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Strategic Education (STRA)

Participants
Terese Wilke Director, Investor Relations
Robert Silberman Executive Chairman
Karl McDonnell President and Chief Executive Officer
Daniel Jackson Executive Vice President and Chief Financial Officer
Jeff Silber BMO Capital Markets
Tobey Sommer Truist Securities
Call transcript
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Operator

Welcome to Strategic Education’s First Quarter 2022 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 first 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,

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

Karl McDonnell

Thank Teresa you, good morning and everyone.

declining interact this nearly We’ve been the reported per to of majority enrollment Academic expected can this consistently reflecting made implemented Improving this progress and Strayer highest campuses in ahead the where current and be operating earnings reopened. vast has The revenue, current enable improving have that substantial of results, I enhancements systems years share, us both Strayer to them achievement has that been Our priority, performance year. in the our declines is company’s more performance University. we of income prospective year. we impact which this of and been throughout share remains to morning with in at respect first year-over-year morning, past effectively included Strayer’s and quarter dozens has the and of at Strayer’s point to students. X

for Ed were U.S. expense Our student various for amongst levels are expect increased the for add will Education seen total prior which higher teach employer-affiliated versus is year new and expense. largest Higher on U.S. now and our without And that full to in employer-affiliated the full demand improve Ed, prior well sorry, showing our effectively to quarters year. we year at substantial XXXX. run year. this enrollment investments, and growth growth Across significant X years students rate finally, within the including all U.S. increase accounts as better we’ve our We’ve enrollment XX% and Higher second student in retention. the digits into is its performing a which the generated as approximately productivity that reflecting to larger – mid-single Ed, in cohorts stabilization enough Total significant visibility much to and quarter student employer-affiliated points all past have technology X% of our and our the having seen new to accounts up improvements down prior of Higher in in over outlook the strong designed U.S. student pre-pandemic reiterate a Strayer, new as we in of in of of enrollment, interest Higher the levels, below savings indicative into much result basis students XXX universities, from agreements education, ability for year current U.S. growth be for enrollment

enrollment our result, Higher a margin. as U.S. forward, our significant – our Education moving increases we expect to As improvement operating

very to Service well. Technology also perform Education Our division continues

the than the as was last subscribers, Sophia increase approximately added more new fourth prior XX% prior from quarter the year. from increase which a increase more XX,XXX as from which XX% quarter, is XX,XXX were than quarter, well of paid paid total sequentially the first During year Average year. an XX% of a for subscriptions the first

continued and product reflecting prior the operating operating from the year, its marketing. was million, income investments prior revenue million, was down year to Sophia’s and margin XX%, in grew development and slightly $X.X Sophia’s from higher is XX% $X which

Our growth of year. that employee XXXX quarter XX full ahead will revenue and number operating they significantly agreements XXXX, from expect Workforce plans for with people. XX% the the rate with finished total be Edge XXX,XXX population Sophia we for corporate included a of that a

some monetization strategy seen have again SEI Edge. early progress Workforce ultimately is our also Workforce We for from Edge which institutions, in enrollments into

X,XXX close end and Our beginning by from to the year students have the goal beyond. thousand this and is platform of XXXX several in to

we years Australia/New now of Turning being closed. X our division, are Zealand following borders to

practices, students traveling We Australia are includes New working having to to and foreign visas. student normalize which our Zealand enrollment on

of the for plans trends, Torrens the the XX%. to Given helped for within contribute student very in segment Student strong rate highest the enrollment of our to quarter the University slight be remains year. within first excess a expect a the and current line segment some continuation the backlog on seen the ANZ SEI time ANZ in Based in we first operating achieved some for quarter. the and achievement decline Australia, delays student of visas, demand in we’ve of to processing enter the which with

extremely on our throughout ahead total, all students. professionalism in Blue we look key to at my we XXXX in operating either ongoing and questions. And to well And is and and updating of SEI finally, like happy to to strong their our year. that, colleagues be for for our SEI call this So all initiatives the dedication plan, on I’d just with of would be open rest of with forward the or behalf of you once start to progress again, thank an off of track on

Operator

Your Jeff Instructions] BMO the comes first [Operator line Silber from Capital Markets. of question from

open. Your line is

Jeff Silber

operating Karl, you Is Thanks if of appreciate so this again last quarter in I expecting a basis. you terms for XXXX. expect quarter, sure year something think the year? full were on what last you some thing, should reviewing am about talked comments of you I talked mentioned, much. not you One for about roughly year-over-year to we flat be that expenses I

Daniel Jackson

that. Yes. would it Dan. said is largely we flat this Jeff, be and We still Yes. expect

uneven the quarters, a will it little it’s but year in track last be So, over going total. to

Jeff Silber

especially the my the Higher Education. a specific I pull wondering know could expenses, But next Great. you I talk that. there on, pretty quarters am sizable there Okay. of And over etcetera? just unevenness Was if anything guide a you by is segment, don’t forward in margins quarterly basis. on was any drop actually about in U.S. going question. margins specific

Karl McDonnell

the reduced had was But the expected to from quarter in total this the We enrollment mid-single revenue, We XX.X% drove expect for quarter. last nothing year to year. full improve revenue which therefore, being had just year, Dan a we said. the said other in be line the enrollment, in to that impacted last I in in XX.X% being total call, just digits relatively down or enrollment quarter. the we else decline that expenses flat No. number that, the on And there the roughly year to for and Jeff, down as margins than we said, as first that full

year. So, obviously, we this expect throughout improving that to be

Jeff Silber

I sorry, This question. And Technology one margin Services Great. is segment. on the am Education more Okay.

get more were also those forward? in in color. think should down expect that alluded but remarks, If could what if about a bit I little what pretty you dramatically Thanks. Margins segment we going margins to your on segment. we could I happened, talk this just year-over-year

Karl McDonnell

is Sure. Well, part of growth. the our that sustain it want organization, we and obviously to fastest-growing

invest to services. So, we mature will we continue fact basis, marketing, the reflects products in margins out, go-forward Jeff. as ETS a and expect that to the that the reduced margin high-XXs, in begins division mid in to just On settle other

Daniel Jackson

to take but good And some obviously, goal it will Okay. time, have. a it’s

Karl McDonnell

will Thanks jump queue. in Alright. the I so much. back

Karl McDonnell

Sure.

