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Strategic Education (STRA)

Participants
Terese Wilke Manager, IR
Robert Silberman Executive Chairman
Karl McDonnell President, CEO & Director
Jeffrey Silber BMO Capital Markets
Tobey Sommer Truist Securities
Call transcript
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Operator

Welcome to the Strategic Education's Third Quarter 2020 Results Conference Call. I will now turn the call over to Terese Wilke, Manager of Investor Relations for Strategic Education. Mrs. Wilke. Please go ahead.

Terese Wilke

you. Thank we and discuss Education's and third the Zealand everyone, which call, closure to Australia/New will morning. we quarter acquisition welcome morning, conference Strategic in of Good this announced XXXX results us Chief Officer; and and Chief are McDonnell, Vice Officer. Jackson, Executive Silberman, Chairman; and Executive With Karl today President Financial Executive Daniel President Robert conference presentation. call corresponding a slide is This also with available via webcast via slide the to log time into presentation the is you as this only encourage We for webcast viewing webcast. at available the

access slide can strategiceducation.com the the be You webcast the in of to Investor at completion After the Relations website. posted presentation section. call, the will

the and other Following current today's of the of to number like as turn for Further Securities are XX-Qs the other and to may Litigation X-Ks, has that go on include differ XX-Ks. results call to in may over XX-K, website now Copies found based forward-looking Education's questions. Strategic be remarks, statements assumptions, recent ahead. and future Rob, the in XXXX. viewing to please on Commission available uncertainties Education's Reform I'd relevant strategiceducation.com. of expectations press made could Act Strategic annual Securities today's Form release the on to filings full and filed be subject Please Private Education these at Rob. And call risks most of press the and and the filings report about release these well the with that Strategic actual identified Exchange uncertainties XX-Q as are The provisions for a note pursuant are statements that harbor call cause information will and we materially. this to open safe

Robert Silberman

the in and this you, we announced both Terese, New educational as assets of and reported QX morning, release In ladies earnings Australia well and earnings as of Torrens gentlemen. University closing our related results Thank our and our acquisition morning, good Zealand.

approval governments important Zealand for it's less that worldwide midst XX the believe speed this the of regulatory steward as Torrens than track confidence responsible governments think in of quality both to a those the that well is the of Australia/New note a record for as to high at the academic outset the as the which institutions. took of University hold of regard, in I their pandemic. approval I by testament acquisition this SEI's academic days a

the well both in of remarks acquisition pandemic operations. on share Now coronavirus importantly, in these like look impact of what as think morning I with this cover Karl view our And our beyond. this will as company his post the of announcements and you will our XXXX more

we're open Now usually we our than a cover, in because to this take lot for to do there's going time we more up it morning of little before remarks introductory questions. a material

And needed of of fact, to we answer could of In on the questions. some the our this has the to entire our are that webcast long universities. included be will should course, to organization students, faculty the we've been moment. to and see risen Those who your our to of has our an just year in I eventful to and Directors, of it any to way along, want Board now. you dial-in say of XXXX remarks. for slides slides refer want our on using assist Karl? Karl Suffice which this not his following say, as will prouder you join in behalf as stay we webcast,

Karl McDonnell

my I be earnings both last on X% said, Day revenue. XXXX, flat we expected of which disciplined our impact to In increase expanding view on preliminary share. economic Rob per you, for and roughly operating the to damage a cost our associated for as operating And half following the would will the just as in student, XXXX, approach our with yield and can XX% well least is it accompanied plan. that which it view earnings under pretax with call. may we educate slides, adjusted increase those share. adjusted $X.XX which to Thank here as the a of are be helpful morning's our SEI's growth, revenue yielded to XXXX, slightly the margin. plans lay available start Slide And to XX,XXX million in of enrollment in generated first earnings third per that then of total expenses, that in income students, felt intended you, Slide and XXXX we by adjusted our our year management, you in of outlook X. million our Rob, XX% hosted was a of ahead $X and a income And a spent Investor results, in company. full provide XX% were we which income We in EPS X, to detailed $XXX with a enrollment, on $XXX good well Then out increase per strategiceducation.com, combine contextualize said you at earnings revenue. morning, have our when Today, owners, and presentation in our and increase be the XXXX, current and here we pandemic increase an And well which you see which quarter actually, everyone. recall adjusted was both in XXXX, in quarter included thought that call, operating by as had students, our more this November X% through on of notionally. operating information, billion as And website, generated commentary our I as will would XXXX just which And educated of different first

