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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2026


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number: 001-42899

Phoenix Education Partners, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	38-3922540
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4035 S. Riverpoint Parkway Phoenix, AZ	85040
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (800) 990-2765

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     Common Stock, par value $0.01 per share

     PXED

     New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 7, 2026, the registrant had 36,047,376 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page

	OVERVIEW	ii

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION	35

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

OVERVIEW

In this Quarterly Report on Form 10-Q for the period ended May 31, 2026 (this “Quarterly Report on Form 10-Q”), unless otherwise indicated or the context otherwise requires, references to the “Company,” the “Issuer,” “we,” “us” or “our” refer, prior to our conversion into a corporation, to AP VIII Queso Holdings, L.P. and its consolidated subsidiaries and, after our conversion into a corporation, to Phoenix Education Partners, Inc. and its consolidated subsidiaries. References to the “University” refer to The University of Phoenix, Inc., our indirect wholly-owned subsidiary. Apollo Education Group, Inc., our direct wholly-owned subsidiary and the direct parent of the University, has been renamed Phoenix Education Operating Corp (“PEOC”).

Our fiscal year ends on August 31 of each year and our four fiscal quarters comprising our fiscal year end on the last day of November, February, May and August, respectively. The term “fiscal,” with respect to any year, refers to the period ending on August 31 of such year. All condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q have been prepared in U.S. dollars in accordance with generally accepted accounting principles in the United States of America.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	As of
(In thousands, except par value)	May 31, 2026			August 31, 2025
ASSETS
Current assets:
Cash and cash equivalents	$	155,020		$	136,504
Restricted cash and cash equivalents		2,973			36,497
Marketable securities		75,051			9,005
Accounts receivable, net		96,475			58,957
Prepaid income taxes		8,173			3,160
Other current assets		23,176			21,827
Total current assets		360,868			265,950
Marketable securities		36,396			12,803
Property and equipment, net		38,282			38,846
Goodwill		3,732			3,732
Intangible assets, net		85,424			87,294
Operating lease right-of-use assets, net		36,532			41,920
Deferred income taxes, net		24,517			20,566
Other assets		22,896			22,451
Total assets	$	608,647		$	493,562
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	24,375		$	25,696
Accrued compensation and benefits		19,557			28,534
Student deposits		7,594			11,049
Deferred revenue		76,046			37,210
Current operating lease liabilities		9,822			8,948
Other current liabilities		51,047			50,608
Total current liabilities		188,441			162,045
Long-term operating lease liabilities		55,879			64,352
Other long-term liabilities		37,895			27,110
Total liabilities		282,215			253,507
Commitments and contingencies (Note 14 and Note 15)
Equity:(1)
General partner		—			—
Limited partners (35,596 shares outstanding as of August 31, 2025)		—			246,735
Preferred Stock ($0.01 par value; 5,000 shares authorized, no shares issued and outstanding)		—			—
Common Stock ($0.01 par value; 1,495,000 shares authorized, 36,010 shares issued and outstanding as of May 31, 2026)		360			—
Additional paid-in capital		275,155			—
Retained earnings		48,747			—
Accumulated other comprehensive (loss) income, net		(7	)		39
Total Phoenix Education Partners, Inc. equity		324,255			246,774
Noncontrolling interests		2,177			(6,719	)
Total equity		326,432			240,055
Total liabilities and equity	$	608,647		$	493,562

(1)

See Note 1. Nature of Operations and Significant Accounting Policies for a description of our Initial Public Offering, conversion into a corporation and name change.

