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Strategic Education (STRA)

Participants
Terese Wilke Director of Investor Relations
Karl McDonnell President & Chief Executive Officer
Robert Silberman Executive Chairman
Tobey Sommer Truist Securities
Gary Bisbee Bank of America Securities
Greg Pendy Sidoti
Jeff Silber BMO Capital Markets
Call transcript
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Operator

Welcome to Strategic Education's Second Quarter 2021 Results Conference Call. I will now turn the call over to Terese Wilke, Director of Investor Relations for Strategic Education. Mrs. Wilke please go ahead.

Terese Wilke

Thank you. welcome discuss Education's second and which call everyone will we quarter morning to conference Strategic in Good XXXX results. are: Executive Jackson, today President Chief us Robert Chairman; Executive With Karl Financial and Officer. Chief Vice Officer; Executive Daniel and President and Silberman, McDonnell,

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

Karl McDonnell

you, everyone. Thank morning Terese, and good

University, just ahead call basically revenue the Zealand which begin million this operating results this and were said. generated The the our Torrens the a expect is released Our open highlights middle SEI's Terese and by $XX morning cover we we complete to right in integration to line be first which of borders that original And of then second like questions to of Australia/New few foreign third would beginning Design with the complete year of end students mostly School and time I'd was quarter. this for and segment quarter. last essentially year, the quarter results to Australian plan the of that income financial Media expectations. with travel, the the August, $XX of component of onto the I'd integration we morning million in our including second our our Education And the that by year. the up assumed your international well At infrastructure from reopen like of Think this of as

to we impact least their a appears However, XXXX it year's essentially which education plan still at Sophia our our could this, Employer Edge revenue. Solutions EBITDA again of million. remain team. we of will through Workforce be a believe few now segment updates expect I'd platform moderately provide employers have Learning ANZ's And $XX at that learning includes alternative closed spring borders management benefits which negative will next on our this is again which for on like Notwithstanding and

to prior from products learnings' $X.X result to was income support their operating services margin million. accelerated million $XX second growth. operating quarter, direct and XX% revenue continued to the the new alternative in their Their the increased continued XX% For in investments and reduction increased of year the

continues to each to have our which up This well $X exceptionally strong total revenue employ year. employees continues good by than and year is more Edge is Workforce this $XX Edge Edge Sophia subscription-based marketplace. the more the in of to and generating XX the corporate year. preceding Workforce goal of be month the Learning XX generate to perform the expect total Workforce pandemic. XXX% XXX,XXX than on than ago, And months the to than platform gain this more compares XXX,XXX traction full from for track now Based the since more five to million end agreements on Also XXX,XXX million roughly signed months is internal collectively launching employees. we've employees of already traction, which we on

to FlexPath segment. first talk I both useful is increased Capella XX now enrollment prior have our up beginning and thought has the universities have education in continuation our enrollments from year-to-date. prior XX% to total so enrollments Capella's now from the and and Higher it XX% Turning X% points be year. of basis its year. Total quarter which affiliated XXX an with US enrollments XX% grown Employer great total the increased a of basis about incredibly would Capella. year had has University Capella XXXX Year-to-date increased US-based specifically comprise strong second rate points. far of half at

lockdowns. enrollment Turning quarter to the university of Strayer enrollment to Strayer's or was to a Strayer's term continue we our enrollment where with And below returning now positive we had reversing following what to on their our was related declines than will University, focus more was results second than spring year and level line third summer that improve enrollment, a in COVID which better continue the academic sequentially and financial quarter second ultimately quarter inform expectations. expected. albeit at growth

indicative bottom of Australia, extended of financial or result as full the in the end we border earnings during could XXXX closures be results at SEI's a this, our call. outlook last the low provided As year as well

on reversing resume we working and quickly declines are enrollment can. as normal to as we focus Strayer's by safely to continuing practices operating However,

We no October already plans of all XX have Strayer's campuses than XX with campuses X. reopened to open later remaining

as additional also functions network has meetings in-person added of corporate partners. as which resources resumed team, and Solutions with coaching our advising Employer our have well to We Strayer's

predictor year. on and academic quarter, both And operating are with retention the And of million credit in us our and seen and a liquidity will managers assist positive who should of their $XXX like other periods several enrollment to confident my in earn committed securities of cash Both representing basis. a six help summer substantive was SEI half in as leading to indicators, for $XXX the the all declining and We would with generated has institutions, our prior enrolling and again education percentage to University for as along weathered growth. enrollment return from basis of which end aid questions. second of University growth. of period, thanks over the solid as also remain strongest of in And remains on campus investments. of before the supporting once added first in open operations for earn providing their others the ongoing our returning long-term XX% a increases first institution adults I positive a extend to rich serving return since we've that defined which nearly complete such SEI and positive Strayer a all within commitment have have year to the enrollment now additional quality opening back cash inquiries year-over-year the the of to resumption of to serving can year-over-year steps the working applications which months And my of course in history students. their We the new questions, and our strong with students. year. working the happy and the success, activities to we would million strong these very Across that on remain that finally, call Strayer graduates a we into educational for marketable substantial as And has enrollment. be call colleagues well continues a And XXX Dani, course of before our up highest increase of XXXX, we students to