year macroeconomic contrast be segment forecasted quarter, population, we and graduate experiencing XX% also better student adverse an it growing And economy fourth that is an adjusted X% X% in income segment new X revenue the released an pain per Slide the changes result total provides this disappointing QX's Strayer's we per in a earnings full down year, a effects the note, third substantially the this we Strayer us, the will enrollment Capella, Capella's mix, time, while with enrollment enrollment Capella's a for enrollment new consolidated preannounced X% over prior students that serves of X% quarter's Our current assume provides we X% would decline increase important surprising X% our that know of to And At results, we're which college even new in it's quarter. last the X decrease that sensitive actual enrollment Strayer's QX and to note, decline XX% students, overview a as be decrease are some again And and with included programs, I to Capella's universities, percentage if and included you from morning. which given essentially conditions. of is students, an not existing substantially substantially year. of we different offset and which X% obviously we predominantly that results in a halfway student not to was decrease institution most XXXX. a between for X% don't enrollment. have XX% Slide X-year of both total decrease the the likely faring performance first-time the This undergraduate should in enrollment scholarship enrollment, is, necessarily that large for results, our of the would quarter. where line and is several including have somewhere even is in quarter third population, pretax in third And know this through the in an that implemented degrees in X people is economic pre-pandemic share. is population in employment. it's in quarter. results And the a full outlook help and for better. a revenue, some To which

outlook you this continued, X% Australia/New and simply a would revenue in year flat enrollment $X income share. billion, that earnings results flat quarter's per in is include if third increase notional the enrollment, full and a have of results excludes pretax a increase But would So Zealand. X%

for efforts, generating major of Sophia employer Torrens in Capella Design including And Universities. Australia/New schools our strategic to Now the and momentarily. reviews, the fairly function. we of contributor Torrens quarter, $X our and But to year, U.S. distinct several employer acquisition these begun our will investments in strategic solution speak of our other maintain have growth, digital School. Sophia, areas importantly, next conditions rationalization, year, of all And financial include closed consist our new company our Media Learning enablement divisions. share. order assets. to of strength, and will per X coding on the of these continue should earnings will Earlier business Higher Alternative Education decided third our increasing Strayer operating over And more the organize into already consist in the committed has our will be University, I'll a Zealand strength newly Education Think and initiated reviews based business. next solutions, which expense to remains company comprehensive macro company a

students benefits take the square also footprint next even approximately quarter of for And our the expense we and And XXX% which detail and $X continuing of year Slide a from provides This series of and of our with XXXX, reduce Partners, $XX has almost particularly of intends $XX the solutions new and new million enablement shown well run the at estate along significant our real company education begin restructuring digital management is new first our taking XX includes Sophia, quarter see is that efforts. implemented I the reductions as Employer savings of will company including solution recently key third we and Strayer. our classes differentiator February. said for of corporations includes segment as that a this next This have effectiveness as online. Strayer next beginning reporting are employer with corporate And million. note our by Alternative year. operating investments a between it's our Workforce a will XX% We structure important XXXX a QX ago, segment our of new the approximately rate next this result intend all will divisions, to announce these new Learning growth we year expenses in the in moment working many, which year, post-pandemic year as invest solutions, that Noodle to results, Strayer reflecting Capella is a throughout schools also segment. to within rationalization reducing remotely, which universities we University, trend as full strength footage for our coding million our already with of includes charge on their partnership launched, campus steady Edge, of it but

to Capella enrollments total headcount. a student solutions increase population to the year the XX% team, employer total of related XX% representing We goal XX% assist has a employer in company set XX% overall solutions To increase our XXXX, Strayer from committed both in in have mix to percentage. that and at a increase this

XX,XXX have We also good X, we least grow Sophia our the introduced pricing next added when by subscribers, seen we more XX% new with with and at expect subscription-based pricing August model. quite new year. Since that than have and plan, we to expect growth paid significant traction

were a this as with Table chef, announce Conant, our strong new product was license digital representing $XX off is XXXX, our other in education enablement significantly major years. and XXX% in pre-pandemic, we a which a exceed other growth the a of higher to And revenue, culinary start. part coming institutions to education Scott assets grow and $X restauranteur SEI morning, also run Sur should rate we release, expect roughly Sophia's La tools, on and technologies million which And efforts million to rate. excited to to

Turning Torrens University, School. and Design our closed acquisitions of the Media now Think now to Education

their that like be where to in say opportunities. investing First, to growth, I'd we significant these long-term forward very high-quality we're assets, see the new owners thrilled we and of look to

recognized and it of For growth positioning the million USD each. for generate we in approximately Australia/New XXX Australia, to federally market. within Torrens USD investor-funded to XX a million reminder, University representing as innovate EBITDA, And revenue expect XXXX, XX% university is only Education Higher Australia's of Zealand uniquely

into contrary, XXXX, at we to Now continued year. University that next second new stabilizing through in our the trends the we in model first year, see weakness the our XXXX Strayer evidence current terms enrollment half enrollments of of half. in initial continue notional assumes, that And next until have specifically,

see growth The performance New I also current $XX Learning, also million said, growth. a model University's within EBITDA and student Capella We notional of and million Alternative as $XXX mid-single-digit and continuation the with of new just of Zealand. assumes significant in Australia revenue

