Executive Summary / Key Takeaways

• Perdoceo Education Corporation is strategically expanding its reach and enhancing its educational offerings through a balanced approach of technological innovation, particularly with its "intellipath" platform, and targeted acquisitions like the University of St. Augustine for Health Sciences (USAHS).
• The company has demonstrated robust financial performance, with Q3 2025 revenue increasing by 24.8% year-over-year to $211.87 million and adjusted operating income for the full year 2025 projected between $230 million and $236 million, driven by the USAHS acquisition and organic growth at CTU and AIUS.
• Perdoceo maintains a strong balance sheet and is committed to shareholder returns through a growing quarterly dividend, recently increased to $0.15 per share, and an active $75 million share repurchase program.
• Despite a highly scrutinized regulatory environment, including changes to federal student loan programs and Gainful Employment rules, Perdoceo's focus on student retention, engagement, and career-focused programs, bolstered by AI-driven marketing, is expected to mitigate potential headwinds.
• The company's competitive edge is sharpened by its proprietary learning technologies and diversified program portfolio, positioning it for continued growth in the evolving postsecondary education landscape, particularly in high-demand health sciences.

The Evolving Landscape of Postsecondary Education: Perdoceo's Strategic Foundation

Perdoceo Education Corporation, established in 1994 and rebranded from Career Education Corporation in January 2020, operates at the forefront of postsecondary education, offering a diverse array of online, campus-based, and hybrid learning programs. The company's core strategy revolves around delivering industry-relevant, career-focused education to a broad student demographic, including busy adults and the military community. This approach is underpinned by a commitment to enhancing student experiences and academic outcomes, which management believes is crucial for sustainable and responsible growth.

The broader for-profit education sector operates under significant scrutiny from policymakers, government agencies, and interest groups. This environment necessitates a nimble operational strategy to comply with evolving federal student aid initiatives and regulations, such as the Gainful Employment (GE) rule and new earnings-premium standards for Title IV eligibility. Despite these challenges, Perdoceo has strategically positioned itself to capitalize on market opportunities, particularly through technological innovation and targeted acquisitions.

Technological Edge: Intellipath and AI-Driven Learning

A cornerstone of Perdoceo's competitive strategy is its investment in differentiated technology designed to personalize and enhance the learning experience. The company's proprietary intellipath learning platform is a prime example, leveraging data analytics to offer adaptive learning pathways. This technology is instrumental in serving and educating students while significantly enhancing overall learning and academic experiences. The tangible benefits of intellipath include improved student engagement and retention, which directly contribute to stronger customer loyalty and potentially recurring revenue. This personalized approach can lead to greater efficiency in learning outcomes, fostering better capital efficiency and growth prospects for the company.

Beyond intellipath, Perdoceo actively integrates artificial intelligence (AI) into its marketing and admissions strategies. This allows the company to more effectively identify and engage with prospective students who are statistically more likely to succeed in its academic programs. Furthermore, ongoing investments are being made to upgrade and enhance technology supporting admissions, enrollment, and student support functions, ensuring teams are well-equipped to counsel and support a growing student body. These technological differentiators contribute significantly to Perdoceo's competitive moat, driving higher student satisfaction, improving operational efficiency, and ultimately bolstering financial performance through enhanced retention and reduced acquisition costs.

Competitive Positioning in a Dynamic Market

Perdoceo operates within a competitive landscape populated by both direct and indirect education providers. Direct competitors such as Grand Canyon Education (LOPE), Adtalem Global Education (ATGE), and Strategic Education, Inc. (STRA) offer similar career-oriented programs, often with a strong online focus. Perdoceo's strategic blend of online, campus-based, and hybrid programs provides a versatile market positioning, particularly for students seeking flexibility.

