. Our fiscal quarters end on the last day of November, February, May and August, respectively.

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 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 nearly 1.3 million degrees.

Initial Public Offering

On October 10, 2025, we completed an initial public offering (the “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 sale of shares associated with the offering. See Item 1, “Business,” Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and the audited consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K for more information.

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. In addition, in 2018, we implemented our Tuition Price Guarantee program under which a student’s tuition price per course is frozen at the tuition rates in effect at his or her enrollment date, thereby giving each of our students certainty in the price of tuition through the duration of their programs even if rates are subsequently increased for students who enroll at later dates. 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 71.5% for the 2023/2024 cohort (our most recent completed cohort for retention rate purposes). This retention increase is a key factor driving the growth in Average Total Degreed Enrollment in recent years, including an approximate 4% increase in fiscal year 2025 as compared to fiscal year 2024. We have invested in many areas of our business and expect to further improve enrollment, retention and graduation rates, which drive sustainable growth. However, enrollment and retention of students at the University is impacted by many of the risks described in Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate” and “Risk Factors—Risks Related to Our Business,” many of which are beyond our control.

71

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 32% of our Average Total Degreed Enrollment in fiscal year 2025. This represents a valuable opportunity to diversify our student population and net revenue, drive growth and reduce acquisition costs as these students generally have higher retention and graduation rates. In addition, we have begun to expand discussions with employers beyond our degree offerings to include our comprehensive suite of talent development solutions and professional development offerings. While the development of our talent development solutions is in the early stages, 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, 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 enrollments and profitability and could impact the continued viability of our business as currently conducted. See Item 1A, “Risk Factors—Risks Related to the Highly Regulated Industry in Which We Operate—If we fail to comply with the extensive regulatory requirements applicable to our business, we could face significant monetary liabilities, fines and penalties, including loss of or limitations upon access to U.S. federal student loans, grants and military program benefits for our students.”

Cost Structure. Our ability to grow profitably depends on our ability to manage our cost structure. Our historical 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 and we expect our investments will reduce friction points and increase efficiencies throughout the University.

Seasonality. Although the University’s non-term academic model encompassing a series of courses taken consecutively over the length of the program reduces seasonal enrollment fluctuations, 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:

Fiscal Year Ended

August 31, 2025

August 31, 2024

(Enrollment statistics rounded to the nearest hundred; dollars in thousands)

Average Total Degreed Enrollment

81,900

78,900

Net income

$

135,441

$

115,148

Net income margin

13.4

%

12.1

%

Adjusted EBITDA

$

243,929

$

229,053

Adjusted EBITDA Margin

24.2

%

24.1

%

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 time periods. Additionally, enrollment is a reflection of our ability to retain continuing students and enroll new students, which are key

72

components of our growth strategy. Enrollment measures in our industry do not have a standardized meaning, and other companies in our industry may calculate various measures of enrollment 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 example, Average Total Degreed Enrollment for fiscal year 2025 is calculated as the aggregate Total Degreed Enrollment for the twelve months from September 2024 through August 2025 divided by 12.

Net income, Net income margin, Adjusted EBITDA and Adjusted EBITDA Margin. We believe net income, net income margin, Adjusted EBITDA and Adjusted EBITDA Margin are primary indicators of our operating performance because they are measures of profitability, help compare our performance across time periods and assist with the evaluation of the effectiveness of our business strategies. Additionally, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that help compare our profitability on a consistent basis across time periods by excluding items that management and the 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 that of other peer companies using similar measures. See “—Non-GAAP Financial Measures and Reconciliations” for the definition of Adjusted EBITDA and Adjusted EBITDA Margin, a reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA Margin. We calculate net income margin as net income divided by net revenue, expressed as a percentage.

Key Components of Consolidated Statements of Income

Net revenue. The University has historically generated all, or substantially all, of its consolidated net revenue from tuition-bearing degree programs. 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).

Instructional and support costs. Instructional and support costs principally consist of costs related to the delivery and administration of our educational programs and include 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 costs also include course development costs (including amortization of related intangible assets) and costs associated with delivering course content.

