All right, we're going to get rolling with the next one. Thanks, everyone, for joining. I'm Jack Slevin, one of the research analysts here with Jefferies. Pleased to be joined this morning by Steve Beard, CEO of Covista, and we're going to do a little fireside chat here and kick things off for this 2026 Healthcare Services and Tech Conference. Steve, maybe to jump in and the context being, we're here at a healthcare services conference, that's my coverage. Covista is obviously a bit of a unique name in that coverage list or in that coverage space, being a healthcare educator. Can you maybe just talk a little bit about your decision to steer the company towards a healthcare education background and how it fits into the broader healthcare ecosystem?
Sure. When I joined the company in 2018, we were a diversified conglomerate, as many as 12 different brands and businesses in the portfolio, covering a range of education and training domains. We made the decision to try to rationalize the portfolio, and we had lots of different potential directions to take it, but ultimately decided that the highest value proposition was really doubling down on the legacy healthcare assets that we had in the portfolio. We executed a series of divestitures and one large acquisition. So, a host of assets out of the business, the acquisition of Walden University from the Laureate Education group. That gave us the five institutions that we take to market today, all of which are post-secondary higher education, all of which have a center of gravity in healthcare. We love the positioning.
We love the particular programs that we take to market in that domain, and we believe in addition to all of the other attractive attributes, barriers to entry, wide competitive moats, it serves a fantastic public good as well.
Awesome. And so maybe, February Investor Day in New York, the three-year growth path you just finished was called Growth with Purpose. You kicked off a new three-year path. Can you maybe just talk a little bit about how that three-year window helped differentiate versus peers and set you up for this next couple years that you've given a framework for how to think about for investors?
Once we rationalize the portfolio and got down to the set of programs and institutions that we thought were attractive, with our four biggest categories being medicine, veterinary medicine, nursing, and social work, we thought the next order of business was proving out that we could operate those assets in a fully integrated, highly efficient way and deliver the kind of consistent results of operations that I think our owners have been seeking. Growth with Purpose was really an operational excellence-focused strategy that was designed to prove that we could be best in class in the five areas where we thought we had the biggest levers of value creation: marketing, enrollment, developing new programs, price optimization, and student persistence. Over that three-year strategy, we excelled at all five. The results were really quite fantastic.
We enjoyed over that three-year period 12 consecutive quarters of enrollment growth across our institutions. We expanded profitability in a really attractive way, and we were able to grow revenue at high single digits over that period as we expanded margins. We think that's earned us the right to think about how we extend the platform from here. At Investor Day, we announced a new three-year strategy that builds on Growth with Purpose, but looks for ways for us to extend the reach of our platform and expand the impact of our institutions.
That makes sense. Maybe to just dive a little deeper on that plan, you talked about campus expansion in there in Chamberlain. Going into the specifics of that and maybe layering in two questions, the thought process behind how you're going to scale that and why you're going to scale that. Then the second piece, and from all the time we've spent together, it seems to be a little underappreciated. Campus expansion is something you've been doing. Why, at this time with the opportunity set in front from an investment perspective, was that so attractive as well?
Yeah. We start from the place that Chamberlain is already the largest nursing school in the country, and one of the most respected by employers. We were at 23 campuses in 16 states. Having proven that we could operate the business effectively with real consistent operational excellence, we thought this was the right time to think about expanding that footprint in a fairly aggressive way. First, we think it's completely responsive to the market demand. The shortage of clinical workforce, particularly nursing, is vast and growing. There are a host of attractive markets that we weren't operating in, at least in a synchronous campus-based model, that we thought would be attractive, and the returns on campus expansion at Chamberlain have always been very attractive. So we announced a plan to open 10 - 15 new campuses over the next several years.
Those campuses, depending on the location and the size of them, involve an outlay of $9 million-$12 million of CapEx, but we've got an EBITDA break even in 24 months after they launch. They grow rapidly. They bring both campus-based and online programs to those markets, and we believe that that's a highly attractive capital allocation move for us, completely responsive to the needs of U.S. healthcare, and continues to cement our position as the leading trainer of nurses in the United States.
