Phoenix Education Partners Q1 Fiscal 2026 Earnings Call - Steady Enrollment Growth and AI Integration Drive Optimism

Conference Operator: Good afternoon and welcome to Phoenix Education Partners First Quarter Fiscal 2026 Earnings Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. Following prepared remarks, we will open the call for questions. I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Please go ahead.

Beth Coronelli, Vice President of Investor Relations, Phoenix Education Partners: Welcome to the Phoenix Education Partners First Quarter Fiscal 2026 Earnings Conference Call. Speaking on today’s call are Chris Lynne, our Chief Executive Officer, and Blair Westbloom, our Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on current market, competitive and regulatory expectations, and are subject to risks and uncertainties that could cause actual results to vary materially. Listeners should not place undue reliance on such statements. We undertake no obligation to update publicly any forward-looking statement after this presentation, whether a result of new information, future events, changes in assumptions, or otherwise. The risks related to these forward-looking statements are described in our filings with the SEC, including our most recent Form 10-K, Form 10-Q, and other public filings. We will also discuss certain non-GAAP financial measures.

You should consider our non-GAAP results as supplements to, and not in lieu of, our GAAP results. Reconciliations to the most directly comparable GAAP measures can be found in our earnings release and SEC filings. Unless otherwise noted, comments in the call will focus on the comparison to the prior year period. We also direct you to the supplemental earnings slides provided on the Phoenix Education Partners website. With that, I’ll turn the call over to Chris.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Thank you, Beth, and good afternoon, everyone. We appreciate you joining us as we report our results for the first quarter of fiscal 2026. This quarter’s results demonstrate a disciplined execution of our strategy, marked by steady growth, strong retention, and continued investment in student success and long-term value creation. At the University of Phoenix, our mission remains clear: to expand access to higher education that delivers relevant, career-aligned skills for working adults. The students we serve reflect that mission. As our students balance work, family, and education, we remain focused on meeting their needs through flexible programs, strong academic outcomes, and a personalized student experience. Turning to the first quarter, we delivered a solid start to the year with financial performance consistent with our expectations and results that reinforced the full-year outlook we provided on our November earnings call.

First quarter revenue grew 2.9% year over year, with a 4.1% increase in average total degree enrollment to 85,600 students. Employer-affiliated enrollment continues to be an important contributor to overall enrollment growth and now accounts for approximately 34% of total enrollment, which is up from approximately 31% in first quarter 2025. Adjusted EBITDA increased 7.2%, reflecting continued revenue growth, enhanced productivity, and operational efficiency, while sustaining strong student outcomes. Our focus on student outcomes, as well as execution and efficiency, carries directly into how we approach AI and technology across the university. As we’ve discussed previously, we view AI as an important enabler of our existing strategies, and we apply it in a disciplined, deliberate manner, empowering our team to explore and evolve how we work in service of our students. Our approach centers on two priorities. First, we are preparing students to be AI-fluent.

As the workforce landscape continues to change rapidly, we are embedding AI into programs, course content, and the learning experience so students build practical, career-relevant skills. We are equipping learners to use AI ethically and appropriately, understanding when AI adds value and when human judgment is essential. Second, we are leveraging AI as an institution to drive operational excellence. We are starting to use AI to remove friction, increase personalization, automate complexity, and unlock capacity, enabling us to focus on what truly matters.

We are encouraged with our progress, leveraging AI to improve outcomes across the student journey, with examples that include the use of AI-assisted appointment setting and outreach in certain situations to improve enrollment conversion and retention, as well as several pilots we have in production leveraging large language models with our proprietary data to enhance our AI chat assistance in servicing our students 24/7, both inside and outside the classroom. Let’s move on to regulatory updates. Last week, the Negotiated Rulemaking Committee reached consensus on accountability measures related to changes enacted under the One Big Beautiful Bill Act. The proceedings were consistent with our expectations. No new material areas of risk were introduced during the process, and we are pleased we will now have an accountability framework that applies equally to all programs at all institutions.

