PRDO 10-K & 10-Q changes, risk factors and insider trading

As a provider of postsecondary education and a participant in federal and state programs providing financial assistance to students, we are subject to extensive laws and regulationregulations at both the federal and state levelslevels, as well as by accrediting agencies. These requirements cover virtually all aspects of our business.

In particular, the Higher Education Act of 1965, as amended (“HEA”), authorizes participation in Title IV Programs and subjects participants to extensive regulations by the Department, state education authorizing agencies, and accrediting agencies. Our institutions’ participation in education assistance programs administered by the Departments of Defense and Veterans Affairs also subjects us to oversight by those agencies. In addition, other federal agencies such as the Consumer Financial Protection Bureau (“CFPB”) and the Federal Trade Commission (“FTC”) and various state agencies and state attorneys general enforce a broad range of consumer protection and other laws applicable to activities of postsecondary educational institutions, such as recruiting, marketing, the protection of personal information, student financing and payment servicing.

Because of these regulatory requirements, we are subject to compliance reviews and audits, as well as claims of noncompliance and lawsuits by government agencies based on claims by students, current and former students or employees and other third parties. These matters often require the expenditure of substantial time and resources to address and, additionally, they may damage our reputation, even if such actions are eventually determined to be without merit. For example, the Department has broad powers to request information and review records of an institution participating in Title IV Programs. These requests can be open-ended and do not necessarily relate to any specific allegations of wrongdoing or assert any compliance failures of any kind. We received such a request from the Department in December 2021. The inquiry was subsequently closed in January 2025 without any findings. Due process safeguards and protections for institutions subjected to this type of information request are limited to the Department’s interpretation of the boundaries of its authority over institutions participating in Title IV programs.Programs.

The Department, under the Biden Administration, took an ever-expanding view on its authority over the administration of Title IV programs,Programs, institutionsinstitutions, and loans, including overruling or ignoring a number of historical precedents and due process safeguards. The Department partnered with advocacy groups critical of the for-profit education sector in numerous aspects of its agenda, which have lobbied for targeting the sector and our schools. The postsecondary education regulatory environment mayhas change in the futurechanged as a result of the U.S. federal election in November 2024. The new Presidential Administration and new Congress may act to change or eliminate currently effective ED regulations and final ED regulations that have been promulgated but are not yet effective.

In addition to responding to compliance reviews andreviews, audits and other informational requests, we have hadsettled significant matters pending against us in the past which have resulted in the payment of significant amounts to settle the matters and our agreement to ongoing compliance and operational oversight. In this regard, seeSee Item I,1, “Business – Accreditation, State Regulation and Other Compliance Matters – Other Compliance Matters,” for discussion of agreements undertaken in connection with several matters resolved in recent years.

Compliance with reviews andreviews, audits and applicable laws, regulations, standards or policies may impose significant burdens and a failure to comply could result in substantial financial penalties, severe restrictions on or closure of our operations, loss of federal and state financial aid funding for our students, or loss of authorization to operate our institutions.institutions, which could have a material adverse effect on our business, financial condition and results of operations.

“Gainful Employment”Accountability regulations may subject us to significant disclosures and limitations, including program closures, which could materially reduce the enrollments and revenue at our institutions and negatively impact our future growth.

Our institutions could lose their eligibility to participate in federal student financial aid programs, face significant limitations on their ability to serve new or former students or have other limitations placed upon them if the percentage of their revenues derived from certain federal programs is too high.

Additionally,An weinstitution maythat notderives knowmore atthan 90% of its cash receipts from qualifying federal funding sources for any fiscal year will be placed on provisional participation status for its next two fiscal years and must provide notices to existing students about the timepotential loss of receiptTitle thatIV fundingfunding. used by a student was derived from a federal program. In addition, ifIf the institution violates the 90-10 Rule for two consecutive fiscal years and becomes ineligible to participate in Title IV Programs, but continues to disburse Title IV Program funds, the Department would require the repayment of all Title IV Program funds received by it after the effective date of the loss of eligibility. The Departmentissuance alsoof notedany required notice could deter prospective students from enrolling at our institutions and current students from continuing in itstheir publication of the new rule that its expectation was to encourage a shift in enrollment away from for-profit schools and toward taxpayer subsidized community colleges. As such, we expect unfavorable treatment from the Department in its interpretations, guidance, and enforcement with regard to institutional compliance.programs.