Makes a ton of sense. Maybe to just push a little further, we're here in Nashville. Last week, obviously, we get the announcement, the third named campus location of that 10 -1 5 plan here in the city. Maybe talking about those first three, Cincy, Salt Lake, and obviously Nashville here, a little color on what you saw in those markets and maybe particularly for Nashville, just given the announcement.
Yeah. You're correct. The first three locations have been announced. We're open in Cincinnati. We've announced Salt Lake City, and we've announced Nashville. Very different markets, but one of the things I think they share is there's an undersupply of nursing talent in that market. We look at the existing training landscape for nurses, the overall healthcare infrastructure, the labor market, cost of operating, competitor dynamics, and all three cities, for a variety of reasons, represent really attractive markets for us. They also represent places where we think it's possible to not just be a leading educator in those markets, but also to partner more effectively with healthcare delivery institutions in those markets as well. Nashville is obviously a huge healthcare town, fast-growing town, lots of demand for nursing education, undersupply of seats. So we're excited to be here and looking forward to growing in Nashville.
Okay. Makes sense. Easy segue for me there, you just teed up. The partnership side was another thing you've talked about in the last 12 months, and at Investor Day and more recently, right? Can you just go in a little bit into how meaningful that can be? You've obviously had relationships with a lot of health systems for a long time across all your institutions, but in Chamberlain specifically, being more prescriptive with what that partnership or alliance sort of entails. Can you talk a little bit about the twos you've set up and what those can be going forward?
Sure. To your point, academic partnerships in healthcare are not new. Academic medical centers often have their own programs in nursing and medicine, and we, across our institutions, have partnered with healthcare for many, many years. The difference is that coming out of the pandemic and watching the pandemic expose some of the weaknesses in the public health infrastructure, we thought it was time to think about those partnerships in a larger and much more expansive way. Rather than having partnerships that provided a small, incremental, additional number of nurses to a healthcare delivery system, what if we thought about these as scaled partnerships, and what would it take to realize that scale on both the supply and demand side? We started with SSM, a large Catholic system that operates in four states: Oklahoma, Missouri, Illinois, and Wisconsin. We started with our St. Louis market.
We've had a long-standing presence. In fact, Chamberlain's origins go back to St. Louis. We hypothesized that a combination of scholarships and student support, the ability to do one's clinical training at a respected employer in that market, and a clear pathway into employment post-graduation, would actually allow us to grow the overall pool of aspiring nurses for that market. In the just over a year we've been in this with SSM, that has proven itself out. In fact, we've had so much success in SSM that we've actually raised the enrollment target in that partnership. Following that, we announced a similar partnership with Advocate, which is new. Advocate's the third largest not-for-profit integrated health system in the country. Very exciting partnership with them.
Currently scoped small, as all these are at the outset, but given the geographic reach of Advocate, we're excited to see what we can do with them as well. The thing to remember is that there's no talent shortage in nursing. What there is an opportunity shortage in nursing. 96,000 qualified nursing students were turned away from nursing school last year because of a shortage of seats, not because they didn't have the aptitude or interest to become nurses. We're in the scaled capacity business, and we think that our ability to train these nurses at scale and deliver them at scale to health systems will go a long way towards addressing what I think is one of the chronic pain points in healthcare delivery, which is labor.
Okay. Makes a ton of sense. Maybe tying the couple pieces together. You touched on it a little bit, but the online footprint in Chamberlain is broader than the actual physical campus location. As you think about the market expansion piece, along with potentially looking at more hospital partnerships, do these things work kind of hand in hand, where you expand the physical footprint, you have more coverage for more and more multi-state, not-for-profit systems, which seems to be the trend. We see these big mega mergers where non-contiguous markets maybe put together. Does that allow you to better serve those potential partners as you extend beyond, or even with the SSM and Advocate, but possibly beyond those?