As part of Negotiated Rulemaking, the Department of Ed released preliminary program performance accountability metrics. Now, while this information is preliminary, we were encouraged that based on these informational program performance metrics, all University of Phoenix programs for which metrics were provided are passing. I’d also like to briefly address the cybersecurity incident involving our Oracle E-Business Suite software platform, which was disclosed in our early December 8K. The university was one of numerous organizations, including other academic institutions, from which an unauthorized third party exploited a zero-day software vulnerability in Oracle EBS to obtain certain personal information without authorization. The software vulnerability has since been remediated. The incident did not impact our student and academic programming and was addressed promptly.

We recorded $4.5 million of expenses associated with this incident, principally representing costs to notify the affected parties, fees from third-party cybersecurity firms, legal fees, and other expenses related to the incident response. While we expect to incur additional related expenses in future periods, we maintain a comprehensive cybersecurity insurance policy, subject to customary deductibles, exclusions, and limits. Reflecting confidence in the durability of our cash generation, we announced the declaration of our inaugural regular quarterly cash dividend of approximately $0.21 per share of common stock, which was approved by our board of directors and is consistent with the dividend amount we outlined during the IPO process. This decision underscores our disciplined approach to capital allocation and long-term value creation, while continuing to invest in our students, programs, and growth initiatives.

As we move into the second quarter of fiscal 2026, our focus remains on disciplined execution and investing resources intentionally as we balance growth, student success, and financial performance. We started the year on solid footing and are well-positioned to continue executing against our strategic priorities and are guided by our mission to enhance the learner experience and strengthen engagement and retention to support adult learners in achieving meaningful educational and long-term career outcomes. I’ll now turn the call over to Blair to walk through our financial results in more detail.

Blair Westbloom, Chief Financial Officer, Phoenix Education Partners: Thank you, Chris, and good afternoon. For the first quarter of fiscal 2026, our results were in line with our expectations. Net revenue increased 2.9% to $262 million, driven by a 4.1% increase in average total degree enrollment to 85,600 students, supported by new student growth and retention gains from fiscal year 2025 continuing into first quarter 2026. Net income attributable to the company was $15.5 million, or $0.40 diluted earnings per share, compared to $46.4 million a year ago, or $1.23 diluted earnings per share. The decrease in net income attributable to the company and diluted earnings per share was primarily due to non-cash share-based compensation and other expenses that resulted from the initial public offering. Adjusted net income attributable to the company increased 5.3% to $53.6 million, up from $50.9 million in the prior year period.

Adjusted EBITDA for the quarter rose 7.2% to $75.2 million, and adjusted diluted earnings per share increased $0.03 to $1.38. As a reminder, our earnings per share for all periods has been retrospectively recast to reflect our IPO and related transactions. Please refer to our annual report on Form 10-K and quarterly report on Form 10-Q for additional information regarding our dilutive securities. Adjusted EBITDA in the first quarter excludes $29.5 million of non-cash share-based compensation expense, $4.5 million of expense related to the cybersecurity incident, and other items as detailed in our earnings release and quarterly report on Form 10-Q. The share-based compensation expense in the first quarter is not indicative of our expected long-term annual run rate for share-based compensation and was principally the result of expense from modifying pre-IPO stock options.

Adjusted EBITDA margin was 28.7% up from 27.5% in the prior period, reflecting the increase in net revenue, improved student-facing team productivity, as well as lower financial aid processing costs and bad debt expense, in part due to our transition to disbursing financial aid by course. Regarding expenses, instructional support increased $7.1 million to $115.2 million, and general and administrative was up $24.6 million to $106.6 million. Both increases principally attributable to the share-based compensation expense increase discussed in my earlier comments. From a cash and liquidity perspective, we continue to maintain a strong balance sheet with no outstanding debt. We ended the quarter with substantial cash and marketable securities and no borrowings under our revolving credit facility, providing flexibility to invest in the business while maintaining a disciplined capital allocation strategy.