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, IT infrastructure costs, depreciation of property and equipment associated with our administrative functions, rent and related expenses associated with our corporate facilities and other related costs.

Strategic alternatives expense, restructuring charges and other. Strategic alternatives expense, restructuring charges and other principally consists of (1) expenses related to our IPO and other strategic alternatives for the future ownership of the University considered prior to our IPO, (2) lease expense for non-cancelable lease obligations and other related expenses for leased space we have exited as part of our ground campus and administrative space rationalization plans, and (3) other items that we consider unusual or infrequent.

Provision for income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current period and deferred tax assets and liabilities for the future tax consequences of

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events that have been recognized in an entity’s financial statements or tax returns. Our income tax expense and deferred tax assets and liabilities reflect our best assessment of estimated current and future taxes to be paid.

Comparison of Fiscal Years Ended August 31, 2025 and 2024

We have included below a discussion of our operating results and significant items explaining the material changes in our operating results for fiscal years 2025 and 2024. The following details our consolidated results of operations.

Fiscal Year Ended August 31,

% of Net Revenue

% Change

($ in thousands)

2025

2024

2025

2024

2025 versus 2024

Net revenue

$

1,007,192

$

950,015

6.0

%

Costs and expenses

Instructional and support costs

435,992

403,923

43.3

%

42.5

%

7.9

%

General and administrative

352,634

343,993

35.0

%

36.2

%

2.5

%

Strategic alternatives expense, restructuring charges and other

46,435

50,113

4.6

%

5.3

%

(7.3

)%

Total costs and expenses

835,061

798,029

82.9

%

84.0

%

4.6

%

Operating income

172,131

151,986

17.1

%

16.0

%

13.3

%

Interest income

10,458

16,690

1.0

%

1.8

%

(37.3

)%

Interest expense

(480

)

(960

)

—

(0.1

)%

(50.0

)%

Other loss, net

—

(475

)

—

(0.1

)%

*

Income before income taxes

182,109

167,241

18.1

%

17.6

%

8.9

%

Provision for income taxes

46,668

52,093

4.7

%

5.5

%

(10.4

)%

Net income

135,441

115,148

13.4

%

12.1

%

17.6

%

Net income attributable to noncontrolling interests

(1,563

)

(2,018

)

(0.1

)%

(0.2

)%

(22.5

)%

Net income attributable to the Company

$

133,878

$

113,130

13.3

%

11.9

%

18.3

%

*Not meaningful

Net revenue

Net revenue increased $57 million, or 6.0%, to $1,007 million in fiscal year 2025 from $950 million in fiscal year 2024. Since 2018, under our Tuition Price Guarantee, each student’s tuition price per course is frozen at the tuition rates in effect at his or her enrollment date. The increase in net revenue was principally attributable to enrollment growth, as measured by Average Total Degreed Enrollment, which increased approximately 4% in fiscal year 2025 as compared to fiscal year 2024. The increase in Average Total Degreed Enrollment resulted from new student growth and improved student retention. The remaining increase in net revenue was in part due to an increase in the number of course starts per student during fiscal year 2025 compared to the prior year.

Instructional and support costs

Instructional and support costs increased $32 million, or 7.9%, to $436 million in fiscal year 2025 from $404 million in fiscal year 2024. This resulted in such expenses increasing as a percentage of net revenue by 0.8%. The overall increase in instructional and support costs on a dollar basis was primarily attributable to increases in employee salaries and benefits, financial aid processing costs, credit losses on accounts receivable and variable costs associated with the increase in net revenue, including faculty wages and curriculum expense that generally fluctuate with changes in enrollment. We believe part of the increase in employee-related expenses and financial aid processing costs is temporary as we address financial aid processing changes following the Department of Education’s implementation of an updated financial aid application form and transition to disbursing financial aid by course (see further disclosure below in —Liquidity and Capital Resources).