Yeah, we actually think that the fact that Chamberlain can deliver instruction through fully online asynchronous programs, synchronous campus-based programs, and hybrid models is a source of real strength for it. In addition, using SSM as an example, we have a physical campus in St. Louis, but we are also serving them in Oklahoma City, where we do not have a campus, where we are delivering fully online instruction. What we also know is that every place we have a physical campus, online enrollment actually rises. The physical campus can often be a conduit for growing online enrollments as well. Given some of the real challenges with workforce shortages in rural areas, the ability to actually train nurses in areas where it would be unlikely that we would have a campus is a really, really important attribute as well as we think about solving the workforce crisis.
Okay. Then maybe it is one other piece still on the growth trend, but you talked a little bit about the long-term workforce shortages, the challenges that hospitals face. I think that some of that is maybe getting exacerbated by pushes on the regulatory front for them now. In this current environment, as you think about conversations with hospital or demand for the nurses that you may be graduating out of your programs in general, does it feel like that remains strong. Is it accelerating? Can you maybe just talk a little bit about what the environment feels like in the last year and a half since One Big Beautiful Bill Act came through?
Yeah. In our travels, we are not seeing any abatement of the demand on the employer side. We also know that employers are watching a conspicuous demographic trend in clinical workforce, where they expect a pretty significant rash of retirements here in the near future, which I think will only drive up the demand on the employer side. The other thing from where we sit is we see no abatement in demand on the consumer side in terms of folks who would love to pursue a career in nursing. Healthcare has obviously been one of the more reliable and resilient bright spots in the labor market story in the U.S. for the last five years, and we expect that to continue. So from where we sit, we sit between what we think are two very attractive secular and durable trends.
Consumers who aspire to these programs and the quality of life and social and economic mobility that they bring, and employers who for a variety of reasons will need increasing numbers of well-trained, day-one-ready clinicians to serve their patients.
Okay. Makes a ton of sense. Maybe to step back and think a little more structurally, I think, and we'll touch on AI a little bit in this little section here, but some people are looking at education broadly as a place that could get disrupted. Can you just, in a general sense, talk about barriers to entry in healthcare education? There's obviously demand around it and interest in people looking to extend in the area. But if you think about barriers to entry, how do you size that up or how would you describe that for people?
Yeah. I think in clinical education, there's sort of three things I would highlight. The first is all of these folks have to be trained at the bedside. There's a clinical hands-on somatic training component that AI cannot replace. The other thing is that they all have to be licensed, and so they have to, whether it's the NCLEX in nursing or Step 1 and Step 2 USMLE in medicine or NAVLE in veterinary medicine, these folks have to be licensed, and the licensing requirements are not going to go away. Then, the third thing is that the requirements often, this is particularly true in nursing, vary widely from state to state. It's an industry and a profession that's governed at the state level, not at the federal level.
I think that the attributes that make up clinical education are not likely to be disintermediated or otherwise disrupted by AI. In fact, I think for a variety of reasons we can get into, AI actually promises some positive impacts on both the profession and the quality of life for clinicians and our ability to train them at scale.
Okay. Maybe going a little deeper on that, because I think, and we've seen it together as we've talked to some investors over the past year or so, there's this question about AI as threat in education, and maybe there's a distinction to be made across business models. I think to your licensing point, that makes sense. Just diving a little deeper on that, how do you see, let's call it the defensive side of positioning the portfolio given things that AI could change in education?
When we think about AI, we think about it three ways. First, the question that I think every business has to ask is whether AI is a complement or a substitute for any portion of your value proposition. We look at our business, we don't see it as a substitution for anything we do. We see it as a potential complement for lots of what we do. The second thing we look at is we look at it across our customer sets. We have students or consumers on one end, and we have employers on the other end. With respect to students, we actually believe that AI down the road has the promise of allowing us to personalize student journeys in ways that make more students more successful.