As of November 30, 2025, total cash and cash equivalents, restricted cash and cash equivalents, and marketable securities were $218.1 million, compared to $194.8 million as of August 31, 2025. The increase was primarily attributable to $31.1 million of cash generated by operating activities, which was partially offset by $4.7 million of capital expenditures. As Chris mentioned, we announced a regular quarterly common stock dividend today, payable on February 18, 2026, to shareholders of record as of January 28, 2026. We expect to pay quarterly dividends of approximately $0.21 per share or approximately $0.84 per share annually, in each case subject to board approval. Our capital allocation priorities remain unchanged, guided by a commitment to financial discipline and flexibility.

We allocate capital to reinvest in the business, supporting strong student outcomes, driving sustainable enrollment growth, advancing our technology platform, and enhancing operational efficiency while maintaining strong liquidity and returning capital to shareholders. With respect to our Fiscal 2026 outlook, we are reiterating the net revenue guidance of $1.025 billion-$1.035 billion and Adjusted EBITDA guidance of $244 million-$249 million, both of which we provided on our November earnings call. Our first quarter performance represents a strong start to the year and reinforces our confidence in our full-year outlook. We continue to operate from a position of financial strength with strong cash generation to support our strategic priorities. We remain focused on disciplined execution while investing in the success of our students and long-term value creation. I’ll now turn the call back to the operator to open the line for questions.

Conference Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star, then the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. One moment while we compile the Q&A roster. Your first question comes from Greg Parrish with Morgan Stanley. Your line is open.

Hey, Greg. Thanks. Good evening. Congrats on the result. Nice to see solid enrollment growth despite the identity verification changes last year. There was a lot going on at the Department of Education last week as well. Sounds like a positive for you, the gainful employment changes, but maybe you could talk a little bit more about that. Maybe if you just zoom out, there continues to be a real impetus on cracking down on fraud, and it seems like a lot of the risk here is behind you, right? Your past verification, this earnings threshold is now out there. But just kind of level set where we are, what you’re watching, and any potential impacts here for this year. Thanks.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yeah, thanks, Greg. This is Chris. Yeah, so Negotiated Rulemaking’s have been. There’s a lot that’s been covered. The most relevant session was last week for us. They discussed, as I’m sure you know, the program performance metrics for higher education. And the punchline on what we saw is, I mean, they did reach consensus, which we thought was a positive thing. They’re moving in a direction of this earnings metric, both for Gainful Employment and the One Big Beautiful Bill Act earnings threshold across all programs, treating all universities and colleges the same. And so that’s consistent with our early expectations, and they’ve moved further in that direction, which we see as a positive. We don’t anticipate, and we’ve said this in the past, any material adverse impact from this regulation. What we learned last week was supportive of that.

In fact, they actually, the department released preliminary information on program performance metrics for earnings for institutions, and for the programs that they released for us where they had earnings data, all of our programs passed, so obviously, that is encouraging, so we feel pretty good about things there, and I would say that everything is preliminary until it’s final, but it’s moving in the direction that we had anticipated, which we see as a positive thing. In terms of the focus, I think you were alluding to the federal government’s focus on fraud. There’s nothing really new to report there from my perspective as it relates to Negotiated Rulemaking.

The department is, as we discussed a little bit on the last earnings call, aware of the unusual enrollment activity in the market environment, and nothing’s changed there in that they’re focused on increasing their controls around the FAFSA process to prevent those types of issues, and there’s nothing new to report. We didn’t have any new or material activity with the department over the last quarter. As it relates to our efforts with unusual enrollment activity, we continue to see the outcome of our control structure that we put in place with detection and verification in fiscal 2025. We saw the productivity enhancements that we talked about in Q4 as a result continuing to Q1, and we feel like we have that under control at the moment.

Great. That’s very helpful. Thank you. Congrats.

You’re welcome. Thank you.

Conference Operator: Your next question comes from Alex Paris with Barrington Research. Your line is open.

Hi, guys. Thanks for taking my questions, and congrats on a better-than-expected quarter. I’ll just switch up the order here a little bit to follow up on that last question. You said, Chris, regarding the preliminary data that was provided by the Department of Education where earnings data was available. How comprehensive was that in terms of the programs addressed? Were there a lot of programs given? Did it cover the majority of your programs, or are there some that were still waiting, important programs that were still waiting for data?