Several factorsWe have adverselylimited impactedability ourto 90-10control percentagesthe inamount recent years, including increases inof Title IV Program aidfunds, availabilitymilitary includingor year-roundveteran Pelleducation Grantbenefits, or other federal funds andsought budgetby reductionsor for state grant programs, workforce training programs, and other funding programs. We expect this negative trendawarded to continue.our students. Additionally, the lack of visibility into federal fund sources that students utilize, the timing of the identification of the federal fund sources applicable to the 90-10 Rule, and the lack of clarity regarding the definition of federal funds which funds count in the “10”, as well as other technical aspects of the calculation methodology, and interest levels and variability in the timing of receipts of future cash payments made for allowable non-Title IV programs offered by our institutions, all make it difficult to predict future compliance with the 90-10 Rule. WeAlthough we have implemented various measures intended to reduce the percentage of our institutions’ cash basis revenue attributable to designated federal funding sources, including efforts to diversify the sources of our revenue. However,revenue, these measures may not be adequatesufficient to preventensure our compliance with the 90-10 Rule and may not be sufficient to allow our institutions to serve degree-seeking prospective students atin the same rates as we have historically, or may require limiting the type or volume of new students we enroll or programs we offer.future. We may be required to modify our business operations, including reducing our investments in prospective student outreachoutreach, recruitment, and recruitment,enrollment growth in order to preserve Title IV eligibility for our existing students’ ability to continue benefitting from financial assistance for their education pursuant to Title IV Programs. For example, in 2023, we materially reduced prospective student enrollment, marketing and outreach processes at AIUS during the year to limit the volume of new federal funding that the institution would receive to preserve available funding for existing students. Any necessary business changes could materially impact our revenue, operating costs and opportunities for growth. Furthermore, these business changes could make more difficult our ability to comply with other important regulatory requirements.

WhileIn addition to the Departmentconsequences maydescribed attempt to impose additional sanctions on institutions that failabove, the 90-10 Rule, but there is only limited precedent available to determine their legality or predict what those additional sanctions might be. For example, the new financial responsibility rule, discussed further below, imposes a mandatory triggerconsequences for failure to comply withfor one year of the 90-10 Rule. ItA wouldone-year requireviolation triggers a minimumrequirement to provide financial protection ofequal to at least 10 percent of the previousinstitution’s year’sprior-year Title IV funds.funding, Thiswhich protection wouldmust remain in place until the institution passes the 90-10 Rule for two consecutive fiscal years. The Department has discretion to impose a wide range of additional conditions as part of its provisional certification and the institutions' continued participation in Title IV Programs.certification. These conditions may include,include but are not limited to: restrictions on the total amount of Title IV Program funds that may be distributed to students attending the institutions; restrictions on programmatic, enrollment, and geographic expansion; requirements to obtain and post letters of credit; and additional reporting requirements to include additional interim financial or enrollment reporting.

If any of our institutions were to lose eligibility to participate in Title IV Programs due to violation of the prior or modified 90-10 Rule, the institution would experience a dramatic decline in revenue and would be unable to continue its business as it currently is conducted. EffortsPast and future efforts to reducemanage compliance with the 90-10 Rule percentage for our institutions have and may inrequire the future involve taking measuresactions that reduce our revenue, increase our operating expensesexpenses, or involverely on interpretations of the 90-10 Rule or other Title IV regulations that are without clear precedentprecedent, (or allany of thewhich foregoing,could inmaterially eachand caseadversely perhapsaffect significantly).our business, financial condition, and results of operations.

The extensive and evolving regulatory requirements applicable to our business may change, in particular as a result of the scrutiny of the for-profit postsecondary education sectorsector, which could require us to make substantial changes to our business, reduce our profitability and make compliance more difficult.

The Higher Education Act guides the federal government’s support of postsecondary education. The U.S. Congress is required to periodically reauthorize the Higher Education Act and other laws governing Title IV Programs and annually determines the funding level for each Title IV Program. Congress last reauthorized the Higher Education Act in 2008. The reauthorization of the Higher Education Act results in a change in the requirements for existing programs and its participation in Title IV programs. Additionally, funding for student financial assistance programs may be impacted during appropriations and budget actions. See Item 1, “Business—Student Financial Aid and Related Federal Regulation—Legislative Action and Recent Department Regulatory Initiatives,” for more information about the reauthorization of the Higher Education Act. In recent years, Congress, the Department, states, accrediting agencies, the CFPB, the FTC, state attorneys general, consumer advocacy groups, and the media have scrutinized the for-profit postsecondary education sector. See Item 1, “Business - Student Financial Aid and Related Federal Regulation - Scrutiny of the For-Profit Postsecondary Education Sector,” for more information about the focus on our industry. This scrutiny andhas effortsresulted of the Biden Administration led toin significant regulatory changes and increased enforcement efforts designed to target and limit for-profit postsecondary education. See Item 1, “Business - Student Financial Aid and Related Federal Regulation - Legislative Action and Recent Department Regulatory Initiatives,” for an overview of regulatory initiatives by the Department. OngoingIn addition, ongoing efforts by activistsstates and activist groups to change state authorization regulations, State Authorization Reciprocity Agreement ("SARA") reciprocity rules, and other state-by-state standards could further increase regulatory compliance burdens onand operational complexity related to our business. See Item 1, “Business - Accreditation, State Regulation and Other Compliance Matters - State Regulation,” for more information about state regulation and SARA.

