Alex Paris

Alex Paris followed up on U.S. Higher Education unaffiliated enrollment declines, asking about deliberate actions to stem the trend. He also sought confirmation that the notional model (4%-6% revenue CAGR, 200 bps AOI margin increase) is a good proxy for 2026, and inquired about the underlying drivers for 2026 revenue growth, particularly for Australia/New Zealand (ANZ) enrollment.

Answer

Karl McDonnell, President and CEO, affirmed that deliberate actions are part of their operating plans, managing marketing as a portfolio with a strong focus on Workforce Edge, ETS, and employer-affiliated enrollment. He reiterated confidence in U.S. Higher Education enrollment normalizing to mid-single-digit growth. McDonnell confirmed the notional model is a good proxy for 2026, expecting strong growth from ETS and a return to total enrollment growth in Australia by the end of the year, driven by a 3% increase in international enrollment capacity and continued domestic new student growth.

Alex Paris followed up on U.S. higher education enrollment, specifically the unaffiliated segment, asking if deliberate actions were taken to stem declines and future plans. He also sought confirmation that the notional model (4%-6% revenue CAGR, 200 bps AOI margin expansion) is a good proxy for 2026, inquiring about the underlying drivers, particularly the contribution from ETS and other segments. He further asked about the drivers for ANZ's expected return to total enrollment growth, including soft caps and international student transfers.

Answer

President and CEO Karl McDonnell affirmed that deliberate actions are part of annual marketing and operating plans, managed as a portfolio, with a continued focus on Workforce Edge, ETS, and employer-affiliated enrollment. He reiterated confidence in enrollment normalization to mid-single-digit growth. For 2026, he confirmed the notional model as a proxy, expecting strong ETS growth and an earlier-than-anticipated return to total enrollment growth in Australia, driven by domestic new student growth and a 3% increase in international enrollment capacity. He also noted a ban on agent fees for onshore transfers, which may slightly alter transfer volumes.

Alex Paris inquired about the Q1 gross margin forecast, the reason for the low Q1 tax rate, the impact of tariffs on gross margins in 2025 and the anticipated impact in 2026, and the effect of the Supreme Court's tariff decision. He also requested global billings by category for Q4.

Answer

Bruce Hausmann, VP and CFO, confirmed that adjusted gross margin is now essentially GAAP gross margin as nora purchase accounting amortization is fully burned off. He explained the low Q1 tax rate is due to a tax deduction from LPI vesting. Mr. Hausmann stated tariffs diluted 2025 gross profit percentage by about 20 basis points and are expected to have a 50 basis point year-over-year impact in 2026, clarifying they cover dollar-for-dollar but it dilutes the percentage. He noted the Supreme Court's tariff decision is a moving target. Laurel Hurd, President and CEO, provided Q4 global billings: Corporate was flat, Education was up 11.6%, and Healthcare was up 11.7%.

Alex Paris requested the global billings by category (corporate office, education, healthcare) for the fourth quarter of 2025, following the full-year figures provided earlier.

Answer

Laurel Hurd, President and CEO, provided the Q4 global billings: corporate was flat, education was up between 11% and 12% (specifically 11.6%), and healthcare was up 11.7%.

Alex Paris asked about Lincoln Educational Services' increased investment in high school initiatives and sought more color on the performance of healthcare and other professions (HOPS) programs, specifically excluding the culinary program exit and the Paramus nursing enrollment pause.

Answer

President and CEO Scott Shaw explained that the company is investing more talent in high school recruitment due to increased market receptiveness, anticipating significant growth in 2027 and 2028. For HOPS, he expects growth in 2026, driven by the re-enrollment at the Paramus campus, which previously had over 250 students. He also confirmed that all current programs pass the gainful employment threshold after strategically exiting low ROI programs like culinary and cosmetology.

Alex Paris inquired about Lincoln Educational Services' increased investment in high school initiatives, seeking details on strategy and anticipated growth. He also asked for clarification on the performance of the healthcare and other professions segment, specifically excluding the impact of the culinary program exit and the Paramus nursing enrollment pause, and confirmed all programs passed the recent earnings test.

Answer

Scott Shaw, President and CEO, explained that the company is investing more talent in high school recruitment due to increased receptiveness from schools, parents, and guidance counselors, expecting significant growth in 2027-2028. He noted that the healthcare sector is expected to grow in 2026 with the re-enrollment at Paramus, and that the company strategically exited programs like culinary and cosmetology that did not provide strong ROI, confirming all remaining programs passed the Department of Education's gainful employment threshold.

Alex Paris of Barrington Research Associates inquired about the second-half student start guidance, the potential opportunities from the 'One Big Beautiful Bill' and Workforce Pell, and the timeline for updating long-term financial targets.

