Alexander Paris

Alexander Paris inquired about the Q4 revenue beat, specifically how much the Q3 acquisitions contributed to Q4 revenue, and sought clarification on the impact of unanticipated insurance costs on adjusted EBITDA and EPS. He also asked for the underlying assumptions driving the low and high ends of the 2026 guidance, particularly regarding the quantification and methodology for including unannounced acquisitions, and requested an update on the integration process for the Q3 Orlando-based acquisitions.

Answer

John Enwright, SVP and CFO, stated that Q3 acquisitions added approximately $3 million to Q4 revenue and clarified that unanticipated employee benefit expenses, primarily in field margin, impacted EPS by $0.05-$0.06. He detailed that the high end of 2026 guidance assumes higher contributions from new acquisitions ($5M-$10M impact), 1-3% funeral growth, and 6-8% cemetery growth. Carlos Quezada, CEO and Vice Chairman, emphasized the company's readiness for M&A after strengthening its balance sheet. Steven Metzger, President and Secretary, explained that the acquisition guidance includes both specific ongoing discussions and a general methodology, noting that integration for the Q3 acquisitions begins pre-close, with steady progress and strong January performance.

Alexander Paris inquired about the fourth quarter's financial performance, specifically the revenue contribution from third-quarter acquisitions, the impact of insurance costs on EBITDA, and factors affecting adjusted EPS. He also sought clarification on the underlying assumptions for the low and high ends of the 2026 guidance, the quantification and methodology for including unannounced acquisitions, and an update on the integration process for the Orlando-based acquisitions from Q3 2025.

Answer

John Enwright, Senior Vice President and Chief Financial Officer, stated that Q3 acquisitions added approximately $3 million to Q4 revenue and that unanticipated employee benefit expenses impacted diluted EPS by $0.05-$0.06. For 2026 guidance, he explained that the high end would require new acquisitions to be at the upper range ($5 million-$10 million impact), funeral business growth of 1%-3%, and cemetery growth of 6%-8%. Carlos Quezada, CEO and Vice Chairman, emphasized the company's readiness for M&A after strengthening its balance sheet. Steven Metzger, President and Secretary, added that the M&A guidance reflects both specific ongoing discussions and a proactive sourcing methodology. Regarding integration, Mr. Metzger noted the process begins before close, and for the Q3 acquisitions, they are seeing steady progress with January being the strongest month, particularly highlighting cemetery development and pre-need opportunities.

Alexander Paris of Barrington Research Associates questioned the nature of newly announced acquisitions, their expected closing, and pricing multiples. He also sought updates on the divestiture program and the key assumptions driving the raised full-year guidance, including the expected second-half acceleration and specific financial model inputs like the cash tax rate.

Answer

President Steven Metzger confirmed the acquisitions involve multiple transactions with multiple businesses, priced in the high single-digit multiples, with more details to follow post-closing in Q3. He also noted divestitures are winding down. CEO Carlos Quezada added that divestitures focus on businesses in declining demographic areas to redeploy capital into premium properties. CFO John Enwright explained the guidance increase reflects acquisitions, divestitures, and expected organic growth, particularly in Q4. He also confirmed D&A and stock-based comp targets are unchanged and provided a revised full-year cash tax rate of 27-27.5%.

Alexander Paris inquired about funeral segment performance trends for March and April, whether the 'COVID hangover' is now concluded, and the reasons for the year-over-year decline in preneed cemetery interment rights sales. He also asked for clarification on divestiture proceeds in relation to guidance and the expected timing for a return to M&A activity.

Answer

CEO Carlos Quezada confirmed that strong funeral volume and revenue momentum continued through April. He stated that while difficult to forecast, the company believes the 'COVID hangover' should level out this year. Quezada attributed the slower preneed cemetery growth to temporary inventory development delays at key properties, not a decline in consumer demand, and expects a return to the 10-20% growth range in Q2. CFO John Enwright clarified that Q1 divestiture proceeds were part of the guided amount, with another sale planned for Q2. Enwright and Executive Steve Metzger indicated that the company plans to resume acquisitions in the second half of the year, with more details expected in Q3 and Q4.

