Perdoceo Education Q4 2024 Earnings Call Transcript

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February 18, 2025
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Operator

Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Purdue Education Corporation Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Mr.

Operator

Nick Nelson, Alpha IR. You may begin your conference.

Nicholas Nelson
Senior Analyst at Alpha IR Group

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our fourth quarter twenty twenty four earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer and Ashish Gia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section at prodocied.com. A webcast replay will also be available on our site, and you can always contact the Alfa IR Group for Investor Relations support.

Nicholas Nelson
Senior Analyst at Alpha IR Group

Let me remind you that this afternoon's earnings release and remarks made today include forward looking statements as defined in Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions made by and information currently available to Perdocio Education and involve risks and uncertainties that could cause actual future results, performance, business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to, those factors identified in Prodoso's most recent annual report on Form 10 K and subsequent filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update those factors or any forward looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, today's remarks refer to non GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.

Nicholas Nelson
Senior Analyst at Alpha IR Group

The earnings release that accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non GAAP measures and is available within the Investor Relations page of the company's website. With that, I'd like to turn the call over to Todd Nelson. Todd?

Todd Nelson
President & CEO at Perdoceo Education

Thank you, Vic. Good afternoon, everyone, and thank you for joining us for our fourth quarter twenty twenty four earnings call. Today, I look forward to discussing the operating success we've experienced over the past year and how our academic institutions are furthering our goals of changing lives through education and preparing learners for essential skills needed in today's job market. The enrollment trends we are experiencing have reinforced and validated our strategy of optimizing and prioritizing student experiences and academic outcomes that we believe should ultimately support sustainable and responsible growth. Our acquisition of the University of St.

Todd Nelson
President & CEO at Perdoceo Education

Augustine for Health Sciences as a prestigious academic institution in the graduate health sciences field, offering clinical teaching excellence through its innovation, individualized, and quality clinical and business education model, With a strong focus on retention and graduating students, St. Augustine prepares medical professionals to serve and provide quality medical care to communities across the country. Now to the results. I'll first discuss some key highlights for the quarter and full year. Ashish will then review the operating and financial performance and discuss our 2025 outlook.

Todd Nelson
President & CEO at Perdoceo Education

As always, I'd like to thank our faculty, student support staff, and all of their employees for their outstanding and ongoing commitment and hard work in serving and educating our students. Twenty twenty four was a year of operating efficiency as we experienced further improvement in student retention and engagement across our academic institutions. This, coupled with various federal student aid initiatives put in place by the Department of Education, supported total student enrollment growth through 2024. We are entering 2025 with student retention and engagement near multi year highs and expect to operate at or near these levels through the next few quarters. The entire Perdocio team remains focused on continuing to enhance and support student retention and engagement while making selective investments in student technology and leveraging data analytics to identify and engage with prospective students who are most likely to succeed at one of our academic institutions.

Todd Nelson
President & CEO at Perdoceo Education

Let me now review some other key observations and general highlights for the quarter and year. First, our academic institutions, including the University of St. Augustine for Health Sciences, graduated over 12,000 students in 2024. And we wish them well with all their very best for the future. Marketing and admissions investments and commensurately, prospective student inquiry generation grew in the second half of twenty twenty four as we experienced an increase in interest from prospective students looking to pursue a degree at one of our academic institutions.

Todd Nelson
President & CEO at Perdoceo Education

Further, we have seen increased efficiency within our student enrollment and onboarding processes, supported by the use of data analytics and technology, as well as our evolving marketing strategies that focus on identifying prospective students who are most likely to succeed at one of our universities. We have also increased training and development within our admissions and enrollment teams. While optimistic for 2025, we will continue to monitor the myriad of rules, orders, and updated expectations from various federal and state bodies around prospective student outreach. Our corporate engagement programs remain a focus and a priority. Both AUS and CTU continue to make investments in staff and technology to further grow their programs in an efficient and effective manner.

Todd Nelson
President & CEO at Perdoceo Education

We used approximately $38,500,000 for dividends and stock buybacks during 2024. Returning cash to shareholders via quarterly dividends is expected to be an integral and growing part of our capital allocation strategy. Now I'd like to take a minute to discuss the University of St. Augustine for Health Sciences. In early December, we successfully completed the acquisition of St.

Todd Nelson
President & CEO at Perdoceo Education

Augustine, which is a leader in graduate health science degrees, primarily in physical therapy, occupational therapy and speech therapy, as well as nursing. St. Augustine offers its academic programs through a network of ground campuses in California, Florida and Texas. This strategic acquisition allows us to diversify and significantly expand our academic offerings into the health sciences field, broadening our reach and community impact. We expect St.