As in the past, recent and future regulatory changes—whether arising from legislation, rulemaking, enforcement actions, or shifts in regulatory interpretation—may have significant impacts on our business, potentially requiring a large number of operational changes, changes to and elimination of certain educational programs, or other fundamental changes to our business. These actions maycould reduce our student enrollments and profitability or limit our ability to maintain or grow our business. These recent and future regulatory changes may also make compliance with regulatory requirements even more complex and difficult.

A failure to demonstrate "financial responsibilityresponsibility," or "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.

See Item 1, “Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Financial Responsibility,” “Business – Student Financial Aid and Related Federal Regulation -- Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations,” “Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Administrative Capability” and “Business – Student Financial Aid and Related Federal Regulation -- Negotiated Rulemaking: Certification Procedures” above for an overview of the current rules relating to the financial responsibility, administrative capability and certification procedures.

If our institutions fail to maintain financial responsibility or administrative capability, they could lose their eligibility to participate in Title IV Programs, have that eligibility adversely conditioned or be subject to similar negative consequences under accreditor and state regulatory requirements, which would have a material adverse effect on our operations. In particular, limitations on participation in Title IV Programs resulting from the failure to demonstrate financial responsibility or administrative capability could materially reduce the enrollments and revenue at the impacted institution, and a termination of participation would cause a dramatic decline in revenuerevenue, and we would be unable to continue our business as it currently is conducted.

See theItem 1, “Business – Student Financial Aid and Related Federal Regulation -- Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations” above for an overview of the current rules relating to Borrower Defense to Repayment.

We cannot predict the impacteffect variousthat current or future borrower defense toand repaymentloan discharge regulations will have on student enrollments, the volume of claims submitted by borrowers for loan discharge (including closed school discharge claims), the number or amount of claims for loan discharge the Department approves, the amountextent ofto discharged loanswhich the Department assertsmay weseek haveto repaymentrecover liabilitydischarged for,loan amounts from us, our future financial responsibility as determined by the Department, or any sanctionssanctions, conditions, or otherenforcement actions that may be taken or imposed by the Department might take against our institutions based on loans discharged, allincluding any requirement to post a letter of whichcredit. Any such developments could berequire significant cash outlays, increase compliance costs, constrain capital resources, and materially adverseand toadversely affect our business.business, financial condition, results of operations, and future growth.

AnOur institutioninstitutions must bemaintain accreditedinstitutional byaccreditation from an accrediting agency recognized by the Department in order to participate in Title IV Programs. See Item 1, “Business – Accreditation, Jurisdictional Authorizations and Other Compliance Matters – Institutional Accreditation.” The failureFailure to comply with applicable accreditation standards subjectsmay subject an institution to additional oversight and reporting requirements, adverse accreditation proceedingsactions, such as aincluding show-cause directive,directives, anprobation, action to deferdeferral or deny action related to an institution's application for a new grantdenial of accreditation,accreditation anactions, actionsuspension toor suspendloss of an institution's accreditation or a program's approval, or other negative actions. Future inquiries or actions by state or federal agencies could negatively impact our accreditation status. If our institutions or programs are subject to accreditation actions or are placed on probationary or other negative accreditation status, we may experience adverse publicity, impaired ability to attract and retain students and substantial expense to obtain unqualified accreditation status. The inability to obtain reaccreditation following periodic reviews or any final loss of institutional accreditation after exhaustion of the administrative agency processes would result in a loss of Title IV Program funds for the affected institution and its students. In addition, if an accrediting body of our institutions loses recognition by the Department, that institution could lose its ability to participate in Title IV Programs. See Item 1, "Business - Student Financial Aid and Related Federal Regulation - Eligibility and Certification by the Department," for more information.

ManyIn statesaddition to institutional accreditation, many states, licensing bodies, and professional associations require professionalcertain educational programs to be accredited.accredited by specialized accrediting agencies. While programmatic accreditation alone is not a sufficient basis to qualify for institutional Title IV Program certification, programmatic accreditationit may be a prerequisiterequired for graduates to obtain professional licensure or improve employment opportunities of program graduates in their chosen field. Those of our programs that do not have such programmatic accreditation, where available, or fail to maintain such accreditation, particularly in programs in the health sciences field, may experience adverse publicity, declining enrollments, litigation or other claims from students or suffer other adverse impacts, which could result in it being impractical for us to continue offering such programs.

If our institutions fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our institutions may lose the ability to participate in Title IV programs,Programs or have participation in these programs conditioned or limited.

Our institutions must maintain systems and processes to identify and prevent fraudulent applications for enrollment and financial aid. We cannot be certain that our institutions’ systems and processes will continue to be adequate in the face of increasingly sophisticated fraud schemes, or that we will be able to expand such systems and processes at a pace consistent with the changing nature of these fraud schemes. We believe the risk of outside parties attempting to perpetrate fraud in connection with the award and disbursement of Title IV programProgram funds, including as a result of identity theft, is heightened dueat toour beinginstitutions anthat are exclusively online education provider.providers.

