Strategic Education Q2 Earnings & Revenues Beat Estimates

Strategic Education, Inc. STRA, or SEI, reported stellar results in second-quarter 2024. Its quarterly earnings and revenues topped the Zacks Consensus Estimate and increased year over year.

The quarterly results reflect solid growth across the company's three reportable segments, attributable to continued enrollment growth in the U.S. Higher Education ("USHE") segment, especially employer-affiliated enrollments, and total enrollment improvement in the Australia/New Zealand (ANZ) segment. Moreover, the Education Technology Services segment portrayed solid performance, mainly driven by the growth in Sophia Learning subscriptions.

However, shares of this education services holding company lost 5% on Jul 31 after its earnings release.

Inside the Headlines

SEI reported adjusted earnings per share of $1.33, which topped the Zacks Consensus Estimate of $1.20 by 10.8% and rose impressively from the year-ago quarter's 82 cents.

Total revenues of $312.3 million surpassed the consensus estimate of $304 million by 2.7% and increased 8.7% from the year-ago quarter's level. On a constant-currency basis, revenues increased 8.9% to $313.4 million in the quarter.

Segmental Details

USHE: This segment comprises Strayer and Capella Universities. The segment's revenues increased 6.9% year over year to $216.6 million, backed by solid enrollment.

Student enrollment increased 8.4% from the year-ago quarter's level to 87,077 students. FlexPath enrollment was 22% of USHE enrollment compared with 21% in the year-ago quarter.

During the quarter, the operating margin rose to 9.2% from 3.3% in the year-ago quarter.

Education Technology Services: This segment includes Employer Solutions, Workforce Edge and Sophia Learning. The segment's quarterly revenues were $24.5 million, up 25.6% year over year, backed by solid growth in Sophia Learning subscriptions and employer-affiliated enrollment.

Sophia Learning's average total subscribers increased 37% from the year-ago period's levels. Employer-affiliated enrollment was 29.3% of USHE enrollment compared with 27.1% in the year-ago period.

Its operating margin was 40.9% in the reported quarter, up by a whopping 930 basis points (bps) from a year ago.

ANZ: This segment includes Torrens University, Think Education and Media Design School. The segment's revenues were $71.1 million, up 8.6% year over year, driven by higher enrollment and revenue-per-student. On a constant-currency basis, revenues rose 10.3% to $72.2 million year over year.

Student enrollment within ANZ rose 6.4% to 19,113 students during the reported quarter compared with the year-ago quarter.

The operating margin was 19.8%, down from 21.8% in the same period of 2023. On a constant-currency basis, the operating income margin was 19.9%, down from 21.8% in the year-ago period.

Operating Highlights

Adjusted operating income was up 61.4% to $43.9 million from $27.2 million in the year-ago quarter. The adjusted operating margin of 14.1% expanded a whopping 460 bps from the year-ago quarter.

Adjusted EBITDA in the reported quarter was $63.3 million, up from $45.4 million in the year-ago quarter.

Financial Details

As of Jun 30, 2024, SEI had cash and cash equivalents of $230.1 million, up from $168.5 million in 2023-end. Long-term debt at the second quarter of 2024-end was $61.3 million, slightly down from $61.4 million in 2023-end.

Cash provided by operating activities was $101.9 million in the first six months of 2024, up from $40.7 million in the comparable year-ago period. In the first half of 2024, capital expenditures were $19.9 million compared with $17.8 million a year ago.

In the second quarter of 2024, consolidated bad debt expense was 4.3% of revenue, slightly down from 4.4% for the same period in 2023.

Zacks Rank & Recent Consumer Discretionary Releases

Strategic Education currently carries a Zacks Rank #3 (Hold).

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