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General and administrative

General and administrative costs increased $9 million, or 2.5%, to $353 million in fiscal year 2025 from $344 million in fiscal year 2024. This resulted in such expenses decreasing as a percentage of net revenue by 1.2%. The increase in general administrative costs on a dollar basis was primarily attributable to investments we have made in our marketing function, including increased advertising, and employee salaries and benefits to support our growth.

Strategic alternatives expense, restructuring charges and other

Strategic alternatives expense, restructuring charges and other includes the following for the respective periods:

Fiscal Year Ended
August 31,

($ in thousands)

2025

2024

Strategic alternatives expense

$

27,342

$

25,257

Exited lease expense, net

6,365

15,201

Other

12,728

9,655

Strategic alternatives expense, restructuring charges and other

$

46,435

$

50,113

Strategic alternatives expense, restructuring charges and other decreased $4 million, or 7.3%, to $46 million in fiscal year 2025 from $50 million in fiscal year 2024. This decrease was principally due to the $12.7 million loss on interest rate swaptions included in strategic alternatives expense during fiscal year 2024 associated with the debt financing we expected to be used for the strategic transaction with Four Three (see Note 1 to our audited consolidated financial statements for more information). The decrease was also the result of the decline in restructuring lease expense associated with our ground campus and administrative space rationalization plans. These decreases were partially offset by costs associated with the termination of our agreement with Four Three and costs associated with our IPO in fiscal year 2025.

Interest income

Interest income decreased approximately $6 million, or 37.3%, to $10.5 million in fiscal year 2025 from $16.7 million in fiscal year 2024. This decrease was principally attributable to a decrease in average cash and cash equivalents and marketable securities held and a decrease in interest rate yields.

Interest expense

We had no outstanding debt as of August 31, 2025 and 2024, respectively, and we incurred insignificant interest expense in fiscal years 2025 and 2024.

Other loss, net

We did not have any other loss, net in fiscal year 2025 and other loss, net was insignificant in fiscal year 2024.

Provision for income taxes

Provision for income taxes decreased $5 million, or 10.4%, to $47 million in fiscal year 2025 from $52 million in fiscal year 2024. The decrease in our provision for income taxes was principally attributable to $8.8 million of tax expense recorded in fiscal year 2024 resulting from our election to no longer pursue a claim of right credit associated with our $50 million settlement payment made in fiscal year 2020 to the Federal Trade Commission.

Our effective income tax rate in fiscal year 2025 was 25.6% compared to 31.1% in fiscal year 2024. The decrease in our effective income tax rate was primarily due to the $8.8 million of tax expense recorded in fiscal year 2024 noted above.

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Non-GAAP Financial Measures and Reconciliations

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we also provide the below non-GAAP financial measures:

•
Adjusted Net Income. We define Adjusted Net Income as net income, adjusted to eliminate the impact of restructuring lease expense, strategic alternatives expense, loss on interest rate swaptions, impairment charges and asset disposal losses, litigation charges and regulatory expense, non-cash share-based compensation expense, certain tax effects and other items set forth in the applicable table below.

•
Adjusted EBITDA. We define Adjusted EBITDA as net income, adjusted to eliminate the impact of restructuring lease expense, strategic alternatives expense, loss on interest rate swaptions, impairment charges and asset disposal losses, litigation charges and regulatory expense, non-cash share-based compensation expense, depreciation and amortization, interest income, net of interest expense, provision for income taxes and certain other items set forth in the applicable table below.

•
Adjusted EBITDA Margin. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue, expressed as a percentage.

Adjusted Net Income, 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 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 time periods and provide an additional analytical tool to help identify 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 net income recognized in accordance with GAAP.

Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools. Additionally, other companies in our industry may calculate Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting each measure’s usefulness as a comparative measure. Some of these limitations are:

•
they do not reflect costs or cash outlays for capital expenditures or contractual commitments;

•
they do not reflect changes in, or cash requirements for, our working capital needs;

•
they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and

•
Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes.

Because of these limitations, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. You are cautioned not to place undue reliance on this information.