The Department requires institutions that participate in Title IV Programs to refer to the Department’s Office of the Inspector General ("OIG") credible information about fraud or other illegal conduct involving Title IV programs.Programs. If the systems and processes that our institutions have established to detect and prevent fraud are inadequate, the Department may find that our institutions do not satisfy the Department’s administrative capability requirements, which could have the adverse effects described in the risk factor captioned “A failure to demonstrate "financial responsibility" or "administrative capability" or meet new "certification" requirements would have negative impacts on our operations.” In addition, our ability to participate in Title IV Programs is conditioned on maintaining accreditation by an accrediting agency that is recognized by the Department. Any significant failure to adequately detect fraudulent activity related to student enrollment and financial aid could cause us to fail to meet accreditors’ standards. Furthermore, accrediting agencies that evaluate institutions offering online programs,programs must require such institutions to have processes through which the institution establishes that a student who registers for such a program is the same student who participates in and receives credit for the program. Failure to meet the requirements of our institutions’ accrediting agencies could result in the loss of accreditation of one or more of our institutions, which could result in their loss of eligibility to participate in Title IV Programs.

Our agreement with the FTC may lead to unexpected impacts on our student enrollments or higher than anticipated expenses,expenses. aA failure to comply with the agreement may lead to additional enforcement actions and continued scrutinyscrutiny, which may result in additional costs or new enforcement actions.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:

Perdoceo’s accredited academic institutions offer a quality postsecondary education to a diverse student population, with fully online, campus-based and hybrid learning programs. The Company’s academic institutions – Colorado Technical University (“CTU”), the American InterContinental University System (“AIUS” or “AIU System”) and University of St. Augustine for Health Sciences ("USAHS") – provide degree programs from the associate through doctoral level as well as non-degree seeking and professional development programs. Our academic institutions offer students industry-relevant and career-focused academic programs that are designed to meet the educational needs of today’s busy adults. CTU and AIUS continue to show innovation in higher education, advancing personalized learning technologies like their intellipath® learning platform and using data analytics and technology to serve and educate students while enhancing overall learning and academic experiences. USAHS isprepares amongmedical professionals to provide quality medical care to communities across the nation'scountry reputableprimarily universitiesthrough offeringits graduate health sciences degrees,degree primarilyofferings in physical therapy, occupational therapy, speech language therapy and nursing, as well as continuing education programs. Perdoceo's academic institutions are committed to providing quality education that closes the gap between learners who seek to advance their careers and employers and communities needing a qualified workforce.

See Note 1817 “Segment Reporting” for a description of each of our current reporting segments along with revenues, operating incomeincome, significant segment expenses and total assets by reporting segment.

As indicated in “Scrutiny of the For-Profit Postsecondary Education Sector” section,section within Item 1, "Business", the for-profit education industry is scrutinized by various policymakers, regulatory agencies and interest groups. Congressional hearings and roundtable discussions were previously held regarding certain aspects of the education industry, including issues surrounding student debtdebt, as well as publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports were issued that are highly critical of for-profit colleges and universities. Many of the most highly criticized institutions have been closed now for several years. See “Scrutiny of the For-Profit Postsecondary Education Sector” for additional information on this matter.

As of December 31, 2025, we experienced total student enrollment growth, supported by continued momentum in student retention and engagement as well as increased interest from prospective students looking to pursue a degree at our academic institutions. Total student enrollments increased 20.0%7.3% at December 31, 20242025 as compared to December 31, 2023,2024, withdriven bothby CTUenrollment andgrowth AIUSat contributingall tothree thisof increase,our alongacademic with the USAHS acquisition.institutions. CTU's total student enrollments increased 8.1%6.6% as compared to the prior year end, drivensupported by studenthigh enrollmentlevels growth within our corporate engagement programs as well as continued improvement in prospective student interest levels,of student retention and engagement, growth within the corporate student engagement.program and strong levels of prospective student interest. Total student enrollments increased 11.8%11.2% at AIUS for the current year end as compared to the prior year endend, driven by an additional academic session during the fourth quarter, as AIUS'well as underlying student retention and engagement trends. Lastly, for USAHS, total student enrollmentenrollments comparabilityincreased had2.6% continued to improve throughfor the current year sinceend revertingas compared to normalized levels of operations at the endprior ofyear 2023.end, primarily driven by growth in programs such as nursing and speech language pathology.

Operating income for the current year increased by 12.5% to $174.3$196.0 million as compared to operating income of $150.4$174.3 million in the prior year.year, driven by increased operating income within all three of our academic institutions as well as reduced operating losses within Corporate and Other. The increase in operating income for the current year was a result of decreasedrevenue growth and continued management of operating expenses, primarily in the areas of administrative, asset impairment, admissions and academics expenses, which more than offset the decrease in revenue during the current year as compared to the prior year.expenses.

