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

our ability to comply with the extensive regulatory requirements for our business, and the impact of a failure to comply with applicable regulations or regulatory requirements, standards or policies, which could subject us to significant monetary liabilities, Title IV repayment obligations (including as a result of sub-regulatory guidance), fines and penalties, including loss of or limitations upon access to U.S. federal student loans, grants and military program benefits for our students, and otherwise have a material adverse impact on our business;

our ability to adapt to changing market needs or new technologiestechnologies, including artificial intelligence;

On October 10, 2025, we completed an IPO of 4.9 million shares of common stock at a price of $32.00 per share, which included 0.6 million shares sold to the underwriters pursuant to their option to purchase additional shares. The shares were offered by certain of the Company’s existing shareholders and, accordingly, we did not receive any proceeds from the sale of shares associated with the offering.

As of the date of this filing, weWe cannot reasonably estimate the extent of future option exercisesexercises, the timing of any related sales of shares, or the methodsettlement of settlementmethods that willmay be elected,utilized andand, accordingly, the potential impact on our outstanding share countcount, liquidity and liquidity is uncertain. In addition, following the expiration of the lock-up period, sales of shares by our employees and former employees may adversely affect the marketstock price ofremains our common stock.uncertain.

Enrollment. The net revenue we generate in a given period largely depends on the total number of courses taken by the enrolled student population and the price per course. As part of our focus on affordable and accessible tuition, we have not raised tuition rates since 2018. Our student retention rates, calculated as (i) the number of confirmed undergraduate students who both started a degree or non-degree certificate program and posted attendance in a course within such program as of an applicable date, divided by (ii) the number of confirmed undergraduate students who started such a program, expressed as a percentage, have increased from 59.7% for the 2016/2017 cohort to 76.6% for the 2024/2025 cohort (our most recent completed cohort for retention rate purposes), which represents a 5.1 percentage point increase from the 2023/2024 cohort. The increase in retention is a key factor driving the growth in Average Total Degreed Enrollment in recent years, including a 2.9%2.2% increase in the sixnine months ended FebruaryMay 28,31, 2026 as compared to the prior year period. We have invested and continue to invest in many areas of our business that we expect will further improve enrollment, retention and graduation rates, which drive sustainable growth. However, enrollment and retention of students at the University are impacted by the risks described in Item 1A, “Risk Factors” of our 2025 Annual Report on Form 10-K, many of which are beyond our control.

Career-Relevant Education and Employer Relationships. Our career-oriented programs and learning platform position us for continued growth in the corporate-sponsored training and education market. Enrollment through our employer relationships represented approximately 34%35% of our Average Total Degreed Enrollment in the sixnine months ended FebruaryMay 28,31, 2026, which represents an approximate 4three percentage point increase compared to the prior year period. This represents a valuable opportunity to drive growth, diversify our student population and reinforce the durability of our net revenue as these students generally have higher retention and graduation rates. We believe demand from employers and working adults for education aligned with evolving workforce and technology needs, including artificial intelligence-related capabilities, continues to support our long-term growth strategy. In addition, we have beguncontinue to expandhave discussions with employers beyond our degree offerings to includeregarding our comprehensive suite of talent development solutions and professional development offerings that extend beyond our degree offerings. While the development of our talent development solutions is in the early stages, we believe our ability to offer these solutions has broadened our relationships with key employers and provides an opportunity for growth.

Regulatory Requirements. Our operations are subject to extensive U.S. federal and state regulation applicable to providers of post-secondary education who participate in Title IV programs. Failure to comply with applicable regulatory requirements, standards or policies could subject us to significant monetary liabilities, Title IV repayment obligations, fines and penalties, including loss of or limitations upon access to U.S. federal student loans and grants for our students. Any actions that limit our participation in Title IV programs or the amount of student financial aid for which our students are eligible would materially impact our student enrollment and profitability and could impact the continued viability of our business as currently conducted. See Item 1A, “Risk Factors” of our Annual Report on Form 10-K for a detailed discussion of regulatory requirements and related risks.

Seasonality. The University’s non-term academic model encompasses a series of courses taken consecutively over the length of the program, which wegenerally would expect to limitlimits seasonal enrollment fluctuations. However, we have historically experienced, and expect to continue to experience, lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to the University’s holiday breaks when no related net revenue is recognized. While our operating costs generally do not fluctuate significantly on a quarterly basis, we have historically experienced, and expect to continue to experience, increased marketing expense in our second and fourth fiscal quarters due to course starts that occur during traditional back-to-school seasons.

