What Phoenix Education Partners (PXED) Said on Its Q4 Earnings Call

Key Points

• Fiscal 2026 results were mixed: Revenue rose 1% to $1.017 billion and adjusted EBITDA increased 2.1% to $249 million, while net income fell to $88.9 million, largely due to IPO-related compensation and higher advertising costs. Fourth-quarter revenue and adjusted EBITDA rose 1.3% and 8.6%, respectively.
• AI-driven search changes are weighing on the outlook. Phoenix expects fiscal 2027 revenue of $970 million to $1 billion and adjusted EBITDA of $225 million to $240 million, calling the year a transition as the impact of reduced website traffic grows; management anticipates a return to growth in fiscal 2028.
• Employer and healthcare programs are key growth priorities: Employer-affiliated enrollment grew nearly 13% in fiscal 2026, while healthcare enrollment increased about 13%. Phoenix plans roughly $35 million in fiscal 2027 cost savings and ended fiscal 2026 with $331.7 million in cash and no debt.

Phoenix Education Partners NYSE: PXED reported modest fourth-quarter and fiscal 2026 revenue and enrollment growth, while outlining a fiscal 2027 outlook that reflects continued pressure from changes in online search behavior driven by artificial intelligence.

Chief Executive Officer Chris Lynne said an algorithm shift during the second quarter reduced the company’s website visibility and traffic, particularly in its non-employer-affiliated enrollment channel. The company said it believes that impact has stabilized, but expects the resulting effects on revenue to be more pronounced in fiscal 2027 as affected student cohorts represent a larger share of enrollment.

“We view fiscal 2027 as a transition year,” Lynne said, adding that the company expects enrollment trends to improve as the year progresses and anticipates returning to growth in fiscal 2028.

Fourth-Quarter and Full-Year Results

For the fourth quarter, Phoenix Education Partners reported net revenue of $260.7 million, up 1.3% from $257.4 million a year earlier. Average Total Degreed Enrollment rose 2.8% to 81,500 students.

Net income attributable to Phoenix Education Partners increased to $23.5 million, or $0.60 per diluted share, from $17.5 million, or $0.46 per diluted share, in the prior-year quarter. Interim Chief Financial Officer Michael Cochran said the increase reflected higher revenue, lower provisions for credit losses and lower restructuring and other expenses, partly offset by higher share-based compensation related to the company’s initial public offering.

Adjusted EBITDA rose 8.6% to $61.5 million, while adjusted EBITDA margin increased to 23.6% from 22%. Adjusted diluted earnings per share were $1.07, compared with $1.03 a year earlier.

For fiscal 2026, net revenue increased 1% to $1.017 billion, while Average Total Degreed Enrollment rose about 2.2% to 83,700 students. Full-year net income fell to $88.9 million, or $2.29 per diluted share, from $133.9 million, or $3.51 per diluted share, in fiscal 2025. The company attributed the decline primarily to IPO-related share-based compensation and increased advertising expenses.

Adjusted EBITDA for the year increased 2.1% to $249 million, and adjusted EBITDA margin expanded to 24.5% from 24.2%. Adjusted diluted EPS was $4.47, compared with $4.50 in the prior year.

Employer Enrollment and Search Strategy

Employer-affiliated enrollment grew nearly 13% during fiscal 2026 and represented about 35% of Average Total Degreed Enrollment for the year. In the fourth quarter, employer-affiliated students accounted for 36% of enrollment, an increase of 270 basis points from the prior-year period.

Lynne said the company works with about 600 employer affiliates through active account-management teams, while its programs are available through tuition-benefit programs covering approximately 2,500 employers. Accounts with dedicated management have historically produced penetration rates about three times those of unmanaged accounts, he said.

The company is responding to AI-driven changes in search by expanding the distribution of evidence-based information about its programs and outcomes through its website, third-party research, alumni advocacy and social-media channels. Lynne said Phoenix tracks more than 10,000 AI search prompts and has seen early improvements in citations and sentiment, though management is not assuming a meaningful recovery in AI search in its fiscal 2027 outlook.

During the question-and-answer session, Lynne said applications from branded search channels have remained stable following the second-quarter reset. He also said non-brand paid-search efficiency weakened in July amid heightened competition ahead of the fall class, but returned to normal ranges in recent weeks.

Growth Investments, Programs and AI

Phoenix Education Partners plans to invest in four areas: expanding employer relationships, growing its academic portfolio, using more targeted student-acquisition channels and improving conversion of prospective students into registrations.

Healthcare-related programs were a notable growth area, with overall enrollment up about 13% year over year. Healthcare represents roughly one-third of Average Total Degreed Enrollment, according to the company. Phoenix said 60% of its planned new programs over the next 18 months will be in nursing, healthcare and specialized business fields. It has also begun launching three-year bachelor’s degree pathways, starting with criminal justice administration.

The company said prospect-to-registration conversion improved year over year in every quarter of fiscal 2026. It is using AI-enabled tools to personalize communications, identify employer education benefits earlier in the enrollment process and support advisors with a more complete view of prospective students’ enrollment status.

Phoenix also said it integrated AI skill-building modules into every course during fiscal 2026 and is expanding its collaboration with OpenAI. Lynne said the effort is designed to help students apply AI tools with judgment and practical workplace context.

Fiscal 2027 Outlook and Capital Allocation

For fiscal 2027, the company expects net revenue of $970 million to $1 billion and adjusted EBITDA of $225 million to $240 million. Cochran said more than two-thirds of revenue comes from prior-year student cohorts, providing visibility into the outlook.

The guidance assumes search conditions remain consistent with those experienced in the fourth quarter. It also includes approximately $35 million in cost savings, primarily workforce-related, intended to align the expense base with current operating conditions. The company said about 5% of its workforce, excluding faculty, was affected following a voluntary separation program and additional organizational changes.

Phoenix expects Fuel50, the skills-intelligence business it acquired on Sept. 30 using cash on hand, to contribute approximately $10 million in revenue over 11 months of fiscal 2027 results, with no material adjusted EBITDA contribution. Fuel50 will continue to operate under its own brand.

The company ended fiscal 2026 with $331.7 million in cash, restricted cash and marketable securities and no outstanding debt. It generated $196.3 million in cash from operating activities and returned $32.7 million to shareholders during the year through dividends and share repurchases. Its board approved a 10% increase in the quarterly cash dividend to $0.23 per share.

Phoenix also announced that Cochran, previously senior vice president of corporate development, is serving as interim CFO following Blair Westblom’s departure. The company said it has launched a search for a permanent CFO.

About Phoenix Education Partners (NYSE:PXED)

Phoenix Education Partners, Inc is a higher education company focused on serving working adults and other nontraditional students. Through the University of Phoenix, its principal operating institution, the company provides career-oriented undergraduate and graduate degree programs, professional certificates, and other educational offerings.

The University of Phoenix primarily delivers instruction through online learning, with programs designed to offer flexible scheduling for students balancing education with employment and other responsibilities.

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