Phoenix Education Partners (NYSE:PXED) reported third-quarter fiscal 2026 revenue that was essentially flat from a year earlier, while profit declined as the company absorbed higher share-based compensation tied to its IPO and increased advertising spending behind a new marketing campaign.
On the company’s earnings call, Chief Executive Officer Chris Lynne said the quarter showed “continued progress across our strategic priorities,” pointing to steady enrollment, strong retention and growth in employer-supported enrollment. Chief Financial Officer Blair Westblom said net revenue was $271.8 million, compared with $271.7 million in the prior-year quarter.
Net income attributable to Phoenix Education Partners fell to $39.2 million, or $1.01 per diluted share, from $53.8 million, or $1.42 per diluted share, in the prior-year period. Westblom said the decline was primarily due to higher share-based compensation expense associated with the IPO, increased advertising expense and higher strategic alternatives, restructuring and other expense.
Adjusted EBITDA decreased 6.4% to $78.1 million from $83.4 million. Adjusted diluted earnings per share was $1.43, compared with $1.57 a year earlier. Adjusted EBITDA margin declined to 28.7% from 30.7%, which Westblom attributed mainly to higher advertising spending, partially offset by lower bad debt expense tied to stronger retention.
Company Updates Fiscal 2026 Outlook
For the first nine months of fiscal 2026, net revenue rose 0.9% to $756.3 million, compared with $749.8 million in the prior-year period. Average total degreed enrollment increased 2.2% to about 84,500 students.
Net income for the first nine months was $65.4 million, or $1.69 per diluted share, down from $116.4 million, or $3.08 per diluted share, with the decline primarily attributed to share-based compensation expense associated with the IPO. Adjusted EBITDA rose 1.2% to $188.1 million, while adjusted diluted EPS was $3.40, compared with $3.49 a year earlier.
Westblom said Phoenix now expects fiscal 2026 net revenue of $1.02 billion to $1.025 billion. He said the revised revenue outlook “primarily reflects the transitional impact of our digital enrollment strategies as we adapt to an evolving search and discovery environment.”
The company raised and tightened its adjusted EBITDA outlook to a range of $246 million to $250 million, citing disciplined cost management and benefits from strategic and operational initiatives, including technology and AI-enabled capabilities.
AI Search Changes Affect Enrollment Funnel
A major theme of the call was the effect of artificial intelligence on how prospective students search for and evaluate higher education programs. Lynne said the company is not seeing weaker demand for University of Phoenix programs, noting that branded search on Google remains strong relative to its competitive set.
“What we are seeing is a change in how prospective students evaluate their options,” Lynne said, adding that prospective students are taking “longer, more iterative evaluation processes” as AI-powered search becomes a larger part of the decision journey.
Lynne said the company accelerated its “Built for Real Life” campaign during the quarter to emphasize what it views as University of Phoenix’s differentiators for working adults, including flexibility, affordability, transparency, career-relevant education and student and alumni satisfaction. Westblom said advertising expense increased $6.6 million year over year in the quarter, partly because of the accelerated campaign launch.
In response to analyst questions, Lynne said the company is working to ensure its evidence-supported claims and differentiators are visible across digital platforms used by AI-powered search tools. He cited social media, YouTube, LinkedIn and website content as examples of areas where the company is focusing its efforts.
Lynne said it was difficult to quantify the percentage of leads coming from large language models because some prospective students may arrive directly at the website after engaging elsewhere. However, he said the company is observing changes in behavior, such as prospective students returning to the website multiple times before starting an application.
Employer-Supported Enrollment Continues to Grow
Lynne said employer-supported enrollment represented about 36% of third-quarter enrollment, up from about 33% a year earlier. He said the growth reflects alignment between the university’s offerings and employer needs.
The CEO said Phoenix has more than 2,500 employer relationships and continues to build more strategic partnerships. He cited Wabash, a New York Stock Exchange-listed supply chain solutions provider, which recently recognized University of Phoenix as a 2025 platinum supplier for collaboration supporting workforce development and operational priorities.
Lynne also said a recent employer research survey conducted by The Harris Poll found that 98% of employers surveyed reported overall satisfaction with University of Phoenix graduates.
Asked about the profitability of the employer channel, Lynne said employer-supported students tend to retain and complete at higher rates. Although the company has seen a slight reduction in revenue per student over time, he said point-in-time measurements have shown similar profitability dynamics in the B2B channel.
OpenAI Collaboration and AI Curriculum
Lynne said Phoenix’s AI strategy is focused on improving the learner experience, equipping students with AI-related skills and enhancing university operations. He said students have earned more than 1.1 million digital skills badges to date.
The company announced a collaboration with OpenAI earlier in the day. Lynne said Phoenix plans to provide eligible students with access to ChatGPT and collaborate with OpenAI on AI-powered learning, research and access to AI technologies for working adult learners.
Lynne said University of Phoenix now offers AI skill-building modules in every course and is expanding AI-powered learning experiences. He also highlighted tools including a Socratic dialogue tool that simulates professional scenarios, AI support for writing and math, and an internal “One Team Assistant” that provides advisors with AI-generated summaries and next-best actions to support students.
He said the One Team Assistant is designed to help advisors spend less time organizing information at the start of a call and more time addressing student needs.
Balance Sheet, Buybacks and Regulatory Comments
Phoenix ended the quarter with $269.4 million in cash, cash equivalents and marketable securities, compared with $194.8 million as of Aug. 31, 2025. Westblom said the increase was mainly due to $116.7 million in cash generated from operating activities, partially offset by dividends, capital expenditures and stock-related cash uses.
The company has no outstanding debt. In April, the board approved a $50 million stock repurchase program. During the third quarter, Phoenix repurchased about 135,000 shares for $4 million at an average price of $29.29 per share, leaving about $46 million available. The company also announced a quarterly dividend of $0.21 per share, payable Aug. 14.
On regulation, Lynne said the company supports the Department of Education’s fraud prevention efforts and said recent enhanced controls and initial data reviewed from the department reinforced management’s confidence in Phoenix’s existing fraud detection and identity verification processes. He said the department’s new FAFSA-related controls created some temporary friction because institutions were required to take flagged students through a verification process, but he described that as a one-time process that is now behind the company.
Lynne also addressed potential discussion around the 90/10 rule, saying he had heard similar indications to analysts that the ratio may be revisited, but declined to speculate on potential changes.
About Phoenix Education Partners (NYSE:PXED)
Our Mission To provide access to higher education opportunities that enable students to develop the knowledge and skills necessary to achieve their professional goals, improve the performance of their organizations and provide leadership and service to their communities. We are a mission-driven organization operating at the forefront of the rapidly evolving post-secondary education market. As one of the largest online education providers and a pioneer in our field, we benefit from the dynamic interplay between technological innovation, education, employment and economic trends.
