Covista Inc. (10-Q) — Fiscal Q1 2027
Quarter ended September 30, 2026; comparisons are with the quarter ended September 30, 2025 unless noted. Covista operates Chamberlain University, Walden University, and medical and veterinary schools (AUC, RUSM, and RUSVM). Amounts below are in millions except per-share data and enrollment.
Financial results
| Metric | Q1 FY2027 | Prior year | Change |
|---|---|---|---|
| Revenue | $511.5 | $462.3 | +10.7% |
| Operating income | $98.0 | $85.5 | +14.7% |
| Net income | $67.4 | $61.8 | +9.0% |
| Diluted EPS | $1.95 | $1.67 | +16.8% |
| Operating cash flow | $114.0 | $130.5 | Down $16.5 |
- Gross margin was 56.8%, compared with 56.6%; GAAP operating margin was 19.2%, compared with 18.5%.
- Adjusted operating income, a non-GAAP measure, was $106.6 million versus $90.3 million; adjusted operating margin was 20.8% versus 19.5%. Adjusted net income was $75.8 million versus $64.9 million, and adjusted diluted EPS was $2.19 versus $1.75.
- Revenue increased in all segments: Chamberlain +7.4% to $192.4 million; Walden +14.1% to $216.7 million; Medical and Veterinary +10.0% to $102.5 million. Enrollment increased 1.3% at Chamberlain’s September session, 12.8% at Walden, and 3.5% at the medical and veterinary schools.
Cash, debt and liquidity
- At September 30, cash and cash equivalents were $222.2 million, down from $406.3 million at June 30; restricted cash was $2.3 million. Current assets were $552.6 million versus current liabilities of $684.5 million.
- Operating cash flow was $114.0 million; capital expenditures were $37.6 million, primarily for Chamberlain campus development and IT. Financing cash outflow was $259.6 million, including $163.0 million of revolver repayments and $81.0 million of share repurchases.
- Term Loan B principal was $510.0 million (carrying value $500.2 million), with a 6.07% rate and maturity in 2033. The revolver had no borrowings and $500.0 million available. Covista reported compliance with debt covenants.
- The company repurchased 658,088 shares for $84.0 million at an average $127.63 per share; $577.8 million remained authorized under its current program. Management said available cash, operating cash flow and credit-facility capacity should fund obligations, working capital, capital spending and anticipated repurchases for the next 12 months and several years.
Material changes, outlook and risks
- Growth was supported by enrollment and tuition increases. Cost of educational services rose 10.0%, broadly in line with revenue, while student-services and administrative expense rose 9.6%. Management cited higher marketing, labor, credit-loss provisions and growth investments. Chamberlain’s gross margin declined to 51.5% from 53.6%; Medical and Veterinary’s rose to 47.9% from 43.3%.
- Provision for credit losses increased to $22.4 million from $14.9 million. Net accounts and financing receivables rose to $241.5 million from $169.6 million at June 30. The filing attributes much of the working-capital movement to term-related collections and deferred revenue; current deferred revenue increased to $365.1 million from $259.1 million.
- Interest expense decreased to $9.9 million from $11.1 million. A $4.1 million discontinued-operations loss, related to ongoing litigation and settlements from prior divestitures, compared with $0.8 million of income a year earlier. Strategic advisory costs were $6.2 million, and debt-modification costs were $0.8 million.
- No specific revenue or earnings guidance is provided. Management described continuing growth initiatives and efforts to improve Chamberlain post-licensure enrollment; no assurance of future results is given. The filing says no material changes were made to the risk factors in the FY2026 Form 10-K.
- Covista institutions had received borrower-defense-to-repayment claims from the U.S. Department of Education. As of quarter-end, none had received notice of approved claims or intent to recoup funds; the company said it believes the claims do not qualify. The filing warns that litigation, regulatory matters and other contingencies could require significant resources and potentially materially affect results.
- On October 27, 2026, CFO Robert Phelan notified the company of his planned retirement; he will remain until a successor is named, and a search is underway. The CEO and CFO also disclosed Rule 10b5-1 stock-sale plans. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Key facts for investors to verify
- Whether enrollment and revenue growth persist, particularly at Walden and in Chamberlain’s post-licensure programs.
- Credit-loss provisions, receivable aging and collection performance as receivables grow.
- Developments in borrower-defense claims, Title IV requirements and other regulatory or legal matters.
- Cash use for capital investment, debt repayment and repurchases, and continued access to the revolver.
- Execution of the CFO transition and the effect of strategic advisory spending and other adjustments in non-GAAP results.