The Company believes it is useful to present non-GAAP financial measures, such as adjusted operating income, which exclude certain significant and non-cash items, as a means to better understand the core performance of its operations. During the current year, the Company no longer adjusts for legal fees associated with certain matters as these amounts are no longer material to the results of operations and, as a result, prior period non-GAAP amounts have been recast to be comparable. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $192.2$237.6 million for the current year as compared to $174.9$188.9 million for the prior year. Adjusted operating income for the years ended December 31, 2024 and 2023 is presented below (dollars in thousands, unless otherwise noted):

Educational services and facilities expense includes costs attributable to the educational activities of our campuses, including: salaries and benefits of faculty, academic administrators and student support personnel, and costs of educational supplies and facilities, such as rents on leased facilities. Also included in educational services and facilities expense are rents on leased administrative facilities, such as our corporate headquarters, and costs of other goods and services provided by our campuses,services, including costs of textbooks and laptoplaptops, computers.and rents on leased campus and administrative facilities.

General and administrative expense includes operating expenses associated with, including salaries and benefits of personnel in,with corporate and campus administration, marketing, admissions, information technology, financial aid, accounting, human resources, legal and compliance. Other expenses within this expense category include costs of advertising and production of marketing materials and bad debt expense.

Educational services and facilities expense for the current year decreasedincreased by 7.3%63.4% or $9.5$76.7 million as compared to the prior year,year. supportedThe byincrease improvementswas inprimarily bothdue academicsto anda studentfull year of expenses related coststo andthe occupancyUSAHS expenses,acquisition as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, expenses increased slightly, primarily driven by increased academic expenses at CTU to support the growth in total student enrollments.

Academics and student relatedstudent-related costs decreasedincreased by 6.5%54.2%, or $7.8$60.8 millionmillion, and occupancy-related costs increased by 183.7%, or $15.9 million, respectively, as compared to the prior year,year. These increases were primarily dueattributable to operationala changesfull madeyear of expenses related to simplificationUSAHS of professional development offerings. Occupancy expenses forin the current year improved by 16.1% or $1.7 millionyear, as compared to only one month of such expenses in the prior year,year driven by ongoing optimization of leased space.period.

The advertisingAdvertising and marketing expense for the current year decreasedincreased by 1.6%11.8% or $1.6$11.9 million as compared to the prior year,year. whichThe increase was driven by adjustments madedue to oura full year of advertising and marketing processesexpenses related to identifythe prospectiveUSAHS studentacquisition interest.in the current year, as compared to only one month of such expenses in the prior year. Excluding the impact of USAHS, advertising and marketing costs decreased slightly as compared to the prior year.

Bad debt expense remained relatively consistent with a slight increase of 1.5% or $0.5 million for the current year as compared to the prior year. We regularly evaluate our reserve rates, which includes a quarterly update of our analysis of historical student receivable collectability based on the most recent data available and a review of current known factors which we believe could affect future collectability of our student receivables, such as the number of students that do not complete the financial aid process. We continue to expect quarterly fluctuations in bad debt expense.

Operating income for the current year increased by 15.8%12.5% or $23.8$21.7 million as compared to the prior year. The current yearThis improvement was supportedprimarily driven by lowerincreased operating expenses across most categoriesrevenue, which more than offset the decreaseincreases in revenueoperating expenses, as compared to the prior year. Additionally, asset impairment expense decreased by $9.8 million as compared to the prior year which benefited the current year comparison.

The summary of segment financial information below should be referenced in connection with a review of the following discussion of our segment results from operations for the years ended December 31, 20242025 and 20232024 (dollars in thousands), including comparisons of our year-over-year performance between these years.performance. Please refer to Part II Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in our Annual Report on Form 10-K for the year ended December 31, 20232024 for a discussion of our results for the year ended December 31, 2022,2024, as well as the year-over-year comparison of our 20232024 financial performance to 2022.2023.

Current year operating income for AIUSCTU decreasedincreased by 20.1%3.4% or $9.1$5.9 million as compared to the prior year,year. This improvement in operating income was driven by the increase in revenue declinediscussed mentioned aboveabove, which wasmore only partiallythan offset with decreasedincreased operating expenses.expenses to support the student enrollment growth.

USAHS. Revenue for the current year was approximately $10.0$157.6 millionmillion, starting from the acquisition date of December 2, 2024. USAHS reported anwith operating lossincome of approximately $2.6$3.2 millionmillion. Operating income for the fourthcurrent quarteryear partiallyincludes driven$30.3 bymillion of depreciation and amortization expense associated with acquired tangible and intangible assets.assets, as well as finance leases, as compared to $2.5 million in the prior year.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current year improved by 21.4%22.2% or $8.3$6.8 million as compared to the prior year, primarily asdue a result ofto lower legalacquisition-related expenses.

We have identified the accounting policies and estimates listed below as those that we believe require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties. This section should be read in conjunction with Note 2 “Summary of Significant Accounting Policies” to our audited consolidated financial statements which includes a discussion of these and other significant accounting policies.