The ability to really supercharge adaptive learning models, self-paced programs, to tailor instruction to the needs of a specific student, to deliver that instruction in the languages they grew up speaking at home. These are all ways that I think allow us to really elevate the student experience in a way that allows us to train even more students more cost-effectively. On the employer side, we've partnered with Google Cloud, Hippocratic AI, GE HealthCare, to try to understand the kinds of tools they expect to deploy on the delivery floor. And we've helped them to develop curricula to train their clinicians to use those tools, because what we understand from them is that the biggest barrier to realizing a return on those tools is employee adoption. That's how we think about it across the spectrum. As a company, we think about cost efficiencies and productivities.
We think those will emerge in widely accepted and potentially commoditized ways, and we'll jump on those innovations like every other smart company will.
Okay. That makes sense. I know there's a white paper from Anthropic that's been getting passed around investing circles in the last week or so. Notably, nurses are one of the sort of, I guess what I'll say is entrenched places where you may see adaptation of some of the tasks that they're doing but not full stop replacement. That obviously makes sense, I think, to everyone here in the room. When you look at that adaptation, and it seems like you guys are starting to layer in AI fluency into other things, how do you think about what could change in the curriculum or sort of the day-to-day work of the nurses that you're graduating over time?
If you read any of the quality of life surveys, the burnout dynamic, particularly among nurses, but also other clinicians, is driven primarily by many of the administrative tasks that they have to do, whether it is coding, whether it is other record keeping. What we do know is that AI has the promise of alleviating some of that administrative burden, which hands time back to clinicians to really do the work that sits at the very top of their license, which is much more rewarding and satisfying to them. We think that is a positive attribute. But we do not think that any of these innovations or any of these developments are likely to result in a state of play where the need for nurses declines or the need for allied health professionals decline.
I think it will make them more effective, more productive, hopefully elevate job satisfaction, but not replace any component of the high-value work that they do.
Okay. And maybe a few deeper topics within the business. The expansion of, not campuses, but of programs inside of Walden University is something you have talked about. Can you maybe just go through what is happening there? I know there is a regulatory piece to sort of unlocking the ability to do that, but what that might mean for Walden University as you look at the next couple of years.
Yeah, Walden University, a fully online comprehensive university that takes to market nearly 100 different programs. Third largest nursing school in the country embedded inside of Walden University, and probably the largest family of behavioral health programs in the country. We purchased Walden University, and its ordinary course in education acquisitions for there to be a pause on new program development until such time as the Department of Education can review academic outcomes. Once they are satisfied with those, they will authorize an institution to launch new programs. Walden University had been out of the new program business for a couple of years, and we have just now jumped back into rolling out new programs, and we have had a ton of real success with that.
Those programs are incremental to the overall enrollment number at Walden University, but over time, go a long way towards ensuring we're able to continue the growth momentum from an enrollment perspective that we've enjoyed there.
Okay. A little bit on the regulatory there in general with that comment. I guess if I think about the regulatory backdrop we're in right now, there's obviously been some changes under the new administration, some legislative changes that have pulled through. As you size up the broader regulatory framework for education, how do you feel? Is there a difference between where healthcare or post-secondary education sits versus the broader extension of what regulatory impacts could oversee for education?
Sure. So changes to lending programs and other sort of OPE education-focused developments notwithstanding, when I zoom out, this is the most attractive regulatory backdrop our industry has seen in probably 20 years. There are two reasons for that. First, this administration regulates education without regard to tax status or capital structure. So the rules that they've promulgated apply equally to not-for-profit, for-profit, private, and public universities, and that levels the playing field in ways that we find very attractive. The other thing is that this administration has been very consistent in their view that they will evaluate the efficacy of academic programs and institutions on the basis of the return on investment received by the students. So they're very focused on outcomes. They're very focused on return on investment, and they're very focused on programs that lead to satisfying and rewarding employment opportunities.
