Perdoceo Education Corporation Stock

Ladies and gentlemen, thank you for standing by. Hello, and welcome to Perdoceo Education Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Nick Nelson. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our second quarter 2026 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section of the company's website at perdoceoed.com. A webcast replay will also be available on our site for 90 days following the call, and you can always contact the Alpha IR Group for Investor Relations support.

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 as amended. These statements are based on assumptions made by and information currently available to Perdoceo Education Corporation 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 forward-looking statements.

These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo'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. 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 financial 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?

Thank you, Nick. Good afternoon, everyone, and thank you for joining us for our second quarter 2026 earnings call. Our portfolio of academic institutions performed well during the second quarter and remain committed to supporting adult learners by offering flexible education pathways that help working professionals grow in their careers, while also training and educating the health care workforce to provide quality medical care across communities nationwide. CTU and AIUS continue to serve a broad population of career-minded students through fully online and hybrid programs, while the University of St. Augustine for Health Sciences prepares graduate-level health science professionals in physical therapy, occupational therapy, speech-language pathology and nursing.

I'll start by discussing some key highlights for the second quarter. Ashish will then provide more details on our operating and financial performance and discuss the third quarter and full year 2026 outlook. As always, I want to thank our faculty, student support staff and employees across the organization for their continued dedication and hard work in serving and educating our students.

Operating performance at our academic institutions has been ahead of our expectation for the first half of 2026, with year-to-date operating income growth of 14.4%, supported by revenue growth of 3%. Net income for the second quarter was $48 million or $0.75 per diluted share as compared to $41 million or $0.62 per diluted share in the prior year quarter. Our academic institutions continue to operate with disciplined expense management while making purposeful investments across academics, program development, technology and student support teams.

With that context, here are a few additional highlights for the quarter. Total student enrollments grew just under 1% at the end of the second quarter. Excluding Trident University, which is a part of AIUS, all of our academic institutions experienced enrollment growth supported by strong retention trends and healthy level of prospective students looking to pursue a degree at one of our academic institutions. Ashish will explain these enrollment trends in more detail.

The shift from traditional Internet search engines to LLM-based AI-powered search is changing how prospective students research and evaluate their education options. However, our analysis indicates a majority of our prospective student inquiries come from channels that are not directly impacted by this trend. In response to increased prospective student interest, we are growing our investment in those channels not impacted while selectively leveraging generative artificial intelligence to identify and engage prospective students who we believe are more likely to succeed at one of our academic institutions.

As a result, while we are seeing some shift in prospective student behavior as AI-powered search grows, the overall impact on enrollment has been modest thus far. We remain focused on keeping our programs visible and accessible as search behavior evolves, actively updating our content so that it is readily accessible to and optimized by AI-powered search while investing in our brands to strengthen the visibility of our academic institutions as these AI engines continue to shape discovery.

Through our corporate student programs, we provide accredited degree programs to employees of our partner organizations, supporting their career advancements while helping corporate partners strengthen employee development and retention. Total enrollment for the corporate student programs at CTU and AIUS continue to grow, and this remains a priority as we continue to make strategic investments in technology and personnel to support future enrollment growth.

Our capital allocation decisions during the year highlight, amongst other priorities, our continued commitment to returning capital to shareholders. In line with our broader strategy, on August 6, the Board authorized an increase to our quarterly dividend with $0.15 -- from $0.15 to $0.17 per share, the third such increase since the dividend payments were initiated in 2023. This reflects our commitment to making dividends a growing and integral part of our capital allocation strategy.

Before I pass the call to Ashish, I'd like to take a moment to highlight the successful acquisition and integration of the University of St. Augustine for Health Sciences. We completed the acquisition in 2024 and currently have approximately 4,200 students enrolled at the university. Since the acquisition, St. Augustine has expanded several of its program offerings as it introduced new modalities at existing campus locations, giving prospective students greater flexibility in how they pursue a degree. We believe the university is on track to have strong revenue and adjusted operating income for the full year of 2026 with further growth expected in 2027.

Our success with acquisitions over the past few years, we believe, reflects the capability we have now built the ability to extend the depth and breadth of our program offerings by acquiring and integrating academic institutions while maintaining their value proposition and creating long-term value. Consistent with our capital allocation strategy, we are evaluating accretive acquisition opportunities to complement our organic growth, and we are very encouraged with our ongoing dialogue with a range of academic institutions across our various programmatic areas of focus, including health sciences.

With proven integration capabilities, a strong balance sheet and disciplined approach to capital allocation, we will act when the right opportunity emerges. In summary, with our academic institutions' solid operating results this quarter, we remain optimistic as we move through the remainder of 2026.

Ashish will now provide more details on the financial results of our 2026 outlook and total student enrollment trends. Ashish?

Thank you, Todd. I will review the second quarter results and then discuss our balance sheet as well as the third quarter and full year 2026 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. In addition, total student enrollment numbers and any referenced student enrollment trends discussed during this call do not include learners pursuing nondegree-seeking and professional development programs and degree-seeking non-Title IV self-paced programs at our universities.

Turning to the second quarter. Net income for the quarter was $48 million or $0.75 per diluted share as compared to $41 million or $0.62 per diluted share. Second quarter revenue increased 1.8% to $213.4 million with year-to-date revenue now up 3% as compared to the prior year-to-date. Operating leverage remained strong as we continue to reinvest a portion of revenue growth in marketing, admissions and various student support processes while maintaining disciplined cost management.

Operating income for the quarter grew by 6.8% to $54.9 million, while adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes depreciation and amortization, grew 4.4% to $64.2 million as compared to $61.5 million, resulting in an adjusted earnings per diluted share of $0.80, an increase of 19.4%. From an operations perspective, both CTU and AIU System continued to invest in marketing and admissions to serve the interest from prospective students for their academic programs, while retention levels trended near multiyear highs.

These institutions also continue to explore and deploy technology, including AI-based tools designed to strengthen academic outcomes and improve the overall student experience. University of St. Augustine for Health Sciences continued to expand its program offerings through introduction of new modalities at existing campus locations, giving prospective students more flexibility in how they pursue a degree. St. Augustine prepares health care practitioners through a combination of on-ground and online offerings and a selective admissions process generally requiring prospective students to hold an undergraduate degree and complete a comprehensive application and admissions process has allowed them to maintain strong academic outcomes and student experiences.

As of June 30, total student enrollments increased by 0.7% as compared to the prior year quarter. At CTU, total student enrollments grew 0.6% to 32,110 students, an 11th consecutive quarter of growth and revenue rose 0.9% to $115.5 million, resulting in year-to-date revenue growth of 2.5%. On year-over-year enrollment comparability, please note that CTU will continue to lap strong record quarters from last year, while also graduating a record number of students in 2026 relative to 2025. These trends should peak in the second half of the year before normalizing in 2027.