Description: Our revenue, which is derived primarily from academic programs taught to students who attend our universities, is generally segregated into two categories: (1) tuition and fees, and (2) other. Tuition and fees represent costs to our students for educational services provided by our universities and are reflected net of scholarships and tuition discounts. Our universities charge tuition and fees at varying amounts and bill students a single charge that covers tuition, certain fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term for our degree programs and recognize the tuition as revenue on a straight-line basis over the academic term. As part of a student’s course of instruction, certain fees, such as technology fees and graduation fees, are billed separately to students. These fees are generally earned over the applicable term and are not considered separate performance obligations. We generally bill student tuition upon enrollment for our non-degree professional development programs and recognize the tuition as revenue on a straight-line basis over the length of the offering.

Description: We extend unsecured credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs. Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we estimate will ultimately not be collectible. As such, our results from operations only reflect the amount of revenue that is estimated to be reasonably collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trendingtrend analysis andof comparingour estimatedcollections and actualwrite-off performance.experience as well as monitoring any emerging factors that we believe impact the ability to collect our student receivables.

our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the new 90-10,90/10 regulations, and earnings premium, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education (the “Department”)), as well as applicable accreditation standards and state regulatory requirements;

the impact of management changes; and changes in the overall U.S. economy.

We encourage you to review "Regulatory Updates" below, and Item 1, “Business,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025 to learn more about our highly regulated industry and related risks and uncertainties.uncertainties, in addition to the MD&A in our 2026 Quarterly Reports on Form 10-Q.

2026 FirstSecond Quarter Overview

During the quarter ended MarchJune 31,30, 2026 ("current quarter"), our academic institutions remained focused on enhancing student experiences and academic outcomes while aligning their academic programs with the current demands of the workforce. We continued to make purposeful investments in marketing and admissions to efficiently serve prospective student interest in our academic institutions.

Total student enrollments increased 1.9%0.6% at CTU as compared to the prior year quarter end, supported by strong levels of student retention and engagement, growth within the corporate student program and consistent levels of prospective student interest. Offsetting some of these enrollment trends at CTU is an increase in the number of students graduating during 2026 as compared to 2025 as well as record prior year comparisons. Total student enrollments increased 3.1%6.0% at USAHS for the current quarter end as compared to the prior year quarter end, driven by growth in the nursing and speech language pathology programs and the introduction of new modalities for the occupational therapy program, as well as underlying student retention and engagement trends. Lastly, for AIUS, total student enrollments decreased 2.2%1.0% for the current quarter end as compared to the prior year quarter end, driven by a decrease in total student enrollments at Trident University.

Strategic investments in technology continue to improve student experiences across our academic institutions, while enhancing operating effectiveness within 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. 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 remain focused on keeping our programs visible and accessible as search behavior evolves to LLM-based, AI powered searches and are actively updating our content so that it is readily accessible to, and optimized for, AI-powered search, while also investing in our brands to strengthen the visibility of our academic institutions as these AI-engines shape discovery.

We expect full year adjusted operating income to be higher for 2026 as compared to 2025, supported by revenue growth across all our academic institutions, combined with lower operating expenses due to our disciplined expense management and investment philosophy.

Revenue for the current quarter increased by 4.1%1.8% or $8.7$3.8 million to $213.4 million as compared to the prior year quarter, driven by increased revenue at allUSAHS threeand ofCTU. ourUSAHS' academicrevenue institutions.increased 10.2% or $3.8 million and CTU’s revenue increased 4.0%0.9% or $4.7 million, and USAHS' revenue increased 9.8% or $3.8$1.1 million, for the current quarter as compared to the prior year quarter, driven by the increase in total student enrollments at both academic institutions.institutions, partially offset with a decline of 1.8% or $1.0 million at AIUS as compared to the prior year quarter primarily due to non-Title IV and professional development offerings.

Operating income for the current quarter increased by 22.0%6.8% to $63.1$54.9 million as compared to operating income of $51.7$51.4 million in the prior year quarter, driven by increased operating income within allUSAHS threeand of our academic institutions.AIUS. The increase in operating income for the current quarter was a result of revenue growth and continued disciplined management of operating expenses.

The Company believes it is useful to present non-GAAP financial measures, such as adjusted operating income,income and adjusted earnings per diluted share, which exclude certain non-cash items, as a means to better understand the core performance of its operations. (See tables below for a GAAP to non-GAAP reconciliation.) Adjusted operating income was $72.5$64.2 million for the current quarter as compared to $63.5$61.5 million for the prior year quarter.

