管理層發言
Ladies and gentlemen, good afternoon and welcome to Phoenix Education Partners third quarter fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following prepared remarks, we will open the call for questions. I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Please go ahead.
Thank you. Welcome to the Phoenix Education Partners third quarter fiscal 2026 earnings conference call. Speaking on today's call are Chris Lynne, 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 GAAP 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 on 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 as we discuss our third quarter fiscal 2026 results and the continued execution of our long-term strategy. Guided by our mission, we remain focused on helping students achieve meaningful educational and career outcomes through flexible and affordable programs designed for working adults. The pace of change continues to accelerate as artificial intelligence reshapes how people work and the skills employers need. This environment aligns directly with our long-standing focus on working adult learners. For nearly five decades, University of Phoenix has helped students adapt, grow and succeed through periods of economic and technological transformation. Today, we are building on that legacy by continuing to enhance the learning experience, incorporating employer-informed curriculum and preparing learners with in-demand skills, creating greater opportunities for career mobility. As we celebrate our 50th anniversary this year, we are reminded that our ability to evolve alongside the needs of learners and employers has been one of our defining strengths. That same commitment to innovation and adaptability continues to guide our strategy today. Turning to our results. The third quarter reflected continued progress across our strategic priorities. Revenue and enrollment were generally consistent with prior year, supported by continued strength in retention and healthy growth in employer-supported enrollment. Retention remains one of the strongest indicators of value. The sustained improvement we've achieved reflects multi-year investments across the learner journey, including technology-enabled support, personalized engagement, flexible learning pathways and skills-aligned curriculum. Together, these efforts continue to support student retention and the long-term durability of our enrollment base. During the quarter, we accelerated the successful launch of our Built for Real Life campaign, an evidence-based omnichannel campaign that highlights our differentiation through the attributes working adults value most: exceptional flexibility, affordable tuition, and practical, career-relevant education, all supported by consistently high levels of student and alumni satisfaction. At University of Phoenix, our AI strategy is centered on three priorities: elevating the learner experience, equipping students with the AI skills employers increasingly value, and enhancing how we operate across the university. During the quarter, we made exciting progress expanding AI-enabled learning and AI skill development for students, which I'll discuss in more detail later in my remarks. We also continue to scale AI to drive operational efficiency across the university, including the launch of our One Team Assistant, which provides AI-generated summaries, including status and next best actions to help our advisors best support our students. Our students continue to benefit from skills-aligned curriculum. To date, students have earned more than 1.1 million digital skills badges, providing another way to demonstrate verified workforce-relevant skills to current and prospective employers. We continue to see growing demand from learners and employers for education aligned with evolving workforce and technology needs. Approximately 36% of our third quarter enrollment came through employer-supported relationships, up from approximately 33% a year ago, reflecting the growing alignment between our educational offerings and employer needs. This alignment is reflected in feedback from employers. I am happy to report that results from a recent employer research survey indicated that 98% of employers surveyed reported overall satisfaction with University of Phoenix graduates during the quarter. We further expanded our work with employers to support upskilling, career mobility and talent development. University of Phoenix was recently recognized by Wabash, a New York Stock Exchange-listed provider of end-to-end supply chain solutions, as a 2025 platinum supplier for its collaboration in supporting workforce development and operational priorities. We believe this recognition reflects the value of helping employers align learning, skills development and business needs while helping organizations build the workforce capabilities they need to succeed. Looking ahead, we will continue expanding our academic portfolio to meet evolving workforce needs with new offerings planned across several high-demand disciplines and more flexible pathways designed to make degree completion faster and more affordable. This includes the approval and planned fall launch of one of our first three-year bachelor's degree paths in the College of Social and Behavioral Sciences in Criminal Justice