As a result, while second half reported enrollments may trend lower as compared to the prior year, we remain encouraged by sustained strength in student retention, ongoing expansion of the corporate student program and increasing levels of prospective student interest, trends that we believe will continue to support the long-term enrollment growth at CTU.

From an operating income perspective, we have continued to reinvest revenue growth into marketing and other student support functions in a disciplined way, and we expect these investments to support long-term growth while further enhancing academic outcomes and student experiences. Additionally, we have made intentional investments in marketing channels that we believe will strengthen brand awareness and visibility, and we also continue to refine our use of AI to more effectively recruit and engage with prospective students.

Legal fees at CTU related to previously disclosed legal matters, which are not reflective of underlying organic growth, have trended higher as compared to the prior year. Excluding this year-over-year increase in legal fees, both quarter and year-to-date operating income at CTU would have increased versus the prior year, highlighting our balanced approach towards growth-related investments.

Now to AIU System. Total student enrollments at AIU System decreased 1%. This decline was expected and primarily due to lower enrollments at Trident University, a part of AIU System. Excluding Trident, AIU System total student enrollments would have increased versus the prior year quarter despite the academic calendar-driven variability that resulted in lower enrollment days in the first half of the year.

Please note that in addition to underlying trends in student retention and engagement, the academic calendar and the number of enrollment days in any given quarter will continue to impact quarterly enrollment comparability at AIUS. With that in mind, we expect AIU System to report strong total student enrollment growth in the third quarter, then turned lower in the fourth quarter before rebounding in the first quarter of 2027. While the academic session calendar will impact quarterly enrollment comparability, we expect operating income to grow for the full year.

And setting aside this calendar-driven variability, our underlying organic growth trends, namely student retention and interest from prospective students remain strong. AIU System continues to invest in marketing and student support functions and will also launch new AI-focused programs this fall. Second quarter revenue at AIU System decreased 1.8% to $57.2 million, while operating income increased 9.7% to $12.6 million. The revenue decrease was primarily from our non-Title IV and professional development offerings that we continue to optimize. Excluding those, revenue for the year-to-date would have increased as compared to the prior year, again, reflecting underlying organic growth at AIU.

As Todd noted, the University of St. Augustine for Health Sciences delivered strong performance this quarter. Reported total student enrollment increased 6% to approximately 4,200 students and revenue rose 10.2% to $40.5 million, supported by strong execution, brand recognition and new program launches. Increase in total student enrollments from the prior year was primarily a result of growth in programs such as nursing and speech-language pathology as well as the introduction of new modalities for the occupational therapy program.

The enrollment pipeline for the upcoming fall term, which is traditionally the biggest term of the year looks strong. Adjusted operating income increased to $10.7 million as compared to an adjusted operating income of $5.5 million in the prior year quarter. The improvement reflected continued enrollment and revenue growth, combined with operating leverage as the university continued to scale its operations. With growth in enrollments supported by ongoing expansion of their program offerings through the introduction of new modalities and program versions at current campus locations as well as consistently high student retention trends, we believe that St. Augustine will meaningfully contribute to the overall revenue and adjusted operating income growth for 2026 and is expected to further grow into 2027.

Moving on to Corporate and Other. Operating losses for the quarter were $5.9 million as compared to $5.2 million in the prior year. Turning to income taxes. For the second quarter, we recorded a provision for income tax of $12.2 million, resulting in an effective tax rate of 20.3%. The tax effects of stock-based compensation and the release of previously recorded tax reserves reduced the effective tax rate by 0.4% and 1.1%, respectively. Additionally, the rate was positively impacted by 5.8% due to the resolution of a state income tax matter.

Commensurately, we expect that for the full year 2026, our effective tax rate will be between 23% and 24%. This includes an estimated benefit for the tax effect of stock-based compensation and the release of previously recorded tax reserves for uncertain tax positions. And from a cash perspective, for 2026, we estimate our cash paid for income taxes to be in the range of 23% to 24% of pretax income.

Turning now to our balance sheet and liquidity position. For the first half, net cash flows provided by operations were $144 million versus $143.9 million in the prior year period. Timing of Title IV drawdowns and working capital mostly offset the increase in cash flows from a year-over-year improvement in adjusted operating income. We ended the quarter with $734.8 million in cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represents an increase of approximately $91.3 million from our prior year-end position.

Uses of cash during the first half were $19.7 million of dividend and dividend equivalent payments, $10.3 million for share repurchases in connection with the payment of taxes due by employees upon stock vesting, $15 million return of capital to shareholders in the form of stock repurchases and $3.3 million of capital expenditures. For full year 2026, we expect capital expenditures to be approximately 1% of revenues.

Before turning to our 2026 outlook, let me take a minute to discuss our balanced and consistent approach to capital allocation. We are pleased to announce that consistent with our dividend policy and continued confidence in our long-term outlook, the Board of Directors approved a 13.3% increase to our quarterly dividend payment to $0.17 per share, payable on September 10, 2026, to the holders of record of Perdoceo's common stock at the close of business on September 1, 2026. Future quarterly dividend payments are expected to be paid out of free cash flow 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 remain an integral and growing component of our balanced allocation -- capital allocation strategy. And in line with the most recent Board decision, we generally expect to review quarterly dividend amounts on an annual basis.

During the quarter, we repurchased 0.2 million shares of our common stock for $6.8 million at an average price of $34.19 per share, bringing our year-to-date purchase to 0.4 million shares for approximately $15 million. We anticipate utilizing the remaining $85 million of our authorized share repurchase program over time, subject to market conditions, organic and inorganic investment opportunities, share valuation and other factors that guide our disciplined approach to capital allocation.

Let us now discuss our outlook for 2026. We now expect the full year 2026 adjusted operating income to range between $258 million and $263 million. This compares to an adjusted operating income of $237.6 million in 2025, with the expected increase primarily due to assumptions for organic revenue growth across our academic institutions, while lower operating expenses in certain categories should offset investments in marketing, academic and other student support processes.

Our outlook range includes the impact of incremental legal fees. And without these incremental costs, the range would have been even higher. Adjusted earnings per diluted share are expected to be between $3.10 and $3.16 versus $2.61 in 2025, a 19.9% increase at the midpoint. As a reminder, GAAP and adjusted EPS calculations include incremental expenses related to depreciation and finance leases for St. Augustine. While these expenses are excluded for the purpose of adjusted operating income, they are part of the adjusted EPS calculations.