Compared to its rivals, Perdoceo's intellipath platform offers a notable advantage in personalized learning, potentially providing a more tailored educational experience than some competitors' broader curriculum approaches. While companies like LOPE benefit from established scale and employer partnerships, Perdoceo's focus on innovative technology and specialized programs in fields like cybersecurity provides a distinct differentiator. For instance, Perdoceo's gross profit margin of 57.35% (TTM) and operating profit margin of 23.59% (TTM) demonstrate solid profitability within the sector. In contrast, Adtalem Global Education (ATGE) has a TTM P/E ratio of 13.54, and Strategic Education, Inc. (STRA) has a TTM P/E ratio of 16.44, while Perdoceo's TTM P/E ratio stands at 13.01, suggesting a potentially attractive valuation relative to some peers.

However, Perdoceo shares vulnerabilities with its peers, particularly regarding regulatory dependencies. The for-profit education sector's structural decline and negative public perception, as noted by some analysts, pose long-term growth threats. Indirect competitors, including massive open online courses (MOOCs) and traditional non-profit universities, also exert pressure by offering lower-cost alternatives, potentially impacting Perdoceo's market share and revenue opportunities. The company's strategic response involves continuous investment in student support and technology, alongside expanding corporate student programs at CTU and AIUS, to maintain relevance and attract a qualified workforce.

Robust Financial Performance and Operational Momentum

Perdoceo has demonstrated strong financial and operational momentum, particularly in the first three quarters of 2025. For the third quarter ended September 30, 2025, total revenue increased by 24.8% to $211.87 million compared to the prior year quarter, primarily driven by the acquisition of USAHS and organic growth at Colorado Technical University (CTU). Year-to-date September 30, 2025, total revenue grew by 25.7% to $634.46 million.

Operating income for Q3 2025 rose to $50.96 million from $44.79 million in the prior year quarter, a 13.8% increase, attributed to revenue growth at CTU and effective management of operating expenses. Adjusted operating income, a key non-GAAP measure, reached $60.97 million for Q3 2025, up from $47.85 million in Q3 2024. This reflects a 27.4% year-over-year increase, highlighting the company's underlying operational strength. Net income for Q3 2025 was $39.85 million, or $0.60 per diluted share, compared to $38.26 million, or $0.57 per diluted share, in the prior year quarter.

Segmental Contributions:

• Colorado Technical University (CTU): CTU remains a significant growth driver, with Q3 2025 revenue increasing by 4.3% to $117.07 million and operating income rising by 6.7% to $47.76 million. This growth was fueled by a 6.7% increase in total student enrollments to 32,000 as of September 30, 2025, supported by high student retention, engagement, and an expanding corporate student program.
• American InterContinental University System (AIUS): AIUS experienced a slight revenue decrease of 1.2% in Q3 2025 to $56.67 million, with total student enrollments declining by 2.9% to 10,100, primarily due to academic calendar comparability. However, operating income for AIUS increased by 8.7% to $9.26 million, driven by lower operating expenses. Management anticipates double-digit enrollment growth for AIUS by year-end 2025, positively impacting 2026 performance.
• University of St. Augustine for Health Sciences (USAHS): Acquired in December 2024, USAHS contributed $37.97 million in revenue in Q3 2025 and $113.85 million year-to-date. While USAHS reported a year-to-date operating loss of approximately $2 million, it achieved breakeven results in Q3 2025, with total student enrollments reaching 4,420 as of September 30, 2025. The acquisition has introduced significant depreciation and amortization expenses, totaling $7.10 million in Q3 2025 and $23.20 million year-to-date, related to acquired assets and finance leases.
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Liquidity and Shareholder Returns

Perdoceo maintains a robust financial position, with total cash, cash equivalents, restricted cash, and available-for-sale short-term investments amounting to $668.60 million as of September 30, 2025.

The company's operating cash flows have historically been sufficient to meet its liquidity requirements, funding operations, organic growth, and acquisitions. Net cash flows provided by operating activities increased to $185.10 million year-to-date September 30, 2025, up from $144 million in the prior year, primarily due to increased operating income.