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The following tables present reconciliations of net income to Adjusted Net Income and net income to Adjusted EBITDA and Adjusted EBITDA Margin for the periods presented below:

Fiscal Year Ended

(in thousands)

August 31,
2025

August 31,
2024

Net income

$

135,441

$

115,148

Special items and share-based compensation:

Restructuring lease expense(a)

6,365

15,201

Strategic alternatives expense(b)

27,342

12,530

Loss on interest rate swaptions(c)

—

12,727

Impairment charges and asset disposal losses(d)

185

212

Litigation charges and regulatory expense(e)

5,188

5,359

Non-cash share-based compensation expense(f)

2,631

5,775

Other(g)

8,074

4,682

Income tax effects of special items and share-based compensation(h)

(12,246

)

(13,947

)

Income tax effects from claim of right reversal, net(i)

—

8,842

Adjusted Net Income

$

172,980

$

166,529

Fiscal Year Ended

(in thousands)

August 31,
2025

August 31,
2024

Net income

$

135,441

$

115,148

Restructuring lease expense(a)

6,365

15,201

Strategic alternatives expense(b)

27,342

12,530

Loss on interest rate swaptions(c)

—

12,727

Impairment charges and asset disposal losses(d)

185

212

Litigation charges and regulatory expense(e)

5,188

5,359

Non-cash share-based compensation expense(f)

2,631

5,775

Depreciation and amortization

22,013

21,056

Interest income, net of interest expense

(9,978

)

(15,730

)

Provision for income taxes

46,668

52,093

Other(g)

8,074

4,682

Adjusted EBITDA

$

243,929

$

229,053

Net income margin

13.4

%

12.1

%

Adjusted EBITDA Margin

24.2

%

24.1

%

(a)
Restructuring lease expense represents non-cancelable lease obligations, including any offset from sublease income, and other related expenses for leased space we have exited as part of our ground campus and administrative space rationalization plans. In 2012, as a key component of the University’s transformation initiatives, the University began the process of completing the orderly closure of its ground campuses, as more enrolling students made the choice to take their programs online. The University completed the orderly closure of its campus locations in early fiscal year 2025, with only one physical location, in Phoenix, Arizona, currently enrolling new students. Additionally, the University completed its exit of 19 floors of its 22-floor administrative office buildings during fiscal year 2024 pursuant to its space rationalization plans.

(b)
Strategic alternatives expense consists of costs associated with our pursuit of strategic alternatives for the future ownership of the University during such periods. This includes costs incurred for our IPO and costs incurred pursuing a strategic transaction with Four Three, which we are no longer pursuing. See Note 1 to our audited consolidated financial statements for more information.

(c)
In July 2023, we purchased two interest rate swaptions for an aggregate premium of $9 million to hedge interest rate risk associated with the debt financing we expected to be used for the strategic transaction with Four Three. The swaptions were reported at fair value on our consolidated balance sheets until they expired out of the money during fiscal year 2024. As a result, we recognized a $12.7 million loss in fiscal year 2024 for associated changes in fair value.

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(d)
Represents non-cash impairment charges and asset disposal losses.

(e)
Litigation charges and regulatory expense principally include $4.8 million in both fiscal years 2025 and 2024 associated with a multi-year insurance policy pertaining to borrower defense to repayment claims. See Note 14 to our audited consolidated financial statements for more information on borrower defense to repayment. The remaining expense primarily represents legal fees for non-routine litigation and regulatory matters that are separate and distinct from normal, recurring litigation and regulatory expenses incurred in the normal course of our business operations.

(f)
Represents non-cash equity-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation: Stock Compensation. Although share-based compensation is a key incentive offered to our employees, we evaluate our business performance excluding share-based compensation expense because it is a non-cash expense.

(g)
Other consists of management fees pursuant to our existing management consulting agreement (see Note 1 to our audited consolidated financial statements for more information) and other expenses that we believe are not indicative of our ongoing operations. The existing management consulting agreement was terminated effective as of the pricing of our IPO and therefore no management fees will accrue or be payable for periods after that date.