This outlook reflects our current belief that the consistent high levels of student retention and student engagement that we experienced in 2025 will continue through 2026. Prospective student interest in our academic programs will continue to remain at current levels, in part supported by incremental marketing investments in brand awareness and visibility. Any changes to the regulatory or legislative environment will not have a meaningful impact on prospective student interest or necessitate any operational changes.

Legal fees related to litigation matters remain in line with the company's current expectations, and there will not be a material impact on student enrollments due to the elimination of the Grad PLUS loan program, the new annual and lifetime graduate loan limits or their ability to finance their education through private lending sources.

Full year revenue is expected to increase versus 2025, supported by the rollout of new program modalities within physical and occupational therapy at St. Augustine and continued organic growth at CTU and AIU. At St. Augustine, we expect revenue and total student enrollment growth each quarter, resulting in double-digit adjusted operating income growth for the full year. At AIU System, while the academic session calendar will impact quarterly enrollment comparability, we expect operating income to grow for the full year, supported by strong student retention and engagement and continued investment in marketing and admissions.

Supporting our organic growth expectations at CTU are strong levels of prospective student interest in its academic programs, ongoing growth in corporate student program and investments in marketing as well as the corporate student program. Partially offsetting these growth trends will be a record number of students expected to graduate in 2026 at CTU, lapping strong enrollment growth from previous quarters and the increased legal fees related to previously disclosed legal matters.

For the third quarter of 2026, we expect adjusted operating income to be in the range of $64 million to $65 million as compared to $61 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.73 and $0.74 per diluted share versus $0.65 in the third quarter of 2025.

Our 2026 outlook also assumes continued investments in technology, data analytics, real estate, academics and student support processes. We believe these investments have supported, improved academic outcomes and enhanced student experiences. In addition, we plan to continue expanding the corporate student program teams at CTU and AIU System to support further growth and engagement.

Please refer to our earnings release filed today for important information about key assumptions and factors underlying the discussion from today's call as well as the GAAP to non-GAAP reconciliations.

With that, I'll turn the call over to Todd for his closing remarks. Todd?

Thank you, Ashish. As I reflect on the second quarter, what stands out is the resilience of our portfolio model of academic institution programs. Perdoceo continued to experience overall growth, and we built on an already strong balance sheet as well as continue to leverage our strong cash position to support various academic and student processes while evaluating growth opportunities through acquisitions.

I want to close by thanking our faculty and staff whose dedication to our students is the reason we can deliver results like these. Thank you for your continued interest in Perdoceo, and we look forward to updating you again next quarter.

The meeting has now concluded. Thank you all for joining, and you may now disconnect.

Good day, everyone, and thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Perdoceo Education Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the floor over to Nick Nelson from Alpha IR. Nick, the floor is now yours.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our first quarter 2026 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer. This conference call is being webcast live within the Investor Relations section of the company's website at perdoceoed.com. A webcast replay will also be available on our site for 90 days following the call, and you can always contact the Alpha IR Group for Investor Relations support.

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 as amended. These statements are currently -- are based on assumptions made by and information currently available to Perdoceo Education Corporation and involves 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 forward-looking statements. These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo'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. The earnings release that accompanies today's call contains financial and other quantitative information to be discussed today as well as reconciliations of the GAAP to non-GAAP financial 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?

Thank you, Nick. Good afternoon, everyone, and thank you for joining us for our first quarter 2026 earnings call. Our academic institutions are committed to supporting adult learners by offering flexible educational pathways that help working professionals grow in their careers while also training and educating the health care workforce to provide quality medical care across communities nationwide. CTU and AIUS continue to serve a broad population of career-minded students through fully online and hybrid programs, while the University of St. Augustine for Health Sciences prepares graduate level health science professionals in physical therapy, occupational therapy, speech language pathology and nursing.

First quarter operating performance exceeded our expectations and further highlighted the success of our balanced approach in operating our academic institutions. By delivering on our financial commitments while also investing in our student onboarding enrollment, academic and student support processes, we continue to position the company for sustainable and responsible long-term growth.

I'll start by discussing some key highlights for the first quarter. Ashish will then provide more details on our operating and financial performance and discuss the 2026 outlook. As always, I'd like to thank our faculty, student support staff and all other employees for their outstanding and ongoing commitment and hard work in serving and educating our students. Net income for the first quarter was $54 million or $0.85 per diluted share, an increase of 30.8% versus the prior year quarter earnings per share, while adjusted earnings per diluted share, which excludes certain noncash items, increased 28.6% to $0.90 as compared to $0.70 in the prior year. These results were ahead of our expectations. Student retention continued to trend near multiyear highs, and we further increased our investments in marketing admissions to serve increased interest from prospective students looking to pursue a degree at our academic institutions.

With that context, here are a few additional highlights for the quarter. First, total student enrollments increased by 1.9% at CTU and 3.1% at St. Augustine, which was partially offset by a 2.2% expected decline at AIUS. Strategic investments in technology continue to improve student experiences across our academic institutions while enhancing the operating effectiveness of our functional areas, ongoing artificial intelligence efforts, focus on our students and classroom learning as well as enhancing various operating and functional processes. Faculty where feasible, are utilizing AI in their classrooms with the goal of enabling students to leverage AI both personally and professionally. Academic leadership is exploring various AI-focused courses and programs with plans to launch later this year, pending required approvals.

We are also selectively leveraging generative artificial intelligence to identify and engage with prospective students who we believe are more likely to succeed at one of our academic institutions. We also have several pilots and tests in process that continue to evolve and shape the use of AI across various student support and functional areas, including software engineering and development. We will continue to share updates and success as relevant.

Our institutions' corporate student programs remain a meaningful avenue supporting total student enrollment growth, particularly at CTU. Through these programs, our institution provide accredited degree opportunities to employees of our partner organizations, supporting their potential career advancement while helping corporate partners strengthen employee development and retention. We continue to invest strategically in technology and talent to expand the program and enhance academic outcomes across our institutions.

In summary, we are executing against our objectives of sustainable and responsible growth and remain optimistic for 2026 and beyond.

Ashish will now provide more details on the financial results, our 2026 outlook and student enrollment trends. Ashish?

Thank you, Todd. I will review the first quarter results and then discuss our balance sheet and 2026 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. In addition, total student enrollment numbers and any referenced student enrollment trends discussed during this call do not include learners pursuing nondegree-seeking and professional development programs and degree-seeking non-Title IV self-paced programs at our universities.

Turning to the first quarter. Net income for the quarter was $54 million or $0.85 per diluted share as compared to $43.7 million or $0.65 per diluted share. Operating income grew by 22% to $63.1 million, while adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes depreciation and amortization, grew 14.1% to $72.5 million as compared to $63.5 million, resulting in an adjusted EPS of $0.90 per diluted share. First quarter revenue increased 4.1% to $221.7 million from $213 million. Improvement in these reported metrics was primarily supported by organic revenue growth across all our academic institutions, while operating-related efficiencies were partially reinvested in various student-related processes.

