PXED - NYSE

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 Elizabeth Coronelli, Vice President of Investor Relations. Please go ahead.

Welcome to the Phoenix Education Partners first quarter 2026 earnings conference call. Speaking on today's call are Christopher Lynne, our Chief Executive Officer, and Blair Westblom, 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. These 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 as 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 turn the call over to Christopher Lynne.

Thank you, Elizabeth, and good afternoon, everyone. We appreciate you joining us as we report our results for 2026. This quarter's results demonstrated 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 reinforce 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 the first quarter of 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 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 assistant 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 and 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 Education released preliminary program performance accountability metrics. 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 cyber incident involving our Oracle E-Business Suite software platform, which was disclosed in our early December 8-K. 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 expense 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 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 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 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.

Thank you, Christopher, and good afternoon. For 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 the first quarter of 2026. Net income attributable to the company was $15.5 million or 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 noncash 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 3¢ to $1.38. As a reminder, our earnings per share for all periods have 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 noncash 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 for 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 dispersing financial aid by course. Regarding expenses, instructional and increased $7.1 million to $115.2 million, and general and administrative was up $24.6 million to $106.6 million. Both increases are 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 Christopher 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 21¢ per share or approximately 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 to $1.035 billion and adjusted EBITDA guidance of $244 million to $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.

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 Gregory Parrish with Morgan Stanley. Your line is open.

Congrats on the result. Nice to see solid enrollment growth despite the identity verification changes last year. There'll be 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. 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 kinda level set where we are, what you're watching, and then any potential impacts here for this year.

Yeah. Thanks, Gregory. This is Christopher. Yeah. So NEG regs 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 punch line 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 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, you know, 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, continue into 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.

Your next question comes from Alex Parrish 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, Christopher, 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 we're still waiting for data?

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. And 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 it just gonna have large enough cohorts. So, there would be a probably a larger proportion of those that they didn't have earnings information for that would correlate with smaller programs. But don't have the exact data I have it at a high level, and our team is working through it. But I think it's net positive from the perspective that it was a 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 gonna have any challenge, and what percentage of enrollment does that account for? You know, like, in the old days, 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. Yeah. We talked a little bit about this in the process of going public. I can't recall if we've talked about it on the last earnings call, but and 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, you know, 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 in while the bill was in sort of preliminary form. With that said, you know, if we were to look at preliminary info, it was positive. Reflecting on what we speculated. But again, it's preliminary info. So you know, we didn't anticipate and continue not to 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 let up 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, you know, based on the IPO roadshow and our conversation since, it did have an impact on enrollment in, you know, maybe the 2024 and early into 2025, yet I 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've 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. And then in Q4, you know, 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.

Your next question comes from Jeffrey Bibb with Truist Securities. Line is open.

Hey. Good afternoon, everyone. I think, on the last call, you messaged 2026 was gonna be a little bit of second half weighted year from enrollment growth perspective. Has that changed? I mean, it seems like fairly strong start to the year here in the first quarter.

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, unknack 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 those into that risk-free cohort this year. So, you know, said differently from a pure financial perspective, the quality of the incoming revenue is higher but you're gonna see a little bit of a lag related to the average total degree enrollment growth. And that's gonna 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 in we'll expect that to normalize much more in Q4. In terms of average total degree to enrollment growth, you know, we had a solid first quarter. You know, we think we set a solid foundation for the year. We're not, you know, 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, you know, in revenue per student or enrollment? I just you could provide a bit more detail there from a modeling perspective. Yeah. I mean, revenue student 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, you know, 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 among the 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 to that.

Absolutely. Thanks, Christopher. Great question. Thanks, Jasper. I just wanted to comment you know, you will see variability in 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 Christopher mentioned. And in Q1, '26, 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 Christopher noted in his remarks, it was up three points year over year, and 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.

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

Hi. Good evening. Thanks for taking my questions. Just starting off on the enrollment growth aspect there. Is there any color you can 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. You know, as we've described, our program offerings, you know, 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 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, Christopher. 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 gonna be any, you know, marginal increase in cybersecurity or maybe legal fees that you're gonna 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 opening remarks, we do have a comprehensive cybersecurity policy that covers the majority of the cost 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 in our adjusted EBITDA calculation. In terms of recurring costs associated with cyber, you know, 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. I mean, 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, you know, 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, Christopher. And then just last quick for me on the stock-based comp side. Blair, obviously, you mentioned $30 million, of course, is not gonna 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 comp going forward? Maybe a range of percentage of revenue or something like that or how you're thinking about it? Would be helpful.