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended May 31,						Nine Months Ended May 31,
(In thousands, except per share data)	2026			2025			2026			2025
Net revenue	$	271,801		$	271,703		$	756,289		$	749,801
Costs and expenses:
Instructional and support		110,284			110,446			330,774			325,779
General and administrative		97,754			83,320			302,416			255,703
Strategic alternatives, restructuring and other		11,937			6,837			31,673			17,886
Total costs and expenses		219,975			200,603			664,863			599,368
Operating income		51,826			71,100			91,426			150,433
Interest income		2,183			2,278			5,720			8,334
Interest expense		(651	)		(107	)		(1,416	)		(332	)
Income before income taxes		53,358			73,271			95,730			158,435
Provision for income taxes		14,452			18,622			30,877			40,564
Net income		38,906			54,649			64,853			117,871
Net loss (income) attributable to noncontrolling interests		261			(808	)		548			(1,489	)
Net income attributable to Phoenix Education Partners, Inc.	$	39,167		$	53,841		$	65,401		$	116,382
Earnings per share:(1)
Basic	$	1.09		$	1.51		$	1.83		$	3.27
Diluted	$	1.01		$	1.42		$	1.69		$	3.08
Shares used in computing earnings per share:
Basic		35,882			35,560			35,766			35,542
Diluted		38,920			37,966			38,799			37,831

(1)

See Note 1. Nature of Operations and Significant Accounting Policies for a description of our Initial Public Offering, conversion into a corporation and name change.

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended May 31,						Nine Months Ended May 31,
($ in thousands)	2026			2025			2026			2025
Net income	$	38,906		$	54,649		$	64,853		$	117,871
Other comprehensive income (loss) (net of tax)(1):
Change in fair value of available-for-sale securities		(72	)		(26	)		(46	)		(84	)
Comprehensive income		38,834			54,623			64,807			117,787
Comprehensive loss (income) attributable to noncontrolling interests		261			(808	)		548			(1,489	)
Comprehensive income attributable to Phoenix Education Partners, Inc.	$	39,095		$	53,815		$	65,355		$	116,298

(1)

The tax effect during the three and nine months ended May 31, 2026 and 2025 was not material.

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(In thousands)	Common Stock(1) (Shares)			General Partner		Limited Partners		Common Stock (Amount)			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Total Phoenix Education Partners, Inc. Equity			Noncontrolling Interests			Total Equity
Balance as of February 28, 2026		35,811		$	—	$	—	$	358		$	272,814		$	17,889		$	65		$	291,126		$	2,438		$	293,564
Change in fair value of available-for-sale securities, net of tax		—			—		—		—			—			—			(72	)		(72	)		—			(72	)
Share-based compensation		—			—		—		—			8,458			—			—			8,458			—			8,458
Shares issued under share-based compensation plans		425			—		—		4			452			—			—			456			—			456
Tax withholdings for share-based award settlements		(91	)		—		—		(1	)		(2,607	)		—			—			(2,608	)		—			(2,608	)
Common stock repurchased		(135	)		—		—		(1	)		(3,962	)		—			—			(3,963	)		—			(3,963	)
Common stock dividends ($0.21 per share) and dividend equivalents		—			—		—		—			—			(8,309	)		—			(8,309	)		—			(8,309	)
Net income (loss)		—			—		—		—			—			39,167			—			39,167			(261	)		38,906
Balance as of May 31, 2026		36,010		$	—	$	—	$	360		$	275,155		$	48,747		$	(7	)	$	324,255		$	2,177		$	326,432

(In thousands)	Common Stock(1) (Shares)			General Partner		Limited Partners		Common Stock (Amount)			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Total Phoenix Education Partners, Inc. Equity			Noncontrolling Interests			Total Equity
Balance as of February 28, 2025		35,560		$	—	$	255,799	$	—		$	—		$	—		$	(13	)	$	255,786		$	13,431		$	269,217
Change in fair value of available-for-sale securities, net of tax		—			—		—		—			—			—			(26	)		(26	)		—			(26	)
Share-based compensation		—			—		—		—			—			—			—			—			645			645
Net income		—			—		53,841		—			—			—			—			53,841			808			54,649
Balance as of May 31, 2025		35,560		$	—	$	309,640	$	—		$	—		$	—		$	(39	)	$	309,601		$	14,884		$	324,485

(1)

See Note 1. Nature of Operations and Significant Accounting Policies for a description of our Initial Public Offering, conversion into a corporation and name change.