Administration. In today's workforce, preparing learners for an AI-enabled workplace is central to helping them develop practical, career-relevant skills that can apply throughout their careers. Recent findings from the University of Phoenix Career Institute Career Optimism Index underscored the importance of continuous learning and AI skill development. The study found that about half of workers say AI increases their confidence in pursuing new career opportunities, while more than half report greater confidence in developing new skills and adapting to evolving workplace technologies. Our goal isn't simply to teach students how to use AI tools, it's to prepare working adults to succeed as AI continues to transform the workplace. We are integrating generative AI throughout our curriculum to help students develop practical AI skills they can apply on the job. We're continuously expanding AI-powered learning experiences and now offer AI skill-building modules in every course. We are currently enhancing teaching and learning through support tools and advanced AI training for faculty, expansion of our Socratic dialogue tool that simulates real-world professional scenarios, and an AI agent that provides 24/7 support for writing and math. Earlier today, we announced a collaboration with OpenAI, an exciting opportunity to accelerate this work. Working with OpenAI, we plan to advance AI-powered learning, explore collaborative research and expand access to AI technologies that help working adult learners develop the skills they need for an increasingly AI-enabled workplace. As part of this relationship, we plan to provide eligible students with access to ChatGPT, giving them a hands-on experience with AI as they continue developing those skills throughout their education. As search and discovery continue to rapidly evolve, we remain focused on how prospective learners explore, evaluate, and ultimately choose University of Phoenix as they look for ways to advance their education and careers. We believe our strong brand leading position across social media among our peer set, career-relevant content, media expertise and broad digital presence provide a solid foundation in this changing environment. This foundation has provided strong support for adjustments to our digital acquisition strategies to meet the evolving needs of prospective learners, who increasingly use AI in their search process. The recent launch of the Built for Real Life campaign has been one of our more successful campaigns and is an important evolution in how we communicate what differentiates University of Phoenix. It has been effective at maintaining strong demand for our brand and is designed to provide authoritative, evidence-based content around the most important decision factors in a manner that influences AI-powered search. We will continue to adapt our approach to meet learners wherever they are making decisions about their education. I also want to briefly touch on the Department of Education's recent fraud prevention initiatives. As I've discussed on previous calls, we support the department's efforts to strengthen fraud prevention and protect the integrity of the federal student aid system. Importantly, the department's enhanced controls and the recent initial data we've reviewed from the department has reinforced our confidence in the effectiveness of the fraud detection and identity verification processes we already had in place. Before I close, I'd like to welcome Robert Brackenbury to the Phoenix Education Partners Board of Directors. Robert brings extensive leadership and governance experience, most recently serving as Deputy Chief Investment Officer for the State of Michigan Retirement System, where he helped to oversee more than $170 billion in pension and trust assets for a fund with a long-term track record of outperformance among large public pension funds. Combined with a decade of higher education leadership experience, Robert brings valuable perspective, and we look forward to his contributions to our board as we look to the future. An important part of our growth strategy and capital allocation approach is evaluating opportunities that complement our core business, enhance our ability to serve learners and employers, and strengthen our long-term value proposition. Playing a key role in leading these efforts, I'd also like to welcome Michael Cochrane as our Senior Vice President, Corporate Development. Michael brings extensive transaction and strategic advisory experience, most recently as an Executive Director at Morgan Stanley, where he served as a key leader supporting the company in its return to the public markets. As we enter the final quarter of 2026, we remain focused on executing against our strategic priorities, supporting student success, strengthening employer relationships and helping learners build the skills they need to succeed in a rapidly evolving workforce. The progress we continue to see in student outcomes reinforces our confidence in our strategy. Supported by a strong financial foundation, disciplined execution and continued investment in our students, we remain confident in our long-term trajectory and our ability to create value for learners, employers and shareholders. With that, I'll turn the call over to Blair.