Yeah. Sure. Appreciate the question. So the large noncash expense of $29.5 million in Q1 2026 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 mark to market, represented $23 million of the $29.5 million of the total noncash SBC expense in the quarter. So once we've, you know, anniversaried 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've recognized the expense associated with that, we would expect our stock-based compensation to normalize. And I'd suggest that you refer to Form 10-Q for more detail in terms of our stock-based compensation.

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 consultant, that grant was at a level that would be a little higher on a per participant basis given the IPO than future awards. So, you know, 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, Christopher. Blair, thanks for taking my questions. Appreciate it.

Yeah. You're welcome.

Your next question comes from George Tang with Goldman Sachs. Your line is open.

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?

Yeah. Thanks, George. I'll take that question. We've been looking at the debt to earnings ratios as 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, you know, 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. 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, and you know, based on our understanding of actually where the regulations are going, we are seeing that the regulations are going to converge with the legislation in the One Big Beautiful Bill Act. So in terms of any accountability that would affect our ability to offer Title IV, it will be only in earnings threshold metric as we understand it currently. And 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. You know, 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 put in place. They've been effective and continued to be effective since we implemented them. So we've seen consistency earlier in Q4, and we've seen consistent improvements in productivity on a per enrollment rep basis. So, you know, 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 can just put on cruise control. We have very effective controls, and we have very effective metrics. So it's something 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.

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

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 that are gonna 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 what you think the exposure might be. Thanks.

Yeah. Thanks, Jeffrey. 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.

Alright. That's great to hear. And then as a follow-up, I know it's only the first quarter of the year but 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 I 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, you know, our students are off for a couple 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.

Alright. That makes sense. Thanks so much.

You're welcome.

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?

Yes.

Oh, my apologies. You know, 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 employer engagement is going this year in the opportunities we can see for, you know, continued growth in that vertical would be helpful. And I'll stop there.

Okay. Thanks, Stephanie. Yeah. So you know, 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 seed 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 know, you spoke in the actually, last answer to the last 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 future years. We'd love to hear your thoughts. Thanks.

Yeah. We're not anticipating any and I jumped right in here. So, yeah, 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's no there are season patterns associated with B2B that are driven by the timing of reimbursement and things like that. That they may have an impact over time. But I don't think that's something that I would having a meaningful impact going into, like, 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.

Your next question comes from Robert Sanderson with Loop Capital. Your line is open.

Thank you. Good afternoon, everybody. Thanks for taking my questions. I have two, please. First, just on it's been 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've 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 a follow-up on AI.

Thanks, Robert. Yeah. The way we think about prices, you know, we believe based on our assessment of the markets that we operate in that the pricing could be a lever, but we also believe long term that affordability is gonna matter more and more to our students. You know, we've been very effective at driving operating leverage into our model for quite some time. I think our 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, you know, 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. Know, if we were to see that dynamic changing, you know, 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, you know, over time, I think as we deepen these relationships with employers and that value proposition gets stronger and stronger and grows. And that's the area that I think over time, we'd like to drive pricing is really based on value that we're delivering in the marketplace. But for now, we continue to believe that know, we can hold pricing constant and drive up our margins. The way that we have put out in our outlooks.

Great. Now we wanna talk a little bit about AI. You know, you mentioned just on the call or on your prepared remarks how you've been implementing AI into the curriculum and your health helping learners sort of prepare to responsibly to 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, you know, a trend that your enterprise affiliates are talking about or perhaps, you know, thinking about preparing for?

Yeah. I think that absolutely. You know, our belief based on everything we can see across our leadership and our organization and working with employers is that there is gonna be displacement and there is gonna be change in the workforce and that the jobs of the future are gonna be held by those that are fluent and using AI to drive value in organizations. Now you can get deep into that, and, you know, there are studies that come out almost weekly now about what the future looks like and five to ten 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 gonna 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 wanna 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. And then for most other jobs, it's ones that are gonna keep the jobs and advance the workforce are the ones that are gonna be fluent in AI, which is why it's a big focus of our curriculum.

Thank you, Christopher.

You're welcome.

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

Thank you, everyone. The 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.