From an operations perspective, both CTU and AIUS continued to invest in marketing and admissions during the quarter to serve prospective student interest for their academic programs, while retention levels trended near multiyear highs. Our institutions also continue to explore and deploy technology, including AI-based tools designed to strengthen academic outcomes and improve the overall student experience. University of St. Augustine for Health Sciences continued to expand its program offerings through the introduction of new modalities at existing campus locations, giving prospective students more flexibility in how they pursue a degree. St. Augustine prepares health care practitioners through a combination of on-ground and online offerings and its selective admissions process, generally requiring prospective students to hold an undergraduate degree and complete a comprehensive application admissions process has allowed them to maintain strong academic outcomes and student experiences.

As of March 31, total student enrollments increased by 1.1% as compared to the prior year quarter. Total enrollments at CTU grew 1.9% to 34,050 students, marking the 10th consecutive quarter of enrollment growth. From a year-over-year enrollment comparability perspective, please note that CTU will continue to lap strong record quarters from last year while also graduating a record number of students in 2026 as compared to 2025. We expect total enrollment trends at CTU to be supported by sustained strength in student retention, ongoing expansion of the corporate student program and consistent levels of prospective student interest. Additionally, CTU will accelerate investments in marketing while also refining the use of AI to more effectively engage with prospective students. As expected, total enrollments at AIU System decreased 2.2%. This decline was expected and primarily due to lower enrollments at Trident University, a part of AIU System.

Looking forward, we expect reported total enrollments to increase in the second quarter and accelerate further in the third quarter as compared to the prior year quarters. Please note that in addition to underlying trends in student retention and engagement, the number of enrollment days in any given quarter will continue to impact quarterly enrollment comparability at AIU System. And from a full year perspective, we expect both revenue and operating income to grow in 2026 as AIU System plans to continue investing in marketing and admissions, while student retention is anticipated to remain near multiyear highs.

At University of St. Augustine for Health Sciences, new student enrollments were higher for the spring term as compared to the prior year with just under 4,400 total students enrolled for the term. The enrollment increase from prior year was primarily as a result of growth in programs such as nursing and speech language pathology as well as the introduction of new modalities for the occupational therapy program. We also expect new student enrollment growth for our summer term and fall term, the latter, which is traditionally the biggest term of the year. With expected growth in new enrollments, supported by ongoing expansion of their program offerings through the introduction of new modalities and program versions at current campus locations as well as consistently high student retention trends, we believe St. Augustine will meaningfully contribute to the overall revenue and adjusted operating income growth for 2026 and is expected to further grow into 2027.

Note that St. Augustine has a traditional university calendar with 3 academic terms and multiple campuses for in-person classes in California, Texas and Florida. Commensurately, we may share student enrollment data for the beginning of an academic term, which are typically different from total student enrollment numbers reported at the end of each fiscal quarter.

In summary, we expect total company revenue to increase each remaining quarter of 2026 versus '25. Growth in total student enrollments and sustained improvement in student retention and engagement will drive this expected revenue growth.

Moving on to our segment results. In the first quarter, CTU's revenue increased 4% to $120.8 million, while operating income increased 8.1% to $50.5 million, primarily due to the total enrollment and revenue growth trends I previously discussed. Additionally, lower bad debt expense more than offset investments in marketing and admissions. AIU Systems first quarter revenue increased to $57.8 million, while operating income increased 12% to $12.6 million. Investments in marketing were more than offset with lower bad debt expense. St. Augustine had a strong quarter with revenue of $43 million, increasing 9.8% as compared to the prior year quarter, while operating income increased to $6.3 million as compared to an operating loss in the prior year quarter. Excluding depreciation and amortization, adjusted operating income increased to $13.3 million as compared to $8.5 million.

Moving on to Corporate and Other. Operating losses for the quarter were $6.3 million, a slight increase from the $5.9 million in the prior year.

Turning to income taxes. For the first quarter, we recorded a provision for income tax of $14.2 million, resulting in an effective tax rate of 20.8%. The tax effect of stock-based compensation and the release of previously recorded tax reserves reduced the effective tax rate by 5.6% and 1.2%, respectively. We expect that for the full year 2026, our effective tax rate will be between 22.5% and 23.5%. This includes an estimated benefit for the tax effect of stock-based compensation and the release of previously recorded tax reserves for uncertain tax positions. The full year effective tax rate assumption also includes a 1.5% nonrecurring tax benefit related to the resolution of a prior period state tax matter. As a reminder, various tax provisions from the 2025 reconciliation bill will, in general, continue to reduce cash expenditures for U.S. federal and state income taxes from what it would have otherwise been.

Additionally, various tax attributes acquired with the acquisition of St. Augustine will also lower our federal and state income tax payments. For 2026, we estimate our cash paid for income taxes to be in the range of 23% to 24% of pretax income.

Turning now to our balance sheet and liquidity. For the first quarter, net cash flows provided by operations were $69.4 million versus $65.1 million in the prior year quarter. This growth versus the prior year was primarily supported by year-over-year improvement in adjusted operating income. We ended the quarter with $680 million in cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represent an increase of approximately $36.5 million from our prior year-end position. Key uses of cash during the quarter include approximately $18 million return of capital to shareholders in the form of quarterly dividend and stock repurchases, $10.3 million for the payment of employee taxes via share repurchases for stock investing and $1.7 million of capital expenditures. For full year 2026, we expect capital expenditures to be approximately 1.5% of revenue.

Before turning to our 2026 outlook, I will address our balanced approach to capital allocation. We have $91.9 million of authorization remaining under our current share repurchase program and anticipate utilizing it over time, subject to market conditions, organic and inorganic investment opportunities, share valuation and other factors that guide our disciplined approach to capital allocation. Additionally, consistent with our dividend policy and continued confidence in our long-term outlook, the Board of Directors declared a quarterly dividend of $0.15 per share payable on June 12, 2026, to the holders of record of Perdoceo's common stock at the close of business on June 1, 2026. 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 conditions previously outlined, we continue to view quarterly dividend payments as an integral and growing part of our balanced capital allocation strategy.

We generally expect [indiscernible] dividend amounts at least on an annual basis with the next review expected in the third quarter of 2026.

We will now discuss our outlook for 2026. We now expect the full year 2026 adjusted operating income to range between $254 million to $263 million. This compares to an adjusted operating income of $237.6 million in 2025, with the expected increase primarily due to assumptions for organic revenue growth across our academic institutions, while lower operating expenses in certain categories should offset investments in marketing, academics and other student support processes. Adjusted earnings per diluted share are expected to be between $3.05 and $3.16 versus $2.61 in 2025, a 19% increase at the midpoint. This outlook reflects our current beliefs that the consistent high levels of student retention and student engagement that we experienced in 2025 will continue through 2026.