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


(In thousands)	Common Stock(1) (Shares)			General Partner		Limited Partners			Common Stock (Amount)			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Total Phoenix Education Partners, Inc. Equity			Noncontrolling Interests			Total Equity
Balance as of August 31, 2025		35,596		$	—	$	246,735		$	—		$	—		$	—		$	39		$	246,774		$	(6,719	)	$	240,055
Corporate conversion		—			—		(246,735	)		356			236,935			—			—			(9,444	)		9,444			—
Change in fair value of available-for-sale securities, net of tax		—			—		—			—			—			—			(46	)		(46	)		—			(46	)
Share-based compensation		—			—		—			—			47,624			—			—			47,624			—			47,624
Shares issued under share-based compensation plans		744			—		—			7			449			—			—			456			—			456
Tax withholdings for share-based award settlements		(195	)		—		—			(2	)		(5,891	)		—			—			(5,893	)		—			(5,893	)
Common stock repurchased		(135	)		—		—			(1	)		(3,962	)		—			—			(3,963	)		—			(3,963	)
Common stock dividends ($0.42 per share) and dividend equivalents		—			—		—			—			—			(16,654	)		—			(16,654	)		—			(16,654	)
Net income (loss)		—			—		—			—			—			65,401			—			65,401			(548	)		64,853
Balance as of May 31, 2026		36,010		$	—	$	—		$	360		$	275,155		$	48,747		$	(7	)	$	324,255		$	2,177		$	326,432

(In thousands)	Common Stock(1) (Shares)			General Partner		Limited Partners			Common Stock (Amount)			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Total Phoenix Education Partners, Inc. Equity			Noncontrolling Interests			Total Equity
Balance as of August 31, 2024		35,501		$	—	$	327,259		$	—		$	—		$	—		$	45		$	327,304		$	21,626		$	348,930
Noncontrolling interest issued in business combination		—			—		—			—			—			—			—			—			4,147			4,147
Change in fair value of available-for-sale securities, net of tax		—			—		—			—			—			—			(84	)		(84	)		—			(84	)
Share-based compensation		77			—		—			—			—			—			—			—			1,908			1,908
Tax withholdings for share-based award settlements		(18	)		—		—			—			—			—			—			—			(325	)		(325	)
Dividends and dividend equivalents to noncontrolling interests		—			—		—			—			—			—			—			—			(13,961	)		(13,961	)
Capital distributions to limited partners ($3.85 per share)		—			—		(134,001	)		—			—			—			—			(134,001	)		—			(134,001	)
Net income		—			—		116,382			—			—			—			—			116,382			1,489			117,871
Balance as of May 31, 2025		35,560		$	—	$	309,640		$	—		$	—		$	—		$	(39	)	$	309,601		$	14,884		$	324,485

(1)

See Note 1. Nature of Operations and Significant Accounting Policies for a description of our Initial Public Offering, conversion into a corporation and name change.

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended May 31,
($ in thousands)	2026			2025
Operating activities:
Net income	$	64,853		$	117,871
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation		47,624			1,908
Depreciation and amortization		16,800			16,348
Non-cash lease expense		5,388			5,370
Impairment charges and asset disposal losses		609			113
Provision for credit losses on accounts receivable		24,585			35,885
Deferred income taxes		6,931			28,885
Changes in assets and liabilities, excluding the impact of acquisition:
Accounts receivable		(62,103	)		(76,715	)
Prepaid income taxes		(5,013	)		(276	)
Other assets		(1,948	)		983
Accounts payable		(1,321	)		(11,197	)
Accrued compensation and benefits		(8,977	)		(11,383	)
Student deposits		(3,455	)		(70,862	)
Deferred revenue		38,836			28,742
Operating lease liabilities		(7,599	)		(8,510	)
Other liabilities		1,474			(5,373	)
Net cash provided by operating activities		116,684			51,789
Investing activities:
Purchases of property and equipment		(15,005	)		(16,399	)
Purchases of marketable securities		(118,120	)		(20,557	)
Sales of marketable securities		14,758			8,475
Maturities of marketable securities		13,815			14,723
Acquisition, net of cash acquired		—			(1,982	)
Other investing activities		(108	)		(58	)
Net cash used in investing activities		(104,660	)		(15,798	)
Financing activities:
Common stock repurchased		(3,963	)		—
Payments of dividends and dividend equivalents		(17,375	)		—
Payroll taxes paid on share-based awards		(6,150	)		(774	)
Proceeds from stock option exercises		456			—
Payments of dividends and dividend equivalents to noncontrolling interests		—			(13,961	)
Capital distributions to limited partners		—			(134,001	)
Net cash used in financing activities		(27,032	)		(148,736	)
Net change in cash and restricted cash		(15,008	)		(112,745	)
Cash and restricted cash, beginning of period		173,001			356,170
Cash and restricted cash, end of period	$	157,993		$	243,425
Supplemental disclosure information:
Income tax payments, net	$	28,958		$	11,987
Noncontrolling interest issued in business combination	$	—		$	4,147