Substantially all of our net revenue is generated from student enrollment in tuition-bearing degree programs encompassing a series of courses (e.g., most often five-week courses) taken consecutively over the length of the program. Over comparative periods, Total Degreed Enrollment generally increases as new students attend a credit-bearing course or continuing students return to the University, which increases are generally offset by graduations or continuing students not attending a credit-bearing course (e.g., by withdrawing from the University). We define “Total Degreed Enrollment” as the number of confirmed students (both new and continuing) enrolled in credit-bearing courses who post attendance at least one time during a calendar month (even if they withdraw later in the same month), excluding students who graduated as of the end of such month. Average Total Degreed Enrollment for the periods shown above represents the aggregate of monthly Total Degreed Enrollment during such period divided by the number of months in the period. For example, Average Total Degreed Enrollment for the three months ended FebruaryMay 28,31, 2026 is calculated as the aggregate Total Degreed Enrollment for the three months from DecemberMarch 20252026 through FebruaryMay 2026 divided by three.

Three and SixNine Months Ended FebruaryMay 28,31, 2026 Compared to the Three and SixNine Months Ended FebruaryMay 28,31, 2025

Net revenue increased $6.4$6.5 million, or 1.3%,0.9%, in the sixnine months ended FebruaryMay 28,31, 2026 compared to the prior year period. The increase in net revenue was principally attributable to enrollment growthgrowth, as measured by Average Total Degreed Enrollment, which increased 2.9%2.2% compared to the prior year period primarily due to improved student retention. ThisThe increase was partially offset by an increase in discounts mainlyprimarily resulting from a higher percentage of our enrollment through employer relationships.

Instructional and support increaseddecreased $5.2$0.2 million, or 2.4%,0.1%, in the sixthree months ended FebruaryMay 28,31, 2026 compared to the prior year period, whichand resultedremained in a 0.5% increaseconsistent as a percentage of net revenue fromat 45.0%40.6%. toThe 45.5%. This increasedecrease was principally attributable to ana $8.8$4.0 million decrease in credit losses on accounts receivable, partially offset by a $2.8 million increase in compensation and related costs, including a $0.9 million increase in share-based compensation expense resulting from our IPO (see Note 1. Nature of Operations and Significant Accounting Policies and Note 12.13. Share-Based Awards to our condensed consolidated financial statements). The increase was partially offset by decreases in credit losses on accounts receivable and financial aid processing costs as described above.

General and administrative increased $7.7 million and $32.3$14.4 million, or 8.5% and 18.7%,17.3%, in the three and six months ended FebruaryMay 28,31, 2026, respectively,2026 compared to the prior year periods.period, Thisand resulted in such expense increasing 3.6%increased as a percentage of net revenue from 40.5%30.7% to 44.1% in the three months ended February 28, 2026, and 6.1% as a percentage of net revenue from 36.1% to 42.2% in the six months ended February 28, 2026.36.0%. The increasesincrease in expense werewas principally attributable to increaseshigher compensation and related costs of $6.8 million, including a $6.9 million increase in share-based compensation of $6.8 million and $29.1 million resulting from our IPO in the threeIPO, and sixhigher monthsadvertising endedexpense Februaryof 28,$6.6 2026, respectively, compared to the prior year periodsmillion (see Note 1. Nature of Operations and Significant Accounting Policies and Note 12.13. Share-Based Awards to our condensed consolidated financial statements).

Strategic alternatives, restructuring and other decreasedincreased $1.0$5.1 million in the three months ended FebruaryMay 28,31, 2026 compared to the prior year period, which was principally due to a reduction in strategic alternatives expense following our IPO. This was partially offset by an increase in lease restructuring expense principallydriven attributableby to a net credit recognized in the prior year period resulting from a reductionchanges in our estimated future cash flows associated with our exited space and an increase in litigation charges and regulatory expense related to a class action lawsuit (see Note 8.14. OtherCommitments Liabilitiesand Contingencies to our condensed consolidated financial statements).

Strategic alternatives, restructuring and other increased $8.7$13.8 million in the sixnine months ended FebruaryMay 28,31, 2026 compared to the prior year period, which was principally due to costs associated with athe cybersecurity incident detected in November 2025, an increase in litigation charges and regulatory expense related to a class action lawsuit (see Note 13.14. Commitments and Contingencies to our condensed consolidated financial statements), and an increase in lease restructuring expense asdriven describedby above.changes in our estimated future cash flows associated with exited space.

Interest income decreased $0.4$0.1 million, or 19.2%,4.2%, in the three months ended FebruaryMay 28,31, 2026 compared to the prior year period, which was principally attributable to a decrease in interest rate yields.