Thank you, Chris. I'll begin with a review of our third quarter financial results, followed by updates on our balance sheet, capital allocation and fiscal 2026 outlook. For the third quarter, net revenue was $271.8 million compared to $271.7 million in the prior year period. Average total degreed enrollment increased 0.6% for the third quarter to approximately 85,300 students, compared to 84,800 in the prior year, with continued strength in retention. Net income attributable to Phoenix Education Partners was $39.2 million, or $1.01 per diluted share, compared to $53.8 million, or $1.42 per diluted share in the prior year. The decrease was primarily driven by higher share-based compensation expense associated with our IPO, which increased $7.8 million compared to the prior year period, an increase in advertising expense, and higher strategic alternatives, restructuring and other expense. Adjusted EBITDA for the quarter was $78.1 million, compared to $83.4 million in the prior year, a decrease of 6.4%. Adjusted diluted earnings per share was $1.43 in the third quarter, compared to $1.57 in the prior year. Adjusted EBITDA margin for the third quarter was 28.7%, compared to 30.7% in the prior period, primarily driven by higher advertising expense, which increased $6.6 million in the third quarter to support the accelerated launch of the Built for Real Life campaign. This was partially offset by lower bad debt expense due to higher retention. For the first nine months of fiscal 2026, net revenue was $756.3 million, an increase of 0.9% compared to $749.8 million in the prior year. Average total degreed enrollment increased 2.2% for the first nine months to approximately 84,500 students, compared to 82,700, reflecting continued strength in retention. Net income attributable to Phoenix Education Partners was $65.4 million, or $1.69 per diluted share, compared to $116.4 million, or $3.08 per diluted share in the prior period, with the year-over-year decrease primarily due to share-based compensation expense associated with our IPO for the first nine months. Adjusted EBITDA for the first nine months increased 1.2% to $188.1 million, compared to $185.8 million in the prior year, and adjusted diluted earnings per share was $3.40, compared to $3.49 in the prior year. Adjusted EBITDA margin for the first nine months was 24.9%, compared to 24.8% in the prior year period. These results reflect the increase in net revenue, as well as lower bad debt expense, primarily due to higher retention. Our results continue to benefit from strong retention trends and disciplined cost management, which we believe support long-term margin expansion, scalability, and strong cash generation. We continue to maintain a strong balance sheet with substantial liquidity and no outstanding debt. As of May 31, 2026, our cash, cash equivalents and marketable securities were $269.4 million, compared to $194.8 million as of August 31, 2025. The increase was principally due to $116.7 million of cash generated from operating activities, which was partially offset by $17.4 million of cash paid for dividends and dividend equivalents, $15 million of capital expenditures, as well as net cash paid to settle share-based awards and common stock repurchases. Our capital allocation priorities remain focused on investing in student outcomes, technology-enabled capabilities and strategic growth opportunities, while maintaining financial flexibility and returning capital to shareholders. In April, our Board of Directors approved and we announced a $50 million stock repurchase program. In the third quarter, we repurchased approximately 135,000 of our common shares for an aggregate purchase price of $4 million at an average of $29.29 per share. As of quarter end, we had approximately $46 million remaining available for repurchases. Today, we announced another quarterly dividend of $0.21 per share, payable on August 14. We expect to continue to pay quarterly dividends in subsequent quarters of $0.21 per share, which equates to $0.84 per share annually, subject to board approval. We also continue evaluating select M&A opportunities that complement our workforce-aligned capabilities, learner experience and employer ecosystem while maintaining financial discipline. Turning to our fiscal 2026 outlook. Based on our expectations for the remainder of the year, we anticipate net revenue will be in the $1.02 billion to $1.025 billion range. The revised outlook primarily reflects the transitional impact of our digital enrollment strategies as we adapt to an evolving search and discovery environment. We remain confident in the long-term demand for University of Phoenix and our ability to successfully execute our strategy. We are also raising and tightening our fiscal 2026 adjusted EBITDA guidance, and now expect adjusted EBITDA to be in the range of $246 million to $250 million. This updated outlook reflects disciplined cost management and the benefits of our strategic and operational initiatives, including technology and AI-enabled capabilities that continue to support efficiency, scalability and student outcomes. We continue to operate from a position of financial strength supported by healthy cash flow generation, a debt-free balance sheet, and disciplined capital allocation. These attributes provide the flexibility to continue investing in our strategic priorities while supporting long-term value creation. I'll now ask the operator to begin the question-and-answer session.
分析師問答
Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute. When asking your question again, it is star one to join the queue. Our first question comes from the line of Greg Parrish with Morgan Stanley. Your line is open.
