Business Context and Reporting Period
Company: Perdoceo Education Corp (PRDO)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Perdoceo operates three accredited academic institutions: Colorado Technical University (CTU), the American InterContinental University System (AIUS), and the University of St. Augustine for Health Sciences (USAHS). The company provides fully online, campus-based, and hybrid degree programs primarily for non-traditional adult learners. A significant portion of revenue is derived from federal Title IV financial aid programs.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenue | $846.1 million | $681.3 million | +24.2% |
| Operating Income | $196.0 million | $174.3 million | +12.5% |
| Net Income | $159.9 million | $147.6 million | +8.3% |
| Diluted EPS | $2.42 | $2.19 | +10.5% |
| Adjusted Operating Income | $237.6 million | $188.9 million | +25.8% |
| Operating Cash Flow | $225.2 million | $161.6 million | +39.4% |
| Cash & Equivalents | $643.5 million | $591.5 million | +8.8% |
| Total Student Enrollments | 44,400 | 41,380 | +7.3% |
Note: Revenue and expense growth in 2025 were significantly impacted by the full-year inclusion of USAHS, acquired in December 2024.
Material Changes vs. Prior Period
- USAHS Acquisition Impact: The acquisition of USAHS contributed approximately $147.5 million to the year-over-year revenue increase. USAHS generated $157.6 million in revenue and $3.2 million in operating income for the full year 2025.
- Enrollment Growth: Total enrollments increased 7.3% to 44,400. CTU grew 6.6%, AIUS grew 11.2%, and USAHS grew 2.6%.
- Expense Management: Bad debt expense decreased 12.5% to $29.5 million (3.5% of revenue) due to improved student retention and engagement. Depreciation and amortization increased 184.2% to $41.6 million, primarily due to USAHS intangible assets.
- Capital Allocation: The company repurchased 4.1 million shares of common stock for approximately $120.8 million in 2025. Dividends paid totaled $36.9 million.
Guidance, Outlook, and Risks
Management Commentary and Outlook
- 2026 Outlook: Management expects full-year adjusted operating income to be higher in 2026 compared to 2025, driven by anticipated enrollment and revenue growth.
- Regulatory Environment: The company is navigating significant regulatory changes under the "Reconciliation Act" signed in July 2025. Key changes effective July 1, 2026, include the elimination of Grad PLUS loans for new borrowers and new earnings-premium accountability tests.
- USAHS Status: USAHS was removed from Heightened Cash Monitoring (HCM1) status in January 2026, and the $20.5 million letter of credit requirement was lifted, releasing restricted cash.
Risks and Contingencies
- Regulatory Compliance: The company faces risks related to the 90-10 Rule (federal funding limits), Gainful Employment rules, and cohort default rates. Preliminary 2025 calculations indicate compliance with the 90-10 Rule.
- Legal Proceedings: Two active qui tam (False Claims Act) lawsuits are pending. The DOJ has declined to intervene in both, but the relators are pursuing litigation regarding credit hour requirements and incentive compensation. The company cannot estimate potential losses.
- Loan Default Rates: While the 2022 cohort default rate was 0%, the company anticipates higher default rates starting with the 2024 cohort due to the resumption of federal loan repayments and servicer disruptions.
Investor Verification Checklist
- USAHS Integration: Verify the sustainability of USAHS enrollment growth and the impact of the new loan limits on graduate health sciences programs starting July 2026.
- Regulatory Compliance: Monitor the finalization of the "Reconciliation Act" regulations and the company's ability to maintain compliance with the 90-10 Rule and new earnings-premium metrics.
- Legal Exposure: Track the status of the two pending False Claims Act lawsuits and any potential settlements or judgments.
- Cash Flow Quality: Confirm the release of the $20.5 million restricted cash from USAHS and its deployment for operations or shareholder returns.
- Enrollment Trends: Assess whether the 7.3% enrollment growth is organic or driven by specific corporate partnerships that may be subject to renewal risks.