The company is committed to a balanced capital allocation strategy that prioritizes shareholder value. On July 31, 2025, the Board approved a new $75 million stock repurchase program, replacing a prior authorization, with $54.30 million remaining as of September 30, 2025. Year-to-date, Perdoceo repurchased 2.30 million shares for $66.70 million at an average price of $29.07 per share. Furthermore, the quarterly dividend was increased from $0.13 to $0.15 per share, declared on October 31, 2025, reflecting management's confidence in future free cash flows and its commitment to making dividends an integral and growing component of its strategy. Capital expenditures for the full year 2025 are expected to be approximately 1.5% of revenue, supporting organic projects and real estate updates for USAHS.

Outlook and Strategic Trajectory

Perdoceo's management has provided an optimistic outlook for 2025, driven by strong operating trends and strategic initiatives. The company raised its full-year adjusted operating income outlook to a range of $230 million to $236 million, up from $188.9 million in 2024. Adjusted earnings per diluted share are now expected to range between $2.48 and $2.55, compared to $2.26 in 2024. This guidance incorporates incremental expenses related to depreciation and finance leases for USAHS, which are estimated to impact adjusted EPS by approximately $0.25 per diluted share.

The positive outlook is predicated on several key assumptions: the continuation of high student retention and engagement levels experienced in the first half of 2025, sustained prospective student interest, and the positive contribution from the USAHS acquisition. Full-year revenue for 2025 is projected to be higher than 2024, primarily due to USAHS and organic growth at CTU and AIUS. CTU is expected to achieve revenue and total enrollment growth throughout 2025, while AIUS anticipates double-digit enrollment growth by year-end, significantly impacting 2026 operating performance. Ongoing investments in technology, data analytics, real estate, academics, and student support processes are expected to continue enhancing student outcomes and experiences.

Key Risks and Challenges

Despite the positive outlook, Perdoceo faces several material risks inherent in the for-profit education sector. The most significant is the highly regulated environment, particularly regarding federal student aid programs. The phasing out of the Grad PLUS loan program for new students after July 1, 2026, and its replacement with a more targeted funding framework, introduces uncertainty, especially for USAHS graduate students who have historically relied on these loans. While management believes most USAHS graduate students' borrowing aligns with professional program limits, the Department of Education's final definitions and interpretations remain crucial. A material reduction in eligible Title IV programs could significantly impact student enrollments and profitability.

Furthermore, the Biden Administration's Gainful Employment (GE) regulations, despite being upheld by a district court on October 2, 2025, are subject to ongoing legal challenges and expected appeals. A new, universally applicable earnings-premium standard for Title IV eligibility, which may overlap with the GE rule, also presents an evolving regulatory landscape. While Perdoceo believes this new standard will be less restrictive, its ultimate scope and rigor are uncertain. The company also faces legal proceedings, including a False Claims Act complaint and a Civil Investigative Demand from the Department of Justice, which, while currently not reasonably estimable for potential loss, represent ongoing operational and reputational risks. The outcome of the November 2024 federal elections also introduces uncertainty regarding potential changes in regulatory interpretation and enforcement.

Conclusion

Perdoceo Education Corporation stands as a compelling investment case, demonstrating resilience and strategic foresight in a complex industry. The company's commitment to technological innovation, exemplified by its intellipath platform and AI-driven strategies, provides a robust competitive advantage in delivering personalized, career-focused education. The strategic acquisition of USAHS has successfully diversified its academic portfolio into high-demand health sciences, positioning Perdoceo for sustained growth and enhanced profitability.

With a strong balance sheet, consistent cash flow generation, and a clear capital allocation strategy that prioritizes shareholder returns through dividends and share repurchases, Perdoceo offers a compelling value proposition. While regulatory headwinds and competitive pressures are persistent, the company's proactive approach to student retention, operational efficiency, and technological leadership, coupled with its positive financial outlook for 2025, underscores its potential for continued long-term value creation. Investors should monitor the evolving regulatory landscape and the successful integration and growth of USAHS as key indicators of Perdoceo's ongoing success.