Hey guys, good afternoon and thanks for taking my question. Maybe just help level set here, especially on enrollment growth. What's changed versus the initial expectations that you've had? What's going on in the market that may have been different than nine months ago? I know you talked about search changes and you mentioned it again today. Is it all search changes or is there anything else to call out? And what do you view as structural versus temporary? Maybe just help us there. Thank you.
Thanks, Greg. I'll take that question. First and foremost, it's important to point out that we're not seeing weaker demand for our programs. In fact, demand for University of Phoenix's brand remains strong. One of the measures we follow for years is branded search on Google, and we continue to be one of the top two brands across the competitive set and are top in terms of year-over-year growth. So the interest is there. As you alluded, what we are seeing is a change in how prospective students evaluate their options. We're seeing longer, more iterative evaluation processes as AI-powered search becomes more a part of the evaluation journey, and that's really the driver of the near-term impact. We've been preparing for the shift for a long time, so this is a transition. For example, we accelerated our Built for Real Life campaign into Q3. That campaign is designed to make our differentiators highly visible. There are many claims across the most important attributes that adult learners care about—exceptional flexibility, affordability, transparency, career-relevant education, and consistently high student and alumni satisfaction. That campaign is one of the things we're doing to make sure those evidence-based differentiators are put onto the digital platforms in a way that AI-powered search picks them up and presents us favorably versus competitors. We've been doing a lot alongside those efforts, but that has created near-term impact. Long term, strategically, we believe this change in the search environment will be favorable for institutions that have built credible evidence around their differentiation. That's where we see ourselves well positioned. We see this as a transition, and it's a shift we've been working through, which is why we modestly reduced our revenue outlook for the year. In terms of other factors, it's worth mentioning we did have a temporary level of friction on enrollment related to unusual enrollment activity. That's actually good news in that we've talked about the control structures we put in place and those continue to be validated. One thing that did happen this prior quarter that I've mentioned in previous calls is the Department of Education rolled out their system of new detection and verification controls as part of the FAFSA process. In that process, they have risk identifiers that they share with institutions—signals of different levels of risk around potential unusual enrollment activity, or what they call potential identity fraud or ghost students. The good news is anything they flagged in their process was very consistent with our internal controls, which validated that we have robust controls, as does the department. That did create some friction because with the new regulations, when students are flagged, institutions are required to take them through a process. Because they did a lookback, we had a one-time process we had to work through for a number of applications, and that's behind us now. I wouldn't say it was meaningful in terms of our results, but given your question, that was another factor.
Yeah, okay. Fantastic. Maybe taking all that forward, could you refresh how you think about the long-term growth rate of the business? How do you see that evolving? And as we go into 2027, do you expect to be within your long-term framework in 2027?
We're not providing an outlook for fiscal 2027 on this call; we'll share that on our next earnings call. In terms of the long-term outlook, we still feel our previous communications on long-term expectations are consistent with today. We are in the middle of a shift in how search is conducted, but we've set a very strong foundation. Most importantly, our brand demand is high, which is paramount. It's about setting up our differentiators in a way that search engines used by prospective students can pick up. Over the long term, we believe this will be a strength for universities that have clear differentiators earned in the marketplace. We see satisfaction across the key attributes adult learners care about, most importantly the relevancy of our curriculum. That gives us confidence. Another point to mention is that we have other channels performing well that are not impacted by AI search. We're seeing healthy growth in our B2B channel and continue to expect that to grow because we've been effective with account management across our 2,500-plus employer relationships and are building more strategic relationships with employers, like the example I shared with Wabash. That will continue to drive success. We also see healthy direct demand continuing to come to the university, and we've improved our ability to meet that demand effectively with personalization, leveraging AI and technology throughout the enrollment process, where we're seeing continued improvements in conversion. All of those things give us confidence in our long-term expectations.
Great. Thank you for that. If I may slip in one more quick modeling question and then I'll pass it off: stock-based compensation coming out of the IPO is a bit elevated. This quarter was higher—maybe just help us: what's the right level of stock-based comp as a percent of revenue to think about going forward?