Alexander Paris from Barrington Research questioned the updated full-year guidance, which implies a sequential decline in Q4 revenue despite a strong Q3. He asked about the underlying assumptions, what drove the Q3 outperformance, what it would take to reach the high end of the guidance range, Q3 funeral volume trends, recent divestiture activity, and the timeline for returning to M&A given the accelerated debt reduction.

Answer

CEO Carlos Quezada explained that Q3 benefited from unexpectedly large preneed cemetery sales, and the Q4 forecast is cautious due to upcoming elections and economic uncertainty, though he expects to finish at the high end of the range. He noted a slight uptick in funeral volume decline in October, partly due to closing two underperforming businesses. Executive Steve Metzger confirmed they are on track to achieve $20-$30 million in divestiture proceeds in 2024 with a minimal EBITDA impact. Carlos Quezada added that disciplined capital allocation and a favorable credit agreement amendment have accelerated debt paydown, and the company expects to resume M&A activity in 2025.

Alexander Paris of Barrington Research Associates inquired about the outlook for funeral service volumes in the second half of 2024, the monthly trends during Q2, the interest rate on variable debt, and specifics of the recent credit agreement amendment.

Answer

CEO Carlos Quezada stated that he anticipates a slight decrease in funeral volumes for Q3 and Q4 due to the pull-forward effect, which should normalize by Q1 2025. He noted that July volumes were slightly above the prior year. Quezada also confirmed the interest rate on variable debt saw a similar year-over-year increase as in Q1 and detailed five key benefits of the amended credit facility, including a term extension to 2029, reduced rates, and increased M&A flexibility.

Alexander Paris of Barrington Research Associates inquired about the monthly performance trend during Q2, the start of Q3, performance in smaller segments like government and retail, business conditions in Australia and Asia, and the company's capital allocation strategy regarding share repurchases.

Answer

CEO Laurel Hurd confirmed that Q2 momentum was strong, with a solid start to July, and noted broad-based growth across nearly all market segments. She also stated that the Australia and Asia businesses are performing well without negative macro impacts due to strong local teams. CFO Bruce Hausmann added that the last share repurchase was in 2022 and the current strategy remains balanced between investing for growth and returning capital to shareholders, valuing the flexibility of a strong balance sheet.

Alexander Paris asked for a breakdown of geographic growth within the EAAA segment, particularly in Asia, and inquired about the government market. He also questioned potential changes to capital allocation given the strong balance sheet and followed up on the financial impact of tariffs.

Answer

CFO Bruce Hausmann stated that on a currency-neutral basis, Asia was strong with double-digit sales growth, while Europe and Australia were softer. CEO Laurel Hurd noted the government segment is small but grew in Q1 due to churn. Regarding capital allocation, Bruce Hausmann emphasized that the priority is investing in the business for growth and margin expansion. He also confirmed the tariff impact is minimal, representing less than 15% of product cost, and that mitigation plans via pricing and productivity are already reflected in the company's guidance.

Alexander Paris of Barrington Research asked for a breakdown of the 2025 CapEx budget, the company's exposure to the government sector, recent performance in the retail segment, and potential impacts from new tariffs.

Answer

CFO Bruce Hausman detailed that the $45M CapEx consists of ~$10M for growth investments and ~$35M for maintenance. CEO Laurel Hurd stated that U.S. government business is a low-single-digit, diverse part of their portfolio. On tariffs, management explained their sourcing strategy—local-for-local carpet manufacturing, LVT from South Korea, and rubber from Germany—limits direct exposure, though they continue to monitor the dynamic situation.

Alexander Paris asked for additional details on billings performance, particularly in the retail and healthcare segments, and sought clarification on the drivers behind the strong adjusted gross margin and the company's long-term target.

