Covista (CVSA) Q3 2026 earnings review
Enrollment Crosses 100K, Chamberlain Missteps Corrected
Covista achieved a milestone 100,000+ total enrollments this quarter, driven by the critical turnaround at Chamberlain University, which reversed its recent contraction to post 0.5% growth. The reported financials (Revenue +4.5%, Adj. EPS +3.1%) look artificially weak due to a previously disclosed Walden academic calendar shift that pulled $18M in revenue forward into Q2. Adjusted for this shift, revenue grew a robust 8.4%. Management's confidence in the underlying momentum is evident: they aggressively bought back $66M in stock, refinanced debt to 2033, and raised FY26 guidance for both revenue and earnings.
🐂 Bull Case
After a marketing and execution failure caused enrollment to dip 1% in 26Q2, Chamberlain has stabilized, returning to +0.5% growth. The core issue is contained.
Walden achieved its 11th consecutive quarter of enrollment growth (+12.3% YoY). Adjusting for the calendar shift, Walden segment revenue jumped an impressive 14.7%.
🐻 Bear Case
Reported net income plunged 31.6% YoY to $41.6M. This was heavily dragged down by a $16.3M loss from discontinued operations and elevated strategic advisory costs.
With Chamberlain growing at a mere 0.5% and Med/Vet at 4.1%, Walden is carrying the entire enterprise. Any future execution misstep at Walden would severely damage the growth trajectory.
⚖️ Verdict: 🟢
Bullish. The headline numbers look decelerated, but adjusting for the Walden calendar shift reveals a business firing on all cylinders. The Chamberlain stabilization removes the biggest overhang from the previous quarter.
Key Themes
Chamberlain Stabilizes and Reverses Decline
Reversing. The biggest risk from last quarter was Chamberlain's surprise 1% enrollment decline due to marketing execution failures. Management promised a fix, and Q3 delivered: Chamberlain returned to positive total enrollment growth (+0.5%) and achieved its 15th straight quarter of pre-licensure BSN growth. This validates management's claim that the Q2 issue was a temporary operational misstep rather than a structural loss of market share.
Walden Sustains Double-Digit Engine
Stable. Walden's momentum is relentless. The segment hit its 11th consecutive quarter of enrollment growth (+12.3%), reaching the highest total enrollment in university history (54,474). Underlying revenue growth (adjusted for the academic shift) was a stellar 14.7%, proving that new program launches and digital marketing investments continue to yield high returns.
Optics of the Walden Calendar Shift
Decelerating. A previously telegraphed shift of one academic week from Q3 to Q2 significantly distorted Q3 financials. Reported consolidated revenue grew only 4.5% ($487M) and adjusted EBITDA margin compressed 110 bps to 26.3%. While adjusted revenue growth would have been 8.4% ($505M) and adjusted EBITDA margin 28.9%, the headline deceleration requires investors to manually back out the noise to see the true growth rate.
Discontinued Operations and Advisory Costs Weigh on GAAP
GAAP net income fell 31.6% YoY to $41.6M, contradicting the positive operational narrative. This was driven by a $16.3M loss from discontinued operations (related to legacy litigation/earn-outs) and a jump in strategic advisory costs to $7.2M (up from $5.1M). While adjusted out of EPS, these represent real cash drains and balance sheet noise.
Medical and Veterinary Leverage Resumes
Accelerating. The Med/Vet segment showed excellent operating leverage this quarter. Despite modest enrollment growth (+4.1%), revenue grew 8.9% to $103.5M, and Adjusted EBITDA surged 20.1% to $27.5M. This puts the segment's Adjusted EBITDA margin at 26.5%, up 250 bps YoY, proving that pricing power and operational efficiencies are flowing directly to the bottom line.
AI Integration Drives Immediate Demand
In partnership with Google Cloud, Covista launched healthcare-specific AI professional certificates across all five institutions. The immediate enrollment of over 4,000 learners demonstrates massive student appetite for AI fluency in clinical practice. This serves as a key program differentiator and a potential pipeline for higher-level degree enrollments.
Macro Tailwinds: The Structural Healthcare Shortage
Management continues to position Covista as essential infrastructure for the U.S. healthcare system. With 97% first-time residency attainment at AUC and RUSM and over 750 students placed in 400+ healthcare facilities in 2026, the company is successfully marketing its outcomes to both prospective students and regulatory bodies.
Reliance on Share Buybacks for EPS Growth
While operational growth is solid, a significant portion of EPS growth relies on financial engineering. Covista repurchased $66M of shares in Q3 alone, reducing the diluted share count by roughly 3.45 million shares YoY (38.2M to 34.8M). Without this 9% reduction in share count, the EPS beats would be notably smaller.
Other KPIs
Covista remains a cash-generating machine. LTM Free Cash Flow dipped slightly sequentially but remains highly robust, funding $66M in Q3 buybacks. The company also successfully refinanced its debt, consolidating into a $510M Term Loan B extending to 2033, leaving net leverage at a highly conservative 0.7x.
Up from $146.2 million at the end of FY25. While revenue is growing, the 20% increase in receivables outpaces the 9% YTD revenue growth. The provision for bad debts also increased slightly to $48.9M YTD. This warrants monitoring for any changes in student payment behavior or collection friction.
Guidance
Accelerating. Raised from the prior range of $1,900M-$1,940M. The new midpoint ($1,937.5M) implies an 8.3% YoY growth rate over FY25. This signals management's confidence that the Chamberlain recovery will hold and Walden will not decelerate materially in Q4.
Accelerating. Raised from the prior range of $7.80-$8.00. The new midpoint ($8.05) implies a massive 20.7% YoY growth rate over FY25. This is driven by top-line stability combined with lower interest expenses from the recent debt refinance and a substantially lower share count from aggressive Q3 repurchases.
Key Questions
Chamberlain Go-Forward Growth Rate
With Chamberlain returning to positive total enrollment (+0.5%), what is the normalized, steady-state enrollment growth expectation for this segment going into FY27 now that the marketing missteps are corrected?
Discontinued Operations Liability
Q3 saw a $16.3M loss from discontinued operations related to legacy litigation and earn-outs. Are there remaining liabilities or pending settlements that could trigger further cash outflows or GAAP earnings drags in future quarters?
Monetization of AI Certificates
The Google Cloud AI certificates enrolled 4,000 learners immediately. Are these currently offered as free value-adds to existing students, or are they standalone revenue-generating products? How does this impact customer acquisition costs?
Receivables Growth
Accounts receivable grew 20% compared to FY25 year-end, outpacing year-to-date revenue growth of 9%. Is this simply a timing issue related to the Walden academic shift, or are there changes in student funding timelines?