Strategic Education ((STRA)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Strategic Education’s recent earnings call painted a balanced picture of the company’s performance, highlighting significant growth in the Education Technology Services (ETS) segment and strategic corporate partnerships. However, challenges persist in the U.S. Higher Education sector, particularly with unaffiliated enrollment, and regulatory issues in Australia and New Zealand. The management demonstrated effective cost control and strategic adjustments, though some areas continue to face hurdles.
Revenue Growth and Expense Management
Strategic Education, Inc. (SEI) reported a 4% revenue growth on a constant currency basis from the previous year. The company maintained disciplined expense management, limiting operating expense growth to 2%, which resulted in a 12% increase in operating income, reaching $49 million.
Strong ETS Segment Performance
The ETS segment was a standout performer, with both revenue and operating income increasing by 50% from the prior year. This growth significantly contributed to SEI’s earnings, with ETS’s share of operating income rising from 23% to 31%.
Sophia Learning and Workforce Edge Growth
Sophia Learning experienced a 40% increase in subscribers and revenue, while Workforce Edge expanded its corporate partnerships to 80, collectively employing over 3.8 million employees.
U.S. Higher Education Operating Income Increase
Despite a 1% decrease in total enrollment, U.S. Higher Education saw a 5% increase in operating income. This was attributed to reduced operating expenses and higher revenue per student.
Share Repurchase Program
During the quarter, SEI repurchased approximately 325,000 shares for $28 million, with $169 million remaining on the share repurchase authorization.
Decline in U.S. Higher Education Enrollment
The U.S. Higher Education sector faced a 1% decline in total enrollment, with a significant drop in unaffiliated enrollment, particularly at Strayer University.
Challenges in Australia and New Zealand Enrollment
Enrollment in Australia and New Zealand decreased by 3% due to regulatory restrictions on international students, resulting in a decrease in operating income from $14 million to $13 million.
Regulatory Challenges in Australia
International enrollment in Australia was impacted by a 30% reduction due to government caps and restrictions on student transfers. However, a strategic pivot to the domestic market shows potential for growth.
Forward-Looking Guidance
Looking ahead, Strategic Education anticipates continued strong financial performance, with a focus on maintaining revenue growth and improving operating margins. The ETS segment is expected to remain a key contributor, while efforts to boost domestic enrollment in Australia and New Zealand are underway. The company also plans to continue its share repurchase program, with $169 million remaining authorized for future repurchases.
In conclusion, Strategic Education’s earnings call highlighted a mix of growth and challenges. The company demonstrated strong performance in the ETS segment and strategic corporate partnerships, while navigating hurdles in U.S. Higher Education and regulatory challenges in Australia and New Zealand. The management’s effective cost control and strategic pivots are expected to support future growth.