Answer

CEO Laurel Hurd explained that the retail rebound was anticipated due to prior-year project delays and that the healthcare segment's strong double-digit order growth signals future revenue, despite a longer sales cycle. CFO Bruce Hausmann confirmed that billings for all three product categories were up year-to-date in both price and volume. Regarding margins, Laurel Hurd reiterated the long-term goal of 38% to 38.5%, while Bruce Hausmann highlighted that the full-year guidance for adjusted gross margin was raised to 36.6% due to strong performance.

Alexander Paris of Barrington Research Associates inquired about the specifics of the decline in unaffiliated enrollment within U.S. Higher Education, the changing mix of domestic versus international students in the Australia/New Zealand segment, and the potential impact of recent legislative and regulatory changes.

Answer

President & CEO Karl McDonnell acknowledged the softness in new unaffiliated student enrollment, primarily at Strayer University, but noted the rate of decline improved in Q2. For the ANZ segment, he explained the mix is skewing more domestic due to international restrictions, but expects a return to growth in early 2026 after anniversarying the declines. Regarding regulations, McDonnell stated that based on current understanding, SEI does not expect a material adverse impact from the "one big beautiful bill."

Alexander Paris inquired about student persistence trends in U.S. Higher Education, the reasons for the early decline in international enrollment in Australia/New Zealand (ANZ), and the factors contributing to operating expense leverage in the quarter.

Answer

President and CEO Karl McDonnell noted that student persistence remains stable and slightly improved. He attributed the ANZ international enrollment decline to a new regulation requiring stricter verification for onshore transfer students. EVP and CFO Daniel Jackson added that operating expense favorability was due to the timing of headcount additions, with planned investments still on track for the year. McDonnell also reaffirmed confidence in the company's long-term operating margin targets.

Alexander Paris inquired about the domestic vs. international student mix in Australia/New Zealand (ANZ), the drivers of operating expenses, and expectations for operating margin expansion and enrollment growth in 2025.

Answer

President and CEO Karl McDonnell stated that while historically 50-50, they are pivoting marketing to focus more on domestic students in Australia. Executive Vice President and CFO Daniel Jackson confirmed that the Q4 2024 expense level is a good run rate for 2025, with expected seasonality. McDonnell reiterated the company's long-term notional model goal of approximately 200 basis points of margin expansion annually, expressing confidence in their five-year plan.

Alexander Paris from Barrington Research asked for more detail on lower-than-expected expenses, the specific investments being made in the ETS and Australia/New Zealand segments, and the overall demand environment for U.S. higher education.

Answer

EVP & CFO Daniel Jackson clarified that lower expenses were due to timing and some bad debt benefits, and the current expense run rate is expected to hold for the rest of the year. President and CEO Karl McDonnell specified that investments included marketing in Australia and hiring staff to support a new large Workforce Edge partner. He also characterized the demand environment as healthy, with student acquisition costs trending down year-over-year.

Alexander Paris of Barrington Research Associates inquired about progress milestones for the Enterprise Division's sales transformation, the surprising strength of the Education Division amid market uncertainty, and the specific drivers behind the revised revenue guidance.

Answer

CEO Paul Walker explained that key progress indicators include an increase in new logo wins, greater expansion within existing clients outside of renewal periods, strong marketing lead flow, and a high 60% services attachment rate. He affirmed confidence in the Education division's growth, expecting new school additions to be on par with or better than last year despite headwinds. Walker attributed the guidance revision primarily to the timing risk of delivering services for recently closed deals and potential delays in closing new deals within the quarter, affecting both the Enterprise and Education segments.

Alexander Paris inquired about the specific external impacts on revenue, including details on the government business, the nature of the risk to the Education segment, the spending pace of the go-to-market investment, and the implications of revised guidance on long-term targets.

Answer

CEO Paul Walker and CFO Stephen D. Young clarified that the revenue decline was primarily due to government contract cancellations, with the $17 million government business being mostly federal (DoD, VA). They explained the Education risk is about potential short-term decision delays, not a long-term funding issue. Paul Walker confirmed the $16 million investment is on schedule and is the engine for future growth, which they are not cutting. He also noted that while this year is a step back, the underlying growth thesis remains intact, with formal long-term guidance to be updated in November.