Operator

from Instructions] of Truist comes Your Sommer Securities. question. Please Tobey the your [Operator from first question ask line

Tobey Sommer

expected what particularly, campuses so Thank is your enrollment impact marketing you. and I'm impact reopening future the physical curious on trends? of and far

Karl McDonnell

Well, early that we we enrollment we some substantially performing we rates, new that rates well enrollment years does as where suggest have suggest academic closed. in than And many a better both are campuses COVID, student remain being data and of down reopened on a result year that areas more of campuses the rates and have of that – they campuses we've achievement don't. it than higher as are versus data areas the have preliminary shut to after that as

will So said, a plans and for reopened we I as have total of performance and new that than enrollment well on the October as already retention both later improve remaining we've the we achievement. XX as that academic to expect XX no X. And our XX open

Tobey Sommer

reopened Have to – geographic localized back it every been open? maintained that had roll on any conditions? you have Or you've of based has one time you

Karl McDonnell

can. safely local state always to campus a Xst. that our close to we October to we're campuses of we And had to would not course, all And all open as issue. or by But reopened. not plan XX pivot has we open any with -- campuses continue working We've that been and an we've to-date Obviously, or as regulations. comply

Tobey Sommer

months Okay. your the something XX, to across Pivoting how a little conceptually informed expand schools FlexPath it's has plans And XX whether it? of FlexPath bit like are last what future the view? your experience specifically or

Karl McDonnell

cost. allow a essentially program complete the time in in is that their to FlexPath great half learners degree the to half Well, designed it's Capella at

FlexPath program. growth. driver said I launched major of As enrollment We've it's been recently doctoral Capella's first the a

but probably FlexPath support we to said ahead there's expanding believe that a very given just into happy it, has we're Strayer some into the future extend the lead-time growth. its of longer approvals issue before of looked We've areas as at continue lot that doctoral over involved to have that to to programs well So, we and are That's University. with as FlexPath. bachelor FlexPath regulatory bringing runway a

Tobey Sommer

the for it not of is applicable? there or Australia/New acquired newly maybe an to respect Zealand concept opportunity business, this is there With kind

Karl McDonnell

existing We some that revenue synergies Australia. US-based by curricula exporting other are into looking along at with

will But University FlexPath-like for one about Management Australia as online we there is do that Torrens in to which first nursing Welch Institute's think place program. an Jack MBA well. And of the by this opportunity in well. The end be is the year plan a program as to

Tobey Sommer

your for Terese medium Thank you for pricing could on Last I geographic your well? Could differences the get me. if Okay. question schools? you. perspective long-term and across And on the as touch outlook

Karl McDonnell

do lot revenue to strategy which FlexPath said as of because we ultimately and where well a to forth. student. think moderate increases But per overall notional we of cost mix corporate normally our there's of taking by that reduce might in Well, continue be so enrollments. for has a in and be slightly as enrollment student purely are an tuition there We would higher the opportunity degree degree increases which and just increases we know our things very be a per Those corporate drive strategy basis revenue a reduces flat notionally as higher and to on value in so. plan program pricing relatively to the that offset is some FlexPath lower

pricing we So, for flat. notionally to plan be

Tobey Sommer

Thank you very much.

Operator

of question comes Gary second from from Your Securities. BoA Bisbee the line

question. your ask may You

Gary Bisbee

morning. good Hey

Karl McDonnell

Gary, good Hey morning.