Prospective student interest in our academic programs will continue to remain at current levels, in part supported by incremental marketing investments in brand awareness and visibility. Any changes to the regulatory or legislative environment will not have a meaningful impact on prospective student interest or necessitate any operational changes. There will not be a material impact on student enrollments due to the elimination of the Grad plus loan program, the annual and lifetime graduate loan limits or their ability to finance their education through private lending sources.

Full year revenue is expected to increase versus 2025, supported by the rollout of the new program versions within physical and occupational therapy at St. Augustine and continued organic growth at CTU and AIU System. At St. Augustine, we expect revenue growth each quarter, resulting in double-digit adjusted operating income growth for the full year. At AIU System, while the academic session calendar will impact quarterly enrollment comparability, we expect both revenue and operating income to grow for the full year, supported by strong retention and engagement and continued investment in marketing and admissions.

Supporting our organic growth expectations at CTU are strong levels of prospective student interest in its academic programs, ongoing growth in marketing -- in corporate student program and investments in marketing as well as the corporate student program. Partially offsetting these growth trends will be a record number of students expected to graduate in 2026. Additionally, please note that from a year-over-year enrollment comparability perspective, CTU will continue to lap strong enrollment growth from previous quarters. For the second quarter of 2026, we expect adjusted operating income to be in the range of $63 million to $64 million as compared to $61.5 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.79 and $0.80 per diluted share versus $0.67 in the second quarter of 2025.

The second quarter EPS range assumption includes a nonrecurring $0.05 per share benefit related to the resolution of a prior period state tax matter. Our 2026 outlook also assumes continued investments in technology, data analytics, real estate, academics and student support processes. We believe these investments have supported improved academic outcomes and enhanced student experiences. In addition, we plan to continue expanding the corporate student program teams at CTU and AIU System to support further growth and engagement. Please refer to our earnings release filed today for important information about the key assumptions and factors underlying the discussion from today's call as well as our GAAP to non-GAAP reconciliations.

With that, I will turn the call over to Todd for his closing remarks. Todd?

Thank you, Ashish. I am pleased with the first quarter operating performance and with the continued progress our academic institutions are making in serving and educating our students. We are investing with purpose and remain focused on our overall objective of sustainable and responsible long-term growth. As always, I want to thank our faculty and staff for their dedication to our students. Their work is what drives everything we do. Thank you for joining us today, and we look forward to speaking with you again next quarter.

Thank you. And this does conclude today's conference call. You may now disconnect. Have a great day, everyone.

[Audio Gap] $0.19 per diluted share in the prior year. adjusted earnings per diluted share, which we believe better reflects underlying operating performance, increased 15.5% to $2.61 from $2.26 in the prior year.

Full year operating income grew 12.5% to $196 million while adjusted operating income, which we believe better reflects the underlying operating performance and exclude certain noncash items, increased 25.8% to $237.6 million. Increases in full year operating income, adjusted operating income and adjusted EPS were supported by the acquisition of St. Augustine as well as underlying organic growth and operational efficiencies achieved at CTU and AIU system.

Full year revenue increased 24.2% or $164.8 million to $846.1 million. And from an expense perspective, our results included selective investments in marketing, admissions and overall personnel. While bad debt expense at 3.5% of revenue was lower by $4.2 million versus the prior year which offset some of these investments.

Turning to the fourth quarter. Adjusted operating income was $51.6 million compared to $42.7 million in the prior year quarter, and adjusted earnings per diluted share increased 20.4% to $0.59 from $0.49 in the prior year. Fourth quarter revenue increased 20% to $211.6 million from $176.4 million in the prior year. From an operations perspective, both CTU and AIU system accelerated their marketing and admissions efforts in the second half of the year to support and serve increased levels of prospective student interest they were experiencing while student retention levels trended near multiyear highs. Additionally, we continue to upgrade and invest in new technology, including exploring the use of AI as an innovative tool to enhance academic at our institutions.

University of St. Augustine for Health Sciences has continued to expand their program offerings in terms of introducing to new modalities at current campus locations, providing more flexibility for prospective students in pursuing a degree of the institution. The university prepares professional health care practices through innovative on-ground and virtual education offerings. Prospectus students are generally required to have an undergraduate degree and go through a comprehensive application and admissions process, which has allowed them to maintain strong academic outcomes and student experiences.

As of December 31, total student enrollments increased by 7.3% compared to the prior year-end, reflecting growth across all of our academic institutions. As expected, total enrollments at AIU system increased 11.2%, supported in part by the academic session that started in December as well as underlying operating trends, such as student retention and engagement. As a reminder, the number of enrollment days in any given quarter will continue to impact quarterly enrollment comparable AIU system. As a result, we expect total reported enrollments to remain relatively flat in the first quarter, increased in the second quarter and accelerate further in the third quarter. And from a full year perspective, we expect both revenue and operating income to grow in 2026 as we plan for AI system to continue investing in marketing and admissions while student retention is anticipated to remain near multi-year highs.

CTU ended the year with a record 30,000 total student enrollments, reflecting 6.6% growth supported by high levels of student retention and engagement, continued expansion of the corporate student program and sustained interest from prospective students. As Todd noted, this marks 9 consecutive quarters of total enrollment growth. While we do expect to graduate a higher number of students in 2026, we plan on continuing our investments in marketing and admissions and the Corporate student program and expect total enrollments at CTU to grow in 2026.

University of St. Augustine for Health Sciences ended the full 2025 term with approximately 3,900 total students enrolled as of December 31, 2025. The increase from prior year was primarily a result of growth in programs such as nursing and speech language pathology. Note that St. Augustine as a traditional university calendar with 3 academic terms and multiple campuses for in-person classes in California, Texas and Folida. Commensurately, we may share student enrollment data for the beginning of an academic term, which are typically different from total enrollment numbers reported at the end of each fiscal quarter.

Moving on now to our segment results. For the full year, revenue at CTU was $461.6 million, up 4.1% from the prior year while operating income increased 3.4% to $180.6 million. A significant portion of the revenue increase at CTU was reinvested in the academic institution within faculty, course development and various student support services. Additionally, in response to prospective student interest for our programs, we also increased our investment in admissions and marketing to continue supporting future enrollment growth. Partially offsetting these increases were lower expenses associated with our professional development offerings. In the fourth quarter, CTU's revenue increased 2.5% to $114 million while operating income decreased by $2.8 million to $39.2 million.