Alexander Paris of Barrington Research asked for details on the quarterly allocation of the $16 million growth investment, inquired about early key performance indicators (KPIs) from the new sales initiatives, sought clarification on the number of "hunter" and "expander" sales roles, and asked for an update on the 7 Habits 5.0 product launch.

Answer

CFO Stephen D. Young detailed the investment spending, allocating ~$3M to Q1, ~$4M to Q2, and ~$4.5M each to Q3 and Q4. CEO Paul Walker explained that KPIs like lead flow and pipeline growth would become more visible later, as the new structure was only weeks old. Chief Revenue Officer Holly Procter confirmed the sales force numbers (approx. 44 hunters, 88 expanders) and highlighted the high quality of new hires from firms like Zoom and LinkedIn. President of the Enterprise Division Jennifer Colosimo noted the 7 Habits 5.0 launch drove a 15% increase in marketing event registrations and strong client interest.

Alexander Paris asked about the quarterly allocation of the $16 million growth investment, the reason for the lower Q2 EBITDA guidance, early KPIs from the new sales initiatives, the specific headcount for 'hunter' and 'expander' roles, and the market reception of the 7 Habits 5.0 relaunch.

Answer

CFO Stephen D. Young provided the quarterly spending plan for the growth investment, noting a higher spend in Q2 explains the lower EBITDA guidance. CEO Paul Walker and Chief Revenue Officer Holly Procter highlighted that key early indicators include the high quality of new 'hunter' hires from top firms. Jennifer Colosimo, President of the Enterprise Division, noted strong marketing event registrations and client excitement for the 7 Habits 5.0 launch.

Alexander Paris of Barrington Research asked a series of questions regarding the cadence of the $16 million investment spend in FY25, the market reception of new product launches, the financial impact of the end of ESSER funds on the Education division, the reason for the FY25 revenue guidance deceleration, and a clarification on the adjusted EBITDA outlook.

Answer

CFO Stephen D. Young explained the investment spend is front-loaded, with the largest incremental expense hitting in Q2. Enterprise President Jennifer Colosimo reported positive feedback and strong booking pace for new Trust solutions. Education President Sean Covey stated that the end of ESSER funds is not a major concern due to offsetting success with grants and foundation partnerships. CEO Paul Walker clarified the 4.5% FY25 revenue growth guidance reflects the lag in recognizing subscription revenue, which will first build on the balance sheet. Finally, management confirmed that without the $16M investment, FY25 adjusted EBITDA would have been in line with prior expectations.

Alexander Paris inquired about the ongoing market uncertainty, specifically asking for an update on the K-12 and CTE sales cycle lengths, the impact of the late-quarter revenue surge, and the expected effect of Chinese tariffs on bill of materials (BOM) costs.

Answer

CEO Paul Kellenberger confirmed that the K-12 sales cycle remains extended at 75-90 days due to funding volatility, while CTE funding is more stable. He stated that zSpace plans to pass the expected 20% tariff on to customers and noted that OEM partners are planning to move production to lower-tariff regions. CFO Erick DeOliveira added that a late-quarter surge in orders from customers securing funding drove the revenue beat and that the new Inspire 2 laptop's lower BOM cost helps mitigate tariff impacts on hardware profitability.

Questioned the K-12 funding sources amid sales cycle uncertainty, the past impact of ESSER funds, the magnitude of sales cycle lengthening, the potential impact of China tariffs, and the use of IPO proceeds for sales force expansion and the BlocksCAD acquisition.

Answer

Executives clarified that while funding is primarily state/local and available, general market uncertainty causes hesitation. ESSER was a minor part of revenue (<11%). The sales cycle has lengthened from ~60-75 days to ~75-90 days. Tariffs would be passed through to customers, similar to 2018. IPO proceeds were used to increase the U.S. sales force by ~50% and to acquire BlocksCAD, a previously resold technology, to improve integration and gross margins.

Alexander Paris sought clarification on several financial items, including the nature of a $1.4 million timing of expenses, the impact of a $2.9 million redemption premium and $1.7 million in combination costs on Q2 guidance, and the financial impact from contract issues at Graduate School.