(h)
Represents the income tax effect of these non-GAAP adjustments, calculated using the appropriate statutory tax rates. The non-GAAP effective tax rates were 24.6% and 24.7% for fiscal years 2025 and 2024, respectively.

(i)
Represents income tax effects from a claim of right credit that we elected to no longer pursue in fiscal year 2024 associated with our $50 million settlement payment made in fiscal year 2020 to the Federal Trade Commission. We do not believe the settlement payment and the related income tax effects are indicative of our ongoing operations. See Note 10 to our audited consolidated financial statements for more information.

Liquidity and Capital Resources

Our primary sources of cash are cash provided by operations, cash and cash equivalents and marketable securities on hand. Our principal uses of cash are, and we expect to continue to be, payments of our operating expenses, such as wages and benefits, advertising and investments to maintain and enhance our digital technology platform and various technology systems to support and improve the student experience. As discussed below, we also plan to pay a quarterly cash dividend following the completion of our IPO, subject to the discretion of our board of directors. We believe that our existing cash and investment balances and funds generated from operating activities will be sufficient to meet our working and other capital 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 this Form 10-K for a discussion of composite score requirements and calculations.

On November 13, 2025, we entered into a senior secured revolving credit facility in an aggregate principal amount of $100 million (the “Revolving Facility”). The Revolving Facility is available for general corporate purposes, including letters of credit, for the Company and its subsidiaries. The Revolving Facility matures on November 13, 2030. See Note 1 to our audited consolidated financial statements for more information.

Beginning with our second fiscal quarter ended February 28, 2026, we plan to begin paying a quarterly cash dividend of $30 million per annum in the aggregate to holders of our common stock. Although we currently intend to pay this quarterly cash dividend to holders of our common stock, we have no obligation to do so, and our dividend policy may change at any time without notice to our shareholders. Any declaration and payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, cash flows, capital requirements, levels of indebtedness, receipt of cash dividends from our operating subsidiaries, restrictions imposed by applicable law, our overall financial condition, restrictions in debt agreements that we or our subsidiaries may enter into in the future, including the Revolving Facility, and any other factors deemed relevant by our board of directors. If we pay such dividends, we may in the future reduce or discontinue entirely the payment of such dividends at any time. We are a holding company and our operations are conducted through our

78

operating subsidiaries. In the event that we do pay a dividend, we intend to cause our operating subsidiaries to make distributions to us in an amount sufficient to cover such dividend.

Cash and cash equivalents, restricted cash and cash equivalents and marketable securities

Our cash and cash equivalents, including 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:

($ in thousands)

August 31,
2025

August 31,
2024

% Change

Cash and cash equivalents

$

136,504

$

297,339

(54

)%

Restricted cash and cash equivalents

36,497

58,831

(38

)%

Current marketable securities

9,005

16,336

(45

)%

Noncurrent marketable securities

12,803

10,438

23

%

Total

$

194,809

$

382,944

(49

)%

Total cash and cash equivalents (including restricted cash and cash equivalents) and marketable securities (including current and noncurrent marketable securities) decreased $188 million, or 49%, to $195 million during fiscal year 2025 from $383 million in fiscal year 2024 principally due to $251 million of distributions (including approximately $215 million and $36 million to our limited partners and noncontrolling interests, respectively) and $22 million of capital expenditures. This was partially offset by cash generated by operating activities principally attributable to net income and associated non-cash items as further described below in “—Operating Cash Flows.”

As of August 31, 2025, our cash and cash equivalents (including restricted cash and cash equivalents) approximate fair value because of the short-term nature of the financial instruments. Our marketable securities (including current and noncurrent marketable securities) have original maturities to us greater than three months, and contractual maturities that will occur within three years. Our marketable securities are classified as available-for-sale and are measured at fair value. We determine the fair value of these investments using a market approach with Level 2 observable inputs including quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active. 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 the securities we hold are investment grade, and we had no related allowance for credit losses as of August 31, 2025.