In addition to the investments mentioned about, the fourth quarter also included nonrecurring compensation-related investments in personnel. AIU system reported full year revenue of $226 million, while operating income increased 9.8% to $36 million. For the quarter, we recorded $53.8 million in revenue, while operating income increased 3.4% to $4 million. Expenses in the fourth quarter of 2025 also included nonrecurring compensation-related investments in personnel. University of San Agustin for Health Sciences recorded full year revenue of $157.6 million. Excluding depreciation and amortization, adjusted operating income was $33.5 million. San Agustin spring term 2026 is off to a strong start and based on current prospective student interest, we expect new enrollment growth for both summer and fall terms.

Supporting this new normal growth is the ongoing expansion of their program offerings through the introduction of new modalities and program versions at current campus locations. And commensurately, we also expect strong revenue growth for the full year. In summary, our academic institutions experienced revenue and operating income growth for the full year 2025, and we expect this momentum to continue into 2026. We believe our disciplined investment philosophy centered on enhancing student experiences and strengthening academic outcomes together with consistent operational execution have resulted in sustainable performance and long-term value creation.

Moving on to Corporate and Other. Operating losses for the year were $23.8 million, a decrease from $30.5 million in the prior year. This improvement was primarily driven by lower acquisition-related expenses during the full year 2025.

Turning to income taxes. For the fourth quarter, we recorded provision for income taxes of $12.7 million, bringing our full year effective tax rate to 26.3%. The statutory federal and state income tax rates combined were 24.7%. The other principal component of the full year's effective tax rate was a 1.3% increase attributable to changes in unrecognized tax benefits. We expect that for full year 2026, our effective tax rate will be between 23.5% and 24.5%, which includes an estimated benefit for tax effect of stock-based compensation and the release of previously recorded tax reserves for uncertain tax positions. A significant portion of the full year stock-based compensation benefit is expected to be recognized in the first quarter.

Separately, various tax provisions from the reconciliation bill as well as various tax attributes acquired with the unicity of St August team will reduce our cash payments for U.S. federal and state income taxes. In 2025, we paid $49.3 million in federal, state and foreign income taxes representing 22.8% of pretax income, down from 23.3% in 2024.

Turning now to our balance sheet and liquidity position. For the full year 2025, net cash flows provided by operations were $225.2 million versus $161.6 million in the prior year. This growth versus the prior year was primarily supported by year-over-year improvement in adjusted operating income. We ended the year with $643.5 million in cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represents an increase of approximately $51.9 million from the prior year-end position. Uses of cash during the year included $120.8 million in return of capital to shareholders in the form of stock repurchases, $36.9 million of quarterly dividend and dividend equivalent payments, $49.3 million of federal and state income tax payments and $8.6 million of capital expenditures.

For full year 2026, we expect capital expenditures to be approximately 1.5% of revenue. Before turning to our 2026 outlook, I want to address our balanced approach to capital allocation. During the quarter, we repurchased 1.8 million shares of our common stock for $54.1 million, bringing our 2025 full year share repurchase total to 4.1 million shares repurchased for $120.8 million at an average price of $29.7 per share. And as Todd noted, our Board recently approved a new share repurchase program are up to $100 million. We anticipate utilizing the new $100 million repurchase authorization over time, subject to market conditions, organic and inorganic investment opportunities, valuation and other factors that guide our disciplined approach to capital allocation.

Additionally, consistent with our dividend policy and continued confidence in our long-term outlook, the Board of Directors declared a quarterly dividend payment of $0.15 per share payable on March 13, 2026, to holders of record of Perdoceo's common stock at the close of business on March 2, 2026. Future quarterly dividend payments are expected to be paid out of free cash flow for the relevant year, subject to Board approval and the company's available retained earnings, financial conditions and other relevant factors. Subject to the conditions previously outlined, we continue to view quarterly dividend payments as an integral and growing part of our balanced capital allocation strategy. We generally expect to evaluate dividend amounts on an annual basis.

We'll now discuss our outlook for 2026. We expect the full year 2026 adjusted operating income to range between $250 million and $263 million. This compares to an adjusted operating income of $237.6 million in 2025 with the expected increase primarily due to organic revenue and total enrollment growth assumptions across our academic institutions. Adjusted earnings per diluted share are expected to be between $2.97 and $3.12 versus $2.61 in 2025, a 16% increase at the midpoint. As a reminder, GAAP and adjusted EPS calculations include incremental expenses related to the depreciation and finance leases for St. Augustine. While these expenses are excluded for the purpose of adjusted operating income, they are a part of the adjusted EPS calculation. This outlook reflects our current belief that the consistent high levels of student retention and student engagement that we experienced in 2025 will continue into 2026.

Prospective student for academic programs will continue to increase in 2026. Any changes to the regulatory or legislative environment will not have a meaningful impact on prospective student interest levels or necessitate any operational changes. There will not be a material impact on prospective students from the elimination of Grads loan program, the new annual and lifetime graduate loan limits or their ability to finance their education with private lending. Full year revenue is expected to increase versus 2025 supported by the rollout of new program versions within physical and occupational therapy at University of St. Augustine and continued organic growth at CTU and AIU system. At San Agustin, we expect revenue and total student enrollment growth each quarter, resulting in double-digit adjusted operating income growth for the full year.

At AIU system, while the academic session calendar will impact quarterly enrollment comparability, we expect both revenue and operating income to grow for the full year, supported by strong student retention and engagement and continued investment in marketing and admissions. At CTU, we expect total student enrollments to grow in 2026, in part supported by the levels of prospective student interest in our academic programs. Although we will also graduate a record number of students in 2026 that may temporarily moderate that rate of enrollment growth in the first half of '26 before accelerating in the second half of 2026 driven by the ongoing investments.

For the first quarter of 2026, we expect adjusted operating income to be in the range of $68 million to $70 million as compared to $63.5 million in the prior year quarter with adjusted earnings per diluted share to range between $0.83 and $0.85 per diluted share versus $0.70 in the first quarter of 2025. Our 2026 outlook also assumes continued investment in technology, data analytics, real estate, academics and student support processes. We believe these investments have supported improved academic outcomes and enhance student experience. In addition, we plan to continue expanding the corporate student program teams at CTU and AIU system to support further growth and engagement. Please refer to our earnings release filed today for important information about the key assumptions and factors underlying this discussion from today's call as well as GAAP to non-GAAP reconciliations.

With that, I will turn the call over to Todd for his closing remarks. Todd?

Thank you, Ashish. I'm very pleased with our 2025 operating and financial performance and the continued progress made by all of our academic institutions in educating and serving our students. The operational excellence of our academic institutions as well as our strong capital position allows us to continue executing against the goal of sustainable and responsible growth.

