Covista (CVSA) Q1 2027 earnings review
Covista raises its full-year plan, but nursing enrollment slows
Covista, America's largest healthcare educator, grew revenue fast in the first quarter even as its nursing school lost speed. Revenue rose 11% from a year ago, while profit per share excluding one-offs climbed 25% on lower operating costs and share buybacks. Chief executive Steve Beard lifted the full-year outlook, though by our math the plan points to revenue growth slowing to 5% for the rest of the year.
| Revenue | $511.5M +10.7% from a year ago |
|---|---|
| Total student enrollment | 104,713 +7.6% from a year ago |
| Profit per share, excluding one-offs | $2.19 +25.1% from a year ago |
| Full-year revenue outlook | Raised $7.5M middle of the range: 6.3% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because online university Walden reached record enrollment and medical school sign-ups grew despite federal student loan cuts taking effect in July. One caution: nursing school Chamberlain grew enrollment just 1.3%, missing management's forecast for an acceleration, while unpaid student bills rose.
The question now is whether the full-year outlook is cautious or if rising unpaid student bills and slower nursing growth will drag revenue down. Either Covista is repeating its pattern of setting low targets it can beat, or federal loan caps are starting to hurt student financing. Second-quarter enrollment and bad-debt expense will tell.
🐂 Bull Case
Walden Reaches Record Student Enrollment
Walden University is Covista's online degree school and its largest profit engine. The university grew enrollment for a 13th consecutive quarter and reached the "highest total enrollment in university history". It also launched four new degree programs during the period and is rolling out artificial intelligence certificates with Google Cloud.
- Total students: 58,881, up 12.8% from a year ago
- Walden revenue: $216.7 million, up 14.1% from a year ago
- Operating profit excluding one-offs: $65.0 million, up 16.0%
- Students in programs launched for the 2026 academic year: more than 2,000, up from 1,700 last quarter
The school is growing despite a tough comparison from last year, when enrollment rose 13.6%. Covista said the fast uptake of new courses is "demonstrating Walden’s speed to market in high-demand fields". Because online classes cost little to scale, Walden's operating margin excluding one-offs rose 0.5 percentage points to 30.0%.
What to watch: Walden's second-quarter revenue growth, excluding last year's $18 million calendar shift. Holding growth above 10% would show that new program launches are offsetting tougher comparisons.
Medical Schools Shrug Off Federal Loan Cuts
New federal rules eliminated Grad PLUS loans, a government lending program for graduate students, on July 1, 2026. That change created a risk that medical and veterinary students would struggle to pay tuition this fall, especially after some students enrolled early in May to beat the deadline.
Instead, Medical and Veterinary enrollment rose 3.5% from a year ago to 5,481 students, and revenue grew 10.0% to $102.5 million. Segment operating profit excluding one-offs rose 32.7% to $22.3 million, lifting its operating margin by 3.7 percentage points to 21.7%.
Covista also published data showing that graduates at its Ross and American University of the Caribbean medical schools "passed the United States Medical Licensing Examination® (USMLE®) Step 1 on their first attempt at rates comparable to or higher than U.S. MD students with similar MCAT scores in most score bands". Strong exam scores help attract paying students even when federal borrowing is tighter.
What to watch: January semester enrollment in the second-quarter report. Another positive reading would show that students have found alternative loans for the full academic year.
Lower Operating Costs Lift Profit Margins
Covista set a full-year target of 0 to 50 basis points (0.0 to 0.5 percentage points) of EBITDA margin expansion because it is spending money on new campuses and technology. Chief executive Steve Beard said this quarter that "all four pillars of the strategy are contributing to our momentum" and driving margin expansion.
First-quarter margins rose well ahead of the full-year pace. EBITDA margin excluding one-offs climbed 1.4 percentage points from a year ago to 25.6%, while operating margin excluding one-offs rose 1.3 percentage points to 20.8%. By our math, the cost of educational services — instructional and campus expenses — fell 0.3 percentage points of revenue to 43.2%, and student services and administrative expense — marketing and support — dropped 0.4 percentage points to 37.6%.
What to watch: second-quarter EBITDA margin excluding one-offs. Keeping the margin steady against last year's calendar-boosted quarter would show that the full-year margin plan is too low.
Buybacks and Lower Interest Boost Per-Share Profit
Covista paused its share buybacks in the fourth quarter of last year, leaving investors to wonder when repurchases would resume under its $750 million authorization. This quarter, the healthcare educator bought back $84 million of stock, reducing its diluted share count by 6.7% from a year ago to 34.6 million shares.
The company also repriced its $510 million Term Loan B, cutting the interest rate margin by 0.25 percentage points to the benchmark rate (SOFR) plus 2.00%. Interest expense fell 10.3% from a year ago to $9.9 million, so a 16.8% increase in net income excluding one-offs turned into a 25.1% rise in profit per share.
What to watch: second-quarter share repurchases in the cash flow statement. Buying back another $50 million or more would show management is systematically using its remaining authorization.
🐻 Bear Case
Chamberlain Enrollment Slows Despite Easy Comparison
Chamberlain University is Covista's nursing school, and management expected its enrollment growth to accelerate this quarter after rising from 0.5% in the third quarter to 1.6% in the fourth. The school also had an easy comparison because operational missteps held last year's September enrollment growth to 2.2%.