The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral part of this statement.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Nature of Operations and Significant Accounting Policies

Description of Business

Prior to completing our initial public offering (“IPO”) on October 10, 2025, AP VIII Queso Holdings, L.P. (“Queso”, and together with its subsidiaries, the “Company”, “we”, “us”, or “our”) was a limited partnership that was formed in accordance with the laws of Delaware on January 9, 2014. Queso made an election to be classified as a corporation for federal income tax purposes and its fiscal year was from September 1 to August 31. Prior to the IPO, Queso converted into a Delaware corporation pursuant to a statutory conversion and changed its name to Phoenix Education Partners, Inc. (“Phoenix Education Partners”). In connection with our conversion into a corporation, all of the 1,028,000 outstanding limited partnership units of Queso were converted on a 1-for-33.858 basis into an aggregate of 34,805,541 shares of our common stock. Following our conversion into a corporation, Phoenix Education Partners holds all of the property and assets and assumed all of the debts and obligations of Queso.

Initial Public Offering

At our IPO closing, certain of our existing shareholders sold 4,250,000 shares at the IPO price of $32.00 per share. The existing shareholders sold an additional 637,500 shares on October 15, 2025 at the same price. The selling shareholders received all of the proceeds from these sales, and we did not issue or sell any shares in the IPO.

Offering costs consist primarily of legal, accounting, printing and filing services, and other third-party fees associated with the IPO. Because we did not receive any proceeds from the IPO, these costs were expensed as incurred and are included in strategic alternatives, restructuring and other on our condensed consolidated statements of income. We did not incur any offering costs in the three months ended May 31, 2026 and incurred approximately $5 million of offering costs in the nine months ended May 31, 2026. During the three and nine months ended May 31, 2025, we incurred approximately $2 million and $6 million of offering costs, respectively.

Prior to the IPO, we owned approximately 98% of the outstanding shares of the University’s common stock. In connection with the IPO, all of the outstanding shares of the University’s common stock owned by persons other than the Company were converted into shares of our common stock at a ratio equal to one share of the Company’s common stock for each share of the University’s common stock. As a result, we issued 790,714 shares of the Company’s common stock upon the conversion of 790,714 outstanding shares of the University’s common stock. Following the closing of the IPO, the University is a wholly-owned subsidiary of the Company.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Phoenix Education Partners on a consistent basis with the audited consolidated financial statements for the year ended August 31, 2025, and contain all adjustments, including normal recurring adjustments, necessary to fairly state the information set forth herein. These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and, therefore, omit certain information and footnote disclosures necessary to present the unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 of our 2025 Annual Report on Form 10-K for the year ended August 31, 2025, as filed with the SEC on November 20, 2025. The results of operations for the three and nine months ended May 31, 2026 are not necessarily indicative of the results that may be expected for the year ending August 31, 2026 or any other future period.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share, we have applied retrospective presentation to our earnings per share for all periods presented in our financial statements to reflect the shares of common stock resulting from our IPO. Refer to Note 12. Earnings Per Share for additional information.