Operating cash flows

The following provides a summary of our operating cash flows during the periods shown below:

Fiscal Year Ended

(in thousands)

August 31,
2025

August 31,
2024

Net income

$

135,441

$

115,148

Non-cash items

115,882

108,822

Changes in assets and liabilities, excluding impact of acquisition

(163,936

)

(60,734

)

Net cash provided by operating activities

$

87,387

$

163,236

Fiscal year 2025 – Our non-cash items primarily consisted of a $48 million provision for credit losses on accounts receivable, $36 million of deferred income taxes, $22 million of depreciation and amortization, and $7 million of non-cash lease expense.

The changes in assets and liabilities primarily consisted of a $73 million decrease in student deposits (see further discussion below), a $55 million increase in accounts receivable (excluding provision for credit losses in non-cash items discussed above), and an $11 million decrease in operating lease liabilities. The decrease in student deposits was primarily due to a change in the timing of financial aid disbursements for the University’s students. Before the

79

change, financial aid funds were typically disbursed in two installments that generally involved four courses. Such funding was included in student deposits on our 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.

Fiscal Year 2024 – Our non-cash items primarily consisted of a $41 million provision for credit losses on accounts receivable, $21 million of deferred income taxes, $21 million of depreciation and amortization, a $13 million loss on interest rate swaptions that were purchased in connection with our pursuit of strategic alternatives, and $8 million of non-cash lease expense.

The changes in assets and liabilities primarily consisted of a $46 million increase in accounts receivable (excluding provision for credit losses in non-cash items discussed above) and decreases in student deposits, operating lease liabilities and deferred revenue of $26 million, $14 million, and $6 million, respectively. This was partially offset by a decrease in prepaid income taxes resulting from our election to no longer pursue a claim of right credit (see Note 10 to our audited consolidated financial statements for more information).

Investing cash flows

The following provides a summary of our investing cash flows during the periods shown below:

Fiscal Year Ended

(in thousands)

August 31,
2025

August 31,
2024

Purchases of property and equipment

$

(22,457

)

$

(22,589

)

Marketable securities sales and maturities (purchases), net

4,584

(4,560

)

Acquisition, net of cash acquired

(1,982

)

—

Other investing activities

(146

)

(353

)

Net cash used in investing activities

$

(20,001

)

$

(27,502

)

Fiscal year 2025 and 2024 – Cash used in investing activities was $20 million and $28 million for fiscal years 2025 and 2024, respectively. Capital expenditures were the substantial majority of cash used in investing activities during both periods, and substantially all of our capital expenditures represented internal software development. In addition, we paid approximately $2 million, net of cash acquired, to acquire a controlling interest in Empath, Inc. (see Note 3 to our audited consolidated financial statements for more information).

Financing cash flows

The following provides a summary of our financing cash flows during the periods shown below:

Fiscal Year Ended

(in thousands)

August 31,
2025

August 31,
2024

Capital distributions to limited partners

$

(214,402

)

$

(69,959

)

Capital distributions to noncontrolling interests

(36,153

)

(5,332

)

Capital contributions

—

98

Net cash used in financing activities

$

(250,555

)

$

(75,193

)

Fiscal year 2025 and 2024 – Cash used in financing activities was $251 million for fiscal year 2025,which represented capital distributions that included approximately $215 million and $36 million to our limited partners and noncontrolling interests, respectively. Cash used in financing activities was $75 million for fiscal year 2024, which represented capital distributions that included approximately $70 million and $5 million to our limited partners and noncontrolling interests, respectively.

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Off-Balance Sheet Arrangements

We had a $32 million outstanding cash collateralized letter of credit as of August 31, 2025, which supports a sublease for a facility we have exited. 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 August 31, 2025, the face amount of these surety bonds was less than $1 million.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these 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 the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ from our estimates under different assumptions, judgments or conditions.

Our significant accounting policies, which are detailed in Note 1 to our audited consolidated financial statements, describe the significant accounting policies and methods used in the preparation of our consolidated financial statements. Of our significant accounting policies, we consider the following policies to be critical as they involve a higher degree of subjective or complex judgments and assumptions, often as a result of the need to make estimates about the effect of inherently uncertain matters: (i) Revenue Recognition, (ii) Allowance for Credit Losses, and (iii) Income Taxes.