Hey Greg, it's Blair. Thanks for the question. Our Q3 2026 share-based compensation expense was $8.5 million. As mentioned on previous calls, a little less than half of SBC was associated with the modification of pre-IPO stock options, not new stock. The majority of the remaining expense was associated with shares granted at IPO or post-IPO. Year-to-date expense of $47.6 million of SBC includes a number of components. Approximately $31 million is related to modification of stock options, of which $4 million was incurred in Q3. Then you have approximately $3 million for unrestricted share grants to a very limited number of employees and less than $1 million from pre-awards. The ongoing component is approximately $13 million from newly granted awards at IPO or post-IPO that generally vest over three years. As always, I direct you to our fiscal 2025 Form 10-K and our Q3 2026 Form 10-Q for additional detail. You can see a significant portion of non-cash SBC was due to the modification of pre-IPO options.
Okay, great. That's helpful. Thank you.
Our next question comes from the line of Jasper Bibb with Truist Securities. Your line is open.
Hey, good afternoon everyone. Just wanted to get a little more color on the enrollment growth rate. In the prepared remarks you talked about strength in retention supporting the roughly 1% enrollment growth. I know you don't disclose new starts, but can you provide a little color on what you're seeing in new starts so far this year and in the past quarter?
We don't disclose new starts, but one point to highlight: from a revenue growth perspective, we had a higher propensity last year of students that didn't retain beyond earlier courses. We anticipated the year-over-year revenue growth rate to be higher in Q2 and Q3, and that masks some of the actual growth from a revenue perspective. In terms of new student growth, we feel good about the demand we're seeing. We do have a near-term impact as we navigate early changes in search, but as I said earlier, we feel good about the demand. We've planned our response for a long time, knowing search was changing, and we've been shifting into this new environment. We manage thousands of prompts and can see traction as we optimize for AI-powered search, so we see strong demand and good progress. I would caution you to view the growth rate overall for revenue this quarter as being a little masked by that year-over-year issue I mentioned.
That makes sense. I had an expense question: advertising expense grew about 16% year over year in the quarter. Can you talk about the drivers of the increase this quarter? Was it related to the AI shift you discussed, and do you expect advertising to moderate in fiscal fourth quarter?
Certainly, Jasper. We incurred $6.6 million higher advertising expense in Q3 versus the same period prior year. As we adapt to changes in how prospective learners discover, evaluate and ultimately choose higher education, we decided to accelerate the Built for Real Life campaign, which is designed to differentiate University of Phoenix for working adults while strengthening top-of-funnel awareness and consideration. We believe this and other marketing initiatives will support long-term growth in enrollment. Coupled with anticipated expansion of our direct channels, including employer-affiliated enrollment, we believe these investments will enhance our acquisition efficiency over time.
One more note, Jasper: the acceleration of the Built for Real Life campaign was exceptional work by our marketing team. We launched it earlier than planned because it was built on broad evidence and designed to be effective for AI-powered search. It has driven strength in our brand demand and helped optimize for AI-powered search. That was a deliberate decision; part of the higher spend was to accelerate that campaign earlier in the year.
That makes sense. Thank you for taking the question.
Our next question comes from the line of Alex Paris with Barrington Research. Your line is open.
Hi, thanks for taking my questions. At the time of the IPO, enrollment by field of study was broken down with about 63% business, around 31% healthcare and related, and 4% education. Year-to-date or in the third quarter, where has the strength been and where is there less strength?
We're seeing a diversified portfolio aligned to in-demand fields. The breakdown is pretty similar to what you described, but we've seen stronger growth in healthcare. The macro trends there have been strong; healthcare is just under a third of our B2B relationships now. We're seeing strong growth in healthcare-related programming while also seeing growth in other non-healthcare programs within growing verticals. Skills-aligned curriculum is driving growth across different parts of our portfolio and across the B2B network, which we expect will reflect in broader consumer demand over time.
Thanks. On guidance: given the updated guidance, revenue slightly below prior guidance and adjusted EBITDA tightened and slightly above prior guidance, it looks like Q4 implies roughly 3.4% revenue growth and about 5.8% adjusted EBITDA growth at the midpoint. That seems to align with a long-term mid-single-digit top-line and mid-single-digit-plus earnings growth algorithm. Any reason to think that algorithm wouldn't hold for fiscal 2027?