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: I don’t have the exact data because the team is working through it. What I can say is it was a majority, greater than 50% of our programs that we did have earnings information for. It covered a pretty material amount of our programs in terms of size and importance of the programs. One reason why I think earnings may not be available for programs is they’re just not going to have large enough cohorts. There would be probably a larger proportion of those that they didn’t have earnings information for that would correlate with smaller programs. I don’t have the exact data. I have it at a high level, and our team is working through it. I think it’s net positive from the perspective that it was greater than 50% of our programs that were reported on.

Great. That’s good news. Intuitively, are there any programs among the University of Phoenix offering that you would think that it is going to have any challenge? And what percentage of enrollment does that account for? Like in the old days under Gainful Employment, concerning programs would have been culinary or criminal justice and things like that. Any programs that you think might have a challenge when that data is available just from what you know from previous?

Yeah, thanks, Alex. We talked a little bit about this in the process of going public. I can’t recall if we talked about it on the last earnings call, but I hesitate to speculate too much about this based on where we’re at because I don’t want to leave an impression one way or the other. But what we had done earlier in the process is we looked at all of our programs, and this is something that historically we’ve been good at in terms of taking all available data. Some of this data was similar to the data that you would track for gainful employment regulations that we’ve been looking at since the Obama administration. And within that assessment, what we would have on our radar are programs that are in disciplines that structurally have lower earnings.

So the one area that we talked about was some of the behavioral sciences where just by the nature of those programs, the graduates don’t make a lot of money comparatively. And so we thought that that may be an area of risk. And when this was going through Congress, that was an area that there was a lot of discussion while the bill was in sort of preliminary form. With that said, if we were to look at the preliminary info, it was positive, reflecting on what we speculated. But again, it’s preliminary info. So we didn’t anticipate and continue not to anticipate this having any kind of material adverse impact on our programs.

Good. Well, thank you. That’s helpful. And then last one on that regulatory front. It seems that the controls, the algorithms that you put in place that you’ve moved to the top of the funnel in the fourth quarter is doing what you wanted it to do. I was just curious, has there been any letup in the number of fraudulent attempts, or are the criminals still running around the industry?

Yeah, I mean, the activity is definitely still in the marketplace. I would say that as we put the controls further up in the funnel, we’ve seen those volumes deter and trend downward since Q4, pretty significantly since Q4 when we put the detection and verification processes at the application process. But the volume that we’re deterring that we can see is still, I would consider, pretty significant. So I would say that the activity is definitely in the marketplace, and we’re just doing an effective job of stopping it from getting into our enrollment funnel.

That’s great, and then my last question is regarding new student enrollment. I know you don’t report it specifically, new student enrollment, but based on the IPO roadshow and our conversation, since it did have an impact on enrollment in maybe the fourth quarter of 2024 and early into 2025, yet, if I understand it correctly, your new student enrollment has been up year over year for the last couple of quarters. When do the comps get easier in terms of new student enrollment? Is it in the third quarter of this year or the fourth quarter of this year?

Yeah, for new student, we had pretty significant productivity impact in the enrollment funnel that was seen through Q3 of last year. It did improve quite a bit in Q4, as you just mentioned, of fiscal 2025, and that was associated with moving these detection and verification controls to the top of the funnel. And what that meant is we were doing a better job of preventing that noise in the funnel, which means our enrollment representatives were seeing a lot more productivity and moving closer to historical levels that we have predictably and sustainably met over many years. So we continue to see that productivity carry into Q1. And to your point, that is helping with continued new student growth. And we expect that trend to continue in Q2 and Q3.

Then in Q4, the comp as it relates specifically to those productivity enhancements will be a little bit tougher because that’s when we saw the trend reverse historically.

Gotcha. Okay. Well, thank you for the additional color. I appreciate it. I’ll get back in the queue.

Thanks, Alex.

Conference Operator: Your next question comes from Jasper Bibb with Truist Securities. Your line is open.