Gary Bisbee

of questions. A couple

in hard to So, what you you the thought be some thought does two of also us. later that more on students might it's likely what said you are this Is the really looking that this Strayer, in mean but indicators positive does are I it up make Thanks. could acknowledge earlier that turn Or period, in like telling leading just I previously What but from the XXXX. back below XXXX? those potentially you're statements of it guess, some define mean? year. fair? difficult new half it's really to positive look still you It's first after trending QX,

Karl McDonnell

Gary summer which And term, than way first we're Strayer's been it quarter Well, I remind to the this second is the enrollment steadily third was since of the actually you midst will the best year. in improving the quarter describe the has part of. better academic

have we and are So, a quarter we Strayer. final, so attending forth. some new year students drop those third enrollment But where first also saw numbers the declines at and the from the the student first because could not still quarter is term ago summer

get on indicators which expectation then leading a more had was the referenced enrollment, to indicators. just second And the a applications than we sheer and to probably. two even be might very the fact better notwithstanding is into now leading standpoint, that quarter. are from continues since the XX university months than new for enrollment that basis Those currently for are in important that higher time first it so better those the so was positive And close inquiries the thought year-over-year I it

we're that fourth by it and the be certainly plays We year. confident the Maybe. just see trajectory and between Could quarter? quarter? growth then, the end be hope the on we the soon. how so some point to to now we'll the at first Could And remain have wait return that Strayer of but relatively out enrollment to so

Gary Bisbee

Got it.

the That's even But little So of the year, probably moved through that…? lot as aside Is off you've gotten that part bottom. comp's the sequentially a year-to-year gotten you're easier. seeing. a have improvement things the better

Karl McDonnell

fair. Yes, that's

Gary Bisbee

and Okay. whatnot. schools That's students, not on challenged quarter helpful. and on hardship three you of impacting a things think still, which And day last that lot demographic, I with it. then economic open we called were with -- understand out the and your The fully is care

better. have intensity then ton to some the some first change me to Are you you all did more Just relative issues, it your any headcount the parse And any those operating that. from know a gotten a there. update the reference the strike apart data focus in three challenges open BLS getting ago? perspective don't still quarter campuses I the if two trying on doesn't Competitive that's more comments real

Karl McDonnell

it say has wouldn't that the was available to I'd And borne reopened. say level have the lever the there's campuses has biggest have performance I out. us campuses of our our see is No. in we That to that expectation. higher getting been change. That encouraging any reopened.

much management safely as We to resources normal just level can. as at noted we as quickly as to as level activity we facing well we as just can try the as have and added you resume as as some the both can student

new our dollars we on of focused awareness brand into focused part drive our what because what getting And on relied local shifting the is Strayer historically all campuses always just those team the so the is students. now that's prospective and in advertising campuses of open to then

we're So by normal can operations, target on we do the to and quicker to return we that think Xst. campus the better October

Gary Bisbee

then just if New And and one Zealand on could. Australia Great. I

change the wherever So border. but what changed enrolled I year border enrollment they was on And the to remotely do I guess The your heard it they commentary last flowed I students guess new were. that closed, understanding was were I sharply. allowed now? year-to-year guess, online would in my or this Or that explain a in of what's second is didn't something to international either do year? that the that there of want to students do the is on? just is concept weren't that the deceleration for allowed enrollment Or else going pace growth? from

Karl McDonnell

foreign seen hit areas what of country we've specifically from the students students enter India. is Torrens would Well, amount the very in including prospectively at fair hard came were that who enrolled to or with a enroll from that the Torrens inability COVID of were

Gary Bisbee

Okay.

Karl McDonnell

What as moderately online which impacting of well-positioned we've in impact their other enrollment. of also in none a are capability it's Australian it pretty a some And XX remain be period time kind international if that is And all that year of so reopens country to all programs what in Torrens of negative next issue. competitive we're indefinite likely other to the is position have students. unique that on we continue we point because Australia which of that teach that's before given a -- know to saying the that been is But we foreign suggesting is the borders who all on that the their one-time respect, could also universities is read for some and position. think in fully have that rely the travel at universities press, of is they part doing, Australian to the middle the closed

that attract could world from standpoint border best this in sustained we've can So students would continue we job closures offshore the where in do domestic have expect Australia, a we and we a year. to certainly done those online teaching students remote as last we that

Robert Silberman

it's Rob. Gary Hey,

think that obviously, on Australia, and online. borders inside when them the comment who is students of other outside about those -- the enrolled most were way is Torrens most stayed think had enrolled I the were Australia of that closed, were first were those to at that one Just it simplest international

what And that continue top the is from As really off stay Karl's to what's reflected seeing growth sizzle little think it borders international we're that's bit takes I think the of the close, of a I students. in comments.

Gary Bisbee

Right, normalize right. once this. But that would we through presumably get

Robert Silberman

Correct.

Gary Bisbee

Okay. And one last that. tactical one on

any and timing reasonable assumption year, school than or the not is other the So FX for there be reason adjusted quarter? $XX seasonality the that something that -- the revenue this like a next given that million would of

Karl McDonnell

so. think don't I Gary, Yes.