That's a good breakdown, but we're not providing fiscal 2027 guidance on this call. For now, I'll reiterate that our long-term expectations remain as previously communicated. We'll share more about fiscal 2027 on the next earnings call.
One more quick question on regulatory: we've discussed negotiated rulemaking and changes like gainful employment, and more recently there's been talk the Department of Education could revisit the 90/10 rule, which applies only to for-profits. With your 90/10 around 88%, what are your thoughts or what are you hearing about potential 90/10 changes?
I'm hearing similar things to you. I wouldn't want to speculate on 90/10 changes, but there is acknowledgement that the ratio is worth revisiting. There's some common acknowledgement that any accountability metrics should be applied across all of higher education. 90/10 currently is not handled that way, and it doesn't necessarily align with student success the way we'd prefer. There's hopeful discussion consistent with what you've been hearing.
Great. I appreciate the extra color. Thank you very much. I'll yield to the next caller.
Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is open.
Thanks. I wanted to circle back to how students are changing the way they look for institutions. Two-part question: one, can you give a rough estimate of what percentage of leads are now coming from LLMs and how that's changed over the past year? And two, you mentioned positioning to get your differentiators picked up by LLMs—can you give examples of how you are doing that and how successful you've been?
I'll address the second question first. We're doing many things to make sure discovery is optimized. Best practices continue to emerge across digital platforms, websites and social media, which has become a rich source for LLM-based discovery. Video, particularly YouTube, is becoming an increasingly primary source for LLMs. We are staying on the leading edge of where the market is going and work closely with partners, and today we've announced a collaboration with OpenAI to better understand the market. We measure these activities carefully across thousands of prompts that matter to adult learners and correlate them to outcomes so we can see what's working. For example, LinkedIn is a strong source for us—about 750,000 people on LinkedIn report attending or graduating from University of Phoenix—and student and alumni engagement around their experiences is being picked up by LLMs. We have strong social media and content generation on YouTube and other platforms, and we've seen real progress in visibility and traction as we shift into this new environment. On the first question about percentage of leads coming from LLMs, it's difficult to give a precise percentage. We have a large volume of demand that comes to us, and we analyze how that demand engages at a detailed level. Some demand that historically came through search now results in visitors coming to our website multiple times before they start an application; that behavior is a sign of a more iterative and elongated evaluation process. It's not necessarily a huge percentage shift yet, but any shift in the process is something we need to adapt to in the near term, which is what's occurring now.
All right, thanks so much.
Our next question comes from the line of George Tong with Goldman Sachs. Your line is open.
Thanks. You talked about initiatives to make sure your differentiation is getting picked up by AI-powered search. How long do you think it will take before AI-powered search produces results similar to or better than traditional search?
That's a difficult question to answer precisely. We're still in early days, but we can already see the impact of the things we're doing to improve how we show up—metrics like number of citations and how often our brand shows up. That encourages me that this will be a transition we can measure over time. It's hard to give a definitive timeline for when LLM-driven discovery will be equivalent to traditional search. One important distinction is that traditional search rewarded marketing claims; AI-powered search will increasingly show comparisons of institutions based on outcomes. That's where I see the real opportunity—if your outcomes position you well, that will matter more over time.
Got it. You mentioned the Department of Education rolled out detection and verification controls as part of FAFSA. What's the likelihood the Department rolls out additional detection systems that could impact the funnel and onboarding process?
I think the Department is likely to continue to bolster and enhance their controls, either to make them more efficient or to adapt to evolving threats. We've been adapting for some time and must continue to improve. From our perspective, anything they do that creates responsibilities for institutions is likely mitigated by the fact that now the department provides frontline defense that didn't exist prior to these rollouts. Previously, institutions were fully dependent on their own systems. Now, threat actors have to go through the department before they reach institutions. That should reduce friction meaningfully into the future, in my view.
Got it, very helpful. Thank you.
Our next question comes from the line of Rob Sanderson with Loop Capital Markets. Your line is open.
