Perdoceo's 2025 Results Show Growth Driven by USAHS but Regulatory Risks Loom Large

What happened

Perdoceo Education Corporation reported its fourth quarter and full year 2025 financial results, likely meeting or slightly exceeding prior guidance with revenue growth fueled by the USAHS acquisition. The integration of USAHS contributed to top-line expansion but also brought significant depreciation and amortization costs, temporarily compressing operating margins despite overall profit increases. Free cash flow remained robust, supporting continued shareholder returns through buybacks and dividends, while cash balances stayed elevated, reinforcing the strong net cash position highlighted in filings. Enrollment trends were mixed, with CTU showing growth, AIUS facing slight declines, and USAHS adding students, but the core brands' reliance on federal aid persists unchanged. Critically, the results do not alter the binary regulatory exposure tied to Title IV funding, leaving the company vulnerable to potential policy shifts that could undermine financial stability.

Implication

The 2025 results validate Perdoceo's ability to drive revenue growth through acquisitions like USAHS and maintain strong free cash flow, underpinning shareholder returns and balance-sheet resilience. However, the reliance on adjusted earnings metrics, which exclude substantial USAHS-related amortization, may overstate operational health and mask integration challenges as the company scales. Regulatory dependencies on federal student aid remain acute, with any adverse changes in gainful-employment or 90/10 rules capable of swiftly eroding earnings and cash flow despite current strengths. While the stock trades at a discount to intrinsic value, this margin of safety is contingent on stable policy environments, a fragile assumption given the for-profit sector's history of crackdowns. Consequently, the investment case requires a high tolerance for political uncertainty, making position sizing and ongoing risk assessment critical for those considering exposure.

Thesis delta

The 2025 results align with the DeepValue report's expectation of sustained earnings growth and cash generation, reinforcing the 'POSSIBLE BUY' thesis based on valuation and fundamentals. However, no material reduction in regulatory or reputational risks is evident, meaning the thesis remains unchanged—investors must still underwrite significant policy volatility that could negate financial advantages.