Hey, good afternoon, everyone. I think on the last call, you messaged 26 was going to be a little bit of a second-half weighted year from an enrollment growth perspective. Has that changed? I mean, it seems like fairly strong start to the year here in the first quarter.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yeah, Jasper, I’ll take that question. The primary conversation from my perspective in the last quarter talking about trajectory this year was really around the relationship between our enrollment growth and our revenue growth. And so we are anticipating that our revenue growth is going to be, I don’t know, from a lack of a better word, unnaturally lower than our enrollment growth through Q3, driven by the fact that last year we had a higher volume of students that we were attracting into our risk-free period that ended up not persisting beyond the initial courses. So that created shorter-term revenue last year that we’re not anticipating based on who we’re attracting into that risk-free cohort this year.

So, said differently, from a pure financial perspective, the quality of the incoming revenue is higher, but you’re going to see a little bit of a lag related to the average total degree enrollment growth. And that’s going to be more prominent in Q2 and Q3. So that’s what we intended to communicate last quarter, and it will be consistent with what we still believe. And we’ll expect that to normalize much more in Q4. In terms of average total degree enrollment growth, we had a solid first quarter. We think we set a solid foundation for the year. We’re reiterating our outlook for the year. We’re still early in the year, so we continue to stand behind the outlook that we provided last quarter and this quarter.

Thanks for that. Maybe just following up on the headwind from higher, I guess, students going through the risk-free period last year. Should we expect that to show up in revenue per student or enrollment? I’m just hoping you could provide a bit more detail there from a modeling perspective.

Yeah, I mean, revenue per student.

I guess my question is, yeah, was that recognized in enrollment or in the prior year? And should it just flow out of revenue per student this year?

Yeah. So revenue per student for us is not a key metric. But if you were to calculate the revenue per average total degree of enrollment, we would expect that to come down in Q2 and Q3 as a result of this because we had enrollment associated with those students that didn’t persist past the first few courses last year, but we had sort of a shorter-term impact on revenue. And so we’re not seeing that revenue carry into this year. So based on that calculation of revenue per student, you should anticipate this would be something that would drive down revenue per student. Blair, I think you wanted to add something.

Yeah, absolutely. Thanks, Chris. Great question. Thanks, Jasper. I just wanted to comment that you will see variability in the growth of revenue versus average total degree enrollment by quarter, and that’s driven by a number of different factors, including the timing of course starts, composition of enrollment, in addition to the factors that Chris mentioned. In Q1, fiscal 2026, as I’m sure you noted, revenue growth of 2.9%, driven by growth in average total degree enrollment of 4.1%. The difference was primarily the expansion of B2B. As Chris noted in his remarks, it was up three points year over year. B2B students typically receive a higher discount rate than that of non-B2B students. So those are other factors that could impact it by quarter.

Super helpful. Thanks so much.

You’re welcome.

Conference Operator: Your next question comes from Griffin Boss with B. Riley Securities. Your line is open.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Hi, good evening. Thanks for taking my questions. Just starting off on the enrollment growth aspect there, is there any color you could provide about where primarily you’re seeing that new student growth? Is it broad-based, or are there specific disciplines that you’re seeing stronger demand for?

Yeah, Griffin, thanks for the question. As we’ve described our program offerings, we have done a lot of work and continue to focus on ensuring that they’re aligned to fields that are in demand and growing. Over 90% are aligned to the market in that way. And as a result, we’re seeing broad-based growth across our programs. And I think that’s reflected also in what we’re seeing with the B2B growth because that’s aligning to what we’re seeing employers where they’re hiring and where they currently have employees. So I think the simple answer is that it’s broad-based.

Got it. Okay. Thanks, Chris, and then just have a couple quick ones on the OpEx side. First, just curious if there will be some level of higher operating expenses going forward given that cybersecurity event you saw last fall and the $4.5 million paid in the quarter? Is there going to be any marginal increase in cybersecurity or maybe legal fees that you’re going to be paying that wouldn’t have happened had that cybersecurity event not occurred?