Interest income decreased $2.5$2.6 million, or 41.6%,31.4%, in the sixnine months ended FebruaryMay 28,31, 2026 compared to the prior year period.period, The decreasewhich was principally attributable to a decreasedecreases in (i) average cash and cash equivalents and marketable securities held and a decrease in(ii) interest rate yields.

Interest expense increased $0.4$0.5 million and $0.5$1.1 million in the three and sixnine months ended FebruaryMay 28,31, 2026, respectively, compared to the prior year periods. The increases were primarily from amortization of deferred financing costs from our $100 million Revolving Facility.

Provision for income taxes decreased $0.9$4.2 million, or 15.7%,22.4%, in the three months ended FebruaryMay 28,31, 2026 compared to the prior year period. Our effective income tax rate for the three months ended FebruaryMay 28,31, 2026 was 31.3%27.1% compared to 26.0%25.4% in the prior year period. The increase in our effective tax rate was primarily due to certain executive compensation costs becoming nondeductible after the completion of our IPO.IPO, partially offset by excess tax benefits from share-based compensation.

Provision for income taxes decreased $5.5$9.7 million, or 25.1%,23.9%, in the sixnine months ended FebruaryMay 28,31, 2026 compared to the prior year period. Our effective income tax rate for the sixnine months ended FebruaryMay 28,31, 2026 was 38.8%32.3% compared to 25.8%25.6% in the prior year period. The increase in our effective tax rate was primarily due to the completion of our IPO, which resulted in certain IPO and executive compensation costs becoming nondeductible.nondeductible, partially offset by excess tax benefits from share-based compensation.

Adjusted net income attributable to Phoenix Education Partners, Inc. We define adjusted net income attributable to Phoenix Education Partners, Inc. as net income attributable to Phoenix Education Partners, Inc., adjusted to eliminate the impact of restructuring lease expense (credit),expense, net, strategic alternatives expense, cybersecurity incident expense, impairment charges and asset disposal losses, litigation charges and regulatory expense, non-cash share-based compensation expense, certain tax effects and other items set forth in the applicable table below.1 Adjusted EBITDA. We define adjusted EBITDA as net income attributable to Phoenix Education Partners, Inc., adjusted to eliminate the impact of restructuring lease expense (credit),expense, net, strategic alternatives expense, cybersecurity incident expense, impairment charges and asset disposal losses, litigation charges and regulatory expense, non-cash share-based compensation expense, depreciation and amortization, interest income, net of interest expense, provision for income taxes and certain other items set forth in the applicable table below.1 Adjusted EBITDA margin. We define adjusted EBITDA margin as adjusted EBITDA divided by net revenue, expressed as a percentage.

Adjusted net income attributable to Phoenix Education Partners, Inc., adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are included as supplemental disclosures because we believe they are useful indicators of our operating performance. Derivations of net income and EBITDA are well recognized performance measurements in the education industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties to compare the operating performance of companies in our industry. We believe these non-GAAP measures help compare our performance on a consistent basis across periods and provide an additional analytical tool to assist with identifying underlying trends in our results of operations. While we believe that these non-GAAP measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the comparable GAAP measures.

(iii) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and (iv) adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes.

Restructuring lease expense (credit),expense, net represents non-cancelable lease obligations, including any offset from sublease income, and other related expenses for leased space we have exited as part of our ground campus and administrative space rationalization plans. In 2012, as a key component of the University’s transformation initiatives, the University began the process of completing the orderly closure of its ground campuses, as more enrolling students made the choice to take their programs online. The University completed the orderly closure of its campus locations in early fiscal year 2025, with only one physical location, in Phoenix, Arizona, currently enrolling new students. Additionally, the University completed its exit of 19 floors of its 22-floor administrative office buildings during fiscal year 2024 pursuant to its space rationalization plans.

Strategic alternatives expense generally consists of costs incurredassociated forwith strategic and capital market transactions, including our IPO and offering-related costs, strategic advisory fees, and costs incurredassociated forwith pursuingthe evaluation or execution of strategic alternatives.

Represents expense associated with athe cybersecurity incident we detected onin November 21, 2025 (see Note 13.14. Commitments and Contingencies to our condensed consolidated financial statements).

Litigation charges and regulatory expense principally includes $1.2charges millionincurred to defend, settle or otherwise resolve legal matters that fall outside the scope of ordinary or routine litigation incidental to our business and $2.4 million in both the three and six months ended February 28, 2026 and 2025, respectively,expense associated with a multi-year insurance policy pertaining to borrower defense to repayment claims (see Note 14. Commitments and Contingencies and Note 15. Regulatory Matters to our condensed consolidated financial statements).