Operator

from [Operator Tobey the Securities. line question comes of Sommer Instructions] from Truist next Your

open. Your is line

Tobey Sommer

Thanks. sort market wanted some labor impacting. related be to might that start of by asking how questions I to see

Fed in talking wage back and your terms students about maybe raise composition What you is doesn’t inflation, the marketing maybe that. And internal that in needle the how a over you own of here the has staff rates business out rushing in are of experiencing case factor trip are changed growth? while everybody about the last comment experiencing up they your the thread not for roaring? kind being hearing conversely, you. adequately Thank structure labor in economic expense it’s be of there then couple the years, working kind whether students that of fact So, who or economy could and might

Karl McDonnell

Sure.

and On the think question, students. which staff part then first was, parts of two I your

appears we normal haven’t the wage I have alluded students, demand quite year. be to and have staff we than inflation. adversely plan adverse every don’t several haven’t prepared lower seen turnover First on on a demand for We strong, Actually, for of my compensation highest so I now us. to as to seen in respect also the it’s impacted we staff, pressure our we any lot And with seen year, the SEI levels really And that right interest seen really and last over obviously remarks, implement of us years. in of environment think increases some impacts. in

your impacted that stabilizing seen. part business been well. degree the the question our organization. the of just an Ed demand part we certainly to has second So, We around U.S. that in see quite then that, is Higher – is largest impact, business And have an of that, doing and that’s obviously, it composition, the

slight do throughout And the expect this Australia then said growing, expect question, to – ETS to returned expect country’s we getting beyond. that continue we it also borders to in reopened Jeff’s I and year. as and well. a year it We improve to just has segment, There which the seems is just fastest been our And delay this normal. segment to

Robert Silberman

is least thing Karl as rates fact, and I labor of suggests sure we labor to inflationary side, historical and And are don’t seeing predictive rates trying is we to macroeconomic that as have in actually the it this market demand. demand. it Hey then employment to a Rob. starting for The are participation on most impact one student because on said, that are to much actually at Higher macroeconomically, we experience types that a Ed how want Tobey, in of our the an macroeconomic confidence have the situation of bearing that pressures shareholders the out. better is understand matter to make that are And our students indices increase. firmed appears And be U.S., attract participation actually

Tobey Sommer

in terms you What you helpful? sets, of Thanks. pricing Thank could would your are trends that seeing on update you. us changes principal any be among competitive

Karl McDonnell

material in noticed changes competitive really any haven’t pricing. We

kind offset by associated realized notionally pricing have price of in flat We our which planned is for in of pricing, increases or discounting stable some as modest increases of organization various net parts enrollment. with always employer-affiliated perhaps relatively our

appears So, flat. stable basically, to and be it relatively

Tobey Sommer

margin then student to persistent the within the what And kind of margin me, expansion? perspective visibility for Thanks. from achieve one Great. of total company to need kind have expansion other confidence a one does and into growth company,

Karl McDonnell

Higher we our to of below should prevent on there of decline Well, mostly said from a business at Strayer I in what XX%. company the obviously in enrollment growth growth because just revert on to we are expected below because And almost said variety enrollment trajectory and digit the a to high-single of now, nothing clearly, to this that I a from do mid have I first on what year we for enrollment expected are that U.S. given pandemic on that we And stable where are down time, was Ed’s we would returning basis, do at well, we revenue us I quarter model. that mid-XXs. pre-pandemic. and margins but And that notional that pricing quite notional to as impacted. would But a reasons, is commentary multiyear said sit, the the in that we

in down the for expect be mid-single to year. only We digits that the

think need. So fact we – we the said, essentially expense base I combined we the as and that, with have that have

the as time, to levels. expansion significant enrollment So, increases that we over expect margin enrollment as returns pre-pandemic

Tobey Sommer

question That’s helpful. Last me. for

administration arrived. been may that’s this crested any at news ever since been whether something I am On the concern sort regulatory wondering And point? front, This that in has changes. the the of have just

Karl McDonnell

to. are us obviously that to something is for nothing specific it’s react monitoring. There we Well,

We profile promulgated. with Education institutions. of quality are regulations very anticipate issue Higher any be U.S. with complying may confident We of in the the that set don’t reasonable any

continue it’s and from profile that So, risk our we watch, something are to in we will that confident quite standpoint.

Tobey Sommer

update. Thank Perfect. the you for

Karl McDonnell

Thanks.

Operator

no There McDonnell. further call are time. to at would I to like the Karl back over questions now this turn

Karl McDonnell

thank Well, I said, And we our forward we continuing Alright. will update next to you, look talk to you everyone. on as you quarter. progress to and

Operator

today’s concludes day. participation your for have call. wonderful conference This Thank you a and

all may You disconnect.