I’ll take that question. So yeah, we do anticipate additional expenses associated with the incident itself. We don’t expect those to be material. As Blair mentioned in her opening remarks, we do have a comprehensive cybersecurity policy that covers the majority of the costs we would anticipate, including the majority of the costs associated with the $4.5 million in expenses to date. And in terms of sort of the—and we’ve treated that, as you can see, as a sort of one-time in nature. It’s an add-back to our Adjusted EBITDA calculation. In terms of recurring costs associated with cyber, we’ve always aspired to have a cyber control environment that represents best practices. This cyber event, not getting too into it, but I think it was pretty clear that this was a zero-day vulnerability. And what that means is this is something that could not have been prevented.

It was not known to anyone except the threat actor, and it happened to our software provider, Oracle, but there are things that we expect that we can continue to do to reduce impact for the risk of those things, but from what we can see, we expect to be able to absorb that into our outlook and don’t anticipate any kind of incremental operating expenses on our recurring expenses as a result of this.

Okay, great. Understood. Thanks, Chris. And then just last quick one from me on the stock-based comp side. Blair, obviously, you mentioned the $30 million, of course, is not going to be recurring going forward per quarter. But is there any sense that you can give now as a public company of kind of how that stock-based compensation will look going forward, maybe a range of percentage of revenue or something like that, or how you’re thinking about it would be helpful?

Blair Westbloom, Chief Financial Officer, Phoenix Education Partners: Yeah, sure. Appreciate the question. So the large non-cash expense of $29.5 million in Q1 26 is not indicative of our expected long-term annual run rate for stock-based compensation, and it was principally the result of expense from modifying pre-IPO stock options that were granted years ago. They were structured in a way that didn’t contemplate an IPO, and the modification of such stock options, which were marked to market, represented $23 million of the $29.5 million of the total non-cash SBC expense in the quarter. So once we’ve anniversary the IPO date, we wouldn’t expect that to be an ongoing expense. There were also some share grants as of the IPO associated with the IPO that vest over a three-year period, so once we recognize the expenses associated with that, we would expect our stock-based compensation to normalize.

I’d suggest that you refer to Form 10-Q for more detail in terms of our stock-based compensation.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yeah. One thing probably worth mentioning is the grant you’ll see if you look at the proxy that was subsequent to the IPO based on the outside compensation consultants. That grant was at a level that would be a little higher on a per-participant basis given the IPO than future awards. So it’s difficult to predict where that’ll land given that process that’ll be evaluated in the future by our board. But those would be higher than what I would anticipate on a per-participant basis in the future.

Got it. Okay, Chris. Blair, thanks for taking my questions. Appreciate it.

You’re welcome.

Conference Operator: Your next question comes from George Tong with Goldman Sachs. Your line is open.

Hi, thanks. Good afternoon. You provided some additional color on the earnings threshold test of gainful employment. Can you talk a bit more about how programs performed with the debt-to-earnings test?

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yeah, thanks, George. I’ll take that question. We’ve been looking at the debt-to-earnings ratios associated with the gainful employment regulations as they were constructed under President Obama, and as you know, those were never actually implemented, and then as they were contemplated under the Biden administration, and so that’s all proxy analysis internally over the years, but what I can say is that our average borrowing trended in the right direction across all programs. Our average earnings trended in the right direction across all programs, and the last official analysis, which is a little dated right now, suggested very little risk if the gainful employment regulations were to be implemented, so we feel good in light of gainful employment regulations.

Based on our understanding of actually where the regulations are going, we are seeing that the regulations are going to converge with the legislation and the One Big Beautiful Bill Act. In terms of any accountability that would affect our ability to offer Title IV, it will be only an earnings threshold metric as we understand it currently. There’ll be some reporting requirements potentially on debt-to-earnings, but nothing that would affect our eligibility for Title IV.

Got it. That’s helpful. And then with respect to detection and verification measures put into place to fight fraud and suspicious activity, can you quantify or ballpark what impact that had in the quarter in terms of growth and what you’re expecting and what you’re contemplating in the guide?

We’re not really in a position to do that. What I can say is we saw nothing in Q1 that puts any concern in the outlook that we provided in Q1, which is why we’re reiterating our guidance. We feel good about the controls that we’ve put in place. They’ve been effective and continue to be effective since we implemented them earlier in Q4. So we’ve seen consistency, and we’ve seen consistent improvements in productivity on a per-enrollment rep basis. So we see it as a net positive, and it’s been reflected in our outlook. I will give you a little bit of color that because the activity continues to exist in the marketplace, this is not something that you can just put on cruise control. We have very effective controls, and we have very effective metrics. So it’s something that we’re constantly calibrating and making sure we’re managing.

