Phoenix Education Partners, Inc.

Good afternoon, and welcome to Phoenix Education Partners' second quarter fiscal 2026 earnings conference call. At this time, all participants are in listen-only mode. Following prepared remarks, we will open the call for questions. I would now like to turn the call over to Beth Coroneli, Vice President of Investor Relations. Please go ahead.

Thank you. Welcome to the Phoenix Education Partners Second Quarter Fiscal 2026 Earnings Conference Call. Speaking in today's call are Chris Lynn, our Chief Executive Officer, and Blair Westbloom, 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 that 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 statements after this presentation. 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 gap measures can be found in our earnings release and SEC filings. Unless otherwise noted, comments in the call will focus on comparisons to the prior year period. We also direct you to the supplemental earnings slides provided in the Phoenix Education Partners website. I'll now turn the call over to Chris.

Thank you, Beth, and good afternoon, everyone. We appreciate you joining us. Today we'll walk through our results for the second quarter of fiscal 2026, and the continued progress we're making on our strategy. Guided by our mission, we remain focused on advancing student success through flexible, career-relevant education for working adults. Our students balance professional and personal responsibilities as they pursue their education and our strategy remains centered on supporting their success through personalized, technology-enabled programs. Fiscal 2026 also represents an important milestone for the University of Phoenix. Later this year, we will celebrate our 50th anniversary, marking five decades of serving working adult learners while continuously adapting to the evolving needs of the workforce. Our commitment to student satisfaction is reflected in the recent Ankura Ruffalo-Noel Levitz Priorities Survey for Online Learners, a national study spanning 150 institutions and approximately 90,000 learners, which shows consistently high satisfaction among currently enrolled online students. The university administered, through the Knollevich platform, the survey to a random sample of 20,000 actively enrolled associate, undergraduate, graduate, and doctoral students representing each college and degree level, with approximately 2,500 students responding. The university performed above the national averages across all 26 measured attributes. with 85% of our students reporting being very satisfied or satisfied with their online university experience, compared to 73% of students in the national benchmarked institutions. These results combined with strong retention results underscore our commitment to delivering strong student outcomes and ensuring that working adult learners develop skills that translate directly into their careers. Turning to our results, the second quarter reflects continued progress across our key priorities, Enrollment growth driven by record retention, margin expansion, and a strong balance sheet that gives us the flexibility to invest in students and return capital to shareholders, all underscoring the durability of our model and commitment to student success. For the quarter, average total degree enrollment was up 1.8%, net revenue was down 0.4%, and adjusted EBITDA was up 7.8% from the prior year. Average total degree enrollment was driven by strong retention trends. Our retention rate from the most recent annual cohort was 76.6%, up approximately 500 basis points from the prior year, and significantly improved from the 59.7% retention rate from the annual cohort ending in 2017, prior to our transformation. This sustained progress reflects the continued disciplined execution of initiatives across the student life cycle, aimed at enhancing engagement, persistence, and ultimately student outcomes. Net revenue was in line with expectations and adjusted EBITDA outperformed as a result of disciplined cost management and lower bad debt expense. Our employer-affiliated or B2B channel continues to be a meaningful growth driver. Employer-affiliated students represented 35% of total enrollment in the quarter, up from 31% in the comparable period in 2025. reflecting continued expansion of both existing and new employer relationships. This channel now represents over a third of our total enrollment and helps reinforce the durability of our revenue as B2B students typically have higher retention. We are seeing increasing demand from employers seeking to upskill and reskill their workforce, and our flexible career-relevant programs are well-positioned to meet that need. We align our curriculum to in-demand skills, with students building verified job-relevant capabilities throughout their coursework, an approach that differentiates us with both employers and individual learners. We also enable our students and alumni to showcase these capabilities through shareable, employer-informed skill badges, and have now issued over one million of these digital badges to date. Complementing our B2B momentum, we are continuing to invest in technology and artificial intelligence to better serve students and employer needs. We are making meaningful progress deploying AI across the university. Examples include an AI-assisted student onboarding experience, delivering 24-7 support for students and faculty, increasing advisor productivity, expanding our software development capacity, and driving greater efficiency in credit evaluation. We are using AI-driven personalization to enhance engagement and student support as well as improved conversion in our marketing and enrollment funnel. We believe these initiatives are contributing to our performance and will continue to support margin improvement. We are also investing in how the university shows up across the next generation of search and discovery platforms. As social media and AI increasingly shape how prospective students explore and evaluate their education options, we continue to optimize our presence across these emerging interfaces and ensure our outcomes-focused content reaches students wherever they are and wherever they begin their journey. We believe that our response over time has been effective, as evidenced by our leading brand position across marketing platforms. While underlying demand for our brand remains strong, we experienced changes to search algorithms which affected our marketing funnel. As we've done consistently for years, we proactively leveraged our leading brand targeted content and digital expertise to adapt and optimize within the shifting marketing environment. As we headed into the third quarter, we have continued to see healthy underlying demand and are encouraged by the early signs of improvement in the marketing funnel from our proactive initiatives and our ability to maintain our brand leadership position. We also believe the university is well positioned for the needs of today's workforce. We are in the early stages of what many are calling the great reskilling of the American workforce. Estimates suggest that 60% of the global workforce will need to acquire new skills by 2030 to remain competitive in an AI-transformed economy. We believe the majority of jobs in the future will be held by workers fluent in AI. The workers most affected by this change are mid-career adults who need flexible, career-relevant education that fits around their professional and personal lives. the exact population this university has served for five decades. We have been committed to the AI fluency of our students since we adopted the ethical use of AI by all of our students in our skills-aligned curriculum approximately two and a half years ago. And we will continuously adapt our curriculum and thoughtfully add AI skill development related to specific disciplines and careers that are rapidly evolving in their use of AI. Our progress is demonstrated. by the reporting from 79% of the students surveyed in the most recent Ruffalo Noel Levitt's priority survey for online learners, that they are satisfied with their confidence applying AI tools in real world scenarios. As we enter the second half of the year, underlying demand and retention remains strong. We remain focused on disciplined execution and thoughtful investment to support student outcomes and financial performance. Our approach continues to be guided by our mission, to enhance the adult learner experience, including strengthening engagement and retention. With that, I'll turn it over to Blair.