Thank you. I wanted to ask about healthy growth in your B2B partnerships. Is expansion of your managed accounts having the expected stimulus on enrollment, and will that be a growing focus for the university? Is B2B enrollment approaching 40% now? And can you give a sense of the impact to revenue and profit contribution as your enrollment mix shifts to this channel?
We've continued to see healthy growth from investments in account management. This past quarter, 36% of our enrollment came through employer-supported relationships, versus 33% the prior year. We expect that growth to continue based on account management performance and deeper strategic relationships. That will be a continued focus going into fiscal 2027 and beyond. From a profitability perspective, there's been a slight reduction in revenue per student over time in the B2B channel due to discounts under tuition assistance programs. However, B2B students tend to retain and complete at higher rates, so profitability has been similar in point-in-time measurements. As the channel becomes more efficient and we expand through account management, we expect profitability dynamics in B2B to likely improve relative to the lower tuition, given the higher retention and completion.
Thanks. Follow-up on AI initiatives: can you talk about your tech platform investments and how they help the university move more quickly on implementing AI initiatives? Do these investments give you a material differentiator versus other education providers? And does the OpenAI collaboration give you opportunities to align more deeply with B2B partners?
We're excited about where AI can take us. We're focused on three areas where AI will be transformational: improving the learner experience, driving operational efficiency in how we deliver education and improving outcomes while reducing delivery costs, and equipping adult learners with workforce-relevant AI skills. We've made significant investments in our data and technology foundation, which allows us to move more nimbly than many competitors who must navigate heavier governance processes. We've integrated AI into curriculum early, ethically and responsibly. We weave AI into all curriculum and include skill development in every course, with discipline-specific AI assignments in development. The OpenAI collaboration accelerates these efforts: it provides tools to students and faculty, enables curriculum and skills collaboration, and supports research and pathways to the workforce. Operationally, we've been using OpenAI and other models to scale solutions that improve student outcomes and drive operating leverage. The One Team Assistant is an example: it summarizes student status and suggests next-best actions so advisors can focus on the most strategic parts of interactions. That saves time and improves student outcomes. Working with OpenAI’s engineers will accelerate developments across learning experience and operational efficiency.
Great, thanks for all that, Chris.
Our final question comes from the line of Jack Slevin with Jefferies. Your line is open.
Thanks for taking the question. Two quick items: on guidance, Q4 implies a bit of a step-up in pace—what drives your confidence for that growth rate versus the past two quarters? And on the buyback front, only $4 million of the $50 million authorization has been repurchased—how are you thinking about pacing and how quickly could you accelerate repurchases if you chose to?
On the revenue point, we continue to see healthy retention and strong demand. As we work through the changes in AI-driven search, we are seeing improvements as we navigate those changes, which factors into expectations for Q4 versus Q3. Another element to consider is that last year we had higher propensity in certain cohorts—students who entered a risk-free trial program and then were more likely to drop in earlier courses—which softened year-over-year growth in Q2 and Q3. That effect doesn't carry into Q4 year over year, which helps explain some of the step-up dynamics.
Thanks, Jack. On capital allocation, our priorities remain focused on investing in student success, technology and other initiatives that support long-term sustainable growth. We maintain a strong financial position with approximately $269 million of cash, cash equivalents and marketable securities and no debt, plus our revolving credit facility for additional flexibility. We remain committed to returning capital to shareholders through our quarterly dividend and share repurchase program, and we currently have about $46 million in capacity remaining under the repurchase authorization. Any acceleration of buybacks would be thoughtful, considering float and trading volume, and we would continue to evaluate M&A opportunities that complement our strategy and create long-term shareholder value.
Got it. Thanks for the color and the welcome.
That concludes our question-and-answer session. I will now turn the conference back over to Mr. Chris Lynne for closing remarks.
Thank you, everyone, for your questions and for joining us today. Our strategic priorities remain centered on student outcomes, employer engagement, and preparing learners for a rapidly evolving world of work. Those priorities continue to guide how we invest, innovate, and execute as we create long-term value for learners, employers, and shareholders. I want to thank our faculty and team members for their continued dedication to our students and their commitment to helping working adult learners achieve their educational and career goals. Thank you for your continued interest in Phoenix Education Partners.
Ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.