But it’s been well managed and sort of become part of our normal operation since we put it into place. So hopefully that’s helpful. But in terms of giving you more specific quantification, we’re not in a position to do that.

Got it. That’s helpful. Thank you.

You’re welcome.

Conference Operator: Your next question comes from Jeffrey Silber with BMO Capital Markets. Your line is open.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Thanks so much. Sorry to go back to some of the regulatory items. Beyond the earnings premium test, I guess there’s some loan caps they’re going to start beginning next July. I know they affect graduate and professional programs. You don’t have as much exposure there. But if you can give us a little bit of color of what you think the exposure might be? Thanks.

Yeah, thanks, Jeff. From any internal analysis we’ve done, nothing’s changed. And we don’t see any material impact expected from loan caps, removal of loans, changes in Pell offerings, workforce Pell. None of those other items that were contemplated in the One Big Beautiful Bill are anticipated to have any kind of material impact on us.

All right. That’s great to hear. And then as a follow-up, I know it’s only the first quarter of the year, and you didn’t provide specific guidance for the quarter, but I think you handily beat most expectations. Are you just being somewhat more conservative in terms of not changing your guidance for the rest of the year because of that?

Good question. The way we look at it coming into this call is we had a solid first quarter. That includes our fall enrollment, which is great. We set a strong foundation for the year. We feel really good about that. We’re in the second quarter, still early in the year. And based on the seasonality of how our quarters work, we’re coming right out of the holidays, which is a very seasonal period for us. So our students are off for a couple of weeks in December, for example. So it’s just early in the year. And so at this point, we think it’s prudent to have reiterated our outlook for the year based on Q1.

All right. That makes sense. Thanks so much.

You’re welcome.

Conference Operator: Your next question comes from Stephanie Moore with Jefferies. Your line is open. Stephanie, your line is open.

My apologies. Can you hear me better now?

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yes.

Oh, my apologies. I wanted to follow up on some of the commentary from a B2B standpoint. If you could give us an update on how some of those employer engagement is going this year, any opportunities we can see for continued growth in that vertical would be helpful, and I’ll stop there.

Okay. Thanks, Stephanie. Yeah. So it’s consistent with what we’ve shared in the recent past. Our account management structure has been effective at helping us build deeper penetration with our current employer affiliates. We came into the year with an expectation to continue to grow that, and we’ve seen that happen effectively into Q1. We did see some investments in some newer incremental growth. So we have an account management team focused on actually adding new employers. We have 2,500 employer alliances, but we’re seeing some opportunities in adding new clients and approaching the conversation differently than we’ve in the past since we have some newer products that help employers with needs beyond the degree program offerings. And so we’re seeing some success there. That’s helping drive some of the growth.

So that account management focus, we expect to continue to answer your other question to drive the growth that we’re expecting going forward.

And maybe just as a follow-up, you spoke in actually your last answer to the last question about kind of the seasonality of the business. As you continue to see strength in the B2B side, does that change the traditional seasonality of the business that we should think about? Maybe not necessarily this year, but in future years. We’d love to hear your thoughts. Thanks.

Yeah. We’re not anticipating any, and I jumped right in here. So Blair looks at our seasonality much closer than I do. But from what we can see, we have seasonal patterns that have been pretty consistent, whether or not B2B or B2C. So there are seasonal patterns associated with B2B that are driven by the timing of reimbursement and things like that that may have an impact over time. But I don’t think that’s something that I would anticipate having a meaningful impact going into next fiscal year. The seasonal patterns, for the most part, for our students, given most of them are working adults, are pretty consistent across both B2B and B2C.

Understood. Thanks so much.

You’re welcome.

Conference Operator: Your next question comes from Rob Sanderson with Loop Capital. Your line is open.