Adjusted operating income and adjusted earnings per diluted share for the quarters and years to date ended MarchJune 31,30, 2026 and 2025 is presented below (dollars in thousands, unless otherwise noted):

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the quarters and years to date ended MarchJune 31,30, 2026 and 2025 (dollars in thousands):

TheCurrent quarter educational services and facilities expense for the current quarter decreasedincreased by 3.0%1.3% or $1.5$0.7 million, compared to the prior year quarter driven by lower academics and student related costs at AIUS, along with reduced occupancy costsmillion as compared to the prior year period.quarter. The increase was primarily driven by higher academics and student related expenses of 1.6% or $0.7 million as a result of increases in total student enrollments at USAHS and CTU. Occupancy expense remained relatively flat as compared to the prior year quarter.

The general and administrative expense for the current quarter and year to date increased by 1.3%0.5% or $1.3$0.4 million and 0.9% or $1.7 million, respectively, as compared to the prior year quarterperiods, primarily duedriven toby higherincreased advertising and marketing andexpense for both comparative periods as well as increased administrative costs,expense whichfor wasthe onlycurrent partiallyyear offsetto withdate reducedas compared to the prior year period. Partially offsetting these increases were decreases in bad debt.debt expense as compared to the prior year periods.

Advertising and marketing expense for the current quarter and year to date increased by 1.3%4.7% or $0.4$1.3 million and 2.9% or $1.6 million, respectively, as compared to the prior year quarter.periods. IncreasedThe current quarter increase was primarily due to higher advertising and marketing spendingspend across all three institutions, while the year to date increase was primarily due to higher spend at CTU and AIUS was partially offset by reduced spending at USAHS asAIUS, compared to the respective prior year quarter.periods.

The increase in administrative expense for the currentyear quarterto date was primarily driven by increased bylegal 6.3%fees orfor $2.7previously milliondisclosed legal matters within CTU as compared to the prior year quarter, driven by increased legal fees.period.

Bad debt expense incurred by each of our segments during the quarters and years to date ended MarchJune 31,30, 2026 and 2025 was as follows (dollars in thousands):

Bad debt expense for the current quarter and year to date decreased by 24.0%11.5% or $1.8$0.6 million and 18.7% or $2.4 million, respectively, as compared to the prior year quarter.periods. The decrease infor the current quarter was primarily due to lower bad debt expense at AIUS and USAHS, which more than offset higher bad debt expense at CTU. The year to date decrease was primarily driven by reductionslower atbad bothdebt CTUexpense andacross AIUS.all three academic institutions as compared to the prior year period.

Depreciation and Amortization Expense

Depreciation and amortization expense for the current quarter and year to date decreased by 20.8% or $2.5$0.8 million and $3.3 million, respectively, as compared to the prior year quarter,periods, primarily driven by decreases withinacross USAHSall forthree academic institutions, with the year to date decrease primarily driven by leased assets.assets within USAHS.

Operating income for the current quarter and year to date increased by 22.0%6.8% or $11.4$3.5 million and 14.4% or $14.9 million, respectively, as compared to the prior year quarter.periods. TheThis improvement was primarily driven by higherincreased revenue at CTU and USAHSrevenue, as well as decreaseddisciplined depreciationmanagement andof amortizationoperating expenseexpenses, atparticularly USAHSin andthe decreasedcurrent badyear debtto expense at CTU and AIUSdate, as compared to the prior year quarter.periods.

For the quarter and year to date ended MarchJune 31,30, 2026, we recorded a provision for income taxes of $14.2$12.2 million orreflecting 20.8%an effective tax rate of 20.3% and $26.4 million reflecting an effective tax rate of 20.6%, respectively, as compared to a provision for income taxes of $12.8$15.2 million orreflecting 22.7%an effective tax rate of 27.0% and $28.0 million reflecting an effective tax rate of 24.9% for the respective prior year quarter.periods. The effective tax rate for the current quarter and year to date was benefittedbenefited by the tax effect of stock-based compensation and the release of previously recorded tax reserves, whichwhich, when combined, reduced the effective tax rate by 5.6%7.3% and 1.2%,7.0%, respectively. The effective tax rate for the prior year quarter and year to date was impactedbenefited by the tax effect of stock-based compensation and the release of previously recorded tax reserves, whichwhich, when combined, reduced the effective tax rate by 5.5%2.0% and 1.3%,4.4%, respectively. For the full year 2026, we expect our effective tax rate to be between 23.0% and 24.0%.

CTU. Current quarter and year to date revenue increased by 4.0%0.9% or $4.7$1.1 million and 2.5% or $5.7 million, respectively, as compared to the prior year quarter.periods. The increaseimprovement in revenue was primarily driven by increase in total student enrollment growth of 1.9%0.6% at MarchJune 31,30, 2026 as compared to the prior year quarter.quarter end. CTU's total student enrollment growth was supported by stronghigh levels of student retention and engagement, growth in the corporate student program and consistenthigher levels of prospective student interest. Offsetting some of these enrollment trends at CTU is an increase in the number of students graduating during 2026 as compared to 2025 as well as record prior year comparisons.