Represents non-cash equity-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation: Stock Compensation. Although share-based compensation is a key incentive offered to our employees, we evaluate our business performance excluding share-based compensation expense because it is a non-cash expense. The increase in share-based compensation expense in the three and sixnine months ended FebruaryMay 28,31, 2026 compared to the respective prior year periods resulted from our IPO (see Note 1. Nature of Operations and Significant Accounting Policies and Note 12.13. Share-Based Awards to our condensed consolidated financial statements).

Our primary sources of cash are cash provided by operations and cash and cash equivalents and marketable securities on hand. We also have available liquidity through our $100Revolving million revolving credit facility, which we have not drawn on as of February 28, 2026 (see “Off-Balance Sheet Arrangements” below).Facility.

We paid a regular, quarterly cash dividend of $0.21 per share of common stock in each of our second quarterand third quarters of fiscal year 2026. Additionally, our board of directors approved a regular, quarterly cash dividend of $0.21 per share of common stock that will be paid to shareholders of record and holders of certain share-based awards during our thirdfourth quarter of fiscal year 2026. We plan to pay additional regular, quarterly cash dividends in subsequent quarters, subject to the discretion of and approval from our board of directors.

On April 3, 2026, our board of directors adopted a share repurchase program of up to an aggregate of $50 million of our common stock (the “April 2026 Repurchase Program”). As of theMay date31, of this filing,2026, we have not utilized any$4.0 million of the authorized amount.

Total cash and cash equivalents (including restricted cash and cash equivalents) and marketable securities (including current and noncurrent marketable securities) increased $57.3$74.6 million, or 29.4%,38.3%, during the sixnine months ended FebruaryMay 28,31, 20262026. The increase was principally due to $80.0$116.7 million of cash generated from operating activities.activities, Thiswhich was partially offset by $10.1$17.4 million of cash paid for dividends and dividend equivalents, $15.0 million of capital expendituresexpenditures, andnet cash paid forto dividends.settle share-based awards, and common stock repurchases.

For the sixnine months ended FebruaryMay 28,31, 2026, we generated $80.0$116.7 million of net cash provided by operating activities, which was principally attributable to net income of $25.9$64.9 million and the following:

Net inflowoutflow of $7.9$62.1 million from aan decreaseincrease in accounts receivable (excluding provision for credit losses in non-cash items discussed above) primarily from course start timing at the beginning and end of the period;

Net outflow of $11.8$9.0 million from ana increasedecrease in prepaidaccrued incomecompensation taxesand benefits primarily due to estimatedtiming taxof payroll payments made during the period;

For the sixnine months ended FebruaryMay 28,31, 2025, we generated $22.1$51.8 million of cash provided by operating activities, which was principally attributable to $63.2$117.9 million of net income and $51.9$88.5 million of non-cash adjustments. This was partially offset by a net cash outflow of $93.0$154.6 million from changes in assets and liabilities, which was primarily the result of an increase in accounts receivable (excluding provision for credit losses) primarily from course start timing and a decrease in student deposits attributable to a change in the timing of financial aid disbursements for the University’s students. Before the change, financial aid funds were typically disbursed in two installments that generally involved four courses. Such funding was included in student deposits on our condensed consolidated balance sheets until students began subsequent courses. Beginning in July 2024, the University began transitioning to financial aid disbursements by course with students transitioning after they complete their current academic year. Accordingly, student deposits decreased throughout fiscal year 2025 as the University’s students transitioned to single course financial aid disbursements.

Net cash used in investing activities for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 was $9.0$104.7 million and $12.9$15.8 million, respectively,respectively. Net cash used in investing activities for the nine months ended May 31, 2026 was primarily driven by $89.5 million of net marketable securities purchases and principally$15.0 consistedmillion of capitalpurchases expendituresof forproperty and equipment, substantially all of which related to internal software development. InNet cash used in investing activities for the priornine yearmonths period,ended weMay also31, paid2025 was primarily driven by $16.4 million of purchases of property and equipment, substantially all of which related to internal software development, and $2.0 million,million paid, net of cash acquired, to acquire a controlling interest in Empath, Inc.Inc., (seepartially offset by $2.6 million of net marketable securities maturities and sales. See Note 3. Acquisition to our condensed consolidated financial statements for more information). regarding our acquisition of Empath, Inc.

Additionally, our insurers issue surety bonds that are required by various states where we operate, or that are required for other purposes. We are obligated to reimburse our insurers for any surety bonds that are paid. As of FebruaryMay 28,31, 2026, the face amount of these surety bonds was less than $1 million.