Answer

CFO Brian Meyers clarified that Q3 starts are expected to be flat against a tough prior-year comparison, while Q4 should align with H1's strong growth. CEO Scott Shaw stated that Workforce Pell does not present a major opportunity and that the company is focused on its core business. Shaw also noted that updated long-term guidance would likely be provided in November, with a formal Investor Day planned for the following year.

Alex Paris inquired about the fourth quarter 2025 results, specifically the impact of the government shutdown on military tuition assistance revenue, the factors influencing operating income and margin, the ongoing trend of students graduating in less than four years, and an update on Grand Canyon Education's corporate programs, including employer partnerships and potential discounting.

Answer

Dan Bachus, CFO, clarified that the government shutdown's impact on revenue was slightly lower than estimated, in the $2.5 million to $3 million range. Regarding operating income and margin, Mr. Bachus noted significant investments, primarily for the ground campus. Brian Mueller, President and CEO, elaborated on a strategic shift in ground campus recruitment, moving spend from high school representatives to social media advertising, which has shown positive results in Fall 2026 registrations. He also discussed investments in the Honors College and a long-term goal to grow the ground campus to 50,000 students, confirming a 10% reduction in high school enrollment counselors. Mr. Mueller affirmed the continuation of students graduating in less than four years, aiming to offset this with increased new enrollments. For corporate programs, he confirmed some discounting impacting online revenue per student but highlighted robust growth in partnerships across various fields, including a significant relationship with a Taiwanese chip manufacturer. He projected employer-related starts could increase from one-third to 50% of online starts over the next five years.

Alex Paris from Barrington Research inquired about the fourth quarter financial results, specifically the impact of the government shutdown on military tuition assistance revenue and the factors influencing operating income and margin. He also sought an update on Grand Canyon Education's corporate programs, including the process of working with 5,500 employers, adding new corporations, and any associated discounting.

Answer

CFO Dan Bachus estimated the government shutdown's revenue impact at $2.5 million-$3 million. He noted that operating margin was impacted by significant investments in the ground campus. CEO Brian Mueller elaborated on these investments, highlighting increased social media advertising, the growth of the Honors College, and a shift in recruitment strategy, leading to a 10% reduction in high school enrollment counselors. Regarding corporate programs, Mr. Mueller confirmed some discounting, significant ongoing growth with school districts and other organizations, and the application of successful models from education and nursing to new areas like counseling, social work, cybersecurity, and manufacturing. He also mentioned a strong relationship with a Taiwanese chip manufacturing company in Arizona and projected corporate programs could account for 50% of starts in the next five years.

Alex Paris sought clarification on the cycling of market share gains and the Brothers acquisition benefit, an update on OEM contract awards and the company's strategy regarding competitive pricing, anecdotal rebidding of lanes due to service issues, and the current M&A pipeline.

Answer

Brad Wright, Chief Financial Officer, confirmed the Brothers acquisition benefit would cycle through in one more quarter, with market share gains having less impact in Q1. Amy Rice, President and Chief Operating Officer, described a mix of new locations gained and incumbent locations lost due to rate dynamics, emphasizing a disciplined approach. She also acknowledged the potential for business to return to market if competitors fail on service. Rick O'Dell, CEO and Chairman, indicated an active M&A pipeline, with expectations for 1-2 acquisitions per year.

Alex Paris inquired about the timing of market share gains and the Brothers acquisition cycling through, an update on OEM contract awards and the company's strategy regarding competitive pricing, and the M&A pipeline for 2026.

Answer

CFO Bradley Wright clarified that the Brothers acquisition benefit would cycle through after Q1, with market share gains having occurred earlier. President and COO Amy Rice discussed recent OEM contract awards, noting a mix of new wins and incumbent losses due to rate dynamics, and expressed optimism for future opportunities. She also addressed the potential for business to return to market from competitors facing service issues due to aggressive pricing. Bradley Wright confirmed an active M&A pipeline, expecting 1-2 acquisitions in 2026.

Alex Paris with Barrington Research inquired about the consolidated student starts, specifically the stronger growth in the UTI division versus flat growth in Concorde, and the impact of shifting marketing dollars to UTI adult and high school segments. He also asked for clarification on capital expenditure expectations for fiscal years 2026 and 2027.

Answer

CEO Jerome Grant confirmed that Q1 starts were in line with guidance, attributing Concorde's flat growth to a high comparable quarter last year and increased investment in UTI ahead of new campus launches. He noted strong initial enrollments for San Antonio and Atlanta. CFO Bruce Schuman added that UTI starts showed broad-based mid-single-digit growth across channels and reiterated the $100 million CapEx expectation for fiscal 2026, with a similar quantum expected for 2027, primarily for growth initiatives.

Alex Paris asked about the consolidated student starts, specifically the stronger growth on the UTI side and flat growth on the Concorde side, and the impact of shifting marketing dollars to UTI adult and high school segments. He also inquired about CapEx expectations for the current and upcoming fiscal years.