Beginning in the first quarter of fiscal year 2026 and after the IPO, we began separately presenting tax withholding for share‑based award settlements and dividends and dividend equivalents to noncontrolling interests on our condensed consolidated statements of equity and condensed consolidated statements of cash flows. We have reclassified prior periods to conform to our current period presentation.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Estimates, Assumptions and Judgments

The preparation of these unaudited condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during applicable reporting periods. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation

These unaudited condensed consolidated financial statements include the assets, liabilities, revenues and expenses of Phoenix Education Partners, our wholly-owned subsidiaries and other subsidiaries that we control, substantially all of which represents the University. We eliminate intercompany transactions and balances in consolidation.

We record noncontrolling interests to recognize the noncontrolling ownership interests in our consolidated subsidiaries. We allocate a portion of the net income (loss) of such subsidiaries to our noncontrolling interests generally based on the respective noncontrolling shareholder’s ownership interest in the consolidated subsidiary.

Seasonality

The University’s non-term academic model encompasses a series of courses taken consecutively over the length of the program, which generally limits seasonal enrollment fluctuations. However, we have historically experienced, and expect to continue to experience, lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to the University’s holiday breaks when no related net revenue is recognized. While our operating costs generally do not fluctuate significantly on a quarterly basis, we have historically experienced, and expect to continue to experience, increased marketing expense in our second and fourth fiscal quarters due to course starts that occur during traditional back-to-school seasons.

Revenue Recognition

We recognize revenue in a manner to depict the transfer of goods or services to our customers at an amount that reflects the consideration we expect to receive in exchange for our goods or services. The University generates all of our consolidated net revenue, and substantially all of the University’s net revenue is generated from tuition-bearing degree programs. The University’s students generally fund their education through loans and/or grants from U.S. federal financial aid programs established by Title IV of the Higher Education Act and regulations promulgated thereunder (“Title IV”), military benefit programs, tuition assistance from their employers, or personal funds.

As of May 31, 2026 and August 31, 2025, we had $19.1 million and $13.1 million, respectively, of contract liabilities for discount programs that represent material rights to students which are included in other current liabilities on our condensed consolidated balance sheets. Additionally, we had contract liabilities consisting of deferred revenue and student deposits as reflected on our condensed consolidated balance sheets. The substantial majority of our contract liabilities as of a respective period end will be recognized in net revenue during the following sequential quarter due to course start timing and course duration.

Related Party Transactions

Prior to our IPO, we paid affiliates of Apollo Global Management, Inc. (“Apollo”) and The Vistria Group, LP (“Vistria”) for management consulting and advisory professional services. Apollo and Vistria are affiliated with entities that have ownership interests in Phoenix Education Partners. Our management consulting agreements with Apollo and Vistria were terminated effective as of the pricing of our IPO and amounts we paid for such services during the nine months ended May 31, 2026 were immaterial.

We remain a “controlled company” of Apollo following the IPO and have related party transactions with certain Apollo-affiliated portfolio companies. During the three months ended May 31, 2026 and 2025, we paid Rackspace Technology, Inc. $2.1 million and $1.1 million, respectively, and $5.4 million and $3.2 million during the nine months ended May 31, 2026 and 2025, respectively, for technology services.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

New Accounting Standards

Income Taxes - Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies and enhances certain required income tax disclosures. ASU 2023-09 was effective for our fiscal year that began on September 1, 2025. ASU 2023-09 will not impact our consolidated balance sheets, consolidated statements of income or consolidated statements of cash flows, but will impact our financial statement disclosures in our 2026 Annual Report on Form 10-K.

Financial Instruments - Credit Losses

In July 2025, the FASB issued ASU 2025‑05, Financial Instruments—Credit Losses (Topic 326‑20): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of current accounts receivable and current contract assets. ASU 2025-05 will be effective for our fiscal year beginning on September 1, 2026 and we are currently evaluating the impact it may have on our consolidated financial statements.

Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. ASU 2024-03 is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. ASU 2024-03 will be effective for our fiscal year beginning on September 1, 2027 and we are currently evaluating the impact it may have on our financial statement disclosures.

Intangibles - Goodwill and Other - Internal-Use Software

In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is intended to improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. ASU 2025-06 will be effective for our fiscal year beginning on September 1, 2028 and we are currently evaluating the impact it may have on our consolidated financial statements.

Interim Reporting

In December 2025, the FASB issued ASU 2025‑11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which is intended to clarify the applicability of interim reporting guidance, the types of interim reporting and the form and content of interim GAAP financial statements. ASU 2025-11 will be effective for our fiscal year beginning on September 1, 2028 and we are currently evaluating the impact it may have on our interim condensed consolidated financial statements.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 2. Strategic Alternatives, Restructuring and Other

Strategic alternatives, restructuring and other includes the following during the respective periods:


	Three Months Ended May 31,				Nine Months Ended May 31,
($ in thousands)	2026		2025		2026		2025
Strategic alternatives	$	856	$	2,402	$	6,133	$	7,401
Cybersecurity incident		267		—		5,096		—
Lease restructuring expense		4,029		2,121		7,634		3,837
Litigation charges and regulatory expense(1)		4,977		1,203		7,383		3,609
Other		1,808		1,111		5,427		3,039
Strategic alternatives, restructuring and other	$	11,937	$	6,837	$	31,673	$	17,886

(1)

Beginning in the third quarter of fiscal year 2026, we began separately presenting Litigation charges and regulatory expense in the table above, which were previously included in Other. We have reclassified prior periods to conform to our current period presentation.

Strategic alternatives represents costs associated with our IPO, other capital market transactions, and the evaluation of other strategic alternatives (see Note 1. Nature of Operations and Significant Accounting Policies). See Note 14. Commitments and Contingencies for information on the cybersecurity incident and Note 8. Other Liabilities for information on lease restructuring.

Note 3. Acquisition

As of August 31, 2024, Talent Mobility, LLC, a wholly-owned subsidiary of Phoenix Education Operating Corp. (“PEOC”), had a minority ownership interest in Empath, Inc. (“Empath”). Empath provides clients with a company-wide skills inventory for its employees through machine learning-based skills inference. In the first quarter of fiscal year 2025, PEOC acquired a controlling interest in Empath pursuant to an Agreement and Plan of Merger, by merging Talent Mobility, LLC with Empath, with Empath surviving as a subsidiary of PEOC. Empath was subsequently renamed “Talent Mobility, Inc.” PEOC paid approximately $2 million, net of cash acquired, to facilitate this merger and did not incur material transaction costs.

We accounted for this merger as a business combination and allocated the purchase price to the assets acquired and liabilities assumed at fair value as summarized below:



($ in thousands)
Cash	$	2,418
Finite-lived intangibles - Technology (3 year useful life)		7,254
Goodwill		3,732
Deferred income taxes		(1,706	)
Other		(99	)
Total assets acquired and liabilities assumed, net		11,599
Less: Fair value of noncontrolling interests		(4,147	)
Total fair value of consideration transferred		7,452
Less: Cash acquired		(2,418	)
Less: Fair value of equity method investment		(2,452	)
Less: Note forgiven		(600	)
Cash paid for acquisition, net of cash acquired	$	1,982

We determined fair value using the following assumptions, the majority of which include significant unobservable inputs (Level 3), that we believe reasonable market participants would use while employing the concept of highest and best use of the respective items:

•

Intangibles – We valued the technology primarily using the replacement cost approach. We determined this acquired intangible asset is finite-lived and we are amortizing the asset on a straight-line basis over three years, which we believe reflects the pattern in which the economic benefits of the asset are expected to be consumed.

•

Other – The carrying value of all other assets acquired and liabilities assumed approximated their fair value at the time of acquisition.

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

•

Noncontrolling interests – We estimated the fair value of the noncontrolling interests principally as the noncontrolling ownership percentage of the implied fair value of the acquired entity, and applied a discount for lack of control.