That plays to the particular strengths of our portfolio. Our programs are all career-focused. They train folks for jobs that come with meaningful earnings premiums over what they might have otherwise received. It prepares people to participate in growing and attractive industries. So it's actually a very favorable environment for institutions like ours. There are things we have to navigate, like modifications to the loan programs, but we think those are manageable, and thus far, we've not seen any slack in demand for our programs or any struggles in our students' ability to finance their academic journeys.
Okay. No disruption there. If I think about in the context of a couple of those changes, you guys obviously run a pretty buttoned-up organization. You have things like size, sophistication, a capital base that can help you manage that operational challenge of a change in the regulatory backdrop or the lending backdrop. Is there an opportunity to win share? Or maybe if you could talk a little bit about just competitive dynamics as it relates to other institutions that may not have all those things I just listed in the context of that change?
Yeah. I think we benefit from our scale. We benefit from our regulatory standing. We benefit from the fact that, particularly in nursing, the barriers to entry are pretty high, particularly given the state-by-state nature of nursing. On the lending modifications, again, we believe we have the ability and the wherewithal to educate consumers on all of the various ways they can finance their student journeys. We have the ability to be creative in the solutions we bring to bear for them, including things like our partnership with Sallie Mae. We think we have the kind of academic outcomes in the form of NCLEX pass rates and Step 1 and Step 2 in USMLE pass rates and residency match rates that give consumers confidence that that investment is one where they are going to get a high rate of return. We are not standing still.
We are committed to extending the platform, growing our programs, Chamberlain campus expansion, growing in medical education, expanding our footprint in behavioral health, and better integrating our programs with employers, which we think over time will become an important way that we grow our business.
Awesome. Okay, and maybe growing the business, another. Keep teeing me off with the segues. It is great. If I think about campus expansion is one piece that puts some of the capital and the excess free cash flow to use, but there is going to be plenty left after that. Can you just talk a little bit about where that investment might go? You have used buybacks, you have used M&A in the past, how you think about prioritizing other ways to grow the business outside of some of the initiatives you have laid out.
Well, one of the more important hypotheses going into Growth with Purpose three years ago is that we believed we could structure our business in a way that we could create real operating leverage in the business, and we've been able to do that. Last year, we generated just under $400 million of free cash flow. We've got enormous flexibility. Bob, who's here with me in the back of the room, and team have done a really nice job on the balance sheet. What that means is we can pursue some of these investments in campus expansion, new programs, while still repurchasing shares where it makes sense to do so, and finding other ways, efficient ways to return excess capital to the owners. We've got a tremendous amount of flexibility across our capital allocation priorities, which we think is an enviable position to be in.
Makes sense. A little under three minutes on the clock. Maybe just to close, something that you think about Covista that maybe investors are missing or something that people in general don't appreciate that you think they could come to realize in the next one to two years?
Yeah, I don't think people fully appreciate how much runway we have ahead of us. Even with all the growth we've enjoyed over the last three years, there's a tremendous amount of market opportunity for us to address geographically from a program mix perspective, from an employer partnership perspective, from a technology perspective, and we've got, again, the financial strength as a business to be able to thoughtfully explore all of those. I think the second thing that isn't probably as well understood as it could be is the competitive moat. Whether that's the strength of our brands, whether that's the regulatory stature that we enjoy as one of the only nationally scaled platforms in healthcare education. This is a very difficult model to replicate. Ours was years in the making. It's not standing still.
While we keep an eye on our competitors, there's quite a bit of a gap for them to close, and we are intent to ensure that that gap gets larger. Then I think maybe the third thing that isn't fully understood is the durable nature of the need among employers for clinical workforce, the demographic trends that are going to make that need even more acute, and the limitations of technology in addressing that. Which means the demand trends on the employer side are just durable and growing in a super attractive way, and there's probably no family of institutions on the academic side better positioned to address that than ours.
Makes a ton of sense. Steve, thanks so much for joining.
Thank you.
A pleasure to have you here, and thanks everyone in the room.