Answer

CFO Richard Sunderland explained the $1.4 million in expenses were delayed from Q1 to Q2. He clarified the $2.9 million redemption premium impacts net income guidance, not adjusted EBITDA, while the $1.7 million in combination costs are for Q2 and part of a previously guided annual total. He also noted the Graduate School revenue impact was limited in Q1 but is more pronounced starting in Q2, and this headwind is fully incorporated into the maintained full-year revenue guidance.

Alexander Paris of Barrington Research inquired about the drivers of strong Q1 demand and marketing efficiency, the current regulatory environment in Washington D.C., the specific revenue contribution from the new East Point campus, and the reasons for improved bad debt expense.

Answer

Executive Scott Shaw attributed marketing success to both internal vendor management and a favorable macro environment with heightened interest in skilled trades. He also expressed confidence in navigating regulatory changes at the Department of Education. CFO Brian Meyers provided specifics, stating the East Point campus contributed over $4 million in Q1 revenue and that bad debt expense as a percentage of revenue fell from 12% to 10% year-over-year due to a successful new collections software implementation.

In a follow-up, Alexander Paris of Barrington Research Associates, Inc. asked for details on the Healthcare and Other Professions segment, where student starts declined 17% in the quarter. He also requested an update on the Paramus nursing program's test scores and the timeline for resuming enrollments.

Answer

Executive Scott Shaw attributed the start decline to the strategic exit from cosmetology, culinary, and massage therapy programs, a timing shift of a nursing start, and the enrollment pause at the Paramus campus. Executive Brian Meyers added that on a like-for-like basis, segment starts would have been up nearly 10% for the year. Scott Shaw confirmed Paramus's test scores are now well above the required benchmark, but they are conservatively not forecasting new starts in 2025 pending an annual board review.

Alexander Paris of Barrington Research inquired about the new Long Island campus plans, including the regulatory framework in New York, and sought clarification on the decision to divest the Euphoria Institute in Las Vegas.

Answer

Executive Scott Shaw detailed that the Long Island campus is driven by strong demand from partners like the Greater New York Dealers Association and the opportunity to offer multiple skilled trades. While acknowledging New York's challenging regulatory environment, he expressed confidence due to their 20-year operating history in the state. Regarding the Euphoria Institute, Shaw clarified it is a strategic divestiture, not a closure, as the cosmetology program is a non-core asset that would be better managed by a specialized organization. Executive Brian Meyers added that the campus will be reported as held for sale and part of the Transitional segment starting in Q4.

Alexander Paris of Barrington Research sought confirmation on margin guidance, asking if the fiscal 2026 outlook for 100 basis points of expansion still holds. He also inquired about the nature of the asset impairment and strategic advisory costs, and asked for commentary on the current tone and efficiency of the Department of Education.

Answer

CFO Robert Phelan confirmed no change to the fiscal 2026 margin expansion outlook. He clarified the asset impairment was for a former headquarters property and strategic advisory costs are for developing plans to expand capacity. CEO Stephen Beard described interactions with the Department of Education as 'extremely constructive' and responsive, aligning with reports of a more business-friendly tone.

Alexander Paris of Barrington Research inquired about the sustainability of adjusted EBITDA margin expansion into fiscal 2026, the potential regulatory changes under the new administration, and an update on the Med/Vet segment's remediation and enrollment trends.

Answer

CFO Bob Phelan confirmed the company still anticipates over 100 basis points of adjusted EBITDA margin expansion in fiscal 2026, on top of the raised fiscal 2025 guidance. CEO Stephen Beard commented that while the general consensus points to a lighter regulatory environment, the company looks forward to engaging with the new leadership on key issues. Beard also noted that January enrollment demand for the Med/Vet segment was encouraging.

Alexander Paris questioned the rationale for increasing marketing investment given the already strong enrollment performance. He also asked if marketing costs would be leveraged for the full year and whether the company planned to revise its long-term fiscal 2026 targets.