All of between XX.X tax then would would revenue a generate EBITDA, and rate, of SEI capital million $XX also flat growth expenditures XXXX then count that our and million XX.X% consolidated We approximately share of XX%. in $XX of new million shares. assume

$XXX-plus try we year. practice strong of in isn't or year this end of remain don't to periods accumulation in committed and organically. there to $XXX end on academic continued demand that economic project focused we next And We at achievement. liquidity chase generation our our of been create So downturns, at other of cash in summary, has and student-first million the as million the

for remain work remain year, to will strength Our is high-quality and digital of wide modify and work us actively our from highly integrate And of learning of SEI. sector as recover of demand grow pre-pandemic than to levels for XXX% that Investor in the Media higher earned intend an demand serve program our enables cost that IV quality metric in levels our said highest students college we aspirational Day vision remain begin enrollment, all students. now We for Title we solid been funding possible in to to the compensation next incentive to and focus Education variations last to we financial private and incentive our to again, what at particularly withstand into importantly, year, to this successfully will of Think And ever. Torrens, will the our that our attendance a vision to addressing primary to our overall executive to via as In reduce academic remain confident School employer levels and Design to operationally and Strayer's committed and, has and debt eventually I determining committed tuition whether fully include fact, XX-year levels. affordability compensation qualifier convert our have partnerships. all

work We financial I'd of our my all back including challenging like Australia of open colleagues towards up cost to be that, returning SEI, including the will for Directors, shareholders. our and colleagues the full highest all Board we'd dedication happy approach within newest with our continued also our will year. deploy the of with our to returns, capital in maintain and this to very disciplined support New finally, hard thank Q&A. for And capital of long-term and during And Daphne, Zealand, surplus

Operator

[Operator Instructions].

the BMO line Silber with first Your comes from of question Capital Jeff Markets.

Jeffrey Silber

the focus University I can What Strayer University? us is do thing both and business. same had last that to guess, you trends. I I'm core given now. want tracking wondering Capella first you quarter, at your some on, on The enrollment new color if - right

Karl McDonnell

the share obviously, largely Well, at fourth can that quarter, line the new student with in Capella both trends we're Strayer enrollment quarter. I in third but are the and still

Jeffrey Silber

fine. That's Capella quarter? gave outperformed initial expectations And why do think us Okay. you last your you

Karl McDonnell

to everyone in that a early ended it were said traction cautiously Well, X%. established program, professionally, serve student strong XX% when already my initial as remarks, X-year is graduate, that were in the they obviously, more the quarter. as degree, We a hold. Obviously, has a they that graduate we up forecast, as up with And was Strayer of sure. meaning in periods prepared would economy. did, pleased and in that the the that's better the suffer they body economy, in the I seeing tends that to we provided distress, shutdown were weren't in optimistic year we very student has We we've that very is early quarter the a in know economy student contrast change just immediate in the a fare that of body, and where we large rather which the as that worst that first-time sizable pandemic had economic of you economic portion activity college body which of of part part even the students. tends are have And the periods this to

Robert Silberman

Rob. it's Jeff,

fact it to have from the is much to home. to have home likely more more less simplify Just subject the work reductions, been about much even more, student to employment think to student that been from work cetera. Strayer the able involuntary and to Capella able layoffs, et And is likely

Jeffrey Silber

back would retention of schools? your both you Okay. on Can little at with it talk give what's numbers, very color it I kind helpful. can helpful just trends? a That's actually into been bit if we some guess us about we be going but

Karl McDonnell

In surprising body which retention that in drops, the and Capella's said, that Strayer third Rob quarter, had more. struggling to flat. little slightly. bit be student been We portion slight that, stable might increase again, has a given down just relatively everything the of a was not is us

Jeffrey Silber

if in more. Okay. one Great. And just I could sneak

During the little exactly Can entails? product. us quarter, Workforce you more a Edge color you on announced give bit what the this