- Chamberlain student enrollment: 40,351, up 1.3% from a year ago
- Chamberlain revenue: $192.4 million, up 7.4% from a year ago
- Chamberlain operating profit: $26.7 million, up 4.4%
- Chamberlain operating margin: 13.9%, down 0.4 percentage points from 14.3% a year ago
Instead of speeding up, enrollment growth slowed to 1.3%, cutting against management's recovery plan. Chamberlain did open new campuses in Cincinnati and Salt Lake City, announced a 27th campus in Nashville for January 2027, and expanded its nursing partnership with hospital system Advocate Health from Wisconsin into three Chicago campuses. However, new campuses cost money before they fill up, which pushed the segment's operating margin down.
What to watch: Chamberlain's total enrollment growth in the second-quarter release. A second straight slowdown would mean post-licensure nursing declines are offsetting new campus openings.
Unpaid Student Bills Rise Faster Than Revenue
As federal student loan rules tightened in July, more students used payment plans or delayed paying tuition. On the balance sheet, accounts and financing receivables — money students owe the schools — rose 42.4% in three months to $241.5 million, pulling $94.2 million out of operating cash flow compared with $62.7 million a year ago.
At the same time, the provision for credit losses — the expense for student bills Covista expects never to collect — rose 50.5% from a year ago to $22.4 million, nearly five times faster than the 10.7% revenue increase. Combined with a more than doubling of capital spending to $37.6 million for new campuses, free cash flow fell 33.1% from a year ago to $76.7 million by our math.
What to watch: the provision for credit losses in next quarter's cash flow statement. Another jump above 20% would indicate that federal loan caps are hurting tuition collection.
Risks this quarter didn't answer
Several standing financial, regulatory and cost concerns received no update in the first-quarter earnings release.
- Sallie Mae private lending partnership: unmentioned in the release despite Grad PLUS loan elimination taking effect; the quarterly filing or call may clarify if an agreement is signed.
- Pending borrower-defense claims (16,623 student loan forgiveness claims at year-end): no update in the release; the quarterly filing's legal footnote will show if any claims moved.
- AI search disruption to student marketing: no marketing spend breakdown in the release; the quarterly filing will show whether advertising costs rose faster than enrollment.
- Recurring one-time exclusions: strategic advisory costs jumped to $6.2 million from $1.7 million a year ago, and discontinued operations lost $4.1 million from "ongoing litigation costs and settlements related to prior divestitures", keeping a $0.24 gap between GAAP and adjusted profit per share.
👓 Other Themes
Three-Year Strategy Launch and Finance Chief Retirement
Covista launched Purpose at Scale, its three-year plan to "train the next generation of healthcare professionals at industry-leading scale" built on "operational excellence, platform extension, employer integration and a technology focus". Separately, finance chief Robert Phelan announced his planned retirement after nearly seven years; he will stay in his role until Covista names a successor.
💲 Other KPIs
Deferred revenue — tuition cash collected or billed for classes not yet taught — rose 13.1% from a year ago by our math, outpacing the 10.7% rise in reported revenue. Because fall semesters start in September, this balance peaks in the first quarter and provides visibility into second-quarter revenue.
Covista repaid the $163 million credit-line borrowing it took out at the end of June, bringing total long-term debt principal down to $510 million. With $222.2 million in cash, net debt stands at 0.5 times trailing twelve-month EBITDA excluding one-offs, unchanged from last quarter.
🔮 Guidance
Raised. The healthcare educator lifted the middle of its full-year revenue plan by $7.5 million to $2,077.5 million, or about 6.3% growth from a year ago. By our math, after 10.7% growth in the first quarter, the outlook leaves 5.0% growth for the rest of the year. In each of the past two fiscal years, management raised its initial revenue plan and beat the raised range.
Raised. Management increased the middle of its full-year profit-per-share forecast by $0.075 to $9.10, representing 10.3% growth over last year's $8.25. By our math, after a 25.1% jump in the first quarter, the plan leaves 6.3% growth for the rest of the year. The second quarter faces a tough comparison against last year's academic calendar shift, which moves back into the third quarter this year.
❓ Key Questions
Why did Chamberlain enrollment slow against an easy comparison?
Management expected Chamberlain's enrollment growth to speed up from 1.6% in the fourth quarter, especially against last year's weak September intake. Instead, growth slowed to 1.3%, raising questions about demand in post-licensure nursing.
Why did bad-debt expense jump 51% this quarter?
The provision for credit losses rose to $22.4 million from $14.9 million a year ago, while student receivables climbed $94.2 million. Investors need to know if the July federal loan caps are leaving more students unable to pay.
What is the status of the Sallie Mae loan partnership?
Federal Grad PLUS loans ended on July 1, 2026, yet the release did not mention the planned Sallie Mae private-lending agreement. Management has not said whether the deal is signed or dropped.
What caused strategic advisory costs to nearly quadruple?
Covista excluded $6.2 million of strategic advisory costs from its operating profit, up from $1.7 million a year ago, after spending $18.6 million on them last year. Management has not said when these project costs will end.