Answer

President and CEO Stephen Beard clarified that the marketing strategy includes a mix of short-term performance marketing and long-term brand building to ensure future growth. CFO Bob Phelan confirmed that marketing costs are expected to be leveraged for the full year, consistent with the prior year's efficiency. Regarding long-term targets, Stephen Beard stated that fiscal 2026 guidance would be provided in the ordinary course, with multi-year targets to be shared at the next Investor Day.

Alexander Paris asked a series of follow-up questions, seeking confirmation that franchise volume declines were due to buybacks, inquiring about the Net Average Charge (NAC) difference between company and franchise stores, the impact of state-level filing extensions, the effect of 1099 form changes, and the company's dividend policy and target payout ratio.

Answer

CFO Tiffany Mason confirmed franchise volume decline was primarily due to the 123 buybacks year-to-date. Executive Jeffrey Jones explained that NAC differences stem from franchisees setting their own prices and serving varied client mixes. Mason noted that filing extensions would cause a minor volume shift from Q3 to Q4 but were not material to full-year guidance. Jones stated 1099 changes had no material impact. Regarding the dividend, Mason affirmed the Board reviews the payout ratio annually, and Jones reiterated that the dividend is the top capital priority after business reinvestment.

Alexander Paris of Barrington Research posed several questions regarding the potential upside from the 1099-K reporting threshold change, the status of the IRS's Direct File program, H&R Block's pricing strategy for both assisted and DIY services, the increase in the Refund Advance loan, and the factors behind lower Emerald Advance revenue.

Answer

President and CEO Jeff Jones confirmed the 1099-K change could represent upside but is not in the forecast. He reiterated that Direct File is not a major concern and that H&R Block's pricing involves low single-digit increases for assisted services and dynamic pricing for DIY. Jones noted the Refund Advance loan increased from $3,500 to $4,000 and attributed the Emerald Advance weakness to tightened underwriting guidelines to balance approval and repayment rates.

Alexander Paris requested clarification on the fiscal 2025 tax rate guidance, specifically the timing of the onetime benefit, asked for more color on the quarter's legal expenses, and sought updated thoughts on the government's expanded Direct File program.

Answer

CFO Tiffany Mason reiterated the full-year effective tax rate outlook of 13%, which includes a ~$0.50 EPS onetime benefit, but noted the exact timing is uncertain as it depends on the IRS settlement process. She confirmed the higher legal expense relates to a proposed FTC settlement that is fully accrued for. President and CEO Jeff Jones addressed the Direct File program, stating that despite its expansion, H&R Block has not seen and does not anticipate a material impact, as it primarily competes with other free offerings where H&R Block has a strong product.

Alexander Paris from Barrington Research inquired about SuRo Capital's process and timeline for returning capital to shareholders, particularly concerning potential dividends from the anticipated sale of CoreWeave and ServiceTitan shares later in the year.

Answer

Mark Klein, Chairman and CEO, reiterated SuRo Capital's commitment to transparent communication regarding its dividend policy. He explained that if significant net realized gains are generated by year-end, the company would distribute them by the end of that year or early in the following quarter, consistent with past practices.

Alexander Paris requested an update on long-term enrollment targets by business segment, sought confirmation on enrollment guidance for the remainder of 2025, and asked about the company's current perspective on M&A.

Answer

CEO Brian Mueller reiterated the company's overall long-term enrollment growth target of 7% but did not break it down by segment, though he noted online and hybrid were running ahead of plan. He confirmed that 2025 guidance for mid- to high-single-digit online start growth and low- to mid-teens hybrid growth remains intact. On M&A, Mueller stated that the company strongly prefers organic growth and building its own capabilities, particularly in workforce development, rather than pursuing acquisitions.

Alexander Paris of Barrington Research inquired about the potential impact of new leadership at the Department of Education, sought an update on the Ninth Circuit court ruling regarding GCU's non-profit status, and asked if the hybrid pillar is expected to return to profitability in 2025.