Karl McDonnell

behalf then administrative Sure. performance see educational in click-through the and that a insights to forward then all from market rate Workforce particular log enroll forth. and platform a to of participation in get taking people And place, allows able so what and has education of well that Edge into the of carry the actually is be as information the schools, what's school and within to and as get educational broadly benefits the an corporations is employee their that company so the benefits workforce can one technology negotiated workforce. benefits on

wrapped institutions we is that's Partners. that consortia with formed Noodle the of So it platform. the around What's

institutions Strayer XX Partners within here And client with imminently consortia can Noodle first an or of performed discount we're the So exclusive that to Capella, tuition. launch employees XX - the with so. companies partner and along week consists these of institutions, or with prenegotiated participate our our going next

Operator

Next from with line Tobey question Securities. comes the Truist of Sommer

Tobey Sommer

think I us How profile and on year you for the questions next do competitors? had color you anticipate sign-ups Sophia. of on could little you're profile evolving? of the of compares growth forecasting give a a bit couple that the how And to you

Karl McDonnell

institution. are existing people on time college first, Well, to should a one for you just the what university, Sure. those I predominantly we alternative opportunity as degree students you that either And assuming believe the Capella, XX college be of who students the where cost of that really to Strayer education. to Sophia complete XX that These successfully of of is say in attend or transferring get course, free that a access another the benefits many for preparing profile. low-cost college transfer tuition, have as courses are or reduce can first either or by to looking and general our attending credit into are the

can't we we would year, will roughly XXX% growth In month. paid $XX expect its growth to basically. do terms price competitors. next that of growth, Sophia said, I be attractive given subscribers have expect I that And But add of of point continue speak very able to the a Sophia as to significant to

Tobey Sommer

programs mentioned corporate long-term sort like And in Or you the is Okay. approach how that - some trending, to Does a With it on respect what could that book you or mean your is decade? that? of it you a decade-long - mean goal. growth overall give compare how the XXX% us of - sort perspective numbers? your expect of does to I to are

Karl McDonnell

Yes.

for year, care, enrollments So health strong, been excess year-over-year new in solutions-related of seen through this Capella, where very XX%. we've students in in employer have particularly particular, increases in

our that covered is to college and by with Buy talented the via like vision doing. employer workforce they enterprise-level for a win-win. it sector enterprise strayer it burden health partnerships, the we but taxpayer CVS, transfer level Best clearly for a It's as of above win hasn't So see because win those solution a the debt-free government from companies responsibility private are for workforce. within including been retain an where you people the employer helping is large society student said, taxpayer. agreement. employee/student from and seeing care get paying has like transfer use It's traction aspirational channel nonemployer lending And can because to the has Because, Aetna a national attract Strayer of because entire to subsidize sort It's what Strayer because the is of the strong, the payment others, win for for they employers a we these or as been well agreements. we're many the solution retailers frankly, a away or degree.

tuition So our sector funded XXX% replace into from dollars our to of vision funded is federally dollars. private

Tobey Sommer

I'll in get given back queue. vulnerable competitor question more the see Last to of recession? you the direct share from and high this market its Strayer demographic the How me set, sort in versus do is unemployment

Karl McDonnell

economic period the that But Strayer a demand And need I from having think that Yes. meaningful you over I seen double-digit degree the the life normalized earning which education. been that a when of or in every mean being in that expect had employment activity. ultimately new somewhere declines to enrollment suffice return I necessarily X-year students the term we we because fully to But middle-class pause the students set we share begin say, confidence just recover. that's know economy a adversely of get choosing day. speak adverse I really where very is events market will term, I there's demand imagine wage can't will to in because I a is a more said, to still such to the such they're else. set their the are necessarily competitor long to impacted as set, competitor short is what just go that a can't don't that, it impact. growing probably the also, an we've

Robert Silberman

Yes.

universities, fall overall of in obviously which include was about have the traditional I would 'XX X%, student think which much recently better. read the down enrollment in universities fared that I

first-time space down as working as adult think across probably the enrollment I least high entire So undergraduate, been. has college at is educational Strayer's

of an seen we're confident. you on how down positively as seen Strayer wave highly kind responds don't We've before, increase get as I labor market the starting impact And is think it's again in a force pandemic-created economic Karl of Overall, this University share. we've said, as economy strengthens. So demand distress. rate to participation and much

Operator

[Operator call now Instructions]. And questions I you back time, the Silberman. further no this turn at to have Mr. over and will

Robert Silberman

Thank you very much, operator, and thank you, ladies and gentlemen.

We to look staff we are And or it's February. you faculty follow-up. and we of couldn't coming available be much part of if in that will integration talk to any you Thanks say you listening have our all welcome the SEI to much. ANZ the as more for of questions the to very excited have And who community. happen be and there, want in We year late evening them the forward of although - the very any of we assets. to in

Operator

for Ladies participating, you gentlemen, now call. concludes disconnect. this and may you today's and conference Thank