Lastly, I would once again like to thank all of our incredible faculty and staff for their hard work in supporting and educating our students. Thank you again for joining us, and we look forward to speaking again with you next quarter.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Danny, and I will be your conference operator today. At this time, I would like to welcome everyone to Perdoceo Education Corporation Third Quarter 2025 Earnings Conference Call.

[Operator Instructions]

I would now like to turn the conference over to Nick Nelson with Alpha IR Group. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 earnings call. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Chief Financial Officer.

This conference call is being webcast live within the Investor Relations section of the company's website at perdoceoed.com. A webcast replay will also be available on our site for 90 days following the call, and you can always contact the Alpha IR Group for Investor Relations support.

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 as amended. These statements are based on any assumptions made by and information currently available to Perdoceo 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 forward-looking statements.

These risks and uncertainties include, but are not limited to, those factors identified in Perdoceo'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. 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?

Thank you, Nick. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 earnings call. In today's call, I'll start by discussing some key highlights for the quarter. Ashish will then provide more details on the operating and financial performance and discuss the 2025 outlook. As always, I'd like to thank our faculty, student support staff and all other employees for their outstanding commitment and hard work in serving and educating our students. Our academic institutions share a common mission of transforming lives through education by equipping learners with the practical skills required to succeed in today's dynamic work environment.

CTU and AIUS provide diverse career-focused programs designed to help students excel in rapidly changing job market. The University of St. Augustine develops professionals to deliver exceptional health care services to communities nationwide.

Third quarter operating performance exceeded our expectations with net income of $39.9 million or $0.60 per diluted share, while adjusted earnings per diluted share, which excludes certain noncash items, was $0.65 as compared to $0.59 in the prior year. These operating results are supported by continued momentum in student retention and engagement that has been trending near multiyear highs as well as increased interest from prospective students looking to pursue a degree at one of our academic institutions.

During the quarter, we also continued to invest in student technology and student support processes that we believe will further enhance academic outcomes and student experiences. Some key successes and other highlights from the quarter include total student enrollments grew 15.1% versus the prior year quarter, driven by 6.7% growth at CTU and the acquisition of St. Augustine. At CTU, this marks 8 consecutive quarters of total enrollment growth, primarily due to continued progress within the corporate student program as well as strong levels of interest from prospective students in pursuing a degree. As expected, AIUS reported a decline in total student enrollments of 2.9%.

Excluding the impact from the academic calendar and number of enrollment days, AIUS would have also reported total enrollment growth. As a reminder, we expect AIUS to end the year with double-digit total enrollment growth. At St. Augustine, fall term new student enrollments increased as compared to the prior year, and there were approximately 4,400 total students enrolled for the term. Please note that the fall term is typically the biggest term of the year in terms of student enrollments. Supporting new enrollment growth at St. Augustine is the ongoing expansion of their program offering matrix in terms of introducing new modalities at current campus locations.

The goal is to maximize the geographical area each campus location can serve while providing students with a wider choice in taking their courses, whether online instruction in person at a campus location or a hybrid option in between. We are very pleased with the current trends and expect adjusted operating income at St. Augustine to grow in 2026 as compared to 2025. Total enrollments from the corporate student programs at CTU and AIUS continue to increase. And these programs remain a priority as we continue to make strategic investments in technology and personnel to assist further enrollment growth in these corporate programs.

Improving technology for admissions, academic and student support processes is a key priority, and we continue to equip our teams with the necessary tools to effectively counsel and support the growing number of students through their education. We continue to refine our marketing and admission spending strategies and are integrating artificial intelligence to help identify and engage prospective students who we believe are more likely to succeed at one of our academic institutions.

Our capital allocation decisions throughout the year highlight, amongst other priorities, our continued commitment to returning capital to shareholders. Commensurately, during the quarter, we repurchased $20.6 million worth of shares under our recently approved $75 million share repurchase authorization. Through both share repurchases and quarterly dividends, we have returned a total of $94.1 million to shareholders for the first 3 quarters of 2025, underscoring our ongoing commitment to long-term value, delivering long-term value and disciplined capital deployment.

In closing, I am pleased with the momentum we have experienced through 2025 and remain optimistic for 2026 as we continue to focus on serving students while investing in further enhanced academic outcomes and student experiences.

Ashish will now provide more details on the quarter, our outlook through the remainder of 2025 and enrollment trends. Ashish?

Thank you, Todd. I will start with an overview of the third quarter results and then discuss our balance sheet and outlook for the remainder of 2025 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.

In addition, total student enrollment numbers and any referenced enrollment trends discussed during this call do not include learners pursuing nondegree-seeking and professional development programs and degree-seeking non-Title IV, self-paced programs at CTU and AIU System. As a final reminder regarding year-over-year comparability, this quarter's financial results include the operating performance from the University of St. Augustine for Health Sciences acquisition, which was completed in December of 2024.

With that said, let us begin with an overview of our third quarter results. Third quarter operating income grew by 13.8% to $51 million, while adjusted operating income, which we believe is more indicative of the underlying operating performance and excludes certain noncash items, increased 27.4% to $61 million as compared to $47.8 million during the prior year. Finally, adjusted earnings per diluted share was $0.65 as compared to $0.59 in the prior year. All 3 academic institutions contributed to the growth in operating income, adjusted operating income and adjusted EPS for the quarter.

Revenue for the third quarter was $211.9 million, representing a 24.8% increase from $169.8 million in the prior year. Revenue was favorably impacted by $38 million attributed to the St. Augustine and total enrollment growth at CTU. As of September 30, total student enrollments increased 15.1% compared to the prior year. At a segment level, CTU's total enrollments increased by 6.7%, supported by higher levels of student retention and engagement, growth within the corporate student program and higher levels of prospective student interest.

As Todd mentioned, this represents 8 consecutive quarters of total enrollment growth, and we expect to see continued growth in total enrollments in the fourth quarter as we exit 2025. As expected, total student enrollments at AIU System decreased by 2.9% as compared to the prior year. This decrease was due to enrollment day comparability. But looking ahead to the fourth quarter, we expect to see double-digit enrollment growth at AIU System. As a reminder, in addition to the underlying operating trends such as student retention and engagement, enrollment days in each quarter will also affect quarterly enrollment comparability at AIU System.

At St. Augustine, we began our fall term with approximately 4,400 students enrolled in one of our academic programs. New student enrollments for the fall term were higher as compared to the prior year, primarily due to growth in programs such as nursing and speech language pathology as well as the introduction of new modalities for the doctorate or physical therapy program. Note that St. Augustine has a traditional university calendar with 3 academic terms and multiple campuses for in-person classes in California, Texas and Florida. Commensurately, we may share student enrollment data for the beginning of an academic term, which are typically different from the total student enrollment numbers reported at the end of each fiscal quarter.

