Strategic Education ((STRA)) has held its Q1 earnings call. Read on for the main highlights of the call.
Strategic Education’s recent earnings call reflected a generally positive sentiment, highlighting financial growth and strategic advancements, particularly in corporate partnerships and education technology services. Despite facing challenges in international markets, especially in Australia and New Zealand, and a slowdown in U.S. higher education enrollment growth, the company’s strong performance in education technology services and strategic partnerships offers a promising outlook.
Revenue and Earnings Growth
Strategic Education Inc. (SEI) reported a 5% increase in revenue for the first quarter, with adjusted operating income rising by 16%. The operating margin improved to 13.6%, and adjusted earnings per share grew from $1.11 to $1.29 compared to the same period last year, showcasing the company’s robust financial health.
Education Technology Services Performance
The education technology services segment demonstrated remarkable growth, with revenue increasing by 45% and operating income up by 37%. This surge was driven by Sofia Learning subscriptions and new Workforce Edge employer partnerships, underscoring the segment’s pivotal role in the company’s overall success.
US Higher Education Enrollment
While total enrollment in U.S. higher education saw a slight increase, employer-affiliated enrollment rose by 7% from the previous year. Corporate partnership enrollment now makes up 31% of total U.S. higher education enrollment, marking a 200 basis point increase from the prior year, indicating a shift towards more employer-driven education models.
Notable Corporate Partnerships
Workforce Edge expanded its reach by adding two more corporate partners, bringing the total to 78, which collectively employ about 3.9 million employees. The partnership with Best Buy was notably expanded, allowing employees to earn degrees at no cost, highlighting SEI’s commitment to accessible education.
Capital Allocation Strategy
The company executed a share repurchase of approximately 390,000 shares for $32 million, with $197 million still authorized for future repurchases. This strategy reflects confidence in the company’s financial stability and commitment to returning value to shareholders.
Challenges in Australia and New Zealand
In Australia and New Zealand, total enrollment decreased by 1% due to regulatory changes impacting international students, resulting in an operating loss of $2.2 million for the first quarter. Despite these challenges, ANZ revenue increased by 6% on a constant currency basis.
Operating Margin Decline in ETS
Despite strong revenue growth, the education technology services segment experienced a decline in operating margin by 240 basis points to 40.3%, attributed to increased marketing and staffing investments, which are expected to drive future growth.
US Higher Education Enrollment Stability
The U.S. higher education segment saw only a 1% revenue growth, with enrollment growth remaining relatively flat, indicating a slowdown compared to previous trends. However, employer-affiliated enrollment continues to be a bright spot.
Forward-Looking Guidance
Looking ahead, Strategic Education anticipates continued growth, with a 5% revenue increase and a 16% rise in adjusted operating income for the first quarter of 2025. The company remains optimistic about its education technology services and corporate partnerships, despite challenges in international markets. With a solid capital allocation strategy and expanding partnerships, SEI is well-positioned for future success.
In summary, Strategic Education’s earnings call painted a picture of a company on a positive trajectory, driven by strong performances in education technology services and strategic partnerships. While challenges persist in international markets and U.S. enrollment growth slows, the company’s strategic initiatives and financial health provide a strong foundation for continued growth.