Blair Westbloom, Chief Financial Officer, Phoenix Education Partners: Thank you. Good afternoon, everybody. Thank you for taking my questions. I have two, please. First, you’ve held enrollment pricing consistent for - I can’t remember how many years, but a long time now. And obviously, the cost of education has been moving higher in the market. So you suggest you’ve got this sort of large and growing umbrella versus broader industry trends. Could you just sort of - I mean, price guarantee, I think, is important to your marketing message. But sort of under what conditions might you consider using price as a growth lever? And then I’ve got to follow up on AI.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Thanks, Rob. Yeah. The way we think about price is we believe, based on our assessment of the markets that we operate in, that pricing could be a lever. But we also believe long-term that affordability is going to matter more and more to our students. We’ve been very effective at driving operating leverage into our model for quite some time. I think our pricing hasn’t changed since 2018, and we’ve seen consistent improvements in our ability to improve student outcomes and reduce the cost to deliver those outcomes, and that’s from a lot of things that we’ve been doing, but heavily from the investments in our tech and data foundation, and we believe that we can continue that, and we’ve talked a lot about AI being. It’s almost serendipitous this moment we’re in because these investments really position us well to continue to do this, leveraging AI technologies.

And so when we contemplate the future, we believe that we can continue to build that operating leverage in ways that offset inflation and other drivers of cost. If we were to see that dynamic changing, price is a lever that we could choose to pursue. And we have a lot of forward visibility in the business. So I think that is a lever we could be proactive with if necessary. And then over time, I think as we deepen these relationships with employers and that value proposition gets stronger and stronger and differentiation grows, that’s the area that I think over time we’d like to drive pricing is really based on the value that we’re delivering in the marketplace. But for now, we continue to believe that we can hold pricing constant and drive up our margins the way that we have put out in our outlooks.

Blair Westbloom, Chief Financial Officer, Phoenix Education Partners: Great. Now, we’re going to talk a little bit about AI. You mentioned just on the call or on your prepared remarks how you’ve been implementing AI into the curriculum and you’re helping learners sort of prepare to responsibly use this new technology. But can you offer any thoughts on just future job displacement and the need for reskilling because of AI? And is this a trend that your enterprise affiliates are talking about or perhaps thinking about preparing for?

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Yeah, I think that absolutely. Our belief, based on everything we can see across our leadership and our organization and working with employers, is that there is going to be displacement and there is going to be change in the workforce and that the jobs of the future are going to be held by those that are fluent in using AI to drive value in organizations. Now, you can get deep into that, and there’s studies that come out almost weekly now about what the future looks like in five to 10 years. But we’re confident that that’s the direction things are going, and I think this is a nice moment in that every organization has to look inward to figure this out with their workforce and think about the future. So we are hearing this feedback from employers, but frankly, as an organization ourselves, we’re contemplating the same things.

And we can see the power of AI, but we also see the power of our team members and our people. And augmenting the capabilities we have across our teams with the capabilities of AI is very much the focus on now into the distant future. And we’re seeing a lot of that with employers. So I think there’s going to be segments of the economy where there may be displacement fully. And so we’re very cognizant that those that are affected by that, we want to be able to provide them programs and offerings that move them into the jobs that exist. And those jobs are going to require AI skills.

For most other jobs, the ones that are going to keep the jobs and advance in the workforce are the ones that are going to be fluent in AI, which is why it’s a big focus of our curriculum.

Blair Westbloom, Chief Financial Officer, Phoenix Education Partners: Thank you, Chris.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: You’re welcome.

Conference Operator: That concludes our Q&A session. I will now turn the conference back over to Chris Lynne for closing remarks.

Chris Lynne, Chief Executive Officer, Phoenix Education Partners: Thank you, everyone. The first quarter of fiscal 2026 reflects a strong start to the year and continued progress against our strategic priorities. We’re encouraged by the momentum we’re building and excited about the opportunities ahead as we remain focused on expanding access to personalized, career-relevant education and supporting student success. I want to close by thanking our faculty and our entire team for their dedication to our mission and for keeping students at the center of everything we do, and thank you all for joining us today.

Conference Operator: This concludes today’s call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.