Higher education company Perdoceo Education (NASDAQ:PRDO) announced better-than-expected results in Q4 FY2023, with revenue down 16% year on year to $147.9 million. It made a GAAP profit of $0.26 per share, improving from its profit of $0.23 per share in the same quarter last year.
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Perdoceo Education (PRDO) Q4 FY2023 Highlights:
- Revenue: $147.9 million vs analyst estimates of $146.2 million (1.2% beat)
- EPS: $0.26 vs analyst estimates of $0.20 (30% beat)
- Free Cash Flow of $11.58 million, down 63.1% from the previous quarter
- Gross Margin (GAAP): 79.6%, down from 84.6% in the same quarter last year
- Market Capitalization: $1.13 billion
Education ServicesA whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.
Sales GrowthA company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Perdoceo Education's annualized revenue growth rate of 2.4% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Perdoceo Education's recent history shows the business has slowed as its annualized revenue growth of 1.2% over the last two years is below its five-year trend.
This quarter, Perdoceo Education's revenue fell 16% year on year to $147.9 million but beat Wall Street's estimates by 1.2%.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Perdoceo Education has shown solid cash profitability, giving it the flexibility to reinvest or return capital to investors. The company's free cash flow margin has averaged 17.2%, above the broader consumer discretionary sector.
Perdoceo Education's free cash flow came in at $11.58 million in Q4, equivalent to a 7.8% margin and down 68.7% year on year.
Key Takeaways from Perdoceo Education's Q4 Results We were impressed by how Perdoceo Education beat past analysts' operating margin and EPS expectations this quarter. Despite topping estimates, however, we note that its revenue and earnings are still dropping. Zooming out, we think this was a relatively good quarter, but investors were likely hoping for more. The stock is down 1.4% after reporting, trading at $16.76 per share.