Answer

CEO Brian Mueller stated that the new administration's focus on outcomes should be very positive for GCE's model. Regarding the court case, he noted GCU was 'elated' with the unanimous ruling that the Department of Education acted outside its authority, calling it a 'major milestone'. CFO Dan Bachus confirmed that while not formally tracked, it is an 'appropriate expectation' for the hybrid pillar to cross back to profitability in 2025 based on improving site-level margins.

Alexander Paris of Barrington Research asked for a recap of comments on enrollment trends and the outlook for fiscal 2026. He also sought clarification on the timing of fall applications, the improved guidance for revenue per enrollment, and how to calculate diluted EPS using the provided convertible note data.

Answer

CEO James Rhyu confirmed that Stride expects to end the year with higher enrollment than it started, which provides a strong base for growth next year. He noted it is too early for fall application data. CFO Donna Blackman confirmed the improved revenue per enrollment guidance (now down less than 1% for the year) and explained that the diluted share count is calculated by adding shares based on the quarter's average stock price, as shown on the investor presentation slide.

Alexander Paris sought clarification on several points: whether enrollment strength was from new students versus retention, the context for weak career funnels despite strong growth, the drivers of softness in the Adult Learning segment, and the composition of the sub-5% federal funding exposure.

Answer

CEO James Rhyu clarified that retention is stable year-over-year after post-pandemic structural gains. He explained the career learning commentary reflects a belief that the market opportunity is much larger than current results. The Adult Learning softness is partly due to a strategic pivot of the MedCerts business to a B2B model. Finally, he confirmed the federal funding exposure includes various small streams beyond the now-immaterial ESSER funds.

Alexander Paris questioned if FY25 guidance includes new states or cap lifts, asked about plans for new Career Learning programs, and sought clarification on the ESSER fund flow and its impact on revenue per enrollment guidance.

Answer

CFO Donna Blackman confirmed guidance includes known cap increases but no new states. CEO James Rhyu noted no new Career Learning programs are planned for FY25 but maybe next year. Rhyu reiterated that the ESSER headwind is offset by state funding, resulting in expected flat to slightly down revenue per enrollment.

Alexander Paris of Barrington Research asked for an analogy between the current auto hauling market disruption and the LTL industry's experience with a major bankruptcy, inquiring about the expected timeline and impact. He followed up by asking if Proficient has seen an initial impact from the disruption and if it expects to gain its 'fair share' of the reallocated volume.

Answer

Chairman and CEO Richard O'Dell explained that displaced volume would likely go to backup carriers first before being re-bid, creating a two-stage opportunity. He confirmed that some near-term impact is already being seen and is factored into the Q1 forecast, which anticipates a volume recovery in March. President and COO Amy Rice added that Proficient is well-positioned to participate in any volume reallocation, though its ability to capture share is influenced by its specific geographic network density, which does not overlap with all competitors.

Alexander Paris inquired about Universal Technical Institute's new campus expansion, the non-linear nature of EBITDA margin expansion under the North Star 2 strategy, and details on the M&A pipeline for healthcare acquisitions.

Answer

CEO Jerome Grant confirmed the new Atlanta campus is a greenfield expansion into Georgia and will be a comprehensive UTI campus. He affirmed that EBITDA margin expansion will not be linear, with heavier investment in FY25-27 before accretion accelerates in FY28-29. Regarding M&A, Grant noted the primary focus is on acquiring nursing programs to complement Concorde's portfolio.

Alexander Paris of Barrington Research inquired about the future run rate for marketing and admissions costs, asking if recent levels represent a new normal. He also asked for follow-up details on the regulatory front, specifically UTI's 90/10 calculation under the new rules and whether any programs were at risk under the gainful employment regulation.

Answer

CEO Jerome Grant responded that he expects continued efficiency gains in marketing and admissions spend, driven by scale and the ability to attract more students to a wider variety of programs on existing campuses. On regulatory matters, he stated UTI's 90/10 ratio is approximately 78% under the new calculation, which is safely below the limit. He also confirmed that no programs were at risk from gainful employment rules, though a few small Concorde programs were close to the threshold due to the exclusion of tips from earnings calculations.