I think more seasonality there. there's

just should for you don't enrollment revenue. think we the know going forward what to part yes. course we is And so, don't the still of carry for third quarter I So most -- ANZ the be

Gary Bisbee

Because better worse? based I Is closed your on and three had year... same guidance QX that or the the was you previously seasonality had preliminary think and essentially this when some of I

Karl McDonnell

I'd similar. they're say

Robert Silberman

was are is. Yes terms QX similar he what and asking. seasonality. it in Gary QX that's of

Gary Bisbee

Yes.

there's Okay. I variability enrollment. some certainly understand with

That’s you. Okay. Thank I had. all

Robert Silberman

Yes, thanks Gary.

Operator

[Operator Greg Sidoti. the from Pendy Instructions] go of line ahead. comes third of question Your Please

Greg Pendy

Hey in might can any little the be that demand on guys. that of IT whether areas as think in for growth demand? I my like based on on seeing provide job the inquiries growth Thanks different you're impacting, applications maybe on something And versus topic pickups degrees for well, any effect? bit mix color taking business where in Strayer, appreciate job maybe a but you you question. and

Karl McDonnell

that job growth It's health health the and And been area at Capella has or health health the focus reflecting the demand programs highest business case. are including side care strong degree to in of RN-to-BSN the be predominantly Strayer side on Well field. always undergraduate. the the been primary care we continues Capella has is, strong very care-related -- always programs see growing care. The the

we for at of shift So doctoral mostly area undergraduate always an in then to now, to what be we been and seen a business program teams and from ways the haven't areas believe Counseling Strayer. care has are that obviously demand add might strong our programs, if growth. away programs for health strongest there's Capella our at really But masters looking other any programs. historically we expected job expand and there's degree where

Greg Pendy

you'd around you're Okay. what front? in in Great. maybe is seen compare of you mentioned downturn time at the maybe contrast seeing then can different and color And that Strayer. a this recovery? you -- What maybe terms on maybe Any 'XX

Karl McDonnell

Today, is Well, do we've a down disparate Strayer. much absorbing fully assets, we bigger suppressed impact we those prior in we're should such obviously fully seen prior periods. that we And induced more resume done activity. all of Zealand terms when different our from weren't was growth enrollment I for which of think this as other what we organization University. different a and periods enrollment several and a know enrollment an just return is, so of will decline was prior we than even very faced obviously activity entire network as able we it economic a downturns those to why had decline. I Strayer that's impact once And to related fully periods weather campuses was our in diverse it had thing our where it's to also economic our shut to we when Capella when today with to normal open at note and in Australia/New the normality level those able that of from to versus periods But operate we're Strayer We that our pandemic year had campuses. organization, return more one periods activities had time What is, expect declines. it's before, again of

fast-growing this alternative learning got we've division. Now

we of to I we're a returning believe year. equipped think next this what period even beginning and relatively be So better normality to enrollment short-lived -- weather declines will

Robert Silberman

about highly the costs. the running Yes, of a Greg is add have enterprise. to is a operationally thing the fixed other levered it It's tends thing I university would lot that,

the for without you're the curricula, lot when pay add pay you You you additional costs. addition in technology classrooms. of the for for the you professors, pay revenue -- And adding students, a

very you contribution you goes same operating enrollment quickly. in that And reverse margin tenure our student. incremental lose And enrollment rapidly. thing start high again you your there's the at And margin when had pretty it's per operating seen before the least here. students. declines as to So down expands we've grow twice in When margin

the some So margin where we again. this cycle that we'll to now some ones pretty will similar grow significant enrollment pressure particular margin and face starts we when think we get expansion face be other to

Greg Pendy

Very helpful. Thanks a lot.

Karl McDonnell

bet. You

Operator

from question Silber And your from BMO comes Jeff Capital Markets. line the of next

Jeff Silber

Thanks so much.

the of or issues enrollments side subsidies was just questions a ended out regarding wondering or – mentioned you in seeing one unemployment I'm the You extra had change of in seeing been University economic and at of earlier hardships. I either one has where the think applicants some Strayer states some it you early, meaningful from any the those some are parsing locations? bit

Karl McDonnell

all of as is seeing Jeff. good demand What first we said. are I Well, increased morning,

So our other time campus it's that in And months – begun overall why difficult network. have for demand the we out up to reopen than aggregate year-over-year. exactly parse is is demand to XX first

dollars activity. There is a – marketing dollars We advertising our market local are focusing healthier into markets. those economic

of by summer it's help improve to factors, is to return essentially. performance all those of expectation we my of entire hope is So the And growth. plan that ultimately which the reopen is to and guess will end a our Strayer's continue campuses and our why combination enrollment our network