Todd Nelson
President & CEO at Perdoceo Education

Augustine to be accretive to Perdocio's operating income and adjusted operating income in 2025 and to provide further growth in operating income and adjusted operating income in 2026. Shifting now to our operating results. Fourth quarter and full year results surpassed our expectations. We reported fourth quarter net income of $31,500,000 or $0.47 per diluted share, while adjusted earnings per diluted share, which excludes certain significant and noncash items, was $0.5 A quick note on total student enrollments. At CCU, total student enrollments increased by 8.1% compared to the prior year end.

Todd Nelson
President & CEO at Perdoceo Education

And as anticipated, at AIU System, total student enrollments increased by 11.8% as AIUS reverted to normalized operations in 2024. As mentioned earlier, since 2020, the Department of Education has implemented several student loan initiatives that, in addition to organic improvements, contributed to total enrollment growth in 2024. Some of these programs have ended and are expected to change or end in 2025. However, we believe that the underlying momentum in student retention and student engagement metrics, coupled with increased levels of prospective student interest, should be able to offset any headwinds from loan program initiatives ending. Ashish will now provide more details on the quarter and full year performance, 2025 outlook and enrollment trends.

Todd Nelson
President & CEO at Perdoceo Education

With that said, I'd now like to turn the call over to Ashish for a deeper review of our performance. Ashish?

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Thank you, Todd. I will now review the fourth quarter and full year results and then discuss our balance sheet and 2025 outlook before handing the call back to Todd for his closing remarks. Please note all comparisons discussed on this call are versus the comparative prior year period unless otherwise stated. Please also note that the total student enrollment numbers discussed on this call or any enrollment trends that are referred to on this call exclude learners pursuing non degree seeking and professional development programs and degree seeking non Title IV self paced programs at our universities. Finally, a quick reminder about year over year comparability.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

2024 financial results include one month of operating performance from the University of St. Augustine for Health Sciences acquisition which will be reported as a separate segment and which we will refer to as St. Augustine. With that said, let us begin with an overview of our operating results. Net income for the full year was $147,600,000 or $2.19 per diluted share compared to $147,700,000 or $2.18 per diluted share.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Adjusted earnings per diluted share, which we believe is more indicative of the underlying operating performance was $2.29 as compared to $2.1 in the prior year. Please note that the 2024 EPS and adjusted EPS were higher than $0.23 despite the prior year EPS including a non recurring federal income tax benefit of approximately $4,500,000 or $0.07 Full year 2024 operating income of $174,300,000 was $23,800,000 higher as compared to the prior year quarter. Adjusted operating income which excludes certain significant and non cash items that we believe is not necessarily indicative of the underlying operating performance was $192,000,000 or 9.9% higher as compared to the prior year. As expected, revenue for the full year was lower by $28,700,000 which was more than offset with $52,000,000 in lower operating expenses. This expected decrease in revenue was primarily due to a lag impact from the 2023 operational changes at AIU System and changes within the professional development offerings at CTU.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Operating expenses for the year were favorable due to overall expense efficiencies and certain non recurring charges in the prior year that benefited year over year expense comparability. Additionally, we realized cost savings from rightsizing processes and operations that supported our professional development offerings at CTU. As we focus on delivering academic programs more effectively and efficiently while investing in student processes that we believe will further enhance the overall academic value proposition of CTU. For the fourth quarter, adjusted operating income was $43,200,000 as compared to $19,400,000 in the prior year quarter and adjusted earnings per diluted share was $0.5 as compared to $0.27 This increase was primarily due to 12.5% organic revenue growth that is after excluding St. Augustine as well as lower expenses that I just discussed.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Please note that the December acquisition of St. Augustine did not have a material impact on the year over year comparability of adjusted operating income. Full year revenue excluding St. Augustine decreased to $671,200,000 as compared to $710,000,000 This decline in full year revenue was expected due to the lag impact resulting from the operational changes made at AIU System in 2023 and simplification of our professional development offerings at CTU. But as I just mentioned, revenue in the fourth quarter increased by 12.5% to $166,400,000 primarily due to strong levels of student retention and engagement across AIU System and CTU.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Furthermore, the effects of the operational changes at AIU System have largely been annualized as AIU System has been operating at normalized levels of marketing and admissions through most of 2024. A note on total student enrollments. Total enrollments at CTU increased by 8.1% as of December 31, primarily driven by growth in enrollments from corporate engagements as well as continued improvements in prospective student interest levels, student retention and student engagement trends. At AIU System, total student enrollments at December 31 increased 11.8% as compared to the prior year. This was in line with our expectations of double digit enrollment growth at AIU System operated at normalized levels of marketing and admissions for the most of 2024.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