In summary, from a total company perspective, we expect revenue and total student enrollments to increase in the fourth quarter and for the full year 2025. And we believe that this expected enrollment growth in the fourth quarter should positively impact revenue and operating performance metrics going into 2026.

Moving on to our segment results. For the third quarter, revenue at CTU was $117.1 million or 4.3% higher than the prior year quarter, while operating income for the quarter increased 6.7% to $47.8 million, primarily due to the student enrollment and revenue growth trends I previously discussed, including sustained demand for degree programs and our continued investment in marketing and admissions to support that demand. At AIU System, as expected, third quarter revenue remained relatively flat at $56.7 million, while operating income increased versus the prior year quarter, mainly due to lower operating expenses, including bad debt.

St. Augustine recorded third quarter revenue of $38 million. Excluding depreciation and amortization, adjusted operating income for St. Augustine was $7.2 million, and as Todd mentioned, will be accretive to our operating results for the full year 2025 and expected to further grow adjusted operating income in 2026.

Moving on to Corporate and Other. Operating losses for the quarter decreased to $6.1 million from $8.5 million in the prior year quarter. The decline was primarily due to incurrence of acquisition-related expenses in the prior year period.

Turning to income taxes. For the third quarter, we recorded a provision for income taxes of $16.2 million, bringing our year-to-date effective tax rate to 26.2%. The year-to-date effective tax rate was positively impacted by tax effect of stock-based compensation, which reduced the effective tax rate by 2 percentage points. Finally, we expect that for the full year 2025, our effective tax rate will be between 26% and 26.5%, which includes an estimated benefit for tax effect of stock-based compensation and the release of previously recorded tax reserves for uncertain tax positions.

Separately, the tax provisions from the reconciliation bill, allowing 100% bonus depreciation and the immediate expensing of domestic research expenditures are expected to reduce our U.S. federal cash tax payments for the rest of 2025 and future years. Additionally, various tax attributes acquired with the University of St. Augustine acquisition will also lower our federal cash tax -- income tax payments for the full year '25 and beyond.

Turning now to our balance sheet and liquidity position. For the year-to-date period ended September 30, 2025, net cash flows provided by operations were $185.1 million versus $144 million in the prior year-to-date. This growth versus the prior year was primarily supported by year-over-year improvements in adjusted operating income. We ended the third quarter with $668.6 million of cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represents an increase of approximately $77.1 million from our year-end position.

During the first 3 quarters, some key uses of cash were $66.7 million in return of capital to shareholders in the form of stock repurchases, $27.4 million of quarterly dividend and dividend equivalent payments, $38.4 million of federal and state income tax payments and $6.3 million of capital expenditures. For full year 2025, we continue to foresee capital expenditures to be approximately 1.5% of revenues.

Before sharing our revised outlook, I want to briefly address our approach to capital allocation. Consistent with our dividend policy and continued confidence in our long-term outlook, the Board of Directors declared a quarterly dividend payment of $0.15 per share payable on December 12, 2025, to the holders of record of Perdoceo's common stock at the close of the business on November 28, 2025. Future quarterly dividend payments are expected to be paid out of free cash flows from the relevant year, subject to Board approval and the company's available retained earnings, financial condition and other relevant factors.

Subject to the conditions previously outlined, we continue to view quarterly dividend payments as an integral and growing part of our balanced capital allocation strategy. We generally expect to evaluate dividend amounts on an annual basis, consistent with Board's recent decision to increase the quarterly dividend.

During the quarter, we repurchased 660,000 shares of our common stock for $20.6 million, bringing our year-to-date share repurchase total to 2.3 million shares repurchased for $66.7 million at an average price of $29.07 per share. As of September 30, 2025, approximately $54.3 million was available under our authorized stock repurchase program to repurchase outstanding shares of our common stock. This reflects our continued commitment to disciplined capital deployment and our ability to invest in growth opportunities, both organic and inorganic, while continually returning capital to our shareholders.

With that foundation in place, we'll shift focus to our outlook for the remainder of 2025. Given the stronger-than-expected operating performance, we are updating our full year adjusted operating income outlook to a range between $234 million and $236 million. This compares to an adjusted operating income of $188.9 million in 2024, with the expected increase primarily due to the St. Augustine acquisition and positive operating trends at CTU and AIU Systems.

Adjusted earnings per diluted share are expected to be between $2.54 and $2.56 versus $2.26 in 2024. As mentioned last quarter, beginning in 2025, the GAAP and adjusted EPS calculations include incremental expenses related to depreciation and finance leases for St. Augustine. While these expenses are excluded for the purpose of adjusted operating income, they are part of the adjusted EPS calculation. Inherent in 2025 adjusted EPS outlook range provided is approximately $0.24 per diluted share related to these incremental expenses. This outlook reflects our current beliefs that the consistently high levels of student retention and student engagement that we experienced in the first 3 quarters will carry into the fourth quarter.

The higher levels of prospective student interest, which we've experienced since the second half of 2024 will continue. And any changes to the regulatory or legislative environment will not have a meaningful impact on prospective student interest levels or necessitate any operational changes. Full year revenue is expected to increase as compared to 2024, primarily driven by the recent acquisitions St. Augustine and organic growth trends at CTU, as I just discussed.

At AIU System, we may see quarterly variability in total enrollment trends due to enrollment day comparability. Additionally, AIU System has an additional academic session beginning in December 2025, which is expected to contribute to the year-over-year enrollment growth as of December 31 and expected to favorably impact operating performance going into 2026. As a reminder, the academic calendar at CTU and AIU System may influence the comparability of revenue earning days and student enrollment numbers in any given quarter, though not necessarily with the same magnitude or direction.

For the fourth quarter of 2025, we expect adjusted operating income to be in the range of $47.9 million to $49.9 million as compared to $42.7 million in the prior year quarter, with adjusted earnings per diluted share to range between $0.53 and $0.55 per diluted share versus $0.49 in the fourth quarter of 2024.

Our 2025 outlook also assumes ongoing investments in technology, data analytics, real estate, academics and student support processes. We believe these investments have supported improved academic outcomes and enhanced student experiences. In addition, we plan to continue expanding the corporate student program teams at CTU and AIU system to support further growth and engagement. Please refer to our earnings release filed 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 will turn the call back over to Todd for his closing remarks. Todd?

Thank you, Ashish, and thank you again to all our incredible faculty and staff for their hard work in supporting and educating our students. We believe that the third quarter performance is representative of the success we have had in improving student experiences, retention and academic outcomes through ongoing personnel and technology investments, and we remain optimistic for the future.

Thank you for joining us, and we look forward to speaking with you again next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.