Jeff Silber

of kind or can reason an either you Okay. there can for if your And shortfall? on for revenue then How Despite we the going are That's are that year? you get there over there switch guidance to EBITDA if blessed the enrollment helpful. is ANZ. still issues some

Karl McDonnell

one efficient revenue any expect is we be organization. to a there very Well, be And relatively if that's shortfall to modest.

cost costs. focused there'll the is And therefore we and team have of seasonality that just if expect be And So happens – fewer then instructional the the discipline. enrollment a to we of on ANZ the in calendar, first have of part very we revenue if year. bulk the academic fewer due management their students we their

So intake actually half are periods in back of the the smaller the year.

be to the there of opportunity below expecting have I and their less we still not through million. still But for there's see to is. them saying miss. on get sort see that So at some what enrollment calendar everything to that come to in to want we point caveat have major this based we're we by the EBITDA of US$XX

Jeff Silber

That’s Okay. helpful. Thanks much. really so

Karl McDonnell

Thank Sure. you, Jeff.

Operator

And please. your of ahead, line next Sommer the of from question Securities. Tobey Truist comes Go

Tobey Sommer

Just fairway expected regulatory us administration? could what a Biden wanted At changes on the this expected from changes of the you to ask the on you question may think emanating Thank you stage or be impact. if sort down refresh

Karl McDonnell

that our first that that always US-based take say of regulations. Yes. that Sure. making based negotiated of an we been announcing approach very high this be providing just very Well we view as to with universities we And quality we're universities we the make point long-term able department set reasonable of our a sure rulemaking. of any can. At early all me the confident comply the manage stages on in we've a would is that both we let when education decisions on always always and as base

share new be to regulatory So would delighted on we we extent rulemaking. And don't to be be We we might details to of what a any our asked cover. opinion might would a that ever in party And potentially ever the reforms hope have on participate said to some Strayer. what lot we look do constructive degree to we're regulatory I to like. in welcome that attention would opportunity Obviously, rule-making the so. the the profile But asked of process. would both we'll to and we Capella confident the as what's be pay happening to

Tobey Sommer

one? And Have be prior stage this some asked participate rulemaking expect to processes? to been would at you invited in during you

Karl McDonnell

should be could. in We expectation being have with invited. to we and participate no of rulemaking committee. have be several invited, SEI members We as we participated would as we But the do rulemaking certainly executives so actually sessions constructively obviously

Tobey Sommer

Thank you very much.

Operator

comes question Gary Go And from your next of please. from Securities. ahead Bisbee BoA line the

Gary Bisbee

over to to past get product, said up one know Workforce maybe at just And and in means XX the lot cost using platform which on you what workers X% Is The right. short-term? I drive what software update enroll really to understand time understand charging going of universities. initially lower with to at it for I your it the not the if hope mean does for about X% any a in what does you've potential long-term it you're Edge business your you're their and employees a follow-up. costs their XXX,XXX Just you. -- I and XXX,XXX acquisition short-term? Just what it? really your what other they whatnot. doing But those are Thank it mean? the companies in companies, What that thinking that than of how signed period? employees still or does

Karl McDonnell

you is on said right everything exactly Gary Well, point.

get can for the So, employees to as scale. Edge the to platform monetization Workforce first is on many get we strategy as just

companies to close that just if year an based the first those Capella. and comes use on all companies You're just Workforce build the by members do. between rates to platform or And expect have enroll employees averages platform and Edge Strayer into it I which of those that correct, we don't to allow we The X% think it to companies platform national don't institution of we're around on or mean cost. enormously in on end participation And somewhere track that Strayer educational on itself the employees scale long-term. it's either employees to would ultimately of at that much platform improve a the in of about enroll to no very be could decide unreasonable SEI This Capella. to million year monetization getting the when within very we successful. we get the employers would the to X% itself the was decide expect be be market to continuously benefits,

a platform channel would no the than you also be coming in that where it's to $X to to have see so the to invest itself of obviously say whatever we in. cost enrollments we be new And way XXXX for And that million. acquisition we year in would correct which scale the are us to-date other is really would barely start look --

So, going new and had be product for source major initial good we strategy and students a it's in great a go-to-market of it's us potentially very think XXXX beyond. a that's to

Robert Silberman

compared be space on going traditional other from revenue to that. take with Hey, product universities. providing thing Gary and as we're cost I to in also tuition entities zero zero other a this at are think one better other that

Gary Bisbee

all right. That’s helpful. Thank Okay, you.

Operator

there And back time. I'll further call the questions at no are hand Karl. this to

Karl McDonnell

Thank your and call to another today All everyone. you quarter. very appreciate you look with right. having forward next We time much

Operator

concludes today's Thank this participating. for conference And you call.

You disconnect. may now