For 2025, we expect total revenue and total enrollments to increase versus twenty twenty four. Strong levels of prospective student interest per CTO and AIU system as well as sustained improvement in student retention and engagement should offset the headwinds from the U. S. Department of Education Student Loan Initiatives Program that have ended or are expected to change or end in 2025. Moving now to our segment results.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Full year revenue at CTU decreased by 2.6% to $456,900,000 Excluding the impact from the simplification of the professional development offerings, 2024 revenue at CTU experienced organic growth, strong underlying student retention engagement and an increase in enrollments from corporate engagements more than offset the negative impact of approximately 5% pure revenue earning days during the year and resulted in this organic revenue growth. For the fourth quarter, revenue at CTU was $114,800,000 or 9.7% higher than the prior year quarter primarily due to the growth trends I just discussed. Operating income for the quarter was $42,000,000 as compared to $25,400,000 in the prior year quarter while full year operating income increased by 18.9% to $171,300,000 Lower expenses associated with professional development offerings combined with the organic revenue growth discussed above contributed to the year over year increase in operating income. At AIU System, as expected, full year revenue decreased by 11.1% to $213,500,000 but fourth quarter revenue was $51,400,000 or 19.1% higher than the prior year quarter. The increase in fourth quarter revenue was in line with our expectations and supported by total enrollment growth which also resulted in an operating income for the quarter of $4,900,000 as compared to $600,000 Please also note that while the full year operating income decreased by 20.1% to $36,200,000 much of that decrease was experienced in the first half of twenty twenty four.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Let us now spend a minute on the University of St. Augustine for Health Sciences. St. Augustine has a traditional university calendar with ground campuses in California, Texas and Florida. The university develops professional healthcare practitioners through innovative on ground and virtual education.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

St. Augustine has three academic terms spring, summer and fall. Prospective students are generally required to have an undergraduate degree and go through a comprehensive application and admissions process, which has allowed St. Augustine to maintain strong academic outcomes and student experiences. St.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Augustine had approximately 3,800 total enrollments at December 31 and we expect that to grow in 2025. Please note that the reported total enrollments in December will typically be a low point in the year since the fall term ends in December and the spring term does not begin until January. Moving on to corporate and other, operating losses for the quarter and the year were $7,100,000 and $30,500,000 respectively which improved by $2,900,000 and $8,300,000 respectively as compared to the prior year periods. This improvement was primarily driven by lower legal expenses during the full year 2024. Now turning to income taxes.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

For the fourth quarter, we recorded a provision for income taxes of $11,700,000 This resulted in an effective tax rate of 27.2% for the quarter bringing our annual tax rate to 26.7%. The effective tax rate for the quarter was positively impacted by approximately 1.4% as a result of the overall reduction in the amount of previously recorded tax reserves for uncertain tax positions. Similarly, the full year tax rate was benefited by approximately 2% for discrete adjustments primarily attributable to the release of previously recorded tax reserves for uncertain tax positions. Finally, we expect that for the full year 2025, our effective tax rate will be between 25.526.5%, which includes an estimated benefit for the tax effect of stock based compensation and release of previously recorded tax reserves for uncertain tax positions. Now moving on to our balance sheet and liquidity.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