The goodwill resulting from the merger is principally attributable to the future earnings potential associated with customer enrollment growth and other intangibles that do not qualify for separate recognition, such as the assembled workforce. The operating results of Empath are included in our consolidated financial statements from the date of acquisition and its results are not material to our consolidated results of operations. Pro forma financial information is not presented as Empath’s results were not material to our condensed consolidated statements of income.

Note 4. Financial Instruments

Cash and cash equivalents and Restricted cash and cash equivalents

We consider all highly liquid investments with original maturities of three months or less from the date we purchase the investment to be cash equivalents.

Restricted cash and cash equivalents are presented separately from cash and cash equivalents on our condensed consolidated balance sheets. The following provides a reconciliation of cash and restricted cash as presented on our condensed consolidated statements of cash flows as of the respective periods:


	May 31,
($ in thousands)	2026		2025
Cash and cash equivalents	$	155,020	$	203,497
Restricted cash and cash equivalents		2,973		39,928
Total cash and restricted cash	$	157,993	$	243,425

Fair value measurements

Our financial instruments are classified within Level 1 or Level 2 of the fair value hierarchy because their fair values are derived from quoted prices for transactions in active exchange markets involving identical assets or quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.

The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective periods:


	May 31, 2026
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	42,005	$	—	$	—		$	42,005	$	42,005	$	—	$	—
Level 1:
Money market funds		77,144		—		—			77,144		77,144		—		—
U.S. Treasury securities		24,207		—		(1	)		24,206		7,981		16,225		—
Level 2:
U.S. agency securities		18,498		—		(11	)		18,487		—		—		18,487
Commercial paper		85,784		—		(1	)		85,783		30,863		54,920		—
Corporate debt securities		21,812		31		(28	)		21,815		—		3,906		17,909
Total	$	269,450	$	31	$	(41	)	$	269,440	$	157,993	$	75,051	$	36,396

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements


	August 31, 2025
($ in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Current Marketable Securities		Noncurrent Marketable Securities
Cash	$	129,113	$	—	$	—		$	129,113	$	129,113	$	—	$	—
Level 1:
Money market funds		39,574		—		—			39,574		39,574		—		—
Level 2:
Corporate debt securities		26,070		71		(19	)		26,122		4,314		9,005		12,803
Total	$	194,757	$	71	$	(19	)	$	194,809	$	173,001	$	9,005	$	12,803

(1)

Cash and cash equivalents includes restricted cash and cash equivalents.

Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales. Additionally, all of our securities are investment grade, are classified as available for sale, and have no related allowance for credit losses as of May 31, 2026.

Note 5. Accounts Receivable, Net

Accounts receivable, net consists of the following as of the respective periods:


($ in thousands)	May 31, 2026			August 31, 2025
Student accounts receivable	$	136,094		$	91,127
Allowance for credit losses		(41,230	)		(42,000	)
Net student accounts receivable		94,864			49,127
Other receivables		1,611			9,830
Accounts receivable, net	$	96,475		$	58,957

The following summarizes the activity in allowance for credit losses during the respective periods:


	Three Months Ended May 31,						Nine Months Ended May 31,
($ in thousands)	2026			2025			2026			2025
Beginning allowance for credit losses	$	40,420		$	43,746		$	42,000		$	49,200
Provision for credit losses on accounts receivable		8,510			12,531			24,585			35,885
Write-offs, net of recoveries		(7,700	)		(9,889	)		(25,355	)		(38,697	)
Ending allowance for credit losses	$	41,230		$	46,388		$	41,230		$	46,388

PHOENIX EDUCATION PARTNERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 6. Goodwill and Intangibles

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the net identifiable assets acquired and liabilities assumed. See Note 3. Acquisition for goodwill acquired in the first quarter of fiscal year 2025.

Intangible assets consist of the following as of the respective periods:


	May 31, 2026							August 31, 2025
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Curriculum	$	636	$	(335	)	$	301	$	659	$	(301	)	$	358

Phoenix Education Partners, Inc. 10-Q