Revenue Recognition

We analyze revenue recognition on a portfolio approach based on our determination that University students generally behave similarly (e.g., enrollment agreements all contain similar terms, refund policies are consistent, and all students work with the University to obtain some type of funding as described above). 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 contract separately.

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. Each course represents one performance obligation that the University satisfies over time and, accordingly, time elapsed (an output method) is used to recognize revenue 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). For students who participate in the University’s risk-free, three-week program during their first credit-bearing course, the University does not recognize revenue for the risk-free period until students continue beyond the risk-free period, which is when the contract with the student has commercial substance.

The University’s refund policy permits students who attend 60% or less of a course to be eligible for a refund for the portion of the course they did not attend. Accordingly, the University ceases revenue recognition for the remainder of a course if a student withdraws prior to the tuition refund period elapsing. We record refunds as a reduction of deferred revenue, and refunds are limited to the balance of deferred revenue at the date that a student withdraws.

Discounts are generally recognized over the period of instruction in the same manner as the related revenue to which the discount relates. Additionally, the University offers certain discount programs which provide students with the opportunity to earn increased tuition discounts as they take certain courses. The University evaluates such programs to determine whether the future discounts represent a material right to the student. If the future discounts represent a material right, we estimate the amount of these future discounts based on historical experience with student persistence and recognize the associated amount when the performance obligation is satisfied, which is either when the student attends applicable future courses or is no longer eligible for the discount. As of August 31, 2025 and 2024, we had approximately $13 million and $10 million, respectively, of contract liabilities for discount programs that represent material rights to students that are included in other current liabilities on our consolidated balance sheets.

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See Note 1 to our audited consolidated financial statements for more information on revenue recognition.

Allowance for Credit Losses

Our estimated allowance for credit losses is generally based on historical collection experience and write-offs, current student enrollment, the aging of the receivables, and current trends. Accounts receivable are written off once the account is deemed to be uncollectible, which typically occurs after collection efforts have ceased. We believe our allowance for credit losses reflects the amount of receivables that will become uncollectible by considering our most recent collections experience with respect to such receivables, changes in trends and other relevant facts.

We recorded provisions for credit losses of approximately $48 million and $41 million during fiscal years 2025 and 2024, respectively. Our allowance for doubtful accounts was approximately $42 million and $49 million as of August 31, 2025 and August 31, 2024, respectively, which approximated 46% and 51% of gross student receivables as of the respective dates. For the purpose of sensitivity:

•
A ten percent change in our allowance for doubtful accounts as a percentage of gross student receivables as of August 31, 2025 would have resulted in a pre-tax change in income of approximately $9 million; and

•
If our bad debt expense were to have changed by one percent of net revenue for fiscal year 2025, we would have recorded a pre-tax change in income of approximately $10 million.

See Note 1 and Note 5 to our audited consolidated financial statements for more information.

Income Taxes

We are subject to the income tax laws of the United States, which are complex and subject to differing interpretations. As a result, significant judgments and interpretations are required in determining our provision for income taxes and evaluating our uncertain tax positions.

As of August 31, 2025 and 2024, we had approximately $21 million and $47 million of net deferred tax assets, respectively. During fiscal year 2025, we recorded a valuation allowance for deferred taxes related to our Talent Mobility, Inc. operations (see Note 3 and Note 10 to our audited consolidated financial statements for more information). We have not recorded a valuation allowance for any of our other deferred tax assets principally based on our recent cumulative pre-tax income. Additionally, we had $27 million of unrecognized tax benefits, excluding interest and penalties, as of both August 31, 2025 and 2024.

See Note 1 and Note 10 to our audited consolidated financial statements for more information.

Recent Accounting Pronouncements

See Note 1 to our audited consolidated financial statements for recently issued accounting pronouncements adopted or not yet adopted as of the date of this Form 10-K.

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 to our audited consolidated financial statements for more information regarding new or revised accounting pronouncements.

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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.