For the full year 2024, cash flow from operations was $161,600,000 versus $112,000,000 in the prior year. This increase was partially driven by year over year improvement in adjusted operating income. Additionally, 2023 cash flow from operations was negatively impacted by the timing of cash receipts related to tuition and fees positively impacting the comparability to 2024. We ended the year with $591,500,000 in cash, cash equivalents, restricted cash and available for sale short term investments. Excluding the St.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Augustine purchase price payment of approximately $137,800,000 this balance represents an increase of approximately $125,000,000 as compared to the year end 2023 cash balance. Some of the primary uses of cash during the year were $46,800,000 in income tax payments, $38,500,000 in return of capital to shareholders in the form of dividends and stock repurchases and $4,600,000 of capital expenditures. We expect our 2025 ending cash balance to grow as compared to the year end 2024. Please note that St. Augustine did not have a material impact on the 2024 operating cash flows, but we expect it to contribute positively to our 2025 cash flow from operations.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Capital expenditures for the full year were approximately $4,600,000 or 0.7% of revenue. For full year 2025, we foresee capital expenditures to be approximately 2% revenue, largely driven by St. Augustine. Before I share the updated outlook, let me take a minute to discuss capital allocation. We are pleased to announce that consistent with our dividend policy, the Board of Directors approved the fourth quarter twenty twenty four dividend payment of $0.13 per share payable on 03/13/2025 to the holders of record of Virtosio's common stock at the close of business on 03/01/2025.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Future quarterly dividend payments are expected to be paid out of free cash flows for the relevant year subject to Board approval and the company's available retained earnings, financial condition and other relevant factors. Subject to the requirements just mentioned, we continue to expect that quarterly dividend payments will be an integral and growing part of our balanced capital allocation strategy and generally expect to review quarterly dividend amounts on an annual basis. Our balanced approach to capital allocation prioritizes investments in organic projects focusing on technology updates that support student success as well as real estate updates for St. Augustine. At the same time, we strive to maintain a strong balance sheet while actively evaluating diverse strategies to enhance stockholder value including capital return and acquisitions.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Now let us discuss our outlook for 2025. We expect the full year 2025 adjusted operating income to range between $215,000,000 and $235,000,000 This compares to an adjusted operating income of $192,200,000 in 2024 with the expected increase primarily due to the St. Augustine acquisition, which is accretive to our 2025 performance as well as growth expectations at AIU System and CTU. Adjusted earnings per diluted share is expected to range between $2.31 and $2.51 versus $2.29 in 2024. Please note that beginning in 2025, the GAAP and adjusted EPS calculation will include incremental expenses for depreciation and finance leases related to the St.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Augustine acquisition. These expenses are excluded for the purpose of adjusted operating income. The 2025 adjusted EPS range is impacted by approximately $0.23 per diluted share related to these incremental expenses, which are not part of adjusted operating income. This outlook reflects our current beliefs that high levels of student retention and student engagement we experienced in 2024, partly supported by the positive impact from various federal student aid initiatives will continue to persist in 2025. The higher levels of prospective student interest, which we experienced in second half of twenty twenty four, will persist into 2025 and any changes to the myriad of rules, orders and update expectations from various federal and state bodies around prospective student outreach will not have a meaningful impact on prospective student interest levels.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Full year revenue will be higher than 2024, primarily due to the recent acquisition of St. Augustine. Excluding the acquisition, we expect revenue and total enrollments for both AIU System and CTU to also show growth. While we may see quarterly variability in revenue and enrollment trends, our growth assumption is that the impact from the department's student loan initiatives that have ended or expected to change or end in 2025 will be mostly offset with organic improvements in student retention, student engagement and higher levels of prospective student interest for our academic programs, including growth in corporate engagements. Additionally, for the year end 2025, AIU System has an additional academic session start in December 2025, which will contribute to the growth specifically when comparing year over year total enrollments.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

As a reminder, the academic calendar at AI system and CTU may impact the comparability of revenue earning days and enrollment results in any given quarter, but not necessarily in the same magnitude or direction. For the first quarter of twenty twenty five, we expect adjusted operating income to be in the range of $61,000,000 to $63,000,000 as compared to $14,500,000 in the prior year quarter. With adjusted earnings per diluted share to range between $0.64 and $0.67 per diluted share versus $0.6 in the first quarter of twenty twenty four. Our 2025 outlook also assumes ongoing investments in technology, data analytics, real estate, academics and student support processes. We believe these investments have been successful in positively impacting academic outcomes and student experiences.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Additionally, we will also continue to increase the size of our institution's corporate engagement teams. As disclosed in our Form 10 ks filed today, with the new presidential administration, many changes are anticipated at the Department of Education. We expect the new administration to review the organization of the department itself as well as potentially issue new regulations and provide new interpretations and guidance surrounding various topics. We will monitor and evaluate all these actions and initiatives. It is too early to determine if any of these actions or initiatives could have an impact either positive or negative on the outlook I just presented.

Ashish Ghia
Senior VP & CFO at Perdoceo Education

Please refer to our earnings release file today for important information about the key assumptions and factors underlying this discussion from today's call as well as the GAAP to non GAAP reconciliations. With that, I'll turn the call back over to Todd for his closing remarks. Todd?

Todd Nelson
President & CEO at Perdoceo Education

Thank you, Ashish. I am proud of our performance in 2024 and pleased with our operational execution, which continue to focus on improved academic outcomes and experiences for our students across our academic institutions. We're excited about the addition of the University of St. Augustine for Health Sciences. Our academic institutions remain focused on serving and educating students.

Todd Nelson
President & CEO at Perdoceo Education

And I'd like to once again thank all of our students and staff for their ongoing hard work and dedication. Thanks again for joining us.

Analysts
    • Nicholas Nelson
      Senior Analyst at Alpha IR Group
    • Todd Nelson
      President & CEO at Perdoceo Education
    • Ashish Ghia
      Senior VP & CFO at Perdoceo Education
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