USAHS.AIUS. Current quarter and year to date revenue increaseddecreased by 9.8%1.8% or $3.8$1.0 million and 0.7% or $0.8 million, respectively, as compared to the prior year quarter. The increase wasperiods, primarily drivendue byto totalnon-Title IV and professional development offerings. Total student enrollmentenrollments growthdecreased of 3.1%1.0% at MarchJune 31,30, 2026 as compared to the prior year quarter.quarter end, driven by a decrease at Trident University.

Current quarter and year to date operating income for USAHSAIUS increased by $6.69.7% or $1.1 million and 10.8% or $2.5 million, respectively, as compared to the prior year quarterperiod, driven by thelower increaseoperating inexpenses revenueacross discussedmost above,expense as well as reduced depreciation and amortization on leased assetscategories as compared to the prior-yearprior quarter.year periods, which more than offset the decrease in revenue.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company. Total Corporate and Other operating loss for the current quarter and year to date increased by 6.2%11.4% or $0.4$0.6 million and 8.7% or $1.0 million, respectively, as compared to the prior year quarterperiods, primarily driven by increased administrative costs for theboth currentcomparative quarter.periods.

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Summary of Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025. Note 2 “Summary of Significant Accounting Policies” of the notes to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025 also includes a discussion of these and other significant accounting policies.

As of MarchJune 31,30, 2026, cash, cash equivalents, restricted cash and available-for-sale short-term investments (“cash balances”) totaled $680.0$734.8 million. Restricted cash as of MarchJune 31,30, 2026 was $0.8 million and primarily related to escrow balances for Hippo Education and required letters of credit for USAHS. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash balances. We expect to continue to generate cash during the remainder of 2026. We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures, lease commitments, share repurchases and quarterly dividendsdividend payments through at least the next 12 months primarily with cash generated by operations and existing cash balances.

On January 2, 2026, the Board of Directors of the Company approved a common stock repurchase program, authorizing the Company to repurchase up to $100.0 million of its outstanding common stock on the open marketmarket, andwhich expires on June 30, 2027. The stock repurchase program may be modified, suspended or discontinued at any time in the Company's discretion without prior notice, and does not commit the Company to repurchase shares of its common stock. The timing of purchases and the number of shares repurchased under the program is determined by the Company’s management and will depend on a variety of factors including stock price, trading volume and other general market and economic conditions, its assessment of alternative uses of capital, regulatory requirements and other factors. See Note 11 "Stock Repurchase Program" to our unaudited condensed consolidated financial statements for additional details.

The Board of Directors approved the aforementioned stock repurchase programsprogram believing it advantageous to the Company and its stockholders to repurchase shares of the Company’s common stock from time to time at prices below what the Board of Directors believedbelieves to be the intrinsic value of the Company’s common stock.

During the quartersyears to date ended MarchJune 31,30, 2026 and 2025, net cash flows provided by operating activities totaled $69.4$144.0 million and $65.1$143.9 million, respectively. The increase in net cash flows from operating activities for the current quarter was driven by increased operating income.

During the quarteryears to date ended MarchJune 31,30, 2026,2026 and 2025, net cash flows used in investing activities totaled $7.1$65.8 million comparedand to$7.3 netmillion, cash flows provided by investing activities of $1.2 million for the prior year quarter.respectively.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a net cash outflow of $5.3$62.5 million and $3.6 million for the current quarter as comparedyears to adate netended cashJune inflow30, of2026 $2.9and million2025, for the prior year quarter.respectively.

Capital Expenditures. Capital expenditures weredecreased $1.7to $3.3 million for eachthe ofyear to date ended June 30, 2026 as compared to $4.5 million for the quartersyear to date ended MarchJune 31, 2026 and30, 2025. For the full year 2026, we expect capital expenditures are expected to be approximately 1.5%1.0% of revenue.

During the quartersyears to date ended MarchJune 31,30, 2026 and 2025, net cash flows used in financing activities totaled $29.5$46.8 million and $44.4$74.7 million, respectively. Payments to repurchase shares of our common stock were $8.1$15.0 million and $46.1 million for the quarteryears to date ended MarchJune 31,30, 2026 and $25.22025, million for the quarter ended March 31, 2025.respectively.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $10.3 million and $7.5 million for the quartersyears to date ended MarchJune 31,30, 2026 and 2025, respectively.

Payments of cash dividends and dividend equivalents. During the quartersyears to date ended MarchJune 31,30, 2026 and 2025, the Company made dividend and dividend equivalent payments of $10.3$19.7 million and $9.2$17.7 million, respectively.

Principal payments for finance leases and failed sale leaseback.sale-leaseback. During the quarteryear to date ended MarchJune 31,30, 2026, the Company made principal payments of $1.3$2.7 million for finance leases, and during the quarteryear endedto Marchdate 31,June 30, 2025, principal payments of $1.7$2.9 million were made for finance leases and failed sale-leaseback transactions, both related to USAHS.

Selected condensed consolidated balance sheet account changes from December 31, 2025 to MarchJune 31,30, 2026 were as follows (dollars in thousands):