Answer

CEO Jerome Grant confirmed starts were in line with guidance, noting Concorde's high prior-year Q1 compare. He explained increased investment in UTI marketing ahead of new campus launches (San Antonio, Atlanta) and the addition of high school reps, with payoffs expected next fall. CFO Bruce Schuman added that UTI starts were strong across all channels and confirmed CapEx expectations of $100 million for fiscal 2026 (with $19 million growth CapEx in Q1) and at least $100 million for fiscal 2027.

Alex Paris with Barrington Research inquired about the initial impact of a partial government shutdown on H&R Block's operations and early tax season trends, including e-file opening and potential shifts in assisted versus DIY filing due to the One Big Beautiful Bill Act. He also asked about pricing expectations for both channels.

Answer

President and CEO Curtis Campbell stated no material impact from the government shutdown, citing H&R Block's extensive experience. He noted it was too early for definitive tax season trends but reaffirmed the expectation of 1% industry growth and a tailwind for assisted filing due to increased complexity from the One Big Beautiful Bill Act. Campbell also confirmed expectations for low single-digit price increases across assisted and DIY services.

Alex Paris with Barrington Research inquired about the initial impact of the IRS e-file opening, potential effects of a partial government shutdown, early tax season trends, and whether the One Big Beautiful Bill's complexity would alter expectations for assisted vs. DIY market share and pricing.

Answer

President and CEO Curtis Campbell stated no material impact from the government shutdown, noting H&R Block's 70 years of experience. He highlighted early season confidence, strategic initiatives like Second Look and AI-enabled tax pro assistance, and confirmed expectations for a 1% industry growth and a tailwind for assisted filing due to increased complexity from the One Big Beautiful Bill. He also affirmed low single-digit price increases for both assisted and DIY.

Alex Paris asked about the return to historical withdrawal trends, the continued strength of demand as measured by applications, and the feedback from school and program partners regarding the platform issues and remediation efforts.

Answer

CEO James Rhyu confirmed that January month-to-date withdrawal rates returned to normal levels. He characterized demand as strong, similar to last year's record volumes, even with less aggressive marketing. Rhyu noted that partners, despite initial frustration, understood the shared mission and expressed faith in Stride's ability to resolve issues, with record turnout at a recent partner summit.

Alex Paris inquired about the stabilization of withdrawal trends, asking if they have returned to historical norms after elevated attrition, and sought clarification on the continued robustness of demand as measured by application volumes. He also asked about the company's relationship with school and program partners following the platform issues, and the effectiveness of remediation efforts.

Answer

CEO James Rhyu confirmed that January month-to-date withdrawal rates returned to normal levels, which is positive news. He also stated that demand, measured by application volumes, remains strong and similar to last year's record-breaking levels, even with reduced marketing spend. Regarding partner relations, Mr. Rhyu noted that while partners were frustrated, they largely understood the shared mission and expressed faith in Stride's ability to resolve issues, as evidenced by strong attendance at a recent partner summit.

Alex Paris of Barrington Research Associates sought clarification on the New Mexico contract situation, asking if the students from the terminated Gallup McKinley contract had migrated to the new multi-district program and whether that program was pre-existing. He also asked about the potential impact of the 'one big beautiful bill' on Stride's business.

Answer

CEO James Rhyu confirmed that the 'vast, vast, vast majority' of families from the previous program reregistered with Stride's new partner schools, resulting in 'no hole to fill' from the contract change. He explained Stride stood by the families and teachers, which strengthened their position. Regarding the legislative bill, Rhyu stated that any administration that favors school choice is aligned with Stride's mission and generally favorable for the company.

Alex Paris asked about the anticipated tariff impact for the second half of the year, the status of moving manufacturing out of China, the quarter-end backlog figure, and sought more detail on the Career and Technical Education (CTE) market opportunity, including the split between K-12 and community colleges.

Answer

CFO Erick DeOliveira stated the tariff situation remains volatile but the company intends to pass costs through, which may cause some margin compression. He also provided the Q2 ending backlog figure of $7.3 million. CEO Paul Kellenberger confirmed that the core Inspire product is now manufactured in Thailand, with benefits expected later in the year, and noted that CTE business is currently concentrated in high schools but expanding in community colleges.

Inquired about the outlook for tariffs in the second half, the status of moving manufacturing out of China, the Q2 ending backlog figure, and requested more detail on the Career and Technical Education (CTE) market opportunity, including the split between K-12 and community colleges.

Answer

The tariff situation remains volatile, but the impact is being mitigated by moving production of the Inspire product to Thailand, with benefits expected in Q3/Q4. The Q2 ending backlog was $7.3 million. The CTE business is growing, with bookings mix increasing to 35% in Q2. The focus is on career exploration, healthcare, manufacturing, and automotive, primarily within the K-12 segment currently, but with expansion opportunities in community colleges.